Tax Type
Retail Sales and Use Tax
Description
Occasional sales; Average rate per month
Topic
Exemptions
Date Issued
06-05-1985
June 5, 1985
Re: § 58.1-1821 Application/Sales and Use Tax
Dear ****
This will reply to your letter of March 18, 1985 on behalf of ***** (Taxpayer), appealing an assessment of sales and use tax for the audit period of January 1, 1982 through October 31, 1984.
FACTS
Until April, 1983, taxpayer operated in three major construction divisions - highway, building, and utilities. Taxpayer has been registered as a dealer for its highway division only, with the two other divisions paying sales and use tax on all items they purchased. Each of the three divisions operated independently, with their own managers, employees, separate income and accounting records. Due to losses incurred in the building division, it was decided in 1982 to terminate the division by not bidding on any new contracts. As jobs were completed, employees were permanently laid off or transferred to another division.
To facilitate the winding up of the building division, taxpayer began to liquidate its assets on an asset by asset basis. In addition to construction equipment; desks, chairs, and other office equipment used in the division were sold over a 30 month period.
Taxpayer argues that the sale of assets which occurred in 1983 and 1984 should be exempt from the sales and use tax as occasional sales of tangible personal property under §§ 58.1-608(15) and 58.1-602(12). In partial support of its contention that such items should be exempt from the tax, taxpayer cites two letters of the Tax Commissioner dated May 19, 1983 and September 2, 1980.
DETERMINATION
§ 58.1-608(15) of the Virginia Code exempts "occasional sales" from the sales and use tax. § 58.1-602(12) defines "occasional sale" as
"a sale of tangible personal property not held or used by a seller in the course of an activity for which he is required to hold a certificate of registration, including the sale or exchange of all or substantially all the assets of any business and the reorganization or liquidation of any business, provided such sale or exchange is not one of a series of sales and exchanges sufficient in number, scope and character to constitute an activity requiring the holding of a certificate of registration."
The sale of assets which transpired in the present case meets none of these requirements.
The department has interpreted the term "occasional sale" to mean a sale by a person who is engaged in sales on three or fewer occasions within a calendar year, except that sales at fairs, carnivals, etc. are not occasional sales.
Both of the letters cited by taxpayer in support of its contention that the sale of assets in the present case represent occasional sales are distinguishable from the facts presented herein in that both the May 19, 1983 and November 2, 1980 determination letters involved, either the purchase or transfer of all or substantially all the assets of liquidating companies, in a single transaction, or to a single transferee.
Furthermore, pursuant to Maryland sales and use tax law governing casual and isolated sales similar to Virginia law, the Maryland Supreme Court held in ACF Industries, Inc. v. Comptroller of the Treasury, 257 Md. 513, 263 A2d 574 (1970), that "the sale of an entire business operation, including integrated plants and personal property, by a company which had been involved in such transactions five times in the preceding 13 years, was a taxable transaction since the sale did not qualify as a casual and isolated sale by a vendor who was not regularly engaged in the business of selling tangible, personal property." The court concluded that "such sales were to be expected in a corporation that undertook to diversify."
Similarly, the sales of assets in the present case, which occurred at an average rate of about two per month over a 30 month period, were sufficient in number to constitute an activity requiring the holding of a certificate of registration, notwithstanding the fact that taxpayer was not regularly engaged in the business of selling such assets.
Based on all of the foregoing, I find no basis to adjust the assessment in the present case, the entire amount of which is hereby due and payable.
Sincerely,
W. H. Forst
State Tax Commissioner
Re: § 58.1-1821 Application/Sales and Use Tax
Dear ****
This will reply to your letter of March 18, 1985 on behalf of ***** (Taxpayer), appealing an assessment of sales and use tax for the audit period of January 1, 1982 through October 31, 1984.
FACTS
Until April, 1983, taxpayer operated in three major construction divisions - highway, building, and utilities. Taxpayer has been registered as a dealer for its highway division only, with the two other divisions paying sales and use tax on all items they purchased. Each of the three divisions operated independently, with their own managers, employees, separate income and accounting records. Due to losses incurred in the building division, it was decided in 1982 to terminate the division by not bidding on any new contracts. As jobs were completed, employees were permanently laid off or transferred to another division.
To facilitate the winding up of the building division, taxpayer began to liquidate its assets on an asset by asset basis. In addition to construction equipment; desks, chairs, and other office equipment used in the division were sold over a 30 month period.
Taxpayer argues that the sale of assets which occurred in 1983 and 1984 should be exempt from the sales and use tax as occasional sales of tangible personal property under §§ 58.1-608(15) and 58.1-602(12). In partial support of its contention that such items should be exempt from the tax, taxpayer cites two letters of the Tax Commissioner dated May 19, 1983 and September 2, 1980.
DETERMINATION
§ 58.1-608(15) of the Virginia Code exempts "occasional sales" from the sales and use tax. § 58.1-602(12) defines "occasional sale" as
"a sale of tangible personal property not held or used by a seller in the course of an activity for which he is required to hold a certificate of registration, including the sale or exchange of all or substantially all the assets of any business and the reorganization or liquidation of any business, provided such sale or exchange is not one of a series of sales and exchanges sufficient in number, scope and character to constitute an activity requiring the holding of a certificate of registration."
The sale of assets which transpired in the present case meets none of these requirements.
The department has interpreted the term "occasional sale" to mean a sale by a person who is engaged in sales on three or fewer occasions within a calendar year, except that sales at fairs, carnivals, etc. are not occasional sales.
Both of the letters cited by taxpayer in support of its contention that the sale of assets in the present case represent occasional sales are distinguishable from the facts presented herein in that both the May 19, 1983 and November 2, 1980 determination letters involved, either the purchase or transfer of all or substantially all the assets of liquidating companies, in a single transaction, or to a single transferee.
Furthermore, pursuant to Maryland sales and use tax law governing casual and isolated sales similar to Virginia law, the Maryland Supreme Court held in ACF Industries, Inc. v. Comptroller of the Treasury, 257 Md. 513, 263 A2d 574 (1970), that "the sale of an entire business operation, including integrated plants and personal property, by a company which had been involved in such transactions five times in the preceding 13 years, was a taxable transaction since the sale did not qualify as a casual and isolated sale by a vendor who was not regularly engaged in the business of selling tangible, personal property." The court concluded that "such sales were to be expected in a corporation that undertook to diversify."
Similarly, the sales of assets in the present case, which occurred at an average rate of about two per month over a 30 month period, were sufficient in number to constitute an activity requiring the holding of a certificate of registration, notwithstanding the fact that taxpayer was not regularly engaged in the business of selling such assets.
Based on all of the foregoing, I find no basis to adjust the assessment in the present case, the entire amount of which is hereby due and payable.
Sincerely,
W. H. Forst
State Tax Commissioner
Rulings of the Tax Commissioner