Tax Type
Aircraft Sales and Use Tax
Description
Sales under liquidation plan
Topic
Exemptions
Taxability of Persons and Transactions
Date Issued
05-12-1988
May 12, 1988
Re: Ruling Request: Aircraft Sales and Use Tax/ Retail Sales and Use Tax
Dear***************
This will reply to your letter of January 19, 1988 seeking a ruling whether proposed sales by********(taxpayer) of three aircraft pursuant to a plan of liquidation qualify for exemption from the aircraft sales and use tax and the retail sales and use tax
FACTS
The taxpayer is a Virginia corporation organized to operate truck terminals and a freight delivery service. The taxpayer is not engaged in making any retail sales and therefore is not registered with the department for purposes of collecting and reporting sales tax.
Pursuant to a plan of complete liquidation under §633(d) of the Tax Reform Act of 1986 and §337 of the Internal Revenue Code, the taxpayer plans to sell three aircraft to three separate third party purchasers or distribute the aircraft together with any remaining unsold assets directly to its two shareholders as distributions with respect to their stock. The taxpayer sold one aircraft in calendar year 1987. The remaining three aircraft are to be sold, or distributed to shareholders, in calendar year 1988.
You contend that the proposed sales of aircraft should qualify for exemption from the aircraft sales and use tax since they are part of the sale of all or substantially all the assets of a business. In addition, you state that the proposed sales should qualify for the occasional sale exemption from the retail sales and use tax since they are part of a liquidation sale of tangible personal property on three (3) or fewer occasions during a calendar year.
Therefore, you ask whether the proposed sales of aircraft qualify for exemption from the aircraft sales and use tax, and if so, whether they would also qualify for exemption from the retail sales and use tax.
RULING
Aircraft Sales and Use Tax
§58.1-1502 of the Virginia Code imposes a tax equal to "[t]wo percent of the sale price of each aircraft sold in the Commonwealth." Virginia Code §58.1-1501 then defines "sale" to mean "any transfer of ownership or possession of any aircraft by exchange or barter, lease or rental, conditional or otherwise, in any manner or by any means whatsoever." This section provides further however that "the term sale shall not include a transfer of ownership ... (iii) as part of the sale of all or substantially all the assets of any business." (Emphasis added)
Similarly, Virginia Aircraft Sales and Use Tax Regulation (VR) 630-11-1501.6(d) provides that the term "sale" does not include ... "[a]ny transfer of ownership or possession which is part of the sale of all or substantially all the assets of any business." (Emphasis added) This regulation then defines "substantially all the assets of a business" to mean, "eighty percent (80%) or more."
Moreover, the regulation states that the term "sale" does not include ..."[a]ny transfer of ownership or possession from an individual or partnership to a corporation or from a corporation to an individual or partnership if the transfer is incidental to the formation, organization, reorganization, or dissolution of a corporation in which the individual or partnership holds a controlling interest." The term "controlling interest" is defined to mean "the ownership of at least eighty percent of all outstanding shares of voting stock."
Unlike the retail sales and use tax, there is no "occasional sale" exemption per se from the aircraft sales and use tax. Rather, what is contemplated by the exemption from the aircraft sales and use tax for aircraft sold as part of the sale of all or substantially all the assets of a business is the sale of aircraft in connection with a sale of all or substantially all the assets of a business (80% or more) in a single transaction to a single purchaser. Therefore, even if the three aircraft proposed for sale in this case were the only assets of the taxpayer's business, the exemption would not apply since taken separately, no single aircraft sold would qualify as the sale of 80% or more of the assets of the taxpayer's business. Accordingly, I find no basis for concluding that the proposed sale of aircraft in this case would qualify for exemption from the aircraft sales and use tax as the sale of all or substantially all the assets of the taxpayer's business.
In addition, based on the regulation cited above, unless either of the taxpayer's two shareholders owns a controlling interest (80% or more of the outstanding shares of voting stock) in the corporation, I find no basis for concluding that the proposed transfer of the aircraft to the shareholders, (together with any remaining unsold assets in exchange for their stock), would qualify for this exemption from the aircraft sales and use tax.
Retail Sales and Use Tax
Since the proposed transactions have been found to be subject to the aircraft sales and use tax, it is not necessary to determine whether they might also qualify for the occasional sale exemption from the retail sales and use tax.
I hope that the foregoing has responded to your questions, but let the department know if you have any further questions.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner