Tax Type
Retail Sales and Use Tax
Description
Occasional Sales, Sale of All or Substantially All of the Assets of a Business
Topic
Taxability of Persons and Transactions
Date Issued
09-14-1992
September 14, 1992
Re: §58.1-1821 Application: Sales and Use Tax
Dear*************
This will reply to your letter of March 25, 1991 in which you submit an application for correction of sales and use tax assessed to*************(the Taxpayer), as the result of a recent audit.
FACTS
The Taxpayer is in the business of marketing and servicing high resolution image setting equipment, electronic composition systems and related products. The Taxpayer is a corporation that was formed in August, 1988 as a wholly owned subsidiary of******** (the Parent). At the time of incorporation, the assets of the Taxpayer were purchased from*************** (the Corporation). The Taxpayer was audited and assessed tax on fixed assets purchased from the Corporation. The Taxpayer is taking exception to the taxing of the assets purchased from the Corporation as they feel such purchase is the result of an occasional sale by the Corporation and should be exempt from the tax.
The Taxpayer also contests the inclusion of a service contract in the sales sample. In support of their contention, the Taxpayer has submitted a Form ST-11, certificate of exemption.
DETERMINATION
Va. Code §58.1-608(10)(b) provides an exemption for an occasional sale as defined in Va. Code §58.1-602. Va. Code §58.1-602 defines an "occasion sale" as follows:
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- "Occasional sale" means 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. (Emphasis added.)
- "Occasional sale" means 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. (Emphasis added.)
- Each division must have a completely separate set of books which are separately maintained.
- Separate bank accounts must be maintained.
- Employees must be active in only one division.
- Divisions must be separately housed.
- Each division must have its own fixed assets which are not used interchangeably.
The final determination must be based on an analysis of all the criteria set forth above.
Based on the information contained in your letter, there is not sufficient evidence provided to substantiate the fact that the sale from the Corporation to the Taxpayer included all or substantially all of the assets of a business. Provided the Taxpayer can furnish additional information substantiating the sale of the assets, I will allow the occasional sale exemption and adjust the audit accordingly.
A representative from the department will contact you as soon as practicable in order to determine if the occasional sale exemption is applicable to the purchase by the Taxpayer.
In regard to the service contract included in the sales sample, I do find basis for removal of such sale from the sample period. The audit will be adjusted accordingly.
If you should have any further questions, please feel free to contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
OTP/5076K
Rulings of the Tax Commissioner