Tax Type
Retail Sales and Use Tax
Description
Occasional sales
Topic
Exemptions
Date Issued
07-23-1993
July 23, 1993
Re: Request for Ruling: Retail Sales and Use Tax
Dear*********
This will reply to your letter of March 1, 1993 in which you request a on behalf of *******(the Taxpayer) regarding the application of the Virginia sales and use tax to the purchase of an art collection.
FACTS
The Taxpayer, a Virginia resident, is contemplating the purchase of two privately owned collections of art and artifacts which are being sold together as one collection under a single contract. The collection is being sold by three parties as follows: 1) A partnership of principal heirs formed to administer the estate of a deceased individual collector. This partnership owns all of the first collection and 50% of the second. 2) A colleague of the deceased, who owns 25% of the second collection, and 3) the three children of the colleague, who collectively own 25% of the second collection.
The collection is located outside of Virginia, and the Taxpayer will take title and possession of the collection in the State of Kansas. All of the sellers reside outside of Virginia, and neither the partnership, any individuals within the partnership nor the other sellers engage or have ever engaged in business with respect to the collection. Further, the deceased collector and the colleague assembled the collection over a number of years as a scholarly pursuit and not for business purposes. Similarly the Taxpayer intends to purchase the collection for personal use and enjoyment and for scholarly research.
The Taxpayer requests a ruling confirming that the purchase of the collection is an exempt occasional sale pursuant to Va. Code §58.1-608(A)(10)(b).
DETERMINATION
Va. Code §58.1-603 imposes the tax upon "every person who engages in the business of selling at retail or distributing tangible personal property in this Commonwealth...." "Business" is defined in Va. Code §58.1-602 as including "any activity engaged in by any person, or caused to be engaged in by him, with the object of gain, benefit or advantage, either directly or indirectly."
Further, Va. Code §58.1-602 defines an "occasional sale" to mean:
-
- 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 ... provided such sale ... 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.
- 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 ... provided such sale ... 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.
Without reviewing the partnership agreement it is not possible to determine the stated business of the partnership: whether it was formed to sell tangible personal property or if it was formed to aid in the administration of an estate.
If the business of the partnership is to sell tangible personal property, none of its sales would qualify as occasional sales since the sales and use tax laws make it clear that sales made by one in the business of making sales are taxable. This determination is supported by VR 630-10-17.2 which provides that a business "includes the leasing of property by an entity organized for such purpose, even if its only activity is the lease or rental of a single item or single group of items."
However, if the partnership was set up to facilitate the administration of the estate and to expedite the distribution of assets, the occasional sale exemption may apply. Under this scenario the provisions of VR 630-10-75 would govern the transaction. Thus, if the partnership, or any other of the sellers, makes three or fewer sales in the same calendar year in which the collection is sold, those sales would be deemed occasional sales for Virginia tax purposes.
Notwithstanding the above, because the Taxpayer will take possession of the collection in the State of Kansas, it is to that state the Taxpayer must also look to determine the application of the tax. While I note that the sellers contend that the sale is not taxable to the State of Kansas, no evidence has been submitted supporting that contention If the tax is due and paid to the State of Kansas, the Taxpayer will be allowed a credit against any potential Virginia use tax pursuant to Va. Code §58.1-611. However, if the transaction is an exempt occasional sale under the laws of the State of Kansas, or, alternatively, if the sale is taxable to that state, but the tax is not paid to that state, the Virginia tax will or will not apply based on the statutes and regulations outlined above.
Also, I do not accept the Taxpayer's argument that the proposed transaction is an exempt occasional sale merely because the sellers are located outside of Virginia and do not have sufficient contact with the Commonwealth to require that they hold a certificate of registration. The occasional sale exemption is not founded on nexus or other issues relating to interstate commerce, but rather on limited sales activity measured by the number, scope and character of those sales as mandated in the Code. Further, nexus is an issue that relates to a seller's obligation to collect the tax. The absence of nexus does not in itself negate the purchaser's responsibility to pay the use tax if such is due.
While I do not have sufficient facts at this time to confirm or deny your contention that the instant case represents an exempt occasional sale, I trust you will find this determination clarifies the department's policy.
If you need any further assistance, please contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
OTP/6792I
Rulings of the Tax Commissioner