Tax Type
Retail Sales and Use Tax
Description
Occasional sale; Sale of Virginia assets; Restaurant Chain
Topic
Exemptions
Date Issued
02-09-1995
February 9, 1995
Re: §58.1-1821 Application: Retail Sales and Use Tax
Dear***************
This is in response to your letter of October 18, 1994 and prior correspondence in which you seek correction of a sales and use tax assessment issued to*************(the Taxpayer).
FACTS
The Taxpayer operates as a restaurant chain. An audit for the period January 1993 through March 1993 resulted in an assessment primarily for the purchase of fixed assets transferred to the Taxpayer from ***********(the Seller), a***************company. The Seller and the Taxpayer are related subsidiaries of a common parent corporation.
Prior to the transfer, the Seller operated ten restaurants, only one of which was located in Virginia. In January 1993 the Seller reorganized its operation and transferred four of its restaurants to the Taxpayer, including its one Virginia location. After the transfer, the Seller continued in business with its remaining six out-of-state locations. Accordingly, you maintain that the disputed transaction represented the sale of all the Seller's Virginia assets and was therefore an exempt occasional sale.
However, in addition to the restaurants which it owned and operated, the Seller, along with a Virginia corporation, held a fifty percent interest in a joint venture. At the time of the protested transaction, this joint venture operated restaurants primarily in Virginia and the*****************.
DETERMINATION
Virginia law provides an exemption from the retail sales and use tax for tangible personal property sold in an occasional sale. An "occasional sale" is defined in Code of Virginia §58.1-602 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, including the sale or exchange of all or substantially all the assets of any business and the reorganization or liquidation of any business.... (Emphasis added)
Further, in Public Document 94-21 (2118194), the department determined that the sale of all the Virginia assets of a business qualified as an occasional sale regardless that the seller continued in business outside of Virginia.
Accordingly, because the Seller sold all its Virginia assets to the Taxpayer in one transaction, the sale is an exempt occasional sale and will be removed from the assessment. Further, the exemption applies in this case regardless that the Seller continues to operate Virginia restaurants through its joint venture.
Code of Virginia §58.1-602 defines "business" to mean "any activity engaged in by any person, or caused to be engaged in by him, with the object of gain, benefit or advantage...." The statute then defines "person" to mean:
Any individual, firm, copartnership, cooperative, nonprofit membership corporation, joint venture, association, corporation, estate, trust, ... or other group or combination acting as a unit....
Even though the joint venture continues to do business in Virginia, it is immaterial in this case because the joint venture is clearly a separate and distinct business. If the joint venture had sold some, but not all, of its Virginia assets, it is unlikely that the occasional sale exemption would apply. In this case, however, the Seller, acting as its own corporation, sold all of its Virginia assets. Such a transaction qualifies as an occasional sale exempt from tax.
Because the Taxpayer paid the entire audit assessment, a refund of tax and interest applicable to the contested transaction will be issued as soon as practicable. If you have an questions regarding this matter, please contact ********* in the department's Office of Tax Policy****************.
-
-
-
-
-
-
-
-
-
-
-
- Sincerely,
Danny M. Payne
Tax Commissioner
- Sincerely,
-
-
-
-
-
-
-
-
-
-
Rulings of the Tax Commissioner