Tax Type
Retail Sales and Use Tax
Description
Occasional sales, including mergers; Sale of portion of business
Topic
Taxability of Persons and Transactions
Date Issued
06-19-1996
June 19, 1996
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear******************
This is in reply to your letter of May 13, 1996 in which you seek correction of a sales and use tax assessment issued to ******** (the "Taxpayer"). I note that the tax, penalty, and interest associated with the uncontested portion of the assessment have been paid.
FACTS
The Taxpayer operates as a photography studio in Virginia and began its business by purchasing a photographic studio from ****** (the"Seller") in 1993. An audit for the period August 1993 through December 1995 resulted in an assessment which included untaxed purchases of fixed assets. Included in these fixed assets were the assets purchased by the Taxpayer from the Seller. The Taxpayer protests this portion of the assessment and contends that the transaction with the Seller represents an exempt occasional sale.
Prior to the sale, the Seller's business was comprised of two separate segments: (1) the Portrait segment (including portrait, wedding, and restoration activities), and (2) a Corporation Art segment. The Taxpayer purchased only the Portrait segment. I understand the Seller retained the assets associated with the Corporate Art segment and continued this activity from a location outside Virginia. According to the purchase agreement, the Portrait segment constituted approximately 80% of the Seller's total business assets.
DETERMINATION
Code of Virginia § 58.1-609.10(2) provides an exemption from the tax for an occasional sale as defined in § 58.1-602. That section defines an "occasional sale" as:
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- 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)
I have reviewed the list of assets sold to the Taxpayer under the terms of the purchase agreement as well as those assets retained by the Seller. The latter assets are comprised entirely of Corporate Art client information on a computer disk, one display case, and various slides. These assets are minimal, especially when compared to the furniture, fixtures, studio equipment, and photographic equipment sold to the Taxpayer. Accordingly, I agree that the sale of the Portrait segment assets to the Taxpayer is the sale of all or substantially all of the Seller's business, and that such sale is an exempt occasional sale.
Based on this determination, the assessment will be revised to remove the contested fixed assets purchased by the Taxpayer.
If you have additional questions regarding this issue, you may contact****in my Office of Tax Policy at*********.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/11250I
Rulings of the Tax Commissioner