Tax Type
Retail Sales and Use Tax
Description
Occasional sales, including mergers; Sealed bid sales of surplus property
Topic
Taxability of Persons and Transactions
Date Issued
02-27-1996
February 27, 1996
Re: Request for Ruling: Retail Sales and Use Tax
Dear *******
This is in response to your letter of October 13,1995 and subsequent correspondence from*********regarding application of the occasional sale exemption to sealed bid sales made by the ******* (the"Taxpayer").
FACTS
The Taxpayer is an agency of a Virginia locality and provides general services for that locality. Among other functions, the Taxpayer acts as the central procurement arm for the locality and its schools, provides warehouse, distribution, and inventory control services, and disposes of the locality's surplus property.
Most of this surplus property is sold by a third-party auctioneer who conducts the sales, collects the applicable sales taxes, and remits the proceeds, less a commission, to the locality. However, certain property which does not lend itself to the auctioneer's services is sold directly by the Taxpayer through solicitation of sealed bids. Recent sales made by the Taxpayer in this manner include a dredge, a tractor, and waste water treatment equipment. The records which specifically identify sealed bid sales indicate that the Taxpayer made no sales in fiscal year 1994, three in fiscal year 1995, and three (thus far) in fiscal year 1996.
The Taxpayer suggests that these intermittent sales of surplus property through sealed bids are exempt occasional sales and requests a ruling on this issue.
RULING
Code of Virginia § 58.1-609.10(2) exempts from the tax an occasional sale which is defined in § 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 ... provided such sale or exchange is not one of a series of sales or exchanges sufficient in number, scope and character to constitute an activity requiring the holding of a certificate of registration. (Emphasis added.)
Virginia Regulation 630-10-75 indicates that an occasional sale means a sale by a person who is engaged in sales on three or fewer separate occasions within a calendar year. While the Taxpayer frequently and regularly disposes of surplus property, it does so primarily through an auctioneer. In these instances it is the auctioneer, and not the Taxpayer, making the sales. Accordingly, the infrequency of sealed bid sales made by the Taxpayer appears to satisfy the "number" requirement set out in the statute and the regulation.
However, neither the statute nor the regulations define the "scope" or "character" of an exempt occasion sale or what would be required to satisfy these criteria. Nevertheless, a fundamental characteristic of an occasional sale is that it lacks continuity and regularity and it occurs without being expected or without design. This characteristic is absent in the instant case because the sale of surplus property is one of the Taxpayer's routine responsibilities. Regardless that sealed bid sales are infrequent in number, such sales are an integral part of the Taxpayer's activities. Accordingly, the Taxpayer's sealed bid sales cannot be characterized as occasional in nature.
Based on the above, the Taxpayer is a dealer and is required to charge and collect the tax on its sealed bid sales of surplus tangible personal property. If a purchaser is exempt from paying the tax, the Taxpayer may take from that purchaser a fully completed certificate of exemption indicating that the sale is exempt under the law.
Further, I understand that the locality holds sales and use tax certificates of registration and that it collects and remits the tax monthly. Therefore, and as an administrative convenience, the Taxpayer may choose to report its sales and remit the tax through an existing registration held by the locality's Office of Finance. If this procedure is not available, the Taxpayer will be required to register with the department and file monthly sales and use tax returns.
I regret that this determination is contrary to your opinion of the nature of the sealed bid sales. However, if you need additional information on this issue, please contact ******* in my Office of Tax Policy at ***** .
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/10401I
Rulings of the Tax Commissioner