Tax Type
Retail Sales and Use Tax
Description
Character of occasional sales; Series of transactions
Topic
Taxability of Persons and Transactions
Date Issued
04-25-1997
April 25, 1997
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear**********
This is in response to your letter of February 6, 1997, in which you seek correction of a sales and use tax assessment issued to (the "Taxpayer") for the period March 1993 through February 1996.
FACTS
The Taxpayer operated as a multi-divisional enterprise which included a petroleum terminal, a wholesale petroleum division, and a motor fuels division (comprised of retail service stations/convenience stores). At issue in this case is the untaxed sales of the Taxpayer's 24 Virginia retail service stations/convenience stores (the "Stores"). Because it could not find one purchaser for all of the Stores, the 24 Stores were sold in five separate transactions to five separate entities. I understand that these five sales occurred within a nine month period from April 1994 to January 1995.
You maintain that the five sales of the 24 Stores are exempt occasional sales. In making this claim, you point out that the motor fuels division was operated as a separate and distinct business with separate financial records, different management and employees, and separate locations from the other operating divisions. You also indicate that the Stores were sold pursuant to a single plan of liquidation. In this regard, you indicate that the Taxpayer could not find a single purchaser for all 24 Stores. Further, because the Stores were scattered across Virginia, it was not feasible to sell them to a single purchaser.
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.)
The department has issued a number of prior rulings which address the application of the occasional sale exemption to liquidation sales. Public Documents 87-25 (2/13/87) and 87-56 (2/27/87), copies enclosed, appear to be especially on point because they deal with a series of transactions in which assets were sold over a period of time under a plan of liquidation. I have also enclosed Public Document 94-134 (4/28/94) which addresses this same issue. As these determinations indicate, the sale of a business requiring several transactions over an extended period of time to different purchasers does not qualify as an exempt occasional sale. Rather, it was determined in these cases that the sales were sufficient in number, scope and character requiring the holding of a certificate of registration.
Nor is this inconsistent with the determination set out in Public Document 96-75 on which you rely. The taxpayers in that case, who owned a chain of retail stores, first transferred the assets of a group of stores into a wholly-owned subsidiary through a tax free reorganization under Section 351 of the Internal Revenue Code. The stock of the subsidiary was subsequently sold. This process was continued until all the stores were sold. The transfers under Section 351 qualified in that case as occasional sales because they were reorganizations of a business. The subsequent sales of the subsidiaries also were deemed to be exempt occasional sales because they represented the sale of all the assets of a business (i.e., the assets of the subsidiary corporation.)
Each transaction in that case was an exempt occasional sale - either as a tax free reorganization or as the sale of all the assets of a business. The transactions in the instant case were neither. The Taxpayer's disposal of assets eventually resulted in the sale of all or substantially all of the Taxpayer's assets. The nature of those transactions, however, to many purchasers over a nine month period, is not indicative of exempt occasional sales.
Based on this determination, the assets sold by the Taxpayer are subject to the tax and the audit was properly assessed. A bill for the unpaid portion of the assessment, with interest accrued to date, will immediately be issued to the Taxpayer. No additional interest will accrue provided the assessment is paid within 30 days.
If you have any questions regarding this letter, please contact *****in my Office of Tax Policy at ********..
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/12157I
Rulings of the Tax Commissioner