Tax Type
Retail Sales and Use Tax
Description
Occasional sales; Liquidating sales
Topic
Taxability of Persons and Transactions
Date Issued
02-21-1997
February 24, 1997
Re: § 58.1 -1821 Application: Retail Sales and Use Tax
Dear**************
This is in response to your letter of December 4, 1996 in which you seek correction of a sales and use tax assessment issued to ***********(the"Taxpayer").
FACTS
The Taxpayer operated as a real property construction contractor in Virginia. A sales and use tax audit for the period February 1994 through September 1996 resulted in an assessment for untaxed sales predominantly of office equipment, construction equipment, and trailers. These items were sold by the Taxpayer during an eleven-month period from February through December 1994.
The Taxpayer contests the transactions and maintains that they are exempt occasional sales under Virginia Regulation 630-10-75. In making this claim, you indicate that the Taxpayer liquidated its operations during 1994 and had no payroll from early 1994. You also indicate that because of the large variety and quantity of assets, it was not practical to have one sale, so the assets were sold over a period of time. You point out that the assets were not sold for a profit or to buy new equipment, and that all the items were sold for a net loss.
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:
-
- 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 85--113 (6/5/85) and 87-25 (2/13/87) appear to be especially on point because they deal with the disposal of construction equipment under a plan of liquidation. As noted therein, the sale of a business requiring several transactions over an extended period of time to many different purchasers did 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.
The disposal of assets in your case ultimately resulted in the sale of all or substantially all of the Taxpayer's assets. The nature of those transactions, however, to many purchasers over an eleven-month period, is not deemed to qualify as an exempt occasional sale. Accordingly, the assets sold by the Taxpayer are subject to the tax and the audit was properly assessed.
Notwithstanding the above, l am mindful of your claim that the Taxpayer is insolvent. It may therefore be possible for the Taxpayer to settle the outstanding assessment through an offer in compromise based on doubtful collectibility pursuant to Code of Virginia § 58.1-105. With this in mind, l have asked the department's collection personnel to contact you as soon as practicable to investigate the feasibility of such an offer.
If you have any questions regarding this letter, please contact ***********in my Office of Tax Policy at **********.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/11995I
Rulings of the Tax Commissioner