05-35 | Virginia Tax

Tax Type

Retail Sales and Use Tax

Description

Hospital, Occasional sale exemption

Topic

Exemptions

Date Issued

03-16-2005

March 16, 2005

Re: § 58.1-1821 Application: Retail Sales and Use Tax

Dear *****:

This is in response to the letter submitted on behalf of ***** (the "Taxpayer"), in which you seek correction of the retail sales and use tax assessment for the audit period August 2000 through March 2003. I apologize for the delay in responding to your appeal.

FACTS

The Taxpayer, a hospital, contests the tax assessed on several purchase transactions held taxable in the Department's audit. The Taxpayer also contests the assessment of tax on the sale of a metal building and a fitness facility. The medal building was located on the Taxpayer's property and was used as a business office by the Taxpayer. When the metal building was sold, it was disassembled and trucked away. The sale of the fitness facility included the sale of a free-standing structure, the property on which it stood, and all the equipment therewith. The Taxpayer maintains that the occasional sale exemption applies to the sale of both the metal building and the fitness facility.

DETERMINATION

The Taxpayer contests the assessment of tax on the following line items listed on the Non-Contested Assets exceptions list:

Item# 158 - *****
Item# 159 - *****
Item# 160 - *****
Item# 161 - *****
Item# 163 - *****
Item# 164 - *****
Item# 165 - *****
Item# 180 - *****
Item# 185 - *****
Item# 207 - *****
Item# 208 - *****
Item# 216 - *****
Item# 219 - *****
Item# 220 - *****
Item# 221 - *****
Item# 222 - *****
Item# 223 - *****
Item# 224 - *****
Item# 225 - *****

The Taxpayer maintains that the transactions with *****, ***** and ***** (Item #216) were for services. At the time of the audit, these invoices were not available. After reviewing the invoices provided with the Taxpayer's appeal, I find that the transactions are for nontaxable services. Accordingly, these invoices will be removed from the assessment.

With regard to Items 219 through 225, the Taxpayer maintains that the sales tax was paid to the vendor at the time the sale took place. After reviewing the invoices provided and the Department's accounting system, the auditor determined the vendor (*****) is not a registered Virginia dealer. Therefore, the tax was never remitted to the Department. The auditor correctly assessed tax to the Taxpayer. The Taxpayer's remedy in this case is to seek a refund directly from the vendor for tax paid but not remitted. This determination is consistent with the ruling in Public Document 91-198 (8/30/91), in which the taxpayer was instructed that it would have to seek a refund directly from those dealers that we're not registered with the Department and who did not remit the tax paid to the Department.

Occasional Sale Exemption

Virginia Code § 58.1-609.10 2 provides that the tax does not apply to an occasional sale, as defined in § 58.1-602. Pursuant to Va. Code § 58.1-602, occasional sale 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, 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.

Title 23 of the Virginia Administrative Code (VAC) 10-210-1080 provides, in pertinent part, that the term occasional sale means, "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. The words 'not held or used by a seller in the course of an activity for which he is required to hold a certificate of registration' mean that a registered dealer is not entitled to an occasional sale exemption solely by virtue of the fact that the article sold may be of a different class from the merchandise he/she regularly sells."

Metal Building - Pursuant to Title 23 VAC 10-210-1080, the sale of the metal building qualifies for the occasional sale exemption. This transaction is deemed an occasional sale because the metal building is not property used by the Taxpayer for an activity for which it is required to hold a certificate of registration. The tax assessed on this transaction will be removed from the audit assessment.

Fitness Facility - The Taxpayer is in the business of providing health care services, which includes preventative medical services. The fitness facility that was owned by the Taxpayer provided preventative medical services to its patrons. Accordingly, the occasional sale exemption is not applicable to the sale of the fitness equipment, and the tax was correctly assessed on this transaction.

Based on this determination, the audit report will be revised. A revised bill, with interest accrued to date, will be mailed shortly to the Taxpayer. No further interest will accrue provided the outstanding assessment is paid within 30 days from the date of this letter. Please remit your payment to: Virginia Department of Taxation, 3600 West Broad Street, Suite 160, Richmond, Virginia 23230, Attn: *****. If you have any questions concerning payment of the assessment, you may contact ***** at *****.

The Code of Virginia sections, regulations and public document cited are available on-line in the Tax Policy Library section of the Department of Taxation's web site, located at www.policylibrary.tax.virginia.gov. If you have any questions about this determination, you may contact ***** in the Department's Office of Policy and Administration, Appeals and Rulings, at *****.

- - - - Sincerely,

- - - - Kenneth W. Thorson
        
        Tax Commissioner

AR/52058P

Rulings of the Tax Commissioner