Tax Type
Retail Sales and Use Tax
Description
Occasional Sale; Fixed Assets Exceptions
Topic
Assessment
Exemptions
Tangible Personal Property
Date Issued
02-20-2013
February 20, 2013
Re: § 58.1-1824 Application: Retail Sales and Use Tax
Dear *****:
This is in reply to your letter in which you submit a protective claim for refund of overpaid sales and use taxes for the period March 2007 through February 2010 on behalf of ***** (the “Taxpayer”). I apologize for the delay in the Department’s response.
FACTS
The Taxpayer is in the business of selling tires, accessories and related automotive services. During the audit period, the Taxpayer entered into an asset purchase agreement with three related entities (the “Sellers”). The Sellers owned and operated retail automotive service and repair stores (the “Stores”). The Taxpayer agreed to purchase, and the Sellers agreed to sell, all equipment, inventory, customer lists and other personal property located at or related to the Stores. Acquired assets include all furniture, fixtures, equipment and supplies owned by the Sellers, all inventory, all customer and supplier lists, all business records, correspondence, files, and other related books and records, as well as all intangible property and intangible property rights. The asset purchase agreement includes a non-compete agreement between the Taxpayer and the Sellers. The Taxpayer contests the assessment of tax on certain fixed assets related to the asset purchase agreement, contending that the sale at issue is an occasional sale and not subject to the retail sales and use tax.
DETERMINATION
Virginia Code 58.1-609.10 2 states that, the retail sales and use tax does not apply to “An occasional sale as defined in 58.1-602….” Virginia Code 58.1-602 defines 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.
- 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,
In Public Document 96-39 (4/5/96), the taxpayer was an out-of-state corporation that had its business operations physically located in Virginia. The owners were planning to form an out-of-state limited liability company (LLC) and to sell all of the Virginia corporate business operation, to include real and tangible personal property, to the LLC. The assets were going to be sold at fair market value and were going to consist of all the inventory, furniture, fixtures, machinery and equipment, and land and buildings. Based upon the information provided, it was determined that the sale at issue constituted the sale of all or substantially all the assets of the business. As such, it was determined that the sale at issue was an occasional sale that was exempt from the retail sales and use tax.
Based upon the information provided and the terms of the asset purchase agreement, the sale at issue is for the sale of all or substantially all the assets of the Sellers’ business. In accordance with the aforementioned authorities, the sale at issue is deemed an occasional sale that is not subject to the retail sales and use tax. Accordingly, line item numbers 4, 5, 6, 7, 8 and 9 will be removed from the Fixed Assets Exceptions list and the audit assessment adjusted accordingly. The Taxpayer will receive a refund of tax, penalty and interest paid with respect to these line items, plus refund interest accrued to date.
The Code of Virginia sections and public document cited are available on-line at www.tax.virginia.gov in the Laws, Rules and Decisions section of the Department’s web site. If you have any questions about this response, you may contact ***** in the Department’s Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/1-5050852072.P
Rulings of the Tax Commissioner