Tax Type
Retail Sales and Use Tax
Description
Occasional sales
Topic
Taxability of Persons and Transactions
Date Issued
08-26-1986
August 26, 1986
Re: §58.1-1821 Application/Sales and Use Tax
Dear **********************
This will reply to your letter of February 21, 1986, in which you submit an application for correction of sales and use tax assessed to***************** as the result of a recent audit.
FACTS
*********************** (Taxpayer) is engaged in the placement of coin operated amusement devices such as pinball machines and video games on the premises of various business. In addition, the taxpayer sold a number of amusement devices. Inasmuch as the taxpayer did not collect and remit the sales tax on such sales, the transactions were included in a recent audit by the department.
The taxpayer contests the assessment of sales tax, contending that its sales of amusement devices were exempt "occasional" sales.
DETERMINATION
Section 58.1-608.15 of the Code of Virginia exempts "[a]n occasional sale" from the sales and use tax. The term "occasional sale" is defined in Virginia Code § on 58.1-602.12 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...provided such sale...is not one of a series of sales...sufficient in number, scope and character to constitute an activity requiring the holding of a certificate of registration" (emphasis added).
In this case, the taxpayer is engaged primarily in the operation of coin-operated amusement devices. As the operation of such devices does not entail a sale, lease or rental of tangible personal property, a certificate of registration to collect and remit the sale tax is not necessary. Accordingly, a sale of amusement devices used in such an operation qualifies for the occasional sale exemption, provided that the sale is not one of a series of sales sufficient in frequency and character to require the seller to register to collect and remit the tax.
§ 1-75 of the Virginia Retail Sales and Use Tax Regulations, which was in effect during much of the period of the department's audit of the taxpayer, clearly set forth the statutory intent that an otherwise qualifying occasional sale be taxable if one of a series of sales requiring the seller to register:
The tax does not apply to an occasional sale provided the sale... is not one of a series of sales...sufficient in number, scope and character to constitute an activity requiring the holding of a Certificate of Registration.
The identical language also appears in Regulation § 630-10-75, published on January 1, 1985. This regulation also sets forth four types of transactions that qualify for the occasional sale exemption. Along with the sale of tangible personal property not held or used in the course of a registerable activity, one of the other three qualifying transactions is "[a] sale by a person who is engaged in sales on three or fewer separate occasions within one calendar year." Accordingly, the occasional sale exemption does not apply when a person makes four or more sales per year even though the property sold is not used in the course of a registerable activity.
As the above referenced statutes and regulations clearly state that sufficient sales activity will negate the exemption and the present regulation provides that four or more sales per year constitutes sufficient activity to negate the. exemption, I find that the taxpayer's sales activities during the audit period were sufficient to require his registration to collect and remit the tax. It should be noted that my determination here is entirely consistent with the doctrine of strict construction applied to tax exemptions by the Virginia courts. The doctrine, as articulated by the Virginia Supreme Court in Winchester TV Cable v. State Tax Commissioner, 216 Va. 286, 217 S.E.2d 885 (1975), provides that [t]axation is the rule and not the exception; statutory tax exemptions are construed strictly against the taxpayer; and, when a tax statute is susceptible to alternative and constructions, one granting an exemption and the other denying it, the later construction will be adopted."
Because you note this to be the case for at least one year, I will direct the department's Technical Services Section to remove any sales from the audit that were made in a calendar year during which three or fewer total sales were made.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner