Tax Type
Retail Sales and Use Tax
Description
Purchase from liquidating business; Occasional sale exemption criteria
Topic
Exemptions
Taxability of Persons and Transactions
Date Issued
02-27-1987
February 27, 1987
Re: §58.1-1821 Application/ Sales and Use Tax
Dear ***********************
This will reply to your letter of May 29, 1986 appealing an assessment of sales and use taxes in the above referenced case for the period April, 1983 through March, 1986.
FACTS
In connection with its operation as a fast food retailer, *********** (Taxpayer), purchased certain equipment from a company which had begun the process of liquidating its fast food business assets in Virginia. Pursuant to department audit the taxpayer was held liable for the tax on its purchase of such equipment since it neither paid the sales tax at the time of purchase from its supplier nor remitted the use tax directly to the department.
The taxpayer contends that since its equipment supplier was in the process of liquidating all of its assets in Virginia, its sale of such equipment to the taxpayer qualified for exemption from the tax as an "occasional sale" pursuant to §58.1-608(15) of the Virginia Code.
DETERMINATION
§58.1-608(15) of the Virginia Code exempts from the sales and use tax an "occasional sale", as defined in §58.1-602(12). This latter section then 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.
It is the department's understanding that while the equipment supplier in this case may have begun the process of liquidating its assets in Virginia at the time of the purchase by the taxpayer, this process was far from complete. Instead, at all times during and subsequent to the sale of the equipment to the taxpayer its supplier continued to operate another retail establishment subject to the department's sales tax registration and reporting requirements. The department's records indicate that while the purchase of equipment by the taxpayer took place in April, 1983, the supplier did not sell the remainder of its retail business assets in Virginia until November, 1985.
Therefore, while the equipment in this case may not have been of the type routinely sold by the taxpayer's supplier in the course of its registerable activities, the sale of such equipment fails to qualify for exemption from the tax since it did not represent the sale of all or substantially all the assets of, or the reorganization or liquidation of the suppliers business.
Accordingly, I find no basis for correction of the assessment in this case which was previously paid in full.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner