Tax Type
Retail Sales and Use Tax
Description
Purchase of corporate assets; Occasional sale
Topic
Taxability of Persons and Transactions
Date Issued
04-28-1989
April 28, 1989
Re: §58.1-1821 Application/ Sales and Use Tax
Dear*****************
This will reply to your letter of January 9, 1989, on behalf of ********* (taxpayer), seeking correction of an assessment of sales and use tax for the period July, 1984 through May, 1987.
FACTS
The taxpayer recently purchased all the assets of a utility plant training facility from **********(seller), in exchange for 50% of the taxpayer's stock. The seller formerly operated the training facility as a training division of its manufacturing business. The taxpayer was audited and held liable for its untaxed purchase of such assets.
The taxpayer contests the assessment, contending that the sale of all the training facility assets in a single transaction qualifies as the exempt occasional sale of all or substantially all the assets of a business or the reorganization or liquidation of a business, under Virginia Code §58.1 -608(15).
DETERMINATION
Virginia Code §58.1-608(15) exempts "an occasional sale" from the sales and use tax. The term "occasional sale" is defined in Virginia Code §58.1-602(12) as:
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- [A] sale of tangible personal property not held or used by the 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 of the assets 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.
The term "business," is defined in Virginia Code §58.1-602(1) to include, "any activity engaged in by any person, or caused to be engaged in by him, with the object of gain, benefit or advantage, either directly or indirectly. "
Based on the strict construction of all exemption statutes as confirmed by the Virginia Supreme Court in Winchester T.V. Cable Company v. State Tax Commissioner, 216 Va. 286, 217 S.E. 2d 885 (1975), I cannot agree that the sale of assets in the instant case qualifies as an exempt "occasional sale" of all or substantially all the assets of a business or the reorganization of a business.
Despite the fact that the taxpayer's seller may, for bookkeeping and record keeping purposes, have treated its training facility as a separate part of its manufacturing business, the training facility assets themselves were inextricably linked to the manufacturing business of the seller. The training facility assets in this case were used by the seller to provide classroom and laboratory training in the operation and maintenance of equipment identical to that produced in its manufacturing business. Given the highly technical nature of the seller's manufactured equipment, the training facility was directly supportive of and essential to the success of its manufacturing business, the activity for which the seller was required to hold a registration certificate.
These facts standing alone are sufficient to distinguish this case from those cited by the taxpayer in support of an exemption. In each of the cases cited, the assets sold were used in activities entirely unrelated to the activities for which the taxpayers were required to hold registration certificates .
Furthermore, the fact that all of the seller's customers may not have availed themselves of its training facility, or that the charge made for the training was the same, whether or not a customer purchased the seller's manufactured products, does not render the training facility a business separate and distinct from the seller's manufacturing business.
Accordingly, I find no basis for correction of the assessment which is now due and payable. If after a review of this determination, the taxpayer still seeks a meeting with department officials, please contact the Tax Policy Division to arrange such a meeting.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner