89-307 | Virginia Tax

Tax Type

Retail Sales and Use Tax

Description

Partial sale of assets; Occasional sale

Topic

Taxability of Persons and Transactions

Date Issued

11-07-1989

November 7, 1989

Re: §58.1-1824. Protective Claim/Sales and Use Tax

Dear****************

This will reply to your letter of February 17, 1989 in which you file a protective claim for refund on behalf of your client, ***************(the taxpayer).

FACTS

The taxpayer was audited for the period of January 1983 through September 1985. During the audit period, the taxpayer operated as many as eleven restaurants in Virginia. All restaurants operated as one corporation. During the audit period the taxpayer sold three of its restaurants, leaving eight of the restaurants still operating as a corporation. The auditor held the sale of the furniture, fixtures and equipment of the three restaurants sold as taxable. The taxpayer felt the sale of the three restaurants was an "occasional sale" and therefore exempt from the tax.

A Memorandum of Lien was filed against the taxpayer for the audit liability on January 30, 1987. Demand for Payment of the lien was issued on January 25, 1989 for payment no later than February 15, 1989. on February 17, 1989, the attorney filed a protective claim for refund due to the fact that the lien had been satisfied by the bank.

DETERMINATION

Virginia Code §58.1-608(10)(b) exempts an occasional sale from the retail sales and use tax. An "occasional sale" is defined in Virginia Code §58.1-602 as follows:

- 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 of 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.

§630-10-75(b)(2) of the Virginia Retail Sales and Use Tax Regulations also defines "occasional sale" as follows:

- 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" means 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; Emphasis added.

As can be seen from the above, a registered dealer is not allowed an occasional sale exemption for the mere fact that the article sold differs in type or class from the products he normally sells. Rather, if the article sold is used in the course of a registerable activity, such as the sale of food products, the exemption applies only if the sale of all or substantially all of the assets of a business occurs. In the taxpayers case, the taxpayer sold only a portion (27.27%) of the corporation. For this reason, the audit assessment was correct and the protective claim must be denied.

I have enclosed for your information copies of previous determinations in similar cases. If you should have any further questions, please feel free to contact the department.

Sincerely,

W. H. Forst
Tax Commissioner

Rulings of the Tax Commissioner