Tax Type
Retail Sales and Use Tax
Description
Occasional sale; Lease of dental equipment
Topic
Collection of Delinquent Tax
Exemptions
Property Subject to Tax
Taxability of Persons and Transactions
Date Issued
08-09-1993
August 9, 1993
Re: §58.1-1821 Application: Retail Sales and Use Tax
Dear*************
This will reply to your letter in which you seek correction of a sales and use tax assessment for**************(the Taxpayer).
FACTS
Taxpayer operates a dental practice. An audit for the period January 1989 through December 1991 produced an assessment for the Taxpayer's failure to remit the sales and use tax on the lease and purchase of various items of tangible personal property. The only transaction under protest is the purchase of dental equipment previously leased from****************(the Lessor).
In July 1985 the Taxpayer purchased the Lessor's dental practice. Because it was advantageous to both parties, dental equipment which was used by the Lessor in his practice was leased to the Taxpayer. The lease agreement stipulated a five year lease period, at the end of which period the Taxpayer had the option to purchase the equipment.
In July 1989, prior to the expiration of the lease agreement, the Taxpayer negotiated to purchase from the Lessor all of the equipment subject to the lease. While you do not protest the tax on the monthly lease payments, you contend that the sale is an exempt occasional sale because: (i) the Lessor never was a dealer in dental equipment; (ii) the sale represented the sale of all or substantially all of the assets held by the Lessor; and (iii) the sale constituted the liquidation of the Lessor's rental business.
Determination
I cannot agree that the Lessor was never a dealer in dental equipment. he enclosed Public Document 86-179 (8/26/86) sets out the department's current policy regarding this issue. As noted in the ruling letter, any person engaged in the business of leasing tangible personal property to others is required to register as a dealer and collect and pay the tax on gross proceeds. The Lessor's failure to register in the instant case does not negate the fact that he was acting as a dealer.
However, the ultimate sale of the dental equipment from the Lessor to the Taxpayer in the present case may qualify as an occasional sale for purposes of exemption from. the sales and use tax. Va. Code §58.1-602 defines an "occasional sale" to include:
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- 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 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 sale or exchange of all or substantially all the assets of any business and the reorganization or liquidation of any business, provided such sale 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.
Therefore, when the Taxpayer and Lessor agreed to the sale. the lease contract was terminated by mutual consent. Because the sale was made outside the terms of the lease contract, it may qualify as an occasional sale provided that it can be shown by affidavit from the Lessor or other incontrovertible evidence that the transaction represented the sale of all or substantially all of the assets of the Lessor's leasing business. Upon receipt of such evidence, the contested sale will be removed from the audit assessment.
Accordingly, collection activity on the outstanding balance of the assessment will remain suspended for the next 60 days pending receipt of the required documents as noted above. such documents to the department's Office of Tax Box 1880, Richmond, Virginia 23282-1880.
Sincerely,
W. H. Forst
Tax Commissioner
OTP/6262I
Rulings of the Tax Commissioner