Virginia – Fixed Asset Sales Tax Refund

SALT Report 2229 – The Virginia Tax Commissioner issued a ruling regarding a refund claim for sales tax paid on fixed assets purchased in an occasional sale. The Taxpayer in this case is in the automotive industry and entered into an agreement to purchase an automotive repair service. The purchase agreement stated that the Taxpayer was acquiring all of the seller’s assets which included furniture, fixtures, equipment, all inventory, all customer and supplier lists, all business records, correspondence, files, and other related books and records, as well as all intangible property and intangible property rights owned by the seller.

The Taxpayer paid tax on certain fixed assets listed in the purchase agreement. However, the Taxpayer believes that the sale at issue is an occasional sale and therefore, not subject to sales and use tax. The Taxpayer filed a refund request for the amount of tax overpaid.

Upon review of the case, the Commissioner referred to Virginia Code 58.1-609.10 2 which states that retail sales and use tax does not apply to “an occasional sale as defined in 58.1-602…” Virginia Code 58.1-602 defines an occasional sale 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, 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.”

Based on the information provided and the terms of the asset purchase agreement, the Commissioner determined that the sale at issue is for the sale of all the assets of the Sellers’ business. Thus, the sale is deemed an occasional sale and is not subject to the retail sales and use tax.

Accordingly, the Commissioner removed the disputed items from the fixed assets exceptions list and the audit assessment was adjusted. The Taxpayer received a refund of the tax, penalty and interest paid on those items.

For Further Information

Virginia Department of Taxation –Ruling of the Tax Commissioner 13-22