Was laundry equipment sold with a self-service laundry exempt when the owner separately remained in the laundry-equipment sales business?

Plain-English summary

At one location, an owner operated both a self-service laundry and a business selling laundry equipment, with separate records for each. In February 1951, the owner sold the self-service laundry and the equipment used in it but continued selling laundry equipment from the same location.

Board counsel agreed that the transferred equipment had apparently been used only in the service enterprise, not in a permit-requiring retail activity. That satisfied the first part of section 6006.5(a).

The sale still was taxable under the second part. Because the owner held a seller's permit for selling the same type of laundry equipment, counsel treated the transfer as one of a series of taxable retail sales rather than an exempt occasional sale.

Two-part test, cited enclosure, and source limits

Assistant Counsel W. W. Mangels answered a November 25, 1952 letter from J. V. L--- of A--- L--- S--- and E--- Co. The requester operated a self-service laundry and a laundry-equipment sales business at the same place but kept separate records. In February 1951, the requester sold the self-service laundry and its equipment while continuing the equipment-sales business at that location.

Counsel parsed section 6006.5(a) in two parts. First, the equipment apparently had been used only in a separate service enterprise rather than an activity requiring a seller's permit. That part was satisfied. Second, however, the transfer could not be one of a series sufficient in number, scope, and character to constitute a permit-requiring activity. Because the requester already held a permit to sell laundry equipment of the same type, counsel regarded this transfer as a taxable retail sale in that series.

The letter also cited Sales and Use Tax Ruling 81 and said a copy was enclosed. CDTFA's PDF does not reproduce that enclosure, so this page does not attribute any additional proposition to it.

The PDF does not include the November 25 request, separate business records, February 1951 sale agreement or transfer records, equipment list, use history, seller's permit, other equipment-sale records, prices, invoices, returns, tax calculation, assessment, payment, refund claim, protest, appeal, Ruling 81 enclosure, or later outcome. It copies an unidentified auditing recipient but gives no administrative disposition.

The live annotation preserves the two businesses at one place, sale of the service laundry and equipment, and non-occasional-sale result. It omits the request and sale dates, separate records, continued equipment-sales business, service-only-use first limb, same-type property and series-of-sales second limb, section 6006.5(a), missing Ruling 81 enclosure, copied auditor, missing records, and absent tax outcome.

What this means for you

Owners operating service and equipment-sales businesses

Separate books and service-only use did not decide the result when the seller also regularly sold the same kind of equipment.

Accountants and tax professionals

Test both parts of the occasional-sale rule: how the asset was used and whether the sale belongs to a broader series requiring a seller's permit.

Common questions

Q: Were the two businesses separately recorded?
A: Yes.

Q: Was the equipment used only in the self-service laundry?
A: Apparently yes, according to the letter.

Q: Why was the sale nevertheless taxable?
A: The owner held a permit and continued a business selling the same type of equipment.

Q: Did selling the service business end the equipment-sales activity?
A: No. That retail business continued at the same location.

Q: Which part of the occasional-sale test did the equipment satisfy?

A: Counsel said it apparently satisfied the property-use limb because it had been used only in the separate service enterprise.

Q: Why did the other part fail?

A: The owner held a permit and continued selling laundry equipment of the same type, so counsel treated the transfer as part of that series of taxable sales.

Q: Can this page verify what Ruling 81 said?

A: No. The letter cites it and says a copy was enclosed, but the official PDF does not include the enclosure.

Citations and references

• California Revenue and Taxation Code § 6006.5(a)
• California Sales and Use Tax Ruling 81 — cited as enclosed but not included
• November 25, 1952 request, separate records, February 1951 transaction, equipment and permit records, sales and tax records, and later outcome — described or implicated but not included

Verbatim support

From the official February 16, 1953 Assistant Counsel letter:

Separate records were kept. In February of 1951 the self-service laundry was sold but you continued to operate the business of selling laundry equipment at the same place of business.

Since this equipment was apparently only used in connection with a separate service enterprise the first part of Section 6006.5(a) is satisfied.

It is our opinion, however, that inasmuch as you hold a seller's permit for selling laundry equipment of the type sold, that we should regard the sale, not as an occasional sale, but as a taxable retail sale as one of a series of taxable sales of such personal property in accordance with the latter part of Section 6006.5(a).

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 395.0240
• Original supporting opinion: 395.0240 PDF

Original ruling text

395.0240

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

February 16, 1953

Mr. J. V. L--A--- L--- S--- and E--- Co.
XXXX --- Avenue
--- --- 6, California

Your letter of November 25,
1952

Dear Mr. L---:
You state that, at the same place of business, you operated two businesses, a selfservice laundry and a business of selling laundry equipment. Separate records were kept. In February of 1951 the self-service laundry was sold but you continued to operate the business of selling laundry equipment at the same place of business. You inquire whether the sales tax should apply to the sale of the laundry equipment, which had been used in the self-service laundry, and which was transferred when the self-service laundry was sold. It is true that the sales tax does not apply to occasional sales. An occasional sale is defined, in part, under Section 6006.5(a) of the California Sales and Use Tax Law as a sale of property not held or used in the course of an activity for which a seller is required to hold a seller’s permit, provided such sale is not one of a series of sales sufficient in number, scope and character to constitute an activity requiring the holding of a seller’s permit. (See also Sales and Use Tax Ruling 81, copy enclosed. Since this equipment was apparently only used in connection with a separate service enterprise the first part of Section 6006.5(a) is satisfied. It is our opinion, however, that inasmuch as you hold a seller’s permit for selling laundry equipment of the type sold, that we should regard the sale, not as an occasional sale, but as a taxable retail sale as one of a series of taxable sales of such personal property in accordance with the latter part of Section 6006.5(a). Very truly yours,

W. W. Mangels
Assistant Counsel

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