Was a one-time sale of computer equipment to an unrelated buyer exempt as an occasional sale?

Plain-English summary

Taxpayers planned a one-time sale of computer equipment to an unrelated third party. They were not in the business of selling similar equipment, the assets had never been inventory, and they had not been purchased for resale.

Florida found that the transaction qualified as an occasional or isolated sale. The facts showed a single asset disposition, no identified prior sale affecting the rule's frequency limit, and no specific regulatory exclusion.

The sale therefore was exempt from Florida sales and use tax.

What this means for you

A business-asset sale can qualify even when the property was not originally bought for resale. The seller's business, inventory treatment, purchase purpose, transaction frequency, and regulatory exclusions all matter.

Common questions

Did the equipment have to be sold within twelve months? No. The rule limited the number of sales within a twelve-month period rather than requiring disposition within twelve months.

Could inventory qualify? Not on these facts. The ruling relied on the equipment never having been held in inventory.

Did the original purchase treatment prevent the exemption? No. The ruling concluded the one-time sale qualified under the presented facts.

Citations and references

• Fla. Stat. § 212.02(2) (business excludes qualifying occasional or isolated sales)
• Fla. Stat. § 212.05 (sales tax on retail sales)
• Fla. Admin. Code r. 12A-1.037 (occasional or isolated sales)
• Fla. Stat. § 213.22 (Technical Assistance Advisements)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 06A-013

Original ruling text

SUMMARY
QUESTION: Whether, notwithstanding the taxpayers' exemption at the time of purchase, the one-time sale of
business assets by an entity to an unrelated third party is an isolated or occasional sale, and therefore exempt from
sales tax.
ANSWER - Based on Facts Below: The one-time sale of computer equipment by the taxpayer qualifies as an
occasional or isolated sale, and thus is exempt.

June 2, 2006

Re: Technical Assistance Advisement 06A-013
Taxpayer Identification Number: XX
Taxpayer Identification Number: XX
Collectively, the "taxpayers"
Sales and Use Tax
Occasional or Isolated Sales
Section 212.05 F.S. ("Florida Statutes")
Rule 12A-1.037, F.A.C. ("Florida Administrative Code")
Dear :
This is in response to your correspondence to the Department, dated October 13, 2005, and February 3, 2006,
requesting the Department's issuance of a Technical Assistance Advisement ("TAA") pursuant to Section 213.22,
F.S., and chapter 12-11, F.A.C., regarding the occasional or isolated Sales sale of computer equipment. An
examination of your letter established that you complied with the statutory and regulatory requirements for issuance of
a TAA. Therefore, the Department is hereby granting your request for issuance of a TAA.
ISSUE
Whether, notwithstanding the taxpayers' exemption at the time of purchase, the one-time sale of business assets by
an entity to an unrelated third party is an isolated or occasional sale, and therefore exempt from sales tax.
FACTS
Your letter dated October 13, 2005, provides the following relevant facts:
The taxpayers are entering into agreements with a third-party computer company ("Computer Co.") to outsource their
information technology functions. As part of the agreement, the taxpayers will divest certain information technology
assets to the Computer Co. in a one-time sale.

The taxpayers were not required to pay sales tax when these assets were originally purchased because of their
classification as Internal Revenue Code s. 501(c)(3) entities. The purchase of the equipment occurred prior to the
three-year period and is outside the statute of limitations. The taxpayers possess valid Florida sales and use tax
exemption certificates.
This is a one-time sale for both taxpayers, and as such, will occur within a twelve-month period.
TAXPAYERS' ARGUMENT
It is the position of the taxpayers that the transaction described above should qualify as an occasional or isolated sale
of tangible personal property, and thus be exempt from Florida sales and use tax.
APPLICABLE STATUTES AND RULES
Section 212.05, F.S., provides, in part:
It is hereby declared to be the legislative intent that every person is exercising a taxable privilege who engages in the
business of selling tangible personal property at retail in this state....
Section 212.02(2), F.S., provides, in part:
(2) "Business" means any activity engaged in by any person, or caused to be engaged in by him or her, with the object
of private or public gain, benefit, or advantage, either direct or indirect. Except for the sales of any aircraft, boat,
mobile home, or motor vehicle, the term "business" shall not be construed in this chapter to include occasional or
isolated sales or transactions involving tangible personal property or services by a person who does not hold himself
or herself out as engaged in business....
Paragraph 95.091(3)(a), F.S, provides, in part:
With the exception of taxes levied under chapter 198 and tax adjustments made pursuant to ss. 220.23 and
624.50921, the Department of Revenue may determine and assess the amount of any tax, penalty, or interest due
under any tax enumerated in s. 72.011 which it has authority to administer...
1.a. For taxes due before July 1, 1999, within 5 years after the date the tax is due, any return with respect to the tax is
due, or such return is filed, whichever occurs later; and for taxes due on or after July 1, 1999, within 3 years after the
date the tax is due, any return with respect to the tax is due, or such return is filed, whichever occurs later;
b. Effective July 1, 2002, notwithstanding sub-subparagraph a., within 3 years after the date the tax is due, any return
with respect to the tax is due, or such return is filed, whichever occurs later;....
Rule 12A-1.037, F.A.C., provides, in part:

(1) Occasional or isolated sales or transactions involving tangible personal property or taxable services are exempt,
provided the sales or series of sales meet the requirements set forth in this rule, regarding: the intent of the parties;
the frequency and duration of the sales; the type of tangible personal property or services offered for sale; the location
where the sales take place; and the status of the parties, as it relates to the tangible personal property or taxable
services being sold.

(3)(a) An exempt occasional sale or series of sales occurs when there is a sale by the owner of tangible personal
property, which meets the requirements set forth below, regarding the frequency and duration of the sales, the type of
tangible personal property sold, the location of the sales, and the status of the parties as it relates to the property
being sold.
(b) An exempt occasional sale or series of sales by the owner of tangible personal property must occur under the
following circumstances:

1. The seller must have paid any applicable sales or use tax on such property unless at the time of sale the statute of
   limitations for assessment of sales and use tax on the property had expired, as provided in section 95.091(3), F.S.
   (emphasis added)
2. Such sales or series of sales occur no more frequently than two times during any 12 month period.

b. The term "series of sales," for purposes of this rule, means any multiple sales of tangible personal property, for a
limited duration not to exceed 30 consecutive days, which as to any single sale within the series of sales would not be
taxable under the requirements set forth in this rule for each such single sale. Each series of sales shall be considered
a single sale....

3. Sales by a dealer of tangible personal property that was used in the business, which is not inventory and which was
   not originally purchased for resale, may qualify as an occasional sale, regardless of the items' similarity to any items
   sold in the regular course of the dealer's trade or business, provided the items are not specifically excluded, as set
   forth in subsection (5) of this rule, from the occasional sales exemption, and provided all other requirements set forth
   herein are met.

(5) The sale of tangible personal property, or the sale of services, under any one of the following circumstances, is
taxable and is not an occasional sale if:
(a) Such sale or series of sales occurs more than two times within any 12 month period (tax shall apply only to the
third and subsequent sale(s)).
(b) Such property was originally purchased or acquired for resale.
(c) Such sale or series of sales are made on the same commercial premises or from a location, which is not its fixed

and permanent business location, and which is in competition with other persons required to collect tax, regardless of
whether such sales may otherwise qualify as occasional sales, and regardless of the similarity of the tangible personal
property to that of the other dealers' tangible personal property.

LAW AND DISCUSSION
Generally, Florida sales tax applies to the retail sale of tangible personal property within Florida, as well as certain
enumerated taxable services. See section 212.05, F.S. The taxable privilege upon which the sales tax is imposed is
the engagement in the business of selling tangible personal property. See section 212.05, F.S. Florida law defines
"business" to exclude occasional and isolated sales. See section 212.02(2), F.S. Rule 12A-1.037, F.A.C., outlines the
characteristics of an occasional or isolated sale. See Rule 12A-1.037(1), F.A.C.
As stated in your letter, the regulatory provisions applicable to the contemplated transaction are found in Rule 12A1.037(3), F.A.C. In order to qualify as an occasional sale, these provisions generally require that 1) taxpayer have
paid any applicable tax on its purchase of the equipment, unless the statute of limitations provided in Subsection
95.031(3), F.S., applies, 2) taxpayer have engaged in no more than one other sale within the prior twelve months, 3)
the equipment not be in taxpayer’s inventory, 4) the equipment not have been purchased for resale, and 5) the
transaction not be specifically excluded by another provision.
You state in your letter that the taxpayers are not engaged in the business of selling similar equipment, the equipment
has never been in taxpayers inventory, the taxpayers did not purchase the equipment for resale, and no provision in
Rule 12A-1.037, F.A.C., specifically excludes the contemplated transaction from occasional sale treatment.
You state that all of the assets will be sold in a one-time sale, and as such, the requirement that there not be any other
similar sales within any 12-month period is satisfied. I point out here that prior unrelated sales affect the qualification
of your intended transaction as an occasional or isolated sale. Nothing in your facts indicates that a prior sale exists.
However, the requirement is not that the equipment be sold within twelve months, but that no more than two sales
occur within any twelve-month period.
CONCLUSION
Based upon the information submitted, the one-time sale of computer equipment by the taxpayers qualify as an
occasional or isolated sale, and thus is exempt.
This response constitutes a Technical Assistance Advisement under Section 213.22, F.S., which is binding on the
Department only under the facts and circumstances described in the request for this advice as specified in Section
213.22, F.S. Our response is predicated on those facts and the specific situation summarized above. You are advised
that subsequent statutory or administrative rule changes, or judicial interpretations of the statutes or rules, upon which
this advice is based, may subject similar future transactions to a different treatment than expressed in this response.
You are further advised that this response, your request and related backup documents are public records under

Chapter 119, F.S., and are subject to disclosure to the public under the conditions of s. 213.22, F.S. Confidential
information must be deleted before public disclosure. In an effort to protect confidentiality, we request you provide the
undersigned with an edited copy of your request for Technical Assistance Advisement, the backup material and this
response, deleting names, addresses and any other details which might lead to identification of the taxpayer. Your
response should be received by the Department within 15 days of the date of this letter.
Sincerely,
Jimmy Kalfas
Senior Tax Specialist
Technical Assistance and Dispute Resolution
(850) 922-4845
Record ID# 19445