Which assets in the sale of a phosphate business qualified for Florida's resale or occasional-sale exemptions?

Subject

Occasional or Isolated Sale

Plain-English summary

Different parts of the phosphate-business asset sale received different tax treatment. Phosphate-chemical inventory and salvage property that the buyer would hold for resale were exempt if the buyer gave the seller a properly executed resale certificate at the time of sale.

The mining, production, chemical-processing, and distribution equipment qualified as an occasional or isolated sale because the seller was not in the business of selling its operating assets. That result depended on the seller not having enough prior substantial operational-asset sales to make this the third or later such sale under the ruling's twelve-month frequency test.

The occasional-sale exemption did not cover aircraft, boats, mobile homes, motor vehicles, or other vehicles required to be titled, registered, licensed, or documented. Transfers of those items remained taxable.

What this means for you

An asset purchase is not classified as one indivisible tax event. Inventory held for resale, ordinary operational assets, and titled vehicles can each follow a different rule, and the seller's prior sale history matters.

Common questions

Q: Were inventory and salvage property exempt? Yes, if held for resale and supported by the required resale certificate.

Q: Were the operating assets exempt? Yes, as an occasional or isolated sale on the stated business and frequency facts.

Q: Did the exemption cover titled vehicles? No.

Citations and references

• Fla. Stat. §§ 212.02(2), (15)(a), (16)(a) — business, retail sale, and sale definitions
• Fla. Stat. §§ 212.05(1)(a)1.a. and 212.06(1)(a), (2)(a) — taxable retail sales and dealers
• Fla. Admin. Code r. 12A-1.037(1)(a), (b) — occasional or isolated sales
• Fla. Admin. Code r. 12A-1.038(1) — resale certificates
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 93A-043

Original ruling text

Jul 16, 1993

RE: TAA 93A-043
Occasional or Isolated Sale of Tangible Personal Property
Sections 212.02(2),(15)(a), and (16)(a), 212.05(1)(a)1.a.,
212.06(1)(a) and (2)(a), F.S.
Rules 12A-1.037(1)(a) and (b), 12A-1.038(1), F.A.C.

Dear :

This is in response to your letters of April 16, 1993,
April 29, 1993 and May 3, 1993, in which you requested the
issuance of a technical assistance advisement regarding the sale
of certain assets from XXX [hereinafter "Seller"] to XXX
[hereinafter "Buyer"] under an asset purchase agreement and
whether or not the sale of the assets is exempt from sales tax
under the sale for resale exemption and the occasional or
isolated sale provision found in Chapter 212, F.S., and rules of
the Florida Administrative Code.

Your letters provide in part:

"A. Taxpayer Information

"[Seller] is a corporation, with its principal business
address at XXX... [Seller] is registered as a `dealer' for sales
tax purposes in XXX.

"[Buyer] is a corporation with its principal business
address at XXX... [Buyer] is registered as a `dealer' for sales
tax purposes.

"B. Description of Phosphate Business

"[Seller] is engaged in the production, distribution, and
sale of phosphate rock, fertilizers, agricultural chemicals, and
related products (hereinafter, the production, distribution, and
sale of these items is generally referred to as the `Phosphate
Business'; the items produced, distributed, and sold by [Seller]

in the conduct of the Phosphate Business are referred to as
Phosphate Chemicals'). [Seller's] Phosphate Business facilities are located in XXX (hereinafterPhosphate
Operations') [Seller's] Phosphate Operations can generally be
described as follows:

"1. Mining and Production Facilities [Seller] mines
phosphate ore on land located in XXX. The phosphate ore is
mined utilizing large draglines. The rough ore (commonly
referred to as `matrix') is transported, via pipeline, to
beneficiation plants where impurities are removed. The
processed phosphate ore is transported to [Seller's] chemical
processing facilities or sold to third parties.
"2. Chemical Processing Facilities [Seller] operates
Phosphate Chemical processing facilities in XXX. These
facilities use the refined phosphate ore to produce a variety of
chemicals, including monoammonium phosphate, diammonium
phosphate, triple super phosphate, and phosphoric acid.
"3. Distribution Facilities [Seller] operates phosphate
distribution facilities in XXX. Primarily, these facilities
include rail and sea transportation facilities used to transport
[Seller's] Phosphate Chemicals from XXX.

"C. Proposed Sale of Assets

"The Phosphate Operations consist of the XXX, the XXX
located near XXX, the XXX located in XXX and other related
facilities and assets. [Seller] has entered into an Asset
Purchase Agreement under which [Seller] will sell to [Buyer] all
of the assets constituting the facilities or necessary to the
conduct of the operation of the facilities.

"Pursuant to the Asset Purchase Agreement, all of
[Seller's] tangible personal property that comprises the
Phosphate Operations will be sold to [Buyer] upon closing of the
transaction (the Transfer Date'). (Hereinafter the termXXX
TPP' is used to refer to all of the tangible personal property
that comprises the Phosphate Operations, including the Phosphate
Chemicals held by [Seller] on the Transfer Date.

"D. Sales of Salvage Property

"The Phosphate Business involves the use or handling of
many abrasive compounds. Consequently, phosphate companies must
undertake almost continual maintenance programs to ensure the
continued, efficient operation of their mining, production, and
chemical processing facilities. Certain aspects of these
maintenance programs are mandated by law or governmental
regulation, e.g., federal or state environmental regulations.
One consequence of the maintenance programs conducted by
[Seller] is the removal and stockpiling of obsolete, unneeded,
or defective items and materials used in [Seller's] mining,
production, and processing facilities. Apart from the continued
maintenance required of [Seller] to ensure efficient plant
operations, [Seller] from time to time finds it necessary to
replace existing facilities (including, machinery and equipment,
fixtures, structures, etc.) because of technological changes.
To summarize, [Seller] disposes of items or materials used in
the Phosphate Operations that become obsolete, unneeded, or
defective. (Hereinafter the term Salvage Property' is used to refer to these obsolete, unneeded, or defective items, and to any other TPP, other than Phosphate Chemicals, that have been disposed of by [Seller], the termOperating XXX TPP' is used to
refer to the XXX TPP, other than the Phosphate Chemicals and
Salvage Property.)

"[Seller] must remove Salvage Property from its facilities.
In some cases, [Seller] must pay a third party to remove the
Salvage Property. In other cases, [Seller] is able to sell the
Salvage Property to either scrap dealers who purchase the
Salvage Property for resale or to other persons who purchase the
property for their own use. (Hereinafter the term `Salvage
Sales' is used to refer to Sales of Salvage Property to scrap
dealers or other persons.)

"During the past twelve-month period, [Seller] has
conducted sales of Salvage Property. The Salvage Sales have
included items of tangible personal property from all phases of
[Seller's] Phosphate Operations. For example, everything from
office furniture and equipment to scrap metal has been sold by
[Seller]. Several characteristics are unique to the Salvage
Property and Salvage Sales:

"(1) the Salvage Sales were all made by [Seller] to remove
the Salvage Property from its facilities and, where
possible, to recoup the value of the Salvage Property;
"(2) the gross revenue from Salvage Sales was de minimis as
compared to the gross revenue derived by [Seller] from
sales of Phosphate Chemicals ([Seller's] 1992 Gross
Revenue from sales of Phosphate totalled $294 million
as compared to less than $300,000 for Salvage Sales);
"(3) the value of Salvage Property to be transferred as
part of the asset sale is de minimis when compared to
the value of the Operating XXX TPP; and
"(4) the Salvage Sales were completely unrelated to
proposed asset sale and were not part of an overall
business contraction plan for the Phosphate Business.

"Other than as contemplated by the by the present
transaction, during the past five years, [Seller] has not sold
its Operating XXX TPP more than twice within any twelve month
period. [Seller] has not sold its Operating XXX TPP more than
once within the past twelve month period. [Seller] holds (and
will hold on the Transfer Date) Salvage Property for sale at
scrap value. [Seller] will also hold Phosphate Chemicals for
sale to customers in the ordinary course of its businesses.
After the Transfer Date, [Buyer] will hold the Phosphate
Chemicals and Salvage Property for resale.

ISSUE

"Is [Seller's] transfer of the XXX TPP to [Buyer] in the
asset sale exempt from the sales tax under (1) the sale for resale' exemption as to a portion of the property, and (2) theoccasional or isolated sale' exemption as to the balance of the
property?"

"Analysis of Taxpayer's Transfer

"Even though the transfer of XXX TPP by [Seller] to [Buyer]
is merely a change in the form of ownership of the XXX TPP,

assuming arguendo, that the transfers constitute a sale' under the sales tax, the transfer of such property is not a taxable sale for several reasons. First, the transfer of Seller's Phosphate Chemicals does not constitute aretail sale.' See
Fla. Stat. s. 212.02(15). This conclusion assumes the taxpayer
complies with the provisions of Rule 12A-1.038. Similarly, the
transfers of the Salvage Property do not constitute retail sales
because [Buyer] will hold the Salvage Property for resale.

"The transfer of Operating XXX TPP is a non-taxable
occasional or isolated sale for the following reasons. First,
[Seller] cannot be considered to be engaged in the business of
selling Operating XXX TPP, i.e., phosphate mining, production,
or processing facilities. The principal commodities sold by
[Seller], i.e., Phosphate Chemicals, are dissimilar to the
Operating XXX TPP. Even if [Seller] can be considered to be
engaged in the business of selling Salvage Property because of
the de minimis Salvage Sales, the Salvage Property clearly
represents a type of property different than the Operating XXX
TPP for purposes of the occasional or isolated sale rule.
Second, the transfer of the Operating XXX TPP to [Buyer] is
wholly unrelated to, and isolated from, the [Seller's] frequent
Phosphate Chemicals sales and occasional Salvage Sales.
Accordingly, the transfer of the Operating XXX TPP clearly
represents an isolated sale, notwithstanding the frequent
Phosphate Chemicals sales and occasional Salvage Sales.

"REQUESTED RULING

"[Seller's] transfer to [Buyer] of the XXX TPP that is part
of the Phosphate Business is exempt from the sales tax under (1)
the sale for resale exemption as to a portion of the property,
and (2) the occasional or isolated sale exemption as to the
balance of the property."

APPLICABLE AUTHORITY

Section 212.05(1)(a)1.a., F.S., provides in part:

"212.05 Sales, storage, use tax.--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 in this state....
"(1) For the exercise of such privilege, a tax is levied on
each taxable transaction or incident, which tax is due and
payable as follows:
"(a)1.a. At the rate of 6 percent of the sales price of
each item or article of tangible personal property when
sold at retail in this state, computed on each taxable sale
for the purpose of remitting the amount of tax due the
state, and including each and every retail sale...."

Section 212.06(1)(a), F.S., provides:

"(1)(a) The aforesaid tax at the rate of 6 percent of the
retail sales price as of the moment of sale, 6 percent of
the cost price as of the moment of purchase, or 6 percent
of the cost price as of the moment of commingling with the
general mass of property in this state, as the case may be,
shall be collectible from all dealers as herein defined on
the sale at retail, the use, the consumption, the
distribution, and the storage for use or consumption in
this state of tangible personal property or services
taxable under this part. The full amount of the tax on a
credit sale, installment sale, or sale made on any kind of
deferred payment plan shall be due at the moment of the
transaction in the same manner as on a cash sale."

Section 212.06(2)(a), F.S., provides:

"(2)(a) The term `dealer,' as used in this chapter,
includes every person who manufactures or produces tangible
personal property for sale at retail; for use, consumption,
or distribution; or for storage to be used or consumed in
this state."

Section 212.02(16)(a), provides:

"(16) `Sale' means and includes:
"(a) Any transfer of title or possession, or both,
exchange, barter, license, lease, or rental, conditional or
otherwise, in any manner or by any means whatsoever of

tangible personal property for a consideration."

Section 212.02(15)(a), F.S., provides:

"(15)(a) Retail sale' orsale at retail' means a sale to
a consumer or to any person for any purpose other than for
resale in the form of tangible personal property or
services taxable under this part, and includes all such
transactions that may be made in lieu of retail sales or
sales at retail."

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, 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 termbusiness'
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 out as engaged in business, but includes
other charges for the sale or rental of tangible personal
property,...."

Rule 12A-1.037(1)(a) and (b), F.A.C., provides in part:

"(1)(a) Occasional or isolated sales of tangible personal
property made by a person who does not hold himself out as
engaged in business are exempt. However, this exemption
never applies to occasional or isolated sales of aircraft,
boats, mobile homes, motor vehicles, or other vehicles in
this state of a class or type required to be registered,
licensed, titled, or documented in this state or by the
United States Government (see Rule 12A-1.007, F.A.C.), or
to sales made by those persons who hold themselves out as
engaged in a business, notwithstanding the fact that their
sales may be few and infrequent.
"(b) An exempt occasional or isolated sale occurs when the
sale is made by the owner of tangible personal property
under the following circumstances:

"1. The seller does not hold himself out as engaged in
business and such sales or series of sales occur no more
frequently than 2 times during any 12 month period. The
third sale or series of sales of tangible items during any
12 month period makes that person engaged in that business,
and that person is required to register as a dealer and to
collect and remit tax on the third sale or series of sales
and all subsequent sales.
"2. Such sales or series of sales are not made on the same
commercial premises or from a location in competition with
other persons required to collect tax.
"3. Such sale does not involve an aircraft, boat, mobile
home, motor vehicle, or any other vehicle of a class or
type required to be registered, licensed, titled, or
documented in this state or by the United States
Government...."

Rule 12A-1.038(1), F.A.C., provides:

"(1) It is the specific legislative intent that each and
every sale, admission, use, storage, consumption or rental
is taxable under Chapter 212, F.S., unless such sale,
admission, use, storage, consumption or rental is
specifically exempt. The exempt status of the transaction
must be established by the dealer. Unless the dealer shall
have taken from the purchaser a certificate to the effect
that the property or service was purchased for resale and
bearing the name and address of the purchaser, the
effective date of the certificate and the number of his
dealer's certificate of registration, or a certificate
bearing the number of his consumer's exemption certificate,
and the effective date of the certificate, the sale shall
be deemed to be a taxable sale at retail,...."

DEPARTMENT RESPONSE

Pursuant to the above quoted sections of Chapter 212, F.S.,
and rules of the Florida Administrative Code, it is the
Department's position that Seller's sale of inventories of
phosphate chemicals held for resale and Salvage Property to
Buyer would be exempt from tax provided Buyer extends a properly

executed resale certificate to Seller at the time of sale as
required in Rule 12A-1.038, F.A.C.

The sale of the tangible personal property from Mining and
Production Facilities, Chemical Processing Facilities, and
Distribution Facilities would qualify as an occasional or
isolated sale, as Seller under the facts presented is not
considered to be in the business of selling its operational
assets, so long as Seller has not engaged in the sale of all or
a substantial portion of its operational assets twice or more in
the previous twelve months, causing this sale to become the
third or more such sale, or more than twice in any other twelve
month period.

Any transfer of ownership of an aircraft, boat, mobile
home, motor vehicle, or any other vehicle of a class or type
required to be registered, licensed, titled, or documented in
this state or by the United States Government would be subject
to sales and use tax as the occasional or isolated sale
provision is not extended to this type of tangible personal
property.

This response constitutes a Technical Assistance Advisement
under s. 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 s. 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 and your request
are public records under Chapter 119, F.S., which are subject to
disclosure to the public under the conditions of s. 213.22, F.S.
Your name, address, and any other details which might lead to
identification of the taxpayer must be deleted by the Department
before disclosure. In an effort to protect the confidentiality
of such information, we request you notify the undersigned in
writing within 15 days of any deletions you wish made to the

request or the response.

Sincerely,

Richard S. Harrod
Technical Assistant

RSH/pb
Con. #8347