Was a $17 million sale of a broadcaster's operating assets exempt from Florida sales tax as an occasional or isolated sale?

Plain-English summary

Florida treated the proposed $17 million transfer of a broadcasting business's assets as an occasional and isolated sale, so the non-inventory tangible personal property qualified for the sales-tax exclusion.

The seller planned to transfer the assets used to operate the business, including broadcast and office equipment, furniture, fixtures, supplies, programs, intellectual-property rights, software, and business records. Cash, receivables, organizational documents, and specified insurance items were excluded. The purchaser intended to continue the business, and the seller had made fewer than three equipment sales in any twelve-month period.

The Department focused on the complete liquidation of the tangible personal property and the rules covering a sale of business assets with the business. It concluded that the transaction qualified as an occasional and isolated sale under Rules 12A-1.037 and 12A-1.055.

The exclusion had a clear carve-out: aircraft, boats, mobile homes, and motor vehicles remained taxable. The cited rule noted that another specific exemption could sometimes apply to those items, but the TAA did not find them covered by the isolated-sale result itself.

What this means for you

Owners selling an entire business

A genuine transfer of the business together with all or substantially all of its non-inventory tangible assets may qualify as an isolated sale. The result depends on the structure and facts of the transfer, not merely calling it an asset sale.

Buyers

Identify excluded vehicle-type assets separately. Even when the broader business-asset transfer qualifies, an included aircraft, boat, mobile home, or motor vehicle can remain taxable.

Transaction advisors

Document the assets transferred, any assets retained, the seller's recent sale frequency, the agreement date, and closing timing. Rule 12A-1.037 described a 30-day completion condition for one isolated-sale route and a possible occasional-sale analysis if that period was missed.

Accountants and tax professionals

Separate inventory from non-inventory business assets and do not extend this TAA to piecemeal equipment sales without reviewing the frequency, duration, parties, location, and other factors listed in the rule.

Common questions

Q: What was being sold?
A: The operating assets of a broadcasting business, including tangible and intangible assets, for $17 million cash.

Q: Why did the tangible personal property qualify? A: The Department treated the transfer as a complete liquidation and a sale of business assets with the business under the cited isolated-sale rules.

Q: Were all assets exempt?
A: No. Aircraft, boats, mobile homes, and motor vehicles were excluded from this result and remained taxable unless another exemption applied.

Q: Did the purchaser's plan to continue the business defeat the exemption? A: No. That fact was disclosed, and the Department still found the contemplated transaction occasional and isolated.

Q: Did the seller regularly sell equipment? A: The facts stated there had been fewer than three equipment sales in any twelve-month period.

Q: Does every sale of all business assets qualify? A: No. This TAA is limited to the stated agreement and facts, and the rules impose specific conditions and exclusions.

Citations and references

• Fla. Stat. § 212.05(1) — sales tax and taxable occasional sales of specified vehicle-type property.
• Fla. Stat. § 212.02(2) — "business" excludes occasional or isolated sales except specified vehicle-type property.
• Fla. Admin. Code r. 12A-1.037 — requirements, isolated-sale transactions, exclusions, and timing.
• Fla. Admin. Code r. 12A-1.055(1), (6)(b) — sale of a business and non-inventory assets used in it.
• Fla. Admin. Code r. 12A-1.007(26)(a)3.-5. — other exemptions referenced for specified vehicles.
• Fla. Stat. § 213.22 — Technical Assistance Advisements.
• Fla. Stat. ch. 119 — public-record disclosure with identifying details deleted.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 98A-088

Original ruling text

SUMMARY

The contemplated sale of all business assets in complete liquidation of all tangible personal property is an occasional or isolated sale. Only the sale of aircraft, boats, mobile homes, and motor vehicles are taxable.

Dec 03, 1998

Re: Technical Assistance Advisement 98A-088 Sales and Use Tax - Occasional or Isolated Sale Section 212.02(2), F.S. Rule 12A-1.037, F.A.C. XXX (Licensee) XXX (Taxpayer) XXX (Purchaser)

Dear :

This is in response to the letter dated October 28, 1998, requesting an advisement regarding whether the sale of a business qualifies as an occasional or isolated sale.

FACTS

Licensee and Taxpayer entered into an agreement for the sale of the assets of a business to Purchaser. Taxpayer owns the assets and Licensee is the general partner of the business. Licensee holds the FCC license to broadcast and is a local broadcaster with operating and administrative facilities. The Purchaser plans to continue the existing business.

The terms of the sale are included in the accompanying letter of intent dated August 4, 1998. The contemplated sale transfers the assets used in the conduct of the business and operations of the business. The assets include all licenses, permits, etc., issued by the FCC or other government agencies; contracts and leases; all broadcast and other equipment, office furniture and

fixtures, office materials, and supplies, spare parts and other tangible personal property; all programs, programming material, and music libraries; sellers' rights in and to trademarks, trade names, service marks, patents, franchises, copyrights, jingles, logos, slogans, licenses, permits and privileges, trade secrets, and other intangible property rights and interests; and all files, records, studies, data, lists, filings, general accounting records, books of accounts, computer programs, software and logs.

Excluded assets are any of the seller's organizational documents; cash or similar investments; accounts receivable; and contracts of insurance proceeds and insurance claims. There have been fewer than three equipment sales by the seller in any twelve-month period. The consideration to be given for the above-mentioned items is seventeen million dollars ($17.0 million) in cash. The sale closing is scheduled to occur no later than ten days after the consent of the FCC to the assignment of the station's licenses has become a final order.

TAXPAYER POSITION

Excluding any aircraft, boats, mobile homes, or motor vehicles included in the tangible personal property of Licensee and Taxpayer, the proposed transaction should be exempt in its entirety from sales tax as an occasional or isolated sale.

RELEVANT AUTHORITY

Section 212.05(1), 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, including the business of making mail order sales, or who rents or furnishes any of the things or services taxable under this chapter, or who stores for use or consumption in this state any item or article of tangible personal property as defined herein and who leases or rents such property within the 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.

b. Each occasional or isolated sale of an aircraft, boat, mobile home, or motor vehicle of a class or type which is required to be registered, licensed, titled, or documented in this state or by the United States Government shall be subject to tax at the rate provided in this paragraph....

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....

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.

(2) An exempt isolated sale or transaction occurs when an entity, which for purposes of this rule is a "person," as defined in s. 212.02(12), F.S., required to be registered

as a dealer, either distributes tangible personal property in exchange for the surrender of a proportionate interest in an entity, or transfers all, or substantially all, of the property of a person's business, or a division thereof. Also, the transfer of property to an entity in exchange for an interest therein in proportion to the tangible personal property contributed is exempt as an isolated sale.

(a) The isolated sales exemption does not apply to:

1. Sales of aircraft, boats, mobile homes, or motor
   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; however, such sales may be exempt if they meet the criteria in Rule 12A-1.007(26)(a)3., 4., or 5., F.A.C....

(b) A transfer, distribution, exchange or sale of tangible personal property to or by an entity is an exempt isolated sale when:....

3. The distribution or sale by an entity in complete
   liquidation of non-inventory tangible personal property is made pursuant to the dissolution of that entity or a division thereof....

(d) The sale of business assets in conjunction with the sale of the business as provided in Rule 12A-1.055(6)(b), F.A.C., other than inventory and aircraft, boats, mobile homes, and motor vehicles, qualifies as an isolated sale provided the sale and the transfer of the assets of the business is completed within 30 days from the date of the agreement for the sale of the business. If the sale of the business is not completed within the 30 day period, the sale may nevertheless qualify as an occasional sale provided the sale complies with the requirements in subsection (3), below, and provided none of the elements set forth in subsection (5), below, are present....

Rule 12A-1.055(1) and (6)(b), F.A.C., provides:

(1)(a) For purposes of this rule, the term "business" is as defined in s. 212.02(2), F.S.

(b) When any dealer under Chapter 212, F.S., sells out his business or stock of goods, he shall make a final return and pay any such tax, interest, or penalty due within fifteen days after the date of sale....

(6)(b) The sale to the purchaser of a business, as part of the sale of the business, of tangible personal property other than inventory that had been used by the seller of the business in conducting the business is an occasional or isolated sale, and is thus not taxable, with the exception of aircraft, boats, mobile homes, and motor vehicles, and with other exceptions described in Rule 12A-1.037, F.A.C.

DETERMINATION

Here, the contemplated sale included business assets to be sold in complete liquidation of all of the tangible personal property. As provided by Rule 12A-1.037(2)(b)3., and (d), F.A.C., and Rule 12A-1.055(6)(b), F.A.C., the proposed transaction is an occasional and isolated sale, with the sale of any aircraft, boats, mobile homes, or motor vehicles subject to sales tax.

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 and your request are public records under Chapter 119, F.S., which are subject to disclosure to the public under the conditions of Section 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 response.

Sincerely,

Charles Wallace
Senior Tax Specialist
Technical Assistance and Dispute Resolution (850) 922-4734

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