Is buying shelving and store fixtures from a business that is closing down subject to Kansas sales tax?

Plain-English summary

The taxpayer was buying shelving from a company that is ceasing operations and, in the process, selling its inventory and store fixtures. The question: is that purchase subject to Kansas sales or use tax?

Start with the general rule. Kansas taxes "the gross receipts received from the sale of tangible personal property at retail" (K.S.A. 79-3603(a)). A "sale" is broadly defined as an "exchange of tangible personal property … for a consideration" (K.S.A. 79-3602(c)), and "sale at retail" means sales "for use or consumption and not for resale" (K.S.A. 79-3602(e)). The Department noted the shelving transaction is an exchange of tangible personal property, and because there is consideration, it is a "sale" that is taxable "unless explicitly exempt."

Then apply the isolated-or-occasional-sale exemption. Kansas exempts "all isolated or occasional sales of tangible personal property, services, substances or things," except certain motor vehicles (K.S.A. 79-3606). An "isolated or occasional sale" is "the nonrecurring sale of tangible personal property … by a person not engaged at the time of such sale in the business of selling such property or services" (K.S.A. 79-3602(j)).

A fact-driven answer. The Department said "whether or not a sale qualifies as isolated or occasional is a fact driven analysis," and that the letter did not contain all the needed information. It laid out a "probable scenario" and said that if the sale matches it, "the sale is an isolated or occasional sale and is exempt from Kansas retailers' sales tax." In that scenario the selling company is engaged in a business other than selling shelving at retail; acquired the shelves for use in its business; paid (or should have paid) sales or use tax when it originally bought them; used them for an administrative function or to display merchandise; did not classify them as inventory; and is now selling them because it is ceasing operations.

What this means for you

The exemption depends on the seller, not the buyer

The isolated-or-occasional-sale exemption turns on whether the seller is in the business of selling that kind of property. A retailer whose stock-in-trade is shelving would be making a taxable retail sale. A business selling off the shelves it used to run its own operation is generally making an exempt occasional sale.

Used business assets sold at a closing usually qualify

When a company that is going out of business sells the fixtures and equipment it used internally — items it already paid tax on and never held as inventory — those sales are typically exempt occasional sales. That is the "probable scenario" the Department described.

Inventory is different from fixtures

Note the ruling's care to separate fixtures the company used from inventory it held for sale. Selling off inventory (the goods the business was in the trade of selling) is not automatically an occasional sale; the exemption fits the used store fixtures and similar business-use assets.

It is fact-driven — document the scenario

Because the Department would not give an unconditional answer without full facts, keep records showing the seller's situation: what the property was used for, that tax was paid when it was acquired, that it was not inventory, and that the sale is a one-time event tied to closing. Those facts are what make the exemption apply.

Common questions

Do I owe sales tax when I buy used shelving from a business that is closing?
Probably not, if the sale is an isolated or occasional sale — that is, the seller is not in the business of selling shelving, used the shelves in its own operation, already paid tax on them, and is selling them because it is ceasing operations.

What makes a sale "isolated or occasional"?
It must be a nonrecurring sale by a person "not engaged at the time of such sale in the business of selling such property." A dealer who regularly sells fixtures would not qualify.

Does the exemption cover the seller's inventory too?
The ruling addresses store fixtures the seller used, not the merchandise it held for resale. Sales of inventory are analyzed separately and may be taxable.

Why wouldn't the Department just say "exempt"?
Because qualification is fact-driven. The Department outlined the likely scenario and said that if the actual transaction matches it, the sale is exempt — but it could not confirm without all the facts.

Citations and references

• K.S.A. 79-3603(a) — imposes tax on the gross receipts from the sale of tangible personal property at retail.
• K.S.A. 79-3602(c) — defines "sale" to include the exchange of tangible personal property for consideration.
• K.S.A. 79-3602(e) — defines "sale at retail" as sales for use or consumption and not for resale.
• K.S.A. 79-3602(j) — defines "isolated or occasional sale" as a nonrecurring sale by a person not engaged at the time in the business of selling such property or services.
• K.S.A. 79-3606 — exempts all isolated or occasional sales of tangible personal property (except certain motor vehicles taxed under K.S.A. 79-3603(o)).
• K.A.R. 92-19-59 — authorizes Kansas private letter rulings; this ruling binds the Department only as to the requesting taxpayer and the facts presented.
• Issued November 3, 1998 by Mark D. Ciardullo, Tax Specialist, Office of Policy & Research, Kansas Department of Revenue.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-1998-179

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

November 3, 1998

XXXXXXXXXXXX
XXXXXXXXXXXXXX
XXXXXXXXXXXX

Dear XXXXXXXXXXXXXXX:

The purpose of this letter is to respond to your letter dated October 30, 1998.

You seek a private letter ruling based on the following facts. You have entered into a transaction with XXXXXX to purchase shelving for as specified consideration. XXXXXXX is ceasing operations.XXXXXXXX is in the process of selling inventory and store fixtures.

Kansas taxes “the gross receipts received from the sale of tangible personal property at retail.” K.S.A. 79-3603(a). “Sale at retail” means “all sales made within the state of tangible personal property … for use or consumption and not for resale.” K.S.A. 79-3602(e). “Sale” is defined as the “exchange of tangible personal property, as well as the sale thereof for money, and every transaction, conditional or otherwise, for a consideration, constituting a sale…” 79-3602 (c).
The transaction set out above involves an “exchange of tangible personal property.” However, for the exchange to be subject to the Kansas sales or use tax, there must be “consideration.” If there is consideration, the transfer is a “sale” and subject to tax under the acts, unless explicitly exempt.

Kansas exempts “all isolated or occasional sales of tangible personal property, services, substances or things, except isolated or occasional sale of motor vehicles specifically taxed under the provisions of subsection (o) of K.S.A. 79-3603 and amendments thereto. . .” K.S.A. 79-3606.

“Isolated or occasional sale” means “the nonrecurring sale of tangible personal property, or services taxable hereunder by a person not engaged at the time of such sale in the business of selling such property or services. . .” K.S.A. 79-3602(j).

Whether or not a sale qualifies as isolated or occasional is a fact driven analysis. Your letter does not contain all the information needed to answer your request. Therefore, I will outline a probable scenario that has occurred. If the sale transaction is identical, then the sale is an isolated or occasional sale and is exempt from Kansas retailers’ sales tax.

The company that is selling you the shelves is engaged in a business other than selling shelving at a retail. The shelves were acquired by the company for use in their business. The company paid or should have paid sales or use tax at the time originally purchased or acquired. The shelves were used by the company for an administrative function or to display merchandise for sale. The shelves were not classified as inventory of the company. The company is ceasing operations and is the selling the shelves.

This is a private letter ruling pursuant to Kansas Administrative Regulation 92-19-59. It is based solely on the facts provided in your request. If it is determined that undisclosed facts were material or necessary to an accurate determination by the department, this ruling is null and void. This private letter ruling will be revoked in the future by operation of law without further department action if there is a change in the statutes, administrative regulations, or case law, or a published revenue ruling, that materially affects this ruling.

Sincerely,

Mark D. Ciardullo
Tax Specialist

MDC

Date Composed: 11/04/1998 Date Modified: 10/10/2001

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