When did a tax-exempt public corporation have to pay or collect sales tax on repossessed property, receiver sales, and auctioneer sales?

Plain-English summary

The public corporation's own tax exemption protected property it acquired, but did not eliminate sales tax when it sold property for its own account because the purchaser owed the tax. Receiver sales made through the corporation as servicing agent were exempt casual sales, while an auctioneer had to collect tax on sales for either the corporation or the receiver.

The corporation was a public instrumentality exercising essential governmental functions. It expected to sell furniture and equipment obtained through repossessions and foreclosures, and its 1992 enabling act exempted the corporation, its assets, property, money, and income from state, municipal, and local taxes, excises, and assessments.

The Division separated four situations. The corporation paid no tax when acquiring tangible personal property for itself. It did collect tax when making its own sales because the sales tax fell on the purchaser, not the corporation.

When the corporation sold property as servicing agent for receivers under a Superior Court-approved Servicing Agreement, Regulation SU 87-17 treated receiver sales as exempt casual sales. But Regulation SU 88-5 required tax when an auctioneer conducted the sale, including auctions held for receivers.

What this means for you

Public corporations and instrumentalities

Entity-level exemption did not automatically exempt customers buying property from the corporation. Separate the corporation's acquisition tax status from its sales-tax collection duties.

Receivers and servicing agents

The casual-sale result depended on the corporation acting as servicing agent under the court-approved receiver agreement, not selling the property for itself.

Auctioneers

Using an auctioneer changed the result. The order required the auctioneer sale to include, collect, and remit tax even when the property belonged to a receiver.

Common questions

Did the corporation pay tax when it acquired property for itself? No.

Did it collect tax on its own sales? Yes, because the purchaser was subject to the sales tax.

Were receiver sales handled by the corporation taxable? No, when the corporation acted as servicing agent under the court-approved agreement; those were treated as casual sales.

What if an auctioneer sold the property? Tax had to be collected and remitted for sales on behalf of either the corporation or receiver.

Why did the broad enabling-act exemption not cover every sale? The Division distinguished taxes on the corporation from sales tax imposed on the purchaser.

Citations and references

• 1992 enabling act — public-corporation tax exemption quoted in the order without a chapter or section number.
• Rhode Island Regulation SU 87-17 — receiver sales treated as exempt casual sales.
• Rhode Island Regulation SU 88-5 — auctioneer sales subject to tax.

Source

• Landing page: Rhode Island Declaratory Rulings
• Declaratory order: Declaratory Order 1992-07

Original ruling text

Ruling Request No. 92-07

Declaratory Rulings

Ruling Request No. 92-07

Re: Disposition of Tangible Personal Property by a Public Corporation

Request for Ruling

A public corporation constituting a public instrumentality exercising public and essential government functions ("corporation") requests a ruling regarding its obligation, if any, to collect and remit a sales tax on items of repossessed tangible personal property which it will sell.

Facts

The corporation will be selling at various times furniture and equipment resulting from repossessions and foreclosures. The corporation was created under an enabling act passed by the General Assembly in 1992, which act contained the following tax exemption:

(b) The exercise of the powers granted by this chapter will be in all respects for the benefit of the people of the state, the increase of their commerce, welfare and prosperity and for the improvement of their health and living conditions and will constitute the performance of an essential governmental function and the corporation, its assets, its properties and its moneys, and the income derived therefrom shall be exempt from all state, municipal, and local taxes, excises and assessments...

Ruling Requested

That the corporation is not required to collect or remit a sales or use tax with respect to tangible personal property which it may purchase or sell.

Discussion

Pursuant to Rhode Island law, the corporation is not required to pay a tax on tangible personal property which it acquires. It is required, however, to collect a sales tax on sales which it makes on its own behalf because in that instance the tax is imposed on the purchaser, not the corporation. When the corporation makes sales of tangible personal property when acting as the (servicing) agent under the court approved Service Agreement entered into between it and the receiver for various banking institutions, it is not required to collect a tax since sales by receivers are considered exempt casual sales (Regulation SU 87-17)

If an auctioneer is engaged to sell the repossessed property on behalf of either the corporation or and/or the receiver, then a tax is required to be added, collected, and remitted since sales by auctioneers, including those made on behalf of receivers, are subject to tax (Regulation SU 88-5).

Ruling

(A) Pursuant to Rhode Island law, the corporation is not required to pay a tax on items of tangible personal property which it acquires for itself.

(B) The corporation will not be required to collect or remit any tax on sales of tangible personal property which it sells when acting in the capacity of servicing agent of the receiver under the Servicing Agreement approved by the Superior Court.

(C) The corporation will be required to collect and remit a sales tax on sales of items of tangible personal property made on its own behalf.

(D) A tax must be collected and remitted on any sales of tangible personal property made by an auctioneer on behalf of either the corporation or the receiver.

This ruling may be relied upon by the corporation and shall be valid until the applicable statutory provisions are amended in a manner requiring a different result or until the underlying factual presentation changes.

**R. Gary Clark

Tax Administrator**

October 2, 1992