Ezel / Tax Rulings / TX
TX 8911L0962E01 Sales and/or Use Tax (State,Local,MTA) 1989-11-09

Could a transfer of business assets through a financing lease qualify as an occasional sale?

Short answer: Yes. Financing leases were treated as sales, so using a financing lease did not prevent a transaction that otherwise met the occasional-sale requirements from qualifying for exemption.

Apply this to your situation

This page answers the general question as of 1989. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1989
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official Texas Comptroller of Public Accounts letter published on the State Tax Automated Research (STAR) system. Letters on STAR can be the basis of a detrimental reliance claim only for the taxpayer to whom the letter was directly issued (see 34 Tex. Admin. Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice. Consult a licensed Texas tax professional about your specific situation.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page) is the authoritative source for any reliance.

Plain-English summary

The internal memo said financing leases were treated as sales for Texas sales-tax purposes.

If a business-asset transaction otherwise qualified as an occasional sale, transferring the assets by financing lease did not make tax due merely because of the lease form. The attached request distinguished that financing arrangement from an operating lease under Rule 3.316(b)(4).

Common questions

Was a financing lease treated as a sale? Yes.

Did that prevent occasional-sale treatment? No, if the transaction otherwise qualified.

Citations and references

  • 34 Tex. Admin. Code Rule 3.316(b)(4) and (d)

Source

Original ruling text

November 9, 1989

To: Bob Kuhl

From: Al Van Allen

Subject: Occasional Sale - Property Transferred by Financing Lease

Financing leases are treated as sales. If a transaction would otherwise qualify
as an occasional sale, the fact that the assets are transferred by means of a
financing lease will not cause sales tax to become due.

November 8, 1989

TO: Al Van Allen

FROM Bob Kuhl

SUBJ: Can a Financing Lease Qualify as an Occasional Sale?

A financing lease was assessed in an audit of COMPANY A. On June 1, 1988,
COMPANY A ceased operating and COMPANY B began operating.

It is our thinking that this transaction qualifies as an occasional sale under
Rule 3.316(d) Sale of a business or an identifiable segment of a business and
that 3.316(b)(4) would not be applicable because it refers (we surmise) to an
operating lease and not a financing lease.

However, microfiches 810C09 states "a financing lease is a lease and the
transaction will not qualify as an occasional sale."

Please advise.

Get today's answer for your situation

You just read a 1989 ruling on this question. Ezel checks current Texas tax law and answers your specific situation, with citations.

Opens in Ezel Pro. Every answer cites the authority it relies on.