Did a one-time purchase of used business and manufacturing assets from a Utah facility qualify for Utah's isolated-or-occasional-sale exemption?

Plain-English summary

Utah Private Letter Ruling 95-058 said the proposed purchase of used business property and manufacturing equipment appeared to qualify for the isolated-or-occasional-sale exemption.

The answer depended on the seller not being in the business of selling that type of property.

A one-time disposition of used fixtures, machinery, and equipment could qualify. Repeated similar sales could instead show that the seller regularly dealt in those items.

Vehicles required to be titled or registered in Utah were outside the exemption.

Proposed asset purchase

A corporation planned to purchase assets located at a Utah manufacturing plant from another corporation.

The listed assets included:

• Machine tools.
• Factory support equipment.
• Customer-program-specific tooling.
• Inventory.

The purchaser also planned to lease manufacturing and office space and hire employees from the existing operation.

It asked whether the asset sale qualified as isolated or occasional.

Statutory exemption

Utah Code section 59-12-104(14) exempted isolated or occasional sales by persons not regularly engaged in business.

Utah Admin. Rule R865-19S-38(D) described business as an enterprise engaged in selling tangible personal property or taxable services.

The Commission read those provisions to exempt an isolated sale when the seller was not pursuing its regular business of selling tangible personal property of that type.

Used fixtures, machinery, and equipment

Utah Admin. Rule R865-19S-39(E) treated a business's sale of its used fixtures, machinery, and equipment as isolated or occasional.

The exception was a series of sales numerous enough to show that the seller dealt in selling those items.

The seller's regular course of activity therefore mattered more than the buyer's planned use.

Titled or registered vehicles

Utah Admin. Rule R865-19S-39(C) excluded vehicles required by Utah law to be titled or registered.

The ruling did not identify any titled vehicles in the described asset list, but it stated the limitation as part of the governing rule.

Conditional conclusion

Based on the facts submitted, the Commission said the purchase appeared to qualify for the exemption.

The condition was that the seller was not in the business of selling that type of property.

The response did not make a broader determination about future asset sales or a different seller's course of business.

Holding

Under the ruling:

• The described one-time purchase appeared exempt.
• The seller could not regularly deal in the type of property sold.
• Used fixtures, machinery, and equipment generally qualified as isolated-sale property.
• A sufficient series of similar sales could defeat the exemption.
• Titled or registered vehicles did not qualify.

What this means for you

Manufacturers and business-asset sellers

A one-time disposal of used operational equipment can be different from regularly selling equipment as a business line.

Asset buyers and M&A teams

Document the seller's sales history, the property categories, and whether any vehicles or ordinary-course inventory require separate analysis.

Accountants and tax professionals

Do not rely only on the transaction's size or one-time label. Review the seller's regular business and any pattern of similar dispositions under current law.

Common questions

Q: Did the purchase qualify for the exemption?

A: It appeared to qualify on the stated facts.

Q: What condition mattered most?

A: The seller could not be in the business of selling that type of property.

Q: Could repeated sales defeat the exemption?

A: Yes, if numerous enough to show the seller dealt in those items.

Q: Were titled vehicles covered?

A: No.

Q: Did the ruling automatically exempt every asset in any business acquisition?

A: No. It addressed the described property and the seller's stated course of business.

Key source language

• General test: “These regulations exempt an isolated sale when it is made by a person who is not pursuing his regular course of business of selling tangible personal property.”
• Used equipment: “The sale by a business of its used fixtures, machinery, and equipment is considered an isolated or occasional sale”
• Series limitation: “unless the sale is one of a series of sales sufficient in number to indicate the seller deals in the sale of such items.”
• Conclusion: the purchase “appears to qualify for this exemption so long as XXXXX is not in the business of selling this type of property.”

Citations and references

• Utah Code Ann. § 59-12-104(14)
• Utah Admin. Rule R865-19S-38(D)
• Utah Admin. Rule R865-19S-39(C), (E)

Source

• Landing page: Utah Private Letter Rulings
• Official ruling: Utah PLR 95-058
• Conditional note: the response says the transaction only “appears” exempt and makes the result depend on the seller's regular business.
• Fetch note: the exact official URL returned HTTP 404 to a direct request and was then retrieved through Sofya.

Original ruling text

95-058

Response September 15, 1995

Request

September 6, 1995

XXXXX

Mr. Val Oveson, Chairman

Utah State Tax Commission

210 North 1950 West

Salt Lake City, Utah 84134

Re: Request for an advisory opinion

Dear XXXXX:

XXXXX, a California corporation, has offered to purchase from the XXXXX, a California corporation, a wholly owned subsidiary of XXXXX, certain assets owned by XXXXX and located at the XXXXX plant at XXXXX, XXXXX, Utah. XXXXX would like to receive an advisory opinion from the Utah State Tax Commission regarding the application of the administrative rule on the issue of isolated or occasional sales, as it would apply to the transaction described in this letter.

The assets that XXXXX will purchase from XXXXX are categorized, as follows: machine tools, factory support equipment, customer program (product) specific tooling, and inventory. The approximate purchase price for assets is $$$$$. The assets XXXXX will purchase represents approximately $$$$$ of the total assets currently located at the XXXXX facility. XXXXX will lease approximately 60,000 square feet of manufacturing and office space at the XXXXX facility.

XXXXX intends to hire approximately 110 employees, from the employees currently employed by XXXXX.

XXXXX and XXXXX are attempting to close this transaction before September 30, 1995. XXXXX will expedite the supply of any additional information you may require, at your request.

Thank you for the advise and rapid response already displayed. XXXXX is extremely pleased to have the opportunity to establish operations in Utah and we feel that our presence will be a positive benefit to the State.

Sincerely,

XXXXX

September 15, 1995

XXXXX

RE: Advisory Opinion - Sales tax implications for XXXXX purchase of used business and manufacturing equipment.

Dear XXXXX,

We have received your request for an advisory opinion regarding the sales tax liability attached to your proposed purchase of a portion of XXXXX Systems business property and manufacturing equipment. We find as follows:

Under section 59-12-104(14) of the Utah Code, isolated or occasional sales by persons not regularly engaged in business are exempt from sales tax. Utah Administrative Rule R865-19S-38 (D) construes the term "business" as an enterprise engaged in selling tangible personal property or taxable services. Read together, these regulations exempt an isolated sale when it is made by a person who is not pursuing his regular course of business of selling tangible personal property. The sale by a business of its used fixtures, machinery, and equipment is considered an isolated or occasional sale unless the sale is one of a series of sales sufficient in number to indicate the seller deals in the sale of such items. Utah Admin. R. R865-19S-39(E). This exemption does not apply to the sales of vehicles which are required by Utah law to be titled or registered. Utah Admin. R. R865-19S-39(C).

From the facts presented in your letter. XXXXX purchase of business property and equipment from XXXXX appears to qualify for this exemption so long as XXXXX is not in the business of selling this type of property. If we can answer any other questions, please let us know.

For the Commission,

Alice Shearer

Commissioner