Did a public school division's annual or every-other-year surplus auction qualify as an occasional sale?

Plain-English summary

The surplus auction was not automatically exempt merely because it occurred once a year or every other year. Virginia generally taxed sales of surplus furniture, equipment, and other property by state agencies and political subdivisions, including the public school division.

The occasional-sale exemption required looking at every sale made by the seller during the calendar year. The regulation treated three or fewer separate sales occasions as occasional, subject to listed exclusions.

If the school division made more than three sales in a calendar year, the exemption did not apply to any of those sales, including its surplus auction. The ruling therefore made the annual total—not just the frequency of this particular event—the key fact.

What this means for you

• Government ownership does not by itself exempt surplus-property sales.
• Count every separate sales occasion by the same seller during the year.
• An annual auction can still be taxable if other sales push the total above three.
• Keep a calendar-year sales log before deciding whether to collect tax.

Common questions

Q: Were political-subdivision surplus sales generally taxable?
A: Yes.

Q: What was the regulatory frequency limit?
A: Three or fewer separate sales occasions within a calendar year.

Q: Did Virginia decide this auction was exempt?
A: Not without knowing the school division's total number of sales during that year.

Citations and references

• Va. Code §§ 58.1-602 and 58.1-609.10(2).
• 23 VAC 10-210-691(A), 23 VAC 10-210-691(C)(2), and 23 VAC 10-210-1080(B).

Subject

Occasional sale exemption: Surplus sales held yearly.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 11-166

Original ruling text

September 27, 2011

Re: Request for Ruling: Retail Sales and Use Tax

Dear *:

This is in response to your letter submitted on behalf of * (the "Taxpayer") in which you request a ruling on the application of the retail sales and use tax to the sale of surplus equipment, materials and supplies by the Taxpayer.

FACTS

The Taxpayer is a public school division that periodically conducts sales to dispose of surplus equipment, materials and supplies that are no longer usable by the division. The sales are organized by the school division and are made through public auction. A paid auctioneer is used to conduct the bidding and sale of the items. School division employees are responsible for the surplus sale event and collect all monies from the sale of the items. All proceeds from the surplus sales are given to the school board's, account for use in operating the school division.

In the past the school division has typically conducted a surplus sale once per year. In more recent years, surplus sales are conducted about every other year. The Taxpayer requests a ruling regarding whether the occasional sales exemption applies to sale of surplus items. In the past, the Taxpayer has charged, collected and remitted the sales tax associated with the surplus sales.

RULING

Surplus Sale

Title 23 of the Virginia Administrative Code (VAC)10-210-691 A provides, in pertinent part, "[e]xcept as provided in this section, sales by the Commonwealth, its agencies and political subdivisions generally are taxable."

Title 23 VAC 10-210-691 C 2 further provides sales of surplus furniture, office equipment and other items are taxable when sold by the state, its agencies and political subdivisions and the United States.

The Taxpayer, a division of its local government, is deemed a political subdivision of the Commonwealth. Accordingly, the surplus sales conducted by the Taxpayer are subject to the Virginia retail sales and use tax in accordance with Title 23 VAC 10-210-691.

Occasional Sale Exemption

Virginia Code § 58.1-609.10 2 provides that "the retail sales and use tax does not apply to "[a]n occasional sale, defined in § 58.1-602."

Virginia Code § 58.1-602 defines occasional sale as:

A sale of tangible personal property not held or used by a seller in the course of an activity for which he is required to hold a certificate of registration, including the sale or exchange of all or substantially all the assets of any business and the reorganization or liquidation of any business, provided such sale or exchange is not one of a series of sales and exchanges sufficient in number, scope, and character to constitute an activity requiring the holding of a certificate of registration.

Title 23 of the Virginia Administrative Code 10-210-1080 B defines occasional sale, in pertinent part, as "[a] sale by a person who is engaged in sales on three or fewer separate occasions within one calendar year, except that sales at fairs, flea markets, circuses and carnivals and sales made by peddlers and street vendors are not occasional sales ...."

In this instance, the Taxpayer inquires whether its surplus sales qualify for the occasional sale exemption because they are only held once each year, or once every other year. In order to determine if the occasional sale exemption applies to the surplus sales, all sales made by the Taxpayer within one calendar year must be taken into consideration. Accordingly, if the Taxpayer makes more than three sales within one calendar year, the occasional sale exemption would not apply to any of those sales, including the surplus sales.

I hope this responds to your inquiry. This response is based on the facts provided as summarized above. Any change in facts or the introduction of new facts may lead to a different result.

The Code of Virginia section and regulations cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site. If you have any questions about this response, you may contact * in the Department's Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns

Tax Commissioner

AR/1-4757964415.P