| (a) Sales exempt. A taxable item that is sold or purchased
by way of an occasional sale is exempt from sales and use taxes, except
as provided by subsection (i) of this section.
(b) Occasional sales by persons not in the business
of selling, leasing, or renting.
(1) One or two sales of taxable items, other than an
amusement service, during any 12-month period by a person who does
not hold himself out as engaged (or who does not habitually engage)
in the business of selling taxable items are occasional sales.
(2) The third sale of a taxable item in a 12-month
period by a person not previously in the business of selling, leasing,
or renting taxable items causes that person to become a retailer.
Tax must be collected and reported on the third sale and all subsequent
sales unless the sale qualifies for exemption under paragraph (4)
of this subsection or subsection (d) or (e) of this section. If three
or more sales are made in a 12-month period, then the person must
obtain a permit. See §3.286 of this title (relating to Seller's
and Purchaser's Responsibilities, including Nexus, Permits, Returns
and Reporting Periods, and Collection and Exemption Rules). Example:
A lump-sum contractor sells a backhoe in October, a typewriter in
December and a crane in February. The contractor has not sold, leased
or rented any construction equipment prior to the sale of the backhoe;
therefore, the contractor can sell the backhoe and typewriter tax
free as occasional sales. The sale of the crane is the third sale
within 12 months from the sale of the back-hoe. The sale of the crane
is not an occasional sale. The contractor must obtain a permit, collect
tax on the sale of the crane and, until an intervening 12 months have
passed between sales, all subsequent sales of taxable items.
(3) The sale of not more than ten admissions for amusement
services during a 12-month period by a person who does not hold himself
out as engaged (or who does not habitually engage) in the provision
of amusement services are occasional sales.
(4) The sale of tangible personal property by an individual
is an occasional sale if:
(A) the property was originally purchased by the individual
or a member of the individual's family for either of their personal
use;
(B) the individual does not hold a sales tax permit
and is not required to hold a sales tax permit;
(C) the sale is not made through the use of an auctioneer,
broker, or factor, other than an online auction; and
(D) the total receipts from such sales do not exceed
$3,000 in a calendar year. If the total receipts from the individual's
sales of such tangible personal property exceed $3,000 in a calendar
year, the individual must obtain a sales tax permit and collect tax
on all sales of taxable items in this state, beginning with the first
sale which causes the total receipts to exceed $3,000.
(5) The exemption provided under subsection (b) of
this section does not apply to a rental or lease of a taxable item.
(c) Persons who hold permits.
(1) Persons who hold themselves out as engaged in the
business of selling, leasing, or renting taxable items and persons
who sell, lease, or rent three or more taxable items in a 12-month
period are retailers for the purposes of this section. Also, persons
who sell more than 10 admissions for amusement services during a 12-month
period are retailers for the purposes of this section.
(2) Sales that retailers and other persons who hold
sales or use tax permits make are not occasional sales, even if the
sales are not made in the regular course of business (e.g., a restaurant
owner sells a dining table). All sales by a retailer or permit holder
are subject to tax, unless the sales qualify for exemption under subsection
(d) or (e) of this section.
(3) Sales that persons who hold direct payment permits
make are not occasional sales. All sales by direct payment permit
holders are subject to tax unless the sales qualify for exemption
under subsection (d) or (e) of this section.
(d) Sale of a business or an identifiable segment of
a business.
(1) The sale of the entire operating assets of a business
or of a separate division, branch, or identifiable segment of a business
is an occasional sale. The lease or rental of an identifiable segment
does not qualify as an occasional sale.
(2) The sale of the entire operating assets of a separate
division, branch, or identifiable segment of a business is an occasional
sale if, prior to the sale, the income and expenses attributable to
the separate division, branch or identifiable segment could be separately
established from the books of account or record.
(3) For the purposes of this section, a "separate division,
branch, or identifiable segment" means an enterprise engaged in providing
a product or service to customers, usually for a profit. "Income"
means revenue generated by the enterprise in providing that product
or service. "Expenses" mean those operating expenses incurred by the
enterprise in providing the product or services that are directly
traceable to that enterprise. "Operating assets" means tangible personal
property used exclusively by the enterprise in providing the product
or service but does not mean tangible personal property maintained
and used both for general business purposes and by the specific enterprise.
Inventory and intangible property are not operating assets for purposes
of the exemption.
(4) The entire operating assets of the business or
of the division, branch, or identifiable segment of the business must
be sold in a single transaction to a single purchaser. The sale of
the entire operating assets through several transactions to several
purchasers does not qualify as an occasional sale under this section.
(e) Transfer without change in ownership.
(1) Any transfer of all or substantially all the property
held or used by a person in the course of an activity, when after
such transfer the real or ultimate ownership of such property is substantially
similar to that which existed before such transfer, is an occasional
sale. Since ownership must be transferred, "transfer" does not include
the lease or rental of property.
(2) For the purposes of this section, stockholders,
bondholders, partners, or other persons who hold an interest in a
corporation or other entity are regarded as having the "real or ultimate
ownership" of the property of such corporation or other entity. Ownership
is "substantially similar" if the person who transfers the property
owns 80% or more of the stock in the corporation to which the transfer
is being made. Ownership is "substantially similar" if 80% or more
of the stock in the corporation that makes the transfer is owned by
the transferee.
(3) "All or substantially all" of the property is considered
transferred if 80% or more is transferred.
(f) Occasional sales as defined in subsections (d)
and (e) of this section are not restricted by subsections (a) and
(b) of this section. Three or more sales of the type defined in subsections
(d) and (e) of this section would not result in the loss of the occasional
sale exemption.
(g) Resale certificates - occasional sales - leases.
(1) When a lessor purchases a taxable item tax free
for rental or lease and later sells, leases, or rents the item by
way of an occasional sale as provided in subsection (d) or (e) of
this section, then the lessor owes tax on the amount by which the
lessor's purchase price exceeds the amount of rent, if any, upon which
tax has been collected and reported from the prior rental or lease
of the item.
(2) If the item was exempt from sales tax when originally
purchased by the lessor or if tax was paid on the full purchase price
at the time of purchase by the lessor, then the lessor does not incur
sales tax liability on the original purchase price when sold by way
of an occasional sale as provided in subsection (d) or (e) of this
section.
(h) Purchases exempt from tax. The purchase price of
an item that is sold by means of an occasional sale is not subject
to tax, except as provided in subsection (i) of this section.
(i) Exception to subsection (h) of this section. A
person who holds a permit that is issued pursuant to Tax Code, Chapter
151, and who makes a purchase in a transaction on which the seller
is not required to collect tax under subsection (b) of this section,
must accrue and remit tax to the comptroller on the transaction.
(j) Senior citizens' organizations. Sales that a senior
citizens' organization makes are exempt from tax if all of the following
qualifications are met:
(1) all of the taxable items sold are manufactured,
produced, made, or assembled exclusively by persons 65 years old or
older;
(2) the sale is part of a fund-raising drive held or
sponsored by a nonprofit organization created for the sole purpose
of providing assistance to elderly persons;
(3) all net proceeds from the sale go to either the
organization or the person who produced the taxable item sold or both;
and
Cont'd... |
