| (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
(4) the organization has not conducted more than four
separate fund-raising drives each calendar year for a total of not
more than 20 days per year.
(k) University and college student organizations.
(1) A sale of a taxable item by a qualified student
organization is exempt from sales tax if:
(A) the student organization sells the items at a sale
that lasts for one day only, and the primary purpose of the sale is
to raise funds for the organization;
(B) the student organization holds not more than one
fund-raising sale each calendar month for which the exemption is claimed;
(C) the student organization has as its primary purpose
a purpose other than being engaged in business or performance of an
activity that is designed to make a profit; and
(D) the sales price of the taxable item is $5,000 or
less, except that a taxable item that the organization manufactures
or has received by donation may be sold tax free during the one-day
sale, regardless of sales price, if the item is not sold to the donor.
(2) A taxable item acquired tax free under paragraph
(1) of this subsection is exempt from use tax on its storage, use,
or consumption until the item is resold or subsequently transferred.
(3) The first $5,000 of a qualified student organization's
total receipts from sales of taxable items in a calendar year that
are not exempted under paragraph (1) of this subsection are exempt
from sales tax.
(4) A qualified student organization must be affiliated
with an institution of higher education as defined by Education Code, §61.003,
or a private or independent college or university that is located
in this state and that is accredited by a recognized accrediting agency
under Education Code, §61.003. A student organization must file
with the comptroller a certification issued by the institution, college,
or university showing that the organization is affiliated with the
institution, college, or university. A college, university, or institution
may designate one of its departments or officers to compile a list
of registered or certified student organizations and submit the list
to the comptroller in lieu of having each student organization submit
individual certifications. The certification is valid until the institution,
university, or college notifies the comptroller that a student organization
is decertified, suspended, or otherwise loses its campus privileges
or affiliation with the institution, university, or college.
(l) Sales by religious, educational, charitable organizations,
and organizations classified as 501(c)(3), (4), (8), (10), or (19).
(1) A religious, educational, charitable, eleemosynary
organization, or an organization exempt under Internal Revenue Code, §501(c)(3),
(4), (8), (10), or (19) that has been granted exempt status by the
comptroller, and each bona fide chapter of an exempt organization,
is not required to collect sales tax on the sales price of taxable
items sold for $5000 or less at a sale or auction held by the organization
or chapter only twice a calendar year and each sale or auction lasting
only one day. See §3.322 of this title (relating to Exempt Organizations).
Additionally, a taxable item may be sold tax free during a one-day
tax-free sale or auction, regardless of price, if the item is one
that the organization manufactured or has received by donation and
the item is not sold to the donor.
(2) One day is a consecutive 24-hour period. If a designated
tax-free sale or auction exceeds a consecutive 24-hour period, the
organization or chapter may not hold another tax-free sale or auction
that calendar year. An organization or chapter may hold the two tax-free
sales or auctions consecutively, but the two tax-free sales or auctions
by that organization or chapter cannot exceed a maximum of 48 consecutive
hours in a calendar year.
(3) The organization may employ an auctioneer to conduct
the sale or auction and pay the auctioneer a reasonable fee not to
exceed 20% of the gross receipts.
(4) If two or more exempt organizations or chapters
jointly hold a tax-free sale or auction, each is considered to have
held a tax-free sale or auction during that calendar year. Each exempt
organization that participates in a joint one-day tax-free sale or
auction may hold one other tax-free sale or auction during the remainder
of that calendar year.
(m) Sales by nonprofit animal shelters. The sale, including
the acceptance of a fee for adoption, of an animal by a nonprofit
animal shelter is exempt from sales and use taxes. The term "animal
shelter" is defined in Health and Safety Code, §823.001, as a
facility that keeps or legally impounds stray, homeless, abandoned,
or unwanted animals.
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