34 Tex. Admin. Code § 3.316 - Occasional Sales; Transfers Without Change in Ownership; Sales by Senior Citizens' Organizations; Sales by University and College Student Organizations; and Sales by Nonprofit Animal Shelters
(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.
Notes
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