Texas Comptroller of Public Accounts    STAR System


200711090L



TAX POLICY NEWS
NOVEMBER 2007
SALES TAX


RE: The Occasional Sale Exemption - A Reminder to Sellers and Purchasers

Tax Code 151.304 provides that a taxable item that is sold or purchased by way 
of an occasional sale is exempt from sales and use taxes. Here are some 
reminders for sellers and purchasers about the occasional sale exemption.

There are five types of "occasional sales" specified in  151.304(b). These are:

1. a sale made by a person (or company) who does not habitually engage in the 
business of selling taxable items and who sells no more than two taxable items 
during a 12-month period.

2. the sale of the entire operating assets of a business or of a separate 
division, branch or identifiable segment of a business;

3. transfer of all or substantially all the property used by a person in the 
course of an activity, if after the transfer, the real or ultimate ownership of 
the property is substantially similar to that which existed before the 
transfer;

4. the sale of not more than 10 admissions for amusement services during a 
12-month period by a person who does not hold himself out as engaging, or does 
not habitually engage, in providing amusement services; and,

5. an occasional sale includes the sale of tangible personal property by an 
individual if the property was originally bought for personal use by the 
individual or a member of the individual's family; and, if the individual does 
not employ an auctioneer, broker or factor, other than an online auction to 
sell the property; and, if the total receipts from sales of the individual's 
property in a calendar year do not exceed $3,000.

A seller making a qualifying occasional sale is not required to collect Texas 
sales and use tax on the transaction. Occasional sale exemptions do not apply, 
however, to leases and rentals of tangible personal property. Also, sellers who 
have sales tax permits in Texas or similar licenses or permits in any other state 
may not sell items tax free claiming the occasional sale exemption described in 
numbers 1, 4 and 5 above. See Rule 3.316(b).

Purchasers are not responsible for accruing use tax on purchases made under the 
occasional sale exemption, subject to one important exception. Tax Code  
151.304(g) states that a "person who holds a permit issued under this chapter 
and makes a purchase from a person entitled to claim the exemption provided by 
Subsection (b)(1) of this section shall accrue use tax on the transaction and 
remit it to the comptroller." Therefore, a purchaser who holds a sales tax 
permit must accrue use tax on a taxable item purchased from a person who does 
not hold a sales tax permit and who has sold two or fewer taxable items during 
the 12-month period immediately prior to the sale, other than an amusement 
service.

Although not required by statute, we recommend that a purchaser ask the seller 
to provide a signed statement that the transaction qualifies for the occasional 
sale exemption in order to document the exemption and retain the statement for 
four years following the date of the purchase.  Comptroller Form 01-917, 
Statement of Occasional Sale, can be used for this purpose.




ACCESSION NUMBER: 200711090L
SUPERSEDED: N
DOCUMENT TYPE: L
DATE: 11/14/2007
TAX TYPE: SALES