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Business Taxes Law Guide—Revision 2024
Sales and Use Tax Annotations
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395.0000 Occasional Sales—Sale of a Business—Business Reorganization—Regulation 1595
Annotation 395.0677
(c) Series of Sales—"Number, Scope and Character"
395.0677 Sale of Yacht Not Used in Business. A taxpayer's original intent in applying for a seller's permit was to engage in the manufacture and sale of fiber glass boats. No boats were ever built and the venture was abandoned. The taxpayer then rented or leased the land and buildings it had acquired for the original venture and also acquired milling equipment which was the subject of two of its sales in June and July 1964. There was also a sale of a business asset reported as taxable in the fourth quarter of 1963.
The taxpayer listed three yachts on its books as marine inventory. Two were based out of state and one in California. One of the out-of-state based yachts was sold in August 1964. The California based yacht was sold in April 1965. All expenses incidental to operation, repairs, and licensing of the boats were charged on the taxpayer's books. Depreciation on the California yacht was computed and shown on the books. However, neither the expenses nor the depreciation were claimed on the federal income tax return which appears to support the belief that the California yacht was the taxpayer's personal property and was not being held as a business asset.
The taxpayer has made three substantial sales of tangible personal property within a 12-month period. When the fourth quarter 1963 business asset sale is combined with the two equipment sales in June and July 1964, there has been a series of sales sufficient in number, scope, and character to constitute an activity requiring the holding of a seller's permit.
While the sale of the California yacht may be an unusual sale in light of the prior sales (i.e., milling equipment), it cannot be isolated from the other various sales and treated as an occasional sale. The fact that the taxpayer carried the yacht on its books as a business asset (i.e., expenses of the yacht paid by the taxpayer and depreciation computed) is more compelling in determining its true nature and character than the taxpayer's statement that the yacht was his personal property because neither the expenses nor the depreciation were claimed on the federal income tax return. From this, it is concluded that the sale of the California based yacht was one of a series of sales sufficient in number, scope, and character to constitute an activity requiring the holding of a seller's permit. 2/2/67.
(Note.—Subsequent statutory change re sales of vessels.)