|(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 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). 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 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
(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
(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.