Iowa Administrative Code › Agency 701 - Revenue Department › Title I - Administration › Chapter 18 - Taxable and Exempt Sales Determined by Method of Transaction or Usage › Rule 701-18.28 - Casual Sales

Current through Register Vol. 47, No. 3, July 24, 2024
(1)
Casual sales by persons not retailers or by retailers outside the
				regular course of business.
Casual sales are exempt from the Iowa
				sales and use taxes except for the casual sale of vehicles subject to
				registration, and vehicles subject only to the issuance of a certificate of
				title. On and after July 1, 1988, the casual sale of aircraft is also taxable.
				In order for a casual sale to qualify for exemption under this subrule, two
				conditions must be present:
(1) the sale of
				tangible personal property or taxable services must be of a nonrecurring
				nature, and
(2) the seller, at the
				time of the sale, must not be engaged for profit in the business of selling
				tangible goods or services taxed under Iowa Code section 422.43 or, if so
				engaged, the sale must be outside the regular course of the seller's business
				(Order of State Board of Tax Review, Martin Development Corporation, Docket No.
				136, December 1, 1976, incorporating by reference Order of Department of
				Revenue Hearing Officer in Docket No. 75-28-6A-A, July 9, 1976). See subrule
				18.28(2) for an explanation of the casual sale exemption applicable to the
				liquidation of a trade or business.
If either of the conditions above are lacking, no casual sale
				  occurs. Moreover, prior to July 1, 1985, the casual sale exemption was limited
				  to sales of tangible personal property, and casual enumerated taxable services
				  did not qualify for the exemption.
KTVO, Inc. v. Bair,
Equity
				  No. 385 Linn county District Court, September 5, 1975.
For the purposes of this subrule, the word "aircraft" refers
				  to any contrivance now known or hereafter invented, which is designed or used
				  for navigation of or flight in the air, for the purpose of transporting
				  persons, property, or both or for crop dusting, aerial surveillance,
				  recreational flying, or for providing some other service. By way of
				  nonexclusive example, balloons, gliders, helicopters, and "ultra lights" are
				  aircraft. Also included within the meaning of the word "aircraft" is any craft
				  registered under Iowa Code section
				  32820.
				  or any successor statute thereto.
Sales of capital assets such as equipment, machinery, and
				  furnishings which are not sold as inventory shall be deemed outside the regular
				  course of business (including sales of capital assets during a retailer's
				  liquidation) and the casual sales exemption shall apply as long as such sales
				  are nonrecurring. This will include transactions exempted from state and
				  federal income tax under Section 351 of the Internal Revenue Code.
Two separate selling events outside the regular course of
				  business within a 12-month period shall be considered nonrecurring. Three such
				  separate selling events within a 12-month period shall be considered as
				  recurring. Tax shall only apply commencing with the third separate selling
				  event. However, in the event that a sale event occurs consistently over a span
				  of years, such sale is recurring and not casual, even though only one sales
				  event occurs each year
Des Moines Police Department V. Bair,
Equity No. CE3-1591, Polk County District Court, November 1, 1976.
Example: Corporation A sells the company copy machine at
				  retail to B. At the time of this sale. Corporation A is engaged in the business
				  for profit of selling clothes at retail. Assuming that the sale of the copy
				  machine constitutes a sale of a nonrecurring nature, there is a casual sale
				  because the sale is outside the regular course of Corporation A's
				  business.
Example: Corporation C is engaged in the business of lending
				  money secured by collateral. In the course of such business. Corporation C must
				  repossess some collateral and sell it at retail for purposes of payment of
				  loans. Such sales recur from time to time. Notwithstanding that Corporation C
				  is presumably not engaged in the business of selling tangible goods or services
				  for a profit, since the sales are recurring, there is no casual sale.
S
				  & M Finance Co., Fort Dodge v. Iowa State Tax commission,
1968,
				  Iowa 162 N.W.2d 505.
Example: F, a farmer, does not sell tangible personal
				  property at retail or engage in the performance of any taxable services. F
				  liquidates the farming business and hires a professional auctioneer to auction
				  off many items of tangible personal property. Assuming this liquidation event
				  is casual, all items sold by the auctioneer at retail are casual sales
				  notwithstanding that many different sales to numerous different buyers may
				  occur See rule 18.8(422).
Example: H, an insurance agency, holds a semiannual event to
				  sell its used office furniture. Even though H does not regularly sell tangible
				  personal property at retail, the casual sale exemption does not apply because
				  the selling events are recurring.
Des Moines Police Department v.
				  Bair,
Equity No. CE3-1591, Polk County District Court, November 1,
				  1976.
Example: I, a corporation, has one sales event every year
				  whereby it auctions off capital assets which it has no use for or desires to
				  replace. This event has been a planned function of I and is conducted regularly
				  and consistently over a span of years. Even though this sale event occurs only
				  once a year, it is of a recurring nature because of the pattern of
				  repetitiveness present and, therefore, the casual sale exemption would not
				  apply, regardless of the number of items sold at such sale event each
				  year.
Example: J, a corporation engaged in the sale for resale of
				  tangible personal property, sells three capital assets used in J's trade or
				  business consisting of a copy machine, a desk, and a computer Each sale is made
				  to different buyers and is unrelated to the other sales. The three sales occur
				  in January, June, and October of the same year. The sale made in October
				  consists of a desk. J has not established a pattern of recurring sales of
				  capital assets prior to aforementioned sales of capital assets. Under these
				  circumstances, the sale of the desk is not a casual sale, but the sales of the
				  copy machine and the computer are casual and exempt.
Example: K, a corporation, is primarily engaged in the
				  business of road construction. From time to time, it sells used capital assets
				  and scrap materials reclaimed from its road construction work to individuals
				  and businesses. It does not advertise itself as a retailer of these assets and
				  materials but sells them as a matter of courtesy to persons who cannot purchase
				  them elsewhere. After 42 years of operation, it decides to liquidate. Pursuant
				  to that decision, K employs two auctioneers to sell its capital assets and
				  ceases operation after its assets are sold. K had only one capital asset sale
				  during the 12 months immediately preceding each liquidation auction sale. The
				  auction sales are exempt casual sales under this subrule (1) because they are
				  nonrecurring, and (2) because K is not a retailer of the capital assets sold
				  during its liquidation. See
Holland Bros. Construction Co., Inc. v. Iowa
				  State Board of Tax Review,
611 N.W.2d 495 (Iowa 2000).
Example: L, a sole proprietorship, engaged in selling
				  automobile parts at retail, incorporated. The assets of L are sold to the new
				  corporation in exchange for stock and the new corporation now engages in
				  selling automobile parts at retail. The casual sale exemption would apply, but
				  only because of the exemption set out in subrule 18.28(2) infra, since the
				  transfer involves a liquidation of L's business and the sale of L's inventory
				  to another person (the corporatin) which will continue to engage in a similar
				  trade or business.
The above examples are not the only ones pertaining to the
				  questions of whether a casual sale did or did not occur. However, because of
				  the myriad of factual situations which can and do exist, it is not possible to
				  formulate more detailed rules on this subject matter