Sales Tax On Business Assets Sale - Spidell

Sales Tax On Business Assets Sale

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Message Board Sales Tax On Business Assets Sale

This topic contains 2 replies, has 2 voices, and was last updated by Anonymous 1 week, 2 days ago.

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  • #179668
    Anonymous

    Client is a service business with a very small retail portion (they just sell some products that go along with their service); so they pay sales tax on these products.  They are selling the assets of the business.

    Based on my readyof Ca Code and Reg 1595, they should pay sales tax on the small rack that holds the products and exclude the rest of the furniture/equipment which is used for services?

    Also, there are substantial leasehold improvements including built in cabinets, etc.  How does sales tax apply to leasehold improvements, generally?  Ca Code and Reg 1596 discusses this, but it’s not clear to me as my client may have the right to take some of it with them; they are just choosing not to.

  • #179961
    Renee Rodda
    Participant

    Under Reg. 1595 and the cases, the ultimate question is whether the asset is used in the selling activity. Based on the facts you presented, I would agree with your conclusion on the rack that holds the products. As for the improvements, is a portion of the purchase price allocated to them? If so, look to the analysis in Annotation 395.0066, where assets transferred included leasehold improvements, and furniture and fixtures. The sale of that tangible personal property used in the operation of the branch office was subject to tax.

  • #180053
    Anonymous

    Thank you for the answer.  Yes, a portion of the purchase price was allocated to the improvements.  As long as they represent “real property” and not “personal property” sales tax should not apply.