Understanding the Issues: Occasional Sale Rules
There are specific business transactions that are more complicated in Oklahoma than in other states due to current tax laws. Transactions not performed by an entity on a regular basis, such as an individual selling tangible personal property at a private garage sale, are exempt from state and local sales tax in most states under what is called an “occasional sale rule,” but not in Oklahoma.
Occasional Sale Rules in Other States
Of the 45 states that impose a state sales/use tax, there are only four that do not have an occasional sale rule: Colorado, New York, Oklahoma and Wyoming. In states with an occasional sale rule, the exemptions are often limited by certain requirements. Some states deny the exemption to any person who is normally engaged in the business of making taxable retail sales, while other states allow the exemption to retailers, as long as the sales are not made in the regular course of their business.
Some states provide additional stipulations to their occasional sale rule requirements. For example, Minnesota exempts the sales of tangible personal property not made in the normal course of business if an additional condition is met. One of the additional conditions is that the sale is a sale of substantially all of the assets of a trade or business, which only qualifies for the occasional sales rule if 90% or more of the total fair market value of tangible personal property of the trade or business is sold and if all of the assets are sold within a 12-month period.
By comparison, the occasional sale rule in Texas exempts the sale of the entire operating assets of a business, division, or branch of a business. Texas also exempts the transfer of all or substantially all property when there is no change in the real or ultimate ownership of the property. In Kansas, an isolated or occasional sale is considered a nonrecurring sale of tangible personal property or taxable services by a person not engaged at the time of the sale in the business of selling such property or services. While isolated or occasional sales are exempt, the occasional sales rule exemption does not apply to sales of motor vehicles unless the vehicle is being transferred as a result of corporate organizations or reorganizations or is a transaction between immediate family members.
Possible Next Steps for Oklahoma
One possible next step for Oklahoma is to amend the sales tax exemptions section in Title 68 of Oklahoma Statute to include an occasional sale rule. The exemption could be modeled after Kansas and Texas to include the occasional sale of property by a person that is not regularly engaged in the business of selling the same property, the sale or transfer of all or substantially all tangible personal property when there is no change in the real or ultimate ownership of the property, the sale of the entire operating assets of a business, division, or branch of a business and the transfer of a motor vehicle, trailer or semi-trailer as a result of corporate organizations or reorganizations, or a transaction between immediate family members.
The adoption of an occasional sale rule would enhance Oklahoma’s economic competitiveness by bringing the state onto a level playing field with bordering states and ensuring a more business-friendly environment by allowing businesses to form, restructure and carry out their affairs in a much more efficient manner.