Structuring the Sale
Sales Tax Considerations
When a business is sold, the seller typically transfers two types of tangible personal property to the buyer: (1) equipment and furniture, and (2) stock in trade and merchandise. Because the stock in trade and merchandise of the business is usually sold to the buyer for purposes of resale in the regular course of business, the sale of that type of property is not taxable as a retail sale.
However, because the State Board of Equalization may presume that all gross receipts are subject to sales tax and the seller has the burden of proving that a sale of tangible personal property is not a retail sale, the seller should always obtain a resale certificate from the buyer.
Because the other business assets, such as furniture and equipment, are not generally sold for resale, the gross receipts from their sale are subject to taxation unless they are ''intangible'' or otherwise exempt under the Revenue and Taxation code.
A common exemption available to some taxpayers relates to "occasional sales exemption" which is a sale of business furniture and equipment used in a business that does not involve retail sales – i.e., the taxpayer conducts an activity (providing a service) for which a sales tax permit is not required. The seller must report any taxable proceeds on his or her final sales tax return.
