Request By:
Mr. James H. Frazier, III
Attorney at Law
180 North Mill Street
Lexington, Kentucky 40507
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Charles W. Runyan, Assistant Deputy Attorney General
The issue posed is whether KRS 139.070, occasional sale, as applied in KRS 139.470(4), relates to the transfer of motor vehicle tax imposed by KRS Chapter 186.
Your client, a sole proprietor, sold his business to another individual to be operated as a sole proprietorship. Involved in that sale were numerous office items, equipment, and motor vehicles. The sale of such assets has been treated and identified as an "occasional sale" by the seller pursuant to KRS 139.070, in that the seller is not engaged in the retailing business.
Pursuant to KRS 139.070, you say that an "occasional sale" is exempt from taxation imposed under KRS 139 et seq. However, the Fayette County Clerk refuses to transfer the motor vehicles from the seller to the purchaser without the payment of a transfer fee, 5% of the average retail value of the vehicle sought to be transferred.
The question posed is whether the "occasional sale" status, which would exempt an individual from paying the taxes specified in KRS Chapter 139, applies also to the transfer tax imposed upon individuals transferring motor vehicles, as set forth in KRS Chapter 186? The answer is "yes".
We assume you refer to the use or excise tax, applied on the transfer of tangible personal property, at the rate of five per cent (5%), as described in KRS 139.310.
A county clerk cannot transfer the registration of any motor vehicle unless the excise tax, where due, has been paid. KRS 186.192.
The exemption statute, KRS 139.470, in subsection (4), excludes from the subject excise tax "gross receipts from 'occasional sales' of tangible personal property and the storage, use or other consumption in this state of tangible personal property, the transfer of which to the purchaser is an 'occasional sale'." (Emphasis added).
On the subject of "occasional sale", KRS 139.070 defines that term. That statute reads:
"(1) 'Occasional sale' includes:
"(a) A sale of property not held or used by a seller in the course of an activity for which he is required to hold a seller's permit, provided such sale is not one (1) of a series of sales sufficient in number, scope and character to constitute an activity requiring the holding of a seller's permit.
"(b) Any transfer of all or substantially all the property held or used by a person in the course of such an activity when after such transfer the real or ultimate ownership of such property is substantially similar to that which existed before such transfer.
"(2) For the purposes of this section, stockholders, bondholders, partners or other persons holding 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. "
The "activity" referred to in KRS 139.070 was characterized, in
Commonwealth Ex Rel. Luckett v. Revday Indus., Inc., Ky., 432 S.W.2d 819 (1968) 820, as the "activity of selling goods." (Emphasis added). The court went on to say that:
"We think what the legislature has said is that a sale of property held or used in that part of the seller's business for which he must have a seller's permit is not exempt. "
The word "seller" , as used in KRS 139.070, the court wrote in Revday, above, means a person engaged in the business of selling tangible personal property of a kind that is subject to sales tax.
It may be noted that KRS 139.070(1)(a) defines an "occasional sale", but adds that such sale is not one of a series of sales sufficient in number, scope and character to constitute an activity requiring the holding of a seller's permit. In
Newberg Construction Co. v. Commonwealth, Ky., 516 S.W.2d 846 (1974), a general construction company, after completing portions of its Barkley Dam project, engaged, during a seven-months period, in more than two sales of various items of its construction equipment. The court held Newberg to be a retailer under KRS 139.110(1). In contrast, the court pointed out that Revday (see case mentioned above) involved a single going-out-of-business sale. Since it did not involve a series of sales, the court did not construe the limiting clause of KRS 139.070(1)(a).
Under the facts given, and considering that it was a one sale transaction, it is our opinion that the subject sale of motor vehicles was an "occasional sale", as defined in KRS 139.070(1)(a) and (b) and the seller was thus exempted from paying the use or excise tax pursuant to KRS 139.470(4) .