1. (a) Sales exempt. Except as provided by subsection (i) of this section, a taxable item sold or purchased by way of an occasional sale is exempt from sales and use taxes.

2. (b) Occasional sales by persons not in the business of selling, leasing, or renting.

   1. (1) One or two sales of taxable items, other than an amusement service, during any 12-month period by a person who does not hold himself out as engaging (or who does not habitually engage) in the business of selling taxable items are occasional sales.
   2. (2) The third sale of a taxable item in a 12-month period by a person not previously in the business of selling, leasing, or renting taxable items causes that person to become a retailer. Tax must be collected and reported on the third sale and all subsequent sales unless the sale qualifies for exemption under subsection (d) or (e) of this section. If three or more sales are made in a 12-month period, then the person must obtain a permit. See §3.286 of this title (relating to Seller's and Purchaser's Responsibilities). Example: A lump-sum contractor sells a backhoe in October, a typewriter in December and a crane in February. The contractor has not sold, leased or rented any construction equipment prior to the sale of the backhoe; therefore, the contractor can sell the backhoe and typewriter tax free as occasional sales. The sale of the crane is the third sale within 12 months from the sale of the back-hoe. The sale of the crane is not an occasional sale. The contractor must obtain a permit, collect tax on the sale of the crane and, until an intervening 12 months have passed between sales, all subsequent sales of taxable items.
   3. (3) The sale of not more than ten admissions for amusement services during a 12-month period by a person who does not hold himself out as engaging (or who does not habitually engage) in the provision of amusement services are occasional sales.
   4. (4) The exemption provided under subsection (b) of this section does not apply to a rental or lease of a taxable item.

3. (c) Persons holding permits.

   1. (1) Persons engaged in the business of selling, leasing, or renting taxable items and persons selling, leasing, or renting three or more taxable items in a 12-month period are retailers for the purposes of this section. Also, persons selling more than ten admissions for amusement services during a 12-month period are retailers for the purposes of this section.
   2. (2) Sales made by a retailer and other persons holding sales or use tax permits that are not made in the regular course of business are not occasional sales. All sales by a retailer are subject to tax except for sales that qualify for exemption under subsection (d) or (e) of this section.
   3. (3) Sales made by persons holding direct payment permits are not occasional sales. All sales by direct payment permit holders are subject to tax except for sales that qualify for exemption under subsection (d) or (e) of this section.

4. (d) Sale of a business or an identifiable segment of a business.

   1. (1) The sale of the entire operating assets of a business or of a separate division, branch, or identifiable segment of a business is an occasional sale. The lease or rental of an identifiable segment does not qualify as an occasional sale.
   2. (2) The sale of the entire operating assets of a separate division, branch or identifiable segment of a business is an occasional sale if, prior to the sale, the income and expenses attributable to the separate division, branch or identifiable segment could be separately established from the books of account or record.
   3. (3) For the purposes of this section, a "separate division, branch or identifiable segment" means an enterprise engaged in providing a product or service to customers, usually for a profit. "Income" means revenue generated by the enterprise in providing that product or service. "Expenses" mean those operating expenses incurred by the enterprise in providing the product or services that are directly traceable to that enterprise. "Operating assets" means tangible personal property used exclusively by the enterprise in providing the product or service but does not mean tangible personal property maintained and used both for general business purposes and by the specific enterprise. Inventory and intangible property are not operating assets for purposes of the exemption.
   4. (4) The entire operating assets of the business or of the division, branch or identifiable segment of the business must be sold in a single transaction to a single purchaser. The sale of the entire operating assets through several transactions to several purchasers will not qualify as an occasional sale under this section.

5. (e) Transfer without change in ownership.

   1. (1) Any transfer of all or substantially all the property held or used by a person in the course of an activity, when after such transfer the real or ultimate ownership of such property is substantially similar to that which existed before such transfer, is an occasional sale. Since ownership must be transferred, "transfer" does not include the lease or rental of property.
   2. (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. Ownership is "substantially similar" if the person transferring the property owns 80% or more of the stock in the corporation to which the transfer is being made. Ownership is "substantially similar" if 80% or more of the stock in the corporation making the transfer is owned by the transferee.
   3. (3) "All or substantially all" of the property will be considered to have been transferred if 80% or more is transferred.
6. (f) Occasional sales as defined in subsections (d) and (e) of this section are not restricted by subsections (a) and (b) of this section. Three or more sales of the type defined in subsections (d) and (e) of this section would not result in the loss of the occasional sale exemption.

7. (g) Resale certificates--occasional sales--leases.

   1. (1) When a lessor purchases a taxable item tax free for rental or lease and later sells, leases or rents the item by way of an occasional sale as provided in subsection (d) or (e) of this section, then the lessor owes tax on the amount by which the lessor's purchase price exceeds the amount of rent, if any, upon which tax has been collected and reported from the prior rental or lease of the item.
   2. (2) If the item was exempt from sales tax when originally purchased by the lessor or if tax was paid on the full purchase price at the time of purchase by the lessor, then the lessor does not incur sales tax liability on the original purchase price when sold by way of an occasional sale as provided in subsection (d) or (e) of this section.
8. (h) Purchases exempt from tax. Except as provided in subsection (i) of this section, the purchase price of an item sold by means of an occasional sale is not subject to tax.
9. (i) Exception to subsection (h) of this section. A person who holds a permit issued pursuant to the Tax Code, Chapter 151, who makes a purchase in a transaction on which the seller is not required to collect tax under subsection (b) of this section, must accrue and remit tax to the comptroller on the transaction.

10. (j) Senior citizens' organizations. Sales made by senior citizens' organizations will be exempt from tax if all of the following qualifications are met:

    1. (1) all of the taxable items sold are manufactured, produced, made, or assembled exclusively by persons 65 years old or older;
    2. (2) the sale is part of a fund-raising drive held or sponsored by a nonprofit organization created for the sole purpose of providing assistance to elderly persons;
    3. (3) all net proceeds from the sale go to either the organization or the person who produced the taxable item sold or both; and
    4. (4) the organizations have not conducted more than four separate fund-raising drives each calendar year for a total of not more than 20 days per year.

11. (k) University and college student organizations.

    1. (1) A sale of a taxable item by a qualified student organization is exempted from sales tax if:

       1. (A) the student organization sells the items at a sale that lasts for one day only the primary purpose of which is to raise funds for the organization;
       2. (B) the qualifying organization holds not more than one fund-raising sale each calendar month for which the exemption is claimed; and
       3. (C) the qualifying organization has as its primary purpose a purpose other than engaging in business or performing an activity designed to make a profit.
    2. (2) A taxable item acquired tax free under paragraph (1) of this subsection is exempt from use tax on its storage, use, or consumption until the item is resold or subsequently transferred.
    3. (3) A qualifying student organization must be affiliated with an institution of higher education as defined by the Education Code, §61.003, or a private or independent college or university that is located in this state and that is accredited by a recognized accrediting agency under the Education Code, §61.003. A student organization must file with the comptroller a certification issued by the institution, college, or university showing that the organization is affiliated with the institution, college, or university. A college, university, or institution may designate one of its departments or officers to compile a list of registered or certified student organizations and submit the list to the comptroller in lieu of having each student organization submit individual certifications. The certification is valid for two years after the date the comptroller receives it. After the two-year period, the organization must re-certify with the comptroller.

Source Note:The provisions of this §3.316 adopted to be effective January 1, 1976; amended to be effective April 12, 1977, 2 TexReg 1446; amended to be effective January 31, 1978, 3 TexReg 195; amended to be effective August 10, 1981, 6 TexReg 2693; amended to be effective December 24, 1984, 9 TexReg 6187; amended to be effective May 3, 1994, 19 TexReg 2959; amended to be effective May 17, 1996, 21 TexReg 3946.