In retail sales, at least one type of sales transaction where the application of sales or use tax isn’t obvious or always occurs is when a seller makes a bulk sale of all, or nearly all, the assets of a business.
A bulk sale occurs outside the normal course of business of a seller. It may involve the sale of inventory, other assets of a business or both. In the context of commercial law, bulk sales are more specifically defined and regulated with the laudable purpose of preventing debtors from liquidating assets to avoid creditors.
In the sales tax realm, the term “bulk sale” is used to describe a broader slice of transactions; however, the sales all share a consistent theme: a bulk sale is a sale outside a seller’s normal course of business and generally involves a large portion of a business’ assets.
States View Bulk Sales in Different Ways
For accountants who offer services in sales tax compliance and reporting to their clients, it comes as no surprise that the states are not uniform in the manner they address bulk sales. Yet, one area where there is some agreement is on sales of inventory for resale. In this type of bulk sale, a purchaser who provides evidence of their reseller’s exemption makes the bulk purchase of inventory free of tax, just like any other sale for resale.
On the other hand, states view bulk sales of business assets, including inventory, for purposes other than resale in different ways. In the interest of keeping it brief, here are a few examples of the ways states view these sales to help you sort out the appropriate rules in your state. Remember, facts and circumstances are always important – and that is certainly true with bulk sales, so be cautious to avoid making blanket assumptions about any bulk sale.
About Shane Ratigan
Shane is a Senior Manager in the State and Local Tax Department at Clark Nuber, P.S. in Bellevue Washington. Shane focuses on state and local indirect tax obligations for companies of all sizes operating across the United States and beyond. He collaborates with companies in developing scalable processes to support effective and dynamic indirect tax calculation and compliance, especially sales and use tax.