When a Utah manufacturing business sells all of its Utah assets to an out-of-state buyer, does Utah sales tax apply to the inventory, the accounts receivable, and the fixed assets?

Plain-English summary

A Utah manufacturing business was winding down its Utah operations and selling everything — real property, personal property, and intangibles — to an out-of-state buyer. Counsel asked the Commission to confirm the sales tax treatment of three pieces of the deal before it closed.

The Commission agreed with all three points raised:

1. Inventory (raw materials, work-in-process, finished goods): exempt as a sale for resale under § 59-12-104(27), as long as the buyer registers with Utah and provides a properly completed resale exemption certificate under § 59-12-106(2).
2. Accounts receivable: exempt outright, because receivables simply aren't "tangible personal property" under Utah's statutory definition — the sales tax doesn't reach them at all.
3. Fixed assets (real and personal property used in the business): exempt as an "isolated or occasional sale" of an entire business under § 59-12-104(14) and Rule R865-19-38S — but only if the sale includes all the remaining assets of the operating business or location (the entire legal entity doesn't need to be sold, just all its remaining assets). Even then, motor vehicles, aircraft, and vessels required to be titled or registered in Utah are carved out and stay taxable regardless. The rule also has a frequency limit: three or more similar sales in a year are enough to disqualify the isolated/occasional exemption on the theory the seller is "in the business" of making such sales. Separately, the sale of real property itself is always exempt from sales tax (Utah taxes sales of tangible personal property, not real estate).

What this means for you

Business owners selling or winding down a Utah operation

Selling your entire business (or an entire operating location) as a single package is generally exempt from Utah sales tax on the personal-property assets, as an isolated/occasional sale — but the exemption depends on including all the remaining assets in the sale, not cherry-picking pieces. Titled vehicles, aircraft, and vessels are always taxable no matter how the rest of the deal is structured.

Buyers of a Utah business

If you're buying inventory as part of an asset purchase, register with the Utah State Tax Commission and provide a proper resale exemption certificate — that's what lets the seller skip charging sales tax on the inventory piece of the deal.

Accountants structuring a business sale

Watch the "three or more sales" trap in Rule R865-19-38S: if your client makes a habit of periodically selling off business assets or divisions, repeated sales can disqualify the isolated/occasional-sale exemption even if each individual sale looks like a clean, one-time business wind-down.

Common questions

Q: Do I need an exemption certificate to sell inventory tax-free in a business sale?
A: Yes. The buyer must register with the Utah State Tax Commission and give the seller a properly completed resale exemption certificate.

Q: Are accounts receivable ever subject to Utah sales tax?
A: No — receivables aren't tangible personal property under Utah's sales tax statute, so their sale is categorically outside the tax's reach.

Q: If I sell my whole business, are company vehicles included in the exemption?
A: No. Motor vehicles, aircraft, and vessels required to be titled or registered in Utah are specifically excluded from the isolated/occasional-sale exemption and remain taxable.

Q: Does this ruling apply to my business sale?
A: Not automatically. This is a private letter ruling binding only on the Commission as to this taxpayer's specific facts. Another taxpayer can't rely on it as binding, though it may carry weight in a later appeal depending on how closely the facts match.

Citations and references

Statutes and rules:

• Utah Code Ann. § 59-12-104(27) (resale exemption)
• Utah Code Ann. § 59-12-106(2) (exemption certificate)
• Utah Code Ann. § 59-12-102(13) (tangible personal property definition)
• Utah Code Ann. § 59-12-104(14) (isolated or occasional sale exemption)
• Utah Admin. Rule R865-19-38S (isolated/occasional-sale interpretation)

Source

• Landing page: https://tax.utah.gov/commission/rulings/
• Original PDF: https://files.tax.utah.gov/tax/commission/ruling/94-015.pdf

Original ruling text

95-015

Response
June 27, 1994

Request

XXXXX

Auditing Division

Utah State Tax
Commission

160 East 300 South

Salt Lake City, Utah
84134

Dear XXXXX,

I am following up too
our phone conversation of XXXXX with this written Advisory Opinion
request. As I had mentioned in our
phone conversation our client is tentatively anticipating a consummation of the
sale of its Utah properties, hopefully, by the first week of XXXXX. I have copied XXXXX and the Tax
Commissioners with this request in hopes that we may receive an Advisory
Opinion regarding this transaction before it is consummated.

Let me review the
facts and the three specific issues we would like the Tax Commission to
address. Our client has physical XXXXX
in Utah and XXXXX. It is planning to
sell its Utah asset which are real, personal and intangible to an XXXXX
business. The Utah business is a
manufacturing concern. The three
specific issues are:

1.
The Utah business will sell inventories which will consist of raw
materials, work-in-process and possibly some finished goods. The Utah business is planning not to assess the
sales tax on this bulk sale of inventory since it will constitute a sale for
resale. The XXXXX business will provide
a properly executed Utah resale exemption certificate (the XXXXX business will
need to register with the Utah State Tax Commission in order to execute this
certificate). Given the above facts in
item 1. we would like the Tax Commission to confirm our position that the sales
tax should not be assessed on the sale of the inventory if an exemption certificate
is properly executed.

2. The second issues has to deal with the
   sale of the Utah business accounts receivable to the Arizona business. It is
   our understanding that the sale of accounts receivable is not subject to the
   sales tax.

3. The final issue we ask that the Tax
   Commission rule on is the sale of the fixed assets used by the Utah business in
   its trade or business and whether this sale would be subject to a sales
   tax. The fixed assets would be both
   real and personal property. It is our
   understanding that the as long as the personal property which is being sold was
   not manufactured by the Utah business for sale to its customers in the normal
   course of business that the sale would not be subject to the sales tax. We understand that the sale of licensed
   motor vehicles would be an exception to this exemption. The Utah business is selling these personal
   properties as part of its termination of its Utah operations.

If you should need any
additional information please feel free to call me directly at XXXXX.

Sincerely, XXXXX

Re: Advisory Opinion -- Application of Sales Tax
Exemption Under Various Circumstances

Dear XXXXX:

Your request (copy
attached) for an advisory opinion as to whether certain sales transactions are
taxable or exempt under the Utah Sales and Use Tax Act was referred to the
Auditing Division for their analysis.

The division�s staff
recommendations are as follows:

1.
Utah Code Annotated Section 59-12-104(27) provides exemption for
�property purchased for resale ...either in its original form or as an
ingredient or component part of a manufactured or compounded product.�
Consequently, the sale of raw materials, work-in-process, and finished goods
which will be resold as tangible personal property by the purchaser as
described in our opinion request is exempt from the tax if the purchaser
provides a properly completed exemption certificate to the seller as required
in UCA Section 59-12-106(2).

2.
The sale of the business accounts receivable is exempt from the tax
since receivables do not constitute �tangible personal property� as defined in
UCA 59-12-102(13)..

3.
UCA Section 59-12-04(14) exempts �isolated or occasional sale... except
the sale of vehicles or vessels
required to be titled or registered under the laws of this state.� Administrative Rule R865-19-38S (copy
attached) provides interpretation and clarification of the referenced
statute. The rule in paragraph D
indicates. �Any sale of an entire business to a single buyer is an isolated or
occasional sale and no tax applies to the sale of and assets made part of such
a sale (with the exception of vehicles subject to registration).� Aircraft are included in the definition of
�vehicles.� In order to qualify as the
sale of an entire business, a sale must include all remaining fixed assets
inventories, accounts receivable, etc. of an operating economic entity or
physical business location. The entire
legal entity need not be sold. If all
assets are included in the proposed sale the described sale qualifies for
exemption. Without regard for
the above exemption the transaction may still qualify for exemption if the sale
is not �one of a series of sales sufficient in number, amount and character to
indicate the seller deals in the sale of such items� as indicated in paragraph
E of the referenced rule. Three or more
sales in a year are considered as sufficient in number to disqualify exemption. Regardless of whether the above
exemptions apply, sales of any motor vehicles, aircraft or vessels subject to
registration are taxable. The sale of real property is exempt from the tax.

Based upon the facts
presented in your letter, we are in agreement with the Auditing Division s
recommendations. Obviously, if there
are deviations from these facts, this opinion may be negated.

If you do not agree
with this determination, you may appeal to the Tax Commission for a formal
hearing. The results of that hearing
would constitute a declaratory judgment and be appealable to the Utah State
Supreme Court. A Notice of Appeal
Rights and a copy of the Utah Tax Payer Bill of Rights are attached.

Respectfully,

Alice Shearer

Commissioner