Does Virginia's occasional sale exemption let a police department sell service handguns and service animals to retiring officers without collecting sales tax?

Plain-English summary

A Virginia police department asked the Tax Commissioner whether it has to charge sales tax when it sells two special kinds of property that state law lets it sell: service handguns to retiring officers (Va. Code § 59.1-148.3) and police service animals (K-9s) to their last handler (Va. Code § 2.2-1124 B 8). It couldn't predict how many of these sales it would make in a year, and wanted to know whether the "occasional sale" exemption applied.

The Commissioner's answer comes in two parts:

• Government sales are generally taxable. By regulation, sales by the Commonwealth, its agencies, and localities are taxable unless a specific exemption applies, and law-enforcement agencies must register as dealers and collect tax on sales of tangible personal property (23 VAC 10-210-691). Service firearms and animals are just "other tangible personal property," so the default is that these sales are taxable.

• But the occasional sale exemption can save them — if they stay under a frequency limit. Virginia exempts an "occasional sale" (Va. Code § 58.1-609.10(2)), which by regulation includes a sale by someone "engaged in sales on three or fewer separate occasions within one calendar year" (23 VAC 10-210-1080). The Commissioner walked through the rule's other scenarios (like selling an item unrelated to a business you're already registered for) but concluded that, because this agency isn't registered for some other sales activity, the analysis comes down to that three-or-fewer-occasions frequency test.

Bottom line: these sales are exempt if the department makes them on three or fewer occasions in a calendar year; if it sells on more than three occasions, the exemption is lost and it must register and collect tax. Since the agency said it couldn't forecast its volume, the Commissioner encouraged it to make a good-faith estimate and register if more than three sale occasions look likely.

What this means for you

Government agencies and other occasional sellers

The occasional sale exemption is a frequency rule, not a "these items are special" rule. If your organization isn't in the business of selling and it makes sales on three or fewer separate occasions in a calendar year, those sales can be exempt — but cross that line and every sale that year becomes taxable and you must register as a dealer. When in doubt, estimate conservatively and register.

Businesses selling off assets or surplus

The same exemption is what typically covers a one-time sale of business assets, surplus equipment, or the "sale of all or substantially all the assets" of a business. Watch two traps: (1) an item you sell that's used in an activity you're already registered to collect tax on (the ruling's hotel-mattress example) is not an occasional sale even if you sell just one; and (2) enough repeated sales, "sufficient in number, scope and character," turn you into a dealer regardless.

Tax professionals

Note the interplay the Commissioner drew between the statutory "series of sales" language (§ 58.1-602) and the regulation's four scenarios (23 VAC 10-210-1080). Where a seller holds no certificate of registration tied to a related activity, the practical test collapses to the "three or fewer separate occasions in one calendar year" bright line.

Common questions

Q: Are a government agency's sales of property automatically exempt?
A: No — the default is the opposite. Sales by the Commonwealth, its agencies, and localities are generally taxable, and law-enforcement agencies must register and collect tax unless a specific exemption applies (23 VAC 10-210-691).

Q: What is the "occasional sale" exemption?
A: An exemption for sales made outside a regular sales business — including a seller "engaged in sales on three or fewer separate occasions within one calendar year," and sales of property not used in an activity for which the seller must be registered (Va. Code § 58.1-609.10(2), § 58.1-602; 23 VAC 10-210-1080).

Q: How many sales are too many?
A: More than three separate occasions in a calendar year. At that point the occasional sale exemption does not apply, and the seller must register as a dealer and collect and remit sales tax.

Q: We can't predict how many sales we'll make. What should we do?
A: The Commissioner said to make a good-faith effort to anticipate the number of occasions and to register if it appears likely you'll sell on more than three occasions in the year.

Citations and references

Statutes and regulations:

• Va. Code § 58.1-609.10(2) — occasional sale exemption from the retail sales and use tax
• Va. Code § 58.1-602 — definition of "occasional sale" (sale not one of a series sufficient in number, scope, and character to require a certificate of registration)
• 23 VAC 10-210-1080 — the four occasional-sale scenarios, including the "three or fewer separate occasions within one calendar year" standard
• 23 VAC 10-210-691 — sales by the Commonwealth, its agencies, and political subdivisions are generally taxable; law-enforcement agency sales are taxable
• Va. Code § 59.1-148.3 — police departments may sell service firearms to retiring officers
• Va. Code § 2.2-1124 B 8 — a police service animal may be sold to its last handler

Prior public document the Commissioner relied on (described here rather than linked): a 2011 ruling on a public school division's sale of surplus equipment, where the Department could not confirm the exemption without all the sales measures but noted that sales on more than three occasions in a calendar year would defeat it.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 26-18

Original ruling text

March 30, 2026

RE: Request for Ruling: Retail Sales and Use Tax

Dear *:

This is in response to your letter submitted on behalf of the * (the “Agency”) requesting a ruling on the applicability of the occasional sale exemption to the sale of service handguns and service animals to retiring officers.

FACTS

The Agency, a Virginia police department, conducts restricted sales of tangible personal property. Virginia Code § 59.1-148.3 permits police departments to sell service firearms to retiring officers. Similarly, Virginia Code § 2.2-1124 B 8 permits police departments to sell a police service animal to its last handler. The Agency states that it is unable to forecast the number or frequency of such sales in any given year. The Agency asks if the occasional sale exemption is applicable to these sales.

RULING

Sales by Government Agencies

Unless otherwise exempt, Title 23 of the Virginia Administrative Code (VAC) 10-210-691 A provides, “sales by the Commonwealth, its agencies and political subdivisions generally are taxable.” The regulation goes on to state that “any state agency or locality making sales of tangible personal property not otherwise exempt shall register as a dealer with the department and collect and remit the sales tax on its sales.” See Title 23 VAC 10-210-691 A. Sales of confiscated and other items of tangible personal property by law-enforcement agencies are taxable. See Title 23 VAC 10-210-691 C. Service firearms and animals would be included in other tangible personal property.

Occasional Sale Exemption

The Code of Virginia exempts from the sales and use tax an occasional sale. See Virginia Code § 58.1-609.10 2. Virginia Code § 58.1-602 defines occasional sale as:

A sale of tangible personal property not held or used by a seller in the course of an activity for which it is required to hold a certificate of registration, including the sale or exchange of all or substantially all the assets of any business and the reorganization or liquidation of any business, provided that such sale or exchange is not one of a series of sales and exchanges sufficient in number, scope and character to constitute an activity requiring the holding of a certificate of registration.

Title 23 VAC 10-210-1080 interprets the occasional sale exemption to include four scenarios, two of which are potentially relevant to this request: 1) “a sale by a person who is engaged in sales on three or fewer separate occasions within one calendar year,” and 2) “a sale of tangible personal property not held or used by a seller in the course of an activity for which he is required to hold a certificate of registration.” The words “not held or used by a seller in the course of an activity for which he is required to hold a certificate of registration” mean that a registered dealer is not entitled to an occasional sale exemption solely by virtue of the fact that the article sold may be of a different class from the merchandise the dealer regularly sells.

The second scenario could be relevant if the Agency already possesses a certificate of registration to collect and pay sales tax on sales attributable to other business activities. This scenario differentiates between sales of items that are not related to such other business activities and those that are. The two examples given in the regulation illustrate the distinction:

Example 1: If Company A, which holds a certificate of registration only for retail sales made in its employee cafeteria, sells one piece of computer equipment, such transaction will be deemed an occasional sale since the computer is not property used in the cafeteria, which is the activity for which A is required to hold a certificate of registration.

Example 2: If Company B, which operates a hotel and holds a certificate of registration for collecting tax on room rentals, sells beds and mattresses used in the hotel, the occasional sale exemption is inapplicable since the property being sold is being used in the activity for which B is required to hold a certificate of registration.

Assume the Agency operated an employee cafeteria and held a certification of registration like Company A in Example 1 above. The sale of one firearm or one animal would be deemed an occasional sale because neither the firearm or animal would be considered property held or used by the Agency in the course of conducting its cafeteria sales. In contrast, if the Agency sold cups, trays, or other items it used in the cafeteria, such sales would not qualify for the occasional sale exemption, even if only one item was sold.

This second scenario described by 23 VAC 10-210-1080 B 2, however, does not preclude the possibility that sales of firearms and animals could themselves be of sufficient number, scope, and character to be considered taxable transactions, regardless of whether or not the Agency already possessed a certificate of registration. It does not appear that the Agency already possesses a certificate of registration for sales activities to which the sales of firearms or animals at issue could be related. If it did, then the sales would not be exempt regardless of the quantities involved, as in Example 2 above. In the Department’s opinion, therefore, the question again returns to the three or fewer frequency standard set under the first scenario. See 23 VAC 10-210-1080 B 1. This analysis is consistent with the statutory definition of “occasional sale” under Virginia Code 58.1-602 in that sales coming under the second regulatory scenario, as well as the third or fourth scenarios not at issue in this ruling, are only considered occasional sales, “ provided that such sale or exchange is not one of a series of sales and exchanges sufficient in number, scope and character to constitute an activity requiring the holding of a certificate of registration ” (emphasis supplied).

In Public Document (P.D.) 11-166 (9/27/2011), the Department was unable to determine the applicability of the “three or fewer separate occasions” part of the exemption to the sale of surplus equipment by a public school division because all other sales measures needed to be considered but were not provided. However, the Department also observed that if the taxpayer made sales on more than three occasions within one calendar year, the occasional sale exemption would not apply.

In this case, the Agency states that it is unable to forecast the number or frequency of sales in any given year. While the Department understands the practical issue involved, the Department encourages the Agency to make a good faith effort to anticipate the number of occasions that sales will occur and register if it appears likely that sales will be made on more than three occasions in the year.

This response is based on the facts provided as summarized above. Any change in the facts or introduction of new facts may lead to a different result.

The Code of Virginia sections and regulations cited are available online at law.lis.virginia.gov. The public document cited is available at tax.virginia.gov in the Laws, Rules & Decisions section of the Department’s website. If you have any questions regarding this ruling, you may contact * in the Office of Tax Policy and Legal Affairs, Tax Adjudication and Resolution Division, at or **@tax.virginia.gov.

Sincerely,

Kristin L. Collins
Tax Commissioner
Commonwealth of Virginia

AR/4402.F

Related Documents

11-166