Ruling Request No. 92-07

Declaratory Rulings

Ruling Request No. 92-07

Re: Disposition of Tangible Personal Property by a Public Corporation

Request for Ruling

A public corporation constituting a public instrumentality exercising public and essential government functions ("corporation") requests a ruling regarding its obligation, if any, to collect and remit a sales tax on items of repossessed tangible personal property which it will sell.

Facts

The corporation will be selling at various times furniture and equipment resulting from repossessions and foreclosures. The corporation was created under an enabling act passed by the General Assembly in 1992, which act contained the following tax exemption:

(b) The exercise of the powers granted by this chapter will be in all respects for the benefit of the people of the state, the increase of their commerce, welfare and prosperity and for the improvement of their health and living conditions and will constitute the performance of an essential governmental function and the corporation, its assets, its properties and its moneys, and the income derived therefrom shall be exempt from all state, municipal, and local taxes, excises and assessments...

Ruling Requested

That the corporation is not required to collect or remit a sales or use tax with respect to tangible personal property which it may purchase or sell.

Discussion

Pursuant to Rhode Island law, the corporation is not required to pay a tax on tangible personal property which it acquires. It is required, however, to collect a sales tax on sales which it makes on its own behalf because in that instance the tax is imposed on the purchaser, not the corporation. When the corporation makes sales of tangible personal property when acting as the (servicing) agent under the court approved Service Agreement entered into between it and the receiver for various banking institutions, it is not required to collect a tax since sales by receivers are considered exempt casual sales (Regulation SU 87-17)

If an auctioneer is engaged to sell the repossessed property on behalf of either the corporation or and/or the receiver, then a tax is required to be added, collected, and remitted since sales by auctioneers, including those made on behalf of receivers, are subject to tax (Regulation SU 88-5).

Ruling

(A) Pursuant to Rhode Island law, the corporation is not required to pay a tax on items of tangible personal property which it acquires for itself.

(B) The corporation will not be required to collect or remit any tax on sales of tangible personal property which it sells when acting in the capacity of servicing agent of the receiver under the Servicing Agreement approved by the Superior Court.

(C) The corporation will be required to collect and remit a sales tax on sales of items of tangible personal property made on its own behalf.

(D) A tax must be collected and remitted on any sales of tangible personal property made by an auctioneer on behalf of either the corporation or the receiver.

This ruling may be relied upon by the corporation and shall be valid until the applicable statutory provisions are amended in a manner requiring a different result or until the underlying factual presentation changes.

R. Gary Clark

Tax Administrator

October 2, 1992