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Business Taxes Law Guide—Revision 2024
Sales And Use Tax Court Decisions
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Ontario Community Foundation, Inc., et al. v. State Board of Equalization … (1984)
Sale of Hospital Equipment Is a Nontaxable Occasional Sale
Taxpayers, two hospitals, each sold in a single sale all of the assets of the hospitals, including equipment used in providing tax-exempt medical and nursing services, and other equipment used in selling meals, supplies, and pharmaceuticals, for which selling activities each hospital held a seller's permit. The Board asserted sales tax on the sale of all the equipment. The trial court ordered the Board to refund taxes paid on the sale of the equipment used in providing medical and nursing services.
The California Supreme Court affirmed, and held that no sales tax was due on the sales of the medical and nursing equipment. That equipment was sold in a nontaxable occasional sale under Revenue and Taxation Code section 6006.5(a) since each hospital was not required to hold a seller's permit in rendering its medical and nursing services. The court held that Board
Regulation 1595(a)(3), which classified each hospital as a unitary business since it was required to hold a seller's permit for some of its activities, was void as in conflict with section 6006.5(a). The regulation imposed a condition on the occasional sale exemption not supported by the statute, namely that if a unitary business held a seller's permit for some of its activities, it could not make an exempt occasional sale of assets used solely in other activities not requiring a seller's permit. Ontario Community Foundation, Inc., et al. v. State Board of Equalization (1984) 35 Cal.3d 811.