N.Y. Comp. Codes R. & Regs. tit. 20 § 537.1

Current through Register Vol. 46, No. 43, October 23, 2024

Section 537.1 - Definitions

(a) Bulk sale.

(1) The term bulk sale as used in this Part means any sale, transfer or assignment in bulk of any part or the whole of business assets, other than in the ordinary course of business, by a person required to collect tax and pay the same over to the Department of Taxation and Finance. (For definition of person required to collect tax, see section 526.11 of this Title.)

Example 1:Corporation A, a person required to collect tax, sells its business assets to corporation B for $5,000. Such a sale is a bulk sale.

(2) The fact that a sale is or is not a retail sale does not determine whether such sale is a bulk sale.

Example 2:Corporation A, a person required to collect tax, transfers all of its business assets to corporation B in exchange for stock in corporation B. The transfer of corporation A's assets to corporation B is a bulk sale.

Example 3:Corporation A, a person required to collect tax, sells its entire inventory which is purchased by corporation B for resale. The sale by A is a bulk sale.

(3) The fact that a transfer is by way of gift does not preclude such transfer from being a bulk sale.

Example 4:A husband makes a gift of all his business assets to his wife. Such transfer is a bulk sale.

(4) The term bulk sale does not include:

(i) sales, transfers or assignments of business assets in settlement or realization of a valid lien, mortgage or other security interest;

(ii) sales, transfers or assignments of business assets by executors, administrators, receivers, trustees in bankruptcy or any public officer under judicial process.

(b) Business assets. The term business assets as used in this Part means any assets of a business pertaining directly to the conduct of the business, whether such assets are intangible, tangible or real property. Any asset owned by a corporation is a business asset.

Example 5:An individual owns supermarket A and has the following assets: store fixtures, delivery truck, the building occupied by the store, and a vacant parcel of land not used by the business which is adjacent to the store and his house. All the above assets are business assets except the house and the parcel of land.

Example 6:Assume the previous example, except that the building owned by him contains both a store and his residence. The entire building is a business asset.

Example 7:A person in his own unincorporated business makes a gift of cash to his son. The money is withdrawn from his business account and not from his personal account. The cash is a business asset.

(c) Seller. The term seller as used in this Part means any person required to collect tax who sells, transfers or assigns in bulk any of his business assets other than in the ordinary course of business.

(d) Ordinary course of business.

(1) The phrase ordinary course of business as used in this Part means any function, operation or transaction which is done ordinarily or customarily in the course of business. All the facts and circumstances surrounding the transaction must be examined to ascertain whether the transaction is in the ordinary course of business.

(2) Where a major part of the business assets are sold, such sale is clearly not in the ordinary course of business and is a bulk sale. Where fungible items are sold in bulk or all the items of a specific kind are sold, such sales would usually not be in the ordinary course of business.

Example 8:A clothing manufacturer transfers six of its delivery vehicles as a trade-in on six new vehicles. The transaction is in the ordinary course of business and not a bulk sale.

Example 9:A machine shop sells some of its obsolete machinery, and purchases new machinery. This transaction is in the ordinary course of business and is not a bulk sale.

Example 10:A general merchandising store has a yearly inventory sale to its customers at markedly reduced prices in order to clear its old inventory and make room for new inventory. The sales to its customers are sales in the ordinary course of business and are not bulk sales.

Example 11:A retail appliance store sells on credit. From time to time, it sells its accounts receivables at the going rate of discount and purchases more inventory. Such sales are in the ordinary course of business and are not bulk sales.

Example 12:An appliance store sells its trade fixtures to company A. The price at which the fixtures are sold is the fair market value of such fixtures, and the total assets of the seller are not diminished by the sale. Company A will lease the fixtures back to the appliance store for a stipulated rental for a 10-year term. This sale and leaseback is merely a financing arrangement which will not affect the business operations of the store. The sale and leaseback of the fixtures is in the ordinary course of business and is not a bulk sale.

Example 13:Assume the facts in example 12, except that the price is substantially less than fair market value and the total assets of the appliance store thereby become reduced. The sale and leaseback would not be in the ordinary course of business and is therefore a bulk sale.

Example 14:Assume the facts in example 12, except that, instead of a sale and leaseback of the trade fixtures, the fixtures are sold without any leaseback arrangements. This transaction would not be in the ordinary course of business and is therefore a bulk sale.

Example 15:A grocery store has a cash register which can automatically record on tape the amount of sales tax collected, taxable items, the nature of the items sold, the cost of the items, the selling price and the inventory. The grocery store sells this cash register and purchases a less complex one. The sale of the cash register is in the ordinary course of business and therefore is not a bulk sale.

Example 16:A clothing store has 200 clothing racks. It removes 20 racks from the floor and sells them. The sale of the 20 racks is in the ordinary course of business and therefore is not a bulk sale.

Example 17:Assume the same facts in example 16, except that the store sells the racks together with other fixtures and equipment in a liquidation sale. The sale of the racks is a bulk sale.

(e) Purchaser. The term purchaser as used in this Part means any person who, as part of a bulk sale, purchases or is the transferee or assignee of business assets.

N.Y. Comp. Codes R. & Regs. Tit. 20 § 537.1