Oklahoma Tax Commission Begins Scrutinizing Federal Form 4797, Sales of Business Property

Thoughtware Alert Oct 22, 2020
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The Oklahoma Tax Commission recently began examining federal Form 4797, Sales of Business Property, for potential unreported receipts for Oklahoma sales tax purposes. Taxpayers generally report sales of business property outside of their typical trade or business on federal Form 4797. For example, if a taxpayer sells a fleet of company trucks or computers, the taxpayer would generally calculate the gain or loss from the sale and report it on federal Form 4797. 

In terms of sales and use tax filings, most taxpayers do not reconcile their gross sales with federal Form 4797. Only sales of inventory are considered because most states provide exemptions for transfers of tangible personal property that apply to casual, occasional, or isolated sales or transfers that are part of a business reorganization. As with most issues in state and local taxation, one problem is that each state has its own version of these exemptions with its own particular requirements. Florida conditions its occasional sales exemption on, among other things, “the intent of the parties; the frequency and duration of the sales; the type of tangible personal property or services offered for sale; the location where the sales take place; and the status of the parties, as it relates to the tangible personal property or taxable services being sold.” One specific transaction that qualifies for Florida's exemption is the transfer of property to an acquiring corporation pursuant to a consolidation or merger of the corporation in exchange for stock of the acquiring corporation or its parent.

Oklahoma, on the extreme end of the spectrum, does not have any exemption for casual, occasional, or isolated sales. Oklahoma levies its sales and use tax on all sales unless specifically exempt. Two common examples of applicable exemption are resale and manufacturing—both of which need to be documented with a completed exemption certificate. Taxpayers must be cognizant of the sales and use tax consequences prior to one-off sales of business property. 

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