Minnesota Taxpayer Did Not Show That Sales Were Exempt Farm Auction Sales

Friday, March 28th, 2014


The Minnesota Tax Court recently ruled that a taxpayer failed to show that its sales were exempt farm auction sales.

Minnesota taxes sales of tangible personal property. The person receiving payment for the sales must remit tax to the state. When an auctioneer receives payment for auction sales, the auctioneer must remit tax. However, Minnesota exempts sales made at a farm auction and occasional sales. Both exemptions require that a sale not be in the seller's normal course of business of selling that kind of item.

The taxpayer, an auctioneer, held auctions several times a year. The taxpayer auctioned off animals, farm equipment, and household items for various sellers. Each seller sold approximately two items, though some sold up to eighty items in one auction. The average sale price per item was less than $100.

The state argued that the sales of farm equipment, household items, and non-farm animals such as peacocks and guinea pigs were subject to tax. The taxpayer argued that these sales were exempt farm auction sales or occasional sales. The taxpayer argued that the following facts showed that the sales were not in the sellers' normal course of business: (1) the average price of each item was less than $100, (2) the average seller only sold two items per auction, and (3) the items were listed under the sellers' individual names rather than business names.

The court rejected the taxpayer's arguments. First, the average price of the items did not show that the sales were not in the sellers' normal course of business. Second, the number of items sold per year was not relevant. The taxpayer did not show that the sellers were not selling more of the same items at other auctions. The court also noted that, for example, a luxury boat business might sell only two boats a year in the normal course of business. The number of sales per seller did not show that the sales were not in the normal course of business. Third, the fact that the items were listed under individual names was not relevant. Individuals could operate businesses in their own names. These facts were not enough to show that the sales were not made in the sellers' normal course of business. The taxpayer could not claim the farm auction exemption or the occasional sales exemption.


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