Nevada Department of Taxation Cannot Levy State Sales Tax from an Auctioneer Selling Property of the United States at Auction

An Auctioneer who is involved in an auction sale of federal surplus property is not a ‘retailer’ within the meaning of the Nevada sales tax laws.  Therefore, s/he cannot be taxed when it sells property owned by the U.S. 
In Reynolds Elec. & Eng'r Co. v. Nevada Dep't of Taxation, 930 P.2d 746 (Nev. 1997), the Nevada Supreme Court had to decide if an auctioneer who sold the property of the U.S. was liable to pay state sales tax.

The Appellant Reynolds Electrical & Engineering Company, Inc. is a corporation that conducts auctions sales.  Appellant conducts auctions per the rules and procedures detailed in the Federal Property Management Regulations.  The Appellant entered into a contract with the United States Department of Energy to sell the government property at Nevada test site.   

 The Nevada Department of Taxation (Department) communicated to the Appellant that it owed a deficiency in sales and use tax. Appellant made a part payment of the alleged deficiency and subsequently filed a petition for redetermination regarding the remaining amount. The Nevada Sales tax Commission held that the Appellant had to pay sales tax on the sale of the U.S. property to private purchasers. The district court affirmed the Commission’s decision.  Consequently, the Appellant sought review of the district court’s judgment. 

Appellant auctioneer sought review of a judgment of the First Judicial District Court, Carson City (Nevada) entered in favor of respondent state in an action to assess sales taxes. The district court affirmed a decision of respondent Nevada Tax Commission that found that the auctioneer was liable, pursuant to Nev. Rev. Stat. § 372.105, for state sales taxes on property belonging to the United States that it sold.
To find out whether or not the Appellant had to pay tax, the Court had to first determine if the Appellant would fall under the definition of “retailer” under NRS 372.105.  This section imposes sales tax only on "retailers" selling tangible personal property. Id. at 747. Pursuant to NRS 372.055(1)(a), "retailer" means "every seller who makes any retail sale or sales of tangible personal property, and every person engaged in the business of making retail sales at auction of tangible personal property owned by the person or others." Id.

Further, the statute provides that "person" shall include "any individual, firm, . . . corporation, . . . but shall not include the United States, this state or any agency thereof, or any city, county, district or other political subdivision of this state." Id.; NRS 372.040 (emphasis added).  The Court in this case stated that the term "others" in NRS 372.055(1)(a) meant other persons.   

The Court further stated that the legislature intended to exclude government entities from the definition of "person." Id. at 748. And thus it clearly demarcated the government entities from others. Id. Therefore, it is clear that the legislature intended to exempt sales of government property from state sales taxes. Id. The sale in question involved the property owned by the U.S. and hence was exempt from state sales tax. Id.

The Court stated that the United States is not a "person" or an "other" as defined in NRS 372.040. Id. Appellant auctioned and sold government property. It did not sell its own property. Id. Therefore, Appellant does not fall under the definition of “retailer” for the sale in question. Id. Consequently, the Department does not have the authority to tax the Appellant.  The Court reversed district court’s judgment.  


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