Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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Annotation 125.0070

125.0070 Transfers of Autos to Employees, etc. Transfers of autos or property by corporations to employees as a bonus, even if an annual custom and therefore expected by the employee, is a gift unless consideration such as cash or assumption of liabilities is given by the employee or there is a specific contract provision under which the employee is entitled to such property. A copy of the corporate minutes or a written statement from a responsible corporate official ratifying the gift will suffice as proof. We cannot insist on a ruling from the Internal Revenue Service or the Franchise Tax Board that they accept the transfer as a gift, nor does the inclusion of the transfer as income on a W-2, 1099, or 599 has relevance in deciding if such a transfer is a sale.

Transfers to shareholders of closely held corporations are not sales if the parties follow the "dividend in kind" procedure (see Annotation 495.0725) with both entities showing the transfer as a dividend on its books, unless the corporation receives consideration for the transfer such as cash or the assumption of indebtedness by the transferee.

Transfers to others not directly related to the corporation (e.g., daughter of sole shareholder) cannot be assumed to be sales without payment of traditional consideration such as cash or an assumption of liabilities by the transferee. 4/28/87.