Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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Annotation 330.3634


330.3634 Assignment of Lease. A lessor timely paid tax or tax reimbursement on the purchase price of the property. The lessor will transfer the lease, including all rights, title, and interest in the equipment, to a newly formed subsidiary which will continue to lease the equipment to the same end user. The property will be transferred to the new subsidiary solely in exchange for first issue stock with no assumption of liabilities or other considerations. Thus, the transfer of the property subject to existing leases to the new subsidiary is not taxable.

The transfer of assets directly to a wholly-owned subsidiary solely in exchange for first issue of stock of the subsidiary is not subject to tax. When property subject to an existing tax-paid lease is transferred, as in this case, the rental payments received during the term of that lease are not subject to tax. However, in the present lease, the new lessor did not pay tax or tax reimbursement on its acquisition of the property and did not receive the tax paid status of the property from its transferor (the transfer was not substantially all the tangible personal property of the original lessor). Thus, a renewal of the existing lease or any new lease would be a continuing sale and purchase, subject to use tax measured by rentals payable. 1/24/97.