Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2017
Sales and Use Tax Annotations
395.0000 OCCASIONAL SALES—SALE OF A BUSINESS—BUSINESS REORGANIZATION—Regulation 1595
(g) "SUBSTANTIALLY ALL THE PROPERTY"—TRANSFER OF
395.1527 Transfer of Assets to Parent Corporation. In 1989, Corporation B declared a dividend of certain assets to its parent, Corporation C; in return, C assumed certain of B's liabilities. The assets transferred were (1) all contracts which could be assigned without the consent or approval of the other party (with certain exceptions); (2) all of B's right, title, and interest in any patents, trademarks, or any other proprietary rights in any technologies owned in whole or in part by B; (3) all tangible assets of Corporation B, including, without limitation, inventory, equipment, and accounts receivable, except such as may not be transferred without the consent of any third party.
The sales price (the assumed liabilities) is subject to sales tax with respect to the portion related to tangible personal property not sold for resale. This is true unless that sale is entitled to an exemption, such as the occasional sale exemption as defined in Revenue and Taxation Code section 6006.5(b).
The contracts that were transferred do not appear to be relevant unless tangible personal property related to these contracts were transferred along with the contracts. The transfer of the patents, trademarks, and other proprietary right in technologies are intangible and do not factor in the percentage of tangible personal property transferred. If the tangible personal property retained by B by virtue of the contracts it retained, and by virtue of it being unable to transfer without the consent of a third party, consisted of less than 20% of the tangible personal property B held in the course of activities requiring a seller's permit, then B's sale to C was an exempt occasional sale. 8/30/90.