Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2013
Sales and Use Tax Annotations
395.0000 OCCASIONAL SALES—SALE OF A BUSINESS—BUSINESS REORGANIZATION—Regulation 1595
(i) TRANSFERS AND CONTRIBUTIONS TO NEW CORPORATION OR PARTNERSHIP
395.1893 Contributions. Two separate entities, A and B, formed a joint venture to construct a pipeline distribution system; each having a one-half interest in the undertaking and each contributing one-half of the assets to the joint venture. At the outset, each party contributed cash in equal amounts. Later, entity A contributed equipment and entity B contributed cash in amounts equal to the value of the equipment. The parties retained their 50–50 or equal interest in the joint venture.
In the above transfer, there is no sales tax liability upon the transfer of property to a joint venture or partnership by way of contribution to the capital of the venture or partnership. Thus, where entity A contributed equipment to the joint venture's capital account and received nothing in return from the joint venture in the way of cash or other consideration; there would not be a sale of the asset. In this instance the other joint venturer contributed assets equal in value to those contributed by entity A in order that their respective interests remained the same. The fact that all of the assets were not contributed simultaneously is not controlling and does not result in a sale. The application of tax turns on whether the joint venture paid anything in the form of consideration (cash, assumption of liabilities or other property valued in money or moneys worth) to the transfer. 9/17/73.