Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2014
Sales and Use Tax Annotations
395.0000 OCCASIONAL SALES—SALE OF A BUSINESS—BUSINESS REORGANIZATION—Regulation 1595
(j) MERGERS AND REORGANIZATIONS
395.2161.010 Corporate Reorganization. "T" is a wholly owned subsidiary of "A," which is a wholly owned subsidiary of "G." "G's" class A shares are sold on NASDAQ. Its class B shares are closely held by less than fifteen persons. The assets of "T" include tangible and intangible assets and, specifically, almost 340,000 shares of class A stock of "G."
"T" proposes to transfer all of its assets, except its class A shares of "G," to a newly formed subsidiary, "N," in exchange for first issue stock. Immediately after the transfer, "T" will own 100% of the shares of "N."
Pursuant to a plan of reorganization, which was adopted for valid business reasons, "T" will distribute its shares in "N" to "A." "A," in turn, will distribute the shares to its parent, "G." "G," in turn, will distribute and contribute the shares to a newly formed subsidiary. "I," in exchange for all of the stock of "I."
The net effect is that "N" will become a wholly owned subsidiary of "I" which will be a wholly owned subsidiary of "G."
"G" will then "spin-off" and distribute the class A shares of "I" to its class A shareholders, except for those shares held by "T," on a share by share basis. The class B shares of "I" will be distributed to the class B shareholders of "G." As a result, "I" will become independent of "G" and its shares will be held by the shareholders of "G" in the same proportion as they hold shares in "G." Under these circumstances, the following conclusions have been reached.
(1) The transfer of assets from "T" to "N" is an exempt occasional sale. All of the tangible personal property of "T" has been transferred and the real or ultimate ownership remains the same.
(2) The transfers of stock among the various entities will not give rise to any sales or use tax liability.
(3) It will be necessary to obtain a clearance from a local Board office to effect the transfer of vehicles from "T" to "N" without payment of tax.
These conclusions are based on the assumption that there are valid business reasons, other than the avoidance of sales and use tax, for the handling of the transactions. 1/15/93.