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
(l) SALES BETWEEN PARENT AND SUBSIDIARIES
395.2543 Transfer of Assets to Subsidiary. Corporation A acquired the assets and liabilities of Corporation B by way of a statutory merger. In turn, 75 percent of the assets and liabilities acquired from Corporation B were subsequently transferred to a subsidiary of Corporation A. This second transfer was necessary to meet the requirements of the indentures governing Corporation A's publicly issued debt.
Since substantially all of the assets of the newly merged corporation were not transferred to the subsidiary, the transfer is subject to tax. The fact that the Internal Revenue Service treated the transaction as an exempt transfer has no bearing on sales tax liability. In addition, the transfer does not qualify for the treatment offered in the Macrodyne case because in that case the transfer was to a pre-existing corporation not a newly formed corporation. Subsequently, Macrodyne was at least partially limited in Industrial Asphalt Corporation et al v. SBE. Finally, the Lockheed case, an unpublished case, has no weight as precedent. It involved the restructuring of a corporation made to avoid bankruptcy which was a condition imposed by creditors. ( Please Note: Macrodyne has also been over-ruled in the Beatrice decision.) 11/19/92.