Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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Annotation 395.2547


395.2547 Transfer of Tax Paid Rental Equipment. A parent corporation owns 100% of the issued and outstanding stock of Corporations A and B and 75% of the issued and outstanding stock of Corporation C. Corporations A and C operate equipment rental yards, have elected to pay tax upon the acquisition of their equipment, and have not charged tax on their rental receipts. Corporation B leases equipment but does not operate an equipment rental yard.

The parent corporation has Corporation A transfer all of the assets used in the operation of two of its three yards to Corporation B and all of the assets of its third yard to Corporation C. The transfer would cover substantially all of the assets of Corporation A. In consideration for the transfer, Corporation C would issue additional stock to the parent corporation so that the parent corporation would own 90% of the stock of Corporation C immediately after the transfer.

Under the above conditions, the transfer by Corporation A of substantially all of its assets to Corporations B and C would qualify as an occasional sale under Regulation 1595, which provides for a transfer of substantially all of the property without a substantial change in ownership. Also, the rental receipts derived from the equipment acquired by Corporations B and C would not be subject to tax under Regulation 1660. The regulation provides that if property acquired in a transaction which qualifies as an occasional sale under Regulation 1595 is leased in the same form as acquired and the transferor had paid sales tax reimbursement or use tax, the rentals derived from this property are not taxable. 6/4/71.