Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2013
Sales and Use Tax Annotations
(d) TRANSFERS BETWEEN RELATED LEGAL ENTITIES
495.0722 Co-Owned Gas Plants and Producing Properties. Contributions of property to the joint operation (JO) for a capital interest are not subject to tax. However, sales of property by a participant to the JO for conventional consideration are subject to tax except for the fractional interest of the selling participant. The distribution of assets at the dissolution of the JO are generally not subject to tax, but the withdrawal of assets by a member of the JO before 80 percent completion of the operation are sales and subject to tax except for the fractional interest which had been retained by the member.
New materials provided by the operating member from its own inventory are considered to be taxable sales to the JO, except for the fractional interest of the operator. If the materials were held in a tax paid status, the operator may take a tax-paid purchase resold deduction (except for the fractional interest retained). Transfers of used items from the operators inventory are subject to the same treatment as new materials, EXCEPT a tax-paid purchase resold credit is not allowable. The sale of JO property to nonmembers is a sale of each member's interest and each is liable for the tax if the sale is taxable and if the operator fails to report the tax. If materials are transferred from the JO to the operator or other member of the JO, tax is due on the proportion of the change in ownership. Transfers by members to the JO are sales by the transferor to the extent of the change in ownership and sales tax reimbursement may be charged to the JO. Petroleum products transferred to the JO by the operator or any member of the JO are subject to the same taxability as the operating materials discussed above. 8/23/84; 5/29/96.