Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2013
Sales and Use Tax Annotations
(d) TRANSFERS BETWEEN RELATED LEGAL ENTITIES
495.0735 Sale of Equipment—Oil Well Operating Agreement. Under the provisions of an oil well operating agreement, each member holds a pro-rata share of title to the equipment acquired. The co-owners operating agreement does not create a "person" within the meaning of section 6005. Since each member is a co-owner, a transfer of property (to the jobsite) by one member which becomes co-owned by the other members gives rise to a "sale". Tax applies to the percentage of the sale price which relates to the property interest of the other co-owners. For example, if the transferor holds a 25% interest in the "operating agreement equipment" 75% of the transfer price is subject to tax.
The fact that the transferor is the operator of the site and holds a security interest in the property transferred does not affect this conclusion. 12/6/90.