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Business Taxes Law Guide—Revision 2024
Sales and Use Tax Annotations
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395.0000 Occasional Sales—Sale of a Business—Business Reorganization—Regulation 1595
Annotation 395.1996
(i) Transfers and Contributions to New Corporation or Partnership
395.1996 Shareholders Transfer of Stock in Existing Corporation for Stock in Commencing Corporation. Corporation A, an Ohio Corporation, has all of its operating assets in California. Stock in a commencing Corporation B will be issued by Corporation B to the stockholders of Corporation A in exchange for their stock in Corporation A. Corporation A will, thereafter, be dissolved as a wholly owned subsidiary of Corporation B. All of the assets of Corporation A will thereby be transferred to Corporation B.
Under these circumstances, the exchange of stock will not be subject to tax since the stock is not tangible personal property. The transfer of the tangible assets to Corporation B will not be taxable since it will fall within the scope of Regulation 1595 as a transfer of all or substantially all the assets of an entity and the ultimate ownership will be substantially similar to that which existed before the transfer. 3/25/68.