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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 395.2105

(j) Mergers and Reorganizations

(1) Mergers

395.2105 Mergers Under Nonprofit Corporation Law. A company and both of its subsidiaries are domestic nonprofit corporations organized pursuant to the California Nonprofit Public Benefit Corporation Code. The company has control (via membership) of both subsidiaries but does not, per se, "own" either entity since the two subsidiaries are not stock corporations. The company is considering merging the two subsidiaries. The merger will be in conformance with the California Corporation Code. The reason a transfer of property pursuant to a statutory merger under section 1100 through 1305 of the California Corporations Code or pursuant to similar laws is not subject to sales tax is that the Board regards the property to be transferred by application of law. The transfer is not regarded to be a "sale" within the meaning of section 6006.

Since the Corporation Code provisions related to mergers under nonprofit corporation law are identical to the general corporation law mentioned above, the transfer of property is by operation of law and is not a "sale" as defined in section 6006. Therefore, no sales tax applies to such a transfer. 6/9/95.