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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 395.2155

(j) Mergers and Reorganizations

(1) Mergers

395.2155 Transfer of Assets Followed by Statutory Merger. Corporation A was merged into Corporation B. Subsequently, Corporation B was merged into its parent, Corporation C, and operated as a division.

Before the merger occurred, the assets of Corporation B, which was a separate legal entity, were transferred onto the books of Corporation C. The transfers were made in the corporate books and records by recording an intercompany account receivable for Corporation B and an account payable by Corporation C. Following the transfers, Corporation C depreciated the equipment as its own capital assets and paid the property taxes. No sales or use tax had been paid on the transfer of the assets from B to C since management had intended to ultimately merge two corporations together; however, the merger was delayed for almost a year.

When the assets were transferred from Corporation B to Corporation C, a sale took place which was subject to tax. The fact that no money was exchanged at the time of the transfer and that the payable and receivable were canceled upon merger, does not extinguish the tax debt owing to the state. As such, the surviving corporation, Corporation C, was responsible for the payment of the tax. 2/23/73.