An opinion was requested as to the California sales and use tax implications on the acquisition of certain machinery and equipment for a proposed joint venture between A and B.The joint venture will be a corporation and will be owned 50% by both A and B.At the same time, Newco sold to Purchaser the equipment that had been leased to Parent.Assuming the transfer from Lessor to Newco was a sale (e.g., if Newco assumed liabilities in the transfer), that sale would be an exempt occasional sale because Lessor did not use the property in a business requiring a seller's permit and made no other sales in any 12-month period.It was because customers did not wish to buy hardware from taxpayer during that period.(Section 6019.) (2) In one month the taxpayer made fourteen individual sales of hardware.National Liquidators has handled over 35,000 cases since its inception in 1988, from jet skis to yachts to cruise ships, and everything in between.Our inventories include repossessed yachts and boats, foreclosures, government seized vessels as well as brokerage boats.
Lessor subsequently distributed the equipment it leased, which represented 100 percent of its tangible personal property, to Newco as a dividend in kind.The taxpayer holds a seller's permit to accommodate small companies who want to buy small quantities of materials of a kind used in the deburring process. Sales of these materials represents less than 1% of taxpayer gross receipts.Based on the facts presented, the furniture and fixtures used in the deburring activity are not held or used in an activity requiring the holding of a seller's permit.If, however, ownership passes to the joint venture corporation outside this state, that is, if the transfer constituting the contribution occurs outside this state, then B will have no use tax liability because it would not have used or consumed the property in this state. Back to top 395.0005 Parent Corporation had two wholly owned subsidiaries, Newco and Lessor. Lessor's only activities consisted of leasing to Parent tax paid machinery in substantially the same form as acquired.Since its only activity was the leasing of property in transactions that were not continuing sales, Lessor was not required to hold a seller's permit.Newco retained Lessor's tax-paid status in the property under the last paragraph of subdivision (b)(1)(E) of Regulation 1660 because Lessor transferred all its tangible personal property and the ultimate ownership of the property was unchanged.Since Newco's only activity was the lease of tax-paid property, it was not required to hold a seller's permit.The equipment was transferred subject to the ongoing leases to Parent.Parent thereafter sold its manufacturing business, where the leased equipment was used, to Purchaser.Orders for long lead-time machinery and equipment have been placed and will continue to be placed in the future.Some of this equipment will be purchased by A from U. vendors and some will be purchased by B from foreign vendors.