Summary
In IBEC, the court held that a transfer of vehicles from a corporation to a new wholly owned subsidiary was not a sale for sales tax purposes because it lacked consideration.
Summary of this case from BJ-Titan Services v. State Tax Com'nOpinion
No. 79-1620
Decided June 4, 1980.
Taxation — Sales tax — Intra-corporate transfer of assets — Not a "sale," when — R.C. 5739.01(B), construed.
APPEAL from the Board of Tax Appeals.
International Basic Economy Corporation (hereinafter IBEC) is a New York Corporation. In 1976, it operated two Ohio divisions, one of which was Bellows International, a manufacturing division located in Akron, Ohio. On October 22, 1976, IBEC incorporated a new wholly-owned subsidiary known as IBEC Industries, Inc. (hereinafter appellee), in Delaware. Thereafter, appellee authorized and issued all of its capital stock, consisting of ten shares of common stock, to IBEC.
The two corporations entered into an agreement entitled "General Conveyance, Assignment and Bill of Sale." Pursuant to this agreement, IBEC transferred, with certain exceptions, all of the Bellows Division assets, properties, business and good will to appellee. Seventeen motor vehicles valued at $25,232.44 were included in the assets transferred by IBEC's Bellows Division to appellee. To effect the transfer of the vehicles, new certificates of title were required. The Clerk of Courts of Summit County assessed and collected the Ohio sales tax in the amount of $1,009.16 upon the issuance of new certificates of title, as if the transfers constituted retail sales subject to Ohio sales tax.
Pursuant to the agreement entered into by IBEC and appellee, all assets were granted, bargained, sold, assigned, transferred, set over and delivered to appellee for a price labeled as "good and valuable consideration." All assets transferred were covered by the sales agreement. Although "good and valuable consideration" was recognized as supporting the transaction, no separate payment was made to IBEC for the transfer of the 17 motor vehicles. In addition, no special reference to any particular asset was made in the sales agreement between the two corporations.
Appellee filed an application for refund of sales tax of $1,009.16 paid for the intra-corporate transfer of the 17 motor vehicles. The Tax Commissioner (hereinafter appellant) denied the application, finding that there had been no "illegal or erroneous payment of sales tax."
Appellee timely filed an appeal to the Board of Tax Appeals and requested permission to waive the hearing and submit the appeal upon stipulations of fact. Thereafter, the Board of Tax Appeals reversed the order of the appellant and directed the issuance of the refund to appellee.
The matter is now before this court on an appeal as a matter of right.
Messrs. Squire, Sanders Dempsey and Ms. Maryann B. Gall, for appellee.
Mr. William J. Brown, attorney general, and Mr. John C. Duffy, Jr., for appellant.
The fundamental issue presented, on appeal herein, is whether a taxable sale for "consideration" occurred when IBEC reorganized its corporate structure by transferring all the assets and liabilities of its Bellows Division to appellee, a new wholly-owned subsidiary, in exchange for the stock of appellee.
Appellant, in essence, asserts that there was a "sale" between the two corporations and that "consideration" did flow between the two corporations for the transfer of the 17 motor vehicles. We disagree.
R.C. 5739.01(B) defines the term "sale" for purposes of sales tax as follows:
"`Sale'***include[s] all transactions by which title or possession, or both, of tangible personal property, is or is to be transferred***for a consideration in any manner, whether absolutely or conditionally, whether for a price or rental, in money or by exchange and by any means whatsoever;***."
The application of R.C. 5739.01(B) to a corporate reorganization involving the transfer of assets and liabilities for stock was decided by this court in Roberts, Inc., v. Kosydar (1975), 42 Ohio St.2d 495. Roberts, supra, is factually similar to the instant cause except that the transfer of assets for stock, in Roberts, involved a transaction between a partnership and a corporation. This slight distinction does not alter the rationale espoused in Roberts. This court, at pages 496-497, stated:
"A transfer of tangible personal property from one entity to another is not a `sale' unless there is a `consideration' or `price.' See Kloepfers v. Peck (1953), 158 Ohio St. 577, 110 N.E.2d 560, paragraph one of the syllabus. There is nothing in the record in this case to indicate that there was any `consideration' or `price' paid for the vehicles. True, they were titled in the name of Roberts, Sr., but he received no more shares of stock from the corporation than the other four stock subscribers. The partnership transferred all its tangible personal property to the corporation, including the vehicles. Thus, if there was no finding by the Tax Commissioner that the transferred personal property was sold at a `price,' requiring that a sales tax be paid, this same reasoning must be adhered to as to the transfer of vehicles under the circumstances developed in this cause.
"***
"All partnership assets (including the vehicles) were transferred to the corporation and all five shareholders shared equally in the number and value of corporate shares. Therefore, there was no `consideration' or `price' paid for the vehicles, as defined in R.C. 5739.01(H):
"`"Price" means the aggregate value in money of anything paid or delivered or promised to be paid or delivered in the complete performance of a retail sale***.' Nothing in the record indicates that a `price' was paid for the vehicles and there was therefore no sales tax due for the transfer of the vehicles."
Finding the rationale of Roberts, supra, applicable to this cause, we hold that there was not a retail sale but merely a shifting of assets by a corporation from one division to another.
Therefore, the decision of the Board of Tax Appeals is affirmed.
Decision affirmed.
HERBERT, BELL, P. BROWN, SWEENEY, LOCHER and HOLMES, JJ., concur.
CELEBREZZE, C.J., concurs in the judgment.
BELL, J., of the Ninth Appellate District, sitting for W. BROWN, J.