53 A.D.2d 755 | N.Y. App. Div. | 1976
Proceeding pursuant to CPLR article 78 (transferred to this court by order of the Supreme Court at Special Term, entered in Albany County) to review a determination of the State Tax Commission, which denied a refund of sales tax paid by petitioner. The issue is whether a transfer of assets from a parent to a subsidiary corporation is exempt from the sales tax under section 1101 (subd [b], par [4], cl [ii]) of the Tax Law. Prospect Dairy (hereinafter Dairy) is a subsidiary corporation of Prospect Enterprises, Inc. (hereinafter Enterprises), and is engaged in the processing, distribution and sale of milk products. Enterprises contained a division known as the Handy Stop Food Shops Division (hereinafter Handy), which operates small retail food stores. The milk and dairy products sold by Handy were purchased from Dairy. For administrative convenience, a decision was made in 1972 to transfer Handy to Dairy, which was effectuated when Enterprises transferred all Handy’s assets and liabilities to Dairy in consideration of 59,600 shares of class A common stock of Dairy, which were issued and transferred to Enterprises. Neither Enterprises’ investment in Dairy and Handy nor the business operations of Dairy and Handy have been substantially altered by this transaction. A sales and use tax on this transfer of assets in the amount of $34,438.20 was paid by Dairy, and Dairy’s application for a refund was denied. Initially, Dairy’s contention that the subject transaction was not a sale is without merit, since a sale is any transfer or exchange of title for a consideration (Tax Law, § 1101, subd [b], par [5]), and the stock or securities of the purchasing corporation is clearly consideration. Dairy and Enterprises have chosen for their business objectives to maintain two separate corporate identities. There is no proper basis for ignoring those separate entities so as to hold that sales by one to the other do not constitute "sales”