Was a corporation's transfer of semitrailers to its wholly owned single-member LLC exempt from sales tax?

Plain-English summary

A corporation planned to transfer about 800 semitrailers to a wholly owned single-member LLC in exchange for LLC units, then distribute all of those units to its parent. Although disregarded for federal income tax, the LLC was a separate entity for Florida sales and use tax purposes, so an exemption was required.

The commercial-motor-vehicle exemption did not apply. The semitrailers were transferred separately from truck tractors owned by other operators; standing alone, they did not use motor fuel and could not use the power units' weight to satisfy the rule's weight test.

The corporate-reorganization exemption did apply. Florida found the transaction qualified under section 368(a)(1)(D) of the Internal Revenue Code because it satisfied section 355, making the semitrailer transfers exempt from sales and use tax. Each vehicle could be registered as exempt using Form HSMV 82040.

What this means for you

A transfer can fail one vehicle exemption yet qualify under another. Entity status, how the vehicles are transferred, and the precise federal reorganization steps all matter.

Common questions

Why were the semitrailers not commercial motor vehicles for this exemption? Transferred as stand-alone vehicles, they did not use fuel and could not be weighed in combination with separately owned truck tractors.

Why was the transfer nevertheless exempt? The asset transfer and distribution of the LLC interests qualified as a section 368(a)(1)(D) reorganization satisfying section 355.

Was a disregarded single-member LLC ignored for sales tax? No. Florida treated it as a separate legal entity for non-income-tax purposes.

Citations and references

• Fla. Stat. § 212.06(10) (vehicle title transfers are taxable unless exempt)
• Fla. Stat. § 320.01 (motor-vehicle and weight definitions)
• Fla. Stat. § 608.471 (single-member limited liability companies)
• Fla. Admin. Code r. 12A-1.007(25)(g) (commercial-motor-vehicle transfers)
• Fla. Admin. Code r. 12A-1.007(25)(a)4. (corporate reorganizations)
• 26 U.S.C. §§ 355 and 368(a)(1)(D) (federal reorganization provisions)
• Fla. Stat. § 213.22 (Technical Assistance Advisements)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 06A-020

Original ruling text

SUMMARY
QUESTION: Is a transfer of semitrailers from a corporation to a wholly-owned, single-member LLC in exchange for
stock or units in the LLC exempt from Florida sales and use tax under Rules 12A-1.007(25)(g)1.a. or 12A1.007(25)(a)4., F.A.C.?
ANSWER - Based on Facts Below: The taxpayer's transfer of semitrailers does not qualify under Rule 12A1.007(25)(g)1.a., F.A.C; the taxpayer's semitrailers do not satisfy two of the three requirements in the definition of
"commercial motor vehicle" in Rule 12A-1.007(25)(g)3.a., F.A.C. The taxpayer's transfer of semitrailers is exempt from
Florida sales and use tax under Rule 12A-1.007(25)(a)4., F.A.C. The taxpayer's reorganization qualifies for s.
368(1)(D), I.R.C., because the taxpayer satisfies s. 355, I.R.C.

July 24, 2006

Re: Technical Assistance Advisement 06A-020
Sales and Use Tax
Transfer of semitrailers from corporation to LLC
Section 212.06(10), Florida Statutes (F.S.)
Section 220.03(1)(e), F.S.
Section 320.01, F.S.
Section 608.471, F.S.
Rule 12A-1.007(25), Florida Administrative Code (F.A.C.)
Section 355, Internal Revenue Code [I.R.C.]
Section 368(a), I.R.C.
XXX [Taxpayer]
FEIN: XX
XXX [LLC]
FEIN: XX
XXX [Parent]
FEIN: XX
Dear
This is a response to your letters of May 15, 2006, requesting a Technical Assistance Advisement (TAA) regarding the
above-referenced matter. This response to your request constitutes a TAA under Chapter 12-11, Florida
Administrative Code (F.A.C.), and is issued to you under the authority of Section 213.22, Florida Statutes (F.S.).
FACTS
The facts apply to all pertinent issues. Parent owns 100% of the stock of the taxpayer. The taxpayer is a Florida

corporation that operates within the state of Florida and several other states. It is primarily engaged in the business of
manufacturing and supplying construction materials. It has operated within the state of Florida for more than five
years, controlling several active businesses within the same corporate entity, including a transportation (trucking)
business. Among the taxpayer's assets are approximately 800 semitrailers used to haul cement, aggregates, and
other materials. These semitrailers are required to be registered and licensed for use on Florida's roads and
highways. Appropriate sales or use tax was paid in full upon either the initial acquisition or the registration of these
semitrailers. The taxpayer does not own the heavy trucks or truck tractors that haul these semitrailers. Unrelated,
independent drivers [Owner Operators] haul the semitrailers. Contracts with these Owner Operators are currently
between the Owner Operators and the taxpayer. The heavy trucks or truck tractors that haul the semitrailers are
separately tagged and registered by the Owner Operators with the Florida Department of Motor Vehicles. The gross
vehicle weight of all heavy truck or truck tractor and semitrailer combinations exceeds 26,000 pounds.
In order to limit liability, the taxpayer recently created a single-member Florida limited liability company, LLC. LLC will
be wholly owned by the taxpayer. The taxpayer is contemplating the transfer of ownership of the semitrailers to LLC in
exchange for stocks or units in LLC. Immediately thereafter, the taxpayer will distribute all of its shares in the new
entity to its shareholder, Parent.
The taxpayer believes the transfer will be done in such a manner as to be in accordance with a reorganization as
defined in s. 368(a)(1), I.R.C. No registered heavy trucks or truck tractors will be transferred from the taxpayer to LLC.
After the transfer of the semitrailers from the taxpayer to LLC, the taxpayer does not anticipate leasing the semitrailers
to any related or unrelated legal entity or person.
ISSUE #1
Whether the taxpayer's transfer of semitrailers is exempt from Florida sales and use tax under Rule 12A1.007(25)(g)1.a., F.A.C.
REQUESTED ADVISEMENT
The taxpayer requests that the Department issue a TAA stating the semitrailers transferred from the taxpayer to LLC
are commercial motor vehicles, and the transfer is exempt from sales and use tax under Rule 12A-1.007(25)(g)1.a.,
F.A.C.
TAXPAYER'S POSITION
The taxpayer's transfer of semitrailers to New Line is exempt from sales or use tax since the semitrailers are
commercial motor vehicles that are exempt under the requirements set forth in Rule 12A-1.007(25)(g), F.A.C. The
semitrailers fulfill the definition of a commercial motor vehicle in Rule 12A-1.007(25)(g)3.a., because: 1) they are not
owned by a government entity; 2) the truck tractor and semitrailer combinations meet the definition of a motor vehicle
which uses special fuel or motor fuel on public highways; and 3) the truck tractor and semitrailer combinations each
have a gross vehicle weight of more than 26,000 pounds. The semitrailer transfer meets all three requirements of Rule
12A-1.007(25)(g)1.a., because 1) the taxpayer wholly owns New Line, and New Line is a corporation; 2) the

semitrailers were titled and registered at the time of transfer; and 3) appropriate sales or use tax was paid upon either
the initial acquisition of the semitrailer or upon its registration. It does not matter that the heavy truck and truck tractors
used to haul the semitrailers are owned by unrelated entities.
APPLICABLE LAW
Section 212.06(10), F.S., provides, in part:
... All transfers of title to boats, mobile homes, motor vehicles, and other vehicles are taxable transactions, unless
expressly exempt under this chapter.
Section 220.03(1)(e), F.S., provides, in part:
"Corporation" includes ... limited liability companies, under chapter 608....

Section 608.471, F.S., provides, in part:
(1) ... If a single member limited liability company is disregarded as an entity separate from its owner for federal
income tax purposes, its activities are, for purposes of taxation under chapter 220, treated in the same manner as a
sole proprietorship, branch, or division of the owner.

(3) Single-member limited liability companies and other entities that are disregarded for federal income tax purposes
must be treated as separate legal entities for all non-income-tax purposes....

Section 320.01, F.S., provides, in part:
(1) "Motor vehicle" means:
(a) An automobile, motorcycle, truck, trailer, semitrailer, truck tractor and semitrailer combination.... (emphasis
supplied)

(5) "Semitrailer" means any vehicle without motive power designed to be coupled to or drawn by a motor vehicle and
constructed so that some part of its weight and that of its load rests upon or is carried by another vehicle.

(7) "Gross weight" means the net weight of a motor vehicle in pounds plus the weight of the load carried by it.

(10) "Heavy truck" means any motor vehicle with a net vehicle weight of more than 5,000 pounds, which is registered
on the basis of gross vehicle weight in accordance with s. (4), and which is designed or used for the carriage of goods
or designed or equipped with a connecting device for the purpose of drawing a trailer that is attached or coupled
thereto by means of such connecting device and includes any such motor vehicle to which has been added a cabinet

box, a platform, a rack, or other equipment for the purpose of carrying goods other than the personal effects of the
passengers.

(12) "Gross vehicle weight" means:...
(c) The gross weight of a truck tractor and semitrailer combination is calculated by adding to the net weight of the truck
tractor the gross weight of the semitrailer, which is the maximum gross weight as declared by the owner or person
applying for registration; such vehicles are together by means of a fifth-wheel arrangement whereby part of the weight
of the semitrailer and load rests upon the truck tractor.

Rule 12A-1.007(25)(g), F.A.C., provides, in part:
1.a. The transfer of title of a commercial motor vehicle is not taxable, when all of the following conditions are met:
(I) The transfer of title occurs between two commonly owned and controlled corporations;
(II) Such vehicle was titled and registered in this state at the time of the transfer of title; and
(III) Florida sales tax was paid at the prevailing tax rate on the acquisition of such vehicle by the transferor either on
the full purchase price of such vehicle, or if the vehicle is licensed as a common carrier, to the extent provided in s.
212.08(9)(b), F.S., which is based on the ratio of intrastate mileage to interstate mileage. See Rule 12A-1.064, F.A.C.,
for proration of tax for vehicles used in interstate or foreign commerce.
b. To claim the exemption on the transfer of title to a commercial motor vehicle which qualifies for the exemption set
forth in this subparagraph, a properly executed Form DR-40, Sales Tax Exemption Affidavit (incorporated by reference
in Rule 12A-1.097, F.A.C.) must accompany the application for title transfer.

3.a. The term "commercial motor vehicle" for the purposes of this paragraph means any vehicle that is not owned or
operated by a governmental entity; which uses special fuel or motor fuel on the public highways; and which has a
gross vehicle weight in excess of 26,000 pounds, or has three (3) or more axles regardless of weight, or is used in
combination when the weight of such combination exceeds 26,000 pounds gross vehicle weight.

4. The term "commonly owned and controlled corporations" for purposes of this paragraph means a parent
   corporation and its wholly-owned (100%) subsidiaries.
   DISCUSSION AND RESPONSE
   Section 212.06(10), F.S., states that all transfers of title to motor vehicles are taxable transactions, unless expressly
   exempt under Chapter 212, F.S. Section 320.01, F.S., states that a semitrailer falls under the definition of a "motor
   vehicle." Section 608.471(1), F.S., states that if a single-member limited liability company is disregarded as an entity
   separate from its owner for federal income tax purposes, its activities are treated in the same manner as a branch or
   division of the owner for purposes of taxation under Chapter 220, F.S. Section 608.471(3), F.S., provides that single-

member limited liability companies that are disregarded for federal income tax purposes must be treated as separate
legal entities for all non-income-tax purposes. LLC is a single-member limited liability company that is disregarded for
federal income tax purposes, and it must be treated as a separate legal entity from the taxpayer for Florida sales and
use tax purposes. Therefore, in accordance with s. 212.06(10), F.S., the transfer of semitrailers from the taxpayer to
LLC is a taxable transaction for Florida sales and use tax purposes absent a specific exemption.
Rule 12A-1.007(25)(g), F.A.C., provides an exemption from Florida sales and use tax for the transfer of a commercial
motor vehicle when the transfer meets specific requirements. First, the transfer of title must occur between two
commonly owned and controlled corporations. Second, the vehicle must be titled and registered in Florida at the time
of the transfer of title. Third, Rule 12A-1.007(25)(g), F.A.C., requires that Florida sales tax was paid at the prevailing
tax rate on the acquisition of such vehicle by the transferor either on the full purchase price of such vehicle, or if the
vehicle is licensed as a common carrier, to the extent provided in s. 212.08(9)(b), F.S., which is based on the ratio of
intrastate mileage to interstate mileage.
In the case of the taxpayer, the first concern is whether the taxpayer's semitrailers meet the definition of "commercial
motor vehicles," since the taxpayer does not own the heavy trucks or truck tractors that haul the semitrailers. Rule
12A-1.007(25)(g)3.a., F.A.C., defines a commercial motor vehicle as: 1) any vehicle that is not owned or operated by
a governmental entity; 2) which uses special fuel or motor fuel on the public highways; and 3) which has a gross
vehicle weight in excess of 26,000 pounds, or has three or more axles regardless of weight, or is used in combination
when the weight of such combination exceeds 26,000 pounds gross vehicle weight.
The definition of "commercial vehicle" in Rule 12A-1.007(25)(g)3.a., F.A.C., has three requirements; the first
requirement has two parts. First, the semitrailer must be a "vehicle." Section 320.01, F.S., includes "semitrailer" under
the definition of a "motor vehicle." Second, the semitrailer must not be owned or operated by a government entity. The
taxpayer states that it is not a governmental entity and does not allow a governmental entity to use the semitrailers.
The definition of "commercial vehicle" in Rule 12A-1.007(25)(g)3.a., F.A.C., also requires the vehicle to use special
fuel (i.e., diesel fuel) or motor fuel on public highways. The taxpayer argues a semitrailer cannot be used on public
roads without some form of propulsion; therefore, the heavy truck or truck tractor and the semitrailer must be
considered a "motor vehicle" in combination regardless of the ownership of each. The taxpayer states that since the
semitrailer is a motor vehicle in combination with a heavy truck or truck tractor, the semitrailer by default uses fuel on
public roads.
However, the semitrailer must be titled and registered separately from any truck tractor or heavy truck that is later
attached to it; the semitrailer also requires a separate license plate. When a semitrailer is unattached from a truck
tractor or heavy truck, s. 320.01, F.S., treats the semitrailer as an independent motor vehicle. Therefore, when
considered as a separate, stand-alone vehicle, a semitrailer does not use motor fuel on public highways and is not
eligible for the exemption under Rule 12A-1.007(25)(g)3.a., F.A.C. On May 25, 2006, a representative from the
Department of Highway Safety and Motor Vehicles stated that a semitrailer cannot be a commercial motor vehicle
because it does not use motor fuel. When the taxpayer transfers the semitrailers to LLC, they will be transferred as
stand-alone vehicles, completely separate and unattached from any heavy trucks or truck tractors. These vehicles do
not use motor fuel on public highways.

The third requirement of Rule 12A-1.007(25)(g)3.a., F.A.C., is that the vehicle have a gross vehicle weight in excess
of 26,000 pounds; or it must have three or more axles regardless of weight; or it must be used in combination when
the weight of such combination exceeds 26,000 pounds gross vehicle weight. The taxpayer states s. 320.01(7), F.S.,
provides that "gross weight" means the net weight of a motor vehicle in pounds plus the weight of the load carried by
it. Section 320.01(12)(c), F.S., provides the gross vehicle weight of a truck tractor and semitrailer combination is
calculated by adding to the net weight of the truck tractor the gross weight of the semitrailer, which is the maximum
gross weight as declared by the owner or person applying for registration; such vehicles are together by means of a
fifth-wheel arrangement whereby part of the weight of the semitrailer and load rests upon the truck tractor. The
taxpayer argues that the weight of each semitrailer is properly calculated by adding the gross weight of the semitrailer
to the net weight of the truck tractor or heavy truck.
However, the taxpayer's semitrailers will not be transferred in combination with any truck tractors or heavy trucks
"together by means of a fifth-wheel arrangement whereby part of the weight ... rests upon the truck tractor." The truck
tractors and heavy trucks are owned by separate Owner Operators who are not participants in the transfer of
semitrailers to LLC. Therefore, s. 320.01(12)(c), F.S., which defines gross vehicle weight as it applies to truck tractor
and semitrailer combinations, is not pertinent to the transfers of the taxpayer's semitrailers.
A representative from the Department of Highway Safety and Motor Vehicles stated on May 25, 2006, that when the
Department of Motor Vehicles contemplates vehicle weight under Rule 12A-1.007(25)(g)3.a., F.A.C., that Department
first weighs the "power unit" or heavy truck, which pulls the semitrailer, by itself; if the heavy truck weighs 26,000
pounds or more, it qualifies for the exemption outright. If the "power unit" does not weigh 26,000 pounds, the weight of
the semitrailer that the "power unit" is towing is added to the total weight in an attempt to bring the sum to 26,000
pounds. According to the representative, this is how the Department of Motor Vehicles interprets Rule 12A1.007(25)(g)3.a., F.A.C., when the rule provides that gross vehicle weight may be calculated "in combination." The
taxpayer's semitrailers will be transferred to New Line separate from any truck tractors or heavy trucks; therefore, the
semitrailers cannot be weighed in combination with any "power units." Unless the truck tractors and semitrailers are
transferred in combination, the gross vehicle weight achieved by temporarily joining semitrailers and "power units"
would be misleading and hide the true nature of the transfer.
CONCLUSION
Rule 12A-1.007(25)(g)1.a., F.A.C., does not apply to the taxpayer’s transfer of semitrailers. The taxpayer's
semitrailers do not satisfy two of the three requirements in the definition of "commercial motor vehicle" in Rule 12A1.007(25)(g)3.a., F.A.C.
ISSUE #2
Whether the taxpayer's transfer of semitrailers is exempt from Florida sales and use tax under Rule 12A1.007(25)(a)4., F.A.C.
REQUISTED ADVISEMENT

Taxpayer requests that the Department issue a TAA stating that the transfer of licensed and registered semitrailers
from a Florida corporation to a single-member Florida limited liability company that is disregarded for income tax
purposes does not create Florida sales or use tax liability.
The taxpayer also asks whether, in the event the proposed transfer qualifies for a sales or use tax exemption,
individual DR-40 forms are required to re-register each separate semitrailer as tax exempt (approximately 800 forms)
or whether the information required for the DR-40 form can be provided in a spreadsheet format. If a separate DR-40
form is not required to re-register each semitrailer as exempt, the taxpayer asks what proof should be provided to the
Department of Motor Vehicles to exempt the semitrailers upon registration.
TAXPAYER'S POSITION
The taxpayer believes that the transfer of semitrailers to a single-member disregarded limited company, LLC, in
exchange for stock or units in LLC is not subject to Florida sales or use tax pursuant to the exemption provided in
Rule 12A-1.007(25)(a)4., F.A.C. The taxpayer states that the transaction qualifies as a reorganization pursuant to s.
368(a)(1)(F), I.R.C. The taxpayer believes that if the ownership of LLC is distributed to the shareholder of the
taxpayer, the transaction qualifies as a reorganization pursuant to s. 368(a)(1)(D), I.R.C. The taxpayer states that the
transaction qualifies under s. 368(a)(1)(D), I.R.C., because, in pursuance of the plan, stock or securities of the
corporation to which the assets are transferred will be distributed in a transaction which qualifies under s. 355, I.R.C.
APPLICABLE LAW
Section 213.22(1), F.S., provides, in part:
... Technical assistance advisements shall have no precedential value except to the taxpayer who requests the
advisement and then only for the specific transaction addressed in the technical assistance advisement, unless
specifically stated otherwise in the advisement....

Rule 12A-1.007(25), F.A.C., provides, in part:
a) The following transfers of ownership of any aircraft, boat, mobile home, motor vehicles, or other vehicles of a class
or type required to be registered, licensed, titled, or documented in this state or by the United States Government are
exempt from tax, provided that a certificate setting forth the facts and signed under penalty of perjury accompanies the
application for title transfer, or if no title certificate is required by law, the application for transfer of license or
registration:

4. The transfer of title into the name of the surviving corporation by reason of a corporate consolidation or merger in
   accordance with Chapter 607 or 617, F.S., or a reorganization as defined in s. 368(a)(1) of the Internal Revenue Code
   solely in exchange for stock.

(d) When title to an aircraft, boat, mobile home, motor vehicle, or other vehicle of a class or type required to be
registered, licensed, titled, or documented in this state or by the United States Government is transferred from an
individual, who may or may not be a stockholder, to a corporation, or from a corporation to an individual who may or
may not be a stockholder, or from one corporation to another, or from a partnership to a corporation, or from a
corporation to a partnership, it is presumed that a consideration flows from the transferee to the transferor, and if no
consideration is stated, then it shall be presumed to be the fair market value of the vehicle. This is true even when the
two corporations are owned by the same stockholders.

Section 355, I.R.C., provides in part:
(a) Effect on distributees
(1) General rule
If (A) a corporation (referred to in this section as the "distributing corporation") (i) distributes to a shareholder, with respect to its stock, or
(ii) distributes to a security holder, in exchange for its securities, solely stock or securities of a corporation (referred to
in this section as "controlled corporation") which it controls immediately before the distribution,
(B) the transaction was not used principally as a device for the distribution of the earnings and profits of the
distributing corporation or the controlled corporation or both (but the mere fact that subsequent to the distribution stock
or securities in one or more of such corporations are sold or exchanged by all or some of the distributees (other than
pursuant to an arrangement negotiated or agreed upon prior to such distribution) shall not be construed to mean that
the transaction was used principally as such a device),
(C) the requirements of subsection (b) (relating to active businesses) are satisfied, and
(D) as part of the distribution, the distributing corporation distributes (i) all of the stock and securities in the controlled corporation held by it immediately before the distribution, or
(ii) an amount of stock in the controlled corporation constituting control within the meaning of section , and it is
established to the satisfaction of the Secretary that the retention by the distributing corporation of stock (or stock and
securities) in the controlled corporation was not in pursuance of a plan having as one of its principal purposes the
avoidance of Federal income tax, then no gain or loss shall be recognized to (and no amount shall be includible in the
income of) such shareholder or security holder on the receipt of such stock or securities.

(b) Requirements as to active business

(1) In general
Subsection (a) shall apply only if either (A) the distributing corporation, and the controlled corporation (or, if stock of more than one controlled corporation is
distributed, each of such corporations), is engaged immediately after the distribution in the active conduct of a trade or
business....

(2) Definition
For purposes of paragraph (1), a corporation shall be treated as engaged in the active conduct of a trade or business
if and only if (A) it is engaged in the active conduct of a trade or business, or substantially all of its assets consist of stock and
securities of a corporation controlled by it (immediately after the distribution) which is so engaged,
(B) such trade or business has been actively conducted throughout the 5-year period ending on the date of the
distribution,
(C) such trade or business was not acquired within the period described in subparagraph (B) in a transaction in which
gain or loss was recognized in whole or in part, and
(D) control of a corporation which (at the time of acquisition of control) was conducting such trade or business (i) was not acquired by any distributee corporation directly (or through 1 or more corporations, whether through the
distributing corporation or otherwise) within the period described in subparagraph (B) and was not acquired by the
distributing corporation directly (or through 1 or more corporations) within such period, or
(ii) was so acquired by any such corporation within such period, but, in each case in which such control was so
acquired, it was so acquired, only by reason of transactions in which gain or loss was not recognized in whole or in
part, or only by reason of such transactions combined with acquisitions before the beginning of such period. For
purposes of subparagraph (D), all distributee corporations which are members of the same affiliated group (as defined
in section without regard to section ) shall be treated as 1 distributee corporation.

Section 368(a), I.R.C., provides, in part:
(1) ... For purposes of parts I and II and this part, the term "reorganization" means....

(D) a transfer by a corporation of all or a part of its assets to another corporation if immediately after the transfer the
transferor, or one or more of its shareholders (including persons who were shareholders immediately before the
transfer), or any combination thereof, is in control of the corporation to which the assets are transferred; but only if, in

pursuance of the plan, stock or securities of the corporation to which the assets are transferred are distributed in a
transaction which qualifies under section 354, 355, or 356;

(F) a mere change in identity, form, or place of organization of one corporation, however effected;

DISCUSSION AND RESPONSE
Rule 12A-1.007(25), F.A.C., lists specific transfers of ownership of motor vehicles that are exempt from Florida sales
and use tax. Rule 12A-1.007(25)(a)4., F.A.C., provides that the transfer of title of motor vehicles into the name of the
surviving corporation by reason of a corporate consolidation or merger in accordance with Chapter 607 or 617, F.S.,
or a reorganization as defined in s. 368(a)(1), I.R.C., solely in exchange for stock is exempt from Florida sales and use
tax.
The taxpayer states that the transfer of ownership of semitrailers qualifies as a reorganization under s. 368(a)(1)(F),
I.R.C., which provides that one of the categories for a reorganization is a "mere change in identity, form, or place of
organization of one corporation, however effected". The taxpayer cites TAA 00A-049 (Sept. 14, 2000), in which a
wholly-owned corporate subsidiary of a parent corporation was converted into a limited liability company [LLC]. When
the corporate subsidiary was dissolved into the LLC, all property owned by the subsidiary was transferred to the LLC.
This conversion of a corporation to a limited liability company was considered to be similar to a corporate
reorganization. The taxpayer also cites TAA 02A-007 (Jan. 30, 2002), in which a Florida entity, owning outstanding
shares of a corporation, decided to dissolve the corporation into a Florida limited liability company [LLC] and thereby
transfer ownership of the corporation's airplanes to the LLC. It was held that no sales or use tax was due on the
transfer of certain aircraft in connection with the merger between the dissolving corporation and the LLC. Rule 12A1.007(25)(a)(4), F.A.C., provided an exemption for a transfer of property into the name of the surviving corporation by
reason of a corporate merger.
Section 213.22(1), F.S., states that a TAA shall have no precedential value except to the taxpayer who requests the
advisement and then only for the specific transaction addressed in the TAA, unless specifically stated otherwise in the
advisement. In both TAA 00A-049 and TAA 02A-007, the legal forms of the entities changed as a result of conversion;
the dissolved corporations no longer existed. Section 368(a)(1)(F), I.R.C., requires such a change in identity, form, or
organization of the corporation. The taxpayer's transfer of semitrailers does not involve a corporate conversion that
will change the forms of the entities involved; both the taxpayer and LLC will exist unchanged after the transfer of the
semitrailers. Therefore, the taxpayer's transaction does not qualify as a reorganization under s. 368(a)(1)(F), I.R.C.
The taxpayer states that the transfer of semitrailers qualifies as a reorganization under s. 368(a)(1)(D), I.R.C., which
provides that one of the categories for a reorganization is "a transfer by a corporation of all or a part of its assets to
another corporation if immediately after the transfer the transferor, or one or more of its shareholders (including
persons who were shareholders immediately before the transfer), or any combination thereof, is in control of the
corporation to which the assets are transferred; but only if, in pursuance of the plan, stock or securities of the
corporation to which the assets are transferred are distributed in a transaction which qualifies under section 354, 355,
or 356." The taxpayer will transfer part of its assets to another corporation, LLC, in exchange for stock or units in LLC;

immediately thereafter, the taxpayer will distribute all of its shares in LLC to its shareholder, Parent.
In order to qualify as a reorganization under s. 368(a)(1)(D), I.R.C., the stock or securities of the corporation to which
the assets are transferred must be distributed in a transaction which qualifies under ss. 354, 355, or 356, I.R.C.
Section 355, I.R.C., applies to a reorganization where the following requirements are met: 1) a corporation distributes
to a shareholder, with respect to its stock, solely stock or securities of a corporation which it controls immediately
before the distribution; 2) the distribution is not a device for the distribution of earnings and profits; 3) the “active
business” requirement set forth in s. 355(b), I.R.C., is satisfied; and 4) the distribution is of all of the stock and
securities in the controlled corporation held by the distributing corporation immediately before the distribution.
The taxpayer's reorganization will satisfy the criteria of s. 355, I.R.C. First, the corporation must distribute to a
shareholder, with respect to its stock, solely stock or securities of a corporation which it controls immediately before
the distribution. The taxpayer satisfies this requirement because it will distribute all of the stock of the new entity to its
shareholder, Parent.
Second, the transaction must not be used principally as a device for the distribution of the earnings and profits of the
distributing corporation or the controlled corporation or both. This requirement is satisfied, because the taxpayer
states there will be no sale or further distribution of the stock which could be used as a method for distribution of
earnings and profits.
Third, the "active business" requirement set forth in s. 355(b), I.R.C., must be satisfied. Section 355(b)(1)(A), I.R.C.,
states that the distributing corporation and the controlled corporation must be engaged immediately after the
distribution in the active conduct of a trade or business. The active business rule requires that the trade or business
has been actively conducted throughout a five-year period ending on the date of the distribution. This requirement is
satisfied because the taxpayer has conducted an active trucking business for more than five years, as required by the
statute. When LLC receives the semitrailers, LLC will be able to tack on the taxpayer’s previous years of trucking
business towards satisfying the active business requirement. Once the transfer is complete, the distributing and
controlled corporations must be engaged in the active conduct of a trade or business. Following the transfer, LLC will
be responsible for the semitrailers, accountable for their care and upkeep. The taxpayer will continue to run the
trucking business, hauling cement, aggregates, and other materials.
Fourth, the distributing corporation must distribute all of the stock and securities in the controlled corporation held by
the distributing corporation immediately before the distribution. This requirement is satisfied because the taxpayer will
distribute 100% of the stock of the new entity to Parent.
The taxpayer asks whether, in the event the proposed transfer qualifies for a sales or use tax exemption, individual
DR-40 forms are required to re-register each separate semitrailer as tax exempt (approximately 800 forms) or whether
the information required for the DR-40 form can be provided in a spreadsheet format. The Department no longer uses
form DR-40. The taxpayer will apply for certificates of title for each individual vehicle on Florida Department of
Highway Safety and Motor Vehicles Form 82040. Section nine of this form is titled Sales Tax Exemption Certification
and provides an avenue for the taxpayer to register each semitrailer as tax exempt.

CONCLUSION
Section 368(a)(1)(F), I.R.C., does not apply to the taxpayer's reorganization. Section 368(a)(1)(D), I.R.C., applies to
the taxpayer's specific reorganization. The taxpayer's reorganization qualifies for s. 368(1)(D), I.R.C., because the
taxpayer satisfies s. 355, I.R.C. Therefore, taxpayer's transfer of semitrailers is exempt from Florida sales and use tax
under Rule 12A-1.007(25)(a)4., F.A.C. The taxpayer can register each semitrailer as tax exempt using form HSMV
82040.
This response constitutes a Technical Assistance Advisement under s. 213.22, F.S., which is binding on the
Department only under the facts and circumstances described in the request for this advice, as specified in s. 213.22,
F.S. Our response is predicated on those facts and the specific situation summarized above. You are advised that
subsequent statutory or administrative rule changes or judicial interpretations of the statutes or rules upon which this
advice is based may subject similar future transactions to a different treatment than expressed in this response.
You are further advised that this response, your request and related backup documents are public records under
Chapter 119, F.S., and are subject to disclosure to the public under the conditions of s. 213.22, F.S. Confidential
information must be deleted before public disclosure. In an effort to protect confidentiality, we request you provide the
undersigned with an edited copy of your request for Technical Assistance Advisement, the backup material and this
response, deleting names, addresses and any other details which might lead to identification of the taxpayer. Your
response should be received by the Department within 15 days of the date of this letter.
If you have any further questions with regard to this matter and wish to discuss them, you may contact me directly at
(850) 488-8565.
Sincerely,
Matt Crockett
Attorney
Technical Assistance & Dispute Resolution
Record ID: 21325