Ezel / Tax Rulings / TX
TX 8509L0667A10 Sales and/or Use Tax (State,Local,MTA) 1985-09-26

Did a parent corporation owe Texas sales tax when a subsidiary transferred maritime equipment as a dividend using a nominal Coast Guard bill of sale?

Short answer: No, as long as the Coast Guard fee shown for the required bill of sale was minimal.

Apply this to your situation

This page answers the general question as of 1985. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1985
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official 1985 Texas Comptroller taxpayer-response letter based on maritime equipment transferred from a subsidiary to its parent as a dividend, with a bill of sale prepared only to satisfy a Coast Guard title-transfer requirement and showing a minimal amount. It expressly says different facts could change the opinion. Current corporate-distribution, maritime-title, Coast Guard, consideration, and sales-tax rules may differ, and STAR documents may no longer represent current policy even when not marked superseded. Letters on STAR can support detrimental reliance only for the taxpayer to whom the letter was directly issued under 34 Tex. Admin. Code Rules 3.1 and 3.10. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page) is the authoritative source for any reliance.

Plain-English summary

The subsidiary transferred maritime equipment to its parent as a dividend. Coast Guard rules required a bill of sale whenever title passed between entities, so the document would show a nominal sales price solely to meet that requirement.

The Comptroller said the parent corporation owed no sales tax on the dividend as long as the Coast Guard fee was minimal.

Common questions

Was the dividend taxable? No, under the stated condition.

Why was there a bill of sale? To satisfy the Coast Guard's title-transfer requirement.

What condition did the letter state? The Coast Guard fee had to be minimal.

Citations and references

The reproduced letter cites no numbered statute or rule.

Source

Original ruling text

September 26, 1985

Dear ***:

Thank you for your letter of September 17, 1985 concerning the
taxability of a dividend being transferred from a subsidiary
corporation to the parent corporation.

Your fact situation and the response follows:

The Coast Guard requires that any time title passes from one
entity to another on maritime equipment, a bill of sale will be
presented to them on the transfer. The bill of sale, which will be
furnished only to meet their requirement, will show $***
as the sales price. What are the sales tax consequences of the
above transaction?

Response: The parent corporation will owe no sales tax on the
dividend as long as the fee charged by the coast guard is minimal.

This opinion is based on the facts presented. If there are additional
or different facts, the opinion may change.

If you have any questions or need more information, please call us at
1-800-252-5555 toll free from anywhere in Texas. You may write us at
the Tax Administration Division.

Sincerely,

Tax Policy Section
Tax Administration Division

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