Asphalt Company Wins Tax Case: No Sales Tax on Internal Transfers

• Asphalt Company not liable for 2.6 million dollars in sales tax as judge rules no sale occurred
• Asphalt Emulsion Industries LLC transferred property to parent company Slurry Pavers Inc without consideration, not constituting a sale
• During 2015-2021, AEI operated in North Carolina, producing emulsion for road construction, mainly transferring products to Slurry and Whitehurst Paving Company Inc
• Transfers recorded in VISTA accounting software, showing temporary inventory changes and due to/from entries with dollar amounts similar to external sales prices
• Slurry reported and paid use tax on transfers, calculated based on raw material costs
• North Carolina Department of Revenue claimed these transfers were taxable sales, assessing over 2.5 million dollars in taxes, penalties, and interest
• Administrative Law Judge ruled transfers were not sales as there was no quid pro quo or intent to engage in a sale, rejecting the Department of Revenue’s claim
• Judge found no value in temporary accounting entries and rejected the argument that Slurry’s payment for AEI’s employee and accounting services constituted consideration for sales

Source: jdsupra.com

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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