Drew; February 6, 2013 I have researched the issue whether an exchange of art for stock under a substitution clause in a defective grantor trust is subject to sales tax. A defective grantor trust (IDGT) is a grantor trust whereby the grantor retains certain powers as prescribed in IRC sec 671-677. Basically, the powers retained include the following: a) Reversionary interest b) Power to control beneficiary enjoyment c) Administrative powers (including the power of substitution) d) Power to revoke e) Income for benefit of the grantor. IRC section 674(a) provides that a grantor will be treated as the owner of any portion of a trust over which the grantor has retained a power of disposition. This power is defined in Treas.Reg 1.674(a)-1(a) as any power that can effect the beneficial enjoyment of the trust property. The above powers for Federal Tax purposes considers the IDGT as a non entity, whereby the grantor will be taxed on all income generated by the trust. In fact the IDGT would retain the grantors tax ID (SSN). The question is how is an IDGT treated for NYS sales tax purposes when there is a sale between the grantor and the IDGT. I have not found any specific authority with regard to treatment of an IDGT as a separate entity for sales tax purposes. However an Advisory Opinion for Cleveland Browns Transportation LLC (TSB-A-06(8)S) discusses among other issues as to whether the Petitioners charges to affiliates are subject to sales tax. The opinion concludes "However, if the activities of Petitioner were so dominated and controlled by the parent or affiliates or their activities were so commingled that they would be considered to be operating as alter egos of each other rather than separate legal entities, then the corporate structures would be disregarded and the conclusions reached in this opinion would not apply. See Harfred Operating Corporation etc." Harfred Operating Corporation (TSB-A-86 (28)S) discusses whether a subsidiary is