in-20261021-IR-045260383NRA: DEPARTMENT OF REVENUE

DEPARTMENT OF REVENUE Sales Tax Information Bulletin #12 Subject: Public Transportation Publication Date: September 2026 Effective Date: October 1, 2026 References: IC 6-2.5-3-7; IC 6-2.5-5-8; IC 6-2.5-5-27; IC 6-2.5-5-27.5; 45 IAC 2.2-1-1; 45 IAC 2.2-5-61; Wendt LLP v. Indiana Dep't of State Revenue, 977 N.E.2d 480 (Ind. Tax Ct. 2012) Replaces Bulletin #12, dated April 2023 SUMMARY OF CHANGES Apart from technical, nonsubstantive changes, this bulletin has been updated to provide more guidance on direct consumption and to include examples that were previously in the department's regulations. The bulletin also includes a section on the exemption for rolling stock. INTRODUCTION Transactions involving tangible personal property and services are exempt from Indiana sales tax if the person acquiring the property or service directly uses or consumes it in providing public transportation for persons or property. To qualify for the exemption, the tangible personal property purchased must be predominately used in providing public transportation. The tangible personal property is predominately used in public transportation if more than 50% of its use is attributable to transporting people or property for hire. The purpose of this bulletin is to provide guidance concerning the nuances of this public transportation exemption. PUBLIC TRANSPORTATION DEFINITION "Public transportation" means the movement, transportation, or carrying of persons and/or property for consideration by a common carrier, a contract carrier, a household goods carrier, carriers of exempt commodities, and other specialized carriers performing public transportation service for compensation by highway, rail, air, or water, which carriers operate under authority issued by, or are specifically exempt by statute or regulation from economic regulation of, the appropriate federal or state regulatory authority. Even if a person or company operates under the appropriate authority, they also must transport people or property for consideration. That is to say, a public transportation provider must be compensated for transporting people or goods. The goods transported must be goods owned by someone other than the public transportation provider. PUBLIC TRANSPORTATION REQUIREMENTS The following requirements are factors the department weighs in determining whether a transportation company is engaged in public transportation. An asterisk (*) indicates a requirement that is considered by the department to be a critical factor in determining whether a transportation company qualifies for the public transportation exemption. A transportation company fails to qualify for the exemption if it does not, at a minimum, adhere to all the critical requirements. However, failure to adhere to one or more of the "noncritical" requirements can also result in a transportation company's failure to qualify for the exemption. The requirements are as follows: Ambulances used for emergency services are not used in public transportation, as the operators do not arrange transportation with the public for consideration. However, ambulances that provide pre-scheduled medical transportation to the public (e.g., the picking up of patients to go to medical appointments) could be considered public transportation. These carriers' purpose is to provide a specialized transport, and not to provide emergency medical treatment (although the ambulance might contain medical equipment in the event that the equipment is needed during non-emergency transportation). If an ambulance is used both in emergency and prescheduled, non-emergency services, the ambulance would be exempt if it was predominately used for non-emergency transport. Intrastate non-emergency medical transportation providers are regulated by the department's Motor Carrier Services division as for-hire common or contract carriers of persons. ACQUISITION BY A PUBLIC TRANSPORTATION PROVIDER Tangible personal property bought by a public transportation provider may be purchased exempt from sales or use tax if the property is to be predominantly and directly used or consumed in providing public transportation. Direct Use or Consumption Property is directly used or consumed in providing public transportation if the property is reasonably necessary to provide public transportation. Determining whether property is reasonably necessary to provide public transportation can be difficult. The following items are reasonably necessary to provide public transportation. These items do not comprise a comprehensive list. Rather, the following are provided to offer some basic examples of items that generally are reasonably necessary to provide public transportation: Certain functional categories of items are not reasonably necessary to provide public transportation and are therefore subject to tax: Additional Considerations for Determining Direct Use In general, all vehicles directly used in rendering public transportation, such as airplanes, locomotives, rolling stock, watercraft, vessels, pipelines, buses, tractors, trailers, trucks, and other transportation vehicles, are exempt from sales tax. The exemption extends to vehicular equipment (including containers) directly used in rendering public transportation. This exemption does not extend to motor vehicles used to solicit business, to haul the company's own property, or by company employees for their personal use. Storage facilities and associated equipment for exempt vehicles are generally exempt. Additionally, tangible personal property directly used for temporarily storing persons or property being transported is exempt from sales tax because temporary storage is considered to be an integral part of rendering transportation. The purchase, storage, or use of tangible personal property used for activities prior to or subsequent to the rendition of public transportation is subject to tax because it is not a direct use. However, equipment used to load passengers or property into vehicles is considered exempt. Machinery, tools, equipment, and facilities used for repair and maintenance of tangible personal property directly used in public transportation are not subject to tax. Additionally, replacement parts used to replace worn, broken, inoperative, or missing parts or accessories on exempt property are exempt from sales tax. However, items used for reassembly of equipment or machinery moved by a provider of public transportation are taxable. Labels used during disassembly of equipment to facilitate reassembly are also taxable. Generally, the purchase, storage, or use of tangible personal property to be incorporated into or used as an improvement to realty used in connection with providing public transportation is taxable. However, these items are exempt if they are directly used in providing public transportation. In general, any other tangible personal property that does not fit within a category described elsewhere in this section is taxable. Additional Considerations for Determining Direct Consumption To "consume" means the dissipation or expenditure by combustion, use, or application, and does not mean or include the: of tangible personal property. Shipping materials or supplies are generally taxable except when directly consumed while providing public transportation. The purchase of gasoline, special fuel used as a heating oil, kerosene, ethanol, and alternative fuels are exempt from sales tax if it is purchased to be directly consumed in providing public transportation of persons or property. There is a broader exemption from sales tax on the sale of "special fuel" in Indiana for any purpose except for use as heating oil. The term "special fuel" includes diesel, biodiesel, and "natural gas products," meaning either a liquid or compressed natural gas product, or a combination of liquefied petroleum and a compressed natural gas product. However, the term does not include gasoline or the other fuels mentioned earlier. Generally, all other items of tangible personal property are taxable except those items which are directly consumed in providing public transportation. Predominant Use If a taxpayer acquires tangible personal property for predominant use in providing public transportation, the property is entitled to the exemption. The tangible personal property is predominately used in public transportation if more than 50% of its use is attributable to transporting people or property for hire. Thus, a phone used 10% of the time for sales calls and 90% of the time to dispatch vehicles would meet the predominant use test, so the entire purchase price of the item would be exempt. A transaction in which a person acquires an aircraft to rent or lease to another person for predominant use in public transportation by the other person is exempt from the sales or use tax. For further information, please see Sales Tax Information Bulletin #76, available online at in.gov/dor/resources/tax-library/information-bulletins/sales-tax-information-bulletins/. EXEMPTION FOR ROLLING STOCK In addition to the general exemption for public transportation equipment discussed above, there is an exemption from Indiana sales tax for transactions involving: For purposes of this exemption, "rolling stock" means rail transportation equipment, including locomotives, box cars, flatbed cars, hopper cars, tank cars, and freight cars of any type or class. EXEMPTION CERTIFICATES Any person or company engaged in providing public transportation may buy certain items exempt from sales or use tax, but if the public transportation provider has a facility in Indiana, it must register with the Indiana Department of Revenue to obtain a Registered Retail Merchant Certificate (RRMC) before they will be able to buy tangible personal property exempt from Indiana sales tax. The RRMC will have a taxpayer identification number ("TID") that must be used on all exemption certificates given to vendors by the public transportation provider: either the Form ST-105 (the department's General Sales Tax Exemption Certificate) or a Streamlined Sales Tax Agreement certificate of exemption, which are available online at in.gov/dor/tax-forms/sales-tax-forms/. Exemption certificates can be used as a blanket exemption, kept on file by the vendor, or used for each individual transaction. A blanket exemption certificate lets the vendor know that all purchases made by the public transportation provider are reasonably necessary to provide public transportation. If a public transportation provider uses property purchased with a blanket exemption in a taxable manner, the provider must pay use tax for the purchase. The tax must be remitted on the provider's sales and use tax return, the annual income tax return, or a consumer use tax return (Form ST-115). Individuals engaged in public transportation but operating under another person's United States Department of Transportation (USDOT) or Indiana ID number or similar permit must use Form ST-105 when making an exempt purchase. Another option is for the purchaser to provide the seller with the person's name, address, and motor carrier number or USDOT number and provide a signature to affirm, under penalties of perjury, that the information is correct and that the tangible personal property is being purchased for an exempt purpose. UTILITIES Before a person or company engaged in providing public transportation can purchase utilities, natural gas, electricity, local exchange telephone service, intrastate toll message telephone service, steam, or water exempt from sales tax, an exemption certificate issued by the department on behalf of the transportation provider must be on file with the utility. A public transportation provider must submit an ST-200 Utility Sales Tax Exemption Application. Once approved by the department, a special exemption certificate, Form ST-109, will be issued. However, the department will only issue an ST-109 to a transportation provider if the utility being bought is separately metered or the utility is predominately used in providing public transportation. If the utility is being used less than 50% in providing public transportation, the public transportation provider must pay the tax and file a claim for refund for the exempt percentage. If you have any questions concerning this bulletin, please contact the Tax Policy Division at taxpolicy@dor.in.gov. _________________________