in-20251126-IR-045250673NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE MEMORANDUM OF DECISION: 04-20251499 Sales Tax For the 2024 Tax Year HOLDING Individual established that his purchase of a motor vehicle qualified for a partial exemption. ISSUE

I. Sales Tax – Exempt Sales.

Authority: IC 6-2.5-2-1; IC 6-2.5-5 et seq.; IC 6-2.5-5-2; Dept. of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579 (Ind. 2014); Indianapolis Fruit Co. v. Department of State Revenue, 691 N.E.2d 1379 (Ind. Tax Ct. 1998); Sony Music Entertainment, Inc. v. State Bd. of Tax Comm'rs, 681 N.E.2d 800 (Ind. Tax Ct.1997); Sales Tax Information Bulletin 9 (June 2023). Taxpayer protests the Indiana Department of Revenue’s denial of a claim for refund of sales tax paid. STATEMENT OF FACTS Taxpayer is an Indiana resident. Taxpayer purchased a motor vehicle for use on his farm, and he applied for and received farm license plates from the Bureau of Motor Vehicles. Taxpayer paid sales tax on the purchase of this motor vehicle. In May 2024, Taxpayer applied for a refund of sales tax on the grounds that the vehicle was used in the direct production of agricultural products. The Indiana Department of Revenue (“Department”) denied the refund on the grounds that Taxpayer did not have an exemption certificate on file. Taxpayer timely protested, and this Memorandum of Decision results. Because Taxpayer waived his right to a hearing, this Memorandum of Decision relies on documents that Taxpayer submitted and the Department’s records.

I. Sales Tax – Exempt Sales.

DISCUSSION Taxpayer argues that his purchase of a motor vehicle for use on his farm was exempt from sales tax. The Department denied his refund request because Taxpayer did not provide an exemption certificate showing that he was entitled to claim an exemption from sales and use tax. When a taxpayer claims an exemption, they bear the burden to prove that they are entitled to it. Indianapolis Fruit Co. v. Department of State Revenue, 691 N.E.2d 1379, 1383 (Ind. Tax Ct. 1998). Exemptions are strictly construed against the taxpayer. See Sony Music Entertainment, Inc. v. State Bd. of Tax Comm'rs, 681 N.E.2d 800, 801 (Ind. Tax Ct.1997). Additionally, “when [courts] examine a statute that an agency is ‘charged with enforcing . . . [courts] defer to the agency’s reasonable interpretation of [the] statute even over an equally reasonable interpretation by another party.’” Indiana Dep’t of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579, 583 (Ind. 2014). Thus, all interpretations of Indiana tax law contained within this decision are entitled to deference. Indiana imposes a sales tax on all retail transactions made in Indiana. IC 6-2.5-2-1(a). The purchaser is “liable for the tax on the transaction” and “shall pay the tax to the retail merchant as a separate added amount . . . .” IC 6-2.5-2-1(b). However, some retail transactions are exempt from the sales tax. See IC 6-2.5-5 et seq. Among those transactions exempt from the sales tax are transactions where the purchaser buys “agricultural machinery, tools, and equipment, including material handling equipment purchased for the purpose of transporting materials into activities described in this subsection from an onsite location” if the buyer intends to use the property “for the person's direct use in the direct production, extraction, harvesting, or processing of agricultural commodities.” IC 6-2.5-5-2. “General farm maintenance” is not considered to be direct use in the direct production of farm goods. Sales Tax Information Bulletin 9 (June 2023), 20230719-IR-045230542NRA. However, “mov[ing] exempt items such as seeds, plants, fertilizers, pesticides, and fungicides from temporary storage to a location” where they will be used in the production of farm goods is considered an exempt use. Id. When an item is partially directly used in the direct production of farm goods but mostly used for other, non-exempt purposes, the “amount of [sales] tax . . . imposed” on the purchase of that item “is prorated based on the purchaser’s non-exempt use.”  IC 6-2.5-5-2(e). To claim an agricultural exemption, a taxpayer must complete an Agricultural Equipment Exemption Usage Questionnaire (“AGQ-100”). The AGQ-100 requires a taxpayer seeking an agricultural exemption to list for what uses the taxpayer intends to use the property being purchased. The AGQ-100 asks the taxpayer to estimate how many days per year they intend to use the property for each purpose listed, understanding that the total days may add up to more than 365 because an item may be used for multiple purposes on any given day. The Department will calculate prorated usage by dividing the number of days listed for an exempt use by the total number of days listed. Taxpayer stated on his AGQ-100 that he anticipated using the vehicle 100 days per year for “hauling seeds, fertilizer, and insecticide/fungicide to fields,” 150 days per year for “field/pasture/livestock inspection,” 300 days per year for “hauling tools and equipment,” 20 days for “picking up rocks/debris from field,” 290 days for “transporting farmer/employees,” and 60 days for “mowing or spraying of ditches, field boundaries, and barn yard [sic.] areas.” Taxpayer’s days of listed usage total 920. In his refund claim, Taxpayer included a completed Certificate of Gross Retail or Use Tax Exemption for the Purchase of a Motor Vehicle or Watercraft (“ST-108E”) and a completed AGQ-100. The Department stated during the refund claim process that Taxpayer had not provided an exemption certificate. However, Taxpayer did provide an exemption certificate with his refund claim — the ST-108E. Because the Department did not consider this certificate when it denied Taxpayer’s refund request, Taxpayer’s protest is sustained under IC 6-2.5-5-2. Of the uses that Taxpayer claims, only “hauling seeds, fertilizer, and insecticide/fungicide to fields” constitutes exempt usage under IC 6-2.5-5-2. The other uses are “general farm maintenance” and are not exempt. Therefore, Taxpayer’s exempt-use ratio is 100/920, or 10.9 percent. Taxpayer is sustained to the extent that he is liable only for 89.1 percent of the sales tax assessed. FINDING Taxpayer’s protest is sustained to the extent described above. August 12, 2025 Replaces Finding Document: New