in-20251126-IR-045250669NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 04-20242517 Consumer Use Tax  For The Year 2021 HOLDING Company has not proven that the Department’s assessment was incorrect or that the assessed interest should be waived. Company has demonstrated that the penalty should be abated. ISSUE

I. Indiana Use Tax – Imposition.

Authority: IC 6-2.5-1-2; IC 6-2.5-2-1; IC 6-2.5-3-1; IC 6-2.5-3-2; IC 6-2.5-3-4; IC 6-2.5-4-1; IC 6-2.5-5 et seq.; IC 6-2.5-13-1; IC 6-8.1-5-1; Indiana Dept. of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463 (Ind. 2012); Lafayette Square Amoco, Inc. v. Indiana Dept. of State Revenue, 867 N.E.2d 289 (Ind. Tax Ct. 2007); Dept. of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579 (Ind. 2014); Rhoade v. Indiana Dep't of State Revenue, 774 N.E.2d 1044, 1047 (Ind. Tax Ct. 2002); Indiana Dep't of State Revenue, Sales Tax Division v. RCA Corp., 310 N.E.2d 96 (Ind. Ct. App. 1974); 45 IAC 2.2-3-4; 45 IAC 2.2-3-14. Taxpayer protests the assessment of additional use tax.

II. Indiana Use Tax – Penalty and Interest.

Authority: IC 6-8.1-10-1; IC 6-8.1-10-2.1; 45 IAC 15-11-2. Taxpayer protests the assessment of penalty and interest. STATEMENT OF FACTS Taxpayer is an Indiana company. Taxpayer’s owner (“Owner”) purchased a vehicle, and the vehicle was titled in Owner’s name. Owner subsequently transferred the title of the vehicle to Taxpayer. Sales tax was not paid to the Indiana Bureau of Motor Vehicles (“BMV”) when the vehicle was titled in Taxpayer’s name. The Indiana Department of Revenue (“Department”) later received information from the BMV regarding the transfer and a sales price of $0. The Department of Revenue (“Department”) conducted a review of the transfer and issued an assessment for use tax to the Taxpayer, which included penalty and interest. The Department discussed the protest with Owner as part of the protest process, and this Letter of Findings results. Additional facts will be provided as necessary.

I. Indiana Use Tax – Imposition.

DISCUSSION The Department reviewed Taxpayer’s title application form from the BMV and determined that the vehicle transfer was subject to Indiana use tax. Taxpayer argues that it should not have to pay additional use tax on the vehicle since the Owner paid sales tax on the vehicle when he purchased the vehicle. In support of its protest, Taxpayer submitted a copy of its application for Certificate of Title and a copy of its Certificate of Title. As a threshold issue, it is the Taxpayer’s responsibility to establish that the existing tax assessment is incorrect. A proposed assessment is prima facie evidence that DOR’s claim for the unpaid tax is valid. IC 6-8.1-5-1(c). The burden of proving that the proposed assessment is wrong rests with the person against whom the proposed assessment is made. Id.; See e.g., Indiana Dept. of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463, 466 (Ind. 2012); Lafayette Square Amoco, Inc. v. Indiana Dept. of State Revenue, 867 N.E.2d 289, 292 (Ind. Tax Ct. 2007). An assessment, including Taxpayer’s penalty assessment, is therefore presumed valid. A taxpayer must provide documentation explaining and supporting that the Department’s position is wrong. Additionally, “[W]hen [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.’” Dept. of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579, 583 (Ind. 2014). Indiana imposes a use tax “on the storage, use, or consumption of a vehicle . . . if the vehicle . . . (1) is acquired in a transaction that is an isolated or occasional sale; and (2) is required to be titled, licensed, or registered by this state for use in Indiana.” IC 6-2.5-3-2(b). “Use” means the “exercise of any right or power of ownership over tangible personal property.” IC 6-2.5-3-1(a). The use tax is generally functionally equivalent to the sales tax. See Rhoade v. Indiana Dep't of State Revenue, 774 N.E.2d 1044, 1047 (Ind. Tax Ct. 2002). A retail transaction is a transaction made by a retail merchant that constitutes “selling at retail.” IC 6-2.5-1-2(a). Selling at retail occurs when a person “(1) acquires tangible personal property for the purpose of resale; and (2) transfers that property to another person for consideration.” IC 6-2.5-4-1(b). A person who acquires tangible personal property in a retail transaction (a “retail purchaser”) is liable for the sales tax on the transaction. IC 6-2.5-2-1(b). A retail sale is sourced to Indiana and thus is subject to Indiana sales tax when the transaction is a “retail sale . . . of a product” and “the product is received by the purchaser at a business location of the seller [in Indiana] . . . ” IC 6-2.5-13-1(d)(1). The purchaser in general “shall pay the tax to the retail merchant as a separate added amount to the consideration in the transaction.” IC 6-2.5-2-1(b). When a vehicle “(1) is acquired in a transaction that is an isolated or occasional sale; and (2) is required to be titled, licensed, or registered by this state for use in Indiana” under IC 6-2.5-3-2(b), the purchaser is responsible for the use tax. Exemptions from use tax are granted for transactions where the sales tax was paid at the time of purchase pursuant to IC 6-2.5-3-4 and 45 IAC 2.2-3-4. There are various tax exemptions available under IC 6-2.5-5 et seq.; these exemptions also apply to transactions which are subject to Indiana use tax. 45 IAC 2.2-3-14. A statute which provides a tax exemption, however, is strictly construed against the taxpayer. Indiana Dep't of State Revenue, Sales Tax Division v. RCA Corp., 310 N.E.2d 96, 97 (Ind. Ct. App. 1974). “[W]here such an exemption is claimed, the party claiming the same must show a case, by sufficient evidence, which is clearly within the exact letter of the law.” Id. at 101 (internal citations omitted). Here, Owner transferred ownership of a vehicle to Taxpayer without remitting use tax. Owner acknowledged that he did not retitle the vehicle as an owner to company contribution. Taxpayer’s application for title at the BMV stated that the selling price of the vehicle was $0; thus, no sales or use tax was paid. The documents provided to the Department do not establish that the transaction was exempt from use tax under IC 6-2.5-5. Taxpayer is required to demonstrate the assessment was wrong; however, Taxpayer has failed to do so. Owner explained that the title transfer was completed solely to save money on insurance expenses. Retitling a vehicle for this reason does not qualify as an exempt transaction under Indiana statute. Taxpayer has not met its burden of proof to demonstrate that the Department’s assessment for consumer use tax was incorrect as the vehicle transfer was not exempt from use tax under IC 6-2.5-5. The FINDING Taxpayer’s protest is denied.

II. Indiana Use Tax – Penalty and Interest.

DISCUSSION The Department reviewed Taxpayer’s title application form from the BMV and determined that the vehicle transfer was subject to Indiana use tax. In addition to its assessment for use tax, Department also issued a negligence penalty and interest against Taxpayer. Taxpayer disputes this imposition of penalty and interest. In support of its protest, Taxpayer submitted a copy of its application for Certificate of Title and a copy of its Certificate of Title. As mentioned above, the burden of proof still resides with the taxpayer. An assessment made by the Department will be presumed as correct unless the taxpayer provides sufficient documentation to rebut this presumption. IC 6-8.1-10-2.1(a)(3) requires the Department to impose a negligence penalty if a taxpayer incurs a tax deficiency after an examination by the Department. The penalty is ten percent of the amount of the deficiency as determined by the Department. IC 6-8.1-10-2.1(b)(4). However, if a taxpayer can show that failure to pay the deficiency determined by the Department was due to reasonable cause and not due to willful neglect, Department must waive the penalty. IC 6-8.1-10-2.1(d). Negligence is defined by 45 IAC 15-11-2(b) as: IC 6-8.1-10-1(a) stipulates that the Department must impose interest on unpaid taxes if a taxpayer “incurs a deficiency upon a determination by the department.” This statute also prohibits the waiver of any accrued interest on unpaid taxes by the Department. Taxpayer argues that it should not be required to pay the assessed penalty or interest. Taxpayer’s actions do not constitute “willful neglect” as outlined in IC 6-8.1-10-2.1(d). Taxpayer did not act negligently as defined in 45 IAC 15-11-2(b). Both Taxpayer and Owner have a history of compliance with the Department. The Department agrees that the penalty for the 2021 tax year should be waived. The interest assessed by the Department cannot be waived under IC 6-8.1-10. Penalty imposed under IC 6-8.1-10-2.1(d) should be waived as Taxpayer did not act in a negligent manner. Finally, the interest imposed upon Taxpayer cannot be waived under IC 6-8.1-10. FINDING Taxpayer’s protest is sustained in part and denied in part. Taxpayer’s protest is denied on Issue I regarding the assessment for use tax. Taxpayer’s protest is sustained on Issue II regarding the waiver of penalty but denied regarding the waiver of interest. August 5, 2025 Replaces Finding Document: New