in-20250917-IR-045250461NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 04-20242013 Sales and Use Tax For the Year 2022 HOLDING Individual established that the Department’s proposed assessment for use tax on a vehicle was incorrect because the vehicle was acquired pursuant to a like kind exchange. ISSUE

I. Use Tax – Like Kind Exchange.

Authority: IC 6-2.5-1-6; IC 6-2.5-2-1; IC 6-2.5-3-1; IC 6-2.5-3-2; IC 6-2.5-3-6; IC 6-8.1-5-1; Dept. of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579 (Ind. 2014); 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); Rhoade v. Indiana Dept. of State Revenue, 774 N.E.2d 1044 (Ind. Tax Ct. 2002); 45 IAC 2.2-2-1; 45 IAC 2.2-3-4; Sales Tax Information Bulletin 28S (February 2021). Taxpayer protests the assessment of use tax on a vehicle. STATEMENT OF FACTS Taxpayer is an Indiana resident. In 2022, Taxpayer and another individual made an trade of their respective vehicles. There was no exchange of money. Taxpayer then sought to title the vehicle in his name at the Bureau of Motor Vehicles (“BMV.”) Upon titling the vehicle, Taxpayer listed the sale price as $0.00 and presented a signed and completed Certificate of Gross Retail or Use Tax Exemption for the Purchase of a Motor Vehicle or Watercraft (“Form ST-108E”) which reflected that the vehicle was acquired in a like kind exchange. In 2024, the Indiana Department of Revenue (“Department”) issued a proposed assessment for “Consumer Use” tax, as well as penalty and interest, on the newly titled vehicle. Taxpayer disagreed with the assessment and submitted a protest to that effect. An administrative hearing was held, and this Letter of Findings results. Additional facts will be provided as necessary.

I. Use Tax – Like Kind Exchange.

DISCUSSION In February 2024, Taxpayer received a letter from the Department which states the Department received information that Taxpayer “purchased a vehicle below market value claiming a selling price of $0.00.” The Department then issued an assessment for consumer use tax based on the listed market value for the vehicle. Taxpayer protested and provided an explanation, Bill of Sale, Application for Certificate of Title, Certificate of Title, Affidavit of Missing Title Information, and Form ST-108E. As a threshold issue, it is a taxpayer’s responsibility to establish that the existing tax assessment is incorrect. A proposed assessment is prima facie evidence that the Department’s claim for the unpaid tax is valid. IC 6-8.1-5-1(c). The burden of proving 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). A taxpayer is required to provide documentation explaining and supporting his or her challenge that the Department’s position is wrong. Further, “[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 an excise tax called “the state gross retail tax” or “sales tax” on retail transactions made in Indiana. IC 6-2.5-2-1(a); 45 IAC 2.2-2-1. A person who acquires property in a retail transaction is liable for the sales tax on the transaction. IC 6-2.5-2-1(b). Indiana also imposes a complementary excise tax called a “use tax” on “the storage, use, or consumption of tangible personal property in Indiana if the property was acquired in a retail transaction, regardless of the location of that transaction or of the retail merchant making that transaction.” IC 6-2.5-3-2(a). Purchases of vehicles that are not retail transactions but rather occasional sales, are still subject to use tax pursuant to IC 6-2.5-3-2(b) which provides: “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 a functional equivalent to the sales tax. See Rhoade v. Indiana Dept. of State Revenue, 774 N.E.2d 1044, 1047 (Ind. Tax Ct. 2002). Tangible personal property purchased in Indiana and stored, used, or otherwise consumed in Indiana is subject to Indiana use tax for such property unless the Indiana sales tax has been collected at the point of purchase. 45 IAC 2.2-3-4. IC 6-2.5-3-6 provides further guidance on the collection of use tax on the use, storage, or consumption of tangible personal property acquired in a retail transaction. The person liable for the use tax shall pay the use tax to the Department or, in the case of a vehicle, to the registering agency at the time the person applies for a title for the vehicle. IC 6-2.5-3-6(d)(1). The Department’s Sales Tax Information Bulletin 28S (February 2021), 20210331-IR-045210101NRA, states, “[a]bsent a statutory exemption, all sales of motor vehicles . . . purchased in Indiana are subject to Indiana sales and use tax.” Taxpayer argues that because he and another individual traded vehicles with no other consideration other than the value of the vehicles themselves, the sale should be exempt from Indiana use tax. In other words, Taxpayer argues that this was a “like kind exchange.” IC 6-2.5-1-6 provides: As it pertains to motor vehicles, “[t]he value of property from a like-kind exchange is deductible from the taxable gross retail income for Indiana sales tax purposes.” Sales Tax Information Bulletin 28S (February 2021) (emphasis in original). Further, “[t]o be an exempt trade, the vehicle traded-in must be owned and titled in the name of the customer.” Id. Here, Taxpayer provided documentation sufficient to establish that he traded his vehicle as full payment for another individual’s vehicle. The vehicles involved in the trade were both classic trucks from the same vehicle manufacturer and both individuals owned the vehicles prior to the exchange. As such, the value of the truck Taxpayer traded should have been deducted from the taxable gross retail income. Since the vehicles were of like kind, from the same manufacturer, around the same timeframe, they were nearly equal in value, and no other consideration was exchanged between the parties. Taxpayer has met the burden imposed under IC 6-8.1-5-1(c) of proving that the proposed assessment was wrong. Therefore, the Department erred when it issued an assessment for use tax. FINDING Taxpayer’s protest is sustained. July 9, 2025 Replaces Finding Document: New