in-20250827-IR-045250411NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 04-20242259 Use Tax For the 2023 Tax Year HOLDING Corporation established that it did not owe use tax on the transfer of title of a motor vehicle from its owner. ISSUE

I. Use Tax – Motor Vehicle.

Authority: IC 6-2.5-1-2; IC 6-2.5-3-2; IC 6-2.5-4-1; 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); Indiana Dep’t of State Revenue v. Belterra Resort Indiana, LLC, 935 N.E.2d 174 (Ind. 2010); Lafayette Square Amoco, Inc. v. Indiana Dept. of State Revenue, 867 N.E.2d 289 (Ind. Tax Ct. 2007); 45 IAC 2.2-1-1. Taxpayer protests the assessment of use tax on a transfer of a motor vehicle. STATEMENT OF FACTS Taxpayer is an Indiana corporation. In 2022, Taxpayer purchased a fleet vehicle for its business. After purchasing the vehicle, the owner of the corporation (“Owner”) went to the Indiana Bureau of Motor Vehicles (“BMV”) to register and title the vehicle. Owner titled and registered the vehicle in his name rather than the name of the business. Upon discovering this in 2023, Owner sought to have the vehicle re-titled and registered the vehicle under the business’ name. On the title, Owner listed the “sale price” as $0.00. The Department later determined that Taxpayer had underreported the retail purchase price of the vehicle. The Department then assessed use tax based on the fair market value of the vehicle. Taxpayer timely protested. An administrative hearing was held, and this Letter of Findings results. Additional facts will be provided as necessary.

I. Use Tax – Motor Vehicle.

DISCUSSION The Department issued an assessment for use tax due on a vehicle after it determined that Taxpayer had purchased it below market value. Taxpayer argues that it does not owe use tax because it was not a sale, but rather a transfer of title from the Owner to Taxpayer. 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 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) and Lafayette Square Amoco, Inc. v. Indiana Dept. of State Revenue, 867 N.E.2d 289, 292 (Ind. Tax Ct. 2007). Consequently, 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). Thus, all interpretations of Indiana tax law contained within this decision shall be entitled to deference. Indiana imposes an excise tax called the “use tax” on “the storage, use, or consumption of tangible personal property in Indiana if the property was acquired in a retail transaction.” IC 6-2.5-3-2(a) (emphasis added). A “retail transaction” occurs when a person or business makes a “sale at retail.” See IC 6-2.5-1-2. A “sale at retail” occurs when, “in the ordinary course of . . . regularly conducted trade or business,” a person or business buys property “for the purpose of resale” and transfers it to someone else “for consideration.” IC 6-2.5-4-1(b). For sales of motor vehicles, the use tax is also imposed on “isolated or occasional sale[s],” where the seller originally acquired the vehicle “for . . . storage, use, or consumption.” IC 6-2.5-3-2(b)(1); 45 IAC 2.2-1-1(d). In other words, the purchaser of a motor vehicle must pay use tax so long as they acquired it “for consideration.” Although the term “consideration” is not defined in the Indiana Code, the Indiana Supreme Court has said that it includes “any benefit — however slight — accruing to the [seller] or any detriment — however slight — borne to the [purchaser].” Indiana Dep’t of State Revenue v. Belterra Resort Indiana, LLC, 935 N.E.2d 174, 179 (Ind. 2010). Consideration is therefore not limited to payment in money. Id. It can include a wide variety of benefits, including promises to do something for the seller and the assumption of a debt that the seller owed. A “capital contribution” occurs when the owner of a business “transfers money or property to the [business].” Belterra, 935 N.E.2d at 177–78 (citing Hoang v. Jamestown Homes, Inc., 768 N.E.2d 1029, 1041 (Ind. Ct. App. 2002)). When an owner makes a capital contribution, their tax basis in the stock increases “in proportion to the capital contribution.” Id. The Indiana Supreme Court has said that capital contributions “made without consideration” are not subject to use tax. Id. Taxpayer has presented documentation that shows that it did not acquire the vehicle in question for consideration. The title application shows a “sale price” of $0.00, and it reflects that Taxpayer intended to claim an exemption for “no consideration involved.” Additionally, Taxpayer provided documentation that it remitted use tax at the time Owner originally registered the vehicle. In short, Taxpayer has shown that Owner made a capital contribution to it for which no consideration was paid. No money changed hands, Taxpayer assumed no debts, and Owner received nothing of value from Taxpayer. Because Owner did not receive consideration in exchange for the vehicle, the transfer was not a “sale at retail,” as defined in IC 6-2.5-3-2(a). Taxpayer has carried its burden under IC 6-8.1-5-1(c) that the proposed assessment is incorrect and therefore does not owe use tax on the vehicle. FINDING Taxpayer’s protest is sustained. June 12, 2025 Replaces Finding Document: New