in-20250827-IR-045250409NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 04-20241449 Sales and Use Tax For The Year 2021 HOLDING Indiana Business was responsible for use tax on a vehicle it purchased because Indiana Business failed to provide verifiable documents to substantiate that the vehicle was exempt from tax. ISSUE

I. Sales and 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 6-8.1-5-1; IC 6-2.5-13-1; IC 6-2.5-5 et. seq.; Rhoade v. Indiana Dep’t of State Revenue, 774 N.E.2d 1044 (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 2.2-2-1; 45 IAC 2.2-3-4; 45 IAC 2.2-3-14. Taxpayer claims that the assessment was incorrect because its purchase was exempt from tax. STATEMENT OF FACTS Taxpayer was an Indiana company. Taxpayer titled and registered a motor vehicle at the Indiana Bureau of Motor Vehicles (“BMV”) in 2021. Taxpayer’s title application stated that the selling price of that vehicle was $3,500 and claimed vehicle was exempt from sales/use tax thus $0 tax is due. Taxpayer’s title application at the BMV was forwarded to the Indiana Department of Revenue (“Department”) for a review. The Department determined that Taxpayer’s purchase was subject to Indiana sales and use tax. The Department proceeded to assess Taxpayer the use tax plus interest and penalty as a result. Taxpayer protested the assessment and requested that the Department make the final determination without a hearing. This final determination results based on documents provided by Taxpayer as well as information within the protest file.

I. Sales and Use Tax – Imposition.

DISCUSSION The Department reviewed Taxpayer’s application at the BMV and determined that Taxpayer’s purchase was subject to Indiana sales and use tax. In a Compliance Report, the Department explained, in part, the following: Taxpayer, to the contrary, claimed that the transaction was exempt from the sales and use tax. The issue is thus whether Taxpayer provided verifiable documents to demonstrate that it was not responsible for the tax. Indiana imposes an excise tax called “sales tax” on retail transactions made in Indiana. IC 6-2.5-2-1(a); 45 IAC 2.2-2-1. In addition, the Indiana use tax is imposed “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 person 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. Nonetheless, an exemption from the use tax is 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 enumerated 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). Taxpayer’s protest letter stated that “[i]t was and is still my understanding that this title transfer was exempt from sales tax.” Taxpayer, however, provided no documents to support its acquisition of the vehicle was a non-taxable transfer. In addition, Taxpayer’s supporting documentation provided nothing to substantiate its assertion that the vehicle was exempt from use tax. Without verifiable documents to substantiate its assertion, the purchaser is responsible for sales tax on the vehicle purchase or use tax when a vehicle is required to be titled, licensed, or registered by this state for use in Indiana. To conclude, Taxpayer’s purchase was an Indiana retail transaction subject to Indiana sales and use tax. As mentioned, Taxpayer was required to demonstrate that the assessment was wrong. Without verifiable documents from Taxpayer to substantiate that its purchase qualified for a statutory exemption, the Department is not able to agree that Taxpayer met its burden of proof under IC 6-8.1-5-1. Taxpayer was responsible for the tax plus penalty and interest. FINDING Taxpayer’s protest is denied. June 27, 2025 Replaces Finding Document: New