in-20250625-IR-045250296NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 04-20241878 Use Tax For The Year 2021 HOLDING Taxpayer established the Department’s assessment of use tax on the title transfer of a vehicle and a trailer was incorrect. ISSUE

I. Use Tax – Imposition.

Authority: I.R.C. § 731; 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 6-2.5-4-1; IC 6-8.1-5-1; IC 23-18-9-6; 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 Dept. 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); Rhoade v. Indiana Dept. of State Revenue, 774 N.E.2d 1044 (Ind. Tax Ct. 2002); 45 IAC 2.2-2-1. Taxpayer protests the assessment of consumer use tax on the transfer of a vehicle and a trailer from his business to himself. STATEMENT OF FACTS Taxpayer is an Indiana resident. Taxpayer previously owned and operated a business until its closure in early 2022. Shortly before the business was dissolved, Taxpayer transferred the title for a vehicle and trailer from the business to himself. He then took the titles to the Indiana Bureau of Motor Vehicles (“BMV”) to register the vehicle and trailer in his name. At the BMV, Taxpayer submitted documentation showing that he purchased both for $1 each. The Indiana Department of Revenue (“Department”) later received information from the BMV regarding the transfer because the purchase prices appeared significantly lower than the fair market value of the vehicle and trailer. As a result of the review, the Department issued Taxpayer an assessment for use tax. Taxpayer protested the assessment and waived his right to a hearing. This Letter of Findings is written in reliance on information provided by Taxpayer and the Department’s records. Additional facts will be provided as necessary.

I. Use Tax – Imposition.

DISCUSSION The Department determined Taxpayer’s vehicle and trailer were subject to additional use tax after a review of information received from the BMV. Taxpayer protested the assessment arguing that the trailer and the vehicle were transferred from his business to himself and are not subject to use tax. 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); Lafayette Square Amoco, Inc. v. Indiana Dept. of State Revenue, 867 N.E.2d 289, 292 (Ind. Tax Ct. 2007). Consequently, a taxpayer must provide documentation explaining and supporting that the Department’s position is wrong. Id. 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 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) (emphasis added). A “retail transaction” occurs when a person or business makes a “sale at retail”. 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…use or consumption.” IC 6-2.5-3-2(b)(1); 45 IAC 2.2-1-1(d). “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). 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 by the [purchaser].” Indiana Dept. of State Revenue v. Belterra Resort Indiana, LLC, 935 N.E.2d 174, 179 (Ind. 2010). Consideration is therefore not limited to payment of money. 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. Taxpayer’s documentation and the Department’s records support Taxpayer’s argument that he did not acquire the vehicle and the trailer for consideration. The titles for both the vehicle and trailer reflect that Taxpayer, as the owner of the business, transferred the titles to himself as an individual. Additionally, the Articles of Dissolution for Taxpayer’s business reflect that it was closed in early 2022, shortly after he transferred the titles to his name. Taxpayer’s business was structured as a limited liability company (“LLC”). Indiana law provides that when an LLC is dissolved, whatever property that the LLC owns must be returned to the owner(s) after the debts of the business are paid. IC 23-18-9-6. This transaction, therefore, is considered a distribution of property to the owner of the business as a part of the process of closing the business. Taxpayer has demonstrated that the transfer of the titles for a vehicle and a trailer from his business to himself are not considered retail transactions as defined by Indiana law at IC 6-2.5-3-2(a). Thus, Taxpayer is not liable for any use tax related to the title transfers of the vehicle and the trailer. However, Taxpayer is advised that he may be liable for income tax on the transfer of the vehicle and the trailer as a distribution of property under I.R.C. § 731. FINDING Taxpayer’s protest is sustained. April 30, 2025 Replaces Finding Document: New