in-20250625-IR-045250300NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 04-20242794 Use Tax For the 2023 Tax Year HOLDING Individual established that his use tax assessment was too high. ISSUE

I.     Use Tax – Like Kind Exchanges.

Authority: IC 6-2.5-1-5; IC 6-2.5-1-6; IC 6-2.5-2-1; IC 6-2.5-2-2; IC 6-2.5-3-2; IC 6-2.5-3-3; IC 6-2.5-3-6; IC 6-8.1-5-1; Dep’t of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579 (Ind. 2014); Wendt LLP v. Indiana Dep't of State Revenue, 977 N.E.2d 480 (Ind. Tax Ct. 2012); Scopelite v. Indiana Dep't of Local Gov't Fin., 939 N.E.2d 1138 (Ind. Tax Ct. 2010). Taxpayer protests an assessment of use tax on the purchase of a motor vehicle. STATEMENT OF FACTS Taxpayer, an Indiana resident, purchased a motor vehicle from an Indiana dealer. Taxpayer paid for this vehicle in part with cash and in part by trading in another vehicle of the same type as the one he purchased. Taxpayer did not pay sales tax to the dealer, because he applied for an exemption from sales tax. Similarly, Taxpayer did not pay use tax when he titled the vehicle with the Indiana Bureau of Motor Vehicles. The Indiana Department of Revenue (“Department”) reviewed Taxpayer’s application for title and denied the exemption that he claimed. Accordingly, the Department issued a Notice of Proposed Assessment against Taxpayer using the full purchase price of the vehicle as the taxable base. Taxpayer timely protested, and this Letter of Findings results. Because Taxpayer waived his right to a hearing, this Letter of Findings is written in reliance on documents provided by Taxpayer and the Department’s records. Additional facts will be provided as necessary.

I. Use Tax – Like Kind Exchanges.

DISCUSSION Taxpayer argues that the portion of the purchase price covered by his trade-in credit is exempt from use tax under Indiana law. Where a taxpayer is challenging a proposed assessment, the taxpayer is required to provide documentation explaining and supporting its challenge. See IC 6-8.1-5-1. Poorly developed and non-cogent arguments are subject to waiver. Scopelite v. Indiana Dep't of Local Gov't Fin., 939 N.E.2d 1138, 1145 (Ind. Tax Ct. 2010); Wendt LLP v. Indiana Dep't of State Revenue, 977 N.E.2d 480, 486 n.9 (Ind. Tax Ct. 2012). Additionally, “when [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.’” Indiana Dep’t 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 are entitled to deference. Indiana imposes a sales tax on all retail transactions made in Indiana. IC 6-2.5-2-1(a). The purchaser in a retail transaction “is liable for the tax” and “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). The amount of the tax is equal to seven percent of the merchant’s “gross retail income” received in each transaction. IC 6-2.5-2-2(a). Gross retail income “means the total amount of consideration, including cash, credit, property, and services” that a seller receives in exchange for the property being sold. IC 6-2.5-1-5(a). However, gross retail income does not include any amount of consideration that came from “the value of any tangible personal property received in a like kind exchange in the retail transaction,” if the value of the trade-in is listed separately on an invoice or receipt. IC 6-2.5-1-5(b)(1). Two parties make a like kind exchange when they swap personal property that they each own and that is “of the same kind or character,” even if the exchange also includes other consideration. IC 6-2.5-1-6(a)-(b). Indiana also 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). The use tax is calculated using “the gross retail income received in a retail unitary or bundled transaction” and the definitions used for the sales tax apply. IC 6-2.5-3-3. When a taxpayer purchases a vehicle that must be titled, “the titling agency shall compute the tax due based on the presumption that the sale price was the average selling price for that vehicle,” unless the taxpayer “presents documentation . . . sufficient to . . . establish the actual selling price of the vehicle” IC 6-2.5-3-6(e). Taxpayer provided documentation sufficient to show that he traded in an old vehicle as partial payment for his new vehicle, which was of the same make and model as the old one. The dealer from which he bought his new vehicle listed the value of the trade-in separately on the receipt. Thus, Taxpayer’s purchase of the vehicle in question featured a like kind exchange as provided under IC 6-2.5-1-5(b)(1), and the Department erred when it failed to reduce Taxpayer’s use tax assessment by a corresponding amount. The use tax is assessed based on “the gross retail income” received by the seller in a taxable transaction. Under IC 6-2.5-1-5(b)(1), gross retail income excludes any amount paid with a like kind exchange. Taxpayer showed that he made a like kind exchange when purchasing his vehicle, and thus, he has shown that the Department’s assessment of use tax was too high under IC 6-2.5-1-5. The Department will recalculate Taxpayer’s use tax using the correct gross retail income figure. FINDING Taxpayer’s protest is sustained. April 25, 2025 Replaces Finding Document: New