in-20250528-IR-045250264NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 04-20241846 Use Tax For The Year 2021 HOLDING Taxpayer established that the Department’s assessment of use tax on a boat Taxpayer acquired as a part of a real estate transaction was incorrect. ISSUE

I. Use Tax – Imposition.    

Authority: 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. Taxpayer protests the assessment of consumer use tax on a boat she acquired as part of a real estate transaction. STATEMENT OF FACTS Taxpayer is an Indiana resident. In July 2021, Taxpayer purchased a home that was for sale by owner. As a part of the real estate purchase, Taxpayer acquired a boat which had been sitting on the property for approximately three years. In September 2021, Taxpayer applied to title the boat at the Indiana Bureau of Motor Vehicles (“BMV”). At the BMV, Taxpayer submitted documentation that the purchase price of the boat was $1.00. The Indiana Department of Revenue (“Department”) later received information from the BMV regarding the purchase because the purchase price appeared significantly lower than the fair market value of the boat. As a result of the review, the Department issued Taxpayer an assessment for use tax.  Taxpayer protested the assessment. An administrative hearing was held, and this Letter of Findings results.  Additional facts will be provided as necessary.

I. Use Tax – Imposition.

DISCUSSION The Department determined Taxpayer’s boat was subject to additional use tax after a review of information received from the BMV. Taxpayer protested the assessment. As a part of her protest, Taxpayer provided the Residential Purchase Agreement for the purchase of the home. The Department also received the Application for Certificate of Watercraft Title, Certificate of Title, Assignment of Title, Bill of Sale, and an affidavit regarding the boat. 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).  An assessment is presumed valid. A taxpayer must provide documentation explaining and supporting that the Department’s position is wrong. 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). Purchases of vehicles or watercrafts 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 watercraft, to the registering agency at the time the person applies for a title for the watercraft. IC 6-2.5-3-6(d)(1). IC 6-2.5-3-6 provides guidance on how the titling agency should determine the taxable price of vehicle or boat at issue: In this instant case, Taxpayer acquired a boat incidental to a real estate transaction. The Real Estate Agreement provided by Taxpayer is silent as to the purported value of the boat or what amount of the sale was attributed to the boat. When Taxpayer went to the BMV to apply for a title for the boat, she presented the Certificate of Title, Assignment of Title, Bill of Sale, and a signed affidavit. The Department reviewed the documentation and issued an assessment for use tax based on the fair market value of the boat. The Department erred when it did so. Pursuant to IC 6-2.5-3-6, where a taxpayer has presented the titling agency with documentation which establishes the actual selling price of the vehicle, the titling agency shall compute the tax based on that actual sale price. Taxpayer provided sufficient documentation, including the Bill of Sale and Assignment of Title, which list the actual sale price. Additionally, Taxpayer presented an affidavit signed under penalty of perjury reflecting the actual sale price. Under IC 6-2.5-3-6, the taxable amount should have been based on the actual sale price of the boat. FINDING Taxpayer’s protest is sustained. March 4, 2025 Replaces Finding Document: New