in-20250528-IR-045250263NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 04-20241831 Use Tax For The Year 2022 HOLDING Individual failed to show the purchase of a utility vehicle was exempt from sales tax because it was purchased for agricultural use. ISSUE

I. Sales Tax – Agricultural Exemption.

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 6-2.5-5-2; 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); Sales Tax Information Bulletin 9 (January 2019); 45 IAC 2.2-2-1; 45 IAC 2.2-3-4; 45 IAC 2.2-5-1; 45 IAC 2.2-5-4. Taxpayer protests the assessment of sales tax on a utility vehicle purchase. STATEMENT OF FACTS Taxpayer is an Indiana resident.  In June 2022, Taxpayer purchased a utility vehicle and claimed “Exemption #4,” a tax exemption that may apply when an item is purchased for agricultural use, when he registered the vehicle with the Bureau of Motor Vehicles (“BMV”).  As a result of claiming the exemption, Taxpayer did not remit sales tax on the vehicle at the time of purchase or when the vehicle was titled with the BMV.  The Indiana Department of Revenue (“Department”) later received information from the BMV regarding the purchase and lack of sales tax paid.  As a result, the Department issued Taxpayer an assessment for use tax.  Taxpayer protested the assessment and requested resolution without a hearing.  This Letter of Findings is based on information provided by Taxpayer and a review of the Department’s records.  Additional facts will be provided as necessary.

I. Sales Tax – Agricultural Exemption.

DISCUSSION The Department determined Taxpayer’s utility vehicle purchase was subject to use tax after a review of information received from the BMV.  Taxpayer protested the assessment stating that the utility vehicle was exempt because it was purchased for agricultural use.  Taxpayer provided a copy of Form AGQ-100 (Agricultural Equipment Exemption and Usage Questionnaire), a copy of his Schedule F (Form 1040 – Profit or Loss From Farming), and receipts/invoices from the utility vehicle purchase.  The Department also reviewed various documents related to the titling transaction provided to the BMV. As a threshold issue, it is the 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).  “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 vehicle, to the titling agency when the person applies for a title for the vehicle.  IC 6-2.5-3-6(c) and (d)(1). Further, IC 6-2.5-3-6(e) states: A vehicle may be exempt from sales tax if it is used in agriculture.  IC 6-2.5-5-2 provides, in part, (Emphasis added.) 45 IAC 2.2-5-1(a) states: 45 IAC 2.2-5-4 provides clarification: Sales Tax Information Bulletin 9 (January 2019), 20190227 Ind. Reg. 045190130NRA, provides additional guidance.  Generally, evidence that an individual taxpayer is engaged in engaged in the occupation of farming is presented by filing a federal Schedule F with his/her 1040.  Id.  Example 10, as discussed under “Agricultural Machinery, Tools, Equipment, and Buildings Used Directly in Production” in Information Bulletin 9, is highlighted below. The Department reviewed Taxpayer’s utility vehicle purchase based on a request from the BMV.  After an initial review, the Department requested additional information in the form of a completed Form AGQ-100 Agricultural Equipment Exemption Usage Questionnaire and a copy of Taxpayer’s Schedule F Profit or Loss from Farming (or equivalent) filed with Taxpayer’s federal return.  A review of the Department’s records indicate that Taxpayer provided this information in late October 2023.  This information was reviewed, an exempt percentage of usage determined based on the information provided on the AGQ-100, and an assessment issued to Taxpayer in December 2023. Based on the information provided and the completed Form AGQ-100, the only clearly exempt usage is for the application of fertilizer, which accounts for five days of exempt use per year or less than one percent of the vehicle’s usage.  Taxpayer has not provided any information detailing how the utility vehicle is used in the direct production on the farm or whether the animals raised are raised as agricultural commodities for sale as required under IC 6-2.5-5-2.  Further, the Department’s initial review of Form AGQ-100 provided for a much higher exempt usage calculation than the five days, and the Department based the current assessment amount on this higher, incorrect exempt percentage.  The Department will not penalize Taxpayer for its own calculation error.  Based on the information provided, Taxpayer is not entitled to a reduction of the current assessment based on additional exempt usage considerations.  Taxpayer’s protest is denied. FINDING Taxpayer’s protest is denied. March 4, 2025 Replaces Finding Document: New