in-20250528-IR-045250260NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 04-20241793 Use Tax For The Year 2022 HOLDING Taxpayer showed the Department’s assessment related to the transfer of a vehicle title 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 vehicle purchase. STATEMENT OF FACTS Taxpayer is an Indiana resident.  In 2022, Taxpayer purchased a motorcycle.  Taxpayer titled the motorcycle with the Indiana Bureau of Motor Vehicles (“BMV”).  Paperwork submitted at the BMV showed a purchase price of one dollar, and the back of the title reflected the same sales price and was signed by the seller.  Taxpayer paid $.07 in sales tax related to the transaction. The Indiana Department of Revenue (“Department”) later received information from the BMV regarding the low purchase price because the amount was significantly less than the “blue book” value of the motorcycle.  As a result, the Department issued Taxpayer an assessment for use tax.  Taxpayer protested the assessment and requested resolution with a hearing.  The Department discussed the matter with Taxpayer via telephone.  This Letter of Findings is based on the information submitted by Taxpayer as part of the protest and a review of the Department’s records.  Additional facts will be provided as necessary.

I. Use Tax – Imposition.

DISCUSSION The Department determined Taxpayer’s motorcycle transfer was subject to use tax after a review of information received from the BMV.  Taxpayer protested the assessment and explained that when he purchased the motorcycle from a family friend, the motorcycle was inoperable and never ran while in his possession.  After owning it for three months, Taxpayer gave the motorcycle to another person, who hoped to get the bike in working condition. 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: The Department reviewed Taxpayer’s motorcycle transfer based on a request from the BMV.  The BMV noted that the transfer of ownership occurred with “little or no consideration.”  Based upon this information, the Department completed a review and issued an assessment for use tax based upon the “average selling price” of that make and model of motorcycle. Taxpayer protested the assessment.  During a call with the Department, Taxpayer explained that he received the motorcycle, and the bike was not in running condition.  Taxpayer titled the motorcycle in his name and planned to repair the motorcycle to a working condition.  The title paperwork presented at the BMV showed a purchase price of $1.  The title paperwork was signed by the seller under penalty of “fines and/or imprisonment.”  Ultimately, Taxpayer was unable to repair the motorcycle, and approximately three months later, he gave it to another person. After reviewing the documentation, Taxpayer has met his burden under IC 6-8.1-5-1.  In the court of the protest, Taxpayer provided documentation rebutting the presumption outlined under IC 6-2.5-3-6(e).  The protest is sustained. FINDING Taxpayer’s protest is sustained. March 3, 2025 Replaces Finding Document: New