in-20250528-IR-045250258NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 04-20241487 Consumer Use Tax  For The Tax Year 2021 HOLDING The Department agreed with Individual that she was not required to pay additional Indiana consumer use tax assessed on the transfer of a recreational vehicle from the original owner to Individual; Individual provided a bill of sale, signed by both original owner and Individual under penalty of perjury, documenting the actual selling price of the vehicle. ISSUE

I. Consumer Use Tax – Average Selling Price / Actual Selling Price.

Authority: IC 6-2.5-1-2; IC 6-2.5-1-27; 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 6-2.5-4-1; IC 6-2.5-5 et seq.; IC 6-8.1-3-3; IC 6-8.1-5-1; Indiana Dep’t of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463 (Ind. 2012); Lafayette Square Amoco, Inc. v. Indiana Dep’t of State Revenue, 867 N.E.2d 289 (Ind. Tax Ct. 2007); Rhoade v. Ind. Dep’t of State Revenue, 774 N.E.2d 1044 (Ind. Tax Ct. 2002); Leehaug v. State Bd. of Tax Comm’rs, 583 N.E.2d 211 (Ind. Tax Ct. 1991); 45 IAC 2.2-3-5; 45 IAC 15-5-1. Taxpayer argues that she was not required to pay additional use tax on her acquisition of a vehicle purchased in a casual sale because Indiana’s tax assessment was based on an inflated value of the vehicle. STATEMENT OF FACTS Taxpayer is an Indiana resident who acquired a used recreational vehicle (“2005 Keystone Outback) in a casual sale. Taxpayer titled and registered the vehicle with the Indiana Bureau of Motor Vehicles (“BMV”). In that registration, Taxpayer indicated that the vehicle sold for $900. The registration information was shared with the Indiana Department of Revenue (“Department”). Both the BMV and the Indiana Department of Revenue’s (“Department”) compliance personnel reviewed the document transferring ownership from acquaintances to Taxpayer. That review concluded that Taxpayer owed additional use tax because Taxpayer’s vehicle was undervalued at $900. As a result, the Department issued a “Compliance Report Summary” imposing additional use tax. The notice was dated October 2023 and explained the reason for the assessment. In a “Notice of Proposed Assessment” dated October 2023, the Department assessed a proposed assessment of approximately $700 based on the Department’s “fair market value” of $10,300 Taxpayer disagreed with the assessment and submitted a protest to that effect. Taxpayer did not request an administrative hearing. This Letter of Findings is based on the documents provided at the time Taxpayer submitted her protest, on information available to the Department, and on information provided by the BMV.

I. Consumer Use Tax – Average Selling Price / Actual Selling Price.

DISCUSSION The issue is whether Taxpayer has met her burden of establishing that she was not required to pay additional Indiana use tax on a transaction transferring ownership of the recreational vehicle from her acquaintances to Taxpayer. Taxpayer explains: Along with her protest, Taxpayer provided a “trailer bill of sale” identifying the vehicle and indicating that the vehicle was sold for a “Total Purchase Price [of] $900.” Taxpayer maintains the assessment is wrong because the $10,300 value placed by the Department and the BMV was excessive and that the actual selling price was documented by the $900 bill of sale. The Department’s use tax assessment was made fulfilling the Department’s responsibility set out in IC 6-8.1-5-1(b). That statute defines the Department’s responsibility. “If the [D]epartment reasonably believes that a person has not reported the proper amount of tax due, the [D]epartment shall make a proposed assessment of the amount of the unpaid tax on the basis of the best information available to the [D]epartment.” (Emphasis added). See also 45 IAC 15-5-1. In reviewing both the original use tax assessment and Taxpayer’s contentions, the Department points out that it is Taxpayer’s responsibility to establish that the tax assessment is incorrect. As stated in IC 6-8.1-5-1(c), “The notice of proposed assessment is prima facie evidence that the department's claim for the unpaid tax is valid, including during an action appealed to the tax court under this chapter. The burden of proving that the proposed assessment is wrong rests with the person against whom the proposed assessment is made.” Indiana Dep’t of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463, 466 (Ind. 2012); Lafayette Square Amoco, Inc. v. Indiana Dep’t of State Revenue, 867 N.E.2d 289, 292 (Ind. Tax Ct. 2007). Consequently, a taxpayer is required to provide documentation explaining and supporting his or her challenge that the Department’s position is wrong. Pursuant to IC 6-2.5-2-1, a sales tax, known as state gross retail tax, is imposed on retail transactions made in Indiana unless a valid exemption is applicable. IC 6-2.5-5 et seq. Retail transactions involve the transfer of tangible personal property. IC 6-2.5-1-2; IC 6-2.5-4-1. Indiana’s use tax runs parallel to but separate from the state’s sales tax. Indiana use tax is imposed on a person’s 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); IC 6-2.5-1-27. “Use” means the “exercise of any right or power of ownership over tangible personal property.”IC 6-2.5-3-1(a). In evaluating Taxpayer’s arguments, the Department highlights that the use tax is generally functionally equivalent to the sales tax. See Rhoade v. Indiana Dep’t of State Revenue, 774 N.E.2d 1044, 1047 (Ind. Tax Ct. 2002). Simply stated, an Indiana sales tax exemption also applies to Indiana use tax. The Department notes that the Department’s use tax assessment stems from the $900 value reported by Taxpayer at the time she registered the vehicle. In such instances, IC 6-2.5-3-6(e) provides: The Department recognizes that IC 6-2.5-3-6(e) further provides: 45 IAC 2.2-3-5(d) explains: The regulation requires that vehicle purchasers – in the absence of an affidavit – pay use tax based on the “average selling price of the vehicle.” The Department evaluates Indiana’s statutes beginning with the “plain and ordinary meaning of the language used.” E.g., Leehaug v. State Bd. of Tax Comm’rs, 583 N.E.2d 211, 212 (Ind. Tax Ct. 1991). In this case, the Department assumes that the statute and regulation mean what they say and that use tax is based on the “average selling price” of Taxpayer’s nineteen-year-old recreational vehicle unless the purchaser provides a “affidavit signed under penalty of perjury by the seller that contains the actual selling price of the vehicle.” The Department did what it is required to do under IC 6-8.1-5-1(b) when it determined that “a person has not reported the proper amount of tax due.” Afterwards, the BMV did what it is supposed to do when it calculated an “average selling price” for the vehicle under IC 6-8.1-3-3(c). However, Taxpayer did what she needed to do when she provided the “Trailer Bill of Sales.” That document was signed by both the buyer and seller “under penalties of perjury” and establishes that the $900 Taxpayer paid for the vehicle was correct. The Department agrees that Taxpayer has met her burden under IC 6-8.1-5-1(c) and IC 6-2.5-3-6(e) of establishing that the assessment was wrong, rebutting the presumption the assessment was correct, and that $900 represents the actual selling price of the vehicle. FINDING Taxpayer’s protest is sustained. March 4, 2025 Replaces Finding Document: New