in-20250528-IR-045250269NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 04-20251290 Use Tax For the Tax Year 2023 HOLDING  Indiana Limited Liability Company (“Indiana LLC”) was responsible for use tax on a vehicle it acquired from its member because the Indiana LLC failed to provide verifiable documents to substantiate that the vehicle was exempt from tax. ISSUE

I. Use Tax – Imposition.

Authority: IC 6-2.5-1-2; IC 6-2.5-2-1; IC 6-2.5-3-1; IC 6-2.5-3-2; IC 6-2.5-3-4; IC 6-2.5-4-1; IC 6-2.5-5-1; IC 6-2.5-13-1; Rhoade v. Indiana Dep’t of State Revenue, 774 N.E.2d 1044 (Ind. Tax Ct. 2002); Indiana Dep’t of State Revenue, Sales Tax Division v. RCA Corp., 310 N.E.2d 96 (Ind. Ct. App. 1974); 45 IAC 2.2-2-1; 45 IAC 2.2-3-4; 45 IAC 2.2-3-14; 45 IAC 2.2-5-7. Taxpayer claims that the assessment was incorrect because its acquisition was exempt from tax. STATEMENT OF FACTS Taxpayer is an Indiana LLC. Taxpayer titled and registered a 2016 Ford F250 Super Duty at the Indiana Bureau of Motor Vehicles (“BMV”) in 2023. Taxpayer’s application for the title at the BMV stated that the selling price of that vehicle was $0 and thus $0 tax due. Taxpayer’s title application at the BMV was forwarded to the Indiana Department of Revenue (“Department”) for a review. The Department determined that Taxpayer’s purchase was subject to Indiana sales and use tax. The Department proceeded to assess Taxpayer the use tax plus interest and penalty as a result. Taxpayer paid the assessment under protest and requested that the Department make the final determination without a hearing. This final determination results based on documents provided by Taxpayer as well as information within the protest file.

I. Use Tax – Imposition.

DISCUSSION The Department reviewed Taxpayer’s application at the BMV and determined that Taxpayer’s acquisition of that vehicle was subject to Indiana use tax. The Department explained, in part, the following: The Department subsequently adjusted the vehicle’s fair value and assessed use tax based on an estimated $20,000 taxable amount as a result. Taxpayer, to the contrary, claimed that the transaction was exempt from the sales and use tax. The issue thus is whether Taxpayer provided verifiable documents to demonstrate that it was not responsible for the tax. Indiana imposes an excise tax called “sales tax” on retail transactions made in Indiana. IC 6-2.5-2-1(a); 45 IAC 2.2-2-1. In addition, the Indiana use tax is imposed “on the storage, use, or consumption of a vehicle . . . if the vehicle . . . (1) is acquired in a transaction that is an isolated or occasional sale; and (2) is required to be titled, licensed, or registered by this state for use in Indiana.” IC 6-2.5-3-2(b). “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 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). A retail transaction is a transaction made by a retail merchant that constitutes “selling at retail.” IC 6-2.5-1-2(a). Selling at retail occurs when a person “(1) acquires tangible personal property for the purpose of resale; and (2) transfers that property to another person for consideration.” IC 6-2.5-4-1(b). A person who acquires tangible person property in a retail transaction (a “retail purchaser”) is liable for the sales tax on the transaction. IC 6-2.5-2-1(b). A retail sale is sourced to Indiana and thus is subject to Indiana sales tax when the transaction is a “retail sale . . . of a product” and “the product is received by the purchaser at a business location of the seller [in Indiana] . . . .” IC 6-2.5-13-1(d)(1). The purchaser in general “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). When a vehicle “(1) is acquired in a transaction that is an isolated or occasional sale; and (2) is required to be titled, licensed, or registered by this state for use in Indiana” under IC 6-2.5-3-2(b), the acquirer is responsible for the use tax. Nonetheless, an exemption from the use tax is granted for transactions where the sales tax was paid at the time of acquisition pursuant to IC 6-2.5-3-4 and 45 IAC 2.2-3-4. There are various tax exemptions available such as IC 6-2.5-5-1 or 45 IAC 2.2-5-7; these enumerated exemptions also apply to transactions which are subject to Indiana use tax. 45 IAC 2.2-3-14. A statute which provides a tax exemption, however, is strictly construed against the taxpayer. Indiana Dep’t of State Revenue, Sales Tax Division v. RCA Corp., 310 N.E.2d 96, 97 (Ind. Ct. App. 1974). “[W]here such an exemption is claimed, the party claiming the same must show a case, by sufficient evidence, which is clearly within the exact letter of the law.” Id. at 101 (internal citations omitted). Taxpayer in this case provided a copy of its communication with the Department, stating that the “2016 Ford F250 Super Duty – Purchased in 2016 and depreciated on [the member’s] individual tax return.” Taxpayer argued that one of its members simply transferred the vehicle title and such transfer did not constitute a purchase of the vehicle. Taxpayer, however, provided no documents to support its acquisition of the vehicle was a non-taxable transfer. In addition, Taxpayer offered a photo of a vehicle to support its protest and argued that the photo showed “100[percent] farm usage with flatbed [and] tools.” Upon review, however, Taxpayer’s reliance of its supporting documentation was misplaced. 45 IAC 2.2-5-7(b), in relevant part, provides: Taxpayer’s supporting documentation provided nothing about its direct production and nothing about how the vehicle “with flatbed [and] tools” had an “immediate effect” on its agricultural products. The Department thus is not able to agree that Taxpayer’s use of the vehicle qualified for the above exemption. To conclude, Taxpayer’s acquisition of the vehicle was a transaction subject to Indiana sales and use tax. As mentioned, Taxpayer was required to demonstrate that the assessment was wrong. Without verifiable documents from Taxpayer to substantiate that its acquisition or use qualified for a statutory exemption, the Department is not able to agree that Taxpayer met its burden of proof under IC 6-8.1-5-1. FINDING Taxpayer’s protest is respectfully denied. March 28, 2025 Replaces Finding Document: New