in-20250430-IR-045250202NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 04-20241979 Use Tax For the 2021 Tax Year HOLDING Individual established that she did not owe use tax on the transfer of title of a motor vehicle from her wholly owned business to herself. ISSUE

I. Use Tax – Motor Vehicle.

Authority: I.R.C. § 731; IC 6-2.5-1-2; IC 6-2.5-3-2; IC 6-2.5-4-1; IC 6-8.1-5-1; IC 23-18-9-6; 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); Indiana Dep’t of State Revenue v. Belterra Resort Indiana, LLC, 935 N.E.2d 174 (Ind. 2010); Lafayette Square Amoco, Inc. v. Indiana Dept. of State Revenue, 867 N.E.2d 289 (Ind. Tax Ct. 2007); 45 IAC 2.2-1-1. Taxpayer protests the assessment of use tax on a transfer of a motor vehicle from her business to herself. STATEMENT OF FACTS Taxpayer and her husband were the sole owners of a car dealership organized as a limited liability company (“LLC”). In November 2018, Taxpayer purchased a motor vehicle from another dealership for combined business and personal use, and the business paid sales tax on this purchase. She titled the vehicle in her business’ name. In late 2020, Taxpayer and her husband decided to close the business, and they closed their business tax accounts with the Indiana Department of Revenue (“Department”) in February 2021. In April 2021, Taxpayer retitled this motor vehicle to be in her personal name. She reported to the Bureau of Motor Vehicles that the purchase price was $0. In March 2024, the Department reviewed Taxpayer’s transfer and determined that Taxpayer had underreported the retail purchase price of the vehicle. The Department then assessed use tax based on the fair market value of the vehicle. Taxpayer timely protested, arguing that she did not owe use tax on this transaction because she did not pay consideration for the vehicle. The Department held an administrative hearing, and this Letter of Findings results. Further facts will be provided as necessary.

I.    Use Tax – Motor Vehicle.

DISCUSSION Taxpayer argues that she does not owe use tax on a title change that did not result from a sale. 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) and Lafayette Square Amoco, Inc. v. Indiana Dept. 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. Further, “[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). Thus, all interpretations of Indiana tax law contained within this decision shall be entitled to deference. Indiana imposes an excise tax called the “use tax” on “[the] storage, use, or consumption of tangible personal property in Indiana if the property was acquired in a retail transaction.” IC 6-2.5-3-2(a) (emphasis added). A “retail transaction” occurs when a person or business makes a “sale at retail.” See IC 6-2.5-1-2. A “sale at retail” occurs when, “in the ordinary course of . . . regularly conducted business,” a person or business buys property “for the purpose of resale” and transfers it to someone else “for consideration.” IC 6-2.5-4-1(b). For sales of motor vehicles, the use tax is also imposed on “isolated or occasional sale[s],” where the seller originally acquired the vehicle “for . . . use or consumption.” IC 6-2.5-3-2(b)(1); 45 IAC 2.2-1-1(d). In other words, the purchaser of a motor vehicle must pay use tax so long as they acquired it “for consideration.” Although the term “consideration” is not defined in the Indiana Code, the Indiana Supreme Court has said that it includes “any benefit — however slight — accruing to the [seller] or any detriment — however slight — borne by the [purchaser].” Indiana Dep’t of State Revenue v. Belterra Resort Indiana, LLC, 935 N.E.2d 174, 179 (Ind. 2010). Consideration is therefore not limited to payment in money. Id. It can include a wide variety of benefits, including promises to do something for the seller and the assumption of a debt that the seller owed. Taxpayer has presented documentation in support of her position that she did not acquire the vehicle from her business for consideration. At the hearing, Taxpayer provided documentation showing that she and her husband closed the business before they transferred the title at issue in this protest. Taxpayer’s business was structured as an LLC. Indiana law states that when an LLC is dissolved, whatever property that the LLC owns must be returned to the owners after the LLC’s debts are paid. IC 23-18-9-6. The transaction at issue in this case is therefore best considered a distribution of property to the owner of a business as part of the process of closing the business. Taxpayer has provided documentation showing that her business acquired a new motor vehicle in 2020 on which it paid sales tax, and she provided documentation that the business closed towards the end of 2021. Taxpayer has also provided documentation showing that she acquired title to the vehicle in 2021 for no consideration. Taxpayer’s acquisition of the vehicle was therefore not a retail transaction and as such is not subject to Indiana’s use tax under IC 6-2.5-3-2(a). Taxpayer is not liable for any use tax related to the 2021 transfer of title. However, although Taxpayer does not owe sales tax on this transaction, Taxpayer is advised that she may be liable for income tax on the transfer of the motor vehicle as a distribution of property under I.R.C. § 731. FINDING Taxpayer’s protest is sustained. February 05, 2025 Replaces Finding Document at: New