in-20250430-IR-045250201NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE SUPPLEMENTAL LETTER OF FINDINGS: 04-20241862 Sales and Use Tax  For the Tax Year 2022 HOLDING  Individual failed to document the vehicle conditions to support the price he paid for acquiring it. As such, Individual was responsible for an additional amount of use tax assessed based on fair market value of the vehicle. ISSUE

I. Sales and 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 6-2.5-13-1; IC 6-8.1-5-1; IC 6-8.1-5-4; Indiana Dep’t of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579 (Ind. 2014); Scopelite v. Indiana Dep’t of Local Gov’t Fin., 939 N.E.2d 1138 (Ind. Tax Ct. 2010); 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. Taxpayer protests the assessment of additional use tax on a vehicle he acquired in 2022. STATEMENT OF FACTS Taxpayer is an Indiana resident, who titled and registered a vehicle at the Indiana Bureau of Motor Vehicles (“BMV”) in 2022. Taxpayer’s application for the title at the BMV stated that the selling price of that vehicle was $500. Taxpayer’s title application at the BMV was forwarded to the Indiana Department of Revenue (“Department”) for a review. Based on the best information available to the Department, the fair market value for the vehicle was determined to be $7,904. The Department allowed Taxpayer a credit for tax paid at the BMV and assessed Taxpayer additional use tax, interest, and penalty as a result. Taxpayer protested but failed to attend a hearing initially scheduled. Taxpayer subsequently requested a rehearing. The Department granted the rehearing and allowed additional time for Taxpayer to submit verifiable documents to support his protest. This Supplemental Letter of Findings ensues.

I.    Sales and Use Tax – Imposition.

DISCUSSION The Department reviewed Taxpayer’s application at the BMV and determined that Taxpayer’s purchase was subject to additional Indiana tax. In a letter, the Department explained, in part, the following: Taxpayer argued that the vehicle in question was purchased from a dealer and needed additional repairs. The issue, thus, is whether Taxpayer provided verifiable documents to demonstrate that he was not responsible for the tax because the vehicle’s fair market value was $500. As a threshold issue, IC 6-8.1-5-4(a) states that a taxpayer “must keep books and records, including all source documents,” as statutorily required, “so that the [D]epartment can determine the amount, if any, of the person’s liability for that tax by reviewing those books and records.” All tax assessments are prima facie evidence that the Department’s claim for the unpaid tax is valid; the taxpayer bears the burden of proving that any assessment is incorrect. IC 6-8.1-5-1(c). The taxpayer is required to provide documentation to explain and support his or her challenge. When an agency is charged with enforcing a statute, the Indiana jurisprudence defers to the agency’s reasonable interpretation of that statute “over an equally reasonable interpretation by another party.” Indiana Dep’t of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579, 583 (Ind. 2014). Poorly developed and non-cogent arguments are subject to waiver. Scopelite v. Indiana Dep’t of Local Gov’t Fin., 939 N.E.2d 1138, 1145 (Ind. Tax Ct. 2010). 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 personal 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 purchaser is responsible for the use tax. An exemption from the use tax is granted for transactions where the sales tax was paid at the time of purchase pursuant to IC 6-2.5-3-4 and 45 IAC 2.2-3-4. There are additional tax exemptions available under Indiana tax law; 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 argued that he purchased from a car dealer for $500 because that car (i) had a bad engine, (ii) required repairs, and (iii) was required to be towed away from the dealer’s business location. Further, Taxpayer stated, in relevant part, the following: Throughout the protest process, Taxpayer seemingly argued that the $500 he paid for the ‘AS IS’ condition of the vehicle was fair market value considering the vehicle’s condition at the time of the transaction. Taxpayer maintained that he bought that vehicle from the car dealer whose paperwork supported that $500 transaction. Upon review, however, Taxpayer’s reliance of his supporting documentation is misplaced. The prior vehicle title (last four digits of Title Number: 0006) showed that in 2018, the car dealer registered and titled the vehicle in question with an odometer of 83,821 miles. In 2022, the car dealer included an affidavit for certificate of title correction at the time it sold that vehicle with an odometer of 198,597 miles to Taxpayer. Both the car dealer and Taxpayer reported the same Dealer Number for that transaction. During rehearing, Taxpayer asserted that he paid cash for the car and to have the car towed as well. Taxpayer was asked to provide verifiable source records in which the dealer’s deal jacket contained or documented the vehicle conditions, which may include photos of vehicle as well as cash payment receipts or invoices concerning repairs and towing expense, to support his assertion that the condition of the vehicle sold or purchased at “AS IS” condition was justified to be valued at $500. Taxpayer failed to do so. To conclude, given the totality of the circumstances, without verifiable source documents from Taxpayer to substantiate his protest, the Department is not able to agree that Taxpayer met his burden of proof under IC 6-8.1-5-1. Taxpayer was responsible for the additional tax plus penalty and interest. FINDING Taxpayer’s protest is respectfully denied. February 3, 2025 Replaces Finding Document at: New