in-20250430-IR-045250198NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 04-20241558 Consumer Use Tax For The Tax Year 2022 HOLDING Individuals were required to pay Indiana consumer use tax imposed on the transfer of a pick-up truck from the original owner to Individuals based either on the “fair market value” of the truck or by an affidavit attesting to the actual selling price. ISSUE

I. Consumer Use Tax – Vehicle’s Fair Market Value / 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 6-2.5-4-1; IC 6-2.5-5 et seq.; 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); 45 IAC 2.2-3-5; 45 IAC 15-5-1. Taxpayers argue that they were not required to pay use tax on Taxpayers’ acquisition of a vehicle transferred to them as a gift. STATEMENT OF FACTS Taxpayers are Indiana residents who acquired a used 2002 Ford F-150 pickup truck. Taxpayers claim that truck was provided to them as a gift. Taxpayers proceeded to retitle and register the pickup truck with the Indiana Bureau of Motor Vehicles (“BMV”). At that time, Taxpayers indicated that they paid $1.00 for the truck. Both the BMV and the Indiana Department of Revenue’s (“Department”) compliance personnel reviewed the documents transferring ownership from previous owner to Taxpayers. That review concluded that Taxpayers owed additional use tax. In November 2023, the Department issued Taxpayers a Notice of Proposed Assessment for approximately $600 in consumer use tax. The “audit summary report” explained why the Department issued the proposed assessment. The BMV determined that the “average selling price” or “fair market value” was not $1.00 but approximately $8,000. It was this second amount on which the Department based its proposed $600 use tax assessment. Taxpayers disagreed with the assessment and submitted a protest to that effect. In their protest, Taxpayers asked for a “[f]inal determination without a hearing.” This Letter of Findings is based on the information provided at the time Taxpayers submitted their protest and on information available to the Department.

I. Consumer Use Tax – Vehicle’s Fair Market Value / Actual Selling Price.

DISCUSSION The issue is whether Taxpayers have met their burden of establishing that they were not required to pay additional Indiana use tax on a transaction transferring to them a 2002 Ford F-150 pickup truck. The Department’s use tax assessment was made in 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 Taxpayers’ objections, the Department points out that it is Taxpayers’ 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 Taxpayers’ 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. In this case, the transaction took place between the original truck owners to Taxpayers. That concept is explained in 45 IAC 2.2-3-5, which provides: The Department further notes that the Department’s use tax assessment stems from the $8,000 value assigned by the BMV to the transaction between the original owners and Taxpayers. In such instances, 45 IAC 2.2-3-5(d) explains: Different persons may disagree on exactly what is the “average selling price for that vehicle,” but the Department does not agree with Taxpayers’ conclusion that the average selling price of the used pickup was $1.00. The Department does not agree that Taxpayers have met their burden of establishing that the pickup truck’s “average selling price” was anything other than $8,000 or by providing an affidavit signed under penalty of perjury by both Taxpayer and the seller confirming that $1.00 was the actual selling price. FINDING Taxpayers’ protest is respectfully denied. February 19, 2024 Replaces Finding Document at: New