in-20250326-IR-045250136NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 04-20241894 Sales and Use Tax For the Tax Year 2022 HOLDING 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 proposed assessment of additional use tax on a motorcycle he acquired in 2022. STATEMENT OF FACTS Taxpayer is an Indiana resident, who titled and registered a motorcycle 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 $100. 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 $4,835. 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 and requested that the Department make the “[f]inal determination without a hearing.” This 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: 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 instant case stated, in relevant part, the following: Based on his protest letter, Taxpayer seemingly argued that the $100 he paid for the ‘AS IS’ condition of the motorcycle was the fair market value considering the motorcycle’s condition at the time of the transaction. Additionally, Taxpayer’s letter suggested that the seller joined and supported his protest. Taxpayer, however, did not provide any verifiable source documentation, including photos of motorcycle as well as payment receipts or invoices concerning the needed repairs, to support his assertion that the condition of the motorcycle sold or purchased at “AS IS” condition was justified to be valued at $100. Without verifiable documents to substantiate his protest and without affirmatively attesting under penalty of perjury, Taxpayer’s statement alone was self-serving. To conclude, given the totality of the circumstances, without verifiable source documents from Taxpayer to substantiate her 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. January 17, 2025 Replaces Finding Document at: New