Source: http://www.in.gov/legislative/iac/20121226-IR-045120655NRA.xml.html
Timestamp: 2015-10-04 09:30:59
Document Index: 148527386

Matched Legal Cases: ['§ 6', '§ 6', '§ 6', '§ 6', '§ 6', '§ 6', '§ 6', '§ 6', '§ 6', '§ 6', '§ 6']

04-20120425.LOF
Letter of Findings: 04-20120425
I. Use Tax – Claiming Horses.
Authority: IC § 6-8.1-5-1(c); IC § 6-2.5-2-1; IC § 6-2.5-3-2(a); IC § 6-2.5-1-27; IC § 6-2.5-5-1; IC § 6-2.5-5-8; 71 IAC 6.5-1-1; 71 IAC 6.5-1-2; 71 IAC 6.5-1-4; 45 IAC 2.2-3-4; 45 IAC 2.2-5-5; Sales Tax Information Bulletin 20, (October 2009); Lafayette Square Amoco, Inc. v. Indiana Dep't of Revenue, 867 N.E.2d 289 (Ind. Tax Ct. 2007).
Taxpayer protests the imposition of use tax on a claimed horse.
II. Tax Administration – Imposition of Negligence Penalty.
Authority: IC § 6-8.1-10-2.1, 45 IAC 15-11-2.
The Taxpayer protests the imposition of the ten percent negligence penalty.
The Indiana Department of Revenue ("Department") determined that Taxpayer had not paid sales tax on a horse that he acquired in a "claiming" transaction that occurred at an Indiana racetrack. Given that Taxpayer had not paid sales tax, the Department issued a proposed assessment for use tax, interest, and penalty. Taxpayer filed a protest regarding the proposed assessment. An administrative hearing was held and this Letter of Finding ensures. More facts will be provided below as needed.
The Department found that Taxpayer purchased a horse in Indiana by means of a "claiming transaction." Regarding "claiming" and horse racing, 71 IAC 6.5-1-1, states in part:
Claiming races are a method of determining the price of a horse, with the successful claimant taking title to the horse "at the time the horse leaves the starting gate and is declared an official starter." Taxpayer was the claimant of a horse that was raced in claiming races. The Department assessed tax based upon the claiming amount paid by Taxpayer for the horse.
The next issue is whether or not the purchase of the horse was exempt in Indiana. IC § 6-2.5-5-1, an exemption statute, states:
In Taxpayer's case, the horse at issue was a race horse. Thus the race horse does not come within the scope of sales tax exemption found at IC § 6-2.5-5-1 (as noted above, for the exemption to apply the animal has to be for the "direct use in the direct production of food....").
Taxpayer argues that the ownership of the horse can change frequently. The resale exemption is stated in IC § 6-2.5-5-8(b) and states:
To meet the requirements of this statute, Taxpayer must acquire the horse for resale in his ordinary course of business. However, Taxpayer does not purchase horses to simply resell them. The horses are bought for racing purposes, not for resale in the ordinary course of Taxpayer's business. Also, an owner that purchases a race horse by means of a claiming race could decide not to race the horse again (in that potential scenario, the horse would not be resold).
The Department also notes that the purchase of the horse by means of a claiming race at an Indiana horse racing track does not meet the requirements of a casual sale outlined in Sales Tax Information Bulletin 20, (October 2009), 20091125 Ind. Reg. 045090898NRA. The horses are bought at the horse track in a retail transaction, not at the residence of a prior horse owner.
At the hearing, Taxpayer stated that he now understands why, as a matter of law, horse claiming transactions should be subject to sales/use tax, and pointed out that all surrounding states do subject these transactions to sales tax. Taxpayer's complaint, however, is that for all the years since horse racing came to Indiana, these transactions have not been subjected to tax. Taxpayer states that it is, therefore, not fair for the Department to now impose this tax, especially given that the overall price of the transaction is raised without the claimant having been given notice of the full cost of the transaction. The Department acknowledges Taxpayer's complaint, but points out that the law is, in this instance, clear and that the claiming transaction is properly subjected to tax.
In conclusion, Taxpayer purchased a race horse at a claiming race; Taxpayer failed to pay sales tax at the time of purchase. Thus use tax was properly assessed by the Department.
The Taxpayer also protested the imposition of the ten percent negligence penalty pursuant to IC § 6-8.1-10-2.1. Indiana Regulation 45 IAC 15-11-2(b) clarifies the standard for the imposition of the negligence penalty as follows:
Taxpayer has demonstrated that he met his burden to show that he had reasonable cause not to pay sales tax, or remit use tax, on the claiming transaction at issue.
The Taxpayer's protest of the negligence penalty is sustained.
Composed: Oct 04,2015 5:31:09AM EDT