Source: http://www.in.gov/legislative/iac/20120829-IR-045120484NRA.xml.html
Timestamp: 2014-10-01 09:06:33
Document Index: 559516345

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

04-20120228.LOF
Letter of Findings: 04-20120228
Authority: IC § 6-2.5-1-1 et seq.; IC § 6-2.5-3-4; IC § 6-2.5-5-2; IC § 6-8.1-5-1; 45 IAC 2.2-5-1; 45 IAC 2.2-5-4; 45 IAC 2.2-5-6; Lafayette Square Amoco, Inc. v. Indiana Dep't of State Revenue, 867 N.E.2d 289 (Ind. Tax Ct. 2007); Indiana Dep't of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463 (Ind. 2012); Indiana Dep't of State Revenue v. RCA Corp., 310 N.E.2d 96 (Ind. Ct. App. 1974).
Taxpayer, an Indiana farmer, purchased a chopper (also called "bush hog") to be used on his farm to chop corn stalks in the fields. Pursuant to an audit, the Indiana Department of Revenue ("Department") discovered that Taxpayer did not pay sales tax at the time of the purchase nor did Taxpayer self-assess and remit use tax to the Department. As a result, the Department assessed Taxpayer additional tax and interest.
Taxpayer timely protests the assessment and submitted additional documentation to support his protest. A hearing was held. This Letter of Findings ensues. Additional facts will be provided as necessary.
The Department's audit assessed Taxpayer use tax on his purchases of tangible personal property because Taxpayer did not pay sales tax at the time of the transactions, nor did he self-assess and remit the use tax to the Department. Taxpayer, to the contrary, claimed that he is entitled to the agricultural exemption found in IC § 6-2.5-5-2.
As a threshold issue, 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); Lafayette Square Amoco, Inc. v. Indiana Dep't of State Revenue, 867 N.E.2d 289, 292 (Ind. Tax Ct. 2007); Indiana Dep't of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463 (Ind. 2012).
Indiana imposes a sales tax on retail transactions and a complementary use tax on tangible personal property that is stored, used, or consumed in the state. IC § 6-2.5-1-1 et seq. Generally, all purchases of tangible personal property by persons engaged in the direct production, extraction, harvesting, or processing of agricultural commodities are taxable. 45 IAC 2.2-5-6(a). An exemption from use tax is granted for transactions where the gross retail tax ("sales tax") was paid at the time of purchase pursuant to IC § 6-2.5-3-4. There are also additional exemptions from sales tax and use tax. A statute which provides a tax exemption, however, is strictly construed against the taxpayer. Indiana Dep't of State Revenue 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 100-101.
In this instance, Taxpayer, in relevant part, states:
I operate a farm as part of my profession and the equipment purchased in question for sales tax was a bush hog. I use this bush hog to mow corn stalks and pasture. Both tasks are essential in the direct production of my cattle operation. By mowing the stalks the cattle can eat them better and by mowing the pasture a better quality of grass in grown for consumption.
Thus, Taxpayer believes that he is entitled to the agricultural exemptions on the purchase of the chopper/bush hog.
Taxpayer may argue, and rightly so, that mowing corn stalks and pasture is essential to his cattle operation. However, pursuant to the above mentioned statutes and regulations, all purchases of tangible personal property by persons engaged in the direct production, extraction, harvesting, or processing of agricultural commodities are taxable, unless the use of the tangible personal property satisfies the "double-direct" test; i.e., the equipment at issue must be involved in the direct production of the agricultural commodity and must have a direct effect upon that commodity. In this instance, Taxpayer explained that he leases a portion of his farm to a third party (tenant) who plants the corn and that Taxpayer used the chopper to chop the corn stalks after his tenant harvested the corn. Thus, Taxpayer used the chopper to chop the corn stalks after the harvest of the corn, which is post-production of the agricultural commodity owned by his tenant. Additionally, Taxpayer explained that, unlike his tenant, he raises cattle for human consumption; thus, upon chopping the corn stalks, Taxpayer then used the chopped stalks to make bedding for his cattle. Therefore, Taxpayer's use of the chopper also did not have a direct effect upon his cattle.
Composed: Oct 01,2014 5:06:35AM EDT