Source: http://www.in.gov/legislative/iac/20130529-IR-045130203NRA.xml.html
Timestamp: 2016-06-27 18:43:42
Document Index: 475368760

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

04-20130076.SLOF
Supplemental Letter of Findings: 04-20130076
I. Sales/Use Tax – Agricultural Exemptions – Horses Purchased in Racetrack Claiming Transactions.
Authority: IC § 6-8.1-5-1(c); IC § 6-2.5-2-1; IC § 6-2.5-3-2; IC § 6-2.5-3-4; IC § 6-2.5-1-27; IC § 6-2.5-5-1; 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 2.2-5-4; 45 IAC 2.2-5-5; Lafayette Square Amoco, Inc. v. Indiana Dep't of 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 Revenue v. Interstate Warehousing, 783 N.E.2d 248 (Ind. 2003).
The Indiana Department of Revenue ("Department") determined that Taxpayer had not paid sales tax on four horses that he acquired in "claiming" transactions that occurred at Indiana racetracks in 2010. Given that Taxpayer had not paid sales tax on these transactions, the Department issued a proposed assessment for use tax and interest. Taxpayer filed a protest regarding the proposed assessment. An administrative hearing was scheduled, but Taxpayer did not attend or reschedule the hearing. Subsequently, Taxpayer requested a rehearing. A rehearing was held, and this Supplemental Letter of Findings results. More facts will be provided below as needed.
The Department found that Taxpayer purchased horses at Indiana racetracks by means of "claiming" transactions. 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 horses that were raced in claiming races. The Department assessed tax based upon the claiming amounts paid by Taxpayer for the horses. (See also 71 IAC 6.5-1-1; 71 IAC 6.5-1-2; and 71 IAC 6.5-1-4 for further references to "claiming").
Taxpayer does not, in this protest, contest the taxability of the acquisition of horses in "claiming" transactions. Taxpayer, however, does argue that there is a reason the acquisition of the horses should be exempt from sales and use tax. Specifically, Taxpayer states that the horses he acquired in "claiming" transactions are an integral part of his corn and soy farming operation and therefore qualify for the agricultural exemption. Taxpayer argues that the horses he acquired in the "claiming" transactions are integral and essential to his farming operation because the profuse amount of manure generated by the horses is used to fertilize the crops in Taxpayer's farming operation. Taxpayer further explains that the horses are stabled at his farm and only leave the farm when raced. Taxpayer states that the fertilizer is harvested several times a week to be spread on the land.
Taxpayer states that he is in the corn and soy farming business and that horses are stabled on his farm and their manure is used on the farm as fertilizer. However, the horses at issue are one step removed from Taxpayer's direct agricultural process. The horses produce the manure which is then used to fertilize the farm's crops. The horses are not directly acting on the direct production of food and food ingredients.
The horses at issue were acquired in "claiming" transactions at the race tracks as race horses. The use of the horses' biological byproduct – manure – though important to Taxpayer's agricultural production process, does not meet the requirement that the horses be used directly in the direct agricultural process required by Indiana law and is furthermore incidental to the purchase of the horses as race horses. Thus the subject horses do not come within the scope of the sales and use tax exemption found at IC § 6-2.5-5-1.
DIN: 20130529-IR-045130203NRA
Composed: Jun 27,2016 2:43:41PM EDT