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Letter of Findings Number: 04-20130214
Sales/Use Tax
For Tax Year 2010

NOTICE: Under IC § 4-22-7-7, this document is required to be published in the Indiana Register and is effective on its date of publication. It shall remain in effect until the date it is superseded or deleted by the publication of a new document in the Indiana Register. The publication of this document will provide the general public with information about the Department's official position concerning a specific issue.
I. Sales/Use Tax– Horses Purchased in Racetrack Claiming Transactions.
Authority: IC § 6-2.5-2-1; IC § 6-2.5-3-2(a); IC § 6-2.5-1-27; IC § 6-2.5-3-4; IC § 6-8.1-5-1(c); 45 IAC 2.2-3-4; 71 IAC 6.5-1-1; 71 IAC 6.5-1-2; 71 IAC 6.5-1-4; 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); Wendt LLP v. Indiana Dept. of State Revenue, 977 N.E.2d 480 (Ind. Tax Ct. 2012).
Taxpayer protests use taxes assessed for horses purchased via claiming races.
The Indiana Department of Revenue ("Department") determined that Taxpayer had not paid sales tax on three horses that he acquired in four separate claiming transactions that occurred at Indiana racetracks in 2010. Given that Taxpayer had not paid sales tax on these transactions, the Department issued proposed assessments for use taxes and interest. Taxpayer filed a protest. An administrative hearing was held and this Letter of Findings results. More facts will be provided below as necessary.
I. Sales/Use Tax–Horses Purchased in Racetrack Claiming Transactions.
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").
The notice of proposed assessment is prima facie evidence that the Department's claim for the unpaid tax is valid. The burden of proving that the proposed assessment is wrong rests with the person against whom the proposed assessment is made. IC § 6-8.1-5-1(c); Lafayette Square Amoco, Inc. v. Indiana Dep't of 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, 466 (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 § 6-2.5-2-1 states:
(a) An excise tax, known as the state gross retail tax, is imposed on retail transactions made in Indiana.
(b) The person who acquires property in a retail transaction is liable for the tax on the transaction and, except as otherwise provided in this chapter, shall pay the tax to the retail merchant as a separate added amount to the consideration in the transaction. The retail merchant shall collect the tax as agent for the state.
Use tax is imposed by IC § 6-2.5-3-2(a), which states:
An excise tax, known as the use tax, is imposed on the 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.
Also, 45 IAC 2.2-3-4 further explains:
Tangible personal property, purchased in Indiana, or elsewhere in a retail transaction, and stored, used, or otherwise consumed in Indiana is subject to Indiana use tax for such property, unless the Indiana state gross retail tax has been collected at the point of purchase.
The purchase of a horse is subject to Indiana's sales/use tax, since horses are tangible personal property. IC § 6-2.5-1-27. An exemption from 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. The Department found that Taxpayer had acquired the horses at issue without paying sales tax at the time they were claimed, and assessed use tax on the transactions.
Taxpayer was assessed tax relating to four transactions. One of the horses, referred to here for convenience as "horse J," was purchased twice by Taxpayer. In his protest letter, Taxpayer focuses his argument on horse J:
[T]he filly named [horse J] was claimed by me on August 6, 2010 for $7,500.00 and again I claimed her, less than a month later, for $10,000.00. I contend that after paying sales tax on the first $7,500.00 I should only owe on the difference between the $7,500.00 and the $10,000.00. The total tax paid on the horse then would be on the larger amount of the $10,000.00.
Taxpayer's argument on this issue is denied. As IC § 6-2.5-2-1 and IC § 6-2.5-3-2 make clear, sales and use taxes are based on transactions. Taxpayer purchased horse J twice, in two separate acquisitions, therefore tax is owed for each transaction.
Taxpayer also stated at the hearing that the worth of a race horse is actually less than the claiming price, and that Taxpayer should be taxed on that lower price. Taxpayer has not presented a sufficiently developed argument for the Department to address. See Wendt LLP v. Indiana Dept. of State Revenue, 977 N.E.2d 480, 485 n.9, (Ind. Tax Ct. 2012) (stating in a footnote parenthetical "that poorly developed and non-cogent arguments are subject to waiver" by the Indiana Tax Court) (citing Scopelite v. Indiana Dep't of Local Gov't Fin., 939 N.E.2d 1138, 1145 (Ind. Tax. Ct. 2010)).
Finally, the Department notes that Taxpayer also cited to IC § 6-2.5-14 in the protest. That statute, which becomes effective on July 1, 2013, will create an amnesty program for unpaid use tax on claimed horses. As provided by that statute, taxpayers that are eligible for the amnesty program will still have to remit the use taxes that are owed on claimed horses, but among the provisions of the amnesty statute are the abatement of penalties and interest associated with use taxes owed for claimed horses. Under the amnesty program, taxpayers may also enter into a payment plan regarding the use taxes owed on claimed horses.
Taxpayer's protest is denied.

Posted: 08/28/2013 by Legislative Services Agency

DIN: 20130828-IR-045130391NRA
Composed: May 23,2018 4:55:49PM EDT
A PDF version of this document.