NOTICE: IC § 6-8.1-3-3.5 and IC § 4-22-7-7 require the publication of this document in the Indiana Register. This document provides the general public with information about the Department's official position concerning a specific set of facts and issues. This document is effective as of its date of publication and remains in effect until the date it is superseded or deleted by the publication of another document in the Indiana Register. The "Holding" section of this document is provided for the convenience of the reader and is not part of the analysis contained in this Letter of Findings.

Individual did not provide sufficient documentation to show that the forklift had an immediate effect on the direct production of crops.

I. Sales Tax - Agricultural Exemptions.

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; Indiana Dept. of State Rev. v. Kimball Int'l Inc., 520 N.E.2d 454 (Ind. Ct. App. 1988); Tri-States Double Cola Bottling Co. v. Dep't of State Revenue, 706 N.E.2d 282 (Ind. Tax Ct. 1999); Mynsberge v. Dep't of State Revenue, 716 N.E.2d 629 (Ind. Tax Ct. 1999); Dept. of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579 (Ind. 2014); Indiana Dept. of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463 (Ind. 2012); Lafayette Square Amoco, Inc. v. Indiana Dept. of State Revenue, 867 N.E.2d 289 (Ind. Tax Ct. 2007)Indiana Dep't of State Revenue v. RCA Corp., 310 N.E.2d 96 (Ind. Ct. App. 1974); 45 IAC 2.2-5-1; 45 IAC 2.2-5-4; 45 IAC 2.2-5-6.

Taxpayer protests the Department's assessment.

Taxpayer, an Indiana resident, purchased a forklift in February 2015. Taxpayer was assessed sales tax on the purchase of the forklift by the Indiana Department of Revenue ("Department"). Taxpayer timely protested the assessment. A phone hearing was held. This Letter of finding ensues. Additional facts will be provided as necessary.

I. Sales Tax - Agricultural Exemptions.

The Department determined Taxpayer's purchase of a forklift was taxable as not directly used in direct production of agricultural commodities. Taxpayer, to the contrary, claimed that he is entitled to the agricultural exemption outlined in IC § 6-2.5-5-2.

As a threshold issue, it is Taxpayer's responsibility to establish that the existing tax assessment is incorrect. As stated in IC § 6-8.1-5-1(c), "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." Indiana Dep't of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463, 466 (Ind. 2012); Lafayette Square Amoco, Inc. v. Indiana Dep't of State Revenue, 867 N.E.2d 289, 292 (Ind. Tax Ct. 2007). Consequently, a taxpayer is required to provide documentation explaining and supporting his or her challenge that the Department's position is wrong. Further, "[W]hen [courts] examine a statute that an agency is 'charged with enforcing. . .[courts] defer to the agency's reasonable interpretation of [the] statute even over an equally reasonable interpretation by another party.'" Dep't of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579, 583 (Ind. 2014). Thus, all interpretations of Indiana tax law contained within this decision, as well as the preceding audit, shall be entitled to deference.

In applying any tax exemption, the general rule is that "tax exemptions are strictly construed in favor of taxation and against the exemption." Indiana Dep't of State Rev. v. Kimball Int'l Inc., 520 N.E.2d 454, 456 (Ind. Ct. App. 1988). The exemption to which Taxpayer aspires, IC § 6-2.5-5-2, like all tax exemption provisions, is strictly construed against exemption from the tax. Tri-States Double Cola Bottling Co. v. Dep't of State Revenue, 706 N.E.2d 282, 283 (Ind. Tax Ct. 1999); Mynsberge v. Dep't of State Revenue, 716 N.E.2d 629, 636 (Ind. Tax Ct. 1999). Therefore, in order for Taxpayer to prevail on the different issues it raises, Taxpayer must demonstrate that the initial assessment was "wrong" and that it is instead entitled to a sales tax exemption which is "strictly construed" in favor of taxation.

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).

IC § 6-2.5-5-2 (2015) states:

• Fences, posts, gates, and fencing materials.

• Water supply systems for personal use.

• Drains.

• Any motor vehicle which is required by the motor vehicle law to be licensed for highway use.

• Ditchers and graders.

• Paints and brushes.

• Refrigerators, freezers, and other household appliances.

• Garden and lawn equipment, parts, and supplies.

• Electricity for lighting and other non-agricultural use.

• Any materials used in the construction or repair of non-exempt: buildings, silos, grain bins, corn cribs, barns, houses, and any other permanent structures.

• Items of personal apparel, including footwear, gloves, etc., furnished primarily for the convenience of the workers if the workers are able to participate in the production process without it.

• Pumps.

• All saws.

• All tools, including forks, shovels, hoes, welders, power tools, and hand tools.

• Building materials or building hardware such as lumber, cement, nails, plywood, brick, paint.

• Plumbing, electrical supplies, and accessories, pumps.

• Horses, ponies, or donkeys not used as draft animals in the production of agricultural products.

• Food for non-exempt horses, ponies, etc.

• Fertilizer, pesticides, herbicides, or seeds to be used for gardens and lawns.

• Field tile or culverts.

• Graders, ditchers, front end loaders, or similar equipment (except equipment designed to haul animal waste).

• Any replacement parts or accessories for the above items. (Bullets added).

During the hearing, Taxpayer explained that he used the forklift to move boxes of seed around. Also, he used the forklift to load the planter. Taxpayer explained that he did not use the forklift for any other purpose. Taxpayer stated that the forklift is necessary for him to move the large, heavy seed boxes and enables him to load the planter. However as described in 45 IAC 2.2-5-4(e), the use of the forklift may be a practical necessity for Taxpayer, but does not mean that it is automatically exempt. In this case, while the planter was directly used in the direct production of Taxpayer's crops, the forklift was a step removed from the direct production of those crops, as required by IC § 6-2.5-5-2. Taxpayer did not provide sufficient documentation showing that the forklift was directly used in direct production of crops, nor was the use of the forklift an essential and integral part of an integrated process which produced the crops.

Taxpayer's protest is denied.