NOTICE: IC § 4-22-7-7 permits the publication of this document in the Indiana Register. The publication of this document provides the general public with information about the Indiana Department of Revenue's official position concerning a specific set of facts and issues. The "Holding" section of this document is provided for the convenience of the reader and is not part of the analysis contained in this Final Order Denying Refund.

The Department correctly denied a claim for refund of Indiana sales tax when Dealer used the Arkansas sales tax rate to collect Indiana sales tax on the purchase of a motor vehicle by a non-resident.

I. Sales Tax - Refund.

Authority: IC § 6-2.5-1-2; IC § 6-2.5-2-1; IC § 6-2.5-2-3; IC § 6-2.5-4-1; Arkansas Legislative Tax Handbook, https://www.arkleg.state.ar.us/Committees/Document?type=pdf&

source=2023%2FSummary+Budget+Manuals&filename=Tax+Handbook+2022; Indiana Dep't of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579 (Ind. 2014); 45 IAC 2.2-2-1; Sales Tax Information Bulletin 84 (July 2020).

Taxpayer protests the denial of refund regarding the sales tax collected at the time of Taxpayer's purchase of a motor vehicle in Indiana, after Dealer told Taxpayer that he would be refunded.

Taxpayer is an Arkansas resident. Taxpayer purchased a vehicle at an Indiana dealership ("Dealer"). Dealer collected six and one-half percent sales tax on the transaction, which is the sales tax rate of Taxpayer's home state of Arkansas.

Taxpayer then registered the vehicle in Arkansas, where he was required to pay tax on the vehicle. Taxpayer then filed a claim with the Indiana Department of Revenue ("Department") for a refund of the Indiana sales tax paid to Dealer at the time of purchase in Indiana. The Department denied this request and Taxpayer filed a subsequent protest and requested resolution with a hearing. An administrative hearing was held and this Final Order Denying Refund results.

I. Sales Tax - Refund.

In February 2022, Taxpayer purchased a vehicle in Indiana. Taxpayer and his wife flew to Indiana to purchase the motor vehicle and then drove the vehicle back to Arkansas. When Taxpayer registered the vehicle in Arkansas, he was informed that he needed to pay tax on the vehicle as Arkansas does not allow credit for sale tax paid to another state. Taxpayer states that he then contacted Dealer and was told that he needed to fill out a Form GA-110L (Claim for Refund) and that he would be refunded the sales tax.

As a threshold issue, "when [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.'" Dept. 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 are entitled to deference.

Indiana imposes an excise tax called "the state gross retail tax" (or "sales tax") on retail transactions made in Indiana. IC § 6-2.5-2-1(a); 45 IAC 2.2-2-1. A retail transaction is a transaction made by a retail merchant that constitutes "selling at retail." IC § 6-2.5-1-2(a). Selling at retail occurs when a person "(1) acquires tangible personal property for the purpose of resale; and (2) transfers that property to another person for consideration." IC § 6-2.5-4-1(b). A person who acquires tangible person property in a retail transaction (a "retail purchaser") is liable for the sales tax on the transaction. IC § 6-2.5-2-1(b). The purchaser in general "shall pay the tax to the retail merchant as a separate added amount to the consideration in the transaction." Id. "The retail merchant shall collect the tax as agent for the state." Id.

Sales of vehicles in Indiana generally are subject to Indiana sales tax unless the transactions are specifically exempt under Indiana law. The sales tax treatment of a vehicle changes slightly, however, when the vehicle is purchased to be immediately transported out of state for use outside of Indiana. IC § 6-2.5-2-3 explains the tax implications of this situation:

Specifically, IC § 6-2.5-2-3 allows purchasers who purchase qualified motor vehicles in Indiana but intend to title and register the vehicles to be used in states other than Indiana (within 30 days after the sale) to pay the sales tax rate of the state for which the vehicles are ultimately titled, registered, and used. The Department's Sales Tax Information Bulletin 84 (July 2020), 20200826 Ind. Reg. 045200440NRA further explains the computation of the sales tax concerning the qualified Indiana sales.

Arkansas' sales tax rate is six and one-half percent. Arkansas Legislative Tax Handbook, https://www.arkleg.state.ar.us/Committees/Document?type=pdf&source=2023%2F

Summary+Budget+Manuals&filename=Tax+Handbook+2022 (last visited March 14, 2023). Dealer correctly collected six and one-half percent sales tax reflecting Arkansas' rate, as provided by IC § 6-2.5-2-3.

While Dealer correctly collected Indiana sales tax at the Arkansas rate, Taxpayer was misinformed by Dealer about the possibility of a refund of the sales tax collected in Indiana. Thus, Taxpayer is incorrect regarding how Indiana imposes sales tax on the purchase of vehicles by out-of-state residents. While Indiana allows out-of-state residents to purchase a vehicle in Indiana at the sales tax rate of their home state, it is still Indiana sales tax, as provided by IC § 6-2.5-2-1(b). The Department is unable to refund sales tax that was properly collected on an Indiana transaction. Taxpayer is therefore not entitled to the claimed sales tax refund.

Taxpayer's protest is denied.

March 30, 2023