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 This document is effective on its date of publication and remains in effect until the date it is superseded or deleted by the publication of another document in the Indiana Register.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.

The Department agreed that Indiana Resident established that his purchase of a Polaris vehicle was partially exempt from sales or use tax. Indiana Resident provided information explaining the extent to which the Polaris was directly involved in the production of qualifying agricultural commodities.

I. Gross Retail and Use Tax - Agricultural Exemption.

Authority: IC 6-2.5-2-1; IC 6-2.5-3-1; IC 6-2.5-3-2; IC 6-2.5-5-2; IC 6-8.1-5-1; Indiana Dep't of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463 (Ind. 2012); Wendt LLP v. Indiana Dep't of State Revenue, 977 N.E.2d 480 (Ind. Tax Ct. 2012); Scopelite v. Indiana Dep't of Local Gov't Fin., 939 N.E.2d 1138 (Ind. Tax Ct. 2010); Lafayette Square Amoco, Inc. v. Indiana Dept. of State Revenue, 867 N.E.2d 289 (Ind. Tax Ct. 2007); Rhoade v. Ind. Dep't of State Revenue, 774 N.E.2d 1044 (Ind. Tax Ct. 2002); Mynsberge v. Dep't of State Revenue, 716 N.E.2d 629 (Ind. Tax Ct. 1999); Tri-States Double Cola Bottling Co. v. Dep't of State Revenue, 706 N.E.2d 282 (Ind. Tax Ct. 1999); Dep't of Revenue, State of Ind. v. Kimball Intern., Inc., 520 N.E.2d 454 (Ind. Ct. App. 1988); Sales Tax Information Bulletin 9 (November 2017).

Taxpayer argues that the purchase of a "Polaris" vehicle was exempt from sales tax or use tax on the ground that the vehicle is used in the production of agricultural food products.

Taxpayer is an Indiana resident. Taxpayer purchased a Polaris vehicle for approximately $22,000.

The Indiana Department of Revenue ("Department") assessed Taxpayer sales/use tax on the grounds that the Polaris was not directly used in the direct production of agricultural products.

In a use tax "Compliance Review" issued to Taxpayer and dated December 2021, the Department explained that the assessment was made after having "received correspondence pertaining to the AGQ-100 Agricultural Equipment Exemption Usage Questionnaire."

Taxpayer disagreed with the assessment and submitted a protest to that effect.

An administrative hearing was scheduled to provide Taxpayer an opportunity to explain the basis for the protest. This decision follows a review and consideration of the documentation provided at the time the protest was submitted and information subsequently provided. This Letter of Findings results.

I. Gross Retail Tax - Agricultural Exemption.

Taxpayer's representative explained that Taxpayer operates an Indiana farm and that the Polaris "is used exclusively to produce alfalfa and clover." Therefore, the Polaris "is used in the direct production of agriculture products and . . . would be exempt from sale[s]/use taxation under the Indiana code."

As with any assessment of Indiana listed taxes, it is Taxpayer's responsibility here to establish that the proposed assessments of tax, interest, and penalty are incorrect. As stated in IC 6-8.1-5-1(c) and Indiana case law, "The notice of proposed assessment is prima facie evidence that the [D]epartment's claim for the unpaid tax is valid, including during an action appealed to the tax court under this chapter. The burden of proving that the proposed assessment is wrong rests with the person against whom the proposed assessment is made." See also Indiana Dept. of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463, 466 (Ind. 2012); Lafayette Square Amoco, Inc. v. Indiana Dept. of State Revenue, 867 N.E.2d 289, 292 (Ind. Tax Ct. 2007).

In order to meet the statutory burden, a taxpayer challenging an assessment is required to provide documentation explaining and supporting his or her challenge that the Department's position is wrong. Poorly developed and non-cogent arguments are subject to waiver. Scopelite v. Indiana Dep't of Local Gov't Fin., 939 N.E.2d 1138, 1145 (Ind. Tax Ct. 2010); Wendt LLP v. Indiana Dep't of State Revenue, 977 N.E.2d 480, 486 n.9 (Ind. Tax Ct. 2012).

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). A person who acquires property in a retail transaction (a "retail purchaser") is liable for the tax on the transaction. IC 6-2.5-2-1(b).

Indiana also imposes a complementary excise tax called "the use tax" 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." IC 6-2.5-3-2(a). "'Use' means the exercise of any right or power of ownership over tangible personal property." IC 6-2.5-3-1(a).

In effect and practice, the use tax is functionally equivalent to the sales tax. See Rhoade v. Ind. Dep't of State Revenue, 774 N.E.2d 1044, 1047 (Ind. Tax Ct. 2002).

Taxpayer necessarily relies on IC 6-2.5-5-2 which provides as follows:

In applying any tax exemption such as IC 6-2.5-5-2, the overarching rule is that "tax exemptions are strictly construed in favor of taxation and against the exemption." Dep't of Revenue, State of Ind. v. Kimball Intern., Inc., 520 N.E.2d 454, 456 (Ind. Ct. App. 1988); Mynsberge v. Dep't of State Revenue, 716 N.E.2d 629, 636 (Ind. Tax Ct. 1999); Tri-States Double Cola Bottling Co. v. Dep't of State Revenue, 706 N.E.2d 282, 283 (Ind. Tax Ct. 1999).

The Department has issued Sales Tax Information Bulletin 9 (November 2017), 20180131 Ind. Reg. 045180049NRA (in effect at the time of the Polaris purchase) addressing the exemption on which Taxpayer depends. The Bulletin provides in part as follows:

Bulletin 9 also addresses agricultural functions which do not meet the requirements set out in IC 6-2.5-5-2.

• General farm maintenance;

• Farm management and administration;

• Selling and marketing;

• Exhibition of farm products;

• Safety and fire prevention;

• Illumination;

• Heating and cooling equipment for general temperature control;

• Transportation of animals, poultry, feed, fertilizer, etc. to the farm for use in farming; and

• Transportation of animals, poultry, and other farm produce from the farm to market.

Based on the "AGQ-100 Agricultural Equipment Exemption Usage Questionnaire," Taxpayer explained that the Polaris was used for agricultural purposes. Among the purposes mentioned were that the Polaris was used for "application of crop seed," "application of fertilizer," and "application of insecticide/fungicide." Taxpayer signed and submitted the information "under penalty of perjury." Based on that information, the Department calculated that the Polaris was used for exempt purposes 78 percent of the time and that the assessment should be adjusted to reflect that conclusion.

The Department agrees that Taxpayer has met his burden under IC 6-8.1-5-1(c) of establishing that the original assessment amount was wrong and should be adjusted to reflect the extent to which the Polaris is used in an exempt manner.

To the extent provided in this Letter of Findings, Taxpayer's protest is sustained.

January 20, 2023