United States

Indiana: Tax Court Holds Use Tax owed on Vehicles that Never Entered the State, but were Registered in Indiana

Jul 13, 2015
From KPMG TaxWatch

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Recently, the Indiana Tax Court granted partial summary judgment in favor of the Indiana Department of State Revenue in a case involving two denied use tax refund claims. The taxpayer, a Pennsylvania-based private motor carrier, purchased over 500 vehicles from retailers located outside of Indiana for use in providing services in states other than Indiana. The vehicles at issue were not delivered to Indiana and the vast majority of the vehicles were never driven on Indiana highways. However, pursuant to the International Registration Plan, the taxpayer registered and licensed the vehicles in Indiana; the taxpayer also titled the vehicles in Indiana, at which time it paid around $2.6 million in use tax.

The taxpayer later requested a refund of use taxes paid, arguing that merely licensing, registering, and titling vehicles in Indiana did not give rise to a taxable use. The taxpayer further argued that Indiana use tax could not apply because the vehicles were never physically present in Indiana during the refund claim period. In support of this argument, the taxpayer cited caselaw from other jurisdictions holding that physical presence of the property in the taxing state was a prerequisite to imposing use tax. The court found these cases unpersuasive in interpreting Indiana’s use tax statute. In the court’s view, Indiana’s definition of “use,” which is “the exercise of any right or power of ownership,” was sufficiently broad to encompass registering the vehicles in-state. The taxpayer also argued that the imposition of use tax under these facts violated the Commerce Clause. The court rejected the taxpayer’s challenge to each of the four prongs of the Complete Auto test for whether a state tax passed Commerce Clause muster. The taxpayer had substantial nexus with Indiana because it stored other vehicles in the state. Furthermore, the fair apportionment and discrimination prongs of the tests were not violated because the taxpayer failed to demonstrate that multiple taxation had occurred or that the state provided an advantage to local businesses. Finally, the court found the use tax to be fairly related to the services provided to the taxpayer because Indiana registered the vehicles and the taxpayer had access to the state judicial system to challenge its payment of use tax. For more information on Asplundh Tree Expert Co. v Indiana Department of State Revenue, please contact Dave Perry at 513-763-2402.


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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.