…
Taxpayer explains that he purchased a former golf course and that
he needed the excavator to remove trees and various obstructions from the newly
acquired land in preparation for using the land to raise soybeans and corn.
…
Indiana law provides a number of exemptions from the sales and use
tax including the "agricultural exemption" found at IC § 6-2.5-5-2
which states: (a) Transactions involving
agricultural machinery, tools, and equipment are exempt from the state gross
retail tax if the person acquiring that property acquires it for his direct use
in the direct production, extraction, harvesting, or processing of agricultural
commodities. (b) Transactions involving agricultural machinery or equipment are
exempt from the state gross retail tax if:
(1) the person acquiring the property acquires it for use in conjunction
with the production of food and food ingredients or commodities for sale; (2)
the person acquiring the property is occupationally engaged in the production
of food or commodities which he sells for human or animal consumption or uses
for further food and food ingredients or commodity production; and (3) the
machinery or equipment is designed for use in gathering, moving, or spreading
animal waste.
In relevant part, the rule found at IC § 6-2.5-5-2 is explained in
the Department's regulation set out at 45 IAC 2.2-5-6(c) which
states: Purchasers of agricultural
machinery, tools, and equipment to be directly used by the purchaser in the
direct production, extraction, harvesting, or processing of agricultural
commodities are exempt from tax provided such machinery, tools, and equipment
have a direct effect upon the agricultural commodities produced, harvested,
etc. Property is directly used in the direct production, extraction,
harvesting, or processing of agricultural commodities if the property in
question has an immediate effect on the article being produced.
…
The exemption statute sets out a "double-direct" test
with the Indiana legislature having emphasized that – in order to obtain the
exemption – the excavator at issue must have "an immediate effect on the
article being produced." 45 IAC 2.2-5-6(c). In this instance,
Taxpayer has failed to meet his burden of establishing that the excavator has
an immediate and direct effect on the corn and soybeans. The Department does
not question Taxpayer's assertion that the excavator was useful and necessary
in preparing the land for agricultural purposes but – especially in light of
the fact that tax exemptions are strictly construed – Taxpayer's protest must
be denied.
FINDING
Taxpayer's protest is respectfully denied.
…
The Department believes that Taxpayer erred in determining that
the purchase of the excavator was exempt from sales/use tax. However, there is
insufficient information to establish that Taxpayer's position was so egregious
as to constitute "willful neglect." Based on a
"case-by-case" analysis and after reviewing "the facts and circumstances
of each taxpayer" the Department agrees that the ten-percent negligence
penalty should be abated.
FINDING
Taxpayer's protest is sustained.
