Tuesday, April 3, 2012

Revenue Finds Use Tax on Recreational Vehicle Purchase Barred by Statute of Limitations

Taxpayer purchased a recreational vehicle on December 17, 2007. The Department issued a proposed assessment for this transaction on July 5, 2011.

Taxpayer allegedly purchased the second and third recreational vehicles in 2006. The Department issued a second proposed assessment on July 5, 2011.

IC § 6-8.1-5-2(a) states:  Except as otherwise provided in this section, the department may not issue a proposed assessment under section 1 of this chapter more than three (3) years after the latest of the date the return is filed, or either of the following:  (1) The due date of the return.  (2) In the case of a return filed for the state gross retail or use tax, the gasoline tax, the special fuel tax, the motor carrier fuel tax, the oil inspection fee, or the petroleum severance tax, the end of the calendar year which contains the taxable period for which the return is filed.

The three-year statute of limitations applies in the absence of proof of fraud by clear and convincing evidence or a taxpayer's failure to file a return. See IC § 6-8.1-5-2(f). As noted in Part I above, there is no evidence of either of these circumstances in this case.

Because Taxpayer is not a registered retail merchant, Taxpayer would have been required to report use tax on the 2006 and 2007 transactions on his individual IT-40 income tax returns due on April 17, 2007 and April 15, 2008.

Any additional assessment on the 2006 transactions (even assuming Taxpayer indeed purchased those vehicles and furthermore purchased them on the latest day possible in 2006, December 31st) would be barred by the statute of limitations if issued after April 19, 2010. Since the Department issued the assessment on July 5, 2011, this assessment is barred by the statute of limitations.

Any additional assessment on the 2007 transaction would be barred by the statute of limitations if issued after April 15, 2011. Since the Department issued the assessment on July 5, 2011, this assessment is also barred by the statute of limitations.