The Indiana Department of Revenue ("Department")
determined that Taxpayer had not paid sales tax on horses that he acquired in
transactions that occurred in Indiana. Given that Taxpayer had not paid sales
tax, the Department issued a proposed assessment for use tax (and interest).
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The Department found that Taxpayer purchased horses in
Indiana by means of "claiming transactions."
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Claiming races are a method of determining the price of a
horse, with the successful claimant taking title to the horse "at the time
the horse leaves the starting gate and is declared an official starter."
Taxpayer was the claimant of horses that were raced in claiming races. The
Department assessed tax based upon the claiming amount paid by Taxpayer for the
horses.
…
The purchase of a horse is subject to Indiana's sales/use
tax, since horses are tangible personal property.
…
The next issue is whether or not the purchase of the horses
was exempt in Indiana. IC § 6-2.5-5-1, an exemption statute, states:
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In Taxpayer's case, the horses at issue were race horses.
Thus the race horses do not come within the scope of sales tax exemption found
at IC § 6-2.5-5-1 (as noted above, for the exemption to apply the animal has to
be for the "direct use in the direct production of food....").
Taxpayer argues that the ownership of the horses can change
frequently. The resale exemption is stated in IC § 6-2.5-5-8(b) and states:
Transactions involving tangible personal property other than
a new motor vehicle are exempt from the state gross retail tax if the person
acquiring the property acquires it for resale, rental, or leasing in the
ordinary course of the person's business without changing the form of the
property.
To meet the requirements of this statute, Taxpayer must
acquire the horses for resale in his ordinary course of business. However,
Taxpayer does not purchase horses to simply resell the horse. The horses are
bought for racing purposes, not for resale in the ordinary course of Taxpayer's
business. Also, an owner that purchases a race horse by means of a claiming
race could decide not to race the horse again (in that potential scenario, the
horse would not be resold).
The Department also notes that the purchase of the horses by
means of a claiming race at an Indiana horse racing track does not meet the
requirements of a casual sale outlined in Sales Tax Information Bulletin 20,
(October 2009), 20091125 Ind. Reg. 045090898NRA. The horses are bought at the
horse track, not at the residence of a prior horse owner.
In conclusion, Taxpayer purchased race horses at claiming
races; Taxpayer failed to pay sales tax at the time of purchase. Thus use tax
was properly assessed by the Department. Taxpayer has not met the burden
imposed by IC 6-8.1-5-1(c).
