The Taxpayer was a corporation that designs, manufactures,
and sells modular homes with manufacturing facilities in Indiana. Pursuant to
an audit, the Indiana Department of Revenue ("Department") determined
that tax should have paid on the purchase of modular home platforms
("MHPs") for the 2008, 2009, and 2010 tax years.
…
MHPs are large platforms with wheels. During the
construction process, the Taxpayer attaches modular home parts to the MHPs. The
homes being built are moved from station to station in the building process on
the MHPs.
…
45 IAC
2.2-5-8(f)(3), states as an example:
Transportation equipment used to transport work-in-process
or semi-finished materials to or from storage is not subject to tax if the
transportation is within the production process.
Accordingly, MHPs are exempt from tax when they are used to
transport the modular home during production.
In 2006, Taxpayer was issued a Letter of Finding on the same
issue. The Department determined that 90 percent of the MHPs' use was exempt
and 10 percent of its use was taxable. This Letter of Findings will follow the
same reasoning.
In 2006, the Taxpayer conceded that the MHPs are not used in
an exempt manner after they move the modular home out of the production process
and ship it to the final construction site. The Department calculated the
percentage of time the MHPs were used in an exempt capacity. The Department
used Taxpayer's documentation showing that the MHPs are used for transporting
the modular homes after production for one day out of the total ten days.
Therefore, ten percent of the use is taxable and 90 percent is exempt.
Taxpayer's manufacturing process has not changed since 2006,
so the Department will apply the same percentages to the MHPs at issue in this
case. In conclusion, the Department will recalculate the amount of use tax due
for the years 2008-2010, reflecting the 90 percent exempt rate for the MHPs.
