Taxpayer is a farmer. Taxpayer raises calves on his farm. As the result of an investigation, the Indiana Department of Revenue ("Department") issued proposed assessments for use tax on the purchase of two tractors purchased, a "Massey Ferguson 20" purchased in the tax year 2008 and a "Ford 861" purchased in the tax year 2009 (the "Tractors").
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Taxpayer protests the imposition of use tax on the purchase of the tractors.
… Taxpayer argues that the Tractors were used for farm related activities, inter alia, spreading fertilizer, reseeding pasture, hauling tools and equipment, and to pull a bush hog. Therefore, because the Tractors are used for farm related activities, Taxpayer maintains that the Tractors should be equally exempt from sales and use tax.
The reseeding and fertilizing of the ground for pasture and most of the other farm related activities which taxpayer relates, though important, do not meet the double direct test required by Indiana law. Because the Tractors in question were not directly used in the direct production, extraction, harvest, or processing of an agricultural commodity, in all the uses described by the taxpayer, their purchase and use were only partially exempt from Indiana sales and use tax.
However, the Tractors in question were also used for reasons other than for the purposes mentioned above. The Department has found that one of the stated reasons for the utilization of the Tractors is exempt for sales and use tax. Under IC § 6-2.5-5-2, exempt uses for which the taxpayer used the Tractors include hauling feed to livestock to be sold. To the extent that the Tractors were used for this exempt purpose, the sales and use tax should be reduced on a prorated basis. Based on the Form AGQ-100 filed by Taxpayer, there was some exempt use of the Tractors and the partial exemption was granted accordingly.
However, Taxpayer failed to provide information on how often the Tractors were used for this purpose. Taxpayer will need to provide the Department information showing how many days that the Tractors were used for this purpose in order to calculate the exemption rate for the Tractors based on the information supplied by Taxpayer. Taxpayer must provide this information within thirty (30) days of this Letter of Findings.
Additionally, Taxpayer also makes the point that one of the Tractors was purchased over four years ago. Because Taxpayer is not a registered retail merchant, Taxpayer would have been required to report use tax on the 2008 transaction on his individual IT-40 income tax returns due on April 15, 2009. IC § 6-8.1-5-2(a) provides that:
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.
This allows the Department to make an assessment three years from the date of the IT-40, as opposed to the three years from the date of the 2008 purchase.
