Taxpayer purchased an airplane from a Nevada dealership. No
sales tax was paid to Nevada at the time of the transaction. Taxpayer arranged
for a Montana attorney to establish a Montana LLC to hold title to the
airplane. The only members of the LLC are two individuals, a husband and wife,
who reside in Indiana.
...
The Department assessed use tax on the purchase of the
airplane. The Department imposed use tax after determining that no sales tax
had been paid on the purchase of the airplane.
Taxpayer disagrees stating that the "Proposed
Assessment has been issued for an Aircraft that was purchased by a Montana LLC
in the State of Nevada" which is therefore not subject to either Indiana
sales or use tax. Taxpayer protests that the airplane was titled by a Montana
LLC and that all legal documents establishing the existence of the LLC were
properly filed in Montana. Taxpayer additionally maintains that the Montana LLC
had a legitimate purpose and that Taxpayer used the airplane for purposes
related to the LLC's purpose which is "the business of investing in real
and personal property in Montana and in any other lawful business. . .."
Taxpayer maintains that the airplane is used mostly outside Indiana and was in
Indiana only during the time one of Taxpayer's members was getting his pilot
license.
...
Taxpayer sets out putative reasons for titling an airplane
in Montana and provides all the requisite documentation. Taxpayer also points
out that Montana does not require a "business purpose to create or
organize a Limited Liability Company."
The Department does not contest that the LLC may have been
formed for a purpose other than avoiding the tax. However, in determining that
Taxpayer was entitled to rely on the representations of the Montana attorney to
the extent that Taxpayer did not knowingly commit fraud, the Department also
reasonably notes the attorney's own representations on his web page to:
"Register your vehicle in Montana. Avoid sales tax and licensing
fees." Also, the Department points out that Taxpayer's Montana
registration of the aircraft also designates the "Use" of the
aircraft with a "P" which means "private."
By Taxpayer's own admission, the aircraft was stored in
Dayton, Ohio for a few months after it was purchased in November 2011, and then
it was transferred to a hangar in Indiana. Taxpayer provided hangaring invoices
from both Indiana and other states. Taxpayer has not shown that the aircraft is
used exclusively outside of Indiana. Taxpayer's members are Indiana residents
and that the aircraft is hangared in Indiana at least part of the time.
The Department is unable to agree that Taxpayer has met its
burden under IC § 6-8.1-5-1(c) of demonstrating that the aircraft is not used
or stored in Indiana and that the Department erred in requiring an Indiana
resident from paying use tax on an airplane purchased outside the state.
Unfortunately, the Department is unable to accept the
proposition that Indiana residents may avoid paying sales and use tax on
tangible personal property simply by titling that property outside the state.
In this particular case, the Department is unable to agree that either the law,
the facts presented by Taxpayer, or simple common sense compel the conclusion
that Taxpayer should not be responsible for paying use tax on this airplane.
The Department has consistently determined as such. See Letter of Findings
04-20100111 (March 29, 2010) 20100526 Ind. Reg. 045100324NRA; Letter of
Findings 04-20100299 (July 28, 2010) 20100929 Ind. Reg. 045100591NRA; Letter of
Findings 04-20100175 (August 23, 2010) 20101027 Ind. Reg. 045100650NRA.
