The Department found that Taxpayer purchased horses at Indiana racetracks by means of claiming transactions. 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 amounts paid by Taxpayer for the horses. (See also 71 IAC 6.5-1-1 ; 71 IAC 6.5-1-2 ; and 71 IAC 6.5-1-4 for further references to "claiming").
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The purchase of a horse is subject to Indiana's sales/use tax, since horses are tangible personal property. IC § 6-2.5-1-27. An exemption from use tax is granted for transactions where the sales tax was paid at the time of purchase pursuant to IC § 6-2.5-3-4. The Department found that Taxpayer had acquired the horses at issue without paying sales tax at the time they were claimed, and assessed use tax on the transactions.
Taxpayer does not, in this protest, contest the taxability of the acquisition of horses in claiming transactions. Taxpayer, however, does argue that at the time of the purchases that she was "never informed of any such tax by the race track or it's [ sic] agent," and that she was not given any "paperwork stating the State of Indiana was going to assess any Consumer Use tax on the claimed horses."
Regarding the issue of not being informed of the taxability of the horses, 45 IAC 15-11-2 (b) provides insight into the issue (although it should be noted, Taxpayer was not assessed a penalty). 45 IAC 15-11-2 (b) states, "Ignorance of the listed tax laws, rules and/or regulations is treated as negligence." Thus 45 IAC 15-11-2 (b) stands for the fact that Taxpayers are supposed to be aware of the applicable tax laws. Even if a taxpayer was not charged sales tax in years past for claimed horses, a taxpayer should have self-assessed use tax because the horses are tangible personal property purchased in Indiana.
The Department does note that effective July 1, 2013, Indiana will have a statute (IC § 6-2.5-14) that will create an amnesty program for unpaid use tax on claimed horses. As provided by that statute, taxpayers that are eligible for the amnesty program will still have to remit the use taxes that are owed on claimed horses, but among the provisions of the amnesty statute are the abatement of penalties and interest associated with use taxes owed for claimed horses. Under the amnesty program, taxpayers may also enter into a payment plan regarding the use taxes owed on claimed horses.
