Saturday, September 14, 2013

Revenue Rejects Argument that Horse Purchased in Claiming Race was not Worth Purchase Price and Should be Taxed on Lower Value

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").
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 was assessed tax relating to four transactions. One of the horses, referred to here for convenience as "horse J," was purchased twice by Taxpayer. In his protest letter, Taxpayer focuses his argument on horse J:
[T]he filly named [horse J] was claimed by me on August 6, 2010 for $7,500.00 and again I claimed her, less than a month later, for $10,000.00. I contend that after paying sales tax on the first $7,500.00 I should only owe on the difference between the $7,500.00 and the $10,000.00. The total tax paid on the horse then would be on the larger amount of the $10,000.00.
Taxpayer's argument on this issue is denied. As IC § 6-2.5-2-1 and IC § 6-2.5-3-2 make clear, sales and use taxes are based on transactions. Taxpayer purchased horse J twice, in two separate acquisitions, therefore tax is owed for each transaction.
Taxpayer also stated at the hearing that the worth of a race horse is actually less than the claiming price, and that Taxpayer should be taxed on that lower price. Taxpayer has not presented a sufficiently developed argument for the Department to address. See Wendt LLP v. Indiana Dept. of State Revenue, 977 N.E.2d 480, 485 n.9, (Ind. Tax Ct. 2012) (stating in a footnote parenthetical "that poorly developed and non-cogent arguments are subject to waiver" by the Indiana Tax Court) (citing Scopelite v. Indiana Dep't of Local Gov't Fin., 939 N.E.2d 1138, 1145 (Ind. Tax. Ct. 2010)).
Finally, the Department notes that Taxpayer also cited to IC § 6-2.5-14 in the protest. That statute, which becomes effective on July 1, 2013, 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.