The Indiana Department of Revenue ("Department") determined that Taxpayer had not paid sales tax on a horse that he acquired in a transaction that occurred in Indiana. Given that Taxpayer had not paid sales tax, the Department issued a proposed assessment for use tax (and interest).
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The Department found that Taxpayer purchased a horse in Indiana by means of "claiming transactions." Regarding "claiming" and horse racing, 71 IAC 6.5-1-1 , states in part:
(a) A person entering a horse in a claiming race warrants that the title to the horse is free and clear of any existing claim or lien, either as security interest mortgage, bill of sale, or lien of any kind; unless before entering the horse, the written consent of the holder of the claim or lien has been filed with the stewards and the racing secretary and its entry approved by the stewards. A transfer of ownership arising from a recognized claiming race will terminate any existing prior lease for the horse.
(b) Title to a claimed horse shall be vested in the successful claimant at the time the horse leaves the starting gate and is declared an official starter. The successful claimant shall then become the owner of the horse whether it be alive or dead, sound or unsound, or injured at any time, during the race or after. However, the successful claimant may request on the claim blank at the time the successful claimant makes the claim that the horse be tested for the presence of equine infectious anemia via a Coggins test, or other test as approved by the official veterinarian. Should this test prove positive, it shall be cause for voiding the claim. The expense of the test and the maintenance of the horse during the period requested for the test shall be the responsibility of the successful claimant, unless the test proves positive, wherein the owner or owners of the horse at the time of entry shall be responsible.
(Emphasis added).
(a) Any horse starting in a claiming race is subject to be claimed for its entered price by any:
(1) licensed owner; or
(2) holder of a valid claim certificate; or
(3) licensed authorized agent acting on behalf of an eligible claimant.
(b) Every horse claimed shall race for the account of the original owner, but title to the horse shall be transferred to the claimant at the time the horse leaves the starting gate. The successful claimant shall become the owner of the horse, regardless of whether it is alive or dead, sound or unsound, or injured prior to, during, or after the race.
For a period of thirty (30) days after a claim, a horse shall not start in a race in which the determining eligibility price is less than the price at which it was claimed. The day claimed shall not count for purposes of counting the applicable thirty (30) day period, and for this purpose the immediate following calendar day after the day claimed shall be the first day. The horse shall be entitled to enter whenever necessary so that the horse may start on the thirty-first calendar day following the claim for any claiming price.
(Emphasis added).
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 a horse that was raced in a claiming race. The Department assessed tax based upon the claiming amount paid by Taxpayer for the horse.
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Taxpayer argued that he thought that sales tax was paid at the time of purchase; however, Taxpayer has not provided documentation to that effect. Further, Taxpayer states that it was the racetrack's responsibility to collect and remit sales tax on the race horse purchase. However, the fact that the Department did not pursue the racetrack or another entity does not change Taxpayer's responsibility to self-assess the appropriate amount of use tax when sales tax is not charged on a transaction.
In conclusion, Taxpayer purchased a race horse at a claiming race; Taxpayer failed to pay sales tax at the time of purchase. Thus use tax was properly assessed by the Department. Taxpayer has not met the burden imposed by IC § 6-8.1-5-1(c).
In conclusion, Taxpayer purchased a race horse at a claiming race; Taxpayer failed to pay sales tax at the time of purchase. Thus use tax was properly assessed by the Department. Taxpayer has not met the burden imposed by IC § 6-8.1-5-1(c).
