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 airplane is hangared in Indiana at least part of the time.
Pursuant to an audit investigation, the Indiana Department of Revenue ("Department") determined that Taxpayer failed to properly register its aircraft as required by the Indiana law and failed to pay the aircraft license excise tax. The Department's audit investigation also determined that Taxpayer did not pay sales tax at the time of its purchase of the aircraft or self-assess and remit the use tax accordingly. As a result, the Department assessed Taxpayer the aircraft license excise tax, use tax, interest, and penalty.
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In its request for rehearing Taxpayer pointed to its disagreement with the base tax assessment as justification for its request to abate the penalty.
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Reasonable cause is a fact sensitive question and thus will be dealt with according to the particular facts and circumstances of each case.
Taxpayer's rationale for requesting abatement of the penalty – its disagreement with the base assessment – is interpreted to mean that Taxpayer is arguing it followed the guidance of professionals in setting up the Montana LLC and therefore had "reasonable cause" to presume its arrangement comported with the requirements of the law. As the LOF explained, Taxpayer was entirely misguided in this presumption; however, Taxpayer has shown sufficient basis for a one-time abatement of the late payment negligence penalty.
