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."
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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 raises two alternative contentions. First, Taxpayer argues that he is still responsible for the purchase price, even if the horse dies. Therefore, Taxpayer asserts that the horse is intangible personal property.
However, even a dead horse is capable of being "seen, weighed, measured, felt, or touched" and thus is still tangible personal property as defined under IC § 6-2.5-1-27. Therefore, the horse is tangible personal property.
Taxpayer alternatively asserts that the horse is used on his farm for agricultural purposes. However, Taxpayer has not established that the horse was intended to be purchased for the production of food and food ingredients pursuant to IC § 6-2.5-5-1. Further, even if Taxpayer could show that the horse was used for agricultural purposes, Taxpayer has not established any exempt use for the horse.
In conclusion, Taxpayer purchased a race horse at a claiming race; Taxpayer failed to pay sales tax at the time of purchase. Taxpayer has not established that the horse was purchased for an exempt purpose. Thus use tax was properly assessed by the Department. Taxpayer has not met the burden imposed by IC § 6-8.1-5-1(c).
