Taxpayer is an individual. A company owned by Taxpayer, hereinafter referred to as "Company M," owned a vehicle. Taxpayer's spouse also works at Company M. The title of the vehicle was transferred by Company M to Taxpayer in 2012. The Department issued a proposed assessment for "Consumer Use" tax, as well as penalty and interest, on the transfer of title of the vehicle.
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In a letter to Taxpayer the Department stated:
A review of the title transactions and sales tax collected by the Indiana Bureau of Motor Vehicles (BMV) on the date []/2012 discloses that you obtained a vehicle with a zero selling price from [Company M].
Our documentation has your spouse identified as a related party to [Company M]. This makes this transaction not arms length and the price reported to the BMV a misrepresentation of the value involved. This vehicle title transfer should have been transacted and reported at fair market value. A corporation stands as a separate entity from any owner, officer or employee.
Taxpayer's protest letter states in its entirety:
I wish to protest this assessment. This was not a sale. The vehicle was owned by [Company M]. [Company M] is a corporation for a [] business which had two employees. One of which was my husband. It now has no employees. The corporation has not been dissolved but is doing very little. I own all the shares of stock in the corporation. This is simply a matter of transferring ownership from a corporation that I own to me as an individual.
As the Department's letter noted, Company M is a separate entity from its owner. And that relationship, between company and company's owner, does not qualify under IC § 6-2.5-5-15.5 for exemption from tax:
A transaction involving a motor vehicle is exempt from the state gross retail tax, if:
(1) the transaction consists of changing the motor vehicle title to add or delete an individual; and
(2) the individual being added or deleted is the spouse, child, grandparent, parent, or sibling of an owner.
For purposes of the state gross retail tax and use tax, transactions representing isolated or occasional sales of vehicles required to be licensed by the state for highway use in Indiana shall constitute retail transactions under the provisions of this section. Every sale by a resident or nonresident person who is not a retail merchant as defined in this act of a vehicle required to be licensed by the state for highway use in Indiana shall be deemed a retail transaction and the use of such vehicle shall be subject to the use tax which shall be paid by the purchaser to the Bureau of Motor Vehicles at the time of the licensing of the vehicle by the purchaser. (Emphasis added).
In the case at hand, Company M transferred ownership to Taxpayer. The transaction is deemed a retail transaction, per 45 IAC 2.2-3-5 (a). Taxpayer does not qualify for an exemption under IC § 6-2.5-5-15.5. Thus Taxpayer owes use tax on the vehicle, as calculated per IC § 6-2.5-3-6(e). Finally, the Department notes that penalty and interest were also assessed, but Taxpayer did not protest those issues. Thus they are not addressed in this finding.
