Taxpayer is a non-resident individual. The Indiana Department of Revenue ("Department") found that Taxpayer purchased a horse in Indiana by means of a "claiming transaction." The Department assessed use tax on the purchase price of the horse.
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The Department found that Taxpayer purchased a horse in Indiana by means of a "claiming transaction" and proposed an assessment of use tax on the purchase price of the horse. Taxpayer protests the assessment of use tax. All tax assessments are prima facie evidence that the Department's claim for the tax is valid, and the taxpayer bears the burden of proving that any assessment is incorrect. IC § 6-8.1-5-1(c); Indiana Dep't of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463, 466 (Ind. 2012); Lafayette Square Amoco, Inc. v. Indiana Dep't of State Revenue, 867 N.E.2d 289, 292 (Ind. Tax Ct. 2007). The issue before the Department is whether Taxpayer met his burden to prove the Department's assessment is incorrect.
To determine whether Taxpayer has met his burden, the Department will examine (1) whether the purchase of a horse in a "claiming transaction" is a transaction subject to sales or use tax, (2) if so, if a "claiming transaction" is exempt from sales and use tax, and (3) who is responsible for paying the sales or use tax resulting from a "claiming transaction" if any is due.
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A "claiming transaction" is subject to the Indiana sales and use taxes in that it is a retail transaction involving tangible personal property. In this case, Taxpayer's purchase of a horse by means of a "claiming transaction" is subject to use tax in that it was a retail transaction involving tangible personal property which was used in Indiana.
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In order to be exempt from sales or use tax, the purchase of a harness horse, or other similar animal, must be for use "directly in direct agricultural production" or by a purchaser who is a "registered retail merchant and is buying such animal for resale in the regular course of his business." 45 IAC 2.2-5-5 . Taxpayer provided no evidence that the purchase of the horse in the "claiming transaction" was for agricultural production. In fact, Taxpayer mentioned that he had raced the horse after the "claiming transaction" at issue. Therefore, the Department cannot find that the Taxpayer's purchase of the horse in the "claiming transaction" at issue is exempt from use tax.
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Taxpayer argues that it was the racetrack's responsibility to collect any sales tax that might have been due on the "claiming transaction." Therefore, the final issue is identifying who is responsible for the sales and use tax in a "claiming transaction."
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While a retail merchant may have a duty to collect the sales tax due on a retail transaction, its failure to do so does not relieve the person who "acquires property in a retail transaction" or who "uses, stores, or consumes the tangible personal property acquired in a retail transaction" from personal liability for the tax due. IC § 6-2.5-2-1(b); IC § 6-2.5-3-6(b). Therefore, in this case, even if the racetrack had a duty to collect sales tax on the "claiming transaction," Taxpayer remains personally liable for the tax due.
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Taxpayer's purchase of a horse by means of a "claiming transaction" is a retail transaction involving tangible personal property subject to sales and use tax. Taxpayer's purchase of the horse is subject to use tax as Taxpayer used the horse in Indiana. Taxpayer did not provide evidence that the purchase of the horse in a "claiming transaction" was exempt from use tax. Finally, Taxpayer has not shown that sales tax was collected or paid at the point of purchase, so Taxpayer remains personally liable for the unpaid use tax. Taxpayer has not met his burden to show that the Department's proposed assessment is incorrect. Taxpayer's protest of the use tax assessed on the purchase of a horse in a "claiming transaction" is respectfully denied.
