SALT Report 1785 – The Indiana Department of Revenue issued a letter ruling regarding a use tax assessment against a petroleum products distributor. During an audit, the Department found that the Taxpayer made several purchases of tangible personal property, including semi-trailers, truck parts and motor fuel, without paying sales tax or remitting use tax to the Department. The Department assessed use tax for 2008, 2009, and 2010.
The Taxpayer protested the amount assessed on the purchase price of two semi-trailers claiming that they qualified for the public transportation exemption from use tax as provided in IC § 6-2.5-5-27 and 45 IAC 2.2-5-61.
IC § 6-2.5-5-27 states that, “Transactions involving tangible personal property and services are exempt from the state gross retail tax, if the person acquiring the property or service directly uses or consumes it in providing public transportation for persons or property,” and
45 IAC 2.2-5-61 states that, “The state gross retail tax shall not apply to the sale and storage or use in this state of tangible personal property which is directly used in the rendering of public transportation of persons or property.”
The Taxpayer claims that the semi-trailers were predominantly used to transport fuel it did not own to customers that purchased the fuel directly from the wholesaler. The Taxpayer charged its customers a delivery fee based on the weight of the fuel and the number of miles driven and maintained records detailing the mileage. The records showed that more than 60% of the mileage resulted from transporting property it did not own.
Based on the facts presented, the Department determined that the two semi-trailers qualified for the public transportation exemption because they were used more than 50% of the time to transport property that was owned by another person. Therefore, the Department dismissed the use tax assessment.
For Further Information: