Indiana – Equipment and Salt Used for Ice Removal Was Taxable

SALT Report 1898 – The Indiana Department of Revenue determined that a Taxpayer who is in the construction industry owed sales and use tax on its purchases of a front loader, bull dozer, several forklifts, snow plow, salt, and a utility vehicle. During an audit it was determined that the Taxpayer had purchased these items without paying sales tax at the time of purchase and because of this the Department assessed use tax on those purchases. The Taxpayer appealed the assessment.

In its protest, the Taxpayer claimed that it had purchased the front loader, dozer, and forklifts in order to rent the equipment to its customers and to provide snow removal services.

Indiana law, 45 IAC 2.2-5-15 clarifies the purchase for rental exemption as follows:

Sales of tangible personal property for resale, rental or leasing are exempt from the tax if all of the following conditions are satisfied:

  • The tangible personal property is sold to a purchaser, who purchases this property to resell, rent or lease it,
  • The purchaser is occupationally engaged in reselling, renting or leasing such property in the regular course of his business, and
  • The property is resold, rented or leased in the same form in which it was purchased

In their ruling the Department noted that the Taxpayer’s primary occupation was construction not equipment rental.  This determination was supported by the fact that the Taxpayer was unable to provide any evidence proved he was in the business of renting front loaders, dozers, and forklifts. Therefore, since the Taxpayer was not generally engaged in renting tangible personal property, the Taxpayer’s purchase of the front loader, dozer, and forklifts did not qualify for the exemption from sales and use taxes.

In regards to the Taxpayer’s argument that certain equipment was used to provide snow removal services, the Department determined that the salt that was used to remove snow was subject to sales tax because the Taxpayer transferred the salt to its customers for a fee.  The Department noted that the transfer of salt took place when the Taxpayer applied it to the ground.

For Further Information:

Indiana Department of Revenue – Letter of Findings No. 04-201200316