By Ted Friedman and Andrew Appleby
The Indiana Department of Revenue determined that an Indiana taxpayer owed use tax on its rental of equipment from a related entity. After concluding the taxpayer was involved in a retail transaction when it rented equipment from a related entity, the Department imposed use tax on the taxpayer’s storage, use or consumption of the equipment in Indiana. The taxpayer asserted an equitable argument, contending that because its related entity paid tax at the time of the related entity’s purchase of the equipment, and the related entity did not request a refund of such tax from the Department, the taxpayer should receive credit for the amounts paid by the related entity against the use tax on the rental transactions. The Department concluded that the taxpayer and its related entity were two separate taxpayers, and whether the related entity was responsible for the tax on its original purchase of equipment or could have filed a refund claim due to an exemption was “irrelevant to and beyond the scope” of the taxpayer’s protest for the rental transactions at issue. Ind. Dep’t of Revenue, Letter of Findings No. 04-20130697 (July 30, 2014).