High court tackles use-tax issue

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The Supreme Court today ruled that a contribution by a parent corporation to the capital of its subsidiary is not automatically excluded from Indiana use tax.

At issue in Indiana Department of State Revenue v. Belterra Resort Indiana, LLC, No. 49S10-1010-TA-519, was whether the transfer of the riverboat from the parent company to its subsidiary corporation was a retail transaction under Indiana Code section 6-2.5-3-2(a).

Belterra Resort Indiana LLC is a Nevada corporation that owns and operates a hotel and riverboat casino in Switzerland County, Indiana. Pinnacle Entertainment Inc., a Delaware corporation, is Belterra’s parent company. Pinnacle contracted with Alabama Shipyard Inc. of Mobile, Ala., to purchase and construct the Miss Belterra riverboat in September 1999 at the cost of $34,689,719. Alabama Shipyard conveyed title and possession of the completed riverboat to Pinnacle in July 2000. Pinnacle paid no Alabama sales tax on this transaction. The following day, Pinnacle transferred title and possession of the riverboat to Belterra while in international waters off the Gulf of Mexico. The riverboat then headed to Indiana.

The Indiana Department of Revenue conducted a tax audit of Belterra in 2002 and issued a use-tax assessment against Belterra for $1,869,783 plus penalty and interest because of the  riverboat acquisition. Belterra protested the assessment, and after a hearing the department denied Belterra’s protest. Belterra filed an appeal with the Indiana Tax Court and the parties filed cross-motions for summary judgment.

The Tax Court granted Belterra’s motion for summary judgment and denied the state department’s motion. Belterra Resort Ind., LLC v. Ind. Dep’t of State Revenue, 900 N.E.2d 513, 517 (Ind. Tax Ct. 2009). The Tax Court ruled that Belterra was not subject to use tax on the riverboat acquisition because it was a contribution to capital and not the result of a retail transaction.

The high court noted the use tax is complementary to the sales tax because it ensures non-exempt transactions that have escaped sales tax liability are nonetheless taxed. Indiana’s use tax is primarily designed to reach out-of-state sales of tangible personal property that is subsequently used in Indiana, wrote Justice Robert Rucker for the majority, with which Chief Justice Randall Shepard and Justice Frank Sullivan concurred. Justice Theodore Boehm dissented in a separate opinion, with which Justice Brent Dickson concurred.

Belterra argued it is not subject to Indiana’s use tax because the riverboat was not acquired in a retail transaction because no consideration was given in exchange for the riverboat. Belterra also argued the transfer of the riverboat was made as a capital contribution with no consideration given.

The issue in this case is whether the transfer of the riverboat from Pinnacle to Belterra was done without either side receiving consideration. In an affidavit submitted in support of its motion for summary judgment Belterra declares as much, but whether consideration exists is a question of law for the court.

“… as we have discussed, the concept of consideration encompasses any benefit – however slight – accruing to the promisor or any detriment – however slight – borne by the promissee. We accept as true that Belterra paid no money to Pinnacle in acquiring the riverboat. But this does not resolve the question of whether the exchange lacked consideration. Was there any other benefit inuring to Pinnacle? Was there some detriment borne by Belterra?” wrote Justice Rucker.

The court used the step transaction doctrine to help analyze this issue, noting two separate tests have evolved within this doctrine: the end results test and the interdependence test.

The court applied the step doctrine to “collapse Pinnacle’s and Belterra’s various transactions, we thus treat the acquisition of Miss Belterra from the manufacturer as a retail transaction subject to Indiana use tax. I.C. § 6-2.5-3-2(a). As such, the purchase price paid to the manufacturer by Pinnacle constitutes the consideration required by the statute. I.C. § 6-2.5-4-1(a), (b).”

In his dissent, Justice Boehm noted that the majority adopted a definition of contribution to capital that incorrectly assumes a contribution to capital is for no consideration, and that the majority also uses contract law notions of consideration to conclude that Belterra’s transfer of the riverboat to its subsidiary was not a contribution to capital.



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  1. I think the cops are doing a great job locking up criminals. The Murder rates in the inner cities are skyrocketing and you think that too any people are being incarcerated. Maybe we need to lock up more of them. We have the ACLU, BLM, NAACP, Civil right Division of the DOJ, the innocent Project etc. We have court system with an appeal process that can go on for years, with attorneys supplied by the government. I'm confused as to how that translates into the idea that the defendants are not being represented properly. Maybe the attorneys need to do more Pro-Bono work

  2. We do not have 10% of our population (which would mean about 32 million) incarcerated. It's closer to 2%.

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  4. There's probably a lot of blame that can be cast around for Indiana Tech's abysmal bar passage rate this last February. The folks who decided that Indiana, a state with roughly 16,000 to 18,000 attorneys, needs a fifth law school need to question the motives that drove their support of this project. Others, who have been "strong supporters" of the law school, should likewise ask themselves why they believe this institution should be supported. Is it because it fills some real need in the state? Or is it, instead, nothing more than a resume builder for those who teach there part-time? And others who make excuses for the students' poor performance, especially those who offer nothing more than conspiracy theories to back up their claims--who are they helping? What evidence do they have to support their posturing? Ultimately, though, like most everything in life, whether one succeeds or fails is entirely within one's own hands. At least one student from Indiana Tech proved this when he/she took and passed the February bar. A second Indiana Tech student proved this when they took the bar in another state and passed. As for the remaining 9 who took the bar and didn't pass (apparently, one of the students successfully appealed his/her original score), it's now up to them (and nobody else) to ensure that they pass on their second attempt. These folks should feel no shame; many currently successful practicing attorneys failed the bar exam on their first try. These same attorneys picked themselves up, dusted themselves off, and got back to the rigorous study needed to ensure they would pass on their second go 'round. This is what the Indiana Tech students who didn't pass the first time need to do. Of course, none of this answers such questions as whether Indiana Tech should be accredited by the ABA, whether the school should keep its doors open, or, most importantly, whether it should have even opened its doors in the first place. Those who promoted the idea of a fifth law school in Indiana need to do a lot of soul-searching regarding their decisions. These same people should never be allowed, again, to have a say about the future of legal education in this state or anywhere else. Indiana already has four law schools. That's probably one more than it really needs. But it's more than enough.

  5. This man Steve Hubbard goes on any online post or forum he can find and tries to push his company. He said court reporters would be obsolete a few years ago, yet here we are. How does he have time to search out every single post about court reporters and even spy in private court reporting forums if his company is so successful???? Dude, get a life. And back to what this post was about, I agree that some national firms cause a huge problem.