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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. Video pen? Nice work, "JW"! Let this be a lesson and a caution to all disgruntled ex-spouses (or soon-to-be ex-spouses) . . . you may think that altercation is going to get you some satisfaction . . . it will not.

  2. First comment on this thread is a fitting final comment on this thread, as that the MCBA never answered Duncan's fine question, and now even Eric Holder agrees that the MCBA was in material error as to the facts: "I don't get it" from Duncan December 1, 2014 5:10 PM "The Grand Jury met for 25 days and heard 70 hours of testimony according to this article and they made a decision that no crime occurred. On what basis does the MCBA conclude that their decision was "unjust"? What special knowledge or evidence does the MCBA have that the Grand Jury hearing this matter was unaware of? The system that we as lawyers are sworn to uphold made a decision that there was insufficient proof that officer committed a crime. How can any of us say we know better what was right than the jury that actually heard all of the the evidence in this case."

  3. wow is this a bunch of bs! i know the facts!

  4. MCBA .... time for a new release about your entire membership (or is it just the alter ego) being "saddened and disappointed" in the failure to lynch a police officer protecting himself in the line of duty. But this time against Eric Holder and the Federal Bureau of Investigation: "WASHINGTON — Justice Department lawyers will recommend that no civil rights charges be brought against the police officer who fatally shot an unarmed teenager in Ferguson, Mo., after an F.B.I. investigation found no evidence to support charges, law enforcement officials said Wednesday." http://www.nytimes.com/2015/01/22/us/justice-department-ferguson-civil-rights-darren-wilson.html?ref=us&_r=0

  5. Dr wail asfour lives 3 hours from the hospital,where if he gets an emergency at least he needs three hours,while even if he is on call he should be in a location where it gives him max 10 minutes to be beside the patient,they get paid double on their on call days ,where look how they handle it,so if the death of the patient occurs on weekend and these doctors still repeat same pattern such issue should be raised,they should be closer to the patient.on other hand if all the death occured on the absence of the Dr and the nurses handle it,the nurses should get trained how to function appearntly they not that good,if the Dr lives 3 hours far from the hospital on his call days he should sleep in the hospital

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