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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. Have been seeing this wonderful physician for a few years and was one of his patients who told him about what we were being told at CVS. Multiple ones. This was a witch hunt and they shold be ashamed of how patients were treated. Most of all, CVS should be ashamed for what they put this physician through. So thankful he fought back. His office is no "pill mill'. He does drug testing multiple times a year and sees patients a minimum of four times a year.

  2. Brian W, I fear I have not been sufficiently entertaining to bring you back. Here is a real laugh track that just might do it. When one is grabbed by the scruff of his worldview and made to choose between his Confession and his profession ... it is a not a hard choice, given the Confession affects eternity. But then comes the hardship in this world. Imagine how often I hear taunts like yours ... "what, you could not even pass character and fitness after they let you sit and pass their bar exam ... dude, there must really be something wrong with you!" Even one of the Bishop's foremost courtiers said that, when explaining why the RCC refused to stand with me. You want entertaining? How about watching your personal economy crash while you have a wife and five kids to clothe and feed. And you can't because you cannot work, because those demanding you cast off your Confession to be allowed into "their" profession have all the control. And you know that they are wrong, dead wrong, and that even the professional code itself allows your Faithful stand, to wit: "A lawyer may refuse to comply with an obligation imposed by law upon a good faith belief that no valid obligation exists. The provisions of Rule 1.2(d) concerning a good faith challenge to the validity, scope, meaning or application of the law apply to challenges of legal regulation of the practice of law." YET YOU ARE A NONPERSON before the BLE, and will not be heard on your rights or their duties to the law -- you are under tyranny, not law. And so they win in this world, you lose, and you lose even your belief in the rule of law, and demoralization joins poverty, and very troubling thoughts impeaching self worth rush in to fill the void where your career once lived. Thoughts you did not think possible. You find yourself a failure ... in your profession, in your support of your family, in the mirror. And there is little to keep hope alive, because tyranny rules so firmly and none, not the church, not the NGO's, none truly give a damn. Not even a new court, who pay such lip service to justice and ancient role models. You want entertainment? Well if you are on the side of the courtiers running the system that has crushed me, as I suspect you are, then Orwell must be a real riot: "There will be no curiosity, no enjoyment of the process of life. All competing pleasures will be destroyed. But always — do not forget this, Winston — always there will be the intoxication of power, constantly increasing and constantly growing subtler. Always, at every moment, there will be the thrill of victory, the sensation of trampling on an enemy who is helpless. If you want a picture of the future, imagine a boot stamping on a human face — forever." I never thought they would win, I always thought that at the end of the day the rule of law would prevail. Yes, the rule of man's law. Instead power prevailed, so many rules broken by the system to break me. It took years, but, finally, the end that Dr Bowman predicted is upon me, the end that she advised the BLE to take to break me. Ironically, that is the one thing in her far left of center report that the BLE (after stamping, in red ink, on Jan 22) is uninterested in, as that the BLE and ADA office that used the federal statute as a sword now refuses to even dialogue on her dire prediction as to my fate. "C'est la vie" Entertaining enough for you, status quo defender?

  3. Low energy. Next!

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  5. OK, take notice. Those wondering just how corrupt the Indiana system is can see the picture in this post. Attorney Donald James did not criticize any judges, he merely, it would seem, caused some clients to file against him and then ignored his own defense. James thus disrespected the system via ignoring all and was also ordered to reimburse the commission $525.88 for the costs of prosecuting the first case against him. Yes, nearly $526 for all the costs, the state having proved it all. Ouch, right? Now consider whistleblower and constitutionalist and citizen journalist Paul Ogden who criticized a judge, defended himself in such a professional fashion as to have half the case against him thrown out by the ISC and was then handed a career ending $10,000 bill as "half the costs" of the state crucifying him. http://www.theindianalawyer.com/ogden-quitting-law-citing-high-disciplinary-fine/PARAMS/article/35323 THE TAKEAWAY MESSAGE for any who have ears to hear ... resist Star Chamber and pay with your career ... welcome to the Indiana system of (cough) justice.

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