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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. I have been on this program while on parole from 2011-2013. No person should be forced mentally to share private details of their personal life with total strangers. Also giving permission for a mental therapist to report to your parole agent that your not participating in group therapy because you don't have the financial mean to be in the group therapy. I was personally singled out and sent back three times for not having money and also sent back within the six month when you aren't to be sent according to state law. I will work to het this INSOMM's removed from this state. I also had twelve or thirteen parole agents with a fifteen month period. Thanks for your time.

  2. Our nation produces very few jurists of the caliber of Justice DOUGLAS and his peers these days. Here is that great civil libertarian, who recognized government as both a blessing and, when corrupted by ideological interests, a curse: "Once the investigator has only the conscience of government as a guide, the conscience can become ‘ravenous,’ as Cromwell, bent on destroying Thomas More, said in Bolt, A Man For All Seasons (1960), p. 120. The First Amendment mirrors many episodes where men, harried and harassed by government, sought refuge in their conscience, as these lines of Thomas More show: ‘MORE: And when we stand before God, and you are sent to Paradise for doing according to your conscience, *575 and I am damned for not doing according to mine, will you come with me, for fellowship? ‘CRANMER: So those of us whose names are there are damned, Sir Thomas? ‘MORE: I don't know, Your Grace. I have no window to look into another man's conscience. I condemn no one. ‘CRANMER: Then the matter is capable of question? ‘MORE: Certainly. ‘CRANMER: But that you owe obedience to your King is not capable of question. So weigh a doubt against a certainty—and sign. ‘MORE: Some men think the Earth is round, others think it flat; it is a matter capable of question. But if it is flat, will the King's command make it round? And if it is round, will the King's command flatten it? No, I will not sign.’ Id., pp. 132—133. DOUGLAS THEN WROTE: Where government is the Big Brother,11 privacy gives way to surveillance. **909 But our commitment is otherwise. *576 By the First Amendment we have staked our security on freedom to promote a multiplicity of ideas, to associate at will with kindred spirits, and to defy governmental intrusion into these precincts" Gibson v. Florida Legislative Investigation Comm., 372 U.S. 539, 574-76, 83 S. Ct. 889, 908-09, 9 L. Ed. 2d 929 (1963) Mr. Justice DOUGLAS, concurring. I write: Happy Memorial Day to all -- God please bless our fallen who lived and died to preserve constitutional governance in our wonderful series of Republics. And God open the eyes of those government officials who denounce the constitutions of these Republics by arbitrary actions arising out capricious motives.

  3. From back in the day before secularism got a stranglehold on Hoosier jurists comes this great excerpt via Indiana federal court judge Allan Sharp, dedicated to those many Indiana government attorneys (with whom I have dealt) who count the law as a mere tool, an optional tool that is not to be used when political correctness compels a more acceptable result than merely following the path that the law directs: ALLEN SHARP, District Judge. I. In a scene following a visit by Henry VIII to the home of Sir Thomas More, playwriter Robert Bolt puts the following words into the mouths of his characters: Margaret: Father, that man's bad. MORE: There is no law against that. ROPER: There is! God's law! MORE: Then God can arrest him. ROPER: Sophistication upon sophistication! MORE: No, sheer simplicity. The law, Roper, the law. I know what's legal not what's right. And I'll stick to what's legal. ROPER: Then you set man's law above God's! MORE: No, far below; but let me draw your attention to a fact I'm not God. The currents and eddies of right and wrong, which you find such plain sailing, I can't navigate. I'm no voyager. But in the thickets of law, oh, there I'm a forester. I doubt if there's a man alive who could follow me there, thank God... ALICE: (Exasperated, pointing after Rich) While you talk, he's gone! MORE: And go he should, if he was the Devil himself, until he broke the law! ROPER: So now you'd give the Devil benefit of law! MORE: Yes. What would you do? Cut a great road through the law to get after the Devil? ROPER: I'd cut down every law in England to do that! MORE: (Roused and excited) Oh? (Advances on Roper) And when the last law was down, and the Devil turned round on you where would you hide, Roper, the laws being flat? (He leaves *1257 him) This country's planted thick with laws from coast to coast man's laws, not God's and if you cut them down and you're just the man to do it d'you really think you would stand upright in the winds that would blow then? (Quietly) Yes, I'd give the Devil benefit of law, for my own safety's sake. ROPER: I have long suspected this; this is the golden calf; the law's your god. MORE: (Wearily) Oh, Roper, you're a fool, God's my god... (Rather bitterly) But I find him rather too (Very bitterly) subtle... I don't know where he is nor what he wants. ROPER: My God wants service, to the end and unremitting; nothing else! MORE: (Dryly) Are you sure that's God! He sounds like Moloch. But indeed it may be God And whoever hunts for me, Roper, God or Devil, will find me hiding in the thickets of the law! And I'll hide my daughter with me! Not hoist her up the mainmast of your seagoing principles! They put about too nimbly! (Exit More. They all look after him). Pgs. 65-67, A MAN FOR ALL SEASONS A Play in Two Acts, Robert Bolt, Random House, New York, 1960. Linley E. Pearson, Atty. Gen. of Indiana, Indianapolis, for defendants. Childs v. Duckworth, 509 F. Supp. 1254, 1256 (N.D. Ind. 1981) aff'd, 705 F.2d 915 (7th Cir. 1983)

  4. "Meanwhile small- and mid-size firms are getting squeezed and likely will not survive unless they become a boutique firm." I've been a business attorney in small, and now mid-size firm for over 30 years, and for over 30 years legal consultants have been preaching this exact same mantra of impending doom for small and mid-sized firms -- verbatim. This claim apparently helps them gin up merger opportunities from smaller firms who become convinced that they need to become larger overnight. The claim that large corporations are interested in cost-saving and efficiency has likewise been preached for decades, and is likewise bunk. If large corporations had any real interest in saving money they wouldn't use large law firms whose rates are substantially higher than those of high-quality mid-sized firms.

  5. The family is the foundation of all human government. That is the Grand Design. Modern governments throw off this Design and make bureaucratic war against the family, as does Hollywood and cultural elitists such as third wave feminists. Since WWII we have been on a ship of fools that way, with both the elite and government and their social engineering hacks relentlessly attacking the very foundation of social order. And their success? See it in the streets of Fergusson, on the food stamp doles (mostly broken families)and in the above article. Reject the Grand Design for true social function, enter the Glorious State to manage social dysfunction. Our Brave New World will be a prison camp, and we will welcome it as the only way to manage given the anarchy without it.

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