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. Especially I would like to see all the republican voting patriotic good ole boys to stop and understand that the wars they have been volunteering for all along (especially the past decade at least) have not been for God & Jesus etc no far from it unless you think George Washington's face on the US dollar is god (and we know many do). When I saw the movie about Chris Kyle, I thought wow how many Hoosiers are just like this guy, out there taking orders to do the nasty on the designated bad guys, sometimes bleeding and dying, sometimes just serving and coming home to defend a system that really just views them as reliable cannon fodder. Maybe if the Christians of the red states would stop volunteering for the imperial legions and begin collecting welfare instead of working their butts off, there would be a change in attitude from the haughty professorial overlords that tell us when democracy is allowed and when it isn't. To come home from guarding the borders of the sandbox just to hear if they want the government to protect this country's borders then they are racists and bigots. Well maybe the professorial overlords should gird their own loins for war and fight their own battles in the sandbox. We can see what kind of system this really is from lawsuits like this and we can understand who it really serves. NOT US.... I mean what are all you Hoosiers waving the flag for, the right of the president to start wars of aggression to benefit the Saudis, the right of gay marriage, the right for illegal immigrants to invade our country, and the right of the ACLU to sue over displays of Baby Jesus? The right of the 1 percenters to get richer, the right of zombie banks to use taxpayer money to stay out of bankruptcy? The right of Congress to start a pissing match that could end in WWIII in Ukraine? None of that crud benefits us. We should be like the Amish. You don't have to go far from this farcical lawsuit to find the wise ones, they're in the buggies in the streets not far away....

  2. Moreover, we all know that the well heeled ACLU has a litigation strategy of outspending their adversaries. And, with the help of the legal system well trained in secularism, on top of the genuinely and admittedly secular 1st amendment, they have the strategic high ground. Maybe Christians should begin like the Amish to withdraw their services from the state and the public and become themselves a "people who shall dwell alone" and foster their own kind and let the other individuals and money interests fight it out endlessly in court. I mean, if "the people" don't see how little the state serves their interests, putting Mammon first at nearly every turn, then maybe it is time they wake up and smell the coffee. Maybe all the displays of religiosity by American poohbahs on down the decades have been a mask of piety that concealed their own materialistic inclinations. I know a lot of patriotic Christians don't like that notion but I entertain it more and more all the time.

  3. If I were a judge (and I am not just a humble citizen) I would be inclined to make a finding that there was no real controversy and dismiss them. Do we allow a lawsuit every time someone's feelings are hurt now? It's preposterous. The 1st amendment has become a sword in the hands of those who actually want to suppress religious liberty according to their own backers' conception of how it will serve their own private interests. The state has a duty of impartiality to all citizens to spend its judicial resources wisely and flush these idiotic suits over Nativity Scenes down the toilet where they belong... however as Christians we should welcome them as they are the very sort of persecution that separates the sheep from the wolves.

  4. What about the single mothers trying to protect their children from mentally abusive grandparents who hide who they truly are behind mounds and years of medication and have mentally abused their own children to the point of one being in jail and the other was on drugs. What about trying to keep those children from being subjected to the same abuse they were as a child? I can understand in the instance about the parent losing their right and the grandparent having raised the child previously! But not all circumstances grant this being OKAY! some of us parents are trying to protect our children and yes it is our God given right to make those decisions for our children as adults!! This is not just black and white and I will fight every ounce of this to get denied

  5. Mr Smith the theory of Christian persecution in Indiana has been run by the Indiana Supreme Court and soundly rejected there is no such thing according to those who rule over us. it is a thought crime to think otherwise.