A northern Indiana RV company did not improperly fail to collect and remit sales tax for its out-of-state customers by physically delivering RVs to those customers in Michigan, the Indiana Tax Court ruled Wednesday, finding such sales are not considered to be made in Indiana as matter of law.
In Richardson’s RV Inc. v. Indiana Department of State Revenue, 49T10-1504-TA-16, Middlebury-based Richardson’s RV Inc. operated both an RV dealership and a website that allowed out-of-state customers to shop for RVs. If a sale was made online, Richardson’s would require the customer to sign a purchase agreement and send back a deposit, then come to the Indiana dealership to complete the sale, including to sign title documents.
When finalizing sales with customers from states that did not have a reciprocal agreement with Indiana, Richardson’s allowed the customers to decide whether they preferred to pay Indiana’s sales tax or their home state’s sales/use tax. If a customer chose a home-state sales tax, the RV was transferred to them at a location in Michigan, a state without a reciprocal agreement with Indiana.
After a 2014 Indiana Department of State Revenue sales tax audit, the department determined that for the 2010, 2011 and 2012 tax years, Richardson’s should have collected and remitted a sales tax on 139 sales to non-reciprocal customers. The department issued proposed assessments, which Richardson’s protested but the department denied.
Richardson’s then filed the instant appeal and moved for summary judgment. The department, however, argued the sales should be considered to have been made in Indiana because title was delivered in Indiana, and title passes upon delivery.
In the midst of summary judgment proceedings, Richardson’s moved to strike certain evidence designated by the department in response to the motion for summary judgment. In a related Wednesday opinion under the same cause number, Indiana Tax Court Judge Marth Blood Wentworth declined to strike the deposition of Kyle Richardson, who began working for Richardson’s in 2013 but who testified from his personal knowledge of Richardson’s business practices as they related back to the tax years at issue. Such testimony is relevant, Wentworth wrote, because it tended to make the facts of Richardson’s business practices more or less probable.
However, the judge did strike written statements from three of Richardson’s customers that were not attested to under the penalties for perjury, and the affidavit of tax audit supervisor David Strom. Strom’s affidavit indicated that the department had received 13 responses to letters it sent to Richardson’s out-of-state customers asking where they took delivery of their RV, and three of those responses indicated delivery took place in Indiana.
Wentworth determined those statements were hearsay because they were not made by declarants who were sworn and subject to cross-examination and because the declarants were not parties in the case. Additionally, the statements were offered for their truth, she said.
Wentworth then granted the RV company’s motion for summary judgment on Wednesday, writing “the designated evidence indicates that an explicit agreement to deliver the vehicles in Michigan was made.” Specifically, Wentworth pointed to Richardson’s practice of allowing its non-reciprocal customers to choose to pay an out-of-state sales tax and receive their RV in Michigan.
“These actions reveal the existence of an explicit agreement, a meeting of the minds, between the buyer and the seller regarding the location of delivery that is consistent with Indiana Code section 26-1-2-401(2), but overrides the provisions of Indiana Code section 26-1-2-401(3),” Wentworth wrote. “Under either provision, therefore, the sales at issue were made and title passed upon physical delivery in Michigan.”
Thus, the sales were not made in Indiana as a matter of law, she held.
The department further argued that Richardson’s practice of making physical delivery of the RVs in Michigan should be disregarded as a tax avoidance. Wentworth, however, disagreed, writing that Richardson’s made Michigan deliveries to ensure its customers incurred tax liability in the proper jurisdiction and avoided double taxation while also helping the company maintain competitive pricing.
Finally, the department argued the Indiana General Assembly intended all non-reciprocal buyers to be subject to Indiana’s sales tax because they were omitted from exemption under I.C. 6-2.5-5-39. But Wentworth wrote that argument was unreasonable because the non-reciprocal sales are not made in Indiana and thus are not subject to Indiana’s sales tax in the first place, so the exemption statute can have no effect on non-taxable transactions.