Rhoade v. Indiana Dept. of State Revenue

• Decision Date: 06 September 2002
• Docket Number: No. 49T10-9902-TA-6.,49T10-9902-TA-6.
• Citation: 774 N.E.2d 1044
• Parties: Bradley J. RHOADE, Petitioner, v. INDIANA DEPARTMENT OF STATE REVENUE, Respondent.
• Court: Indiana Tax Court

774 N.E.2d 1044

Bradley J. RHOADE, Petitioner, v. INDIANA DEPARTMENT OF STATE REVENUE, Respondent.

No. 49T10-9902-TA-6.

Tax Court of Indiana.

September 6, 2002.

Randall J. Kaltenmark, Larry J. Stroble, Barnes & Thornburg, Indianapolis, IN, Attorneys for Petitioner.

Steve Carter, Attorney General of Indiana, Laureanne Nordstrom, Deputy Attorney General, Indianapolis, IN, Attorneys for the Respondent.

FISHER, J.

Bradley J. Rhoade appeals the December 29, 1998 order of the Indiana Department of State Revenue (Department) that denied his claim for a refund of Indiana's use tax in the amount of $878.27. This matter is before the Court on Rhoade's motion for summary judgment and the Department's motion for judgment on the pleadings. The parties raise various issues, which the Court restates as:

I. Whether Rhoade is exempt from paying Indiana's use tax because he already paid Florida's sales tax on the purchase price of his vehicle; and

II. Whether imposition of the Indiana use tax on a vehicle for which another state's sales tax has been paid violates the Commerce Clause.¹

For the reasons stated below, the Court DENIES Rhoade's motion for summary judgment as to Issues I, but GRANTS Rhoade's motion for summary judgment as to Issue II. The Court DENIES the Department's motion for judgment on the pleadings.

FACTS AND PROCEDURAL HISTORY

No material facts are in dispute. On January 31, 1998, Rhoade, an Indiana resident, purchased a motor vehicle for $17,265.50 in Florida. At that time, Rhoade paid 6% Florida sales tax on the purchase price of the vehicle, or $1,035.93. On April 20, 1998, when Rhoade titled the vehicle in Indiana, Rhoade was assessed 5% Indiana use tax on the purchase price, or $878.27.² On October 22, 1998, Rhoade filed a Claim for Refund of Indiana Use Tax with the Department for $878.27 and statutory interest. On December 29, 1998, the Department denied Rhoade's claim.

On February 1, 1999, Rhoade initiated an original tax appeal. On July 14, 1999, Rhoade filed a motion for summary judgment. On that same date, the Department filed a motion for judgment on the pleadings. On November 24, 1999, the parties presented oral arguments. Additional facts will be supplied as necessary.

ANALYSIS AND OPINION

Standard of Review

This Court reviews final determinations of the Department de novo and is therefore bound by neither the evidence nor the issues raised at the administrative level. IND.CODE § 6-8.1-9-1(d); Anderson v. Indiana Dep't of State Revenue, 758 N.E.2d 597, 600 (Ind. Tax Ct.2001), review denied, petition for cert. filed, 71 U.S.L.W. 3137 (U.S. Aug. 2, 2002) (No. 02-184). This Court will grant a motion for summary judgment only when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Ind. Trial Rule 56(C); Anderson, 758 N.E.2d at 600. "A party moving for judgment on the pleadings admits, for the purposes of the motion, all facts well pleaded and the untruth of his own allegations which have been denied." Riley at Jackson Remonstrance Group v. Indiana State Bd. of Tax Comm'rs, 642 N.E.2d 562, 565 (Ind. Tax Ct.1994) (internal quotation marks omitted). "Further, all reasonable intendments and inferences are to be taken against the movant." Id. (internal quotation marks and punctuation omitted). "Accordingly, a motion for judgment on the pleadings should be granted only when: 1) the pleadings present no material issues of fact, and 2) the facts as shown by the pleadings entitle one party to judgment." Id.

Discussion

I. Indiana's Use Tax

The first issue is whether Rhoade is exempt from paying Indiana's use tax because he has already paid Florida's sales tax on the purchase price of his vehicle. Rhoade argues that Indiana Code Section 6-2.5-3-6(d) entitles him to such an exemption because he has offered proof that he paid Florida's sales tax. Indiana Code Section 6-2.5-3-6(d) provides that:

a person liable for the use tax imposed in respect to a vehicle, watercraft, or aircraft under section 2(b) of this chapter shall pay the tax:

(1) to the titling agency when the person applies for a title for the vehicle or the watercraft; or

(2) to the registering agency when the person registers the aircraft;

unless the person presents proof to the agency that the use tax or state gross retail tax has already been paid with respect to the purchase of the vehicle, watercraft, or aircraft or proof that the taxes are inapplicable because of an exemption under this article.

IND.CODE § 6-2.5-3-6(d) (1998). The Department argues, on the other hand, that Indiana Code Section 6-2.5-3-5(b) indicates the Legislature's intent to impose the Indiana use tax on vehicles purchased in other states that are required to be titled for use in Indiana. Indiana Code Section 6-2.5-3-5(b) provides that:

[t]he credit [against the use tax imposed on the use, storage, or consumption of a particular item of tangible personal property equal to the amount, if any, of sales tax, purchase tax, or use tax paid to another state for the acquisition of that property] does not apply to the use tax imposed on the use, storage, or consumption of vehicles . . . that are required to be titled, registered, or licensed by Indiana.

IND.CODE § 6-2.5-3-5(b) (1998).

In general, states impose a use tax out of two concerns: (1) that local merchants will lose business if taxpayers purchase goods out-of-state to avoid sales tax liability and (2) that the state will lose tax revenue if taxpayers purchase goods out-of-state. JEROME R. HELLERSTEIN & WALTER HELLERSTEIN, 2 STATE TAXATION § 16.01[2] (3d ed.2000). "To deal with this potential loss of business and revenue, states enacted `complementary' or `compensating' use taxes on the use of goods purchased outside of the state and brought into the state for use." Id. (footnote deleted). A use tax is functionally equivalent to a sales tax and is "typically levied upon the use, storage, or other consumption in the state of tangible personal property that has not been subjected to a sales tax." Id.

Indiana's use tax

(a) ... is imposed on the storage, use, or consumption of tangible personal property in Indiana if the property was acquired in a retail transaction, regardless of the location of that transaction or of the retail merchant making that transaction.

(b) The use tax is also imposed on the storage, use, or consumption of a vehicle, an aircraft, or a watercraft, if the vehicle, aircraft, or watercraft:

(1) is acquired in a transaction that is an isolated or occasional sale; and

(2) is required to be titled, licensed, or registered by this state for use in Indiana.

IND.CODE § 6-2.5-3-2 (1998). The rate of Indiana's use tax is the same as Indiana's sales tax rate. IND.CODE § 6-2.5-3-3 (1998). See also IND.CODE § 6-2.5-2-2(a) (1998) (imposing a 5% sales tax rate on purchases of $0.90 or more). Accordingly, Indiana's use tax complements Indiana's sales tax to ensure that non-exempt retail transactions (particularly out-of-state retail transactions) that escape sales tax liability are nevertheless taxed. See USAir, Inc. v. Indiana Dep't of State Revenue, 623 N.E.2d 466, 468-69 (Ind. Tax Ct.1993).

The parties have relied on two different statutes for their respective positions: Rhoade cites to Indiana Code Section 6-2.5-3-6(d) for the proposition that he is exempt from Indiana's use tax, whereas the Department cites to Indiana Code 6-2.5-3-5(b) for the proposition that the Legislature did not intend for taxpayers such as Rhoade to be relieved from paying Indiana's use tax. When the Court considers two or more statutes that relate to the same general subject matter, it will not read the statutes piecemeal, but rather will read them in pari materia and construe them harmoniously. Roehl Transport, Inc. v. Indiana Dep't of State Revenue, 653 N.E.2d 539, 542 (Ind. Tax Ct.1995); Mechanics Laundry & Supply, Inc. v. Indiana Dep't of State Revenue, 650 N.E.2d 1223, 1232 (Ind. Tax Ct.1995). Moreover, "[t]his Court presumes that the Legislature did not intend to enact a statute that is meaningless or a nullity." Chrysler Financial Co., LLC v. Indiana Dep't Of State Revenue, 761 N.E.2d 909, 916 (Ind. Tax Ct.2002), review denied.

Indiana Code Section 6-2.5-3-6(d) exempts a taxpayer from Indiana's use tax if he proves that he has already paid "the use tax or state gross retail tax" on the purchase of his vehicle. I.C. § 6-2.5-3-6(d). The statute, however, does not expressly indicate whether the taxes mentioned are any state's taxes or just Indiana's. See id. On the other hand, Indiana Code Section 6-2.5-3-5(b) denies any use tax credit for the payment of another state's sales or use tax when a taxpayer purchases a vehicle out-of-state but is required to title the vehicle for use in Indiana. I.C. § 6-2.5-3-5(b); Williams v. Indiana Dep't of State Revenue, 742 N.E.2d 562, 564 (Ind. Tax Ct.2001). Although Rhoade contends that section 6(d) exempts him from Indiana's use tax, an exemption in this instance would be the functional equivalent of a use tax credit, which Indiana Code Section 6-2.5-3-5(b) does not permit in the present circumstance. See I.C. § 6-2.5-3-5(b). Indeed, the plain language of Indiana Code Section 6-2.5-3-5(b) clearly evinces the Legislature's intent not to afford a use tax credit to taxpayers such as Rhoade, regardless of whether another state's sales or use tax has already been paid. See id.

In short, to adopt Rhoade's construction of section 6(d) would render Indiana Code Section 6-2.5-3-5(b) a nullity. Therefore, in construing both these statutes, the Court holds that the Legislature intended the phrase "the use tax or state gross retail tax" in Indiana Code Section 6-2.5-3-6(d) to refer to Indiana taxes only. Consequently, Rhoade is not entitled to the relief he seeks under Indiana Code Section 6-2.5-3-6(d). Accordingly, the Court DENIES Rhoade's motion for summary judgment on this issue.

II. Commerce Clause

The second issue...