Appellate Law Blog

In a decision handed down earlier this month, the Supreme Court refused to give a ruling on an issue that was described as being “within the special expertise of the Tax Court.” The decision comes from a rehearing of an earlier case holding that capital contributions are not automatically exempt from Indiana’s use tax.

In Indiana Dep’t of State Revenue v. Belterra Resort Indiana, LLC, No. 49S10-1010-TA-519, the Department of Revenue imposed a use tax of almost $2 million on Belterra due to its acquisition of a riverboat from its parent company. Belterra argued that the acquisition counts as a capital contribution, which the Department has ruled in the past as not subject to the tax. The court used what is called the “step transaction” doctrine to find that the acquisition constituted a retail transaction and was subject to the tax penalty. Belterra sought rehearing of that decision, arguing that, even if they were subject to the penalty, they shouldn’t have to pay because Indiana law says that a penalty for failure to pay taxes is waivable if the failure to pay is the result of a reasonably held belief that payment isn’t necessary.

The court said that that “the Indiana Tax Court was established to develop and apply specialized expertise in the prompt, fair, and uniform resolution of state tax cases” and that it “extends cautious deference” to decisions that should fall within such expertise. The court remanded the case to the Tax court to resolve the issues of whether or not Belterra exhausted all of its administrative remedies, whether they are subject to the tax, and if the penalty should be paid.