Wendt LLP v. Indiana Department of State Revenue
2012 Ind. Tax LEXIS 21
| Ind. T.C. | 2012Background
- Wendt, an Indiana-licensed common carrier, relocates oversized machinery and argues purchases are exempt under Indiana's public transportation exemption.
- The Department of State Revenue audited 2002–2004 purchases; some items were exempt, others taxable; refunds for 2001–2004 were denied.
- The case is reviewed de novo; exemptions are strictly construed against the taxpayer but must reflect legislative purpose.
- The exemption requires direct use or consumption in providing public transportation; it applies to a continuous, integrated process and does not allow partial exemptions.
- Wendt's process comprises four phases—planning, pre-transport preparations, transportation, and reassembly—with optional warehouse storage and transport-for-repair; post-transport reassembly is not exempt.
- Court holds some phases/items are exempt and others not, determining predominance based on how much of the property is used in exempt public transportation, and remands for further determinations consistent with the opinion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether purchases were predominantly used in providing public transportation. | Wendt argues its integrated process makes most purchases necessary and integral. | Department: items used for stand-alone or non-integral purposes are not exempt. | Yes, Wendt predominately used the items for public transportation (upholding exemption majority). |
| Whether the integrated public transportation process allows exemption for all phases of the service. | Integrated process justifies exemption for property across all phases. | Exemption limited to directly used items; some phases are non-integral or incidental. | Integrated process qualifies for exemption where goods are necessary and integral across phases; some post-transport activities not exempt. |
| Which specific phases are exempt or non-exempt (planning, pre-transport, transportation, reassembly, and optional services). | All phases contributing to the public transportation process are exempt. | Only directly used, necessary, and integral items are exempt; some phases involve non-exempt activities. | Affirms non-exemption for estimate preparation and reassembly; reverses as to other phases and optional services; remands for proper determinations. |
Key Cases Cited
- Harbor Belt v. Indiana Dep't of State Revenue, 460 N.E.2d 170 (Ind. Ct. App. 1984) (integrated system; all elements must be furnished for effective transportation)
- USAIR, Inc. v. Indiana Dep't of State Revenue, 542 N.E.2d 1033 (Ind. Tax Ct. 1989) (direct use standard; necessary and integral to transportation process)
- Panhandle E. Pipeline Co. v. Indiana Dep’t of State Revenue, 741 N.E.2d 816 (Ind. Tax Ct. 2001) (exemption is all-or-nothing; no partial exemptions)
- Indiana Harbor Belt R.R. Co. v. Indiana Dep’t of State Revenue, 460 N.E.2d 170 (Ind. Ct. App. 1984) (single directness standard; necessary and integral elements)
- Calcar Quarries, Inc. v. Indiana Dep’t of State Revenue, 394 N.E.2d 939 (Ind. App. 1979) (predominant use standards for exemptions)