*1 INDIANA DEPARTMENT OF STATE
REVENUE, below, Petitioner INDIANA,
BELTERRA RESORT
LLC, Respondent below.
No. 49S10-1010-TA-519.
Supreme of Indiana. Court
Oct.
the Gulf of Mexico. Thereafter the river- boat headed to its ultimate destination in Pinnacle owned a 97% interest Indiana. *3 at time of the transfer. Pin- subsequently acquired remaining nacle August 3% interest in Belterra in of 2001. Department The Indiana of Revenue a and ("Department") conducted sales use tax audit of Belterra 2002 and issued a proposed against use tax assessment Bel- Zoeller, Gregory Attorney F. General $1,869,783.00 terra in amount of plus Indiana, Snethen, Matthew R. Ni- John D. interest, penalty acquisition due to its Schultz, cholson, Timothy A. Jennifer E. protested of the riverboat. Belterra Swain, Deputy Attor- Gauger, Andrew W. hearing assessment and after a on the Generals, IN, Indianapolis, Attorneys ney Department matter the issued a Letter of for Petitioner. Findings denying protest. Belterra's Bel- Paul, Laramore, H. Jon B. Stephen timely appeal terra filed a of the denial Strickland, Auberry, A. Fenton D. Brent parties with the Indiana Tax The Court. LLP, IN, Indianapolis, Baker & Daniels summary judgment. filed cross-motions for Attorneys Respondent. After a hearing granted court Belter- summary judgment ra's motion for RUCKER, Justice. denied the Department's motion. Belterra we opinion question this address the Ind., Dep't Resort LLC v. Ind. State by parent of whether a contribution a cor- 900 N.E.2d poration subsidiary of its is Ct.2009). The court reasoned that Belter- automatically excluded from Indiana use subject acquisi ra was not to use tax on its conclude it is not. We tion of the riverboat because it awas contribution to capital and not result of History
Facts and Procedural
a retail
transaction.
Id. at 516. We
("Belter-
Belterra Resort
LLC
granted review.
ra")
is a Nevada
that owns and
Standard
of Review
operates a hotel and riverboat casino in
County.
Switzerland
Pinnacle Entertain-
Indiana
Court was es
tablished
develop
apply specialized
("Pinnacle"),
to
ment Inc.
corpo-
Delaware
ration,
parent company.
fair,
is Belterra's
Pin-
expertise
prompt,
and uniform
nacle
Shipyard,
contracted with Alabama
resolution of state tax cases. State Bd. of
Mobile,
purchase
Inc. of
Alabama to
Indianapolis
and Tax Comm'rs v.
Racquet
Inc.,
(Ind.2001).
construct the Miss Belterra riverboat
in Club.
September
at
cost
of This Court extends
deference
cautious
$34,689,719.00.
Supp.App.
See
at
special expertise
decisions within the
Shipyard
conveyed
Alabama
then
title and the Tax
Court,
and we do not
reverse
possession
completed
riverboat
clearly
unless the ruling is
erroneous.
July
Pinnacle on
2000. Pinnacle paid
Dep't
Safayan,
Ind.
State
Revenue
no Alabama sales tax on this transaction.
(Ind.1995);
see also
day,
The following
Pinnacle transferred
Ind. Tax Court Rule 10. We extend the
possession
title and
presumption
validity
the riverboat
same
to Tax Court
Belterra while in international
rulings
summary judgments
apply
waters off
on
property
if the
in Indiana
property
sonal
Ind.
of review.
the same standard
in a retail transaction."
acquired
was
Corp.,
Steel
v. Bethlehem
Revenue
subject
not
contends it
is
is, Belterra
(Ind.1994). That
N.E.2d
tax because the
Indiana's
involves
summary judgment
when
in a retail
transaction.
acquired
pur-
particular
within the
of law
question
Belterra,
so,
be-
according to
And this is
Court,
deference
cautious
of the Tax
view
in ex-
given
consideration was
cause no
will set aside
Id. We
appropriate.
riverboat. See I.C.
6-
change for the
law on
of tax
determinations
Tax Court's
2.5-4-1(b)(2)
part
in relevant
(providing
definite-
only if we are
summary judgment
*4
selling
in
at retail
person
engaged
is
"[a]
was
that an error
firmly convinced
ly and
property
... he ...
transfers that
when
made.
consideration"). Rath-
for
person
another
er,
that
transfer of the
argues
Belterra
Discussion
capital
was made as a
contribu-
tax,
excise
imposes an
Indiana
given.
with no consideration
tion
tax, on retail
state sales
known as the
of its contention
support
In
Ind.
the state.
made within
transactions
Resort, LP
&
cites Grand Victoria Casino
6-2.5-2-1(a). A retail transaction
§
Code
Revenue, 789
Department
Ind.
when,
a retail
among
things,
other
occurs
Ct.2003).
(Ind.
In that
1041
N.E.2d
of its
ordinary course
in the
merchant
a result
was formed as
case Grand Victoria
ac
trade or business
conducted
regularly
companies:
two
G.V.
merger
of a
between
for the
property
quires tangible personal
II, Inc.,
The facts
and GV LLC.
prop
that
of resale and transfers
that
revealed
Grand
merger apparently
for consideration.
person
to another
erty
capital
as a
received a riverboat
Victoria
(b).
6-2.5-4-1(a),
also
§
Indiana
See 1.C.
II, Inc., and that
from GV.
contribution
tax, known as
imposes
complementary
(who were
partners of Grand Victoria
use,
tax,
or con
storage,
on the
the use
Inc.)
II,
received
owners of G.V.
previous
property
tangible personal
sumption
in connection
property
cash or other
no
6-2.5-3-2(a).
§
The
Indiana. See IC.
of the river-
capital
contribution
with
tax
to the sales
complementary
use tax is
was
a claim that Grand Victoria
boat. On
non-exempt
transac
because
it ensures
tax, the De-
a refund of sales
entitled to
liability
sales tax
escaped
tions that have
held
conceded and the Tax Court
partment
Horseshoe Ham
are nonetheless taxed.
capital
contribution
that
mond,
"[blecause
State Reve
Dep't.
v. Ind.
LLC
without consid-
property
a transfer of
nue,
N.E.2d
eration,
subject
a retail sale
it was not
ct.2007).
fact,
pri
use tax is
Indiana's
Here, Belterra
tax."
Id. at 1045.
sales
sales
marily designed to reach out-of-state
similarly situated and
that it is
contends
is subse
property that
tangible personal
that it is
is entitled to a determination
thus
727 n. 4.
in Indiana.
Id. at
quently used
dis-
to Indiana's use tax. We
subject
case is whether
At stake
this
several observations.
agree and make
parent
from the
transfer of the riverboat
capital
context a
corporate
In the
subsidiary corporation was
company to its
"transaction between
is a
meaning
contribution
transaction" within
a "retail
whereby
and a
shareholder
6-2.5-3-2(a).
section
of Indiana Code
money
property
transfers
or
shareholder
part
provides
pertinent
"[aln
statute
receiving
Instead of
tax,
corporation.
tax,
is im-
known as the use
excise
tangible per-
stock,
...
... of
share
on the
the basis of the
posed
additional
investment in the
existing
corpo
capital
holder's
the fact of a
contribution
proportion
standing
automatically
alone
means that
ration is increased
no retail sale
Hoang v.
occurred.2 Instead Grand
capital contribution."
James
Inc.,
can
Homes,
Victoria
best be understood as declar
town
ing that
capital
where a
contribution
J.,
(Bailey,
(Ind.Ct.App.2002)
dissenting)
made "without
(6th
consideration" then the
(citing
Dictionary
Black's Law
subject
transaction is not
sales
ed.1990)),
demied;
trams.
see also J. Wil
differently,
capital
Stated somewhat
if the
Sullivan,
& Maureen A.
liam Callison
Lim
contribution was made without consider
Compamies: A
IAiability
State-by-
ited
ation then there was no retail
sale and
to Law and Practice
State Guide
6:1
thus no Indiana sales or use tax could be
(2010) ("Capital contribution decisions typ
imposed.
ically
are made based on the LLC's
states,
In most
may
needs....
members
The issue in this case is whether
membership interests in exchange
receive
the transfer of the riverboat from Pinnacle
cash, property, and services
contribu
to Belterra was done without either side
*5
..."). However,
capital
not all
tions.
con
receiving consideration.
In an affidavit
equally.
tributions are created
Indeed we
support
submitted in
itsof motion for sum
nothing inherent
in such
see
transactions mary judgment Belterra declares as much.
automatically exempt
that
them from the Specifically, the Board of Director's Reso
reach of Indiana's sales and use tax statu
declared,
lution
Company hereby
"[ Jthe
Thus,
tes.1
we do not read Grand Victo- approves the transfer of ownership of the
for
standing
proposition
rie as
the broad
Riverboat Miss Belterra from Pinnacle
1. In contrast our research reveals that
paragraph
several
in this
corporations
between ...
jurisdictions
expressly provided
have
that
stockholders,
are excluded from the defi-
capital
are
contributions
excluded from use
nition of 'retail sale' because while the form
See, eg.,
§
Md.Code Ann.
ownership
Tax-Gen.
11-
of
property
changed,
there
209(c)(1)(iv)
2010)
(LexisNexis
(''Transfers-
continuity
is a
of
property
interest
in the
(1)
apply
tax
sales
does not
to a
transferred");
Ohio
Rev.Code
Ann.
tangible
5751.01(F)(2)(0 )
personal
property:
(LexisNexis 2010)
(defin-
§
transfer of
(iv)
liability company only
a
ing "gross
limited
a
receipts"
purposes
as
of the Ohio
capital contribution or in consideration
for an
activity
commercial
tax to exclude "[clontri-
liability company.");
interest in the limited
capital").
butions
144.011(4)
(West 2010)
§
Mo. Ann. Stat.
(sales
provision
declaring
and use tax
See,
that
Assocs., Inc.,
e.g., Hogan
2.
Prop.
v. Adams
"the definition of 'retail sale' or 'sale at retail'
217,
805,
(1997)
253 Va.
482 S.E.2d
807
shall not be construed
...
(holding
include
legal
transfer
[the
property
of
title to
as a
tangible personal property
transfer of
to a
capital contribution
exchange
to LLC was in
corporation by a shareholder as a contribu-
for valuable consideration and constituted a
capital
tion to
corpora-
of the transferee
property);
sale of the
Dep't
Wolter v. Wis.
tion");
144.617(4)
§
see also Mo. Ann. Stat.
651,
283,
231 Wis.2d
605 N.W.2d
(West 2010) (denoting
tangi-
transfer of
(Wis.Ct.App.1999)
292
"[the
(holding transfer of
personal property
ble
to a
capital accounts
a
partnership
from limited
shareholder
capital
as a
to the
contribution
pur
LLC was valuable consideration for
corporation"
exemption
transferee
as one
poses
imposing
state real estate transfer fee
tax);
to the
Comp.Codes
sales and use
N.Y.
R.
rights
because the members received new
20,
526.6(d)(1)(v) (2010)
Regs.,
(de-
&
tit.
Gavin,
privileges). But see Mandell v.
262
claring
that the definition of a
retail sale for
619,
(2003)
Conn.
816 A.2d
(holding
625
sales
purposes
and use tax
excludes
property
"[the
that transfer of
to LLC involved "no
property
contribution
partnership
to a
conveyance
pur
consideration" for state
tax
partnership
consideration
for a
interest there-
poses
because it
awas
unilateral act and not
bargained-for
exchange).
stating
the result of a
in" and
transfers described
"[the
Reed,
(Ind.Ct.App.
Entertainment,
to Belterra Resort
Inc.
1989).
end,
as a
contribution
In the
"consideration-no
LLC
of a bar
matter what its form-eonsists
to Pinna
being paid
consideration
without
exchange." Horseshoe Ham
gained-for
at 105
Supp.App.
cle Entertainment...."
mond,
N.E.2d at 729.
added).
However,
this declara
(emphasis
consider
dispositive. Whether
tion is not
"paid"
that it
no consider-
By asserting
of fact for the
question
is a
given
ation is
Pinnacle,
implies there
ation to
Pilarski,
NBZ,
v.
185 Wis.2d
jury.
Inc.
par-
exchanged
cash
between
was no
(Wis.Ct.App.1994).
520 N. W.2d
owner-
consequence
transferring
ties
However,
exists is
whether
consideration
at
Supp.App.
riverboat. See
ship of the
law for the court.
question
generally
However,
long held that
"Indiana has
Inc., Supply,
Russell
Russell
Jim
money is not
in the form of
consideration
146 Ill.DeC.
App.3d
Ill.
contract." Monarch
binding
essential to a
(1990).
without completion series." concur. test, As to the end results the transac-
tions engaged Pinnacle and Belterra BOEHM, J., separate dissents with appear component parts single to be of a DICKSON, J., opinion in which joins. con- To the contributing shareholder. Justice, BOEHM, dissenting. made tax free may be trary, the transfer the ma- I believe dissent. respectfully I who collec- more shareholders by one or to contribution adopts a definition jority 80% of the common tively own at least a contribu- incorrectly assumes that capital receiving corporation. stock of consideration, and for no capital is tion to is in cases the transfer many if not most con- notions of contract law imports then corporation. for shares of exchange Belterra's that to conclude sideration example of such contribu- simplest The subsidiary to its transfer of this the formation of a new incident to tion is capital. a contribution to was not shareholders, of- in which corporation on imposed taxes are and use The sales contribute agreement, contractual ten transactions," as which are defined "retail exchange to the new assets § 6-2.5-4- at retail." Ind.Code "selling clearly There is shares of its stock. for 1(a) (2010). "selling person A is defined that in this transaction as consideration when: at retail" law, I think no in contract but term is used regularly of his ordinary course [I]n that it constitutes a contend one would (1) business, he: ac- trade or conducted the sales or use tax. subject sale retail tangible personal property quires capital only form of contribution (2) resale; transfers purposes view) (incorrectly my be might that for con- person another property to consideration is a contri- viewed as without sideration. by a shareholder who of assets bution 6-2.5-4-1(b). is re- Consideration I.C. equity shares essentially all of owns a "retail a transaction is quired before not take addition corporation and does of a transaction," it is not the test but case, Even in that the share- al shares. The first and central transaction. retail is as that term gets holder consideration "sale," and that there be a requirement is add- law because there used in contract is not a sale. contribution to in the pre-existing in the shares ed value under capital" is a well "Contribution of the contributed of the value amount law and in ac in federal tax stood term is a nee- In short "consideration" assets. at retail or It is not a "sale" counting. not a sufficient condition essary, but otherwise, "ordinary in the and is not at retail." "selling a transaction render busi "regularly conducted" course" of a it, claim to only plausible I As see legal form It is a transfer ness. *8 in case transaction this finding a retail of the ownership ownership from direct bought the having from Pinnacle's arises in a equity of interests ownership assets to in its putting of it to use purposes boat for liability company corporation or limited not created subsidiary. If Pinnacle had the same assets. Comm'r that owns of purchased the simply and had Fink, 89, 94- v. 483 U.S. Internal Revenue there (1987). brought it to boat and 97 L.Ed.2d 107 S.Ct. in placed a use tax when it was would be dealing with a transfer In this case we are The same would in this state. operation its 97% owned sub by corporation one to purchased the boat true if Belterra had neither cor be Among things, other sidiary. But the into the state. brought it under either and has taxable income poration claim that Revenue did not Department of income adjusted gross or Indiana federal boat, purchase collapse could 351 of the it achieved section tax. This is in international was a retail sale not which Code, but that does Internal Revenue to waters, no consideration imply that there is and the contribution hang together, this series of events as a retail transactions that did not regard Belterra for use in Indiana. purchase by rather than simply collapsing purchase Department ap Nor did the advocate this of the boat and the contribution to the step-transaction of the doctrine in plication subsidiary arguing and the transaction was Rather, purchase by the subsidiary that incurs a argument the Tax its Court. "drop kick" presented as a transaction tax in Indiana. have suggested which commentators Federal income tax law recognizes a and use tax. P. subject to sales James "step transaction" doctrine that permits Kleier, Mergers Acquisitions: and Sales the courts to disregard steps the formal Consequences, Mgmt. and Use Tax taken in a series of transactions if the "end (BNA) Multistate Tax Portfolio No. result" of the transaction was from the (Feb. 2000). 1530.05, at 27-28 In a outset the intended result of a series of "drop wishing dispose kick" a seller transactions. An alternative formulation personal property "drops" an item is whether the transactions were so inter newly asset into a formed and dependent that each would have been ("kicks") sells the stock of the new corpo "fruitless" without the steps. series of As buyer. ration to the Although cast as a sociated Wholesale Grocers United the capital subsidiary contribution to of the States, (10th Cir.1991). 927 F.2d buyer, and a transfer stock to the now Until that doctrine had not been in parent substance the has sold the contrib corporated into Indiana tax law. only uted asset to the third-party buyer. Be Indiana tax case cited the Department Court, fore the Tax the Department tried to invoke this or similar reasoning was mold, to fit its contention into this describ Company Mason Metals v. Indiana De ing its transaction argument as a partment "drop kick" identifying the transac Ct.1992), which an "(i) sought collapse tions it the contri entirely different context observed that bution of the to Belterra in inter "substance, form," rather than the dictated (ii) waters, national Belterra's operation of whether the taxpayer was engaged pro casino, (iii) riverboat as Pinna viding transport Although services cle's purchase of the [8% Belterra it did Department Metals, cited Mason the Tax It renews that own]." contention its Department Court found that the "did not petition to review. But that is not what develop this reasoning" and concluded that happened here. Rather it is the reverse: there was a valid business for the purchased by boat was parent parent's acquisition of the boat and its then "dropped" into the subsidiary. And subsequent contribution to the subsidiary found, as the Tax Court the acquisition of obviously had a valid purpose permit
the outstanding 3% of Belterra's stock was operate licensee to in Indiana. Belter independent purchase of the boat ra Resort Ind. v. Ind. State Reve required by Belterra's incorporation nue, (Ind.Tax 516-17 short, documents.1 In *9 by claiming the 3% 2009). minority interest amounted to a reacquisi asset, tion of the "dropped" the Depart Importing transaction doctrine hinged ment its contention on a matrix of done, into Indiana tax law should be if at Presumably if minority price reacquire 3% interest had by agree- less fixed acquired, not been Pinnacle would have re- pur- ment. This seems irrelevant for our ceived additional shares in Belterra to reflect poses. contributed, the value of the boat it un- all, developed argument fully on a more affirm on this I would
the Tax Court. "de-
record, argument was not where therefore do not have the
veloped," andwe analysis of it.
Tax Court's
DICKSON, J., joins. DEEL, Appellant-Petitioner,
Stephanie DEEL, Appellee-Respondent.
Conrad
No. 73A01-0912-CV-606. of Indiana. Appeals
Court 5, 2010.
Aug.