On October 30, 2012, the Indiana Tax Court issued a decision affecting public transportation companies. Indiana law provides a sales and use tax exemption on the purchase of tangible personal property directly used in providing public transportation. In Wendt LLP v. Indiana Department of State Revenue, the court examined the aspects of Wendt's business that qualified for the exemption. Wendt, an Indiana-based company in the business of intrastate, interstate, and international relocation of oversized factory equipment, claimed that the exemption applied to a wide range of its business, including the tangible personal property used to:
- Provide quotes to prospective customers;
- Disassemble the equipment to be transported and installed;
- Transport the equipment;
- Reassemble and re-install the transported equipment at the new location; and
- Temporarily store property being transported through the process.
The court took a slightly more narrow view, finding that the disassembly, transportation and temporary storage of property were all part of the exempt transportation process, but that providing quotes (sales activity) and re-installation of the transported property did not qualify for the exemption.
While every court decision is fact-sensitive, this case generally serves to reinforce some of the underlying fundamentals of this exemption and how it has been applied for many years. Two areas worth additional attention are:
- The court finding that temporary warehouse storage is considered part of the exempt transportation function
- The court's determination that the re-installation of transported property is outside of the exemption
If your company provides public transportation services for numerous customers or operates an exempt captive company that transports primarily for its parent company, this case could impact you.