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Indiana Updates Sales Tax Guidance for Public Transportation Exemption

Posted 7:47 PM by

The Indiana Department of Revenue recently announced changes to its policy regarding the sales tax exemption for companies engaged in public transportation. The policy change was announced via an updated Information Bulletin #12, effective December 2014. Information Bulletin #12 serves as an important policy document for transportation companies ranging from traditional motor carriers to captive companies that transport primarily for their parent companies.

The main changes are for examples of what does and does not qualify. Many of the changes are attributable to the Indiana Tax Court’s decision in Wendt LLP v. Indiana Department of State Revenue (Oct. 30, 2012).

Newly listed examples that qualify for the exemption include:

  • Vehicles used to escort vehicles used in public transportation;
  • Items used to disassemble, load and secure the customer’s machinery for movement in public transportation; and
  • Items used in planning transportation routes and obtaining travel permits

Newly listed examples that do not qualify for the exemption include:

  • Items used in the preparation of estimates;
  • Items used for reassembly of equipment or machinery moved by a provider of public transportation; and
  • Labels used during disassembly of equipment to facilitate reassembly

The updated bulletin also adds a discussion of the new rules applicable to natural gas purchases and how the public transportation exemption under Ind. Code § 6-2.5-5-27 may apply. For most companies using natural gas to fuel a motor vehicle used in providing public transportation, the acquisition of that natural gas is subject to tax for transactions between Jan. 1, 2014, and Dec. 31, 2016. However, purchases are still exempt during this period if they are made by a public transportation corporation and used to fuel a motor vehicle to transport persons.

For more information, contact your KSM advisor.

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