ATTORNEY FOR PETITIONER:                               ATTORNEYS FOR RESPONDENT:
BRETT J. MILLER                                        CURTIS T. HILL, JR.
BINGHAM GREENEBAUM DOLL LLP                            ATTORNEY GENERAL OF INDIANA
Indianapolis, IN                                       WINSTON LIN
                                                       DEPUTY ATTORNEY GENERAL
                                                       Indianapolis, IN



                                 IN THE
                           INDIANA TAX COURT                                         FILED
                                                                                Apr 13 2017, 3:48 pm

                                                                                     CLERK
                                                                                 Indiana Supreme Court
ZIMMER, INC.,                                        )                      Court of Appeals
                                                                             and Tax Court
                                                     )
       Petitioner,                                   )
                                                     )
                      v.                             ) Cause No. 49T10-1507-TA-00025
                                                     )
INDIANA DEPARTMENT OF STATE                          )
REVENUE,                                             )
                                                     )
       Respondent.                                   )


        ORDER ON PARTIES’ CROSS-MOTIONS FOR SUMMARY JUDGMENT

                                     FOR PUBLICATION
                                       April 13, 2017

WENTWORTH, J.

       Zimmer, Inc. has challenged the Indiana Department of State Revenue’s

assessments of use tax for the 2009, 2010, and 2011 tax years (the “years at issue”).

The matter is currently before the Court on the parties’ cross-motions for summary

judgment.1 The dispositive issue is whether Zimmer’s Indiana activities regarding its

exhibition booth components constituted a taxable use or non-taxable storage for use


1
  The Department has designated evidence that contains confidential information. Accordingly,
the Court will provide only that information necessary for the reader to understand its disposition
of the issues presented. See generally Ind. Administrative Rule 9.
outside the state during the years at issue. Upon review, the Court grants the cross-

motions in part and denies them in part.

                         FACTS AND PROCEDURAL HISTORY

         Zimmer is a domestic corporation headquartered in Warsaw, Indiana.2 (Resp’t

Des’g Evid. Supp. Mot. Summ. J. (“Resp’t Des’g Evid.”), Ex. 7 ¶ 1; Pet’r Des’g Evid.

Supp. Cross-Mot. Summ. J. & Opp’n Resp’t Mot. Summ. J. (“Pet’r Des’g Evid.”), Ex. C

at 8.)    Zimmer designs, manufactures, and distributes a wide variety of medical

products, including orthopedic reconstructive devices; spine, cranial maxillofacial, and

thoracic devices; dental implants; and related surgical products. (Pet’r Des’g Evid., Ex.

C at 8; Resp’t Des’g Evid., Ex. 6 at 6.) Consequently, Zimmer’s customer base consists

of numerous entities, such as large multi-national enterprises, hospitals, dentists,

orthopedic surgeons, and neurosurgeons. (See Pet’r Des’g Evid., Ex. C at 8.)

         During the years at issue, Zimmer marketed its products at approximately 80 to

120 out-of-state trade shows and conventions. (See Resp’t Des’g Evid., Ex. 1 at 36-39;

Pet’r Des’g Evid., Ex. G ¶¶ 3, 11.)        In preparation for one of the largest of these

conventions, the American Association of Orthopedic Surgeons (“AAOS”), Zimmer hired

Catalyst Exhibits, an Illinois-based exhibit house, to annually design and manufacture a

new exhibition booth. (See Resp’t Des’g Evid., Ex. 1 at 37-40, 96, Ex. 7 ¶ 10; Pet’r

Des’g Evid., Ex. C at 9, Ex. D at 13.) Each year this exhibition booth incorporated some

of the original, repaired, refurbished, or modified components of prior exhibition booths

(e.g., counters, double-deck structures, structural beams, or walls). (See Resp’t Des’g

Evid., Ex. 1 at 92-101, Ex. 2 at 34-36, 38, 52-54, 63.) As a result, Zimmer arranged for


2
  Zimmer is now known as Zimmer Biomet. (See Pet’r Des’g Evid. Supp. Cross-Mot. Summ. J.
& Opp’n Resp’t Mot. Summ. J. (“Pet’r Des’g Evid.”), Ex. C at 8.)
                                              2
some of its former exhibition booth components that it kept in its Indiana warehouse to

be shipped to Catalyst Exhibits for incorporation into the new AAOS exhibition booth,

while others were retained in its Indiana warehouse. (See Resp’t Des’g Evid., Ex. 1 at

69, Ex. 2 at 34-36, 41-45, 60-62; Pet’r Des’g Evid., Ex. G ¶ 4.)

       While the structure of the AAOS exhibition booth changed from year to year,

Zimmer’s process of getting the exhibition booth components to and from the

convention site was relatively consistent – approximately 15 semi-trucks moved the

exhibition booth components from Catalyst Exhibits’s Illinois location and Zimmer’s

Indiana warehouse to the convention site. (See Pet’r Des’g Evid., Ex. D at 21, 31-35;

Resp’t Des’g Evid., Ex. 1 at 69, 71-72.) Thereafter, independent third parties set-up and

dismantled the exhibition booth at the convention site. (See Pet’r Des’g Evid., Ex. D at

64-66.) After dismantling, the exhibition booth components were returned to Zimmer’s

Indiana warehouse for continued storage and for possible incorporation into other

exhibition booths for approximately 15 other out-of-state trade shows.3            (See, e.g.,

Resp’t Des’g Evid., Ex. 1 at 71-73, 97-98, Ex. 3 at 33, 35-37.)

       Each time the exhibition booth components were returned to Zimmer’s Indiana

warehouse, its in-house carpenter inspected and sorted them based on their expected

future use and the extent of any damage. (See Resp’t Des’g Evid., Ex. 1 at 79, Ex. 2 at

60-61, Ex. 4 at 15, 19-22.) (See also Resp’t Des’g Evid., Ex. 1 at 73-74 (stating that

“there’s always something that gets broken at the big AAOS annual” convention), Ex. 3

at 31 (indicating that exhibition booth components typically required repairs after use in

two or three out-of-state trade shows).) If an exhibition booth component had major


3
  During the years at issue, the exhibition booth components were not used in exhibition booths
for conventions and trade shows in Indiana. (See Pet’r Des’g Evid., Ex. G ¶¶ 6, 15.)
                                              3
damage, it was shipped to Catalyst Exhibits for immediate repair or it was set aside in

Zimmer’s Indiana warehouse for subsequent repair, refurbishing, or modification. (See

Resp’t Des’g Evid., Ex. 1 at 72-74; Ex. 2 at 53.) When an exhibition booth component

had minor damage, such as laminate chips, paint scratches, fabric tears, or broken

doors/locks, Zimmer’s in-house carpenter repaired the item at its Indiana warehouse.

(See Resp’t Des’g Evid., Ex. 1 at 73-74, Ex. 2 at 38; Pet’r Des’g Evid., Ex. G ¶ 16.) In

instances where an exhibition booth component was intact but would not be used in

another trade show that year, Zimmer kept it in its Indiana warehouse until it was to be

incorporated into a future exhibition booth or permanently retired. (See Resp’t Des’g

Evid., Ex. 2 at 60-63.)

       On December 27, 2012, Zimmer filed a claim with the Department seeking a

refund of $1,076,768 in sales tax remitted on purchases of items that were used to

manufacture its products during the years at issue. (See Resp’t Des’g Evid., Ex. 6 at 4-

6, Ex. 7 ¶ 3.) The Department subsequently audited Zimmer and determined that it

owed $523,890.93 in use tax on its exhibition booth components. (See generally Resp’t

Des’g Evid., Ex. 6.) Thereafter, the Department granted Zimmer’s refund claim in part

and offset the refunded amount by the use tax liability. (See, e.g., Resp’t Des’g Evid.,

Ex. 5 ¶ 5.)     Zimmer protested the Department’s use tax determination and the

Department denied Zimmer’s protest on April 20, 2015. (See generally Resp’t Des’g

Evid., Ex. 7 at Exs. A-B.)

       On July 7, 2015, Zimmer initiated this original tax appeal. On August 29, 2016,

the Department filed its motion for summary judgment. On October 13, 2016, Zimmer

filed its cross-motion for summary judgment. On January 12, 2017, the Court held a



                                           4
hearing on the cross-motions. Additional facts will be supplied as necessary.

                               STANDARD OF REVIEW

      Summary judgment is proper when the designated evidence demonstrates that

no genuine issues of material fact exist and the moving party is entitled to judgment as

a matter of law. Ind. Trial Rule 56(C). In reviewing a motion for summary judgment, the

Court will construe all properly asserted facts and the reasonable inferences drawn

therefrom in favor of the non-moving party. See Fresenius USA Mktg., Inc. v. Indiana

Dep’t of State Revenue, 56 N.E.3d 734, 735 (Ind. Tax Ct. 2016), review denied. Cross-

motions for summary judgment do not alter this standard. Horseshoe Hammond, LLC

v. Indiana Dep’t of State Revenue, 865 N.E.2d 725, 727 (Ind. Tax Ct. 2007), review

denied.

                                         LAW

      Indiana imposes a use tax on the “storage, use, or consumption of tangible

personal property in Indiana if the property was acquired in a retail transaction,

regardless of the location of that transaction or of the retail merchant making that

transaction.” IND. CODE § 6-2.5-3-2(a) (2017). During the years at issue, “use” was

defined as “the exercise of any right or power of ownership over tangible personal

property” and “storage” was defined as “the keeping or retention of tangible personal

property in Indiana for any purpose except the subsequent use of that property solely

outside Indiana.”   IND. CODE § 6-2.5-3-1(a)-(b) (2009) (amended 2015) (emphasis

added). Consequently, when property was stored in Indiana for subsequent use solely

outside the state, it was not subject to use tax. See id. See also, e.g., USAir, Inc. v.

Indiana Dep’t of State Revenue, 623 N.E.2d 466, 469-70 (Ind. Tax Ct. 1993).



                                           5
                                       ANALYSIS

      The issue in this case is whether, during the years at issue, Zimmer’s Indiana

activities regarding its exhibition booth components constituted a taxable use or non-

taxable storage for use outside the state. The parties do not dispute that the exhibition

booth components were used in exhibition booths at out-of-state trade shows. (See,

e.g., Pet’r Combined Resp. Br. Opp’n Resp’t Mot. Summ. J. & Br. Supp. Cross-Mot.

Summ. J. (“Pet’r Br.”) at 8 ¶ 29.) The Department claims, however, that Zimmer’s

Indiana activities regarding its exhibition booth components subjected them to use tax

for each of the following reasons.

                                           1.

      The Department claims that Zimmer’s in-state storage of the exhibition booth

components was subject to use tax because the type of storage excluded from use tax

requires permanent use outside the state, not – as here – continuous revolutions

between in-state storage and out-of-state use. (See Hr’g Tr. at 47-48 (citing generally

Miles, Inc. v. Indiana Dep’t of State Revenue, 659 N.E.2d 1158 (Ind. Tax Ct. 1995)).)

(See also Resp’t Mem. Supp. Mot. Summ. J. (“Resp’t Mem.”) at 10-11.)                  The

Department’s claim that Zimmer’s revolving storage, out-of-state use, re-storage, and

re-use rendered its exhibition booth components taxable, however, is unpersuasive.

      Nowhere in Indiana Code § 6-2.5-3-1(b) is there an express temporal limitation

on storage or a prohibition on returning previously stored property to Indiana for

continued storage. See I.C. § 6-2.5-3-1(b). But see, e.g., IND. CODE § 6-2.5-3-1(b), (d)

(2015) (introducing a 180-day temporal limitation into the definition of storage). Rather,

the statutory exclusion from use tax applies only in instances where property is stored in



                                            6
Indiana for subsequent use solely outside of this state.4              See I.C. § 6-2.5-3-2(b).

Consequently, Zimmer’s repeated in-state storage and out-of-state use of its exhibition

booth components is consistent with the statutory exclusion of storage for subsequent

use solely outside Indiana and is not subject to use tax on this basis. See Indiana Dep’t

of State Revenue v. Horizon Bancorp, 644 N.E.2d 870, 872 (Ind. 1994) (stating that

“[n]othing may be read into a statute which is not within the manifest intention of the

legislature as gathered from the statute itself” (citation omitted)).

                                                2.

       The Department further supports its assertion by claiming that Zimmer exercises

other rights of ownership over its exhibition booth components in Indiana that constitute

taxable uses. (See Resp’t Mem. at 7-10.) The Department explains that Indiana is

Zimmer’s “central hub for its year-long, continuous process” of inspecting and selecting

future booth locations, developing goals and objectives for its booths, and directing the

continual updating and modification of its exhibition booth components. (See Resp’t

Mem. at 8; Resp’t Reply Supp. Mot. Summ. J. & Opp’n Pet’r Cross-Mot. Summ. J.

(“Resp’t Reply Br.”) at 2-3.) Accordingly, the Department contends that “the correct

focus in this case is not on passive acts related to Zimmer’s [exhibition booth

components] . . . but, rather, on Zimmer’s active decision-making regarding them in

Indiana.” (Resp’t Reply Br. at 2.) This argument is also unpersuasive.

       Planning, setting goals, and other similar determinations regarding tangible

personal property are certainly rights or powers inherent in the ownership of property,

4
   Property need not be identified for out-of-state shipment prior to its in-state storage for the
exclusion to apply because that requirement would not only impermissibly narrow the scope of
the exclusion, but also frustrate its purpose (i.e., encouraging businesses to locate their regional
warehouses in Indiana). Miles, Inc. v. Indiana Dep’t of State Revenue, 659 N.E.2d 1158, 1163
n.11 (Ind. Tax Ct. 1995).
                                                 7
but decision-making is not an exercise of a right or power that alone would subject a

property to the use tax. For example, this Court recently held that a taxpayer owed use

tax because it “exercised its rights as an owner . . . when it chose to register, license,

and title [its vehicles] in Indiana.” See Asplundh Tree Expert Co. v. Indiana Dep’t of

State Revenue, 38 N.E.3d 744, 747 (Ind. Tax Ct. 2015) (emphasis added), review

denied.    The holding in that case, however, was not due to the taxpayer’s mental

decision of making a choice alone, as the Department claims, but instead was triggered

by the actions that followed the choice - registering, licensing, and titling the vehicles in

Indiana.    See id.     Similarly, Zimmer’s decisions regarding its exhibition booth

components cannot trigger the imposition of use tax without concomitant physical

actions in Indiana that are not excluded. See USAir, 623 N.E.2d at 470 (recognizing

that certain exercises of incidental rights of ownership are not taxable uses under the

statutory exclusion for storage).     Accordingly, Zimmer’s “decision-making” activities

regarding its exhibition booth components did not subject them to use tax during the

years at issue.

                                             3.

       The Department also argues Zimmer’s exhibition booth components were subject

to use tax because “more than just decisions” occurred in Indiana, such as conducting

internal meetings to determine effectiveness and improvements, inspecting the

components when they came back to Indiana, insuring the components, and arranging

logistics. (See Resp’t Mem. at 9; Hr’g Tr. at 31-32.) The Department explains that

these activities are “critical” because creating assortments of exhibition booths that

effectively market Zimmer’s products is necessary to actually use the exhibition booth



                                             8
components out-of-state. (See Hr’g Tr. at 32-33.)

      When property is stored in Indiana solely for subsequent use outside Indiana,

there are incidental actions necessary to facilitate both its storage and its transport for

use solely outside the state. See, e.g., USAir, 623 N.E.2d at 470 (stating “the incidental

exercise of ownership rights in removing tangible personal property from storage for use

outside Indiana is not a taxable use”). Here, the activities of conducting meetings,

inspecting, insuring, and arranging logistics for the exhibition booth components were

necessary for, but incidental to, the property’s in-state storage and out-of-state use.

See id. (explaining that the handling and transporting of property between storage and

use is not taxable because doing so subsumes “storage” within “use”). Thus, those

activities do not subject Zimmer’s exhibition booth components to use tax.

                                            4.

        Finally, the Department claims that the repair of damaged exhibition booth

components by Zimmer’s in-house carpenter at its Indiana warehouse constituted a

taxable use. (See Resp’t Mem. at 8-10; Hr’g Tr. at 32.) Zimmer, however, maintains

that these repairs were merely incidental to the in-state storage and out-of-state use of

its property because they were “minor” and they prevented the deterioration of the

exhibition booth components during storage. (See Pet’r Br. at 16; Hr’g Tr. at 66-69.)

      Repairing the exhibition booth components, regardless of the extent of damage,

is a taxable exercise of ownership rights unless the repairs are incidental to the

property’s “storage” for “use solely outside Indiana.” See I.C. § 6-2.5-3-3-1(b); see also

USAir, 623 N.E.2d at 469 (explaining that Indiana’s statutory definition of a taxable use

is broad and leads to a very low threshold of taxability). The designated evidence



                                            9
shows that the damaged exhibition booth components were stored in Zimmer’s Indiana

warehouse “as is,” and it does not establish that those repairs were necessary for

storage to occur or that the exhibition booth components (or any others) deteriorated

during storage.     (See, e.g., Resp’t Des’g Evid., Ex. 1 at 72-74; Ex. 2 at 53.)

Accordingly, the repairs in Indiana constitute taxable uses. See USAir, 623 N.E.2d at

469 (stating that for purposes of the use tax almost any act not otherwise excluded

constitutes a taxable use).

                                    CONCLUSION

       The undisputed material facts establish that Zimmer stored its exhibition booth

components in Indiana for subsequent use solely at out-of-state trade shows, but that it

repaired some exhibition booth components in its Indiana warehouse on an as-needed

basis. Accordingly, the Court GRANTS summary judgment in favor of Zimmer on those

exhibition booth components that were stored in Indiana for subsequent use solely

outside Indiana. The Court GRANTS summary judgment in favor of the Department,

however, on those exhibition booth components that were repaired in Indiana during the

years at issue.

       SO ORDERED this 13th day of April 2017.




                                               Martha Blood Wentworth, Judge
                                               Indiana Tax Court



DISTRIBUTION:
Brett J. Miller, Winston Lin




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