ATTORNEYS FOR PETITIONER:                          ATTORNEYS FOR RESPONDENT:
RANDAL J. KALTENMARK                               CURTIS T. HILL, JR.
ZIAADDIN MOLLABASHY                                ATTORNEY GENERAL OF INDIANA
BARNES & THORNBURG LLP                             EVAN W. BARTEL
Indianapolis, IN                                   JESSICA REAGAN GASTINEAU
                                                   WINSTON LIN
                                                   DEPUTY ATTORNEYS GENERAL
                                                   Indianapolis, IN



                                IN THE
                          INDIANA TAX COURT                                 FILED
                                                                       Aug 01 2017, 4:25 pm

                                                                            CLERK
                                                                        Indiana Supreme Court
                                                                           Court of Appeals
RICHARDSON’S RV INC.,                            )                           and Tax Court

                                                 )
       Petitioner,                               )
                                                 )
                     v.                          ) Cause No. 49T10-1504-TA-00016
                                                 )
INDIANA DEPARTMENT OF STATE                      )
REVENUE,                                         )
                                                 )
       Respondent.                               )



                              ORDER ON PETITIONER’S
                          MOTION FOR SUMMARY JUDGMENT

                                   FOR PUBLICATION
                                     August 1, 2017


WENTWORTH, J.

       Richardson’s RV Inc. has appealed the Indiana Department of State Revenue’s

final determination that it properly assessed additional sales tax liabilities for the 2010,

2011, and 2012 tax years. The matter is currently before the Court on Richardson’s’

Motion for Summary Judgment, which the Court grants.
                          FACTS AND PROCEDURAL HISTORY1

       Richardson’s is an Indiana corporation that owns and operates a recreational

vehicle dealership in Middlebury, Indiana. (See Pet’r Des’g Evid., App. 1 ¶¶ 6, 7, 10.)

During the years at issue, Richardson’s sold camper trailers, travel trailers, motor

homes, fifth wheels, and toy haulers (collectively “RVs”) as well as related repair parts

and repair services. (See Pet’r Des’g Evid., App. 1 ¶ 10.) Richardson’s also maintained

a website that allowed out-of-state customers to shop for RVs. (See Resp’t Des’g Evid.,

Ex. R-8 at 39-43.)

       In a typical sales transaction from Richardson’s’ website, once a price was

agreed upon, Richardson’s would send a purchase order to the customer to be signed

and returned with the deposit. (See Resp’t Des’g Evid., Ex. R-8 at 43.) Richardson’s

would then arrange a time for the customer to come to the dealership to walk through

the vehicle.    (See Resp’t Des’g Evid., Ex. R-8 at 49-50.)             If the vehicle met the

customer’s expectations, the customer completed the paperwork (e.g., financing

agreements, warranty, and titling documents) in the dealership office.               (See Resp’t

Des’g Evid., Ex. R-8 at 51-52, 58-60.)

       Richardson’s’ regular business practice for transferring physical possession of

the vehicle to a customer varied based on whether the customer resided in a state with

a




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.


                                                2
reciprocal agreement with Indiana.2 (See Resp’t Des’g Evid., Ex. R-8 at 51-64; Pet’r

Des’g Evid., App. 1 ¶¶ 44-48.)        If a customer resided in a state with a reciprocal

agreement with Indiana (“reciprocal customer”), Richardson’s transferred physical

possession of the vehicle to the customer at its dealership. (See Pet’r Des’g Evid., App.

1 ¶ 45.) When a customer did not reside in a state with a reciprocal agreement with

Indiana (“non-reciprocal customer”); however, Richardson’s informed them of Indiana’s

sales tax rate and asked them whether they preferred to pay their home state’s

sales/use tax or Indiana’s sales tax on their purchase. (See Resp’t Des’g Evid., Ex. R-8

at 54-58.) If the non-reciprocal customer chose to pay the tax to their home state,

Richardson’s transferred possession of the vehicle to the customer at a location seven

miles away from the dealership in Michigan, a state without a reciprocal agreement with

Indiana.3 (See Pet’r Des’g Evid., App. 1 ¶¶ 44, 46.) (See also Resp’t Des’g Evid., Ex.

R-8 at 129.)

       At the Michigan transfer location, an employee of Richardson’s and the customer

both signed a letter stating that Richardson’s had physically delivered the vehicle to the

customer in Michigan (“Delivery Letter”). (See Pet’r Des’g Evid., App. 1 ¶¶ 54-55; Ex.

E-1 through E-155.) (See also Resp’t Des’g Evid., Ex. R-8 at 64.) Richardson’s did not




2
  A reciprocal agreement exempts certain out-of-state RV buyers from paying Indiana’s sales
tax on their purchase if Indiana purchasers receive a similar exemption for a purchase in their
states. See IND. CODE § 6-2.5-5-39(c)(5) (2010). During the years at issue, Arizona, California,
Florida, Hawaii, Massachusetts, Michigan, Mississippi, North Carolina, and South Carolina did
not have reciprocal agreements with Indiana. (See Pet’r Des’g Evid., App. 1 ¶ 44.)
3
  Richardson’s delivered the vehicles to its non-reciprocal customers at a vacant lot near a
Speedway gas station located in White Pigeon, Michigan. (See Pet’r Des’g Evid., App. 1 ¶ 46.)
(See also Resp’t Des’g Evid., Ex. R-7 at 92-94; Ex. R-8 at 61, 129.)


                                               3
collect Indiana sales tax from customers who took possession of the RV in Michigan. 4

(See Pet’r Des’g Evid., App. 1 ¶ 26, Ex. C.)

       On February 7, 2014, the Department completed the sales tax audit of

Richardson’s’ business for the years at issue and concluded that Richardson’s should

have collected and remitted Indiana sales tax on 139 sales to non-reciprocal

customers.5     (See Pet’r Des’g Evid., App. 1 ¶¶ 21, 26, 61, Exs. A, C, G.)                 The

Department issued proposed assessments on March 10, 2014, and on March 12, 2014,

Richardson’s filed its protest, which the Department denied in its LOF dated November

25, 2014. (See Pet’r Des’g Evid., App. 1 ¶ 22, Ex. B; App. 7 ¶¶ 27, 31, 33; App. 8 ¶¶

27, 31, 33.) Richardson’s filed a Request for Rehearing, which the Department denied

on February 26, 2015. (See Pet’r Des’g Evid., App. 7 ¶¶ 38-39; App. 8 ¶ 38-39.)

       On April 23, 2015, Richardson’s filed its Original Tax Appeal. On September 18,

2015, Richardson’s filed its Motion for Summary Judgment, and the hearing on the

Motion was held on April 7, 2016. Additional facts will be supplied as necessary.

                                  STANDARD OF REVIEW

       Summary judgment is proper only 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). When reviewing a motion for summary

4
  When Richardson’s assisted non-reciprocal customers with financing for a purchase, however,
the lenders/financial institutions required Richardson’s to secure title to the vehicles in the
customers’ home state. (See Resp’t Des’g Evid., Ex. R-8 at 60.) In these cases, Richardson’s
charged the customer sales/use tax at the rate of the titling state and remitted it to that state.
(See Resp’t Des’g Evid., Ex. R-8 at 61.)
5
  There were 145 transactions at issue that included 3 wholesale transactions to a Canadian
wholesaler/franchise dealer and 3 sales to reciprocal customers residing in Maine and
Nebraska. (See Pet’r Des’g Evid., App. 1 ¶¶ 31-33, 43, Ex. C.) During the hearing, however,
the Department conceded that those 6 transactions were exempt from taxation. (See Hr’g Tr. at
37.)
                                                4
judgment, the Court will construe all properly asserted facts and reasonable inferences

drawn therefrom in favor of the non-moving party. See Scott Oil Co. v. Indiana Dep’t of

State Revenue, 584 N.E.2d 1127, 1128-29 (Ind. Tax Ct. 1992).

                                           LAW

       Indiana imposes a sales tax “on retail transactions made in Indiana.” IND. CODE §

6-2.5-2-1(a) (2010). A “‘[r]etail transaction’ means a transaction of a retail merchant that

constitutes selling at retail[.]” IND. CODE § 6-2.5-1-2(a) (2010). A person is a retail

merchant “selling at retail when, in the ordinary course of his regularly conducted trade

or business, he . . . acquires tangible personal property for the purpose of resale[,] and

[ ] transfers that property to another person for consideration.” IND. CODE § 6-2.5-4-1(b)

(2010) (amended 2013).

       Indiana courts “refer to the law of sales for assistance in interpreting tax laws that

relate to the sale of goods.” Monarch Beverage Co., Inc. v. Indiana Dep’t of State

Revenue, 589 N.E.2d 1209, 1212 (Ind. Tax Ct. 1992) (citations omitted). Indiana’s

codification of the Uniform Commercial Code (UCC) under Indiana Code § 26-1-2-

106(1) defines a “sale” as “the passing of title from the seller to the buyer for a price[.]”

IND. CODE § 26-1-2-106(1) (2010).

       Indiana Code § 26-1-2-401 explains when and where title passes in two different

circumstances:

          (2) Unless otherwise explicitly agreed, title passes to the buyer at
          the time and place at which the seller completes his performance
          with reference to the physical delivery of the goods, despite any
          reservation of a security interest and even though a document of title
          is to be delivered at a different time or place[.]

                            *       *     *       *      *



                                              5
          (3) Unless otherwise explicitly agreed, where delivery is to be made
          without moving the goods: (a) if the seller is to deliver a tangible
          document of title, title passes at the time when and the place where
          he delivers [title] documents and if the seller is to deliver an
          electronic document of title, title passes when the seller delivers the
          document[.]

IND. CODE § 26-1-2-401(2), (3)(a) (2010) (emphasis added). In other words, the general

rule is that title passes, and a sale is completed, at the location of delivery of the goods

themselves, if they are moved for delivery, or of the title documents, if they are not.

                                           ANALYSIS

       Richardson’s’ Motion presents one issue:            whether its sales of RVs to non-

reciprocal customers were made “in Indiana” as a matter of law, subjecting them to

Indiana sales tax.6 Richardson’s claims that its sales to non-reciprocal customers were

not made “in Indiana” because it provided physical delivery of the RVs in Michigan, not

in Indiana.   (See Br. of Pet’r Supp. Mot. Summ. J. (“Pet’r Br.”) at 24-26.)              On the

contrary, the Department contends that the sales were made “in Indiana” because (1)

the title was delivered in Indiana; (2) the delivery of possession in Michigan should be

disregarded as tax avoidance; and (3) the non-reciprocal buyers are not exempt and the

Legislature intended that they pay Indiana’s sales tax. (See Resp’t Br. Opp’n Pet’r Mot.

Summ. J. (“Resp’t Br.”) at 8-22.)

                                          1. Delivery

       The Department first claims Richardson’s’ sales of RVs to non-reciprocal


6
  In its Audit Summary and Letter of Findings, the Department required Richardson’s to produce
sales invoices or purchase orders to establish out-of-state delivery for the transactions at issue,
and it found transactions that lacked this specific type of evidence were taxable. (See Pet’r
Des’g Evid., App. 1 ¶¶ 21-22, Exs. A, B.) At the hearing, however, the Department conceded
that this specific type of documentation was not required as a matter of law. (See Hr’g Tr. at
38.) Therefore, the Court will not address this issue.


                                                6
customers were completed in Indiana under Indiana’s statutes, because title passes

upon delivery, which occurred at the Indiana dealership.          (See Resp’t Br. at 9-12.)

Generally, title to goods passes from the seller to the buyer in accordance with the

explicit agreement of the parties.     See I.C. § 26-1-2-401(1).        Without an explicit

agreement, however, title passes upon delivery under either Indiana Code § 26-1-2-

401(2), which applies when goods are physically delivered, or Indiana Code § 26-1-2-

401(3), which applies when delivery is made without moving the goods. See I.C. § 26-

1-2-401(2), (3)(a).

       The   Department     asserts   that   Indiana   Code   §     26-1-2-401(3)   governs

Richardson’s’ sales of RVs to non-reciprocal customers because delivery could be

made without moving the RVs from the Indiana dealership. (See Resp’t Br. at 11.) In

support, the Department notes that “non-reciprocal customers’ RVs are just as ready to

be driven or towed off [of the Indiana dealership lot] as reciprocal customers’ RVs.”

(See Resp’t Br. at 12 (citing Resp’t Des’g Evid., Ex. R-8 at 49-51; Resp’t Des’g Evid.,

Ex. R-7 at 28-29, 95).)       In addition, the designated evidence shows that both

Richardson’s’ reciprocal and non-reciprocal customers alike completed the warranty,

titling, financing, and odometer forms at the Indiana dealership. (See Resp’t Des’g

Evid., Ex. R-8 at 51-53, 58-59.) Consequently, the Department concludes that the RVs

did not need to be moved for delivery to occur, and under Indiana Code § 26-1-2-

401(3), the sales were completed in Indiana once Richardson’s delivered the “tangible

document[s] of title” at the dealership. (See Resp’t Br. at 9-16; Hr’g Tr. at 47.) See also

I.C. § 26-1-2-401(3).

       On the other hand, Richardson’s claims that Indiana Code § 26-1-2-401(2)



                                             7
governs its sales of RVs to non-reciprocal customers and its transactions were not

made “in Indiana” because it physically delivered the goods in Michigan. (See Pet’r Br.

at 25-26.) Furthermore, Richardson’s explains that its delivery of the RVs in Michigan

expressly countermands the application of Indiana Code § 26-1-401(3) because the

physical delivery of goods controls even if documents of title may have been delivered

at a different place or time. (See Pet’r Reply Br. Supp. Mot. Summ. J. at 16.) See also

I.C. § 26-1-2-401(2).

      The outcome of this case, however, is unaffected by which provision applies.

Each opens with the words “Unless otherwise explicitly agreed,” indicating that an

explicit agreement between the buyer and seller would trump the provisions of either

subsection.   See I.C. § 26-1-401(2), (3).       The parties have not provided a written

contract that explicitly expresses an agreement between them; nonetheless, the

designated evidence indicates that an explicit agreement to deliver the vehicles in

Michigan was made.

      For example, Richardson’s presented unrebutted testimony that non-reciprocal

customers were asked whether they wanted to pay tax to their home state on their

purchase rather than to Indiana, and if so, the RV was physically delivered to them

outside of Indiana. (See Resp’t Des’g Evid., Ex. R-8 at 55.) (See Pet’r Des’g Evid.,

App. 1 ¶ 49 (explaining that Richardson’s occasionally transported vehicles to various

out-of-state locations upon customer request). Moreover, both Richardson’s and its

non-reciprocal customers signed Delivery Letters that acknowledged that the RVs were

physically delivered in Michigan. (See Pet’r Des’g Evid., App. 1 ¶¶ 54-55, Ex. E-1

through E-155.) (See Resp’t Des’g Evid., Ex. R-8 at 64.) These actions reveal the



                                             8
existence of an explicit agreement, a meeting of the minds, between the buyer and the

seller regarding the location of delivery that is consistent with Indiana Code § 26-1-2-

401(2), but overrides the provisions of Indiana Code § 26-1-2-401(3). See I.C. § 26-1-

2-401(2), (3). Under either provision, therefore, the sales at issue were made and title

passed upon physical delivery in Michigan.

       In the alternative, the Department asserts that even if Indiana Code § 26-1-

401(3) does not apply, delivery to non-reciprocal customers must have occurred in

Indiana because delivery precedes inspection and acceptance in a “typical” sales

transaction. (See Hr’g Tr. at 50-52.) See also David R. Webb Co., Inc. v. Indiana Dep’t

of State Revenue, 826 N.E.2d 166, 171 (Ind. Tax Ct. 2005) (explaining that under

Indiana’s UCC, “the sequence of events in a ‘typical’ sales transaction is: 1) delivery; 2)

inspection; and 3) acceptance”) (emphasis added). More specifically, the Department

claims that inspection and acceptance took place when Richardson’s’ customers walked

through the RVs and signed title, financing, and warranty documents at the Indiana

dealership. (See Hr’g Tr. at 52-53.) Therefore, the Department concludes that delivery

necessarily had to have occurred in Indiana. (See Hr’g Tr. at 50-53.)

       Determining the location of a sale, however, is a fact sensitive determination.

See Webb, 826 N.E.2d at 172 (stating “[t]he determination of whether certain activities

constitute local transactions or interstate commerce ‘must be made on a case by case

basis’”) (citation omitted). The designated evidence in this case demonstrates that the

transactions at issue are not typical. Here, Richardson’s’ owner and several employees

testified in affidavits that Richardson’s’ employees drove or towed the RVs at issue to a

location in Michigan where the non-reciprocal customers took physical possession.



                                             9
(See Pet’r Des’g Evid., App. 1 ¶¶ 46-48; App. 2 ¶¶ 10-12; App. 3 ¶¶ 10-13; App. 4 ¶¶

10-13; App. 5 ¶¶ 10-13; App. 6 ¶¶ 10-13.) Thus, delivery occurred in Michigan – after

inspection and acceptance – and title passed outside of Indiana. Accordingly, the Court

finds that as a matter of law the sales transactions at issue were not made “in Indiana.”

                                    2. Tax Avoidance

      The Department contends that Richardson’s’ physical delivery of RVs to non-

reciprocal customers in Michigan should be disregarded as an impermissible attempt to

avoid Indiana sales tax. (See Resp’t Br. at 18-22.) See also Indiana Dep’t of State

Revenue v. Belterra Resort Indiana, LLC, 935 N.E.2d 174, 179 (Ind. 2010) (“[A]

transaction structured solely for the purpose of avoiding taxes with no other legitimate

business purpose will be considered a sham for taxation”). The designated evidence,

however, does not show that Richardson’s made Michigan deliveries to avoid Indiana’s

sales tax, but instead that the purpose of the Michigan deliveries was to ensure its

customers incurred tax liability in the proper jurisdiction: where the vehicles would

ultimately be used. (See Resp’t Des’g Evid., Ex. R-8 at 103.)

      In his deposition, Richardson’s’ Vice President and Chief Financial Officer, Mark

Richardson, stated:

         I don’t think the word ‘avoid’ is correct. . . . [I]t’s a matter of getting
         the proper jurisdiction to get the proper use tax. I mean, this is,
         ultimately, a use tax. The state or the states have agreed, and 41 of
         the states have agreed that it’s a destination tax. In the nine-ones,
         they don’t have an agreement, but it’s still known that it’s a
         destination tax. So the delivery is done to comply, to make sure that
         the proper jurisdiction gets the tax.

(Resp’t Des’g Evid., Ex. R-8 at 9, 103.)          He further testified that another reason

Richardson’s offered out-of-state delivery options was to ensure that its non-reciprocal



                                             10
customers were not taxed in two jurisdictions on the same sales transaction:

         [U]ltimately, the issue here isn’t paying the tax. It’s being double
         taxed. They pay the tax. Every one of these customers pays tax.
         There’s some states that . . . have no sales tax. A lot of those are
         reciprocal states, and so those people don’t pay tax. But nobody’s
         getting out of anything here. The tax is getting paid. It’s just a
         matter of . . . whether it’s going to be in their home state where
         they’re using it, or in Indiana where the dealership is located that,
         you know, gave them the best deal.

(Resp’t Des’g Evid., Ex. R-8 at 69.)         Moreover, he explained that Richardson’s

structured its business model in a manner that would facilitate competitive pricing:

         So not only do we save the freight, but our margins can be less. Our
         whole business model and everything is structured to do that.
         Basically, if your biggest sale feature is going to be price, it better be
         a good one. . . . So because of the lower overhead, the proximity to
         the factories, and just the overall business model, as far as a lot of
         the attention is paid to keep overhead down, to keep costs down, so
         we can keep our margins thin so we can offer the biggest discounts
         to people to entice them to come from all over the country, is the
         business model.

(Resp’t Des’g Evid., Ex. R-8 at 24.)

      In sum, Michigan deliveries were not made for the purpose of affording non-

reciprocal customers a means to escape taxation or to free Richardson’s from collecting

and remitting sales tax on the transactions.           Instead, the unrebutted evidence

demonstrates that Richardson’s’ delivery procedures were designed to further the

legitimate business purposes of ensuring tax is paid to the proper jurisdiction, avoiding

double taxation, and maintaining competitive pricing. (See Resp’t Des’g Evid., Ex. R-8

at 22-24, 69, 103.) Accordingly, Richardson’s had legitimate business purposes for

delivering RVs to its non-reciprocal customers in Michigan, and the Court will not

disregard the deliveries in Michigan.

                                        3. Exemption

                                            11
           Finally, the Department claims that the Indiana Legislature intended to subject all

non-reciprocal buyers to Indiana’s sales tax because they were omitted from the

exemption under Indiana Code § 6-2.5-5-39. (See Resp’t Br. at 16-18.) This statute

exempts purchases of cargo trailers or recreational vehicles from Indiana’s sales tax

only if:

             (5) the cargo trailer or recreational vehicle will be titled or registered
             in a state or country that provides an exemption from sales, use, or
             similar taxes imposed on a cargo trailer or recreational vehicle that is
             purchased in that state or country by an Indiana resident and will be
             titled or registered in Indiana.

             A transaction involving a cargo trailer or recreational vehicle that
             does not meet the requirements of subdivision (5) is not exempt from
             the state gross retail tax

IND. CODE § 6-2.5-5-39(c) (2010). The Department’s inference from the omission of

non-reciprocal customers from the exemption is unreasonable, however, under these

facts.

           An exemption is only effective to shield a transaction from taxation if it is taxable

in the first instance. Consequently, Richardson’s’ sales to non-reciprocal customers first

must fall within the ambit of the imposition statute for an exemption to apply. Here,

physical delivery does not occur in Indiana, and because the transactions at issue were

not made in Indiana, they are not subject to Indiana’s sales tax in the first place. See

I.C. § 6-2.5-2-1(a). Moreover, regardless of the Legislature’s intent in excluding non-

reciprocal purchasers from the exemption, the exemption statute itself is just that – an

exemption statute – not an imposition statute that imposes tax on these purchases.

See generally I.C. § 6-2.5-5-39. Accordingly, the exemption statute has no effect on




                                                12
these non-taxable transactions, and the Court will not deny summary judgment on this

basis.7

                                      CONCLUSION

          For the above-stated reasons, the Court GRANTS summary judgment in favor of

Richardson’s and AGAINST the Department, vacating the Department’s proposed

assessments of Indiana sales tax for the years at issue.

          SO ORDERED this 1st day of August, 2017.


                                                        Martha Blood Wentworth, Judge
                                                        Indiana Tax Court




7
   Richardson’s also asserts that the Department’s sales tax assessments contained
mathematical and legal errors and violated the United States and Indiana Constitutions. (See
Br. of Pet’r Supp. Mot. Summ. J. (“Pet’r Br.”) at 26-31.) Given the holding in favor of
Richardson’s, the Court will not address these arguments.



                                            13
Distribution: Randal J. Kaltenmark, Ziaaddin Mollabashy, Evan W. Bartel, Jessica
Reagan Gastineau, Winston Lin




                                      14
