Sales Tax State Activity Update - June 2004

Use Tax On Aircraft Violates Indiana Commerce Clause

The Indiana Tax Court agreed with the Taxpayer in finding that imposition of use tax on lease payments for aircraft used in interstate commerce violates the Commerce Clause.

The Taxpayer, Simon Aviation, Inc. appealed the Indiana Department of Revenue’s imposition of use tax on aircraft lease payments. The lessee challenged whether use tax is due on lease payments for aircraft when the Department of Revenue had previously issued a letter ruling clarifying that lease payments were exempt. The issue before the Court is whether these lease payments are subject to Indiana’s use tax.

The Taxpayer claimed that the lease payments it made during the years at issue are not subject to use tax because the lease payments are not taxable pursuant to the Commerce Clause.

The Tax Court agreed that the imposition of Indiana’s use tax against the lease payments does discriminate against interstate commerce therefore violating the Commerce Clause resulting in a greater tax burden on aircraft purchased out-of-state than aircraft purchased in-state. The Court thereby granted summary judgment in favor of the Taxpayer.

The case is available at : http://www.in.gov/judiciary/opinions/archive/04020401.tgf.html

(Indiana Tax Court, Simon Aviation, Inc., v Indiana Department Of State Revenue {Cause No. 49T10-003-TA-31} 04/02/2004) 06/04

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