Bottom falls out of Lessor’s “mixed bag” argument. Taxpayer (RentCo) was an Indiana business that leased, rented, and maintained trucks, tractors, trailers, and other specialized equipment.  RentCo was one member of a larger group of seven related businesses.  RentCo owned all of the equipment used by related operating companies, leasing the equipment to its “sister entities” as well as to third-party customers.  Reasoning that it was one entity in a larger “controlled group of corporations” (Group) that collectively engaged in a “unitary transportation business,” RentCo asserted that it was entitled to claim the “public transportation” sales tax exemption.  That provision, Ind. Code § 6-2.5-5-27, provides:

Transactions involving tangible personal property and services are exempt from the state gross retail tax, if the person acquiring the property or service directly uses or consumes it in providing public transportation for persons or property.

According to RentCo, it had an “organic” unitary relationship with the Group’s operating entities that entitled them collectively to claim the public transportation exemption.  To support its position, RentCo relied upon “unitary business” principles developed for income tax apportionment purposes.  The Department, however, accused RentCo of “mixing apples and oranges” in “creating a unique blend of sales and income tax law and principles.”  It was irrelevant whether RentCo could establish a unitary relationship with its sister entities, because its “argument rests on a hybrid interpretation of sales and income tax law which finds no support in either statute or common sense.”  The issue was “whether [RentCo] is in the business of providing public transportation.”  It wasn’t, and “there is no authority which allows [an entity to] re-characterize its separate entity status in order to collectively obtain a narrowly defined sales and use tax advantage.”

Lessor fails to “debunk” assessments for rental of accommodations.  RentCo built bunkhouses at its business location that were used by the sister entities’ drivers while the drivers’ trucks were being repaired, cleaned, or while the drivers were on required rest breaks.  RentCo invoiced its sister entities for use of the bunkhouses.  The Department concluded that sales tax should have been collected because “the invoices are for furnishing of accommodations for less than 30 days.”  RentCo disputed the assessments, claiming it was not in the business of furnishing or renting accommodations.  While RentCo’s “core business” may have been leasing trucks, the Department observed:  “[RentCo] constructed accommodations, rented those accommodations, billed its sister entities for the use of the accommodations, and received payments based on those bills.”  And RentCo provided no information showing that purchasers of the accommodations were entitled to the public transportation exemption.

Storage service wasn’t taxable.  The Department concluded that RentCo did not owe sales tax on charges to its sister operating entities for storing damaged merchandise.  The storage service did not involve the transfer of tangible personal property and therefore was not taxable.

The Department’s ruling can viewed here.