Indiana Administrative Code
Title 45 - DEPARTMENT OF STATE REVENUE
Article 2.2 - SALES AND USE TAX
Rule 5 - Exempt Transactions of a Retail Merchant
Section 5-61 - Public transportation; acquisitions

Universal Citation: 45 IN Admin Code 5-61

Current through September 18, 2024

Authority: IC 6-8.1-3-3

Affected: IC 6-2.5

Sec. 61.

(a) The state gross retail tax shall not apply to the sale and storage or use in this state of tangible personal property which is directly used in the rendering of public transportation of persons or property.

(b) Definition: Public Transportation. Public transportation shall mean and include the movement, transportation, or carrying of persons and/or property for consideration by a common carrier, contract carrier, household goods carrier, carriers of exempt commodities, and other specialized carriers performing public transportation service for compensation by highway, rail, air, or water, which carriers operate under authority issued by, or are specifically exempt by statute or regulation from economic regulation of, the public service commission of Indiana, the Interstate Commerce Commission, the aeronautics commission of Indiana, the U.S. Civil Aeronautics Board, the U.S. Department of Transportation, or the Federal Maritime Commissioner; however, the fact that a company possesses a permit or authority issued by the P.S.C.I., I.C.C., etc., does not of itself mean that such a company is engaged in public transportation unless it is in fact engaged in the transportation of persons or property for consideration as defined above.

(c) In order to qualify for exemption, the tangible personal property must be reasonably necessary to the rendering of public transportation. The tangible personal property must be indispensable and essential in directly transporting persons or property.

(d) The following is a list of items which the department has determined to be necessary to the rendering of public transportation:

Roadway machinery and equipment;

Caboose and locomotive supplies such as fuses, lanterns, batteries, and flags;

Tariff publications;

Vehicles used for public transportation;

Communication equipment;

Equipment and items purchased to meet federal requirements;

All replacement parts, repair parts, and materials consumed by exempt equipment;

Tools and equipment used to repair and maintain rolling stock and track;

Vehicles used primary for transportation of track maintenance crews;

Items used for repairs and maintenance of such vehicles;

Items used for production of financial matters, insurance, schedules, routes, and rates;

Items used to provide customer stations, handle baggage, sell tickets;

Items used to keep vehicles clean and safe for the passengers.

Machine shop and truck tools;

Equipment related to the costruction [sic.] and operation of terminals;

Directories;

Gas storage facilities;

Caboose and locomotive compliments such as towels, masking tape, powders, cleaners, ice, water coolers, and bottles [sic.] water;

Cleaning supplies;

Employee uniforms;

Garage supplies.

(e) The following is a PARTIAL list of items which are not directly used or consumed in the rendering of public transportation and, therefore, are subject to tax:

Promotional expenses, matches, jackets, and promotional items given away to existing or potential customers, advertising to the public, except the printing of schedules and routes.

Sales expenses, sales telephones, and related computer equipment used exclusively for sales activities such as marketing, sales projection, and costing. Such equipment used to handle actual ticket sales (i.e., at the reservation office) or to organize loads and dispatch trucks is exempt.

Office supplies, furniture, equipment, and related items for sales personnel executives including ground and lawn care, except grading required for the vehicles directly used in the rendering of public transportation.

Heating and air conditioning for separate, off-site executive headquarters is subject to tax.

Heating and air conditioning for reservation area, vehicle maintenance area, or switching yard control buildings is exempt.

(f) Pre- and post-transportation activity. The purchase, storage, or use of tangible personal property used for activities prior to or subsequent to the rendition of public transportation is subject to tax. For purposes of this regulation [45 IAC 2.2], transportation means the movement, transporting, or carrying of persons or property from one place to another and includes loading and unloading of persons or property into or from transportation vehicles.

-EXAMPLES-

(1) Ramps used by travelers for boarding and departing from airplanes are exempt because the ramps are directly used in rendering public transportation.

(2) Docks possessed by a carrier and used for loading and unloading vehicles operated in rendering public transportation are exempt.

(g) Storage facilities and equipment. In general, storage facilities and associated equipment for exempt vehicles are exempt. Additionally, tangible personal property directly used for temporarily storing persons or property being transported is exempt from tax because temporary storage is considered to be an integral part of rendering transportation.

-EXAMPLES-

(1) Airline passengers' luggage is held in a baggage room until luggage can be loaded on the aircraft. The racks, carts, bins, and other baggage room equipment are exempt from tax.

(2) A carrier receives property from another carrier and temporarily stores such property prior to loading it for further shipment. Equipment used to handle such in transit property is exempt from tax.

(3) Construction ma terials incorporated into grain elevators or warehouses used for storage are not exempt under this regulation [45 IAC 2.2]. Similarly, fuel storage tanks at a truck terminal are exempt.

(h) Repair and maintenance facilities and equipment.

(1) Machinery, tools, equipment, and facilities used for repair and maintenance of tangible personal property directly used in public transportation are not subject to tax.

-EXAMPLE-

Chain hoists, tire spreaders, welding equipment, drills, sanders, wrenches, paint brushes, sprayers, garages, repair shops, wreckers.

(2) Replacement parts used to replace worn, broken, inoperative, or missing parts or accessories on exempt property are exempt from tax.

-EXAMPLE-

Lights, bulbs, batteries, timers, tires, tubes, wheels, etc., used to replace similar parts or accessories on an exempt truck are exempt from tax.

(i) Transportation vehicles. In general, all vehicles including transportation vehicles such as airplanes, locomotives, rolling sto cks, watercra ft, ve ssels, pipelines, buses, tractors, trailers, trucks, and other vehicular equipment including containers directly used in rendering public transportation are exempt from tax. This exemption does not extend to motor vehicles, including automobiles, used to solicit business or to automobiles supplied to company employees for their personal use.

-EXAMPLES-

(1) A carrier purchases wreckers and service trucks to be used in towing or servicing transportation vehicles which malfunction. The wreckers and service trucks are exempt because they are directly used in rendering public transportation.

(2) Motor vehicles purchased by a carrier, including automobiles, used to solicit business are taxable because they are not directly used in rendering public transportation.

(3) Automobiles supplied to company employees for their personal use are taxable.

(j) Other property. In general, all other tangible personal property is taxable.

-EXAMPLES-

(1) A carrier owns or rents a fork lift to be used for loading and unloading cargo from a railroad car, truck, trailer, or container. The purchase price or rental charge for use of this equipment is exempt from tax.

(2) A carrier purchases a scale for use in determining freight charges to be billed to customers. The scale is exempt because it is directly used in rendering public transportation.

(3) An airline provides accommodations at a motel for pilots at a "turnaround" point. Such accommodations are taxable.

(k) Real property used for transportation. In general, the purchase, storage, or use of tangible personal property to be incorporated into or used as an improvement to realty used in connection with rendering public transportation is taxable. If, however, such items are directly used in rendering public transportation, this exemption is applicable.

(1) Items of tangible personal property incorporated into railroad beds and tracks, bridges, signal towers, and signaling equipment used for direct control of rolling stock, and materials and property incorporated into watchmen shacks, warehouses, tool sheds, and maintenance shops are taxable exempt from tax.

(2) Material used by a railroad in the construction of a passenger platform for the accommodation of the traveling public is exempt because the material is directly used in rendering public transportation.

(3) Sheet steel pilings for surfacing the watersides of piers used by railroads are not subject to tax. These steel piles are an integral part of the railroad's roadbed and are directly used in rendering public transportation.

(4) Items of tangible personal property purchased by a railroad and used in the construction of pedestrial subways and of trainmen are exempt because they are directly used in the rendition of public transportation.

(l) Purchasing exempt property.

(1) Motor Carrier. Common and/or contract motor carriers of property, and any person, firm, or corporation otherwise specifically exempt by statute from regulation by a federal or state regulatory body (example: I.C.C. or P.S.C.I.) engaged in public transportation of property for hire, when claiming exemption from the Indiana sales or use tax, shall issue to suppliers the Indiana general exemption certificate (form ST-105).

Before being eligible to issue valid general exemption certificates, form ST-105, the purchaser must be properly registered with the Indiana revenue department for sales tax purposes. Motor carriers maintaining facilities or offices in the state of Indiana should hold an Indiana registered retail merchant certificate, while out-of-state firms should have an out-of-state use tax collection and remittance permit. The registration number indicated on either permit must be indicated on the exemption certificate before it becomes valid.

(2) Individuals. Truckers engaged in public transportation but operating under another person's permit are to use exemption certificate form ST-135 when claiming tax exemption for items purchased which will be directly used or consumed for exempt purposes.

Exemption certificate form ST-135 is used in lieu of the general exemption certificate form ST-105 by the above-described individuals and eliminates the necessity for these individuals to register with the Indiana department of revenue.

(m) Promotional, sales, and other non-operational activities. Purchase, storage, or use of tangible personal property not directly used in rendering public transportation is taxable. Tangible personal property used for sales or other non-operational activities is not directly used in rendering public transportation and, therefore, is subject to tax. This category includes, but is not limited to, tangible personal property used in any of the following activities: promotional advertising; sales marketing; projection and costing; heating, air conditioning and ventilation units, and equipment for general temperature control of separate, off-site executive headquarters; research and development; waste disposal.

-EXAMPLES-

(1) A company possesses a contract carrier permit to transport stone for a limestone company. It also purchases stone and sells it to its own customers. During the period it is transporting its own stone, it is not engaged in public transportation and tangible personal property and equipment used and consumed in such activities are subject to tax.

(2) A company possesses a limited common carrier permit to transport oil drilling mud, water, and equipment. The company also uses its equipment and employees at the well-drilling site in setting up and removing equipment as well as utilizing the mud and water in the drilling process. During all operations and activities, except the actual transportation of the mud, water, and equipment, the company is not engaged in public transportation, and the tangible personal property used or consumed in such activities is subject to tax.

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