The Indiana Department of Revenue recently issued a ruling that a taxpayer's purchases of chemical storage tanks were taxable.
The taxpayer sold chemicals and used the storage tanks to deliver these chemicals to its customers. The taxpayer's contracts with customers stated that, in connection with the sale of chemicals, the taxpayer would loan the tank to customers at no charge. The customers were to return the tanks to the taxpayer. If the customers did not return the tanks, they had to reimburse the taxpayer for the tanks.
Indiana taxes the purchase of tangible personal property unless an exemption applies. There is an exemption for returnable containers purchased to be resold to customers. Taxpayers may also purchase rental property exempt.
The Department ruled that the taxpayer's purchase of these tanks was taxable. The tanks were not resold or leased to customers. The taxpayer did not charge customers separately for the use of the tanks and did not characterize the transfer as a lease in its contracts. The taxpayer therefore had to pay tax on its purchase of the tanks.