Sham Transactions Cannot Be Used to Avoid Indiana Use Tax

Apr 3rd, 2017

The Indiana Department of Revenue recently ruled that a taxpayer improperly avoided use tax on the purchase of an RV by entering into a sham transaction.

The taxpayer purchased, used, and stored an RV in Indiana but titled the RV to a Montana LLC. The sole purpose of the LLC was to hold title to the RV.

Indiana ignores sham transactions when assessing taxes. Sham transactions are those entered into solely to escape tax. The sole purpose of titling the RV in Montana was to escape tax. As a result, the Department ignored the Montana title and assessed tax for the use and storage of the RV in Indiana.