The Indiana Tax Court recently ruled in Zimmer, Inc. v. Indiana Department of Revenue that Zimmer, Inc.’s Indiana activities regarding exhibition booth components constituted a taxable use and thus owed tax for some of the exhibition booth components. Zimmer is in the business of designing, manufacturing and distributing a wide variety of medical device products. In its activities, it participates in many out-of-state trade shows and conventions and has an elaborate system for construction storage, repair, refurbishment and modification of exhibit booth components, all of which are stored in its Indiana warehouse for use out-of-state. The Indiana Department of Revenue argued, on four bases, that the exhibition booth components are subject to Indiana Use Tax for which the Indiana Tax Court disagreed as to three but agreed as to one basis.
First, the Indiana Department of Revenue argued that the revolving storage, out-of-state use, re-storage and reuse rendered the exhibition booth components taxable. The Indiana Tax Court disagreed citing that the scheme is consistent with the statutory exclusion under Indiana statute allowing storage in Indiana “for subsequent use outside of the state”.
Second, the Department argued that Zimmer exercised other rights of ownership of the exhibition components while located in Indiana which constituted a taxable use. In particular, it was argued that the selection of components for a particular convention, etc., were those ownership rights. The Tax Court disagreed with the Department’s assertion that Zimmer’s act of decision-making in Indiana made those components taxable when none of those decisions were associated with physical actions in Indiana.