ATTORNEY FOR PETITIONER: ATTORNEYS FOR RESPONDENT:

BRETT J. MILLER GREGORY F. ZOELLER BINGHAM GREEN E BAUM DOLL , LLP ATTORNEY GENERAL OF INDIANA Indianapolis, IN JESSICA E. RE A GAN DEPUTY ATTORNEY GENERAL Indianapolis, IN

_____________________________________________________________________ 

# IN THE INDIANA TAX COURT

_______________________________________________ ______________________ HAMILTON SOUTHEASTERN ) UTILITIES , INC., ) ) Petitioner , ) ) v. ) Cause No. 49T10

- 1210

- TA

- 000 6 8 ) INDIANA DEPARTMENT OF ) STATE REVENUE, ) ) Respondent. )

_____________________________________________________________________ _ ORDER ON PARTIES ’ CRO SS

- MOTIONS FOR SUMMARY JUDGMENT
FOR PUBLICATION August 6 , 2015 WENTWORTH, J. Hamilt on Southeastern Utilities, Inc. challenges the Indiana Department of State Revenue’s assessment of Indiana’s utility receipts tax (URT) on system d evelopmen t

c harges and connection f ees it collected during the 2006, 2007, and 2008 tax years (the years at issue)

. This matter is currentl y before the Court on th e parties’ cro ss - motions for summary judgment , which present one issue: whether Hamilton Southeastern’s system development charges and connection fees are gros s receipts subject to the URT.2 FACTS AND PROCEDURAL HISTORY 1 The following facts are not in dispute. Hamilton Southeastern is a domestic business corporation that provides sewage collection and disposal services to 17,000 customers in Hamilton County, Indiana. ( See Pet’ r Br. Supp. Cross

- M ot. Summ. J. (“Pet’r Br.”) at 5 .) ( See also Pet’r Des’g Evid. Supp. Resp. Resp’t Mot. Summ. J. (“Pet’r Des’g Evid.”) at 2 ¶ 6 (indicating that Hamilton Southeastern designated it s B rief in Support of its Cross

- Motion for Summary J udgment as evidence ) .) Hamilton Southeastern charges its customers a fixed, monthly rate in exchange for these services

. ( See Pet’r Original Tax Appeal Pet. (“Pet’r Pet.”) ¶ 10 .) ( See also Pet’r Des’g Evid. at 2

- 3 ¶ 7( G ) (indicating that Hamilton Southeastern designated portions of its Petition as evidence ) .) Ha milton Southeastern also charges two other one

- time fees as new properties

are developed and built. ( See Pet’r Br. at 6

- 11.) The first is the system development charge that is “ an amount which the [ Indiana Utility Regulatory Commission ] permits [ H amilton Southeastern ] to collect, consistent with a tariff, to be used for future expansion of the sewer services provided by [ Hamilton Southeastern ]

. ” ( See Pet’r Des’g Evid ., Ex. 1 ¶ 14 .) More s pecifically, Hamilton Southeastern charg e s $ 2 , 40 0 per equivalent dwelling unit (EDU) 2 each time a new customer is added to its sewage system

. ( See Pet’r Br. at 6

- 7.) This charge is generally paid by the property developer before he conveys the property to the buyer . ( See Pet’r Pet. ¶ ¶ 18, 21.) Of the $2,400,

1 Portions of the parties’ designated evidence are confidential. Consequently, this order will provide only the information necessary for th e reader to understand its disposition of the issues presented. See generally Ind. Administrative Rule 9.

2 One equivalent d welling unit equals the amount of wastewater treatment plant capacity necessary to service 300 gallons per day. ( See Resp’t Confd’l Des’g Evid., Ex. B at 56.)3

Hamilton Southeastern remits $1 , 050 to the Town of Fishers , Indiana pursuant to a Wholesale Sewer Agreement in order to purchase additional sewage treatment capacity

. ( See Pet’r Pet. ¶ 15 ; Pet’r Br. at 6

- 7 .) Hamilton Southeastern retains t he remaining $1,350 for future cap ital improvements and projects including, among other things, installing new equipment and lift stations (thereby increasing capacity in its own sewage collection and disposal system ) . ( See Pet’r Pet. ¶ 23 .) The second charge is the connection fee that is $305 per EDU

. ( See Pet’r Pet. ¶ 31.) The conn ection fee is imposed during the construction of a home or other structure and is generally paid by the builde r

. ( See Pet’r Pet. ¶¶ 31, 33.) In exchange for the connecti on fee, Hamilton Southeastern has its agent inspect the sewer line to determine whether it can be connected to the sewer system. ( See Pet’r Pet. ¶ 32

. ) A fter payment of the connection fee and the inspection , Hamilton Southeastern issues a permit. ( See Pet’r Br

. at 10. ) The builder takes this permit to Fishers , and after confirming the builder has paid the connection fee, Fishers issue s the builder a building permit. ( See Pet’r Pet. ¶ 35.) In August of 2010, the Department completed an audit of Hami lton Southeastern

. ( See Resp’t Confd’l Des’g Evid., Ex. A at 26.) As a result, the Department issued proposed URT assessments , including interest and penalties on , among other things, Hamilton Southeastern ’s receipts from its system development charge s and connection fee s . ( See Resp’t Confd’l Des’g Evid ., Ex. A at 2

- 13 , 29

- 30, 35 .) Hamilton Southeastern protested the proposed assessments

. ( See Resp’t Confd’l Des’g Evid., Ex. B at 2

- 10.) ( See also Pet’r Des’g Evid

. at 2 (stating that Hamilton Southe astern designated a ll evidence that was designated by the4

Department). ) On August 31, 2012, after conducting an a dministrative hearing, the Department issued a Letter of Findings denying Hamilton Southeastern ’s protest. ( See Resp’t Confd’l Des’g Evid., E x. A at 14

- 25.) Hamilton Southeastern initiated this original tax appeal on October 29, 2012

. Hamilton Southeastern and the Department filed cross - motions for summary judgment , and t he Court held a hearing on th e motions on September 5, 2014. A dditional facts will be supplied when necessary. STANDARD OF REVIEW Summary judgment is appropriate when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Ind. Trial Rule 56(C). Cross

- motions for summar y judgment do not alter this standard. Mirant Sugar Creek, LLC v. Indiana Dep’ t of State Revenue , 930 N.E.2d 697, 699 (Ind. Tax Ct. 2010)

. LAW Indiana imposes URT on “ the entire taxable gross receipts of a [ n Indiana resident ][

. ]” I ND

. C ODE § 6

- 2.3

- 2

- 1 (1) (2006 ) . As used in the imposition statute above , t he term “gross receipts” means “anything of value, including cash or other tangible or intangible property , that a taxpayer receives in consideration for the retail sale of utility services for consump tion before deducting any costs incurred in providing the utility services.” I ND

. C ODE § 6

- 2.3

- 1

- 4 (2006). Nonetheless, “ g ross receipts” that are subject to the URT are limited to those received in exchange for the “ installation, maintenance, repair, equ ipment, or leasing services provided to a commercial or domestic consumer that are directly related to the delivery of utility services to the commercial or domestic consumer or the removal of equipment from a commercial or domestic consumer upon5

the termi nation of service.” I ND

. C ODE § 6

- 2.3

- 3

- 10 (2006 ). ANALYSIS On appeal, the Department claims that pursuant to Indiana Code §§ 6

- 2.3

- 1

- 4 and 6

- 2.3

- 3

- 10, Hamilton Southeastern’s system development charges and connection fees a re gross receipts subject to URT. ( See Resp’ t Br. Supp. M ot. Summ. J. (“Resp’t Br.”) at 6

- 8.) Alternatively , the Department contends that the co nnection fees are subject to URT because Hamilton Southeastern did not separate them from other taxable receipts on its records or returns as required by Indiana Code § 6

- 2.3

- 3

- 2 . ( See Resp’t Reply Pet’r Responsive Br. (“Resp’t Reply Br.”) at 3.) Indiana Code § 6 - 2.3 - 1 - 4 The first question befor e the Court is w hether Hamilton Southeastern’s system development charges and connection fees a re gross receipts subject to the URT under Indiana Code § 6

- 2.3

- 1

- 4. The reso lution of this issue depends on whether Hamilton Southeastern receives the system development charges and connection fees “ in consideration for the retail sale of utility service s for consumption [

. ]” I.C. § 6

- 2.3

- 1

- 4 (emphase s added)

. When confronted with a questio n of statutory construction, the Court’s role is to determine a nd implement the intent of the L egislat ure in enacting that statutory provision. See John son Cnty. Farm Bureau Coop. Ass’ n v. Indiana Dep’t of State Revenue , 568 N.E.2d 578, 580 (Ind. Tax Ct. 1991), aff’d by 585 N.E.2d 1336 (Ind. 1992). Generally , the actual language of the statute itself, as chosen by the L egislature , is the best evidence of this intent. See id. at 581. For purposes of the URT, “ utility service ” means , among other things, “ the6

furnishing of . . . [ s ] ewage (as defined in IC 13

- 11

- 2

- 200). ” I ND

. C ODE § 6

- 2.3

- 1

- 14(5) (2006)

. In turn, “s ewage ” is defined in Indiana Code § 13

- 11

- 2

- 200 a s “al l refuse, human excreta, garbage, waste or waste products, or any combination of these substances that : (1) is potentially capable of contaminating the environment; and (2) may be collected and carried off i n a pipe, ditch, or channel.” I ND

. C ODE § 13

- 11

- 2

- 200 (2006). Accordingly, t he plain language of Indi ana Code § § 6

- 2.3

- 1

- 14 (5) and 13

- 11

- 2

- 200 in tandem indicates that sewage utility services are services that remove sewage

. S ee DeKalb C nty. E. Cmty. Sch. Dist. v. Dep’t of Local Gov’ t Fin. , 9 30 N.E.2d 1257, 1260 (Ind. Tax Ct. 2010) (explaining that a statu te must be read in such a way that prevents an illogical or absurd result). The D epartment contends, however, that the URT’s definition of a sewage utility service must be informed by the b roader definit ion of “sewage disposal service ” found in Indiana’s u tility r egulatory l aws. Specifically , the Department cites Indiana Code § 8

- 1

- 2

- 89 (a)(1) , which states :

“ Sewage disposal service” means any public utility service whereby liquid and solid waste, sewage, night soil, and industrial waste of any single territorial area is collected, treated, purified, and disposed of in a sanitary manner, and includes all sewage treatment plant or plants, main sewers, submain sewers, local and lateral sewers, intercepting sewers, outfall sewers, force mains, pumping stations, ejector stations, and all other equipment and appurtenances necessary or useful and convenient for the re ndition of such service. I ND

. C ODE § 8

- 1

- 2

- 89 (a)(1) (2006) (emphasis added). 3 The Department’s apparent rationale is th at this broader definition , which includes infrastructure and equipment as

3 The Department also cites to one of its regulations , which contains similar language to Indiana Code § 8

- 1

- 2

- 89 (a)(1)

. Compare 170 I ND

. A DMIN

. C ODE 8.5

- 1

- 1 (2006) (see http://www.in.gov/legislative/iac/ ) with I ND

. C ODE § 8

- 1

- 2

- 89(a)(1) (2006)

.7

well as removal services, is relevant to the definition of s ewage utility services for purposes of the URT because Indiana had already defined and developed the meaning for utility regulatory purposes . ( See Hr’g Tr. at 10.) The Department’s reasoning is unpersuasive because the Legislature has given no indication that a broader definition applies

. The Legislature is presumed to say what it means. Hyatt Corp. v. Dep’ t of State Revenue , 695 N.E.2d 1051, 1053 (Ind. Tax Ct. 1998), review denied . Here, t he Legislature did not define a sewage utility service by reference to Indiana Code § 8

- 1

- 2

- 89 (a)(1) ; instead , it referred to the definition under Indiana Code § 13

- 11

- 2

- 200. See Scopelite v. Indiana Dep’t of Local Gov’ t Fin. , 939 N.E.2d 1138, 1143 (Ind. Tax Ct. 2010) (explaining that when construing statutes , it is equally as important to recognize what they do not say as it is to recognize what they do say)

. Accordingly , as defined in Indiana Code § 6

- 2.3

- 1

- 4, sewage utility service refers simply to furnishing the removal services themselves, nothing more

. Nonetheless, t he Department further argues that the system development charge s and connection fees must by necessity be gross receipts under the URT definition because they are mandatory, necessary , and essential for the provision of utility services , i. e., but for the ir payment, no sewage services for consumption would exist

. ( See Resp’t Br. at 6 ; Hr’g Tr. at 12, 32 .) T he claim that necessity breeds inclusion , however, is not grounded by the words of the statute itself, and therefore , the Court will not read this into the statute

. See DeKalb , 930 N.E.2d at 1260 (explaining that when the language of a statute is clear and unambiguous, the Court may not expand or contract the meaning of a statute by reading into it language to correct any

s upposed omis sions or defects); s ee also SAC Fin., Inc. v. Indiana Dep’t of State8

Revenue , 24 N.E.3d 541, 547 (Ind. Tax Ct. 2014) (explaining that because the Legislature has intentionally chosen its language, the Court will not expand or contract the meaning of a stat ute by reading language into it to correct supposed omissions) , review denied

. Consequently, neither the system development charge s nor the connection fee s are gross receipts subject to the Indiana URT pursuant to Indiana Code § 6

- 2.3

- 1

- 4

. Indiana Code § 6 - 2.3 - 3 - 10 Next, the Court must determine whether Hamilton Southeastern’s system development charges and connection fees are gross receipts subject to the URT under Indiana Code § 6

- 2.3

- 3

- 10. The Department claims that they are because they are both
pa id in consideration for services that a re directly related to the delivery of sewage utility services to the consumer. ( See Resp’t Br. at 7

- 8; Resp’t Reply Br. at 3

- 6 ; Hr’g Tr. at 18

- 19, 27.) Chapter 3 of the URT statutory framework identif ies specific receipts that are taxable gross receipts even if they fail to meet the definition under Indiana Code § 6

- 2.3

- 1

- 4. See generally I ND

. C ODE § § 6

- 2.3

- 3

- 1 to

- 10

. F or instance, I ndiana Code § 6

- 2.3

- 3

- 10 states:

[g] ross receipts include receipts r eceived for installation, maintenance, repair, equipment, or leasing services provided to a commercial or domestic consumer that are directly related to the delivery of utility services to the commercial or domestic consumer or the r emoval of equipment fro m a commercial or domestic consumer u pon the termination of service. I.C. § 6

- 2.3

- 3

- 10 (emphase s added)

. In other words , this provision includes as gross receipts those receipts that are : 1) received for an enumerated service , 2) the9

enumerated service is provided to a consumer , and 3) the enumerated service is directly related to the delivery of (sewage) utility services to the ( same ) consumer. See I.C. § 6

- 2.3

- 3

- 10. T he grammatical structur e of Indiana Code § 6

- 2.3

- 3

- 10 does not support finding that Hamilton Southeastern’s system developmen t charge s and connection fees are taxable gross receipts

. See Clifft v. Indiana Dep’t of State Revenue , 660 N.E.2d 310, 316 (Ind. 1995) (explaining that when interpreting a statut e, the Court will examine the statute as a whole, including the grammatical structure of the clause or sentence at issue ). Specifically, the statute initially refers to “a” consumer , using the indefinite article to refer to anyone who consumes one or more of the enumerated services. T hen, the
statute requires the enumerated services to be “ directly related ” to the delivery of (sewage) utility services to the same consumer , by the use of the definite article “the.” See T HE C HICAGO M ANUAL OF S TYLE §§ 5.69

- 5.70 at 222

- 23 (16 th ed. 2010) (explaining that the use of a n indefinite article points to nonspecific objects, things, or persons that are not distinguished from th e other members of a class; the use of a definite article points to a definite object that is a thing that is so well understood that it does not need description). See also Enhanced Telecomm. Corp. v. Indiana Dep’ t of State Revenue , 916 N.E.2d 313, 319 (Ind. Tax Ct. 2009) (explaining that to qualify as a gross receipt under Indiana Code § 6

- 2.3

- 3

- 10, the receipt “must be received in the course of providing such services ‘to a consumer that are directly related to the delivery of utility services to th[at] consumer’”) (citation omitted) , review denied

. Thus, even if the Department was co rrect that Hamilton Southeastern’s installation and inspection services are “directly related” to its provision of sewage utility servic es, Indiana Code §10

6

- 2.3

- 3

- 10 could not apply to Hamilton Southeastern’s receipts that are paid by property developers, not by the consumers of its sewage utility service s

. ( See Pet’r Br. at 9.) Consequently , neither the system development charges nor the connection fees are gross receipt s pursuant to Indiana Code § 6

- 2.3

- 3

- 10. Indiana Code § 6 - 2.3 - 3 - 2 Finally, the Department argues that even if the connection fees are not subject to the URT under Indiana Code § 6

- 2.3

- 1

- 4 or Indiana Code § 6

- 2.3

- 3

- 10, they are taxable under Indiana Code § 6

- 2.3

- 3

- 2. Indiana Code § 6

- 2.3

- 3

- 2 states that “ rec eipts that would otherwise no t be taxable under this article are taxable gross receipts under this article to the extent that the amount of the nontaxable receipts are not separated from taxable receipts on the records or returns of the taxpayer. ” I ND

. C O DE § 6

- 2.3

- 3

- 2 (2006). The Department claims that Hamilton Southeastern’s connection fees were not separately stated f r o m th e taxable receipts on either Hamilton Southeastern ’s records or
returns. ( See Resp’t Reply Br. at 3.) To support this claim , t he D epartment designated as evidence one pag e from its Letter of Findings and one page from the Audit Report’s Explanation of A djustments , both stating that Hamilton Southeastern’s connection fees

were not separately stated. ( See Resp’t Confd’l Des’g Evid., Ex. A at 20 , 29 .) Hamilton Southeastern failed to designate any evidence disputing the Department’s claim ; nonetheless, summary judgment cannot be granted to the Department solely because Hamilton Southeastern failed to offer opposing evidence

. See T.R. 56 (C) (stating that “[s]ummary judgment shall not be granted as of course because the opposing party fails to offer opposing affidavits o r evidence, but the court shall make its determination from the evidentiary matter designated to the court ”) . H ere ,11

the Department’s designated evidence in the Audit Report indicates with some particularity that the connection fees were not separated from taxable receipts on Hamilton Southeastern’s records . ( See Resp’t Confd’l Des’g Evid. , Ex. A at 29.) Specifica lly, the Explanation of Adjustments stated that Hamilton Southeastern’s connection fee account included other taxable fees such as “receipts collected from developers in order for them to use HSE’s sewer system,” such as engineering fees. ( See Resp’t Conf d’l Des’g Evid., Ex. A at 29.) On the contrary , t he Department failed to desi gnate evidence showing whether Hamilton Southeastern ’s returns separate the connection fee from taxable receipts . ( See Resp’t Confd’l Des’g Evid., Ex. A at 20, 29.) According ly , it is reasonable to infer that Hamilton Southeastern may have separated its nontaxable from its taxable gross receipts on its returns

. See U

- Haul Co. of Ind., Inc. v. Indiana Dep’ t of State Revenue , 896 N.E.2d 1253, 1255 (Ind. Tax Ct. 2008) (explaining that the Court draws all reasonable inferences in favor of the non

- moving party when resolving motions for summary judgment). Consequently , there is a genuine issue of material fact whether Indiana Code § 6

- 2.3

- 3

- 2 converts Hamilton Southeaste rn’s nontaxable conn ection fees into gross receipts subject to URT. CONCLUSION For the foregoing reasons, the Court GRANTS summary judgment in favor of Hamilton Southeastern and against the Department o n the first two issues

. With respect to the third issue, there is a genuine issue of material fact. Accordingly , the12

Court will schedule a case management conference by separate order

. 4
SO ORDERED this 6 th day o f August 2015

.

________________________________ Martha Blood Wentworth Judge, Indiana Tax Court

DISTRIBUTION : B rett J. Miller, Jessica E. Re a gan

4 Hamilton Southeastern has asked this Court to strike Exhibi t C from the Department’s designated evidence because it is not relevant, it would cause confusion of the issues, it contains inadmissible hearsay, and it is not reliable. ( See Pet’ r Br. Supp. Cross

- Mot. Summ. J. at 28.) Because o f the disposition of this case, the Court denies Hamilton Southeastern’s Motion to Strike.