Source: http://www.in.gov/legislative/iac/20111228-IR-045110755NRA.xml.html
Timestamp: 2013-12-12 19:02:26
Document Index: 574829888

Matched Legal Cases: ['§ 6', '§ 6', '§ 6', '§ 6', '§ 6', '§ 6', '§ 6', '§ 6', '§ 6', '§ 6', '§ 6', '§ 6', '§ 6', '§ 6', '§ 6', '§ 6']

04-20100708.LOF
Letter of Findings Number: 04-20100708
For Tax Years 2006 - 2009
I. Sales/Use Tax–Lighting Equipment.
Authority: IC § 6-8.1-5-1(c); IC § 6-2.5-2-1; IC § 6-2.5-3-2; IC § 6-2.5-1-1; 45 IAC 2.2-1-1.
Taxpayer protests the assessment of use tax for lighting equipment.
II. Sales/Use Tax–Barcode Equipment.
Authority: IC § 6-2.5-3-2; IC § 6-2.5-3-4; IC § 6-8.1-5-1(c); 45 IAC 2.2-5-8(j).
Taxpayer protests the assessment of use tax on barcode equipment.
Taxpayer "is engaged in the business of designing and manufacturing point of sales printed packaging for their customers." Taxpayer was audited by the Indiana Department of Revenue ("Department"). Following the audit, Taxpayer filed a protest. A telephone hearing was held, and this Letter of Findings results. Further facts will be supplied as required below.
The Department initially notes that the burden of proving a proposed assessment wrong rests with the person against whom the proposed assessment is made, as provided by IC § 6-8.1-5-1(c). Regarding sales and use tax, Indiana imposes a sales tax on retail transactions and a complementary use tax on tangible personal property that is stored, used, or consumed in the state. IC § 6-2.5-2-1; IC § 6-2.5-3-2. With that in mind, we now turn to Taxpayer's protest.
As noted, Taxpayer designs and manufactures "point of sales printed packaging...." As the Audit Report states:
The taxpayer specializes in multi color printed boxes for high visibility on store shelves. [Taxpayer] has plants located in [multiple] states around the country including Indiana. Their customers consist of many large consumer product producers in a variety of different products.
Following its audit, Taxpayer filed a protest with the Department. In its protest letter, Taxpayer states that it "request[s] the Department reconsider its audit assessment for [Company S] and [Company B] invoices listed in the capital section of the... audit work papers." Regarding Company S (lighting equipment), Taxpayer states that it has documentation to support its claim that "tax was paid on a later invoice for these purchases."
The Department first addresses the invoices "22826207" and "22819207" (the latter of which was apparently initially charged by Company S at seven percent sales tax on the material, but was corrected by Taxpayer and Company S to six percent, since it was in the year 2007). Those invoices show a portion of the sales tax due. The reason it was only a portion of the tax due, and not the entire amount due, is shown by examining the relevant Indiana law. IC § 6-2.5-1-1 provides that:
And 45 IAC 2.2-1-1 states in relevant part:
The two invoices state the "Labor Tot:" and the "Material Tot:"–but the total charged is a combined charge (the invoices show a "Sub Total" is the labor and material, then with a line that only taxes the material, resulting in a "Invoice Total"). As noted above, the labor and material were furnished under a single order. Thus the tax due should have been on the "total combined charge or price..." under IC § 6-2.5-1-1(a). Therefore, since the invoices of issue are in fact for a unitary transaction, the Department properly imposed tax on the total combined bill.
Taxpayer also protests regarding use tax assessed related to bar code equipment purchased from a vendor ("Company B "). Taxpayer states in its protest letter that a project was initiated "to replace its outdated inventory tracking system at approximately fifty plant locations" in the United States. Taxpayer states:
The project involved implementing bar code scanning equipment at each of the fifty locations. The new bar code scanning system would improve the accuracy of inventory tracking (raw materials & finished goods) while also improving the accuracy of order fulfillment and on time delivery of shipments to customers.
And further, Taxpayer states:
The [Indiana] facility was selected for several reasons. This plant has an IT resource that could receive, secure, configure and then ship the equipment to each facility. The [Indiana] facility also had a secured storage area that could accommodate four hundred bar coders and the ancillary equipment, such as batteries and cables.
The bar code units were then purchased and shipped to the [Indiana] facility for storage and configuration. Since the software was already installed in the bar coders, the [Indiana] IT specialist configured the equipment by programming each scanner for the facility they were to be shipped. The equipment was then run through a brief software configuration so it would talk to that site, and was then set up with an IP address and server. Once configured, the bar coding equipment was shipped to the other box plants throughout the country. As [the Indiana location] is the only box plant located in Indiana, no equipment was shipped to other locations within Indiana.
Regarding use tax, IC § 6-2.5-3-2 states in relevant part:
From Taxpayer's protest letter, the bar code equipment was stored in Indiana ("the [Indiana] facility... had a secured storage facility...."); the bar code equipment was also used in Indiana ("configured the equipment by programming each scanner," "run through a brief software configuration....").
Thus the only question is whether the bar code equipment is exempt under IC § 6-2.5-3-4, which states:
However, Taxpayer, in its protest letter, does not cite to any statute, regulation or court case in support of its position. As previously noted, Taxpayer bears the burden of proof under IC § 6-8.1-5-1(c). In the present case, Taxpayer has not established that the bar coding equipment is exempt under IC § 6-2.5-3-4. And, as the Audit Report stated, the bar coding equipment is taxable under 45 IAC 2.2-5-8(j), which states: "Machinery, tools, and equipment used in managerial sales, research, and development, or other non-operational activities, are not directly used in manufacturing and, therefore, are subject to tax."
Taxpayer's protest of the lighting equipment and the bar coding equipment is denied.
DIN: 20111228-IR-045110755NRA
Composed: Dec 12,2013 2:02:26PM EST