Source: http://www.in.gov/legislative/iac/20120829-IR-045120479NRA.xml.html
Timestamp: 2015-11-28 18:54:40
Document Index: 200738228

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

04-20110619.LOF
Letter of Findings Number: 04-20110619
I. Sales Tax – Imposition – Exempt Sales.
Authority: IC § 6-2.5-1-5; IC § 6-2.5-2-1; IC § 6-2.5-4-1; IC § 6-8.1-5-1; Indiana Dep't. of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463 (Ind. 2012); 45 IAC 2.2-8-12; Sales Tax Information Bulletin 21 (May 2002).
Taxpayer protests the Department's proposed assessments on certain sales, claiming some of its customers were exempt from sales tax.
Taxpayer is an Indiana company which provides pest control services and lawn care. In 2011, the Indiana Department of Revenue ("Department") conducted a sales/use tax audit for 2008 through 2010 tax years. Pursuant to the audit, the Department determined that Taxpayer did not collect and remit sales tax on "turf maintenance contracts." The Department's audit also determined that Taxpayer did not pay sales tax or self assess and remit use tax on certain purchases of tangible personal property, which Taxpayer used for its business. Additionally, the audit determined that Taxpayer was allowed some credits for sales tax which it mistakenly paid at the time of its purchases.
Taxpayer only protested the assessment on "turf maintenance contracts." An administrative hearing was held. This Letter of Findings ensues. Additional facts will be provided as necessary.
The Department's audit determined that Taxpayer failed to collect sales tax on "turf maintenance contracts," which are taxable retail transactions. Taxpayer argued that it was not responsible for collecting sales tax on sales to customers who were exempt from sales tax. Thus, Taxpayer believes that the Department's assessments were overstated.
As a threshold issue, all tax assessments are prima facie evidence that the Department's assessment of tax is presumed correct. "The burden of proving that the proposed assessment is wrong rests with the person against whom the proposed assessment is made." IC § 6-8.1-5-1(c); Indiana Dep't. of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463, 466 (Ind. 2012).
IC § 6-2.5-1-5(a) states:
The Department's Sales Tax Information Bulletin 21 (May 2002), 25 Ind. Reg 3939 ("Information Bulletin 21") addressing issues concerning "Lawn Care Applications," states, in relevant part, that:
The sales tax is imposed on the gross retail income received in a retail unitary transaction. The gross retail income received includes the price of the property transferred plus any bona fide charges made for preparation, fabrication, alteration, modification, finishing, completing, delivery, or other service performed in respect to the property before its transfer. Because the chemicals are not transferred until they are applied to the lawn, the application charges are included in the company's gross retail income. Therefore, the entire contract price is subject to the Indiana sales tax. (Emphasis in original).
Additionally, 45 IAC 2.2-8-12, in relevant part, provides:
In this instance, the Department's audit noted that Taxpayer offers "lawn care applications" to its customers, which are taxable unitary retail transactions outlined in Information Bulletin 21. Taxpayer thus is a retail merchant and should have collected and remitted the sales tax on its sales of "lawn care applications." Taxpayer did not do so. Nor did Taxpayer provide the exemption certificates, which it collected from its customers, to the Department's auditor during the audit. The auditor was therefore unable to verify whether certain sales were exempt from the sales tax.
Claiming that some of its customers were exempt from sales tax, Taxpayer believed that the Department's assessments were overstated. At the hearing, Taxpayer presented several copies of signed exemption certificates, but did not provide the necessary source documentation. Taxpayer was allowed additional time to submit the necessary source documentation to support its protest by April 27, 2012.
There is no question that Taxpayer entered into retail transactions for which – absent an exemption – Taxpayer was required to collect sales tax. Subsequent to the hearing, Taxpayer supplied exemption certificates from its customers for certain of its sales. The Department, Audit Division, is requested to review the late-filed exemption certificates and to make whatever adjustments it deems appropriate.
Additionally, as to the following sales, Taxpayer's documentation, on its face, failed to demonstrate that those sales, for which it claimed were exempt, indeed matched its customers' claimed exempt purchases. Thus, the Department is not able to agree that Taxpayer has met its burden of proof demonstrating that the sales at issue were exempt. Taxpayer remains liable for the sales tax due on the following transactions.
Inv. Date Inv. Nos. Customer Amount 03/27/2008 58415 XXXXX Automotive $ 25.00 05/06/2008 61331 XXXXX Automotive $ 25.00 07/02/2008 62790 XXXXX Automotive $ 25.00 09/02/2008 65267 XXXXX Automotive $ 25.00 10/29/2008 67123 XXXXX Automotive $ 25.00 04/24/2008 1849 XXXXX Power & Light $ 5,600.00 04/04/2008 61150 XXXXX Closures $ 245.00 05/05/2008 61757 XXXXX Closures $ 1,400.00 07/07/2008 62869 XXXXX Closures $ 450.00 07/19/2008 2527 XXXXX Closures $ 500.00 09/05/2008 65121 XXXXX Closures $ 245.00 11/07/2008 66998 XXXXX Closures $ 245.00 02/27/2009 60947 XXXXX Automotive $ 25.00 04/17/2009 71338 XXXXX Automotive $ 25.00 07/06/2009 12611 XXXXX Automotive $ 25.00 08/25/2009 14145 XXXXX Automotive $ 25.00 10/06/2009 16088 XXXXX Automotive $ 25.00 05/08/2009 15680 XXXXX Power & Light $ 3,400.00 06/13/2009 71226 XXXXX Closures $ 245.00 07/30/2009 12747 XXXXX Closures $ 450.00 09/11/2009 14634 XXXXX Closures $ 245.00 10/07/2009 14767 XXXXX Closures $ 1,000.00 03/12/2010 18414 XXXXX Automotive $ 25.00 04/22/2010 19974 XXXXX Automotive $ 25.00 07/06/2010 21856 XXXXX Automotive $ 25.00 10/20/2010 23330 XXXXX Automotive $ 25.00 11/09/2010 25273 XXXXX Automotive $ 25.00 04/09/2010 11449 XXXXX Power & Light $ 2,900.00 04/15/2010 10206 XXXXX Closures $ 1,400.00 05/04/2010 20306 XXXXX Closures $ 245.00 08/02/2010 21975 XXXXX Closures $ 450.00 10/20/2010 23759 XXXXX Closures $ 245.00 Taxpayer is reminded that sales tax becomes due at the time of the transaction; either the purchaser is exempt at the time of the transaction or it is not exempt. If the purchaser claims an exemption, the exemption certificate should be obtained at the time the transaction occurs otherwise the burden of proving the transaction was exempt becomes measurably more difficult.
Taxpayer's protest is sustained in part and denied in part subject to the results of the Department's supplemental audit review.
Composed: Nov 28,2015 1:54:47PM EST