Source: http://www.in.gov/legislative/iac/20130529-IR-045130196NRA.xml.html
Timestamp: 2017-03-31 00:42:15
Document Index: 242555792

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

04-20120462.LOF
Letter of Findings Number: 04-20120462
Tax Years 2008 - 2011
I. Sales and Use Tax–Lump Sum Contracts.
Authority: IC § 6-2.5-2-1; IC § 6-2.5-4-1; IC § 6-2.5-4-9; IC § 6-8.1-5-1; 45 IAC 2.2-3-12; 45 IAC 2.2-4-1; Sales Tax Information Bulletin 60 (April 2011).
Taxpayer protests the Department's proposed assessments as it relates to invoices involving mulch.
Taxpayer operates a mowing and landscaping business. Taxpayer was audited by the Indiana Department of Revenue (hereinafter "Department"). As a result of the audit, the Department issued Taxpayer proposed assessments for sales and use tax. Taxpayer filed a protest with the Department; a hearing was held and this Letter of Findings results. More facts will be provided as needed below.
Taxpayer's protest letter to the Department states:
[T]he examination had misidentified several contracts as time and material contracts when in fact they were lump-sum contracts where the taxpayer had properly paid the sales tax upon purchase of the materials included in the lump-sum contracts. Indiana Administrative Code 45 IAC 2.2-3-12 and Information Bulletin []60 defines a lump-sum contract as a contract in which all of the charges are quoted as a single price. In contrast, a time and material contract is defined as a contract in which all the charges for labor, construction materials, and other items are stated separately.
Taxpayer cites to 45 IAC 2.2-3-12; that regulation states:
The Department notes that Sales Tax Information Bulletin 60 (April 2011), 20110427 Ind. Reg. 045110247NRA, states in part:
C. "Lump sum contract" is a contract in which all of the charges are quoted as a single price. A construction contractor may furnish a breakdown of the charges for labor, materials, and other items without changing the nature of the lump sum contract.
D. "Time and material contract" is a contract in which all the charges for labor, construction materials, and other items are stated separately.
The Audit Report states in pertinent part:
The examination of the taxpayer's sales invoices revealed that they were performing time and material contracts when they were doing landscaping for their customers. On the invoices the taxpayer had listed various materials such as trees, shrubs, grasses, flowers, fabric, mulch, etc. that were used in the job and then stated the labor separately. (Emphasis added).
Taxpayer's protest letter states:
[T]he audit report is enclosed with the misclassified contracts highlighted, followed by copies of the actual invoices. As further proof of the inclusion of all charges as a single price, a pricing breakdown used by taxpayer is enclosed showing the components of the single price.
The invoices provided have the mulch line highlighted, and the "Pricing Break Down" relates to mulch. Thus the issue in Taxpayer's protest is the mulch, with Taxpayer arguing that the mulch always includes a labor component.
Taxpayer has not established that it can invoke lump sum contract concepts regarding the mulch sales, since mulch is not permanently part of a structure. As IC § 6-2.5-4-9 states in relevant part:
(2) after its addition to the structure or facility, would become a part of the real estate on which the structure or facility is located. (Emphasis added).
The Department finds 45 IAC 2.2-4-1 to be applicable to Taxpayer's facts:
(3) No deduction from gross receipts is permitted for services performed or work done on behalf of the seller prior to transfer of such property at retail. (Emphasis added).
Under IC § 6-8.1-5-1(c) the Department's proposed assessments are presumed to be correct. Taxpayer has not met its burden of proof. Taxpayer's billing method cannot be lump sum and time and materials simultaneously–in other words, Taxpayer cannot take a portion of an invoice (i.e., the mulch) and claim its billing method is different from the other items on the same invoice. Also, the Department finds that Taxpayer has not established that mulch becomes part of the real estate, and thus Taxpayer has not shown that "lump sum" concepts are applicable to its facts.
DIN: 20130529-IR-045130196NRA
Composed: Mar 30,2017 8:42:14PM EDT