Source: http://www.in.gov/legislative/iac/20130227-IR-045130056NRA.xml.html
Timestamp: 2014-07-23 16:18:41
Document Index: 62623216

Matched Legal Cases: ['§ 6', '§ 6', '§ 6', '§ 9', '§ 6', '§ 9', '§ 9', '§ 9', '§ 6', '§ 6']

04-20120317.LOF
Letter of Findings Number: 04-20120317
Authority: IC § 6-2.5-2-1; IC § 6-2.5-4-12; IC § 6-8.1-5-1; IC § 9-22-6-2; 45 IAC 2.2-4-33; Lafayette Square Amoco, Inc. v. Indiana Dep't of State Revenue, 867 N.E.2d 289 (Ind. Tax Ct. 2007); Indiana Dep't. of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463 (Ind. 2012).
Taxpayer protests the proposed assessments, claiming it was not responsible for the sales tax.
Taxpayer is an Indiana company which offers towing services. In addition to the towing services, Taxpayer also conducts a weekly auction of the vehicles that were towed to Taxpayer's facility but were not claimed by the owners of the vehicles.
In 2011, the Indiana Department of Revenue ("Department") conducted a sales/use tax audit of Taxpayer's business records. Pursuant to the audit, the Department determined that Taxpayer failed to collect sales tax on the vehicles it sold at its weekly auctions. The Department audit also determined that Taxpayer purchased certain tangible personal property to be used in the course of its business activities but did not pay sales tax or use tax. As a result, the Department assessed additional sales tax, use tax, penalty, and interest.
Taxpayer only protested the Department's assessments on the sales tax concerning the unclaimed vehicles which Taxpayer sold at its weekly auction. An administrative hearing was held. This Letter of Findings ensues. Additional facts will be provided as necessary.
The Department's audit concluded that Taxpayer, as a retail merchant, failed to collect and remit the sales tax on the vehicles that Taxpayer sold at its weekly auctions at its business location. The Department assessed sales tax on these transactions.
Taxpayer, to the contrary, claimed that it was not responsible for collecting the sales tax. Specifically, Taxpayer asserted that it was not a car dealer; rather, it operates towing services and acquired the "mechanic's lien" on the vehicles when the towed vehicles were not claimed by the titled owners after a certain number days pursuant to Indiana law. Taxpayer thus argued that it was not liable for the sales tax on the vehicles sold at its weekly auctions because it had the right to sell those unclaimed vehicles to recoup its costs in providing the towing services and storage.
IC § 6-2.5-4-12(a) explains that "[a] person is a retail merchant making a retail transaction when he sells tangible personal property at auction." 45 IAC 2.2-4-33 further illustrates:
Every person engaged in the business of making sales at auction of tangible personal property owned by such person or others, shall be and constitute a retail merchant making retail transactions in respect thereto and the gross income received therefrom shall constitute gross retail income of a retail merchant received from retail transactions. (Emphasis added).
At the administrative hearing, Taxpayer stated that the owners of the towed vehicles were responsible for fees, including a towing fee, a storage fee, and a processing fee, for the towing services and parking/storage at its facility. Taxpayer explained that it had the "mechanic's liens" on those vehicles that it towed to its facility "under Indiana law." (Presumably, Taxpayer referred to the "mechanic's lien" outlined in IC § 9-22-6-2.) Taxpayer further stated that it obtained the information concerning the titled owners of the vehicles and notified the owners to re-claim their vehicles. Taxpayer asserted that when the titled owners were notified but failed to re-claim their vehicles prior to the specified date stated in the notices, it was allowed by law to "sell" the unclaimed vehicles to recoup its costs. Thus, Taxpayer asserted that it was not a car dealer and was not responsible for collecting and remitting the sales tax; rather, it simply exercised its right to recoup its costs for the services it rendered. To support its protest, Taxpayer submitted a sample copy of the paperwork package concerning the auction sale of a vehicle. In addition, Taxpayer provided a copy of the Indiana Bureau of Motor Vehicles' Mechanic's Lien Application information, which was also available on the Indiana Bureau of Motor Vehicles' website at http://www.in.gov/bmv/2958.htm.
Taxpayer's reliance on the "mechanic's lien" is misplaced. IC § 9-22 et seq. addresses matters of motor vehicles. Specifically, IC § 9-22-6-2 provides a service provider, such as Taxpayer here, a statutory recourse to be compensated for services it performed on the vehicles when the owners failed to pay the service provider. Thus, that statutory recourse ensures Taxpayer's right to fair compensation and intends to timely resolve potential legal disputes between the vehicle owners and the service providers.
The issue in this protest, however, is not whether Taxpayer "may sell" the unclaimed vehicles because it had the "mechanic lien" on the unclaimed vehicles. Rather, the issue in this case is whether Taxpayer engaged in the business of making sales at auction of tangible personal property owned by others. That is, was Taxpayer a retail merchant making retail transactions with the obligation to collect the sales tax as agent for the state pursuant to IC § 6-2.5-2-1?
Taxpayer's documentation demonstrates that it periodically advertised in a local newspaper a list of vehicles for public sale (auction) at its business location on a specific date; the advertisements also include the vehicle models, the vehicle identification numbers, and the prices. Taxpayer subsequently sold the vehicles to the highest bidder at the auctions. Thus, Taxpayer, in the ordinary course of its regular business, conducted auctions at its business location to sell the unclaimed vehicles owned by others and was a person "engaged in the business of making sales at auction of tangible personal property owned by others." Thus, Taxpayer was "a retail merchant making retail transactions" pursuant to IC § 6-2.5-4-12(a) and 45 IAC 2.2-4-33 and was required to collect the sales tax at the time of the auction sales took place.
Finally, Taxpayer provided several copies of the general exemption certificates, claiming some purchasers were exempt from the sales tax. However, Taxpayer's documentation failed to show which specific transactions were claimed to be exempt sales. Thus, given the totality of the circumstances, in the absence of other supporting documentation, the Department is not able to agree that Taxpayer has met its burden of proof demonstrating that the Department's assessment is wrong.
Pursuant to the above mentioned statute and regulation, Taxpayer was a retail merchant making a retail transaction and thus was responsible for collecting the sales tax on the vehicles sold at its weekly auction sales.
In this instance, Taxpayer has demonstrated reasonable cause and therefore the Department will waive the penalty. Taxpayer's protest of the imposition of negligence penalty is sustained.
For the reasons discussed above, Taxpayer's protest of the imposition of the sales tax is denied. Taxpayer's protest of the imposition of interest is also respectfully denied. Taxpayer's protest of the imposition of the negligence penalty is sustained.
Composed: Jul 23,2014 12:18:41PM EDT