Source: http://indianapropertytaxreporter.blogspot.com/2014/01/
Timestamp: 2017-10-17 08:00:22
Document Index: 471671213

Matched Legal Cases: ['§ 6', '§ 6', '§ 6', '§ 6', '§ 6', '§ 6', '§ 6', '§ 6', '§ 6', '§ 6', '§ 6', 'art 1', '§ 6', '§ 6', '§ 6', '§ 6', '§ 6', '§ 6', '§ 7401', '§ 70', '§ 6', '§ 6', '§ 7401', '§ 70', '§ 6', '§ 6', '§ 6']

Indiana Tax Reporter: January 2014
IBJ: House and Senate OK Corporate Tax Plans Despite Protest
http://www.ibj.com/house-senate-ok-corporate-tax-plans-despite-protests/PARAMS/article/45924
Revenue Denies Taxpayer Request to Waive Penalty Where Taxpayer Familiar with Filing Procedures and Had Previous Late Filings
Taxpayer is an Indiana service company. Taxpayer did not timely file the required WH-1 or remit the withholding tax for the period ending May 31, 2013. The Indiana Department of Revenue ("Department") imposed a ten percent negligence penalty and interest. Taxpayer protests the imposition of the penalty and interest.
The Department imposed a penalty and interest for late filing of the required WH-1 and late payment of the withholding tax for the tax period ending May 31, 2013. Taxpayer protests the imposition of the penalty. The issue is whether the penalty imposed shall be waived.
A taxpayer who, upon examination by the Department, incurs a deficiency due to negligence is subject to a penalty. IC § 6-8.1-10-2.1(a). The Department shall waive the penalty if the taxpayer demonstrates that the failure to file the required return or pay the outstanding taxes "was due to reasonable cause and not due to willful neglect." IC § 6-8.1-10-2.1(d); see also 45 IAC 15-11-2. A taxpayer may demonstrate reasonable cause by showing affirmatively that it used "ordinary business care and prudence" in failing to file the required return or pay the outstanding taxes by the due date. Whether a taxpayer demonstrates reasonable cause for penalty purposes is a fact-sensitive question and determined on a case-by-case basis. 45 IAC 15-11-2(b) and (c).
In this case, Taxpayer demonstrated that it is familiar with the procedure for filing of a WH-1 and remitting the withholding tax. It is also familiar with the consequences of filing a WH-1 or paying the withholding tax late, incurring penalties on four (4) previous occasions. Taxpayer provided documentation showing that the penalty imposed in 2006 was due to the Department's error, and that penalty was abated. However, Taxpayer received a "one-time" abatement of the penalty imposed in 2010. For the tax period in question, Taxpayer has not shown by specific facts that it had a reasonable cause for its failure to file the required WH-1 or remit the proper amount of funds withheld by the due date. The Department already accommodated the Taxpayer in 2010 by granting a "one-time" abatement of a penalty. The Department must decline the opportunity to do so again. The penalty is not waived, and Taxpayer's protest is denied.
The Department imposed a penalty and interest for late filing of the required WH-1 and late payment of the withholding tax for the tax period ending May 31, 2013. Taxpayer protests the imposition of the penalty. The issue is whether the interest imposed shall be waived.
A taxpayer who fails to file a required return or pay the required tax is subject to interest. IC § 6-8.1-10-1. Taxpayer has not demonstrated that it is part of an amnesty program or that the proposed assessment was issued outside the required time limit. Therefore, by statute, the Department cannot waive the interest imposed here. IC § 6-8.1-10-1. The interest is not waived, and Taxpayer's protest is denied.
http://www.in.gov/legislative/iac/20140129-IR-045140005NRA.xml.html
News Reports Governor Asks Mayors to Support Tax Reform
Gov. Mike Pence's plan to eliminate the business personal property tax has prompted a number of mayors across the state to denounce the proposal.
His latest effort, a letter to mayors outlining his reasoning, hasn't met much success either.
"I know he's trying to drum up support; I don't think he's going to get it," Shelbyville Mayor Tom DeBaun said Thursday.
In Pence's letter to mayors, dated Wednesday, he wrote that "Indiana's job climate has improved dramatically in recent years. In 2013, Indiana private sector employers added 42,600 jobs to Indiana's economy, and the number of people in our labor force has grown by 33,000, the 6th best in the country.
"However, there is still work to be done. With nearly 7 percent of our fellow Hoosiers still struggling to find work, our communities need new employers to locate, grow and create new jobs."
While pointing to Indiana's advantages--a workforce with a strong work ethic, lower cost of living and improved educational attainment--Pence wrote that "the business personal property tax remains a strong deterrent to job growth."
A chart included in the letter shows Indiana's personal property tax rates for commercial equipment and industrial machinery are each 2.75 percent. Among neighboring states, Ohio and Illinois each have no personal property tax in those categories; Kentucky's tax rates are 0.15 percent on machinery and 1.81 percent on equipment; and Michigan's tax rates are 1.92 percent on machinery and 3.55 percent on equipment, but are being phased out.
"Too often, we see companies choose one of our neighboring states over us," Pence wrote. "The business personal property tax has been a significant factor in many of these instances."
But the Association of Indiana Counties disputes that.
"No one at the state or local level can name a company that did not locate to Indiana because of personal property tax," AIC Director of Government Affairs Andrew Berger wrote in an email to members. "The out-of-state competition argument is much more nuanced than is being publicly discussed. Illinois replaces the dollars for locals. Michigan must replace the dollars to locals or the personal property phase out does not occur. Ohio replaces the revenue with a different tax on businesses, which Indiana does not have. Kentucky has lower tax rates on PP but taxes more items than Indiana. Finally, local units regularly abate personal property taxes for large employers that will create jobs."
Pence reiterated in his letter that he wants tax reform, not tax cuts, and that he is committed to phasing out the business personal property tax "in a way that does not unduly burden local governments' ability to provide the the needs of their citizens."
Pence also wrote that he wants local control for adoption of any permanent phaseout of the tax, and he doesn't want the tax burden shifted to the public.
DeBaun is still concerned with the environment that might be created with the elimination of the tax.
"The legislature needs to find a way other than communities competing with each other," he said
http://www.shelbynews.com/articles/2014/01/31/news/doc52eab7738986a413341824.txt
Daily Journal Reports Greenwood's Food and Beverage Tax Proposal Stalls
For now, state lawmakers won’t be voting on whether diners will pay an added tax when going out to eat or picking up lunch or a drink in Greenwood and seven other cities and towns.
A proposal that would have allowed those communities to approve a local 1 percent food and beverage tax did not get a vote in the House Ways and Means Committee this week.
That means the bill has stalled and won’t go to the full House of Representatives for a vote, unless a state group finds a way to get it added as an amendment to another proposal.
http://www.dailyjournal.net/view/local_story/Food-beverage-tax-proposal-sta_1391137273/#.Uuvh4xBdVx4
News Sentinel Reports "Bad" Year was Good One for Allen County Community Development Corp
The agency that sells local tax-delinquent properties to good owners willing to fix them up raised almost $200,000 less last year than it did in 2012.
But to the head of the Allen County Community Development Corp., that apparent setback is a blessing in disguise because it indicates the number of owners unable to pay their property taxes is on the decline.
“Our goal is to put ourselves out of business, so I look at it as a positive. Three or four years ago we had hundreds of properties for sale,” said County Building Commissioner Dave Fuller, who in his visit to the County Commissioners Friday is expected to report that in 2013 the corporation sold 49 properties with structures and another 106 vacant lots. That generated $250,276, or about $30,000 more than corporation's annual budget, but significantly less than the $430,000 raised in 2012 or the $775,000 in 2011.
Last year's sales leave the corporation with just three properties containing structures, although Fuller expects to receive about 50 that were not claimed during the county's 2013 sale of tax-delinquent properties. The corporation also owns about 560 vacant lots, most of them in central and southeast Fort Wayne, but many of them can't be sold because they're in a floodplain, are inaccessible or for other reasons.
Formed in 2002 to protect county government from liability, the not-for-profit corporation accepts ownership of only those properties it believes can be sold to responsible buyers. Other tax-sale properties may remain under the jurisdiction of the Commissioners.
Prior to creation of the corporation, the county often donated such properties to not-for-profit development groups or sold them to speculators for as little as $150,000 just to get them back on the tax rolls. Fuller said the corporation's initial asking price is generally about five times the property's annual tax bill. The agency prefers buyers who will live in the home, but will sell to responsible landlords or “flippers.”
The corporation now owns about 685 properties, Fuller said, compared to a recession-inflated 2,200 four years ago.
http://www.news-sentinel.com/apps/pbcs.dll/article?AID=/20140131/NEWS/140139971/0/SEARCH
Banner-Graphic Reports Ascena Offered Incentives for Expansion in Greencastle
Ascena Retail Group Inc., a leading specialty retailer of apparel for women and tween girls, has announced plans to commence ecommerce fulfillment operations in the former Greencastle distribution facility, beginning spring 2014.
Ascena, which acquired Charming Shoppes Inc. in June 2012, operates through its subsidiaries the distribution needs of the company's Justice, Lane Bryant, maurices, dressbarn and Catherines brands.
The company has invested in material handling equipment and IT systems to transform the 126-acre Greencastle campus in the former IBM building along Indianapolis Road to become its national ecommerce fulfillment center.
The Indiana Economic Development Corporation has offered Ascena conditional tax credits and training grants based on the company's job creation plans. These tax credits are performance-based, meaning until Hoosiers are hired, the company is not eligible to claim incentives.
The city of Greencastle approved additional property tax abatement and other incentives at the request of the Greencastle/Putnam County Development Center Inc.
http://www.bannergraphic.com/story/2047019.html
Times: Closing Lake County Tax Loophole Could Net RDA $4 Million
The Northwest Indiana Regional Development Authority would get a $4 million budget bump under a plan to fix an income tax break aimed at Lake County's poorest homeowners but claimed by many more.
The Lake County Residential Property Tax Credit annually returns $300 to 29,700 county property owners who earn less than $18,000 a year.
It was enacted in 2001 to help low-income homeowners cope with rising property taxes following a tax overhaul that shifted much of the business tax burden on to homeowners.
However, last year some 13,400 homeowners whose total incomes topped $18,000 received the credit, because under the law, "earned income" does not include most investment or retirement income. At least 23 households with incomes of more than $500,000 got the $300 refund.
State Sen. Ed Charbonneau, R-Valparaiso, proposed in Senate Bill 383 to close that loophole, saving $4 million a year in tax credits that are paid from casino admission tax revenue that otherwise would go to Hammond, East Chicago, Gary and Lake County.
His idea was incorporated Thursday into Senate Bill 367, sponsored by state Sen. Brandt Hershman, R-Buck Creek. But instead of the money returning to the casino cities and Lake County, it would be paid to the RDA — a change Charbonneau supports.
"There's general agreement that the RDA is a good thing, it's really an economic development driver for Northwest Indiana, and we've been looking for ways to fund it," Charbonneau said. "It is a very painless way to get $4 million to the RDA."
The revised proposal was approved by the Senate Appropriations Committee and now goes to the full Senate, where lawmakers will consider additional changes next week.
http://www.nwitimes.com/news/local/govt-and-politics/closing-lake-tax-loophole-could-net-rda-m/article_a7b054ea-efd9-51c7-b5d4-57ac611e3588.html
By Brian Howey in the Northwest Indiana Times:
They want to repeal the business personal property tax in an effort to improve what is already one of the best business climates in the nation. They are attempting a phase-out on new business equipment this year, with the goal of a total repeal a few years down the road.
This is good, right? Aren't all tax cuts good?
Perhaps, unless the tax cut for businesses and big corporations comes out of your pocket. A local option income tax means they want individual counties to make up the $500 million to $1 billion or so in revenues lost to local governments, libraries and schools by dinging your paycheck.
Earlier this month, Pence said in his annual State of the State address, “To make Indiana more competitive let’s find a responsible way to phase out this tax. But let’s do it in a way that protects our local governments and doesn't shift the burden of a business tax onto the backs of hardworking Hoosiers.”
That is the dilemma facing the governor and legislative Republicans. The constitutional property tax caps passed by voters in 2008 have already sliced away significant portions of municipal budgets. Cities like Terre Haute and Muncie have had to slash budgets by millions of dollars. What mayors and city councils are now facing is cleaving into bone.
Two bills in the General Assembly — House Bill 1001 and Senate Bill 1 — begin the repeal process, but neither has replacement revenue for municipalities and counties, other than a slow phase-out and the income tax. SB1 would form a summer study committee while eliminating the tax for businesses with less than $25,000 in property.
Last week, Republican mayors Greg Ballard of Indianapolis, Jim Brainard of Carmel, Lloyd Winnecke, of Evansville, and Democrat mayors Greg Goodnight, of Kokomo, Tom Henry, of Fort Wayne, and Peter Buttigieg, of South Bend, met with Pence to express their alarm at what cities would face with a repeal and no replacement.
Pence sent a letter to mayors later in the day, saying, “I want to assure you that I understand your concerns. You provide essential services to your citizens, and I can see why some believe the phase-out of the business personal property tax could threaten service delivery. I have said that we cannot phase out this tax in a way that shifts the tax burden to hardworking Hoosiers. You may be assured that I will stand by these commitments to your community and your citizens.”
Winnecke told the Evansville Courier & Press afterward, “He reiterated to us that he would not sign any legislation that was not revenue neutral to communities. He reiterated that point several times during the meeting.”
Here’s a couple of closing thoughts. First, over the past 10 years, Indiana has dramatically altered its tax structure. Who are the winners and losers? I'm not sure anyone can tell you. We need a timeout, and a comprehensive study of what's been accomplished and whether the winners have won too much and the losers are just poor schmoes.
Second, Pence is on record saying he understands the dilemma, and that replacement revenue will be found.
http://www.nwitimes.com/news/opinion/columnists/brian-howey/brian-howey-tax-repeals-and-gov-pence-s-promise/article_ad903ac7-d8ed-5064-bb0e-d135267c47e3.html
Times: Preachit Inc. Abandons "Church" Claim to Support Property Tax Exemption; Now Claims to be "Religious Society"
Preachit Inc. is no longer defending itself as a church to maintain tax exempt status on its $1.1 million property in rural Porter Township.
Instead, attorneys for Preachit President and Pastor James Smith argued for two hours Thursday the nonprofit corporation is a religious society.
Smith appeared before the Porter County Property Tax Assessment Board of Appeals with different attorneys than last month.
The three members of the board will decide whether they agree with the definition presented Thursday. The board also will determine if the tax exempt status should cover not only the portion of the 8,746-square-foot home used as corporate offices but also the more than 6,000 square feet used as a parsonage by Smith and his wife. Smith said the business use extends on occasion into the residence.
Board President Joe Wszolek said a decision could come during the group's next meeting Feb. 25.
The Porter County assessor's office initiated an inquiry into the 36-acre site at 234 W. County Road 166 South after it was discovered a religious exemption had been granted in 2009 for part of the site and no property taxes are being paid on any of it. The property includes a two-story house, pond and two barns.
During the hearing last month, it was revealed that Preachit purchased a former restaurant and health club building at 2352 U.S. 30 in Valparaiso in October for $700,000.
http://www.nwitimes.com/news/local/porter/valparaiso/preachit-changes-argument-in-quest-to-retain-tax-exempt-status/article_7daebfad-c72c-56da-a960-cc867f1c0f97.html
Courier: Henry County Will Lose $113 Million if Business Personal Property Tax is Eliminated
From the New Castle Courier:
Henry County officials say they are opposed to any change in legislation that would eliminate or reduce the business personal property tax.
Gov. Mike Pence is pressing the General Assembly to do away with that tax.
County Auditor Pat French said Henry County taxing bodies stand to lose a combined $113 million in business personal property tax. About $31 million of that would be revenues headed for New Castle.
"In theory it may sound like a good idea to make Indiana's business tax structure attractive for investment," French said. "But they don't understand the detriment this would have on our county."
French said House Bill 1001 will allow counties to decide whether to exempt only new business personal property as early as 2015. This would reduce the immediate effect of tax revenue lost by local governments and schools, which would continue to collect tax on existing business personal property.
Allowing counties to decide for themselves whether to eliminate the tax would create an unfair business environment in those counties, like Henry County, that cannot afford to do so, she said.
"Removing the tax would potentially place the tax burden back on homeowners and that could run between $500 to $1,000 per family," French said. "Even our own county government would be forced to cut jobs or programs. This would not help us when we want to work with Anderson or Muncie to attract jobs."
http://www.thecouriertimes.com/main.asp?Search=1&ArticleID=285271&SectionID=23&SubSectionID=45&S=1
Star: Indiana Officials Urge Replace Don't Erase Business Tax
A statewide coalition of 16 groups representing local governments, schools, libraries and police is pushing back harder against bills advancing through the legislature that they say would cut public services and reduce property tax revenue they depend on.
Indiana House and Senate Republicans are pushing separate proposals to cut the personal property taxes businesses pay on equipment — a major source of tax revenue for these local government bodies amounting to an annual total of $1 billion.
Gov. Mike Pence also has made the tax cut a centerpiece of his legislative agenda.
This morning, the House voted 63-33 to approve its business tax cut proposal, House Bill 1001. It allows counties to exempt any new business equipment from property taxes. That measure now moves to the Senate.
The Senate’s bill — considered more modest — is on today’s schedule for a final vote. Senate Bill 1 would eliminate the tax only for businesses with less than $25,000 worth of equipment. That would free 70 percent of Hoosier businesses from the tax. Because those businesses pay very little tax now, the proposal would cost local governments about $24.1 million in revenue.
Coalition members consider neither option acceptable because they do not provide any mechanism to replace the lost revenue.
“We are 100 percent unified on this issue,” said Matt Greller, executive director and CEO of the Indiana Association of Cities and Towns during a press conference today announcing their “Replace Don’t Erase” coalition.
“I think we all see this as the most significant piece of revenue loss coming down the road that local governments have faced in the history of Indiana,” said Greller.
Representatives of the coalition said cutting the business personal property isn’t necessarily wrong, but they don’t believe it should be done without replacing all of the revenue. They also worry that the Senate’s proposal is just the first step in moving toward a total elimination of the tax.
Even though neither bill includes provisions for any revenue replacement, legislative leaders and the governor say they want to do that.
http://www.indystar.com/story/news/2014/01/30/local-officials-say-replace-dont-erase-biz-tax/5058589/
Verizon Hearing Rescheduled for February 5th in Tax Court
Washington Township Assessor, et. al. v. Verizon Data Services, Inc. (View)
Wednesday, February 05, 2014 10:00 AM - 11:00 AM
49T10-1102-TA-13
Petitioners challenge whether the Indiana Board of Tax Review erred in granting summary judgment to Respondent because the Property Tax Assessment Board of Appeals failed to timely issue a final determination on Respondent's personal property tax appeal thereby making the Respondent's self-reported assessment was final.
http://www.in.gov/activecalendar/EventList.aspx?fromdate=1%2f1%2f2014&todate=1%2f31%2f2014&display=Month&view=DateTime
Daily Journal Reports Johnson County Commissioners Sale Planned for Spring
http://www.dailyjournal.net/view/local_story/Delinquent-properties-going-to_1391047269/#.UurRfxBdVx4
Times: Lake County Council Candidate in Danger of Losing Home for Failure to Pay Property Taxes
A candidate seeking election to the highest position of fiscal oversight of Lake County government finances is in danger of losing her home for failing to pay taxes.
Lake County records indicate Carol Ann Seaton owes the county $12,640 in back taxes, penalties and unpaid stormwater fees.
Seaton filed this week for election to the 2nd District seat on the seven-member Lake County Council. She is challenging incumbent Councilwoman Elsie Franklin, who is running for re-election.
The council approves annual spending plans for county government and a number of other local government units. The council also has the authority to regulate the local option income tax now imposed on the personal income of all county residents and workers.
Seaton hasn't returned calls for comment.
Seaton's tax troubles first surfaced in 2010 after she was elected the Democratic nominee for county assessor, when county officials withdrew property tax deductions previously allowed Seaton's home in the 2300 block of Adams Street. They did so after an investigation indicated the deduction application appeared to have been forged in the name of a dead relative.
Seaton denied any wrongdoing and the prosecutor said the statute of limitations barred his office from pursuing any tax violations in connection with the Seaton homestead.
But county officials removed her from the Lake County Property Tax Board of Appeals, where she ruled on the tax assessments of others, and pursued her for back taxes now due because of the deduction withdrawal.
County records indicate Seaton's home is scheduled to be offered in a 2014 tax sale if the delinquent assessments aren't paid.
http://www.nwitimes.com/news/local/lake/gary/lake-council-candidate-owes-property-taxes/article_f3f1ff75-5578-54ba-9fc3-e8b881c59780.html
Revenue Finds County Option Income Tax Properly Applied to Marion County Resident Working in Illinois
Taxpayer is an individual. He maintains a home in Marion County, Indiana, but works in Illinois. Taxpayer filed Indiana individual income tax return for tax year 2011, failing to compute Marion County option income tax, resulting in an assessment for Marion County option income tax. Taxpayer states that he wrote a letter to the Indiana Department of Revenue ("Department") in which he disagreed with the proposed assessment explaining that he works in Illinois. Later, he received a letter from the Department stating that his "recent explanation and/or payment with respect to the specific liability number referenced above, is satisfactory," and requiring "[n]o further action . . ." on the part of the Taxpayer. Taxpayer explained that he relied on this outcome to file his Indiana individual income tax return for 2012 without computing the Marion County option income tax.
The Department adjusted the 2011 return and issued a proposed assessment for Marion County option income tax for both 2011 and 2012 tax years. Taxpayer protests the assessment for the Marion County option income tax for both years.
The county option income tax is calculated on the adjusted gross income of an individual who maintains a home in the county on January 1 of the tax year. IC § 6-3.5-6-1; IC § 6-3.5-6-8(a); IC § 6-3.5-6-20(a)(1) and (b); Income Tax Information Bulletin 32 (July 2008), 20080827 Ind. Reg. 045080659NRA. A county taxpayer is entitled to a credit against the county option income tax if the county taxpayer is "liable for an income tax imposed by a county, city, town, or other local governmental entity located outside of Indiana . . . ." IC § 6-3.5-6-23(a). Otherwise, the county option income tax is calculated on the adjusted gross income of the county taxpayer regardless of where the income is earned.
Marion County imposed a county option income tax during the 2011 and 2012 tax years. Departmental Notice 1 (December 1, 2010); Departmental Notice 1 (December 1, 2011). Taxpayer stated that he maintains a home in Marion County, and has not provided any evidence that he did not do so on January 1, 2011, or January 1, 2012. Additionally, Taxpayer has not provided any evidence that he was liable for an income tax imposed by a local government entity located outside Indiana. Therefore, the Marion County option income tax is calculated on Taxpayer's adjusted gross income wherever earned. Since Taxpayer has failed to prove the proposed assessments wrong, as required by IC § 6-8.1-5-1(c), the Department's assessments for unpaid Marion County option income tax for the tax years 2011 and 2012 are correct and Taxpayer's protest is denied.
The Department imposed a penalty on the failure to remit the Marion County option income tax in both 2011 and 2012 tax years.
A taxpayer who "incurs, upon examination by the department, a deficiency that is due to negligence . . . is subject to a penalty." IC § 6-8.1-10-2.1(a)(3). The Department shall waive the penalty if the taxpayer demonstrates that the failure to pay the outstanding taxes "was due to reasonable cause and not due to willful neglect." IC § 6-8.1-10-2.1(d); see also 45 IAC 15-11-2. The taxpayer may demonstrate reasonable cause by showing affirmatively that it used "ordinary business care and prudence" in not paying the outstanding taxes. Whether a taxpayer demonstrates reasonable cause for penalty purposes is a fact-sensitive question and determined on a case-by-case basis. 45 IAC 15-11-2(b) and (c).
Taxpayer's failure to pay the outstanding county option income tax for tax years 2011 and 2012 was due to reasonable cause and not willful neglect. The Department waives the penalties imposed on the proposed assessments of Marion County option income tax for the tax years 2011 and 2012.
http://www.in.gov/legislative/iac/20140129-IR-045140002NRA.xml.html
Times: Groups Seek Protection from Business Tax Cut
A coalition of local government groups are joining together to ask Indiana lawmakers to replace any money lost through a business tax cut winding its way through the Legislature.
A House Republican plan would give counties the option of eliminating their tax on business equipment. While the Senate Republican plan would cut eliminate the equipment tax for small businesses and further cut the state's corporate income tax.
The cuts could cost Indiana's local governments and school districts hundreds of millions of dollars. Indiana Association of Cities and Towns director Matthew Greller said Thursday that local governments have already been stretched thin because of property tax caps and a struggling economy.
Republican Gov. Mike Pence initially called for the elimination of the state's business equipment tax, but has tempered his stance.
http://www.nwitimes.com/news/state-and-regional/indiana/ind-groups-seek-protection-from-business-tax-cut/article_58679c3d-e70c-57fd-ae1b-36e4e5c45a91.html
IBJ: Preservation Tax Credit Gets Makeover in House Bill
http://www.ibj.com/preservation-tax-credit-gets-makeover-in-house-bill/PARAMS/article/45884
IBJ: Committee Pushes Gambling Discussion to Summer
Indiana's riverboat casinos could receive tax breaks and be able to expand onto land under legislation the Senate Public Policy Committee debated Wednesday, but it won't happen anytime soon.
The panel didn't vote on the bill, however, which means it will likely head to a summer study committee for further discussion.
In 2009, wagering at the casinos topped $2.8 billion. In 2012, it was $2.56 billion, an 11.8-percent drop.
http://www.ibj.com/committee-pushes-gambling-discussion-to-summer/PARAMS/article/45893
Board Finds Alleged Errors Failed to Prove Property's Value Incorrect
The thrust of the Petitioners’ case concerned to alleged errors on the property record card that erroneously increased the value of the property including the assessment of a shed that has no gas and no electric service, and a stairway to an attic in the front house that does not exist. However, even if the property record card contains errors concerning the shed or attic, the Petitioners still failed to meet their burden by simply contesting the methodology used to compute the assessment. Eckerling v. Wayne County Assessor, 841 N.E.2d at 674, 677 (Ind. Tax Ct. 2006). To successfully make a case the Petitioners needed to show the assessment does not accurately reflect the subject property’s market value-in-use. Id.; see also P/A Builders & Developers, LLC v. Jennings County Assessor, 842 N.E.2d 899, 900 (Ind. Tax Ct. 2006) (explaining that proper focus is not on methodology, but rather, on what the correct value actually is). The Petitioners failed to present any evidence that the assessment did not correctly reflect the property’s market value-in-use.
d. The Petitioners presented testimony that a house two blocks from their home sold for $65,000 in 2009. To effectively use any kind of comparison approach to value a property, one must establish that the properties are truly comparable. Conclusory statements that properties are “similar” or “comparable” are not sufficient. Long, 821 N.E.2d at 470. The Petitioner is “responsible for explaining to the Indiana Board the characteristics of their own property, how those characteristics compared to those of the purportedly comparable properties, and how any differences affected the relevant market value-in-use of the properties.” Id. at 471. Here, the Petitioners failed to make any comparisons at all between the subject property and the comparable property.
http://www.in.gov/ibtr/files/Brunson_45-023-10-1-5-00003.pdf
And the Indiana Tax Reporter reaches its second anniversary with 150,000 pageviews. Thanks to all of you that have made this blog a success.
Posted by Indiana Tax Reporter at 5:43 PM
AP Reports Indiana to Begin Processing Tax Returns Friday
The Indiana Department of Revenue will begin processing individual income tax returns on Friday.
The department says taxpayers should visit www.freefile.dor.in.gov to see if they qualify. If not qualified for INfreefile, taxpayers can use a vendor to electronically file their returns.
http://www.kokomotribune.com/breakingnews/x1768008233/Indiana-to-begin-processing-tax-returns-on-Friday
Journal-Gazette Reports New Haven Takes Initial Step Toward Offering Incentives to Hercules Machinery
New Haven City Council members agreed Tuesday to take the initial step toward offering an incentive for a local machining company looking to invest $1.3 million in new equipment and real estate improvements.
The council designated property at 5225 New Haven Ave. as an economic revitalization area – a preliminary step for tax abatement.
Hercules Machinery Corp. bought the property to expand its current operation, which is next door, said Justin Reed, the company’s vice president.
The company will nearly double its space to 60,000 square feet and increase its site from six to 15 acres, Reed said.
Nikki Liter, the county’s economic development specialist, estimated that Hercules could save $71,500 in taxes over seven years. “This would allow us to stay and expand in New Haven for quite some time,” Reed said of the tax incentive.
New equipment would include a mill, lathe and a high-definition plasma table for the fabrication and welding department, Reed said.
Councilman Terry Werling, R-at large, was excited about the expansion. “It’s great to encourage someone to stay in New Haven and grow their company’s jobs by 30 percent,” Werling said, “but the icing on the cake is that these are good jobs with good benefits, and that’s great for the employees.”
Council members will vote on the abatements at the next meeting.
http://journalgazette.net/article/20140129/LOCAL/301299946/0/SEARCH
Tax Tips for Hoosiers – Part 1
INDIANAPOLIS (Jan. 28, 2014) –This is the first of several news releases that will provide important, need-to-know tax tips to Indiana taxpayers during the 2014 individual tax season. Media organizations may use this information in any way appropriate.
With the tax season opening Jan. 31, many Hoosiers are asking questions about how to choose a tax preparer. Letting someone else do your taxes means you are exposing your personal information to someone you might not know. That is why it is important to make sure you find someone you can trust.
Here are some helpful tips on how to best choose a tax preparer:
Ask questions. See if the tax preparer belongs to a professional organization(s).
Before you sign your tax return, or authorize it to be filed electronically, carefully review the return. You are still held responsible for what is being submitted no matter who prepares your taxes.
More information about choosing professional tax preparers is available at www.in.gov/dor/4618.htm.
Starting Jan. 31, the Department of Revenue will again offer qualified taxpayers a free filing service called Indiana freefile (INfreefile) to file both their federal AND state taxes online. Last year, more than 118,000 taxpayers used INfreefile to file their Indiana taxes. However, nearly 1 million Hoosier taxpayers qualify to file taxes for freethrough INfreefile, due to criteria such as having an Adjusted Gross Income of $58,000 or less.
Taxpayers can visit http://www.freefile.dor.in.gov/ to see if they qualify for INfreefile based on the the six approved vendors’ options.
Before filing your taxes, be sure you have ALL of your W-2s, 1099s and tax statements. If you don’t have all your documents—wait. Do not try to file using your last paystub. Electronic filing programs, tax preparation software, and paid preparers must have your W-2 to file. Additionally, if you mail in your return to the department with a paystub your return will be put on hold.
It is better that you wait a few more days and file a correct return than to file an incorrect return and risked being billed and penalized later.
Times Reports Porter County More then Five Million in the Red
The Porter County Council began its year Tuesday with grim news. Its budget is short by more than $5 million this year and could be in the red by as much as $8 million next year if no action is taken.
The council called on county department heads to find ways to reduce spending or risk having the council make those cuts, which could involve personnel.
"The Camelot years are over," said Council President Dan Whitten, D-at large.
Porter County Councilman Jim Biggs, R-1st, urged an immediate response to the news.
"It's really long overdue," he said.
Councilwoman Karen Conover, R-3rd, suggested sending a letter urging department heads in county government to spend only what is necessary.
Biggs was in the minority in October when he opposed a 2014 budget that exceeds incoming revenue. The budget, which includes $1,000 employee pay raises and nine new jailers needed to open the third pod at that facility, was approved with the expectation of dipping into income tax proceeds and interest on the money generated from the 2007 sale of the county hospital.
It also required the council to decrease the money set aside for health insurance by $2.5 million, which some members predicted would have to be restored later this year.
The budget sessions also failed to come up with a long-term funding solutions for E-911 and the animal shelter, and the county faces many drainage and county building needs. Also not addressed were requests to fund a county-generated plan to create jobs and a proposal to build an education and administration center at Sunset Hill Farm County Park in Liberty Township.
The council is hoping a more profitable investment of the county hospital sale proceeds will help alleviate its financial woes. The group is attempting to schedule a meeting with the county commissioners in March to come up with an approach that will attract the unanimous support required.
http://www.nwitimes.com/news/local/porter/county-more-than-million-in-the-red/article_01d20e79-06f8-5b0d-a0f1-22ef361fb2c2.html
News and Tribune Reports Floyd County Budget Certified
Floyd County was due for a little good news, and the Department of Local Government Finance obliged.
The DLGF recently certified the county’s 2014 budget which was projected to be $2.9 million short when it was sent to the state late last year. But due to cost-cutting measures, and a significant bump in the property tax levy and EDIT funds, the county will be able to function without having to make layoffs.
“I figured draconian cuts would have to be made,” said Floyd County Council President Jim Wathen.
When the county received its certified budget, the property tax levy increased by $500,000 over last year and an extra $400,000 came from economic-development income taxes.
The $900,000 along with the $1.5 million cash balance the county had when 2013 ended from the council making 25 percent across the board cuts, along with other cost-cutting savings, eliminated the projected budget deficit. However, the county is expected to have only $18,000 in the general fund at the end of the year.
“If anything happens, we are still behind the eight ball,” Wathen said.
Wathen also said he is pleased with the news and the certified budget since the county didn’t have to eliminate jobs or raise taxes, but said he wants to find out why the property tax levy increased by $500,000. He also said the council will still have to look for ways to make cuts and save money.
http://www.newsandtribune.com/floydcounty/x1427975195/Floyd-County-budget-certified-potential-layoffs-averted
Tribune Reports Bill Proposes Sales Tax Relief on Propane
Indiana state legislators are offering an amendment to Senate Bill 1, which would provide relief to Hoosiers affected by the Midwest propane shortage.
The amendment would eliminate the sales tax on any propane bought for more than $2.50 a gallon, beginning Jan. 1. If it becomes law, customers would get a credit on their next propane bill to offset the sales tax already paid. The waiver would be effective through March.
Some customers are reporting current rates are in excess of $5 per gallon.
http://www.southbendtribune.com/news/business/sales-tax-relief-on-propane/article_e1a26274-88d2-11e3-92a3-001a4bcf6878.html
Revenue Makes Sales and Use Tax Determinations on Multiple Purchases and Contracts for Cement Manufacturer
Oops - I found a decision I had failed to post. This one is from October. Excerpts of Revenue's Determination follow:
Taxpayer is a cement manufacturer in Indiana. Taxpayer has two manufacturing locations of which one uses a dry kiln process ("Dry Location") and the other uses a wet kiln process ("Wet Location"). These locations consist of quarries where stone is mined, delivered to the production areas, and through their kiln process is manufactured into cement. The Department conducted an audit review of Taxpayer's business records employing a statistical sampling methodology for Taxpayer's accounts payable expense purchases and a full review of Taxpayer's capital asset purchases for the 2009, 2010, and 2011 tax years. As a result of the audit, the Indiana Department of Revenue ("Department") determined that Taxpayer owed use tax for the 2009, 2010, and 2011 tax years. The Department found that Taxpayer had made a variety of purchases on which sales tax was not paid at the time of purchase nor was use tax remitted to the Department.
A. "Waste Fuel System."
Taxpayer asserts that the purchases of a "magnum DS switch," a "waste fuel tank 5," "vertical tanks," a "blending tank," a "RAM pump unit," a "solenoid relay," "EGS 1/2 & 3/4 female unions," a "SS sleeve shaft," "RAM service parts kit for waste fuel facility," an "I/O module box," an "AOD pump" for fuel storage, and an "impeller" are directly used in and are an integral part of cement manufacturing as part of its "alternative fuel" system that processes waste fuel ("waste fuel system"). Taxpayer uses "waste fuel" to power the kiln, which is used in manufacturing the cement. Before the "waste fuel" is fed into the kiln, Taxpayer processes the "waste fuel" through a "waste fuel system" that breaks down and removes pieces of sediment to make the "waste fuel" burn more efficiently. Taxpayer asserts that since the kiln needs a continuous supply of fuel, then any and all parts of Taxpayer's "waste fuel system" are used in direct production.
However, in Taxpayer's case, the "waste fuel system" does not have an immediate effect on the manufactured cement. While the "waste fuel system" may make the use of "waste fuel" more efficient, Taxpayer could manufacture cement without using a "waste fuel system." Particularly, since Taxpayer could choose either to use "waste fuel" without processing it or to purchase fuel that is ready for production. Thus, the "waste fuel system" is a separate system distinct and removed from the actual manufacturing of the cement. The "waste fuel system" simply functions to process the "waste fuel" before the fuel enters into the manufacturing process. Accordingly, the processing of "waste fuel" is a preproduction activity and does not fall under the exemption.
Therefore, Taxpayer's protest to the imposition of use tax on the purchases used in its "waste fuel system" is respectfully denied.
B. "Black 5 Gal Pails."
The Department found that use tax was due on Taxpayer's purchase of "black 5 gal pails." Taxpayer maintains that the "black 5 gal pails" are used to accumulate and store "in house waste" that is used for kiln fuel and therefore, qualify for the manufacturing equipment exemption.
While equipment that is used to actually extract the waste from the production process can qualify for the manufacturing exemption, any equipment that is used to collect, transport, store, or otherwise process the waste after its extraction is subject to tax. See Graham Creek Farms v. Indiana Dep't of State Revenue, 819 N.E.2d 151 (Ind. Tax Ct. 2004) (exempting equipment that actually remove waste from the production process, but not extending the exemption to equipment that is used to transport the waste that has been removed from production.) Since the "black 5 gal pails" are used to collect, store, and transport the waste of the manufacturing process that has been extracted from the production process, the "black 5 gal pails" used to move the waste are used in a post-production activity and are taxable. It does not matter that this waste will later re-enter a new cycle of the production process. Once the waste is removed from the production process, any transporting of the waste is a post production activity. While the waste may at some point re-enter Taxpayer's production process, the waste's transport does not become a production activity until it actually re-enters the production process. Therefore, the "black 5 gal pails" that are used in transporting the "in house waste" do not qualify for the manufacturing exemption.
Accordingly, Taxpayer's protest to the imposition of use tax on the "black 5 gal pails" is respectfully denied.
C. "Fly Ash System: Compressor."
Taxpayer asserts that the compressor was purchased and installed on the fly ash tank storage tank, which is part of Taxpayer's "fly ash system" and is exempt from sales and use tax. Taxpayer maintains that the "fly ash system" transports the fly ash from the fly ash tank into the raw mill. The "fly ash system" is used to feed fly ash into the raw mill where it is mixed with other ingredients to form slurry, which is fed into the kiln. Taxpayer states the compressor shoots a burst of air into the fly ash before it enters the rotary valve for the raw mill main feed belt.
The "fly ash system" is used to feed fly ash into the raw mill where it is mixed with other ingredients to form slurry, which is fed into the kiln. The conveyor system moves the fly ash from storage into the raw mill. Taxpayer maintains that since the fly ash tank is attached to its computer system that controls its manufacturing process, the fly ash tank and its component parts are part of the manufacturing process. Taxpayer reasons that since the fly ash tank and its component parts are part of the manufacturing process, then they are used in direct production of cement and are exempt. As discussed previously, Taxpayer mistakenly implies that Cave Stone allows for a blanket exemption to any and all equipment used in the entire process of cement making.
As provided above, the court in Cave Stone found that the "focus of the analysis should be whether the equipment is an 'integral part of manufacturing and operates directly on the product during production.'" Cave Stone, 457 N.E.2d at 525. While the "fly ash system" that is connected to Taxpayer's computer system may be a necessary part of Taxpayer's manufacturing system, the compressor and other components of the "fly ash system" are not machinery that has an immediate effect on the manufactured cement. During the time the fly ash is in the storage tank and on the conveyor system, the fly ash is not being mixed, altered, combined, or changed in form. The storage tank and conveyor system simply function to transport a raw material before it enters into the manufacturing process. Accordingly, even when connected to a computer system, the storage and transporting of the fly ash by a conveyor system is a preproduction activity and does not fall under the exemption.
Therefore, Taxpayer's protest to the imposition of use tax on its purchase of a compressor for the "fly ash system" is respectfully denied.
D. Slurry Tank.
The Department found that use tax was due on Taxpayer's January 30, 2009, purchase–which the auditor described as the materials portion of a time and materials contract that included "bearings; gen. tach; misc parts" (p. 27 of the audit report). At the time of the audit, the Department was unable to verify the nature of the transaction. Therefore, as Taxpayer had not paid sales tax at the time of the transaction, the Department assessed use tax on the purchase. ...
Taxpayer asserts that the materials were purchased to repair the slurry tank and therefore are exempt from sales and use tax. Taxpayer states that the slurry is mixed in the raw mill, transported to and held in the slurry tank, and then transported to and fired in the kiln to produce clinker. Taxpayer maintains that slurry is work-in-process and is temporarily held in the slurry tank between the raw mill and the kiln. Taxpayer reasons that since the slurry tank is used in the manufacturing process, parts purchased for the slurry tank are exempt.
Since the slurry tank is used to temporarily hold work-in-process, pursuant to 45 IAC 2.2-5-8(e)(1) the slurry tank is equipment that is directly used during the production process qualifying for the "manufacturing equipment" exemption. Therefore, pursuant to 45 IAC 2.2-5-8(h)(2) repair parts purchased for the slurry tank would also be tax exempt.
Accordingly, Taxpayer's protest to the imposition of use tax on its January 30, 2009, purchase of "bearings; gen. tach; misc parts" for the slurry tank is sustained.
E. "Maintenance Agreement."
The Department found that use tax was due on Taxpayer's June 19, 2009, purchase which the auditor described as the purchase of a "maintenance agreement (No details provided)" (p. 25 of the audit report). At the time of the audit, the Department was unable to verify the nature of the transaction. Therefore, as Taxpayer had not paid sales tax at the time of the transaction, the Department assessed use tax on the purchase. As stated previously, Indiana imposes "an excise tax, known as the use tax," on tangible personal property that is acquired in retail transactions and is stored, used, or consumed in Indiana. IC § 6-2.5-3-2(a).
Taxpayer asserts that the "maintenance agreement" was purchased for computer software for its "CBX x-ray machine." Taxpayer maintains that since the "maintenance agreement" was purchased for software that runs exempt equipment, the "maintenance agreement" is also exempt from tax. The CBX x-ray machine is in the quality control laboratory and is located immediately next to the kiln burn floor. Taxpayer states that the "CBX x-ray machine" analyzes production samples and therefore is exempt under 45 IAC 2.2-5-8(i). Taxpayer takes "[s]amples every minute to determine whether changes in production are necessary; such changes occur every five minutes."
Since the "CBX x-ray machine" is used to test the product during production according to a schedule for purposes of quality control of the production system, the "CBX x-ray machine" is equipment directly used during the production process qualifying for the "manufacturing equipment" exemption. Therefore, pursuant to 45 IAC 2.2-5-8(h)(2) a "maintenance agreement" purchased for the software for the "CBX x-ray machine" would also be tax exempt.
Accordingly, Taxpayer's protest to the imposition of tax on its June 19, 2009, "maintenance agreement" purchase (p. 19 of the audit report) for software for the "CBX X-Ray Machine" is sustained.
F. Plant Water Tower.
Taxpayer asserts that the materials in its November 18, 2010, purchase were used to repair the "RIP Plant Water Tower" that "contains the water for the slurry." Taxpayer states that "in the raw mill, water creates slurry, becoming part of the work-in-process." Taxpayer argues that since the water tower is physically integrated into the manufacturing system through pipes connecting the tower to the raw mill, the water tower is used in direct production. Taxpayer cites to 45 IAC 2.2-5-8 and maintains that "[t]he water tower has an immediate effect on the work-in-process because it is an essential and integral part of the system furnishing the water to the manufacturing system."
... While the water tower may be a necessary part of Taxpayer's manufacturing system, the "water tower" and piping are not machinery that has an immediate effect on the manufactured cement. During the time water is in the water tower and pipes, the water is not being mixed, altered, combined, or changed. The water tower and pipes simply functions to store and transport a raw material before it enters into the manufacturing process. Accordingly, the storage and transporting of the water by the water tower and pipes is a preproduction activity and does not fall under the exemption.
Alternatively, Taxpayer maintains that if this purchase is taxable, it should be treated as a capital item and not an expense item in the statistical sample. Taxpayer asserts that "[t]he purpose of a statistical sample is to provide a picture of a company's reoccurring expenses during the audit period . . . [and] this major repair to the water tower occurs at most only once every 5.5 years." Taxpayer argues that "[t]reating the purchase, therefore, as a regular occurrence and projecting it as though it occurred regularly during the audit period unfairly skews [Taxpayer's] liability."
Taxpayer suggests that including this particular repair distorts the projection because this repair occurs irregularly. However, the Department has the authority to use methods considered necessary to determine a taxpayer's proper tax liability as provided by IC § 6-8.1-4-2. The Department used a statistical sample selected from Taxpayer's records and a projection method to perform the audit of Taxpayer's expense purchases. The expenses chosen in the statistical sample were divided into six stratums of related purchases based upon the dollar amount of the purchases. As noted above, having protested the audit results, it is the taxpayer's burden of demonstrating that the sampling method is wrong, not that an alternative method would produce a different result. It is not relevant that Taxpayer makes this particular repair "once every 5.5 years." The only relevant fact is that there was a repair transaction during the projection period. Repairs to equipment are a normal occurrence for a manufacturing plant. As such, it does not seem that a cement manufacture having a repair on a piece of equipment would be abnormal, unrelated or incidentally related to the manufacturing operations.
The Department agrees that a recalculation of taxpayer's sales and use tax liabilities could very well result in a different result than the one reached by the audit. However, an administrative hearing is not the appropriate forum by which to explore variances. Taxpayer asks the Legal Division to intrude into an area of expertise of which the Legal Division has little experience and for which Taxpayer has no legal challenge. Taxpayer has failed to demonstrate clear error on the part of the audit.
Accordingly, Taxpayer's protest to the imposition of use tax on its purchase of a water tower is respectfully denied.
G. "Heat Tape."
Taxpayer asserts that its October 22, 2010, purchase of "heat tape" is exempt because the tape was used on the water pipes to prevent them from freezing. Taxpayer maintains that the "heat tape" is wrapped around the water pipes of exempt equipment and is therefore exempt.
"Heat tape" is not equipment or machinery, does not become part of the product, but is a material consumed by Taxpayer. Therefore, the related statute and manufacturing exemption at issue would be the "consumption exemption" found at IC § 6-2.5-5-5.1.
Therefore, items purchased for consumption in a taxpayer's post production activities are subject to tax. Pursuant to 45 IAC 2.2-5-12(f), maintenance is a post production activity. Since "Heat tape" is used in the maintenance of the pipes, it is used in a post production activity and is subject to tax. Given that maintenance is subject to tax regardless of the status of the equipment, the Department declines to address the status of the equipment upon which the tape is used at this time.
Accordingly, Taxpayer's protest to the imposition of use tax on its purchase of "heat tape" is respectfully denied.
Taxpayer asserts that the "materials for well repair" purchase on October 22, 2010, (p. 27 of audit report) was used to repair the wells that are part of the system furnishing water during manufacturing process and therefore are exempt. Taxpayer maintains that since the wells are exempt manufacturing equipment, the repair parts purchased for wells are also exempt.
In Taxpayer's case, the wells do not have an immediate effect on the manufactured cement. While the wells may be a necessary part of Taxpayer's manufacturing system, the wells are not machinery that has an immediate effect on the manufactured cement. Taxpayer could manufacture cement without using the wells. Taxpayer's acquisition of "well water" is a separate process that is distinct and removed from the actual manufacturing of the cement. The wells simply function to draw and/or transport the "well water" before the "well water" enters into the cement manufacturing process. Accordingly, the wells are used in a preproduction activity, as to the concrete manufacturing process, and do not fall under the manufacturing exemption. See Letter of Findings 04-20100634 (June 28, 2011), 20110928 Ind. Reg. 045110493NRA (Finding that "while water is used within the direct processing of Taxpayer's product, the water wells are used to draw and collect water and therefore constitute a pre-production activity. Consequently, the water wells are not exempt from taxation.")
Therefore, Taxpayer's protest to the imposition of use tax on "repair parts" for the wells is respectfully denied.
I. Water Treatment Chemicals.
Taxpayer asserts that its August 4, 2010, purchase of water treatment chemicals "are added to the process water, which becomes part of the slurry (work-in-process) that enters the kilns." Taxpayer states that the chemicals are added to "process water" that is used in the raw mills to create slurry. Taxpayer maintains that the chemicals are either consumed in the kiln qualifying for the manufacturing "consumption exemption" or become incorporated into the slurry qualifying for the manufacturing "incorporation exemption."
However, in Taxpayer's case, the chemicals do not have an immediate effect on the manufactured cement. While the chemicals are added to the "process water" may make the use of "process water" more efficient, Taxpayer could manufacture cement without using the chemicals. Particularly, since Taxpayer could choose either to use "process water" without the chemicals or to purchase water that is ready for production. Thus, adding chemicals to the "process water" is a separate process both distinct and removed from the actual manufacturing of the cement. The chemicals simply functions to treat the "process water" before it enters into the manufacturing process. Accordingly, the treatment of the "process water" is a preproduction activity and does not fall under the exemption.
Therefore, Taxpayer's protest to the imposition of use tax on water treatment chemicals is respectfully denied.
J. Idler Roll.
The Department found that use tax was due on Taxpayer's March 16, 2010, purchase–which the auditor described as "hi-vol roller bearings" (p. 20 of the audit report). At the time of the audit, the Department was unable to verify the nature of the transaction. Therefore, as Taxpayer had not paid sales tax at the time of the transaction, the Department assessed use tax on the purchase. As stated previously, Indiana imposes "an excise tax, known as the use tax," on tangible personal property that is acquired in retail transactions and is stored, used, or consumed in Indiana. IC § 6-2.5-3-2(a).
Taxpayer asserts that the bearings were purchased to repair the idler roll and therefore are exempt from sales and use tax. Taxpayer states that the idler roll is located at the quarry. It moves the crushed stone exiting the crusher to the temporary storage bins, which are used to hold and transport the crushed stone to the raw mill. Taxpayer maintains that since crushed stone is work-in-process and the idler roll transports the crushed stone to the bins that temporarily hold and transport the stone, the idler roll is manufacturing equipment. Taxpayer reasons that since the idler roll is used in the manufacturing process, parts purchased for the idler roll are exempt.
Since the idler roll is used to transport work-in-process, pursuant to 45 IAC 2.2-5-8(f)(3) the idler roll is equipment that is directly used during the production process qualifying for the "manufacturing equipment" exemption. Therefore, pursuant to 45 IAC 2.2-5-8(h)(2) repair parts purchased for the idler roll would also be tax exempt.
Accordingly, Taxpayer's protest to the imposition of use tax on its March 16, 2010, purchase of "hi-vol roller bearings" (p. 20 of the audit report) for the idler roll is sustained.
K. Flowmeter.
The Department found that use tax was due on Taxpayer's October 27, 2009, purchase of a flowmeter (p. 19 of audit report). Taxpayer asserts that the flowmeter was purchased to measure amount of bulk cement that is put in each individual bag in the automated packaging line and therefore is exempt from sales and use tax. Taxpayer states that its cement is packaged in individual bags, placed on pallets, and sold by the pallet. Taxpayer maintains that since the flowmeter measures the amount of cement that goes into each bag, it is exempt from tax under 45 IAC 2.2-5-8(d).
Since the flowmeter is used in transporting and measuring Taxpayer's product to create the packaged product–i.e., the individual bags of cement, the flowmeter is used during production of the product. Therefore, the flowmeter qualifies for the manufacturing equipment exemption.
Accordingly, Taxpayer's protest to the imposition of use tax on its October 27, 2009, purchase of a flowmeter (p. 19 of the audit report) is sustained.
L. Reducer.
Taxpayer asserts that its July 7, 2009, purchase of a reducer–which the auditor described as "reducer (south scale)" (p. 16 of audit report)–was purchased as a repair part for the scale that measures work-in-process in Taxpayer's manufacturing process and therefore is exempt from sales and use tax. Taxpayer maintains that the reducer is used in the scale that measures and controls the amount of clinker that is removed from temporary storage for the finish mills. Taxpayer reasons that since the scale is used in the manufacturing process, a part purchased for the scale is also exempt.
In this case, Taxpayer established that the scale functions as a device to measure work-in-process as part of Taxpayer's production process. In the example cited above, "weighing and measuring equipment" was considered to be part of the first step in production. Taxpayer has described an integrated, automated production process that depends on precise measurement of various combinations of materials. Since the scale is used to measure work-in-process, the scale is equipment that is directly used during the production process qualifying for the "manufacturing equipment" exemption. Therefore, pursuant to 45 IAC 2.2-5-8(h)(2), repair parts purchased for the scale would also be tax exempt.
Accordingly, Taxpayer's protest to the imposition of use tax on its July 7, 2009, purchase of a reducer (p. 16 of audit report) for the scale is sustained.
M. "P & H Crane Rail."
Taxpayer asserts that its August 25, 2009, purchase of a replacement rail (p. 8 of the audit report) was used to replace the rail in the rail system to which the "P & H crane" is attached and runs along. Taxpayer states that the "P & H crane" is used to transport clinker from its temporary storage in the clinker cooler to the finish mill. Taxpayer, therefore, maintains that the rail system attached to the "P & H crane" is used to transport work-in-process in Taxpayer's manufacturing process and is exempt from sales and use tax. Taxpayer reasons that since the rail system is used in the manufacturing process, a replacement part purchased for the rail system is also exempt.
Since the "P & H crane rail system" is used to transport work-in-process, pursuant to 45 IAC 2.2-5-8(f)(3) the "P & H crane rail system" is equipment that is directly used during the production process qualifying for the "manufacturing equipment" exemption. Therefore, pursuant to 45 IAC 2.2-5-8(h)(2) repair parts purchased for the "P & H crane rail system" would also be tax exempt.
Accordingly, Taxpayer's protest to the imposition of use tax on its August 25, 2009, purchase of a replacement rail (p. 8 of the audit report) for the "P & H crane rail system" is sustained.
N. "12 Strand Fiber Optics."
Taxpayer asserts that its December 29, 2011, purchase of "12 strand fiber optics"–which the auditor described as "12 strand fiber optics from office to east silo" (p. 24 of the audit report)–was used as part of the automated "finished product load-out" system which dispenses the finished cement from the finished product silo into customer trucks. Taxpayer maintains that since the "12 strand fiber optics" links the computer to the dispensing mechanism of the "finished product load-out" system that dispenses the final product in the amount that is sold to the customers. Taxpayer states that the "finish product load-out" system functions similarly to "key for the silo." Taxpayer reasons that the dispensing of the product into the customer's trucks is similar to packaging and therefore is exempt.
45 IAC 2.2-5-8(d) excludes pre-production and post production activities by providing that "'direct use in the production process' begins at the point of first operation or activity constituting part of the integrated production process and ends at the point that the production has altered the item to its complete form." Therefore, proper application of the exemption requires determining at what point "production" begins and at what point "production" ends.
However, based upon the information provided, a computer system that functions as a "key for the silo" does not have an immediate effect on the product being produced. Taxpayer's finished product silo holds Taxpayer's finished product in its completed form. Therefore, the computer system performs a post-production activity.
Accordingly, Taxpayer's protest to the imposition of tax on its purchase of "12 strand fiber optics" is respectfully denied.
O. Crusher.
Taxpayer asserts that its August 24, 2011, purchase of fuses–which the auditor described as "CHSWG SCLS-6R 5.08 MAX KVCLS 6R" (p. 23 of audit report)–were purchased to repair the secondary crusher that crushes stone at the quarry in Taxpayer's manufacturing process and therefore is exempt from sales and use tax.
Pursuant to 45 IAC 2.2-5-8(h)(2) "[r]eplacement parts, used to replace worn, broken, inoperative, or missing parts or accessories on exempt machinery and equipment, are exempt from tax." Accordingly, a part purchased for the crusher is tax exempt to the extent that the crusher is exempt. Since the crusher is manufacturing equipment that is exempt as part of Taxpayer's manufacturing process, the repair part purchased for the crusher is also exempt.
Accordingly, Taxpayer's protest to the imposition of use tax on its August 24, 2011, purchase of fuses (p. 23 of the audit report) for the crusher is sustained.
P. "Petron Gear Shield NC Lubricant."
Taxpayer asserts that its December 7, 2011, purchase of "petron gear shield nc lubricant" (p.21 of the audit report) was used to lubricate the kiln drive for kiln #1 and is exempt from sales and use tax under 45 IAC 2.2-5-12(e). Taxpayer maintains that this special lubricant is used to lubricate the kiln drive which controls the gears that are mixing the materials in the kiln.
Since the lubricant directly affects the kiln that is a piece exempt manufacturing equipment that is used by Taxpayer in the direct production, the lubricant qualifies for the consumption exemption.
Accordingly, Taxpayer's protest to the imposition of use tax on its December 7, 2011, purchase of "petron gear shield nc lubricant" (p. 21 of the audit report) for the kiln drive is sustained.
Q. Inline Heater.
The Department determined that Taxpayer's October 24, 2011, purchase of an inline heater (p.27 of the audit report) was subject to tax because it was "pre-heating a raw material" prior to its entry into the production process. Taxpayer maintains that the inline heater is exempt manufacturing equipment.
Taxpayer asserts that the inline heater is used to allow oil to properly flow in the pipes leading to the kiln. Taxpayer maintains that the oil has to be heated so that it can be pumped through the pipes at the frequency required for production.
However, in Taxpayer's case, the inline heater does not have an immediate effect on the manufactured cement. While the inline heater may be necessary to Taxpayer's production process, the inline heater is readying an item consumed in production. Thus, the inline heater has a separate function both distinct and removed from the actual manufacturing of the cement. The inline heater simply functions to process the oil before it enters into the manufacturing process. Accordingly, the pre-heating of the oil is a preproduction activity and does not fall under the exemption.
Therefore, Taxpayer's protest to the imposition of use tax on the purchase of an inline heater is respectfully denied.
R. "V-Ball Controller Housing."
Taxpayer asserts that its July 30, 2009, purchase of ball valves (p. 27 of audit report) were purchased as repair parts for the "v-ball controller housing" that is used in Taxpayer's manufacturing process and therefore is exempt from sales and use tax. Taxpayer maintains that the valve on the v-ball controller housing controls the amount of work-in-process raw feed that enters the kiln from the raw mill and therefore is used to transport work-in-process between manufacturing steps.
Since the "v-ball controller housing" is used in transporting work-in-process, pursuant to 45 IAC 2.2-5-8(f)(3) the "v-ball controller housing" is equipment that is directly used during the production process qualifying for the "manufacturing equipment" exemption. Therefore, pursuant to 45 IAC 2.2-5-8(h)(2) repair parts purchased for the "v-ball controller housing would also be tax exempt.
Accordingly, Taxpayer's protest to the imposition of use tax on July 30, 2009, purchase of ball valves (p. 27 of audit report) for the "v-ball controller housing" is sustained.
S. Quality Control Laboratory: Electrical System.
Taxpayer asserts that its August 24, 2011, purchase of a transformer–which the auditor described as "H-D 23-28-275-6 7.5 KVA 120/240" (p. 27 of audit report)–was purchased to repair the electrical system furnishing electricity to the quality control laboratory that is located in the mill building. Taxpayer maintains that the electricity powers the laboratory that is used to conduct quality control testing during production. Taxpayer reasons that since the electrical system is used to power the laboratory that is used in the manufacturing process, a part purchased to repair the electrical system is also exempt.
Taxpayer's quality control laboratory is located immediately next to the kiln burn floor. Taxpayer states that it analyses production samples in the quality control laboratory and its quality control laboratory equipment is exempt under 45 IAC 2.2-5-8(i). Taxpayer takes "[s]amples every minute to determine whether changes in production are necessary; such changes occur every five minutes."
Since the quality control laboratory has equipment that is used to test the product during production according to a schedule for purposes of quality control of the production system, the laboratory equipment is directly used during the production process qualifying for the "manufacturing equipment" exemption. Therefore, pursuant to 45 IAC 2.2-5-8(h)(2) a transformer purchased to repair the electrical system for the quality control laboratory would also be tax exempt.
Accordingly, Taxpayer's protest to the imposition of use tax on its August 24, 2011, purchase of a transformer–which the auditor described as "H-D 23-28-275-6 7.5 KVA 120/240" (p. 27 of audit report) is sustained.
T. Gypsum Hopper Grate.
Taxpayer asserts that the gypsum hoper grate it purchased on January 22, 2010, (p.27 of the audit report) is used to remove the oversized pieces of gypsum from entering the gypsum storage silo and is exempt from sales and use tax under 45 IAC 2.2-5-12(e). Taxpayer maintains that since the gypsum hopper grate prevents the oversized pieces of gypsum from entering the silo–which meters the gypsum into the finish mill–the grate is part of the manufacturing production process and is exempt.
As provided above, the court found that the "focus of the analysis should be whether the equipment is an 'integral part of manufacturing and operates directly on the product during production.'" Cave Stone, 457 N.E.2d at 525. The gypsum hopper grate is used to sort the gypsum before it goes into the storage silo. Therefore, the gypsum hoper grade readies a raw material, gypsum, for the manufacturing process. Thus, the gypsum hopper, at best, is a separate system both distinct and removed from the actual manufacturing of cement. The gypsum hopper grate simply functions to sort the gypsum before it enters into the manufacturing process. Accordingly, the sorting of the gypsum is a preproduction activity that does not fall under the exemption.
Accordingly, Taxpayer's protest to the imposition of use tax on its purchase of a gypsum hopper grate is respectfully denied.
The Department determined that use tax was due on the purchases of a "cooling tower filter," "85 ppm propane nitrogen," and a spool assembly that Taxpayer had made without paying sales tax. As stated previously, Indiana imposes "an excise tax, known as the use tax," on tangible personal property that is acquired in retail transactions and is stored, used, or consumed in Indiana. IC § 6-2.5-3-2(a). Taxpayer maintains that the purchases were made to comply with environmental standards and are exempt under IC § 6-2.5-5-30.
A. "Cooling Tower Filter."
Taxpayer maintains that the "cooling tower filter" was purchased for the "cooling tower" which is part of Taxpayer's "dust collection system." Taxpayer asserts that the Indiana Department of Environmental Management ("IDEM") required Taxpayer to install the "dust collecting system" before Taxpayer could receive a "Title V Environmental Permit" from the Environmental Protection Agency under Title V of the Clean Air Act. See Clean Air Act, 42 U.S.C. § 7401, et seq. (2007) & 40 C.F.R. § 70.1, et seq. (2007). Taxpayer states:
[T]he water cooling tower . . . is part of a system that pumps water to the dust recycling system. It supplies water to the nozzles in the conditioning tower. We believe that this function means that the cooling tower and its components are incorporated into the function of a facility required by the EPA.
During the hearing process, Taxpayer was asked to present the statutes and/or written requirements from IDEM that Taxpayer purchase "cooling tower filter." However, the consent decree Taxpayer presented does not mention the "cooling tower filter." The Department through its own research found where IDEM required the purchase of "cooling tower filters." Therefore, the cooling tower filter was purchased to comply with an environmental quality standard and is exempt from sales and use tax under the "environmental exemption" as defined in IC § 6-2.5-5-30.
Accordingly, Taxpayer's protest to the imposition of tax on its January 12, 2010, purchase of a cooling tower filter (p. 27 of the audit report) is sustained.
B. "85 PPM Propane Nitrogen."
The Department determined that Taxpayer's $246.82 purchase of "85 ppm propane nitrogen" was subject to use tax because it was used to process raw materials prior to their entry into production. Taxpayer maintains that the "85 ppm propane nitrogen" is required by an Environmental Protection Agency regulation and is exempt as a purchase required for pollution control. Taxpayer states that this nitrogen is a certified calibration gas used daily on the kilns to monitor gas emission concentrations. Taxpayer further asserts that the Environmental Protection Agency requires this type of monitoring pursuant to 40 CFR 63.1209.
Taxpayer has provided sufficient documentation to support Taxpayer's assertion that the "85 ppm propane nitrogen" was purchased to comply with the gas emission monitoring pursuant to 40 CFR 63.1209 and is exempt from sales and use tax under the "environmental exemption" as defined in IC § 6-2.5-5-30.
Accordingly, Taxpayer's protest to the imposition of tax on its April 29, 2011, $246.82 purchase of "85 ppm propane nitrogen" (p. 15 of the audit report) is sustained.
C. "Baghouse: Spool Assembly."
Taxpayer asserts that the "spool assembly" is part of the drop out chamber screw installed to repair the "baghouse." Taxpayer maintains that the Indiana Department of Environmental Management ("IDEM") required Taxpayer to install the "baghouse" to comply with "Title V Environmental Permit" requirements of the Environmental Protection Agency under Title V of the Clean Air Act. See Clean Air Act, 42 U.S.C. § 7401, et seq. (2007) & 40 C.F.R. § 70.1, et seq. (2007). Taxpayer reasons that since the "baghouse" is required by an Environmental Protection Agency regulation and therefore a part purchased to repair the "baghouse" is exempt as a purchase required for pollution control.
During the protest, Taxpayer presented a consent decree from IDEM requiring Taxpayer to purchase the "baghouse." Taxpayer has provided sufficient documentation to support Taxpayer's assertion that the "spool assembly" purchased for the "baghouse" was required to comply with an environmental quality standard and is exempt from sales and use tax under the "environmental exemption" as defined in IC § 6-2.5-5-30.
Accordingly, Taxpayer's protest to the imposition of tax on its September 23, 2010, purchase of a spool assembly (p. 23 of the audit report) for the baghouse is sustained.
The Department found that use tax was due on Taxpayer's January 14, 2009, $12,866.25 purchase–which the auditor described as "plc controller/energy saving device" (p. 8 of audit report). Taxpayer maintains that this purchase was actually made during 2008 and therefore cannot be included in the audit. The Department's audit used the information from Taxpayer's accounting system to determine the sample population. Taxpayer claims that when it originally entered this invoice in its accounting system, Taxpayer mistakenly entered the invoice date as January 14, 2009. Since the date of the transaction was entered as January 14, 2009, in Taxpayer's accounting system, the Department included this purchase as part of the sample population for the audit of the 2009 to 2011 tax years.
During the protest, Taxpayer presented the invoice for this transaction. The invoice was dated January 14, 2008. Therefore, since the date of the transaction is actually January 14, 2008, this transaction cannot be included in the Department's audit of 2009 to 2011 tax years. Thus, the audit division is requested to remove the item from the sample population and to adjust the calculations accordingly.
The Department found that Taxpayer purchased tangible personal property without paying sales tax at the time of purchase, and assessed use tax on the purchases. Pursuant to IC § 6-8.1-5-1(c), all tax assessments are presumed accurate, and the taxpayer bears the burden of proving that an assessment is incorrect.
Taxpayer maintains that the Department incorrectly assessed use tax on its purchases from two "service contractors:" "Contractor A" and "Contractor F."
A. "Contractor A."
The Department found that use tax was due on Taxpayer's March 31, 2009, purchases from "Contractor A" where the auditor described the purchases as "misc parts for smoke/heat detection systems" (p. 8 of the audit report). At the time of the audit, the Department was unable to verify the nature of the transactions. Therefore, as Taxpayer had not paid sales tax at the time of the transactions, the Department assessed use tax on the purchases. As stated previously, Indiana imposes "an excise tax, known as the use tax," on tangible personal property that is acquired in retail transactions and is stored, used, or consumed in Indiana. IC § 6-2.5-3-2(a).
Taxpayer asserts that the Department's assessment of use tax on the two purchases from "Contractor A" is incorrect because these are service transactions that are exempt from use tax. Taxpayer maintains that the invoiced amount represents a charge "for labor only." During the hearing process, Taxpayer provided purchase orders and invoices for the two transactions in question.
However, based upon the documentation provided, the transactions in question were not "labor only" service transactions as the Taxpayer suggests. The purchase orders and invoices provided demonstrate that the transactions represent the payment of one "lump sum" amount for each transaction that covers the provision of 1 unit–i.e., the smoke/heat detection system–and the requisite number of hours to complete the installation of that unit. Therefore, the transactions in question represent "lump sum" payments for "improvements to reality."
In Taxpayer's situation, the installation of "heat detection systems" into realty by a "construction contractor" would qualify as "improvements to realty." Since, based upon the documentation presented, these "improvements to realty" were billed on a "lump sum" basis, the "construction contractor" was liable for the payment of tax upon the materials used.
Accordingly, upon reviewing the documentation, Taxpayer's protest to the imposition of tax on the two transactions with "Contractor A" on March 31, 2009, for "heat detection systems" (p. 8 of the audit report) is sustained.
B. "Contractor F."
The Department found that use tax was due on Taxpayer's purchases from "Contractor F" where the auditor described the purchase as the materials portion of a time and materials contract for the "installation of smoke/heat detectors" (p. 8 of the audit report) and the "materials portion of a fire suppression system" (p.10 of the audit report). Taxpayer asserts that the Department's assessment of use tax on the "Contractor F" purchases is incorrect because these are for materials and services billed under a "lump sum" contract for which Taxpayer is not properly subject to use tax. During the hearing process, Taxpayer provided a "quote" and two payment invoices for the two transactions in question.
In Taxpayer's situation, the installation of "smoke/heat detectors" and a "fire suppression system" into realty by a "construction contractor" would qualify as "improvements to realty." However, based upon the documentation provided, the transactions in question were not billed under "lump sum" contracts as the Taxpayer suggests. The quote, while incomplete, provided for the payment of sales tax on the materials and the invoices that followed showed payments for the materials and labor supplied to the taxpayer listed separately. Therefore, based upon the documentation presented, the transactions in question were billed under a "time and materials" contract for "improvements to reality." Since, based upon the documentation presented, these "improvements to realty" were billed on a "time and materials" basis, the contractor acts as a retail merchant and sales or use tax is due from the contractor's customers on the cost of the materials under 45 IAC 2.2-4-22(d)(1). Thus, Taxpayer's purchase of the materials provided under the contract is subject to sales and use tax.
Accordingly, Taxpayer's protest to the imposition of use tax on the materials provided to install "smoke/heat detectors" and a "fire suppression system" by "Contractor F" is respectfully denied.
http://www.in.gov/legislative/iac/20130925-IR-045130433NRA.xml.html