Revenue Imposes "Environmental Penalty" for Company's Failure to Pay Annual UST Fees

Taxpayer operates a gas station and convenience store in Indiana. Taxpayer purchased four underground storage tanks ("UST"), which were installed at Taxpayer's gas station in 2008. In 2011, the Indiana Department of Revenue ("Department") issued proposed assessments for annual UST fees, penalties, and interest for the years 2009 and 2010. Taxpayer paid the required fees, the Department's statutorily mandated 10 percent penalty, and interest. However, in a separate billing, the Department also assessed a total of $16,000 in "environmental penalties" in the amounts of $8,000 for 2009 and $8,000 for 2010. Taxpayer protests the assessment of these environmental penalties.
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IC § 13-23-12-7(a) states:

Except as provided in subsection (e), an owner of an underground storage tank who:  (1) is required to pay the fee under section 1 of this chapter; and  (2) fails to pay the fee when due as established under section 2 of this chapter; shall be assessed a penalty of not more than two thousand dollars ($2,000) per underground storage tank for each year that passes after the fee becomes due and before the fee is paid.

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Taxpayer provided documentation establishing that it notified the Indiana Department of Environmental Management ("IDEM") of the installation of the four USTs in 2008. Taxpayer also notified IDEM in 2011 when it underwent a name change. Taxpayer also provided affidavits from two employees with knowledge of Taxpayer's operations stating that the Department never sent notices of UST fees due for either 2009 or 2010. Taxpayer believes that the lack of Departmental notice required under IC § 13-23-12-6 should relieve it of the penalties imposed under IC § 13-23-12-7.

The environmental penalties at issue here were not assessed for failing to notify IDEM that Taxpayer had brought into use or service four new USTs. The environmental penalties in question were assessed because Taxpayer failed to pay two consecutive annual $90 registration fees for its four USTs, all of which went unpaid until 2011. The annual registration fee is an obligation of the owner per IC § 13-23-12-1. There is no provision for nullification of the penalty imposed under IC § 13-23-12-7(a) based on the Department's noncompliance with the notification requirement under IC § 13-23-12-6.

Taxpayer also maintains that a timely payment of the fees was made once Taxpayer was notified that registration fees were owed, and makes other arguments relating to equity in support of its position that the fees should be waived. However, the penalties at issue were properly assessed pursuant to IC § 13-23-12-7 and will not be abated.

FINDING

Taxpayer's protest is denied.

http://www.in.gov/legislative/iac/20120229-IR-045120089NRA.xml.pdf