Revenue Finds Utility Provided Sufficient Information to Substantiate Exemption Despite Acceptance of Improper Form

Taxpayer is a municipally-owned utility. The Indiana Department of Revenue ("Department") audited Taxpayer and determined that it sold various utility services to customers without receiving proper exemption certificates from the customers. As a result, the Department assessed additional sales tax and interest.
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For the years at issue, Taxpayer accepted Form ST-105s from its customers. However, Form ST-105 explicitly provides it cannot be used for utility purchases. Thus, the exemption certificates were not "on forms and in the manner prescribed by the department." For utility purchases by an end customer such as an individual or business, a Form ST-109 must be issued by the entity claiming tax exemption.

Absent a proper exemption certificate, IC § 6-2.5-3-7 requires Taxpayer to produce evidence of nontaxability. In this case, after the hearing, Taxpayer provided information to substantiate that the utility purchases for two customers were not subject to sales tax under IC § 6-2.5-4-5(c)(3). Thus, Taxpayer's protest is sustained with regard to two customers to the extent Taxpayer's documented evidence substantiates that the customers are not subject to sales tax.

http://www.in.gov/legislative/iac/20120425-IR-045120181NRA.xml.html