…
Taxpayer protests the assessment of additional use tax on
payments made pursuant to a contract with Imaging Company. The issue is whether
the contract between Taxpayer and Imaging Company is a lease of tangible
personal property.
…
The Department cited to 45 IAC 2.2-4-27(d)(3)(A), which states: The renting or leasing of tangible personal
property, together with the services of an operator shall be subject to the tax
when control of the property is exercised by the lessee. Control is exercised
when the lessee has exclusive use of the property, and the lessee has the right
to direct the manner of the use of the property. If these conditions are
present, control is deemed to be exercised even though it is not actually
exercised.
Taxpayer asserts that it does not control either the
equipment or the personnel provided to operate the equipment. Taxpayer argues
this point despite language to the contrary in the contract between Taxpayer
and Imaging Company, most notably that equipment and personnel would be leased
to Taxpayer and that Taxpayer would "control and supervise the Personnel
to the same extent as if [Taxpayer] employed the personnel directly."
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The Department recognizes Taxpayer's substance over form
arguments. However, in a case such as this, the plain terms of the contract
controlled. If Taxpayer and Imaging Company seek an arrangement, such as one
with the lack of control asserted by Taxpayer, Taxpayer and Imaging Company
must so indicate that relationship in their written contracts. As such,
Taxpayer has not affirmatively established that its contract with Imaging
Company is anything other than a lease as defined by IC § 6-2.5-1-21.
