…
Taxpayer has provided copies of seven different exemption
certificates which Taxpayer asserts establish that transactions otherwise
contained within the sample were exempt from sales/use tax… Taxpayer has met its burden of demonstrating
that the exemption certificates establish that a number of the transactions
contained within the sample were exempt from sales/use tax. The audit should be
corrected to remove the relevant transactions.
…
Taxpayer disagrees with the inclusion of two transactions
with two different vendors on the ground that the transactions with these two
vendors represent "drop shipments."
…
In effect, Taxpayer necessarily relies on the exemption set
out in IC § 6-2.5-5-8(b) which states: Transactions
involving tangible personal property other than a new motor vehicle are exempt
from the state gross retail tax if the person acquiring the property acquires
it for resale, rental, or leasing in the ordinary course of the person's
business without changing the form of the property.
Taxpayer has provided documents labeled "Statement of
Drop Shipment" meeting the requirements set out in Sales Tax Information
Bulletin 57 (March 1995). Therefore, Taxpayer has met its burden under IC §
6-8.1-5-1(c) of establishing that the subject transactions are exempt pursuant
to IC § 6-2.5-5-8(b) and that the audit assessment should be adjusted to
reflect that determination.
…
Taxpayer argues that it is not subject to sales or use tax
on the money it pays for a software maintenance agreement on the ground that
the software directly affects the production of its glass products.
Taxpayer paid a company called "Softsolution" for
a software maintenance agreement. It should be noted that Taxpayer paid a
portion of the total cost for this agreement because the cost is allocated
between related businesses found in different states. The software is used to digitize production
drawings and then to use that digitized information to guide the fabrication of
Taxpayer's glass products.
As such, the software comes within the ambit of 45 IAC 2.2-5-8(c) which states that: The state gross retail tax does not apply to
purchases of manufacturing machinery, tools, and equipment to be directly used
by the purchaser in the production process provided that such machinery, tools,
and equipment are directly used in the production process; i.e., they have an
immediate effect on the article being produced. Property has an immediate
effect on the particle being produced if it is an essential and integral part
of an integrated process which produces personal property.
…
In the case of this particular software maintenance
agreement, it is unnecessary for Taxpayer to rebut the presumption that the
vendor supplies "updates and patches" because – given the fact that
the software itself is exempt – any updates and patches that would be supplied
would also be exempt. Therefore, the software maintenance agreement – because
it provides for services and putatively exempt "tangible personal
property" – is also exempt.
…
Taxpayer argues that it was not subject to sales/use tax on
the purchase of product labels and that it should be given a credit for the tax
it did pay.
Taxpayer purchased labels from "Arrow Graphics"
located in Kentucky. Tax was not paid to Kentucky but Taxpayer self-assessed
use tax on the transactions.
…
In this case, Taxpayer has not met its burden under IC §
6-8.1-5-1(c) of establishing that it is entitled to the exemption. While
Taxpayer's labels may be required by its customers and/or an essential
component within Taxpayer's distribution process, the labels do not become
"material parts" of Taxpayer's products. The labels do not
"constitute a material or integral part of the finished product." The
labels are not essential to Taxpayer's finished products and do not affect the
performance or utility of those finished products.
