Taxpayer protests the imposition of
sales tax on sand and gravel ("tangible personal property") it
purchased and used in the course of making improvements to realty. Taxpayer
states that the sand and gravel were incorporated into realty it does not own
and that it paid sales tax when it purchased the sand and gravel. Also,
Taxpayer states that the improvements to realty were pursuant to lump sum
contracts.
…
In the course of the audit, the
Department determined that Taxpayer did not have actual contracts which spelled
out the terms of the work it would perform for its customers. Rather, Taxpayer
had invoices which it provided to its customers, which listed the different
costs which Taxpayer was charging its customers. The Department reviewed these
invoices and determined that Taxpayer's invoices listed materials and labor
separately and that Taxpayer was therefore acting as a time and materials
contractor.
Taxpayer protested this
determination and explained that it would reach an agreement with its customers
prior to the commencement of any work and that the ensuing agreement would be
for a single price for the whole job. If additional materials were required
after the work started, those costs would be added onto the final invoice.
Also, Taxpayer states that it paid sales tax at the time it purchased the
tangible personal property to be used in a particular job. Taxpayer believes
that these factors show that it was a lump sum contractor and that it was not
responsible for collecting sales tax from its customers on the tangible personal
property used in the project.
The Department notes that Taxpayer
did not simply purchase the materials and charge its customers the price it
paid for the materials. Taxpayer would purchase the tangible personal property
then mark it up and charge its customers the marked up price, as a retail
merchant would do. Also, as explained above, Taxpayer separately stated the
costs of labor and the costs of tangible personal property on its invoices.
This means that Taxpayer was operating as a time and materials contractor.
Therefore, under 45 IAC 2.2-3-9(d), Taxpayer should have purchased
the tangible personal property exempt and then charged its customers sales tax
on the marked-up price. Taxpayer has not met the burden of proving the proposed
assessments wrong, as required by IC § 6-8.1-5-1(c).
http://www.in.gov/legislative/iac/20120725-IR-045120421NRA.xml.html
