Taxpayer is an Indiana automobile dealership that sells new
and used cars. Taxpayer also provides various services, including wheel
alignments, oil changes, and other routine automobile maintenance and repairs.
…
The Department's audit determined that Taxpayer failed to
collect sales tax on tangible personal property, which it sold to its customers
during years 2008, 2009, and 2010. The Department's audit also determined that
Taxpayer failed to pay sales tax or self-assess use tax on its purchases of
tangible personal property used for its business. Taxpayer, at the hearing,
claimed that it was not responsible for taxes on a list of the items outlined
in the audit summary. However, it should be noted that Taxpayer did not provide
any supporting documentation after the hearing.
…
Taxpayer claimed that the Department's audit erroneously
assessed sales tax on tangible personal property it sold to its customers
because its customers were exempt from sales tax.
…
In this instance, there is no question that Taxpayer entered
into retail transactions for which – absent an exemption – Taxpayer was
required to collect sales tax. At the hearing, Taxpayer simply claimed those
sales were exempt but presented no supporting documentation. Specifically,
special exemption certificates would have been required when Taxpayer claimed
those sales were exempt after the Department concluded the audit. Thus, the
Department is not able to agree that Taxpayer met its burden of proof to
demonstrate that it was not responsible for collecting the sales tax.
Taxpayer is reminded that sales tax becomes due at the time
of the transaction; either the purchaser is exempt at the time of the
transaction or it is not exempt. If the purchaser claims an exemption, the
exemption certificate should be obtained at the time the transaction occurs
otherwise the burden of proving the transaction was exempt becomes measurably
more difficult.
…
Taxpayer claimed that it was not responsible for sales/use
tax on the "fertilizer application" because the "fertilizer application"
is a nontaxable service. Taxpayer, however, did not provide any documentation
to support its claim.
…
The Department's Sales Tax Information Bulletin 21 (May
2002), 25 Ind. Reg. 3939 ("Information Bulletin 21") addressing
issues concerning "Lawn Care Applications," states, in relevant part,
that:
The relationship between a lawn care company and its
customer is contractual. The customer agrees to pay a set price and the company
agrees to apply the necessary chemicals to a lawn for its proper care and
maintenance. The chemical cannot be purchased separately from the company and
applied by the customer. A unitary transaction is the purchase of tangible
personal property and services under a single agreement for which a total
combined charge is calculated. A retail unitary transaction is a unitary
transaction that is also a retail transaction. A retail transaction means a
transaction that constitutes selling at retail. A lawn care application is a
retail transaction because the lawn care company acquires tangible personal
property (chemicals) and transfers them to its customers for consideration in
the ordinary course of its regularly conducted business.
The sales tax is imposed on the gross retail income received
in a retail unitary transaction. The gross retail income received includes the
price of the property transferred plus any bona fide charges made for
preparation, fabrication, alteration, modification, finishing, completing,
delivery, or other service performed in respect to the property before its
transfer. Because the chemicals are not transferred until they are applied to
the lawn, the application charges are included in the company's gross retail
income. Therefore, the entire contract price is subject to the Indiana sales
tax.
In this instance, the Department's audit noted that Taxpayer
purchased "fertilizer applications," which are taxable unitary retail
transactions outlined in the Information Bulletin 21. Taxpayer thus should have
paid sales tax. Since sales tax was not paid, use tax is properly imposed.
…
The Department assessed Taxpayer use tax on consumable
supplies which Taxpayer purchased and used to repair and service motor
vehicles, including "Flush kits, brake cleaner," "Radiator
service kits, [and] Transmission service kits." Taxpayer did not pay sales
tax at the time of purchase, nor did it self-assess and remit use tax to the
Department. Taxpayer argued that it was not responsible for the tax because it
did not sell the items to its customers, nor did it purchase them for its own
use. Taxpayer asserted that the items at issue became "waste" as a
result. Thus, Taxpayer maintained that the Department's audit erroneously
assessed tax. It should be noted again that Taxpayer did not provide any
documentation to support its protest.
The Department's Sales Tax Information Bulletin 28S
(February 2008), 20080130 Ind. Reg. 045080050NRA, which addresses issues
concerning sales of motor vehicles and trailers, in pertinent part, provides:
Consumable supplies used by a dealer, such as masking paper
and tape, oil dry, sandpaper, buffing pads, rags and cleaning supplies, used to
repair and service motor vehicles are not exempt purchases by the dealer. The
dealer should pay sales tax upon these type purchases or remit use tax on the
cost of these purchases on their sales tax returns. The purchaser (dealer)
becomes the final consumer of such items because its customer does not become
the owner of such consumable supplies. Although the dealer may charge the
customer a fee for the dealer's consumption of these materials, such items are
not being sold to the customer in a retail transaction and sales tax is not to
be collected from the customer.
Accordingly, Taxpayer, in this instance, used those
consumable supplies to perform its services. Therefore, Taxpayer is responsible
for the sales/use tax on the purchases of the consumable supplies. Since
Taxpayer did not pay sales tax, use tax is properly imposed.
