Taxpayer protests the Department's proposed assessments for
sales and use taxes for the tax years 2008, 2009, and 2010. The Department
determined that Taxpayer had not paid sales tax on some items which were
subject to sales and use taxes during those years. Taxpayer disagrees with some
of the Department's adjustments.
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The first category of protest is in regard to shop supplies
which Taxpayer used in providing its auto body services. In its audit report,
the Department explained that, in accordance with Sales Tax Information
Bulletin 28S (February 2008) 20080130 Ind. Reg. 045080050NRA and Sales Tax
Information Bulletin 28S (December 2009) 20100127 Ind. Reg. 045100029NRA,
consumable supplies used by a dealer such as masking paper and tape, oil dry,
sandpaper, buffing pads, rags and cleaning and detailing supplies used to
repair and service motor vehicles are not exempt purchases by the dealer, and
that Taxpayer should have paid sales tax at the time of purchase of such
supplies or paid use tax after its purchase of such supplies.
Taxpayer argues that the shop supplies should not be
assessed use tax because Sales Tax Information Bulletin 28S does not apply to
it because Taxpayer is not a car dealer. Rather, Taxpayer states that it
considered itself to be a manufacturing business and elected to operate using
the rules for manufacturing businesses in its sales and use tax compliance
procedures. Taxpayer believes that its fabrication, assembly, and finishing
work constitute manufacturing activities.
...
In the instant case, Taxpayer provides the services of an
auto body shop. Taxpayer does not produce new items of tangible personal
property through a manufacturing process.
While it is true that Taxpayer is not a car dealer, Sales
Tax Information Bulletin 28S (as stated in its disclaimer) is not the law and
is to be used generally by taxpayers for guidance. The essence of Sales Tax
Information Bulletin 28S is applicable as guidance to any auto body repair shop
whether or not they are associated with a car dealership. IC § 6-2.5-3-2(a) and
45 IAC 2.2-3-4
apply equally to car dealers and auto body shops and manufacturing businesses.
Taxpayer did not pay sales tax at the time Taxpayer purchased the shop
supplies, but Taxpayer used the shop supplies in Indiana. Therefore use tax is
due by Taxpayer.
The second category under protest is in regard to the amount
of Taxpayer's invoices to its customers which the Department used in its sales
and use tax calculations. Taxpayer argues that the insurance estimate software
it uses applies sales tax to all materials regardless of the taxability of the
material. Taxpayer states that this is double taxation because it is paying use
tax and its customers are paying sales tax on some of the same materials.
Taxpayer is incorrect.
…
Taxpayer uses shop supplies in the course of providing its
auto body shop services. As a consumer, Taxpayer should pay sales tax when it
purchases those supplies or should pay use tax if sales tax was not paid at the
time of purchase. Taxpayer also sells some items of tangible personal property
(fenders, bumpers, etc., for example). Under IC § 6-2.5-2-1, as a retail
merchant, Taxpayer is required to collect sales tax on those items of tangible
personal property which it sells to its customers.
Taxpayer argues that the software it uses imposes sales tax
on everything it sells to its customers. While it has not been established that
Taxpayer separately charges its customers for shop supplies, IC § 6-2.5-1-5(a)
plainly states that the gross retail income it receives from its customers
includes the cost of materials used and all taxes imposed on the seller.
Taxpayer also argues that it should receive a refund of sales tax since the software
it uses includes all items for which it charges its customers. Again, it has
not been established that Taxpayer separately charges its customers for shop
supplies, but even if Taxpayer had collected sales tax incorrectly it would not
be eligible for a refund of those sales taxes since it did not pay the sales
tax. Taxpayer only collected sales tax from its customers as an agent for the
State. If refunds were available, Taxpayer's customers would be the proper
parties to file such claims since the customers were the ones who paid the
sales tax in the first place.
The third category under protest is in regard to purchases
Taxpayer made without paying sales tax at the time of the transaction. The
Department imposed use tax on these purchases. Taxpayer protests the imposition
of use tax on certain purchases because these transactions were paid for with a
personal credit card and should not have been included in an audit of the
corporation.
...
Taxpayer argues that many of the purchases listed on the
audit report were not business purchases. Many purchases were for personal
items and should not be included. On a copy of the items listed as subject to
sales and use taxes in the audit report, Taxpayer wrote "personal
item" next to certain purchases it believed were not business purchases.
There was no further description and no receipts given that showed what was
purchased. Therefore, these items will be treated as business expenses since
Taxpayer failed to provide any evidence that these were personal expenses.
However, through the Department's own research, the
Department is convinced that some of the purchases marked "personal
item" were not business purchases for an auto body shop.
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