Taxpayer is a general contractor and
subcontractor that installs wall and floor tile, and granite countertops. The
Indiana Department of Revenue ("Department") conducted a sales and
use tax audit of Taxpayer for the years 2008 through 2010. As a result of the
audit Taxpayer was assessed use tax and related interest.
…
Most of Taxpayer's jobs are billed
lump sum, with some exempt jobs and labor-only jobs that are billed for time
and materials. Many of Taxpayer's customers are government, hospital, and
not-for-profit organizations.
In making the assessment, the audit
cited to 45 IAC 2.2-3-4 (which imposes use tax on tangible
personal property purchased in a retail transaction that is stored, used or
otherwise consumed in Indiana) and 45 IAC 2.2-3-14 (which exempts use tax on
transactions where sales tax was already paid or which are otherwise
specifically exempt from sales and use tax). At the hearing, Taxpayer did not
provide the Department's auditor sufficient documentation to show that Taxpayer
either paid sales tax on a particular item, or that the item was purchased
subject to exemption.
The Department's audit review of
Taxpayer's use tax records, purchase invoices, and job records revealed various
purchases on which tax was due but neither paid to the vendor upon purchase by
Taxpayer nor self-assessed as use tax when used by Taxpayer.
…
Taxpayer fits the definition of a
"contractor" under 45 IAC 2.2-3-7(a) because Taxpayer converts
construction material into realty. As a contractor, Taxpayer qualifies for
exemption only on materials that are resold to their customers under a time and
materials contract, or are provided as part of a lump-sum improvement to realty
where the customer is exempt. Taxpayer is subject to tax on all other
purchases. Under 45 IAC 2.2-3-20, where the tax was not paid to the
vendor at the time of taxable purchases, the taxpayer is responsible for
payment of use tax directly to the Department.
At the hearing and subsequent to it,
Taxpayer provided documentation contesting fourteen (14) transactions. For all
but three of these transactions, Taxpayer provided invoices showing that the
sales tax was paid to the vendors when Taxpayer purchased these items.
For two of the transactions,
Taxpayer presented exemption certificates (one from a school and the other from
a church) to demonstrate that the transactions were exempt. However for these
two transactions, Taxpayer did not provide sufficient documentation to show
that the exemption certificates are associated with the particular
transactions. Also, one of these two exemption certificates was dated in 2012
for a 2009 transaction. Taxpayer has therefore not met its burden to show that
the transactions listed on the audit summary line 13 of page 10 and line 6 of
page 20 are exempt.
The documentation Taxpayer presented
for the last transaction listed on page 24 of the audit summary was not
relevant to show whether sales tax was paid. Taxpayer has therefore not met its
burden to show that this transaction is exempt.
Therefore, Taxpayer has met its
burden to show that it paid sales tax on eleven (11) of the protested
transactions. However, Taxpayer did not meet its burden to show that the
remaining three (3) contested transactions are either exempt or already
subjected to sales tax.
