Taxpayer is an Indiana company,
which provides landscape, lawn care, and related maintenance services in the
spring, summer, and fall. In the winter, Taxpayer does snow plowing and ice
removal.
In 2011, the Indiana Department of
Revenue ("Department") conducted a sales/use tax audit of Taxpayer
for 2008 through 2010 tax years.
…
The Department's audit assessed
sales tax on "salt applications" on the ground that the transactions
were "unitary transactions." The audit noted that:
During the winter months [Taxpayer]
applies salt to customers' roads, sidewalks, and parking lots. [Taxpayer
charges] one price for this transaction, separating on the invoice amounts for
snow plowing. Some invoices read "shovel and salt". When a combined,
single charge for material and labor is invoiced as one amount this is
considered a unitary transaction which is subject to sales tax. For a salt
spreading application... the salt cannot be purchased separately from the
company and applied by the customer. The company only does the application, so
the labor and material are indivisible. Because the salt is not transferred
until it is applied, the application charges must be included in one retail
price. This gross retail income is therefore subject to sales tax.
Taxpayer, to the contrary, claimed
that it simply performed "ice removal" services. Thus, as services,
those transactions are not subject to sales tax pursuant to 45 IAC 2.2-4-2.
…
In this instance, Taxpayer offers
"snow plowing" and "ice removal" in winter. To ensure the
complete removal of ice, it applies salt to remove the ice on the ground. Thus,
in conjunction with rendering services, Taxpayer also transfers tangible
personal property for a consideration. Pursuant to the above mentioned statutes
and regulations, Taxpayer is a retail merchant and should have collected and
remitted sales tax on the retail transactions.
At the hearing, Taxpayer argued that
it primarily provides non-taxable services. Taxpayer asserted that it has two
categories of customers. The first category of customers supplies salt/sand and
Taxpayer only provides labor. The second category of customers do not supply
salt/sand; rather, they pay Taxpayer to plow snow and also remove ice using
Taxpayer's materials when needed. Thus, the customers who supply salt to
Taxpayer paid Taxpayer by the hour for labor only; for the customers in the
second category, Taxpayer charged them one price per visit for ice removal
which included both labor and materials (salt). Referring to 45 IAC 2.2-4-2, Taxpayer maintained that it
performed services based on customers' specifications. Specifically, Taxpayer
asserted that even if it transferred the tangible personal property to its
customers when performing the "ice removal," its "ice
removal" satisfies the four requirements outlined in 45 IAC 2.2-4-2(a) and thus its "ice
removal" is not subject to sales tax. To support its protest, Taxpayer
provides additional documentation, including sample contracts and invoices,
sample purchase invoices of salt, and a summary of cost of sales for 2012 tax
year.
For the first category of customers
who supplied salt/sand to Taxpayer, the Department agrees that Taxpayer has
provided sufficient documentation to demonstrate that it simply performed
non-taxable services. No tangible personal property is transferred as a result.
Thus, Taxpayer's protest of the assessment concerning the first category of
customers is sustained.
As to the second category of
customers, however, Taxpayer's documentation is not sufficient to demonstrate
that it satisfies the four requirements outlined in 45 IAC 2.2-4-2(a). Specifically, Taxpayer's
contracts and invoices contained two separate line items – Snow Plowing and Ice
Removal (including salt). Taxpayer's invoices clearly state that ice removal
including salt, which is tangible personal property. Thus, the audit correctly
concluded that ice removal is a unitary transaction pursuant to IC §
6-2.5-1-1(a) and 45 IAC 2.2-1-1(a). Taxpayer argued that 45 IAC 2.2-4-2(a) should apply but it did not
illustrate the application. Specifically, Taxpayer's documentation fails to
show that the charge of salt is less than 10 percent compared with the service
charge. Thus, in the absence of other supporting documentation, the Department
is not able to agree with Taxpayer that ice removal is a non-taxable service.
