Taxpayer protests the imposition of sales tax on service agreements...
Taxpayer, a registered
retail merchant, is an Indiana business that sells audio and visual equipment.
The Indiana Department of Revenue ("Department") conducted a sales
and use tax audit of Taxpayer for the years 2008 through 2010.
...
Taxpayer, in a letter to
the Department, states:
[Taxpayer] is a retailer of
audio-visual equipment. [Taxpayer] also sells service agreements to provide
repair services and telephone support services for equipment [Taxpayer] sells.
[Taxpayer] does not have a written service agreement contract that each
customer signs. Rather [Taxpayer] has a specification sheet that describes the
services provided under a standard service agreement.
Taxpayer then states that
it is protesting the "Nontaxable Sales of Service Agreements Where No
Tangible Personal Property Transfers to Purchaser." To that end, Taxpayer
states:
The auditor has assessed
tax on [Taxpayer] for failure to collect sales tax on separately stated charges
for [Taxpayer's] service agreements and service agreement renewals. All of the
service agreements cover equipment that [Taxpayer] sells. The service agreements
are not software maintenance agreements.
Taxpayer also states:
If the customer needs
additional parts, repair parts, or any other property [Taxpayer] bills the
customer for that property separately. The agreement does specify that
[Taxpayer] will install updates as needed to the equipment software. [Taxpayer]
does not provide any updates to equipment software. [Taxpayer] only provides
the labor of a technician to assist the customer in applying any updates that
may be available.
At the hearing, Taxpayer
stated that the agreements that it enters into with its customers are verbal
agreements, and that the annual preventative maintenance referenced in the
audit report is all labor–and that when Taxpayer does provide parts, Taxpayer
separately invoices.
After the hearing date,
Taxpayer provided to the Department a copy of a written statement by the Chief
Financial Officer ("CFO"). In it the CFO states:
[T]he service agreements
listed on the protest listing for [Taxpayer's] audit protest do not involve any
transfer of tangible personal property. If the customers with service
agreements require any tangible personal property as a result of a service
call, [Taxpayer] bills the customer separately for the tangible personal
property and charges the customer sales tax appropriately.
...
Taxpayer is unable to rebut
the presumption discussed in Letter of Findings 05-0438, since Taxpayer does
not have written service agreements. Taxpayer tried to rebut the presumption by
providing the Department with a written statement from the CFO that the service
agreements "do not involve any transfer of property[.]" The
statement, in effect, simply reiterates the assertions made in Taxpayer's
protest letter. It does not provide any substantial evidence to demonstrate
what it asserts. Additionally, Taxpayer provided the Department with a document
titled "General Support." That document says, "Software
upgrades–install updated versions of system software when suggested by manufacturers[.]"
The Department notes that the language of the printout indicates that the
parties anticipate software updates ("install updated versions....").
Finally, Taxpayer provided the Department with a few sample invoices. The
invoices, however, are not dispositive for the protested issue.
As noted, the Department's
assessment is prima facie evidence that the claim for unpaid tax is valid.
Taxpayer has failed to meet its burden of proof.
