Taxpayer operates an Indiana franchise business. The
Department of Revenue ("Department") conducted an audit review of
Taxpayer's business records and withholding tax returns. Taxpayer withheld
Indiana state tax from its employees but failed to withhold county income
taxes.
...
The Department assessed Taxpayer for county income tax it
failed to withhold from its employees' paychecks. The Department determined the
amount of tax by multiplying the employees' "gross wages... by the
appropriate county rate to arrive at the audit assessment."
Taxpayer disagrees with the amount of the assessment and
asks for a "reduction in the liability... by the actual amount paid in the
employees' respective tax returns to the State of Indiana attributable to the
employees' given county."
Taxpayer asserts that if it were to pay the tax, "[T]he
state of Indiana is effectively receiving twice the amount of actual county
taxes due from its employees...."
The Department's regulation found at 45 IAC
3.1-1-97 states in relevant part:
Employers who make payments of wages subject to the Adjusted
Gross Income Tax Act, and who are required to withhold Federal taxes pursuant
to the Internal Revenue Code (USC Title 26), are required to withhold from
employees' wages Adjusted Gross and County Adjusted Gross Income Tax. (Emphasis
added).
...
Taxpayer suggests that it should be relieved of its
responsibility for withholding county income tax if it can demonstrate that
individual employees did in fact report and pay the tax. However, there is
nothing in Indiana law which allows such an exception. Under Indiana law, an
employer is required to withhold taxes as prescribed.
