Taxpayer is a national company with its headquarters out of
state and a branch office in Kentucky. Taxpayer sells and services printers,
copiers, scanners and fax machines. Taxpayer also rents and leases these office
machines. The services include installation, training, supply sales, and
maintenance and repairs. The Kentucky location delivered goods in company owned
vehicles and performed repairs and other services on-site for Indiana
customers. The Kentucky location was sold on July 30, 2011. Taxpayer had no
Indiana locations, was not registered as an Indiana retail merchant, and was a
non-filer for Indiana sales and use tax purposes.
...
The Department's examination of invoices showed charges for
on-site sales and services for customers in Indiana – replacement of rollers;
cleaning and testing of equipment; replacement of parts; installation of items
by technicians – for which no Indiana sales tax had been collected or remitted
to Indiana. The audit allowed Taxpayer time to obtain exemption certificates
from its customers. In addition, the audit excluded from the list of taxable
sales items that were sold to obviously exempt customers such as municipalities
and not-for-profit organizations.
Taxpayer does not now disagree that it should have collected
and remitted Indiana sales tax. Taxpayer states, however, that at the time of
the transactions it did not know it had a duty to collect Indiana sales tax and
argued that it had collected Kentucky sales tax on the transactions and that
the time is closed for Taxpayer to file Kentucky amended returns to request
refunds of the Kentucky sales tax it collected and remitted to Kentucky.
Taxpayer also points out that it is burdensome for Taxpayer to contact its
customers to verify if its customers in the meantime paid Indiana use tax on
these transactions. Taxpayer also states that it has since sold its Kentucky
branch and no longer operates in either Kentucky or Indiana.
As preliminary matter, Taxpayer is presumed to know the law,
especially in light of the fact that Taxpayer is a sophisticated, experienced
business and conducts business in multiple states.
At the hearing Taxpayer was asked to provide invoices
showing that it had collected and paid Kentucky sales tax on the transactions.
Taxpayer stated that the Department's auditor had reviewed the invoices. The
Department's audit makes no mention of Taxpayer having collected and/or
remitted Kentucky sales tax. The Department's audit did retain copies of some
of Taxpayer's invoices for several apparently exempt organizations such as
churches, hospitals and state and/or local government entities. These records
also include invoices for one of Taxpayer's customers who is not an exempt
entity and from whom no Kentucky sales tax was collected. Therefore, in the
absence of any of the remaining invoices for the assessed transactions, this
Letter of Findings cannot confirm that Kentucky sales tax was collected or
remitted.
Even had Taxpayer been able to demonstrate that it collected
and remitted Kentucky sales tax, Taxpayer would still not have been relieved of
its obligation to collect and remit Indiana sales tax, nor would it have
received credit for any Kentucky sales tax it may have collected and remitted.
IC § 6-2.5-3-5 provides for "a credit against the use tax imposed on the
use, storage, or consumption of a particular item of tangible personal property
equal to the amount, if any, of sales tax, purchase tax, or use tax paid to
another state, territory, or possession of the United States for the
acquisition of that property." (Emphasis added). However, IC § 6-2.5-3-5
does not apply to Taxpayer's situation. Taxpayer has not been assessed use tax,
but has been assessed sales tax. Taxpayer sold tangible personal property and
services to Indiana customers, which accepted delivery in Indiana. Pursuant to
IC § 6-2.5-13-1(d)(2), Taxpayer's sales, which are accepted in Indiana, are
completed here and are sourced to Indiana. Since the sales were completed here,
the sales are Indiana retail transactions that are subject to the Indiana sales
tax rather than the Kentucky sales tax.
In this case, Taxpayer owes Indiana sales tax on its sales
of the property on which it had improperly paid sales tax to Kentucky. Thus,
Taxpayer does not receive a credit for the sales tax paid to Kentucky. Taxpayer
remedies for the sales tax it improperly paid to Kentucky are with Kentucky.
