Taxpayer is a sole proprietor of a business that does vehicle work. Taxpayer was audited by the Indiana Department of Revenue ("Department").
...
The Department's Audit Report states that the Department has
made "[n]umerous attempts" to "conduct a compliance audit"
of Taxpayer. The Audit Report states:
The taxpayer has been informed via letters and telephone
calls on many occasions of the audit. The auditor had scheduled the start of
the audit for [] and confirmed with taxpayer, auditor arrived at location and
taxpayer was not there. The taxpayer had left a message just prior to starting
the audit and stated that he did not have the records and needed more time.
Department had granted taxpayer more time to get records and returns up to
date. A subpoena was issued in January 2011 for the taxpayer's records and the
taxpayer has remained unresponsive.
Since Taxpayer did not make the needed information
available, the Department used "an alternative audit technique" to
"determine sales for calendar years 2008-2010[.]" IC § 6-8.1-5-1
states in pertinent part:
(b) If the department reasonably believes that a person has
not reported the proper amount of tax due, the department shall make a proposed
assessment of the amount of the unpaid tax on the basis of the best information
available to the department. The amount of the assessment is considered a tax
payment not made by the due date and is subject to IC 6-8.1-10
concerning the imposition of penalties and interest. The department shall send
the person a notice of the proposed assessment through the United States mail.
(Emphasis added).
...
Thus the Department had the right to examine Taxpayer's
records, and in the event of Taxpayer's failure to provide the records to issue
a proposed assessment based upon "the best information available"
(i.e., "B.I.A."). The Department did this, and Taxpayer subsequently
protested the B.I.A. proposed assessment.
At the hearing, Taxpayer argued that he is the only employee
and that it is a small operation. Taxpayer argued that the business was more
like a part-time business than a full-time one. In his protest letter, Taxpayer
states:
I am a one man operation that's lucky to get one car a day
in to work on, [and] rely on scraping metals to make an income such as junk
cars[,] old mufflers[,] pipes[, and] rotors. I have enclosed a copy of my yearly
earnings since 1979 when I began working to 2004 which is the most current one
I could find [....]
The copy of his "yearly earnings" that Taxpayer
refers to does not have his name or identification on it, nor is it for the
years at issue. Also, it appears to be a federal document relating to taxed
Social Security earnings. It is not applicable to the protested issue at hand.
Taxpayer did not cooperate with the audit at the time of the
audit, which resulted in proposed B.I.A. assessments. Taxpayer's protest is, in
essence, a protest of the Department's B.I.A. methodology. Taxpayer, after the
hearing, provided the Department with copies of numerous repair
orders/invoices. The Department's Audit Division is requested to review the
documentation that Taxpayer has now provided, and to the extent that it is an
accurate representation of Taxpayer's sales and use tax liability for the years
at issue, make any appropriate adjustments to the proposed assessments.
...
Taxpayer was also assessed penalty and interest. It is not
clear from Taxpayer's protest whether or not both are being protested, but for
the purposes of clarity the Department will assume that they are being
protested. Interest, per IC § 6-8.1-10-1(e), cannot be waived. Penalty waiver
is permitted if the taxpayer shows that the failure to pay the full amount of
the tax was due to reasonable cause and not due to willful neglect. IC §
6-8.1-10-2.1.
...
...
Taxpayer has not shown reasonable cause. Taxpayer did not
cooperate with the Audit, despite "[n]umerous attempts" and Taxpayer
was "unresponsive" to the Department's subpoena of documentation.
Taxpayer's protest of the penalty and interest is denied.
