Taxpayer is an Indiana retail business. As the result of an audit, the Indiana Department of Revenue ("Department") determined that Taxpayer had not collected and remitted the proper amount of sales tax as a retail merchant and also had not remitted the proper amount of use tax as a consumer for the tax years 2009 and 2010. The Department therefore issued proposed assessments for sales and use tax plus interest for those years.
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Taxpayer protests the imposition of sales and use tax on
certain items. The Department based its determination to impose sales tax on
some items because Taxpayer is a retail merchant and has a duty to collect and
remit sales tax on items of tangible personal property ("TPP") it
sells at retail. The Department based its determination to impose use tax on
items which Taxpayer used as a consumer, but upon which it did not pay sales
tax at the time of purchase.
Regarding the imposition of sales tax, Taxpayer protests
that some of the sales upon which the Department considered sales tax to be due
were actually exempt sales. In support of this position, Taxpayer provided
several exemption certificates which it states that the audit did not consider.
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As provided by IC § 6-2.5-8-8(a), a seller accepting a valid
exemption certificate has no duty to collect or remit the state gross retail or
use tax on a purchase. Since Taxpayer has now provided the exemption
certificates as part of the protest process, the Department will conduct a
supplemental audit to verify any purchases by the customers listed on the
exemption certificates. Any purchases by those customers will be removed from
the list of taxable sales and the amount of sales tax due will be recalculated.
Regarding the imposition of use tax, Taxpayer states that
several items were exempt. The first category which Taxpayer believes is exempt
from use tax is diesel fuel used in off-road equipment. The equipment in
question is a lawnmower which Taxpayer used to mow the grass at its place of
business. Taxpayer does not reference any statute or regulation in support of
the idea that diesel fuel used in a lawn mower is exempt.
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Therefore, lawn mowers and related supplies such as fuel are
taxable. Taxpayer has not met the burden of proving the proposed assessment
wrong.
Next, Taxpayer protests the imposition of use tax on items
upon which it believes sales tax was paid at the time of purchase. Taxpayer
states that, although it is unable to find any receipts or invoices in support
of its protest, it seems unlikely and unreasonable for the Department to assume
that tax was not paid. The Department notes that there were other items
included as taxable in the audit report which Taxpayer agrees were subject to
sales and use tax but did not have tax paid. Taxpayer has not met the burden of
proving the proposed assessments wrong.
Finally, Taxpayer protests the imposition of use tax on
items which it believes are facially for resale. Taxpayer also states that some
items were originally purchased for resale but were commingled with other items
purchased as supplied. Taxpayer believes that a one-third reduction of the
part/supply purchases would be appropriate in this case. The Department is
unable to agree with this proposition. As stated before, the proposed
assessment is presumed to be correct until proven wrong. In this case, Taxpayer
has only argued that the proposed assessment is wrong and has not proven so.
In conclusion, with regards to the exemption certificates
supplied in the protest process, the Department will conduct a supplemental
audit and will remove any sales to those customers for whom Taxpayer has
supplied exemption certificates from the calculations of taxable sales. With
regards to Taxpayer's use tax arguments, Taxpayer has not provided
documentation to prove those proposed assessments wrong, as required by IC §
6-8.1-5-1(c).
