Taxpayer is an Indiana company which offers towing services. In addition to the towing services, Taxpayer also conducts a weekly auction of the vehicles that were towed to Taxpayer's facility but were not claimed by the owners of the vehicles.
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The Department's audit concluded that Taxpayer, as a retail
merchant, failed to collect and remit the sales tax on the vehicles that
Taxpayer sold at its weekly auctions at its business location. The Department
assessed sales tax on these transactions.
Taxpayer, to the contrary, claimed that it was not
responsible for collecting the sales tax. Specifically, Taxpayer asserted that
it was not a car dealer; rather, it operates towing services and acquired the
"mechanic's lien" on the vehicles when the towed vehicles were not
claimed by the titled owners after a certain number days pursuant to Indiana
law. Taxpayer thus argued that it was not liable for the sales tax on the
vehicles sold at its weekly auctions because it had the right to sell those
unclaimed vehicles to recoup its costs in providing the towing services and
storage.
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At the administrative hearing, Taxpayer stated that the owners
of the towed vehicles were responsible for fees, including a towing fee, a
storage fee, and a processing fee, for the towing services and parking/storage
at its facility. Taxpayer explained that it had the "mechanic's
liens" on those vehicles that it towed to its facility "under Indiana
law." (Presumably, Taxpayer referred to the "mechanic's lien"
outlined in IC § 9-22-6-2.) Taxpayer further stated that it obtained the
information concerning the titled owners of the vehicles and notified the
owners to re-claim their vehicles. Taxpayer asserted that when the titled
owners were notified but failed to re-claim their vehicles prior to the
specified date stated in the notices, it was allowed by law to "sell"
the unclaimed vehicles to recoup its costs. Thus, Taxpayer asserted that it was
not a car dealer and was not responsible for collecting and remitting the sales
tax; rather, it simply exercised its right to recoup its costs for the services
it rendered. To support its protest, Taxpayer submitted a sample copy of the
paperwork package concerning the auction sale of a vehicle. In addition,
Taxpayer provided a copy of the Indiana Bureau of Motor Vehicles' Mechanic's
Lien Application information, which was also available on the Indiana Bureau of
Motor Vehicles' website at http://www.in.gov/bmv/2958.htm.
Taxpayer's reliance on the "mechanic's lien" is
misplaced. IC § 9-22 et seq. addresses matters of motor vehicles. Specifically,
IC § 9-22-6-2 provides a service provider, such as Taxpayer here, a statutory
recourse to be compensated for services it performed on the vehicles when the
owners failed to pay the service provider. Thus, that statutory recourse
ensures Taxpayer's right to fair compensation and intends to timely resolve
potential legal disputes between the vehicle owners and the service providers.
The issue in this protest, however, is not whether Taxpayer
"may sell" the unclaimed vehicles because it had the "mechanic
lien" on the unclaimed vehicles. Rather, the issue in this case is whether
Taxpayer engaged in the business of making sales at auction of tangible
personal property owned by others. That is, was Taxpayer a retail merchant
making retail transactions with the obligation to collect the sales tax as
agent for the state pursuant to IC § 6-2.5-2-1?
Taxpayer's documentation demonstrates that it periodically
advertised in a local newspaper a list of vehicles for public sale (auction) at
its business location on a specific date; the advertisements also include the
vehicle models, the vehicle identification numbers, and the prices. Taxpayer
subsequently sold the vehicles to the highest bidder at the auctions. Thus,
Taxpayer, in the ordinary course of its regular business, conducted auctions at
its business location to sell the unclaimed vehicles owned by others and was a
person "engaged in the business of making sales at auction of tangible
personal property owned by others." Thus, Taxpayer was "a retail
merchant making retail transactions" pursuant to IC § 6-2.5-4-12(a) and 45 IAC
2.2-4-33 and was required to collect the sales tax at the time of the
auction sales took place.
Finally, Taxpayer provided several copies of the general
exemption certificates, claiming some purchasers were exempt from the sales
tax. However, Taxpayer's documentation failed to show which specific
transactions were claimed to be exempt sales. Thus, given the totality of the
circumstances, in the absence of other supporting documentation, the Department
is not able to agree that Taxpayer has met its burden of proof demonstrating
that the Department's assessment is wrong.
Pursuant to the above mentioned statute and regulation,
Taxpayer was a retail merchant making a retail transaction and thus was
responsible for collecting the sales tax on the vehicles sold at its weekly
auction sales.
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The Department assessed interest on the tax liabilities.
Taxpayer protested the imposition of interest.
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Pursuant to IC § 6-8.1-10-1(e), the Department does not have
the authority to waive the interest.
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The Department's audit imposed a ten percent negligence
penalty for the tax period in question. Taxpayer requested that the Department
abate the negligence penalty.
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In this instance, Taxpayer has demonstrated reasonable cause
and therefore the Department will waive the penalty. Taxpayer's protest of the
imposition of negligence penalty is sustained.
