Taxpayer separately filed a claim for refund for the August 2011 overpayment. This refund claim was filed with knowledge of the attempted offsets that Taxpayer had filed. The Indiana Department of Revenue ("Department") issued a refund check for the entire amount of the August 2011 overpayment. Once Taxpayer received the refund check, Taxpayer immediately filed returns reporting the actual amount of tax due for each month that Taxpayer previously claimed offsets. Taxpayer paid the tax amounts reported without payment of penalties and interest. The Department imposed penalties and interest on the late payments, which Taxpayer protested.
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Taxpayer protests the assessment of a penalty for failure to remit Indiana sales and use tax in a timely manner.
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Departmental regulation 45 IAC 15-11-2 (b) defines negligence as "the failure to use such reasonable care, caution, or diligence as would be expected of an ordinary reasonable taxpayer." Negligence is to "be determined on a case-by-case basis according to the facts and circumstances of each taxpayer." Id.
IC § 6-8.1-10-2.1(d) allows the Department to waive the penalty upon a showing that the failure to pay the deficiency was based on "reasonable cause and not due to willful neglect." Departmental regulation 45 IAC 15-11-2 (c) requires that in order to establish "reasonable cause," the taxpayer must demonstrate that it "exercised ordinary business care and prudence in carrying out or failing to carry out a duty giving rise to the penalty imposed...."
In this particular case, Taxpayer has provided information to indicate that it reasonably thought that it had paid the tax for the months in question through its application of the erroneous payment. Based on the circumstances present in this case, Taxpayer has provided sufficient information to demonstrate that its failure to timely remit Indiana sales and use taxes was due to reasonable cause.
However, the Department notes that the Department has specific procedures for handling overpayments. See, e.g., IC §§ 6-8.1-9-1, -2. Taxpayer is advised that, if it has a future overpayment, it is to file refund claims with the Department on the Department's refund claim forms (or such other manner as the Department permits) in order to recover the overpayment. Filing a tax return reporting a lower amount of tax and using the difference as an "offset" is not permissible, and future underpayments that result from an application of overpayments when a taxpayer does not follow the Department's procedures will not be considered as resulting from "reasonable cause."
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Taxpayer protests the imposition of interest with respect to its late payment of tax. For taxes unpaid by the due date for payment, IC § 6-8.1-10-1(b) provides for the imposition of interest. Notwithstanding the issue of the Department's retention of the overpayment, IC § 6-8.1-10-1(e) provides that the Department cannot waive interest even if reasonable cause otherwise exists for penalty waiver. Further, the interest is assessed from the due date of the payment for each period, pursuant to IC § 6-8.1-10-1.
