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Taxpayer protests the imposition of sales tax on certain transactions in which it participated as a retail merchant. The Department determined that Taxpayer should have collected sales tax on those transactions. Taxpayer argues that some of the sales in question were exempt and that one transaction was not a retail sale.
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Taxpayer has provided exemption certificates for some of the transactions that took place during the audited years. Some of the exemption certificates are Indiana exemption certificates, which are on the forms and in the manner prescribed by the Department, as required by IC § 6-2.5-3-7(b) and IC § 6-2.5-8-8(a). Therefore, sales to those customers will be removed from the Department's calculations of sales tax which should have been collected and remitted. However, some of the exemption certificates are from states other than Indiana and do not meet the requirements of IC § 6-2.5-3-7(b) and IC § 6-2.5-8-8(a) and therefore do not exempt items from Indiana state sales tax.
In addition, Taxpayer has provided documentation which supports its argument that it placed funds derived from a court-ordered deposit into an escrow account. Because these funds did not derive from a retail transaction of tangible personal property they are not subject to sales tax. Nevertheless, it is unclear whether the exempted items and the escrow funds were included in the assessment. It is therefore necessary for the Department's audit division to verify that the amount deposited in the escrow account was included in the Department's calculations of sales tax due. If the deposit in question was included in those calculations it will be removed.
The final category of protest is in regards to amounts rising from an auction which was conducted as tax exempt. Taxpayer treated it as exempt on the basis that the purchasers of the tangible personal property would need to pay sales tax at the time the property would be licensed. Taxpayer has not provided any documentation establishing that sales tax was actually paid by the purchasers or that the items in question were actually licensed. In the absence of supporting documentation, Taxpayer has not met the burden imposed under IC § 6-8.1-5-1(c).
In conclusion, Taxpayer has met the burden imposed by IC § 6-8.1-5-1(c) of proving the proposed assessments wrong regarding sales to Taxpayer's customers who provided Indiana sales tax exemption certificates. Taxpayer has not met the burden imposed by IC § 6-8.1-5-1(c) regarding sales to customers who provided out-of-state exemption certificates. Taxpayer has established that the deposit into the escrow account was not a retail sale and was therefore not subject to sales tax. Taxpayer has not met the burden of proving the proposed assessments wrong regarding sales conducted at the auction and treated as exempt. The Department will conduct a supplemental audit to remove sales to those customers who provided Indiana exemption certificates. The supplemental audit will also verify that the amount deposited into the escrow account was included as a taxable sale and will remove that amount if it was included.
