Friday, April 25, 2014

Revenue Finds Gas Station Foreclosure did not Alter Burden to Show Audit Conclusions Erroneous

Excerpts of Revenue's Determination follow:

Taxpayer is the sole proprietor of an Indiana business. The business consists of a combination gas station and convenience store. The store sells such items as food, candy, soda, newspapers, lottery tickets, tobacco products, and the like.

The Indiana Department of Revenue ("Department") conducted an audit review of the Taxpayer's business records and tax returns.

The nine-month audit was initiated August 2012 and was eventually concluded April 2013.

The audit found that "[T]axpayer collected Indiana sales tax during the audit; however the [T]axpayer only reported and remitted a portion of the tax."

The audit found that Taxpayer failed to maintain sales records. The audit also found that Taxpayer failed to file all the requisite tax returns.

In the absence of returns and source documentation, the audit made a determination of the tax due based on the "best information available."

As a business conducting retail transactions and collecting sales tax, Taxpayer was required to maintain accurate financial records. "Every person subject to a listed tax must keep books and records so that the Department can determine the amount, if any, of the person's liability for that tax by reviewing those books and records." IC 6-8.1-5-4(a). "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 [D]epartment." IC 6-8.1-5-1(b). See also45 IAC 15-5-1.

The audit based its "best information available" assessment – in part – on Taxpayer's incomplete documentation, the amount of fuel acquired from Taxpayer's fuel supplier, "average merchandise sales," and an approximation of the ratio of exempt retail sales and non-exempt retail sales.

Taxpayer argues that the gas station/convenience store is now closed, that the bank has possession of the building, that she did not have access to a phone or computer during the audit period, and that "the final audit was never explained to me so that I could understand what all was entailed."

Taxpayer was provided an opportunity to provide supplemental information at the administrative hearing and further explain the basis for the protest during that same hearing. However, despite being advised of the administrative hearing by both email and regular mail, Taxpayer chose not to participate.

Taxpayer has not demonstrated that the audit was erroneous and has failed to meet the burden under IC 6-8.1-5-1(c) of establishing that the assessment was wrong.