Taxpayer is an Indiana business in the printing industry. As the result of an audit, the Indiana Department of Revenue ("Department") determined that during the tax years 2010 and 2011 Taxpayer had not collected and remitted sales tax on some sales which were subject to sales tax and had also not paid sales tax on some of its purchases which were subject to sales tax. The Department therefore issued proposed assessments for sales tax, use tax, and interest for those years.
The Department reviewed Taxpayer's records and determined that Taxpayer was charging its customers postage as part of its delivery charges, but had not been charging sales tax on those amounts, as required by IC § 6-2.5-1-5(a). The Department therefore issued proposed assessments for sales tax which Taxpayer should have charged as a retail merchant under IC § 6-2.5-2-1(b).
In the course of the protest process, Taxpayer provided documentation and analysis in support of its position that it did not charge postage costs to its customers as part of its delivery charges. After review of this material, the Department agrees that Taxpayer was not charging postage to some of its customers as part of its delivery costs and therefore was not required to collect sales tax on those amounts. The documentation supplied by Taxpayer is grouped into categories listed by customer name (initialed "WCA" and "MC") for two customers and one group titled "Other Customers." The Department will remove postage charges from the amounts subject to sales tax and will recalculate the amount of sales tax which should have been charged by Taxpayer. Taxpayer has met the burden imposed by IC § 6-8.1-5-1(c).
Next, Taxpayer provided exemption certificates for several of its customers. The Department refers to IC § 6-2.5-3-7, which states:
(a) A person who acquires tangible personal property from a retail merchant for delivery in Indiana is presumed to have acquired the property for storage, use, or consumption in Indiana, unless the person or the retail merchant can produce evidence to rebut that presumption.
(b) A retail merchant is not required to produce evidence of nontaxability under subsection (a) if the retail merchant receives from the person who acquired the property an exemption certificate which certifies, in the form prescribed by the department, that the acquisition is exempt from the use tax.
Therefore, a retail merchant is not required to collect and remit sales tax on sales to resellers if the retail merchant receives exemption certificates from their customers, as provided by IC § 6-2.5-3-7. Since Taxpayer provided exemption certificates for some of its customers, sales to those customers will be removed from the Department's calculations of sales tax due from Taxpayer as a retail merchant. Taxpayer has met the burden imposed by IC § 6-8.1-5-1(c). For any sales which Taxpayer claims were to customers who purchased TPP for resale, but for which Taxpayer has not provided exemption certificates, Taxpayer has not met the burden imposed by IC § 6-8.1-5-1(c).
Taxpayer's next point of protest involves sales to out-of-state customers. As provided by IC § 6-2.5-2-1(a), sales tax is imposed on transactions made in Indiana. Therefore, if Taxpayer's customers took possession of the TPP in another state, those are non-taxable out-of-state transactions. However, if an out-of-state customer took possession of the TPP in Indiana, then the transaction took place in Indiana and is subject to Indiana sales tax. After a review of the documentation supplied with the protest, the Department is unable to verify where Taxpayer's customers took possession of the TPP. Taxpayer has not met the burden imposed by IC § 6-8.1-5-1(c).
Next, Taxpayer protests that the Department listed several sales in its calculations of sales subject to sales tax upon which sales tax was collected at the time of the sale. After review of the documentation supplied in the protest process, the Department is unable to verify that this is the case. Taxpayer has not met the burden imposed by IC § 6-8.1-5-1(c).
In conclusion, Taxpayer is sustained regarding the imposition of sales tax on postage charges to its customers listed under the categories "MC", "WCA", and "Other Customers." All postage charges to other customers were properly included as taxable amounts as provided by IC § 6-2.5-1-5(a) during the audit years. Taxpayer is sustained regarding sales to customers for whom it has provided exemption certificates. Taxpayer is denied regarding sales to customers whom Taxpayer claims made the purchases for resale but for whom Taxpayer was unable to provide exemption certificates. Taxpayer is denied regarding sales to out-of-state customers, since Taxpayer was unable to verify where those customers took possession of the TPP. Taxpayer is denied regarding sales upon which it states sales tax was collected at the time of the transaction. A supplemental audit will recalculate sales tax due for the years at issue after removing the amounts for postage to "MC", "WCA", and "Other Customers" and the amounts from sales to customers for whom exemption certificates have been provided.
Taxpayer protests the imposition of use tax on some purchases it made during the tax years 2010 and 2011. The Department based its determination that use tax was due on some of Taxpayer's purchases on a review of the documentation available at the time of the audit. Taxpayer protests that it paid sales tax at the time of purchase for some of the transactions. The Department notes that the burden of proving a proposed assessment wrong rests with the person against whom the proposed assessment is made, as provided by IC § 6-8.1-5-1(c).
In the instant case, the Department determined that Taxpayer had not paid sales tax on some items of TPP at the time of purchase. The Department therefore imposed use tax on those purchases. In the course of the protest process, Taxpayer provided documentation in support of its position that some of its purchases were not subject to Indiana use tax. The reasons listed along with the documentation include: 1) purchases upon which sales tax was paid at the time of purchase; 2) one check was voided and was not a purchase; 3) the TPP in some transactions were purchased by Taxpayer for resale and were therefore exempt; 4) the transactions in question were for services and labor only.
After review, the Department agrees that some of the items at issue should be removed from the calculations of purchases subject to use tax. The Department will conduct a supplemental audit to remove any purchases which, by review of the available documentation, can be verified as exempt from use tax. For instance, if an invoice shows that sales tax was paid at the time of purchase, then use tax is not due. However, if an invoice shows a purchase of TPP but does not show that the TPP was resold; such an invoice does not prove that the purchase was exempt. The audit division will use its discretion in determining which invoices establish that use tax is not due.