Revenue Publishes Notice of Intent to Adopt a Rule

TITLE 45 DEPARTMENT OF STATE REVENUE

Notice of Intent to Adopt a Rule LSA Document #14-109

Under IC 4-22-2-23, the Department of State Revenue intends to adopt a rule concerning the following:

OVERVIEW: Repeals 45 IAC 20-1-1 through 45 IAC 20-1-7 concerning Quality Assessment on Health Facilities. Questions concerning the proposed rule may be addressed to the following telephone number: (317) 232-2107. Statutory authority: IC 6-8.1-3-3.

For purposes of IC 4-22-2-28.1, the Small Business Regulatory Coordinator for this rule is:

Shane Corbin, Deputy Director

Department of State Revenue

Indiana Government Center North

100 North Senate Avenue, Room N248

Indianapolis, IN 46204

(317) 232-2107

scorbin@dor.in.gov

For purposes of IC 4-22-2-28.1, the Small Business Ombudsman designated byIC 5-28-17-5 is:

Jacob Schpok

Indiana Small Business Development Center

One North Capitol, Suite 600

Indianapolis, IN 46204

(317) 232-8805

ombudsman@osbe.in.gov

Resources available to regulated entities through the small business ombudsman include the ombudsman's duties stated in IC 5-28-17-5, specifically IC 5-28-17-5(9), investigating and attempting to resolve any matter regarding compliance by a small business with a law, rule, or policy administered by a state agency, either as a party to a proceeding or as a mediator.

http://www.in.gov/legislative/iac/20140402-IR-045140109NIA.xml.html

Times Argues Indiana's Tax Cap Policies Pit Local Municipalities Against One Another

From the Northwest Indiana Times:

Indiana’s unique fiscal policies — particularly the property tax cap backed by the General Assembly and enrolled in the state’s Constitution by voters in November 2010 — now pit local communities against one another in a perpetual fight for funding.

And the situation continues to worsen, especially for municipalities with high poverty rates and low property tax collections.

Justin M. Ross, assistant professor of public finance at Indiana University Bloomington’s School of Public and Environmental Affairs, painted that dismal picture at the Chancellor’s Commission for Community Engagement spring gathering at Indiana University Northwest.

The semi-annual event promotes substantive exchange by connecting campus and regional community leaders, said host IUN Chancellor William Lowe.

Better known as circuit breakers, the original property tax caps limited the amount of property tax owed based on a percentage and type of property being taxed, said Ross, who studies public policy and finances.

Since that law went into effect, the General Assembly has added additional tax breaks to attract businesses to the Hoosier State, he said. Those include tax abatements for companies that expand their businesses or move to Indiana from other states.

That blending of state fiscal policies has had a crippling effect on local governments, stuck with a smaller pot of money to provide services, Ross told community and political leaders gathered at the John W. Anderson Library complex.

Ross believes neither the General Assembly nor citizens realized the effect those policies would have on local governments that now scramble to provide basic services.

Everything from the public schools to infrastructure repairs and emergency services is threatened, Ross said.

Lake County Commissioner Roosevelt Allen, D-Gary, said the state’s policies make doing business in Indiana attractive. However, he said, if the quality of life declines because local services aren’t provided, companies will choose to relocate elsewhere.

Ross stressed the need for collaboration and cooperation rather than infighting. He also proposed local policy reforms that would foster strategic collaboration among taxing bodies, promote fiscal transparency and budget planning and emphasizing tax policy neutrality.

These steps will take a great deal of effort and education from the policy-makers to citizens, Ross said.

...

http://www.nwitimes.com/news/local/lake/indiana-tax-cap-policies-pit-local-munis-against-one-another/article_a1b6fc11-3cef-54ff-bcc5-93b32cf7245e.html

Tax Court Publishes 2013 Annual Report

 INDIANA TAX COURT

2013 ANNUAL REPORT

Carryover Cases from 2012….……………………………………….…… 175

New Cases Filed in 2013…….……………………………………………. 76

Cases Remanded…………………………………………………………… 0

TOTAL…………………………………………………………………………. 251

Written Decisions…………………………………………………………………….... 21

Final ………….…….…………………………………………..……. 16

Non-dispositive ………….…………………..……………………… 5

Dispositions…………………………………………………………………………..... 58

Final ………………………………………………………………… 16

Voluntary Dismissals………………………………………………. 41

Mediations………………………………………………………….. 1

TOTAL PENDING CASES 12-31-13……………………………………………….. 193

Under Advisement…………………………………………………. 50

[As Consolidated…………………………………..41]

Settled / Voluntary Dismissals Pending…………………………. 21

Proceedings Stayed Pending Outcome in Related Cases …… 35

Preliminary or Pleading Stage……………………………………. 8

Status Report Due…………………………………………………. 34

Remanded………………………………………………………….. 0

Mediation…………………………………………………………… 0

Briefs Due………………………………………………………….. 11

Set For Trial or Oral Argument…………………………………… 7

Trial Preparation....………………………………………………… 27

Interlocutory Appeal……………………………………………….. 0

Tax Type of the 76 Cases Filed in 2013

Property Taxes………………………………………………………………… 44

Department of Local Government Finance………………….. 1

Indiana Board of Tax Review

Personal Property………………………………………… 2 

Real Property…………………………………………….. 41

Listed Taxes……………………………………………………………………. 32

Department of State Revenue

Income……………………………………………………. 12

Sales and Use……………………………………………. 19 Fuels………………………………………………………. 0

Inheritance………………………………………………. 0

CSET…………………..………………………………… 0

Bank & FIT………………………………………………. 1

Utilities Receipts………………………………………… 0

Wagering Tax……………………………………………. 0

County Elections for the 76 Cases filed in 2013

Marion………………………………………………………………… 73

Allen………………………………………………………………..…. 0

St. Joseph…………………………………………………………… 1

Lake………………………………………………………………..… 1

Vigo………………………………………………………………..…. 0

Vanderburgh…………………………………………………………. 0

Jefferson…………………………………………………………….. 1

Number of Trials, Oral Arguments, and Hearings……………………………… .. 30

http://www.in.gov/judiciary/tax/files/2013-tax-court-annual-report.pdf

Board Finds Purchase Price Not Sufficiently Related to Valuation Date to be Probative of Property's Value

Excerpts of the Board's Determination follow:

c. The Petitioners contended the purchase price and a new roof costing $2,000 indicates the market value of the subject property should be $40,000.

d. The Petitioners bought the property on June 06, 2008, for $37,700. His purchase was over three years before the assessment and valuation date of March 1, 2012. The purchase price of the property can be a good way to prove an accurate market value-in-use for assessment purposes. Here, however, the Petitioners failed to demonstrate the relevance of the purchase date to the market value-in-use as of the assessment date.

e. The Petitioners claimed the improvement identified as 3446 Red Bud Lane was the only improvement on this property that was rentable on the assessment date. The Petitioners also presented fifteen photos of the improvements to support his claim that all the improvements were in poor condition—referring to items such as broken furnaces, ceilings that leak, rotted floors and windows, smoke damage, damaged cabinets, and frozen water pipes. But he failed to quantify the effect the poor condition of the improvements had on the market value of the property.

f. The Petitioners alleged the property needed $20,000 of improvements to make it worth $60,000. This opinion of value is not supported by evidence or facts. The Petitioners must sufficiently explain the connection between the evidence and Petitioners’ assertions in order for it to be considered material to the facts. ‘Conclusory statements’ are of no value to the State in its evaluation of the evidence. See Heart City Chrysler v. State Bd. of Tax Comm’rs, 714 N.E. 2d 329 (Ind. Tax 1999) (stating that conclusory statements are statements, allegations, or assertions that are unsupported by any detailed factual evidence).

g. When taxpayers fail to provide probative evidence supporting their position that an assessment should be changed, the Respondent’s duty to support the assessment with substantial evidence is not triggered. See Lacy Diversified Indus. v. Dep’t of Local Gov’t Fin., 799 N.E.2d 1215, 1221-1222 (Ind. Tax Ct. 2003); Whitley Products, 704 N.E.2d at 1119.

h. While the Petitioners failed to make a prima facie case for reducing the subject property’s assessment, the Assessor conceded the property was worth only $56,400 for 2012. The Board accepts the Assessor’s concession.

http://www.in.gov/ibtr/files/Wakelam_Jr_72-004-12-1-5-00081.pdf

Trib-Star Reports Vigo County PTABOA Operated Without Quorum

From the Terre Haute Tribune Star:

Two new seats have been added to the Vigo County Property Tax Assessment Review Board after county officials learned that appeals hearings have been conducted without a quorum of appointed members.

In a special meeting of the Vigo County Commissioners and County Council, the makeup of the board was increased from three members to five members.

County attorney Michael Wright told the Tribune-Star that while recent hearings have been conducted with only one appointed board member present, no formal action has been taken on any appeal. All appeals have yet to be reviewed based on the information gathered so far.

Taxpayer Randy Gentry, who had a Property Tax Assessment Board of Appeals hearing on Wednesday morning, questioned the makeup of the board because only one person on the board — county-council appointment John Church – was attending. Board members Rick Conley and Brian Kerns could not attend this week’s hearings.

David Phelps and Kevin Gardner were also at the hearings on Wednesday, along with Harrison Township Assessor Mick Love. Gentry said he was told that Phelps and Gardner were sitting in as “proxy” members so that the hearings could be conducted.

Wright said he reviewed the statute to see if the proxy seats were permissible, but he could find no information on it. He advised the council and commissioners to increase the board size to bring Phelps and Gardner onto the board as full-fledged members.

The county has the option of establishing a three-member or five-member board, Wright said, but there are requirements that a five-member board must have two appointments from the county council, with one being a level 2 or level 3 appraiser/assessor.

The commissioners get three appointments, with one being a level 2 or level 3 appraiser/assessor. Also, there can be no more than three members of the same political party on the board.

The board now has that makeup, Wright said, with commissioner-appointed Gardner as a level 3 appraiser/assessor and council-appointed Church as a level 2 appraiser/assessor.
...

http://www.tribstar.com/local/x1316966239/Assessments-under-attack

Journal & Courier Reports Study Shows Hoosiers Shoulder 22nd Highest Tax Burden

From the Lafayette Journal & Courier:

Indiana ranks 22nd highest for state-local tax burden in the country, according to the nonpartisan Tax Foundation.

The report released today, based on data from the 2011 fiscal year, shows Indiana taxpayers paid 9.5 percent of their incomes in state and local taxes with a per-capita burden of $3,385 on a per-capita income of $35,592.

The national average was 9.8 percent. New York, New Jersey and Connecticut had the highest state-local tax burdens as a share of income in the nation. Wyoming, Alaska and South Dakota had the lowest.

“States have different tax burdens, just as they have different levels of services,” said Tax Foundation economist Liz Malm in a prepared statement. “For Americans to make informed judgments about benefits and costs of state-local government, the costs need to be known.”

The data was collected before the Republican-led General Assembly passed one of the largest tax cuts in Indiana’s history in 2013, a $1.1 billion, multiyear giveback involving cuts in the corporate, financial institution and personal income tax rates and a repeal of the inheritance tax.

The General Assembly voted this year to further reduce the corporate income tax and to give counties more options to cut business taxes, including exempting new business equipment from property taxes.
...

http://www.jconline.com/apps/pbcs.dll/article?AID=2014304020021

Revenue Publishes Commissioner's Directive on Other Tobacco Products Tax

Commissioner's Directive #43

February 2014 (Replaces Commissioner's Directive #43 Dated July 2012) Effective Date: February 1, 2014

SUBJECT: Other Tobacco Products Tax

SUMMARY OF CHANGES:

Aside from nonsubstantive, technical changes, this version of the directive has been changed to reflect the enactment of HEA 1001-2013, which, in pertinent part, amended IC 6-7-2-7 and IC 6-7-2-8 to provide that a person selling other tobacco products (OTP) through an Internet website is required to obtain a distributor's license and remit the OTP tax to the department. The directive also has been changed in accordance with HEA 1006-2013, which, in pertinent part, changes Class D felonies to Level 6 felonies.

INTRODUCTION

The purpose of this commissioner's directive is to provide an interpretation of the Other Tobacco Products Tax as it applies to the wholesale price of tobacco products and moist snuff taxed by the ounce and an interpretation of who is a tobacco distributor that is liable for the tax. This directive applies to other tobacco products distributors as defined in IC 6-7-2-2.

DISCUSSION

"Tobacco product" means:

(1) Any product made from tobacco, other than a cigarette, that is made for smoking, chewing, or both; or

(2) Snuff, including moist snuff.

"Moist snuff" means any finely cut, ground, or powdered tobacco that is not meant to be smoked or placed in the nasal cavity.

The Other Tobacco Products Tax is imposed on tobacco distributors per IC 6-7-2-7, which reads:

A tax is imposed on the distribution of tobacco products in Indiana at the rate of 24% of the wholesale price of the tobacco products other than moist snuff or for moist snuff, $.40 per ounce, and a proportionate tax at the same rate on all fractional parts of an ounce. If the tax calculated for the fractional part of an ounce carried to the third decimal place results in the numeral in the third decimal place being greater than 4, the amount of tax shall be rounded to the next additional cent.

The distributor of the tobacco products, including a person who sells tobacco products through an Internet website, is liable for the tax. The tax is imposed at the time the distributor:

(1) Brings or causes tobacco products to be brought into Indiana for distribution;

(2) Manufactures tobacco products in Indiana for distribution; or

(3) Transports tobacco products to retail dealers in Indiana for resale by those retail dealers.

A distributor, including a person who sells tobacco products through an Internet website, must obtain a license before distributing tobacco products in Indiana.

An unlicensed wholesaler/retailer purchasing tobacco products through a catalogue or other media from a person not licensed as an Indiana distributor must register as a distributor and pay the tax on the wholesale price of the other tobacco products or, if purchasing moist snuff, pay the tax based on the number of ounces. A wholesaler/retailer failing to register and comply with the law commits a Class B misdemeanor. However, the offense is a Level 6 felony if it is committed with intent to evade the tax imposed or to defraud the state.

The term "wholesale price" is defined in IC 6-7-2-6 as follows: "As used in this chapter, 'wholesale price' means the net price shown on an invoice and at which the manufacturer of the tobacco products sells tobacco products other than moist snuff to distributors, excluding any discount or other reduction that is not shown on the invoice."

The department's position is that temporary reduction or discounts for the purpose of promoting certain tobacco products are deductible from the original price in determining the "wholesale price" of tobacco products if the finished tobacco product(s) container is prepackaged indicating a monetary discount. The "wholesale price" for other tobacco products prepackaged in multiple units is the actual price paid and not an imputed cost based on the manufacturer's price per single unit. Purchase discounts, quantity discounts, trade discounts, or any other reductions are deductible when determining the "wholesale price" of tobacco products for purposes of imposing the Other Tobacco Products Tax if the discount is shown on the invoice.

A manufacturer, an importer, a broker, or a shipper of other tobacco products or moist snuff bringing such products into Indiana for the purpose of giving such products away for any type of promotional purpose must pay the tax due on all such products. In applying the Other Tobacco Products Tax to samples, the "wholesale price" is the standard price charged for the single-unit tobacco product before deduction of any discount, including temporary promotional discounts.

http://www.in.gov/legislative/iac/20140226-IR-045140051NRA.xml.html

Revenue Finds Montana LLC Had No Function Other than to Acquire RV and Avoid Sales Taxes

Excerpts of Revenue's Determination follow:

Taxpayers are a married couple and are residents of Indiana. The Indiana Department of Revenue ("Department") determined that Taxpayers purchased a recreational vehicle ("RV") during the tax year 2010 and had been using the RV in Indiana without paying sales tax in any jurisdiction. As a result, the Department issued proposed assessments for Indiana use tax, ten percent negligence penalty, and interest. Taxpayers protest that the RV was purchased and titled by a Montana LLC, of which Taxpayers were the only members and that no Indiana sales or use tax is due. Taxpayers also protest the imposition of negligence penalty.
...

Taxpayers protest the imposition of use tax on the use and storage of an RV in Indiana. The Department imposed use tax after determining that Taxpayers had been using and storing the RV in Indiana and that no sales tax had been paid on the purchase of the RV. Taxpayers protest that the RV was titled by a Montana LLC and that all legal documents establishing the existence of the LLC were properly filed in Montana. Taxpayers state that they purchased the RV in question at a deeply discounted price and intended to sell the RV for a profit when the market improved. 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).
...

The Department determined that Taxpayers purchased the RV in 2010 but did not pay sales tax on the purchase. The Department therefore issued proposed assessments for Indiana use tax.

Other than the purchase of the RV, Taxpayers did not provide any documents establishing any LLC business or non-business activity at all in Indiana, Montana, or any other state in the union. Taxpayers did provide unsigned and undated federal partnership returns for the LLC. These federal returns were prepared after the administrative hearing was conducted. The returns do not show any activity by the Montana LLC. While the LLC made no attempt to undertake any further activity, the titling of the RV by the LLC did have a significant impact on Taxpayers' sales taxes. This leads to consideration of the "sham transaction" doctrine, which is long established both in state and federal tax jurisprudence dating back to Gregory v. Helvering, 293 U.S. 465 (1935). In that case, the Court held that in order to qualify for favorable tax treatment, a corporate reorganization must be motivated by the furtherance of a legitimate corporate business purpose. Id. at 469. A corporate business activity undertaken merely for the purpose of avoiding taxes was without substance and "[T]o hold otherwise would be to exalt artifice above reality and to deprive the statutory provision in question of all serious purpose." Id. at 470.

The courts have subsequently held that "in construing words of a tax statute which describe [any] commercial transactions [the court is] to understand them to refer to transactions entered upon for commercial or industrial purposes and not to include transactions entered upon for no other motive but to escape taxation." Comm'r v. Transp. Trading & Terminal Corp., 176 F.2d 570, 572 (2d Cir. 1949), cert. denied, 338 U.S. 955 (1950). "[T]ransactions that are invalidated by the [sham transaction] doctrine are those motivated by nothing other than the taxpayer's desire to secure the attached tax benefit" but are devoid of any economic substance. Horn v. Comm'r, 968 F.2d 1229, 1236-7 (D.C. Cir. 1992). In determining whether a business transaction was an economic sham, two factors can be considered; "(1) did the transaction have a reasonable prospect, ex ante, for economic gain (profit), and (2) was the transaction undertaken for a business purpose other than the tax benefits?" Id. at 1237. The question of whether or not a transaction is a sham, for purposes of the doctrine, is primarily a factual one. Lee v. Comm'r, 155 F.3d 584, 586 (2d Cir. 1998).

In this case, the facts are that the Montana LLC had no business or non-business functions and never attempted to acquire, maintain, or dispose of any property other than the RV in question. In fact, the LLC had no functions of any kind other than those directly related to the purchase of the RV in question. The titling of the RV in Montana, a state without a sales tax, was merely an attempt to reduce or eliminate Taxpayers' sales and use tax liabilities. The formation of the LLC and the titling of the RV in the name of the LLC was therefore a "sham transaction."

In conclusion, Taxpayers never intended for the LLC to have any valid functions beyond avoiding sales and use taxes on the purchase of the RV. Therefore, the formation of the LLC and the titling of the RV by the LLC was a sham transaction. Consequently, Taxpayers acquired tangible personal property in a retail transaction, used and stored it in Indiana, but did not pay sales tax at the point of purchase or anywhere else. In such circumstances, Indiana use tax is due, as explained by 45 IAC 2.2-3-4.
...

In this case, Taxpayers incurred an assessment which the Department determined was due to negligence under 45 IAC 15-11-2(b), and so was subject to a penalty under IC § 6-8.1-10-2.1(a). After a review of the circumstances in this case, Taxpayers have not established that the assessment arose due to reasonable cause and not due to negligence, as required by 45 IAC 15-11-2(c). Therefore, the negligence penalty will not be waived.

http://www.in.gov/legislative/iac/20140226-IR-045140049NRA.xml.html

Times Reports Porter County Assessor Completes Tax Appeals

From the Northwest Indiana Times:

Porter County Assessor Jon Snyder said his office has completed work on the 1,900 tax assessment appeals filed in the fall, which is a task that has not been accomplished for many years.

Snyder said it was his goal for the office to complete its work on the appeals in time for the spring tax statements.

"I cannot be more proud of the office and their amazing accomplishments," he said.

Less than 300 of those appeals remain in the hands of taxpayers, Snyder said. He predicted that about 50 would likely be challenged to the Porter County Property Tax Assessment Board of Appeals.

Timely appeals will result in tax statement credits rather than refunds, which are more costly for the county, he said.

The next round of appeals will come within 45 days of the new notices of assessment, which Snyder said could go out as early as this spring.

http://www.nwitimes.com/news/local/porter/county-assessor-completes-tax-appeals/article_0d4a15c2-471a-5e22-8206-03441c5b2c2d.html

Board Finds Respondent with Burden Failed to Support Assessed Value of Property with Sales Comparison Analysis

Excerpts of the Board's Determination follow:

c. The Respondent contends the property’s assessed value is possibly too low. In support of this contention, Mr. Potts presented a sales comparison analysis. Mr. Potts identified three properties and adjusted those sales for differences in lot size, amount of living space, number of bathrooms, air conditioning and size of the garage based on costs in the Indiana assessment guidelines. Mr. Potts also adjusted the sale prices for the date of sale where applicable. Mr. Potts testified comparable #1 was the closest to the subject property because it had the least number of adjustments. The adjusted sales price for comparable #1 was $102,100.

d. On March 7, 2013, Mr. Potts was certified by the Department of Local Government Finance (DLGF) as a professional appraiser authorized to provide technical assistance to White County. However, he did not indicate that he complied with the Uniform Standards of Professional Appraisal Practice (USPAP) in preparing the sales comparison analysis for this case. Further, Mr. Potts failed to show how he arrived at many of the adjustments he made between the comparable properties and the subject property. For example, Mr. Potts made adjustments of -$5,100 and -$3,200 based on sale dates. He also made adjustments for site size, number of bedrooms and bathrooms, but failed to account for how he arrived at each adjustment. It is not clear to the Board what objective data Mr. Potts used to justify the adjustments.

e. The adjustments used to support the conclusion that the assessment should not be lowered were a significant part of the Respondent’s case. Because Mr. Potts failed to show how he arrived at the specific adjustments, the Board does not find his evidence to be probative.

f. In other cases where the Respondent has the burden to prove the assessment is correct and failed to carry that burden, the Board has ordered that the assessment be returned to the assessed value of the preceding year. In this case, the assessment is reduced to $76,000.

g. As explained above, the Petitioner asked the Board to reduce the subject property’s assessment even further to $72,400. The Petitioner has the burden of proving he is entitled to the additional reduction. The Board now turns to Mr. Amick’s evidence.

h. The Petitioner asserts the value could be $72,400 based on the application of a 2.3% increase in sales in the area in 2011. This figure represents the average increase in sale price from 2010 to 2011, but not for the valuation date of March 1, 2012. 

i. Further, Mr. Amick relied on the 2009 appraised value as a starting point for his 2012 appeal. The date of the appraisal was September 8, 2009, and so it does not reflect either the value or the condition of the subject property as of the March 1, 2012, assessment date. Further, the Board gives little weight to an appraisal report which includes only the cover letter and one page of an addendum.

j. The Petitioner failed to prove he was entitled to a further reduction in the assessed value.

http://www.in.gov/ibtr/files/Amick_91-016-12-1-5-00005.pdf

Revenue Publishes Information Bulletin on Income Tax Credit for Natural Gas-Powered Vehicles

DEPARTMENT OF STATE REVENUE

Information Bulletin #109 Income Tax January 2014 Effective Date: Upon Publication

SUBJECT: Income Tax Credit for Natural Gas-powered Vehicles

SUMMARY

For taxable years beginning after Dec. 31, 2013, an Indiana income tax credit is available for certain vehicles powered with natural gas. The credit applies only to vehicles weighing more than 33,000 pounds and purchased from an Indiana dealer. The credit is effective for the period of Jan. 1, 2014 through Dec. 31, 2016, and can be applied against the purchaser's state tax liability.

DEFINITIONS

"Natural gas" means compressed natural gas (CNG) or liquefied natural gas (LNG).

"Qualified vehicle" means a natural gas-powered vehicle that has a gross vehicle weight rating of more than 33,000 pounds.

"State tax liability" means a person's total tax liability that is incurred under:

• IC 6-3-1 through IC 6-3-7 (the adjusted gross income tax);

• IC 6-5.5 (the financial institutions tax); or

• IC 27-1-18-2 (the insurance premiums tax).

CALCULATION OF THE CREDIT

A person who places a qualified vehicle into service in a particular taxable year may claim a credit against the person's state tax liability for that taxable year. The amount of the credit is the lesser of the following two amounts:

• The difference between the price of the qualified vehicle and the price of a comparably equipped vehicle that is powered by a gasoline or diesel engine multiplied by 50%; or

• $15,000.

LIMITATIONS

The total value of credits granted to a single taxpayer in a taxable year is limited to $150,000. The total of all credits for all taxpayers in a taxable year is the lesser of either $3 million or the amount of sales tax collected on fuel purchased to power natural-gas vehicles.

CLAIMING THE CREDIT

Credits will be awarded on a first-come, first-served basis for each tax year. To claim the credit, a dealer or purchaser must complete the Commercial Natural Gas Vehicle Credit Form found at www.in.gov/dor/5051.htm. After the department receives the form and all necessary supporting documentation and verifies the credit, the taxpayer will receive a certification number. The taxpayer will also receive instructions on how to claim the credit on an income tax return. The credit will be awarded only to those who file a credit form and receive a confirmation number. Receiving a confirmation number does not guarantee the ability to claim the credit if sales tax collections are less than the $3 million cap.

If a pass-through entity places a qualified vehicle into service but does not have state tax liability against which a tax credit may be applied, a shareholder, partner, or member of the pass-through entity may claim a tax credit under this chapter equal to:

(1) The amount of the tax credit determined for the pass-through entity; multiplied by

(2) The percentage of the pass-through entity's distributive income to which the shareholder, partner, or member is entitled.

The credit is in addition to any other tax credit to which a shareholder, partner, or member of a pass-through entity is otherwise entitled. However, a pass-through entity and a shareholder, partner, or member of the pass-through entity may not claim more than one (1) credit for the same qualified vehicle placed into service.

If the amount of the credit for a person in a taxable year exceeds the person's state tax liability for that taxable year, the person may carry over the excess to the following taxable years. The amount of the credit carryover from a taxable year shall be reduced to the extent that the carryover is used by the person to obtain a credit under IC 6-3.1-34.6 for any subsequent taxable year. A credit may not be carried forward for more than six (6) taxable years following the taxable year in which the person is first entitled to claim the credit. A person is not entitled to a carryback or refund of any unused credit. A person may not sell, assign, convey, or otherwise transfer this tax credit.

http://www.in.gov/legislative/iac/20140226-IR-045140052NRA.xml.html

Revenue Finds Taxpayer's Ignorance of the Laws Failed to Support Abatement of Penalty

Excerpts of Revenue's Determination follow:

Taxpayer operates a combination convenience store and gas station. The Indiana Department of Revenue ("Department") conducted a sales and use tax audit of Taxpayer for the years 2009 through 2011. As a result of that audit, the Department issued proposed assessments for the years at issue. Those proposed assessments also included penalty and interest. Taxpayer protested the imposition of a negligence penalty and interest.
...

In its protest letter, Taxpayer asks the Department to "consider removing the penalty and interest on the liability." The Department notes that interest, under IC § 6-8.1-10-1(e), cannot be waived. The negligence penalty was imposed pursuant to IC § 6-8.1-10-2.1.

Regarding the negligence penalty, 45 IAC 15-11-2(b), states:

"Negligence" on behalf of a taxpayer is defined as the failure to use such reasonable care, caution, or diligence as would be expected of an ordinary reasonable taxpayer. Negligence would result from a taxpayer's carelessness, thoughtlessness, disregard or inattention to duties placed upon the taxpayer by the Indiana Code or department regulations . Ignorance of the listed tax laws, rules and/or regulations is treated as negligence. Further, failure to read and follow instructions provided by the department is treated as negligence. Negligence shall be determined on a case by case basis according to the facts and circumstances of each taxpayer.

(Emphasis added).

And 45 IAC 15-11-2(c) provides in pertinent part:

The department shall waive the negligence penalty imposed under IC 6-8.1-10-1 if the taxpayer affirmatively establishes that the failure to file a return, pay the full amount of tax due, timely remit tax held in trust, or pay a deficiency was due to reasonable cause and not due to negligence. 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 under this section. Factors which may be considered in determining reasonable cause include, but are not limited to:

(1) the nature of the tax involved;

(2) judicial precedents set by Indiana courts;

(3) judicial precedents established in jurisdictions outside Indiana;

(4) published department instructions, nformation bulletins, letters of findings, rulings, letters of advice, etc;

(5) previous audits or letters oif findings concerning the issue and taxpayer involved in the penalty assessment.

Reasonable cause is a fact sensitive question and thus will be dealt with according to the particular facts and circumstances of each case.

Taxpayer's protest letter states in relevant part:

When I bought the business, I knew nothing as far as keeping the data for reporting and submitting the information in order to do the sales tax returns. The former owner showed me how he was doing it. So I started and continued to do it the same way not knowing it was incorrect.

45 IAC 15-11-2(b) notes, "Ignorance of the listed tax laws, rules and/or regulations is treated as negligence." Taxpayer has failed to show reasonable cause under 45 IAC 15-11-2(c), and is thus denied regarding its protest of the penalty.

http://www.in.gov/legislative/iac/20140226-IR-045140047NRA.xml.html

Revenue Finds Taxpayer Fails to Prove Rotary Cutter was Agricultural Machinery Entitled to Exemption

Excerpts of Revenue's Determination follow:

Taxpayer is an Indiana farmer. As the result of an investigation, the Indiana Department of Revenue ("Department") issued a proposed assessment for use tax, penalty, and interest on the purchase of a gator and a rotary cutter ("Cutter") in 2010. Taxpayer paid the portion of the assessment related to the purchase of the gator, but protests the portion of the proposed assessment of use tax on its purchase of the Cutter.
...

Taxpayer protests the imposition of use tax on the purchase of a rotary cutter. Taxpayer protests that the Cutter is exempt. 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).
...

Taxpayer claims that the Cutter is exempt from use tax under 45 IAC 2.2-5-4(d)(4), which states that transactions are exempt for "implements used in the tilling of land and harvesting of crops therefrom, including tractors and attachments." Specifically, Taxpayer argues that the Cutter is necessary to mow hay fields to allow his cattle to properly graze, to produce hay to feed the cattle he raises, and to cut corn stalk stubble in preparation for the next year's tilling.

IC § 6-2.5-5-2 states that "transactions involving agricultural machinery, tools, and equipment are exempt from the state gross retail tax if the person acquiring that property acquires it for his direct use in the direct production, extraction, harvesting, or processing of agricultural commodities. " This statute applies a "double direct" test in which a purchase for agricultural use is exempt only when the property is directly used in the direct production, extraction, harvest, or processing of agricultural commodities. Therefore, equipment used prior to the start of or after the end of the production, extraction, harvesting, or processing of agricultural commodities is not eligible for the agricultural commodities exemption. This standard is reiterated in 45 IAC 2.2-5-4 (e) that states:

The fact that an item is purchased for use on the farm does not necessarily make it exempt from sale [sic.] tax. It must be directly used by the farmer in the direct production of agricultural products. The property in question must have an immediate effect on the article being produced. Property has an immediate effect on the article being produced if it is an essential and integral part of an integrated process which produces agricultural products. The fact that a piece of equipment is convenient, necessary, or essential to farming is insufficient in itself to determine if it is used directly in direct production as required to be exempt.

The preparation of fields for proper grazing does not directly affect the cattle. Rather, it is a pre-production activity similar to storing feed prior to actually feeding the cattle. The hay which Taxpayer cuts down with the Cutter is not itself an agricultural product because Taxpayer does not sell the hay and so this activity does not qualify for exemption under IC § 6-2.5-5-2. The cutting of corn stalk stubble is a post-harvest/pre-tilling activity and is not direct use in the direct production of an agricultural product.

In conclusion, the Cutter is not agricultural machinery, tools, or equipment which is directly used in the direct production, extraction, harvesting, or processing of agricultural commodities. The Cutter therefore does not qualify for the exemption found under IC § 6-2.5-5-2. Taxpayer has not met the burden imposed under IC § 6-8.1-5-1(c).

http://www.in.gov/legislative/iac/20140226-IR-045140046NRA.xml.html

IBJ Reports Tax Credits Offered to Casey's General Stores and Becks Hybrid for Investments in Indiana

From the Indianapolis Business Journal:

Casey’s General Stores Inc. said it plans to build a $30 million distribution center in Indiana that will have as many as 185 employees by 2019.

Ankeny, Iowa-based Casey’s said Tuesday that construction will begin in November on the 250,000-square-foot center in the Vigo County Industrial Park in Terre Haute, about 75 miles west of Indianapolis. The new facility is expected to open by fall 2015.

Casey’s, founded in 1969, operates 1,788 gas station-convenience stores in 14 states, including 80 in Indiana. The company primarily locates stores in communities with populations of 5,000 or less.

The company has about 29,000 employees, with more than 850 in Indiana. It’s only other distribution facility is in its home city of Ankeny.

The Indiana Economic Development Corp. said it would give Casey’s up to $1.4 million in tax credits if it meets its job commitments. It also will provide up to $100,000 in training grants.

In addition, the IEDC will provide Vigo County with as much as $200,000 in infrastructure assistance from the state's Industrial Development Grant Fund. Vigo County will consider additional incentives for the company.

http://www.ibj.com/caseys-to-build-indiana-distribution-center/PARAMS/article/46954

Beck’s Hybrids is planning to expand its Hamilton County headquarters operation to keep up with its booming seed business.

Lt. Gov. Sue Ellspermann will join executives for an “economic development announcement” Wednesday at the sprawling facility in Atlanta—usually an indication that state incentives are on the table—and the Hamilton County Council has three Beck’s-related items on its agenda this week, suggesting local aid for the project.
…

At last month’s meeting, council member Brad Beaver said the county’s redevelopment commission had discussed creating a tax-increment-financing district to help fund improvements near the Beck's headquarters. The council’s Wednesday agenda includes the possible designation of an economic redevelopment area there, the first step in the process.

“We’ve really been pleased with … you folks and how you work with us,” Beck said at the March council meeting. “We love being here.”

Company officials also declined to comment ahead of the official announcement.

Most of the firm's corn, soybeans and wheat is processed and bagged in Hamilton County, then shipped to distribution centers. Billed as the nation’s largest family-owned seed company, Beck’s does business in eight states.

Beck’s has more than 400 employees companywide, most in Indiana. It added 74 workers in 2012 and 85 last year, Sonny Beck told the council.

The company announced a $24.5 million expansion in 2010, promising to create 72 jobs within five years. Indiana Economic Development Corp. offered up to $650,000 in performance-based tax credits for that growth spurt, and the county provided a tax abatement.

Beck told the council the company’s market share increased steadily from 2006 to 2012, outpacing both of its main competitors: corporate giants Pioneer and DeKalb.

http://www.ibj.com/becks-hybrids-planning-to-expand-headquarters-operation/PARAMS/article/46949

Board Finds Hearsay Appraisal Fails to Support Reduction of Property's Value

Excerpts of the Board's Determination follow:

The Petitioners failed to make a prima facie case for reducing the subject property’s 2011 assessment.

…

c) Because the Respondent objected to the appraisal, a final determination cannot rest entirely on it. In other words, even though the appraisal appears to support a significantly lower value for the subject property, the Board cannot change the assessment unless other evidence that is not hearsay also would support such a change. The non-hearsay evidence in the record includes the Petitioners’ comparable analysis. This evidence, however, does not prove that the current assessment is wrong nor does it support a specific lower value.

d) The Petitioners attempted to support their position by comparing the subject property’s assessment to the assessments of purportedly comparable properties. Indiana Code § 6-1.1-15-18 allows parties to introduce assessments of comparable properties to prove the market value-in-use of a property under appeal. But where an appeal involves a residential property, those comparable properties must be located in the same taxing district or within two miles of the taxing district’s boundary. Ind. Code § 6-1.1-15-18(c)(1). Here, all of the comparable properties presented by the Petitioners are within the same taxing district as the subject property.

e) Even if one assumes that the comparable properties meet Ind. Code § 6-1.1-15-18’s taxing-district requirements, other properties’ assessments do not necessarily prove the market value-in-use of a property under appeal. The party relying on those assessments must show that the other properties are comparable to the property under appeal and how relevant differences affect their relative values. See Ind. Code § 6-1.1-15-18(c)(2) (requiring the use of generally accepted appraisal and assessment practices to determine whether properties are comparable); see also Long, 821 N.E.2d at 471 (finding sales data lacked probative value where they did not explain how purportedly comparable properties compared to their property or how relevant differences affected the properties’ relative market values-in-use).

f) Granted, the Petitioners chose properties in the same taxing district, but the comparison of the properties ended there. They did not explain how any relevant differences between the properties affected their relative values. Perhaps most importantly, the Petitioners explained that all of the comparable properties were much larger than the subject property, and this alone would affect value.

g) The Petitioners presented sales information for their comparable properties as well in an attempt to show that the subject property was over-assessed. In making this argument the Petitioners essentially rely on a sales comparison approach to establish the market value-in-use of the property. See MANUAL at 3 (stating that the sales comparison approach “estimates the total value of the property directly by comparing it to similar, or comparable, properties that have sold in the market.”) In order to effectively use the sales comparison approach as evidence in a property assessment appeal, however, the proponent must establish the comparability of the properties being examined. Conclusory statements that a property is “similar” or “comparable” to another property do not constitute probative evidence of the comparability of the properties. Long, 821 N.E.2d at 470. Instead, the proponent must identify the characteristics of the subject property and explain how those characteristics compare to the characteristics of the purportedly comparable properties. Id. at 471. Similarly, the proponent must explain how any differences between the properties affect their relative market values-in-use. Id. The Petitioners did not do this. No adjustments were made on the properties. Further, the majority of the sales were from 2008 and the Petitioners failed to show how they related to the relevant valuation date.

  

h) To further elaborate on the Petitioners’ appraisal, even had the appraisal not been objected to, there were still multiple flaws. The appraisal had an effective date of January 1, 2010, with no explanation of how it would relate to the subject property’s valuation date. Further, the sales used in the appraisal were from 2009. Again, nothing in the appraisal related these sales to the relevant valuation date. Therefore, the appraisal would not be sufficient evidence on its own even without the hearsay objection. The hearsay objection was properly made and served an important purpose here. The Petitioners were allowed the opportunity to cross examine Mr. Fisher on his training and on the work he completed for his appraisal. The Respondent, however, was not provided with the same opportunity to question Mr. Antonelli. The Respondent most likely would have questioned Mr. Antonelli on the same items Mr. Fisher was questioned on. Thus, it is important to have the appraiser present to answer various questions and properly justify the completed appraisal.

i) The Petitioners failed to make a prima facie case that the 2011 assessment is incorrect

http://www.in.gov/ibtr/files/Gorski_20-032-11-1-5-00009.pdf

Revenue Announces Stopped ID Theft Tax Fraud Reaches $2.8 Million

FOR IMMEDIATE RELEASE
Contact: Bob Dittmer, APR
(317) 234-3793

Stopped ID Theft Tax Fraud
Reaches $2.8 Million

Department of Revenue identity protection program
protects 1,533 Hoosiers from identity theft

INDIANAPOLIS (April 1, 2014) — More than $2.8 million in identity theft attempts through fraudulent tax returns has been stopped by the Indiana Department of Revenue during the past two months of processing more than 2 million returns. The attempted identity theft fraud was identified by the department’s increased security features in the 2014 tax filing process.

The department’s Special Investigations Unit (SIU) confirmed 1,533 individual tax returns as identity theft attempts, which represents $2,835,000 that criminals attempted—but failed—to steal from Hoosier taxpayers and the State of Indiana. SIU has developed strong leads that it intends to work with the Indiana Attorney General’s Office to prosecute.

“In past years, Indiana was able to stop identity theft fraud attempts, but not as extensively as we wanted,” said Commissioner Mike Alley. “Stopping $2.8 million in the first two months of the tax season demonstrates we have significantly improved our ability to stop the identity theft epidemic and the resulting tax fraud.”

Part of the department’s Identity Protection Program involves asking selected taxpayers to take an Identity Confirmation Quiz. This additional level of protection consists of a two-minute quiz that asks four questions to which only the respondent would know the answers. It can be taken on a secure website hosted by the department or over the phone. The attempted fraud was stopped while asking only 5 percent of Hoosier taxpayers to take the Identity Confirmation Quiz.

It is important that those required to take the quiz know they are not suspected of identity theft. This effort is designed to further protect taxpayers’ identities and tax refunds.

Hoosiers asked to take the quiz must complete it to allow their refunds to continue processing. All taxpayers asked to take the quiz have 30 days to complete it, but the department encourages them to complete it as soon as possible to prevent refund delays.

After successful quiz completion, taxpayers should not see a delay in the processing of their refunds. All refunds should be received within 14 days if electronically filed and up to 12 weeks if filed by paper.

Seventy percent of those required to take the Identity Confirmation Quiz have taken it online. Those who have taken it on the phone have waited an average of only 12 seconds before being helped by a department representative.

In addition, the department has experienced significant success in answering taxpayer questions through its phone center. Taxpayers are experiencing an average of only a 2-minute wait time to reach a tax analyst for assistance. As of March 31, the department’s call center has handled more than 53,600 calls from taxpayers with individual tax questions. The average call completion time is 4.5 minutes. Hoosiers with simple or complicated tax questions can call the department at (317) 232-2240.

Hoosiers with questions about protecting their identities can visit the department’s Stop ID Theft website at www.in.gov/dor/4794.htm for frequently asked questions, identity protection tips, a video and additional resources. Hoosiers can also sign up for the Attorney General’s ID Theft Protection Tool Kit at www.in.gov/attorneygeneral/2853.htm.

http://www.in.gov/dor/5104.htm

Board Posts New Burden Shifting Legislation that "Applies to All Appeals Pending on the Effective Date"

New Burden Shifting Language

On March 25, 2014, Governor Pence signed Senate Enrolled Act 266 into law.  This new burden shifting language became effective upon passage and applies to all appeals pending on the effective date.

Ind. Code § 6-1.1-15-17.2 provides the following:

  (a) Except as provided in subsection (d), this section applies to any review or appeal of an assessment under this chapter if the assessment that is the subject of the review or appeal is an increase of more than five percent (5%) over the assessment for the same property for the prior tax year. In calculating the change in the assessment for purposes of this section, the assessment to be used for the prior tax year is the original assessment for that prior tax year or, if applicable, the assessment for that prior tax year:
     (1) as last corrected by an assessing official;
     (2) as stipulated or settled by the taxpayer and the assessing official; or
     (3) as determined by the reviewing authority.
  (b) Under this section, the county assessor or township assessor making the assessment has the burden of proving that the assessment is correct in any review or appeal under this chapter and in any appeals taken to the Indiana board of tax review or to the Indiana tax court. If a county assessor or township assessor fails to meet the burden of proof under this section, the taxpayer may introduce evidence to prove the correct assessment. If neither the assessing official nor the taxpayer meets the burden of proof under this section, the assessment reverts to the assessment for the prior tax year, which is the original assessment for that prior tax year or, if applicable, the assessment for that prior tax year:
     (1) as last corrected by an assessing official;
     (2) as stipulated or settled by the taxpayer and the assessing official; or
     (3) as determined by the reviewing authority.
  (c) This section does not apply to an assessment if the assessment that is the subject of the review or appeal is based on:
     (1) structural improvements;
     (2) zoning; or
     (3) uses;
that were not considered in the assessment for the prior tax year.
  (d) This subsection applies to real property for which the gross assessed value of the real property was reduced by the assessing official or reviewing authority in an appeal conducted under IC 6-1.1-15. However, this subsection does not apply for an assessment date if the real property was valued using the income capitalization approach in the appeal. If the gross assessed value of real property for an assessment date that follows the latest assessment date that was the subject of an appeal described in this subsection is increased above the gross assessed value of the real property for the latest assessment date covered by the appeal, regardless of the amount of the increase, the county assessor or township assessor (if any) making the assessment has the burden of proving that the assessment is correct.
  (e) This section, as amended in the 2014 regular session of the Indiana general assembly, applies:
     (1) to all appeals or reviews pending on the effective date of the amendments made to
     this section in the 2014 regular session of the Indiana general assembly; and
     (2) to all appeals or reviews filed thereafter.

http://www.in.gov/ibtr/index.htm

Tax Court Finds "Tasting Cards" Not Purchased for Resale

Excerpts of the Tax Court Determination follow:

Tannins claims that its purchases of tasting cards are exempt from sales and use tax under Indiana Code § 6-2.5-5-8(b) because it resold them to its customers.2 (Pet’r Mem. Law Supp. Contentions at 6, 9.) As evidence, Tannins’ CEO testified that Tannins accounted for the cost of the cards as inventory in its cost of goods sold and that it included the cost of the cards in the sale price of the wine samples. (Trial Tr. at 8-9; Pet’r Evid., Ex. 5 ¶ 5.)

This Court has consistently explained that for a resale to exist, the buyer and seller must separately bargain for the property in exchange for the payment of consideration. See Brambles Indus., Inc. v. Indiana Dep’t of State Revenue, 892 N.E.2d 1287, 1290 (Ind. Tax Ct. 2008); Miles, Inc. v. Indiana Dep’t of State Revenue, 659 N.E.2d 1158, 1165 (Ind. Tax Ct. 1995); Greensburg Motel Assocs. v. Indiana Dep’t of State Revenue, 629 N.E.2d 1302, 1305-06 (Ind. Tax Ct. 1994); Indiana Bell, 627 N.E.2d at 1389; USAir, Inc. v. Indiana Dep’t of State Revenue, 542 N.E.2d 1033, 1035-36 (Ind. Tax Ct. 1989), aff’d, 582 N.E.2d 777 (Ind. 1991). Furthermore, this Court has long recognized that invoices, receipts, or other indicia that distinctly identify the items for which consideration was paid are persuasive evidence that a buyer and seller actually bargained for the exchange of those items. See Brambles, 892 N.E.2d at 1290; Miles, 659 N.E.2d at 1165; Indiana Bell, 627 N.E.2d at 1389; USAir, 542 N.E.2d at 1035-36. Here, Tannins did not provide its customers with receipts that separately identified a charge for the tasting cards. (See Trial Tr. at 28, 62.) Moreover, Tannins did not provide other evidence to show its customers separately bargained for the tasting cards in exchange for their payment.

Tannins asserts, however, that it is not required to show that its tasting cards were separately bargained for by its customers. (Trial Tr. at 17-19.) More specifically, Tannins claims that the purchase for resale exemption cases cited above do not apply here because they are factually distinct: the purchase (i.e., delivery) of the main object of the payment in each of those cases took place before the delivery of the secondary property at issue, while the delivery of the main object here, the wine samples, took place after the delivery of the tasting cards. (See Pet’r Reply Br. at 2-3 (citing USAir, 542 N.E.2d at 1034 (delivery of airline transportation preceded delivery of on-flight meals/snacks); Indiana Bell, 627 N.E.2d 1387 (delivery of telephone service preceded delivery of telephone directories); Greensburg Motel, 629 N.E.2d at 1304 (delivery of room preceded delivery of consumables); Miles, 659 N.E.2d at 1165 (delivery of Alka-Seltzer preceded delivery of discount coupon); Brambles, 892 N.E.2d at 1290 (delivery of products preceded delivery of pallets)).

This distinction lacks legal significance. The separately bargained-for requirement demonstrates that the exact item was actually resold, not transferred by the retailer for another purpose (e.g., as a means to access wine samples). Indeed, the separately bargained-for requirement is the standard against which a resale has been tested for decades, and Tannins did not present any legal authority or any rationale to persuade the Court that the timing of delivery changes this standard’s usefulness.

Tannins has also argued that it is not required under the purchase for resale exemption to show that the tasting cards were separately bargained for by its customers because the decision in Indiana Department of State Revenue v. AOL, LLC, 963 N.E.2d 498 (Ind. 2012) requires only a showing that a retail transaction has taken place. (See Trial Tr. at 20-35.) Tannins’ reliance on AOL for this proposition, however, is misplaced. The issue in AOL was whether the transaction was subject to the imposition of use tax in the first instance (i.e., did a taxable retail transaction occur?). See Indiana Dep’t of State Revenue v. AOL, LLC, 963 N.E.2d 498, 501, 504 (Ind. 2012). The issue here, on the other hand, is whether tasting cards obtained in an otherwise taxable retail transaction are exempt because they were resold. Moreover, the imposition statute construed in AOL and the purchase for resale exemption statute contain different requirements. Compare IND. CODE § 6-2.5-4-1(c)(1) (2009) (stating that when determining what constitutes selling at retail, it is immaterial whether property was transferred in the same form as when it was acquired) with I.C. § 6-2.5-5-8(b) (stating that when determining whether the purchase for resale exemption applies, property must be resold without changing its form). Therefore, the holding in AOL does nothing to remove, supplant, or diminish the value of the separately bargained-for test for purposes of the purchase for resale exemption in determining whether a resale has occurred. Accordingly, the Court finds the tasting cards were not resold within the meaning of Indiana Code § 6-2.5-5-8(b).

http://www.in.gov/judiciary/opinions/pdf/03311401mbw.pdf

Revenue Issues Ruling on Exemption for Property Used to Repair an Aircraft or Aircraft's Avionics System

DEPARTMENT OF STATE REVENUE

Revenue Ruling #2013-09ST January 31, 2014

ISSUES

Sales Tax – Exemption for property used to repair an aircraft or an aircraft's avionics system.

A company ("Taxpayer") is seeking an opinion as to whether it is eligible to utilize the sales tax exemption found in I.C. 6-2.5-5-46.

STATEMENT OF FACTS

Taxpayer provides the following facts regarding its request for a revenue ruling. Taxpayer, which is located in Indiana, is in the business of inspecting, repairing, and modifying aircrafts. Taxpayer requests a ruling as to whether or not the employment of individuals that are themselves FAA-certified brings Taxpayer as an entity within the scope of the sales tax exemption provided for by I.C. 6-2.5-5-46. Taxpayer further provides:

As an entity, Taxpayer itself is not a repair station certified by the Federal Aviation Administration (hereinafter "FAA"). However, Taxpayer employs one or more individuals who are themselves certified by the FAA.

DISCUSSION

I.C. 6-2.5-5-46 provides:

(a) Transactions involving tangible personal property (including materials, parts, equipment, and engines) are exempt from the state gross retail tax, if the property is:

(1) used;

(2) consumed; or

(3) installed;

in furtherance of, or in, the repair, maintenance, refurbishment, remodeling, or remanufacturing of an aircraft or an avionics system of an aircraft.

(b) The exemption provided by this section applies to a transaction only if the retail merchant, at the time of the transaction, possesses a valid repair station certificate issued by the Federal Aviation Administration under 14 CFR 145 et seq . or other applicable law or regulation. (Emphasis added.)

14 CFR 145 et seq. deals with, inter alia, the process through which a repair station must go to become certified by the FAA. In order to be certified by the FAA, an applicant repair station must endure a rather rigorous process, beginning by first submitting an application for certification and rating including an FAA-approved repair station manual, an FAA-approved quality control manual, a list of each make and model for which the station wishes to be certified to service, a comprehensive organizational chart, a description of the housing and facilities, and an FAA-approved training manual. 14 CFR sec. 145.51(a). Once all of that documentation has been provided, an FAA representative then visits the repair station for a comprehensive inspection of the equipment, personnel, technical data, housing, and facilities. 14 CFR sec. 145.51(b). Only once that inspection is passed is the certification and rating granted to the repair station in question. Clearly, the intent of this set of regulations is to ensure the overall quality of the entity as a whole prior to it receiving certification and grading.

It is no accident that the General Assembly, in providing the sales tax exemption herein under consideration, restricted the exemption to be available to only those retail merchants that hold a valid repair station certificate. The very language of the statute does not at all concern itself with whether or not individual employees are themselves certified. That an individual working for an aircraft repair station is certified does not at all speak to the overall quality of the repair station itself. Rather, the statute speaks in terms of whether the station itself is certified by the FAA. Because of the extensive process through which an entity must go to become certified by the FAA, restricting the statute's applicability to such entities by explicit reference to 14 CFR 145 et seq. seems to be an implicit statement by the General Assembly that only those stations that are, as an entity, complying with these rigorous standards can benefit from this exemption. Accordingly, because Taxpayer is not, as an entity, certified by the FAA pursuant to 14 CFR 145 or other applicable law or regulation, it may not benefit from the sales tax exemption found at I.C. 6-2.5-5-46.

RULING

It is not enough that an employee of an entity is certified by the FAA. I.C. 6-2.5-5-46 is, by its plain terms, a sales tax exemption available only to entities that are themselves certified by the FAA pursuant to 14 CFR 145 et seq. or other applicable law or regulation. Because Taxpayer in this instance is not so certified, it may not utilize the sales tax exemption found at I.C. 6-2.5-5-46.

http://www.in.gov/legislative/iac/20140226-IR-045140053NRA.xml.html