Excerpts of Revenue's Determination follow:
Taxpayer is a company doing business in Indiana. For the
period ending December 31, 1998, Taxpayer on March 15, 1999, sent in their 1998
withholding return with a $6,000 payment. However, on March 22, 2000,
Taxpayer's WH-3 was credited in the system. A $6,000 refund was issued on April
13, 2000, by the Indiana Department of Revenue ("Department") in error.
An amended return was filed by the Taxpayer in September of 2003. It stated
that $5,445 was due. A Demand Notice of Payment was sent to Taxpayer for the
amount owed. This bill was cancelled in September of 2003, when Taxpayer agreed
to pay the $5,445 that was owed, and that the payment would be sent by
September 15, 2003. It was apparently never paid. In March of 2012, a new
Notice of Proposed Assessment was issued to Taxpayer for this 1998 liability
when the Department applied a refund to another liability of Taxpayer.
...
Taxpayer argues that the Department does not have the legal
right to collect Taxpayer's withholding tax liability. The issue is whether the
Department's collection actions were proper...
IC § 6-8.1-5-1(b) provides that:
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 department. The amount of the assessment is considered a tax
payment not made by the due date and is subject to IC § 6-8.1-10 concerning the
imposition of penalties and interest. The department shall send the person a
notice of the proposed assessment through the United States mail.
IC § 6-8.1-5-2(a) provides that:
Except as otherwise provided in this section, the department
may not issue a proposed assessment under section 1 of this chapter more than
three (3) years after the latest of the date the return is filed, or either of
the following:
(1) The due date of the return.
(2) In the case of a return filed for the state gross retail
or use tax, the gasoline tax, the special fuel tax, the motor carrier fuel tax,
the oil inspection fee, or the petroleum severance tax, the end of the calendar
year which contains the taxable period for which the return is filed.
Taxpayer also cites to IC § 6-8.1-5-2(g), which provides
that:
If any part of a listed tax has been erroneously refunded by
the department, the erroneous refund may be recovered through the assessment
procedures established in this chapter. An assessment issued for an erroneous
refund must be issued:
(1) within two (2) years after making the refund; or
(2) within five (5) years after making the refund if the
refund was induced by fraud or misrepresentation.
Taxpayer argues that it has already been over three years in
the case of the due date of the return or the date of the return being filed
per IC § 6-8.1-5-2(a), and over two years since the refund was issued in error
per IC § 6-8.1-5-2 (g). Therefore, the Taxpayer argues, the Department no
longer has the right to issue a Notice of Proposed Assessment to collect the
$5,445.
However, IC § 6-8.1-8-2 provides in relevant part:
(a) Except as provided in IC § 6-8.1-5-3 [relating to
jeopardy assessments], the department must issue a demand notice for the
payment of a tax and any interest or penalties accrued on the tax, if a person
files a tax return without including full payment of the tax or if the
department, after ruling on a protest, finds that a person owes the tax before
the department issues a tax warrant. The demand notice must state the following:
(1) That the person has ten (10) days from the date the
department mails the notice to either pay the amount demanded or show
reasonable cause for not paying the amount demanded.
(2) The statutory authority of the department for the
issuance of a tax warrant.
(3) The earliest date on which a tax warrant may be filed
and recorded.
(4) The statutory authority for the department to levy
against a person's property that is held by a financial institution.
(5) The remedies available to the taxpayer to prevent the
filing and recording of the judgment.
If the department files a tax warrant in more than one (1)
county, the department is not required to issue more than one (1) demand
notice.
(b) If the person does not pay the amount demanded or show
reasonable cause for not paying the amount demanded within the ten (10) day
period, the department may issue a tax warrant for the amount of the tax,
interest, penalties, collection fee, sheriff's costs, clerk's costs, and fees
established under section 4(b) of this chapter when applicable. When the
department issues a tax warrant, a collection fee of ten percent (10 [percent])
of the unpaid tax is added to the total amount due.
The procedures relating to demand notices apply when a
taxpayer files a return reporting a liability but fails to pay the full
liability OR when a taxpayer has unsuccessfully protested a proposed
assessment. The Department issued a Demand Notice on September 8, 2003, which
was subsequently cancelled.
With regard to the Department issuing demand notices and
filing tax warrants after the taxpayer fails to pay taxes after the issuance of
a demand notice, Indiana statutes do not provide a specific statute of
limitations such as provided in IC § 6-8.1-5-2. In such an instance, the
so-called residual statute of limitations under IC § 34-11-1-2 controls and
provides that:
(a) A cause of action that:
(1) arises on or after September 1, 1982; and
(2) is not limited by any other statute; must be brought
within ten (10) years.
The ten-year period is subject to tolling, i.e., the
"clock stops," for certain actions by a taxpayer, such as moving out
of state or concealment.
The Department maintains that its notice or determination
that a tax liability is unpaid represents a cause of action relating to unpaid
taxes. An unpaid tax liability is the prerequisite for any judgment to enforce
the payment of tax.
The cause of action arises the first day the Department
could issue a demand notice. At the demand notice stage–however it arises–the
unpaid tax liability has become settled. The bringing of the "cause of
action" is the entry of judgment regarding a tax warrant. Thus, the
Department has ten years from the first date a demand notice could be issued to
file a tax warrant.
Taxpayer owed the $5,445, and yet has not paid this tax.
Taxpayer has not shown why the Department does not have the right to collect
this money, and therefore Taxpayer has not met the burden of proof set out in
IC § 6-8.1-5-1.
