Retail Merchant is a sole proprietor who owns and operates a used vehicle dealership in Indiana. The Indiana Department of Revenue ("Department") conducted a sales and use tax audit of Retail Merchant for the years 2009 through 2011. During the course of the audit, the Department found that Retail Merchant had sold several vehicles without collecting sales tax and without retaining exemption certificates from the purchasers. The Department's audit therefore found these transactions to be subject to Indiana sales tax and assessed additional sales tax and interest for the periods at issue. Retail Merchant protested the inclusion of the sale of a single RV claiming that it was sold to a non-resident who took the RV out of state within 30 days and therefore the transaction was exempt.
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The relevant regulation is 45 IAC 2.2-8-12 (b) which states, "Retail merchants are required to collect sales and use tax on each sale which constitutes a retail transaction unless the merchant can establish that the item purchased will be used for an exempt purpose."
Therefore, Retail Merchant has a duty to collect and remit sales tax on its sales of tangible personal property. When Retail Merchant fails to collect and hold the taxes in trust for the state, Retail Merchant is personally liable for the sales tax, interest, and penalties due to the state for those sales.
Accordingly, it is Retail Merchant's responsibility to retain the documentation that supports the amounts it used to determine tax owed. During the audit of Retail Merchant's sales, it was determined that Retail Merchant had not properly maintained exemption certificates. The Department's audit provided Retail Merchant with Form AD-14, a notice of non-compliance. The Department also provided Retail Merchant with several Forms AD-70, which are special exemption forms filled out by purchasers subsequent to the sales. Retail Merchant was able to have several AD-70s filled out by customers for certain sales and therefore, with exemption substantiated, those sales were removed from the audit assessment. The remaining sales that were not documented remained in the assessment, including the protested sale of the subject RV.
Retail Merchant claims that the RV was sold to a non-resident who took the RV out of Indiana within 30 days of the purchase of the RV. Retail Merchant is presumed to reference IC § 6-2.5-5-39. IC § 6-2.5-5-39 provides an exemption from sales tax for cargo trailers and recreational vehicles registered for use outside of Indiana.
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After the audit, during the course of the protest, Retail Merchant presented a Form ST-137RV – "Affidavit of Exemption by a Nonresident on the Purchase of Recreational Vehicle/Cargo Trailer" – signed by both the purchaser and Retail Merchant as evidence that the sale of the RV was exempt from sales tax. Retail Merchant relies on this affidavit of exemption to relieve it of its duty to have collected and remitted sales tax on the sale of the RV at issue.
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The affidavit of exemption presented by Retail Merchant, previously unavailable during the audit, meets Retail Merchant's burden under IC § 6-8.1-5-1(c) and IC § 6-2.5-8-8(a). The sales tax assessed to Retail Merchant on the sale of the RV should be removed from the proposed assessment.
