Taxpayer sells printed materials to its customers. Taxpayer failed to collect sales tax on some of the transactions. The audit assessed tax. Taxpayer disagrees stating that some of the transactions are exempt from sales tax.
Taxpayer states that certain of the transactions are exempt pursuant to IC § 6-2.5-5-24(a)(2) which states in relevant part:
(a) Transactions are exempt from the state gross retail tax to the extent that the gross retail income from those transactions is derived from gross receipts that are:
(1) derived from sales to the United States government, to the extent the state is prohibited by the Constitution of the United States from taxing that gross income;
(2) derived from commercial printing that results in printed materials, excluding the business of photocopying, that are shipped, mailed, or delivered outside Indiana; (Emphasis added).
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Taxpayer has provided copies of "job tickets" which purport to establish that certain of the transactions included in the audit report resulted in the delivery of printed materials directly to out-of-state locations as specified in IC § 6-2.5-5-24(a)(2). To the extent that the "job tickets" correspond to the invoices in which Taxpayer was assessed sales tax on the purchase of printed materials, Taxpayer's protest is sustained.
The Audit Division is requested to review the newly presented "job tickets" and to make whatever adjustments to the audit assessment as warranted.
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The audit found that Taxpayer failed to collect sales tax on "shipping charges and delivery/postage charges" for non-exempt customers.
Taxpayer disagrees stating that it works through a third-party fulfillment service which arranges for the printed materials to be packaged and shipped, that it does not own or use a postage meter, and that Taxpayer packages and ships the printed materials as a convenience for its Indiana customers.
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IC § 6-2.5-1-5 classifies as taxable "gross retail income" the entire amount a retail merchant charges for "delivery and installation." IC § 6-2.5-1-5 specifically states that the vendor includes all costs associated with "delivery and installation" including "shipping, postage, handling, crating, and packing."
Taxpayer charges its customers to deliver printed materials; the delivery charges are subject to sales tax and the law does not permit a deduction for the cost – separately stated or not – of the postage. Taxpayer has not met its burden under IC § 6-8.1-5-1(c) of establishing that the proposed assessment is wrong.
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Taxpayer maintains that the Department made a transcription error recording the amount of taxable shipping charges on an invoice made out to a local bank. Taxpayer cites to an invoice 11031 which the audit report on page 13 indicates contains a shipping cost of $1,314. Taxpayer provided a copy of original invoice number 11031 which indicates that shipping costs were $13.17.
Taxpayer is correct. On its face, the audit report entry appears incorrect. Taxpayer has met its burden under IC § 6-8.1-5-1(c) sufficient to request that the audit division review the specific entry and make whatever adjustment is deems appropriate.
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During the course of the administrative hearing, Taxpayer's representative explained that Taxpayer could provide exemption certificates for some of its customers. Taxpayer asked that the Department adjust the audit assessment to reflect the fact that it was not required to collect sales tax from the customers represented by the exemption certificates.
Taxpayer is correct that under certain circumstances, a retail merchant such as Taxpayer is not required to collect sales tax. Under IC § 6-2.5-8-8(a), "A person... who makes a purchase in a transaction which is exempt from the state gross retail tax and use taxes, may issue an exemption certificate to the seller instead of paying the tax." Once the purchaser provides the exemption certificate, the retail merchant is under no obligation to collect sales tax on the transaction. IC § 6-2.5-8-8(a) states that, "A seller accepting a proper exemption certificate under this section has no duty to collect or remit the state gross retail or use tax on that purchase."
Taxpayer has belatedly provided exemption certificates and other documentation purportedly relevant to some of the challenged assessments. However, the certificates and documentation are not contemporaneous to the transactions at issue. For example, Taxpayer supplied a Form ST-105 dated November 2012; however, the transactions at issues occurred prior to November 2012.
Taxpayer has not met its burden under IC § 6-8.1-5-1(c) of demonstrating that the original sales tax assessments were incorrect.
