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).
