in-20260826-IR-045260295NRA: LETTERS OF FINDINGS NUMBERS: 04-20251232; 10-20251234

DEPARTMENT OF STATE REVENUE LETTERS OF FINDINGS NUMBERS: 04-20251232; 10-20251234 Sales Tax & Food and Beverage Tax For Tax Years 2021 & 2022 HOLDING Indiana restaurant could not prove the Department's assessments were incorrect. ISSUES

II. Food & Beverage Taxes - Assessment.

Authority: IC 6-8.1-5-1; IC 6-9-12-7; IC 6-9-20-4; IC 6-9-35-8; IC 6-9-48-5; Dept. of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579 (Ind. 2014); Indiana Dept. of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463 (Ind. 2012); Lafayette Square Amoco, Inc. v. Indiana Dept. of State Revenue, 867 N.E.2d 289 (Ind. Tax Ct. 2007); 45 IAC 2.2-6-8. Taxpayer protests the imposition of food and beverage tax. STATEMENT OF FACTS Taxpayer operates a restaurant in Indiana. The Indiana Department of Revenue (“Department”) conducted an audit of Taxpayer's sales tax returns for tax years 2021 and 2022 and determined that Taxpayer had underreported taxable sales and food and beverage tax. Taxpayer protested the assessment of additional sales tax and food and beverage tax. An administrative hearing was held. This Letter of Findings results. Additional facts will be provided as necessary.

I. Sales Tax - Burden of Proof.

DISCUSSION Taxpayer operates a restaurant in Indiana. For tax years 2021 and 2022, the Department conducted an audit of Taxpayer's sales tax returns and determined that Taxpayer had underreported taxable sales and issued Notices of Proposed Assessment for additional sales tax. Taxpayer protested claiming that the Department's assessment is overstated. As a threshold issue, it is the taxpayer's responsibility to establish that the existing tax assessment is incorrect. A proposed assessment is prima facie evidence that the Department's claim for the unpaid tax is valid. IC 6-8.1-5-1(c). The burden of proving that the proposed assessment is wrong rests with the person against whom the proposed assessment is made. Id.; See e.g., Indiana Dept. of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463, 466 (Ind. 2012); Lafayette Square Amoco, Inc. v. Indiana Dept. of State Revenue, 867 N.E.2d 289, 292 (Ind. Tax Ct. 2007). An assessment, including taxpayer's penalty assessment, is therefore presumed valid. A taxpayer must provide documentation explaining and supporting that the Department's position is wrong. Additionally, “[W]hen [courts] examine a statute that an agency is 'charged with enforcing . . . [courts] defer to the agency's reasonable interpretation of [the] statute even over an equally reasonable interpretation by another party.'” Dept. of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579, 583 (Ind. 2014). IC 6-2.5-2-1 provides: (Emphasis added.) IC 6-8.1-5-1 states: Pursuant to Indiana statute, taxpayers are responsible for collecting and maintaining documentation. “Every person subject to a listed tax must keep books and records so that the department can determine the amount, if any, of the person's liability for tax by reviewing those books and records.” IC 6-8.1-5-4(a). In addition, IC 6-8.1-5-4(c) provides that, “A person must allow inspection of the books and records and returns by the department or its authorized agents at all reasonable times.” The Department determined that Taxpayer had underreported sales due to discrepancies between Taxpayer's bank deposits and reported cash sales. Payment Card and Third-Party Network Transactions Form 1099-Ks (“1099-K”) reflected higher sales than reported. Additionally, Taxpayer reported business expenses which were not ordinary to operating a restaurant. Taxpayer provided additional information during the protest period. Taxpayer acknowledged that it did not have a Point of Sales System (“POS”) until 2024. Taxpayer was unable to provide documentation explaining why the 1099-Ks reflected higher credit card sales than what was reported on the monthly sales tax returns. There were also documentation issues regarding tips and related reporting as well as how excluded sales were reported on Taxpayer's returns. Due to the continued discrepances, Taxpayer has failed to meet its burden of proving the Department's assessment was incorrect, as established under IC 6-8.1-5-1(c). Thus, Taxpayer's protest is denied. FINDING Taxpayer's protest is denied.

II. Food and Beverage Tax - Assessment.

Taxpayer operates a restaurant in Indiana. For tax years 2021 and 2022, the Department conducted an audit of Taxpayer's sales tax returns and food and beverage tax and determined that Taxpayer had underreported taxable sales and therefore, also underreported food and beverage tax (“FAB”) and issued Notices of Proposed Assessment for additional FAB tax. Taxpayer protested claiming that the Department's assessment is overstated. This Letter of Findings results. Additional facts will be provided as necessary. As a threshold issue, it is the taxpayer's responsibility to establish that the existing tax assessment is incorrect. A proposed assessment is prima facie evidence that the Department's claim for the unpaid tax is valid. IC 6-8.1-5-1(c). The burden of proving that the proposed assessment is wrong rests with the person against whom the proposed assessment is made. Id.; See e.g., Indiana Dept. of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463, 466 (Ind. 2012); Lafayette Square Amoco, Inc. v. Indiana Dept. of State Revenue, 867 N.E.2d 289, 292 (Ind. Tax Ct. 2007). An assessment, including taxpayer's penalty assessment, is therefore presumed valid. A taxpayer must provide documentation explaining and supporting that the Department's position is wrong. Additionally, “[W]hen [courts] examine a statute that an agency is 'charged with enforcing . . . [courts] defer to the agency's reasonable interpretation of [the] statute even over an equally reasonable interpretation by another party.'” Dept. of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579, 583 (Ind. 2014). As previously discussed, the Department's audit determined Taxpayer underreported sales tax. As a result, sales increased, which in turn increased FAB tax due because FAB tax is calculated based on reported sales figures. Taxpayer did not provide documentation to support its calculations of reported sales tax and corresponding FAB tax during the audit. Due to the lack of documentation, Taxpayer has not met the burden of proving the proposed assessment wrong, as required under IC 6-8.1-5-1(c), therefore Taxpayer's protest is denied. FINDING Taxpayer's food and beverage protest is denied. SUMMARY Taxpayer's protests regarding the assessment of additional sales tax and food and beverage tax are denied. June 5, 2026 Replaces Finding Document: New