in-20251126-IR-045250672NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 04-20251416 Sales and Use Tax For The Years 2021, 2022, and 2023 HOLDING The Department agreed that Company met its burden of establishing that the negligence penalty should be abated. ISSUE

I. Tax Administration – Penalty and Interest.

Authority: IC 6-8.1-5-1; IC 6-8.1-10-2.1; 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); Dept. of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579 (Ind. 2014); 45 IAC 15-11-2. Taxpayer protests the assessment of penalties and interest. STATEMENT OF FACTS Taxpayer is an Indiana company. The Indiana Department of Revenue (“Department”) conducted an audit of tax years 2021, 2022, and 2023. As a result of the audit, the Department assessed additional use tax for each of the three tax years. The assessments also included associated penalties and interest. Taxpayer agreed with the majority of adjustments from the audit, including the amount of use tax assessed. Taxpayer paid the assessed use tax and only protests the assessment of penalties and interest related to each tax year. Taxpayer requested resolution without a hearing. This Letter of Findings results. Additional facts will be provided as necessary.

I. Tax Administration – Penalty and Interest.

DISCUSSION In the course of creating its assessment, the Department imposed negligence penalty and interest. Taxpayer protests the imposition of both penalty and interest, stating that he acted in a reasonable manner in attempting to comply with his tax duties. 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 DOR’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 6-8.1-10-2.1(a)(3) requires the Department to impose a negligence penalty if a taxpayer incurs a tax deficiency after an examination by the Department. The penalty is ten percent of the amount of the deficiency as determined by the Department. IC 6-8.1-10-2.1(b)(4). However, if a taxpayer can show that failure to pay the deficiency determined by the Department was due to reasonable cause and not due to willful neglect, the penalty can be waived by the Department. IC 6-8.1-10-2.1(d). Reasonable cause is defined by 45 IAC 15-11-2(b) as: IC 6-8.1-10-2.1(a) stipulates that the Department must impose interest on unpaid taxes if a taxpayer “incurs a deficiency upon a determination by the department.” This statute also prohibits the waiver of any accrued interest on unpaid taxes by the Department. Taxpayer explained the events surrounding the audit and resulting assessments. During the audit period, Taxpayer made general purchases of mechanical parts and didn’t pay sales tax or remit use tax on these purchases. These parts were intended for taxpayer’s personal use and thus are not exempt from sales or use tax. Taxpayer also purchased “fixed assets” such as power trowels which were then stored, used, and consumed in Indiana. These items were purchased in Kentucky and for which Kentucky sales tax was correctly paid. However, because the Kentucky sales tax rate is less than the Indiana sales tax rate, Taxpayer owed the difference in use tax between the two rates. Under IC 6-2.5-3-5, Taxpayer is entitled to credit against the use tax equal to the amount of sales tax paid in another state at the time of the transaction and would only need to pay the difference. When these discrepancies were discovered during the audit review, Taxpayer made a concerted effort to correct this error and paid the additional tax. Here, Taxpayer erred in originally determining its use tax liability. However, Taxpayer’s actions do not constitute “willful neglect” as outlined in IC 6-8.1-10-2.1(d). Taxpayer did not act negligently as defined in 45 IAC 15-11-2(b). Taxpayer has already paid the use tax assessed by the Department and has a history of compliance with the Department. The Department agrees that the penalties for the tax years of 2021, 2022, and 2023 should be waived. The interest assessed by the Department cannot be waived in these circumstances under IC 6-8.1-10(e). FINDING Taxpayer’s protest is sustained in part and denied in part. June 25, 2025 Replaces Finding Document: New