in-20250917-IR-045250464NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 04-20252133 Sales Tax For the 2020, 2021, and 2022 Tax Years HOLDING Business successfully established that the Department’s assessment for additional sales tax was overstated. ISSUE

I. Sales Tax – Gross Receipts.

Authority: IC 6-2.5-1-5; IC 6-2.5-2-1; IC 6-2.5-2-2; IC 6-8.1-5-1; IC 6-8.1-5-4 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); Scopelite v. Indiana Dept. of Local Gov’t Fin., 939 N.E.2d 1138 (Ind. Tax Ct. 2010); 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; Sales Tax Information Bulletin 11 (June 2019). Taxpayer argues that the Department’s assessment of Indiana sales tax was overstated because Taxpayer did not omit sales from its gross receipts as the audit suggests. STATEMENT OF FACTS Taxpayer is an Indiana restaurant which provides dining room and drive-through food services. The Indiana Department of Revenue (“Department”) conducted an audit of Taxpayer’s business records and documents. The audit resulted in assessments for additional sales tax for tax years 2020, 2021, and 2022. Taxpayer disagreed with the assessments and submitted a protest to that effect. An administrative hearing was held, and this Letter of Findings results. Letter of Findings 01-20242422 and Supplemental Letter of Findings 03-20242423 address the individual income tax and withholding tax protests, respectively, stemming from the audit. Additional facts will be provided as necessary.

I. Sales Tax – Gross Receipts.

DISCUSSION The Department determined that Taxpayer owed additional sales tax due to an increase in gross receipts pursuant to an audit. The audit also reviewed purchases made by Taxpayer for stone, paper towels, bath tissue, and other miscellaneous items which were purchased without the payment of sales tax. Taxpayer did not dispute the adjustments related to the miscellaneous items. This Letter of Findings is therefore limited to the issue of assessments of additional sales tax due to an adjustment of gross receipts for the 2020, 2021, and 2022 tax years. Taxpayer submitted a protest and in support of that protest provided bank statements, copies of checks, multiple Form 1099-K Payment Card and Third Party Network Transactions, a PPP Loan Application, and a local grant application. 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. Consequently, a taxpayer must provide documentation explaining and supporting that the Department’s position is wrong. See 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). 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). Non-cogent and poorly developed arguments are subject to waiver. Scopelite v. Indiana Dep’t of Local Gov’t Fin., 939 N.E.2d 1138, 1144-45 (Ind. Tax Ct. 2010). Indiana imposes a sales tax on "retail transactions made in Indiana." IC 6-2.5-2-1(a). As it relates to the sale of food, the Department’s Sales Tax Information Bulletin 11, 20190731-IR-045190364NRA (June 2019), provides that “sales tax applies to all sales of food and beverages that are packaged, prepared, sold as meals, or in a form which is normally consumed at or near the premises of the retail merchant whether or not such food and beverages are actually consumed on the premises.” IC 6-2.5-2-2 provides that “[t]he state gross retail use tax is measured by the gross retail income received by a retail merchant.” See also 45 IAC 2.2-6-8. Gross retail income is defined as “the total amount of consideration . . . for which tangible personal property is sold . . . ” IC 6-2.5-1-5. Indiana requires that all retail merchants subject to sales tax "keep books and records so that the department can determine the amount, if any, of the person's liability for that tax by reviewing those books and records." IC 6-8.1-5-4(a). If a merchant does not keep records, the Department can consider the lack of records "as it relates to the person's liability for a listed tax." IC 6-8.1-5-4(e). After an audit of Taxpayer’s business, the Department determined that “the gross receipts were significantly higher than the total sales reported on the ST-103s. Therefore[,] the total sales are being adjusted to equal the gross receipts . . . ” The increase in gross receipts stems from the Department’s withholding tax audit of Taxpayer. The withholding audit determined that “wages were paid in cash and these were not included in the gross receipts . . . ” Supplemental Letter of Findings 03-20242423, which is issued contemporaneously with this decision, determined that Taxpayer did not have employees during the tax year at issue. Thus, the adjustment to Taxpayer’s gross receipts to include wages paid to employees was incorrect. The Department will review the audit and adjust the gross receipts to remove wages paid to employees. FINDING Taxpayer’s protest is sustained to the extent described above. July 10, 2025 Replaces Finding Document: New