in-20250827-IR-045250415NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 04-20251193 Sales Tax For the 2020–2023 Tax Years HOLDING LLC successfully showed that the Department’s assessment was incorrect. ISSUE

I. Sales Tax – Documentation.

Authority: IC 6-2.5-1-2; IC 6-2.5-2-1; IC 6-2.5-4-1; IC 6-2.5-5-33; IC 6-2.5-5-34; IC 6-8.1-5-1; IC 6-8.1-5-4; Dep’t of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579 (Ind. 2014); Indiana Dep’t of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463 (Ind. 2012); Wendt LLP v. Indiana Dep’t of State Revenue, 977 N.E.2d 480 (Ind. Tax Ct. 2012); Scopelite v. Indiana Dep’t of Local Gov't Fin., 939 N.E.2d 1138 (Ind. Tax Ct. 2010); Lafayette Square Amoco, Inc. v. Indiana Dep’t of State Revenue, 867 N.E.2d 289 (Ind. Tax Ct. 2007). Taxpayer protests the Department’s assessment of additional Indiana sales tax. STATEMENT OF FACTS Taxpayer is an Indiana limited liability company (“LLC”) that operates a retail store in Indiana. The Indiana Department of Revenue (“Department”) conducted a sales tax audit of Taxpayer. During the audit, the Department requested documentation from Taxpayer to support Taxpayer’s claimed exempt sales. Taxpayer did not provide this documentation, so the Department conducted the audit using the best information available to it. The Department determined at audit that Taxpayer had overreported its exempt sales, so the Department issued a proposed assessment for additional sales tax. Taxpayer timely protested, and the Department held an administrative hearing. This Letter of Findings results. Additional facts will be provided as necessary.

I. Sales Tax – Documentation.

DISCUSSION Taxpayer argues that the Department assessed sales tax on part of its sales which were to customers that were exempt from sales tax and, as a result, the Department’s assessment was too high. The Department performed a “best information available” audit under IC 6-8.1-5-1(b) because Taxpayer did not provide sufficient documentation during the audit. During the protest process, Taxpayer provided documentation that it did not provide during the audit process, specifically a reconciliation of its sales of lottery tickets and purchases paid for using benefits from the Supplemental Nutrition Assistance Program (“SNAP”). 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 Dep’t of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463, 466 (Ind. 2012) and Lafayette Square Amoco, Inc. v. Indiana Dep’t of State Revenue, 867 N.E.2d 289, 292 (Ind. Tax Ct. 2007). Where a taxpayer is challenging the Department’s final determination, the taxpayer is required to provide documentation explaining and supporting its challenge. Poorly developed and non-cogent arguments are subject to waiver. Scopelite v. Indiana Dep't of Local Gov't Fin., 939 N.E.2d 1138, 1145 (Ind. Tax Ct. 2010); Wendt LLP v. Indiana Dep't of State Revenue, 977 N.E.2d 480, 486 n.9 (Ind. Tax Ct. 2012). Additionally, “when [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.’” Indiana Dep’t of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579, 583 (Ind. 2014). Thus, all interpretations of Indiana tax law contained within this decision are entitled to deference. Indiana imposes a tax called the “state gross retail tax” or “sales tax” on “retail transactions made in Indiana.” IC 6-2.5-2-1(a). A “retail transaction” occurs when a person or business makes a “sale at retail.” IC 6-2.5-1-2. A “sale at retail” occurs when, “in the ordinary course of . . . [their] regularly conducted trade or business,” a person or business buys property “for the purpose of resale” and transfers it to someone else “for consideration.” IC 6-2.5-4-1(b). “Sales of lottery tickets . . . are exempt from the state gross retail tax.” IC 6-2.5-5-34. Purchases of tangible personal property paid for using SNAP benefits are also exempt from sales tax. IC 6-2.5-5-33. IC 6-8.1-5-4(a) requires that “[e]very person subject to a listed tax must keep books and records so that the [D]epartment can determine the amount, if any, of the person’s liability for that tax by reviewing those books and records. The records [] include all source documents necessary to determine the tax, including invoices, register tapes, receipts, and canceled checks.” The person also “must allow inspection of the books and records and returns by the [D]epartment or its authorized agents at all reasonable times.” IC 6-8.1-5-4(c). When the person subject to the listed tax fails to keep books and records, under IC 6-8.1-5-1(b), the Department “shall make a proposed assessment of the amount of the unpaid tax on the basis of the best information available to the [D]epartment” if the Department “reasonably believes that a person has not reported the proper amount of tax due.” During the audit, the Department requested documentation substantiating Taxpayer’s exempt sales numbers, and Taxpayer failed to provide those documents. Taxpayer has now provided documents, specifically reconciliations from the Hoosier Lottery and bank statements reflecting payments from the SNAP payment processor, supporting its claimed exemption figures. Taxpayer’s representative stated at the hearing that Taxpayer had understated its exempt sales on its original sales tax returns for the 2020, 2021, and 2023 tax years. The Department agrees with Taxpayer’s representative — Taxpayer underreported its exempt sales on its original sales tax returns by $18,306.33 in 2020, by $180,060.62 in 2021, and by $161,151.22 in 2023. However, Taxpayer’s representative also stated that Taxpayer overreported its exempt sales on its original sales tax returns by $47,390.68 in 2022, and the Department agrees with this as well. The Department will review the newly-supplied documentation and will adjust the calculations of tax due and tax remitted, in accordance with IC 6-2.5-5-33 and IC 6-2.5-5-34. The Department will recalculate the amount of the assessment to reflect the adjusted sales tax results. FINDING Taxpayer’s protest is sustained to the extent that the Department will increase Taxpayer’s exempt sales for the 2020, 2021, and 2023 tax years and will decrease Taxpayer’s exempt sales for the 2022 tax years as described above. The Department will conduct a supplemental review to determine the remaining amount of the assessment, if any. June 6, 2025 Replaces Finding Document: New