in-20250827-IR-045250405NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE FINAL ODER DENYING REFUND: 04-20241007 Sales Tax and County Innkeeper’s Tax For the Period January 1, 2022 – June 30, 2022 HOLDING Business failed to demonstrate that it was entitled to the refund of Indiana sales tax and county innkeeper’s tax. ISSUE

I. Sales Tax and County Innkeeper’s Tax – Refund.

Authority: IC 6-2.5-2-1; IC 6-2.5-4-4; IC 6-2.5-9-3; IC 6-8.1-5-4; IC 6-8.1-9-1; IC 6-9-8-2; IC 6-9-8-4; Indiana Dep’t of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579 (Ind. 2014); Scopelite v. Indiana Dep’t of Local Gov’t Fin., 939 N.E.2d 1138 (Ind. Tax Ct. 2010); Indiana Dep’t of State Revenue, Sales Tax Division v. RCA Corp., 310 N.E.2d 96 (Ind. Ct. App. 1974); 45 IAC 2.2-2-1; 45 IAC 2.2-4-8; 45 IAC 15-9-2; Sales Tax Information Bulletin 41 (June 2019); Sales Tax Information Bulletin 41 (July 2022). Taxpayer protests the refund denial of sales tax and county innkeeper’s tax. STATEMENT OF FACTS Taxpayer is a company doing business in Indiana and outside of Indiana. In May 2023, Taxpayer filed a claim and requested a $145,973.39 refund of sales tax and Marion County innkeeper’s tax. The Indiana Department of Revenue (“Department”) reviewed and denied Taxpayer’s request. Taxpayer protested the refund denial and requested that the Department make the final decision without an administrative hearing. This final determination ensues based on the documentation submitted and information available within the protest file.

I. Sales Tax and County Innkeeper’s Tax – Refund.

DISCUSSION Upon an initial review, the Department denied Taxpayer’s refund request of sales tax and county innkeeper’s tax. Taxpayer disagreed, claiming that it was entitled to the full refund because “it did in fact rent rooms for more than 30 continuous days and an agreement with each lodging provider is not required.” The issue is whether Taxpayer’s documents demonstrated that it was entitled to the refund and the Department erred in denying its refund claim. IC 6-8.1-9-1(a) affords a taxpayer a right to file a claim for refund if the taxpayer determines that it has paid more tax than the amount is legally due for a particular taxable period. In general, the Department “has no legal method of generating a claim for refund. A claim for refund can only be initiated pursuant to IC [§] 6-8.1-9-1.” 45 IAC 15-9-2(b). To obtain a refund, the person must file the claim with the Department “within three (3) years after the later of . . . [t]he due date of the return [or the] date of payment.” IC 6-8.1-9-1(a). The claim must include certain verifiable information such as the amount of the refund to which the person is entitled, the reasons why the person is entitled to the refund, the tax period for which the overpayment is claimed, and the year and date of the overpayment. 45 IAC 15-9-2(d). The claim for refund is required to be filed on the form prescribed by the Department. Id. Further, 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 department can determine the amount, if any, of the person’s liability for that tax by reviewing those books and records . . . including invoices, register tapes, receipts, and canceled checks.” The taxpayer is required to provide documentation to explain and support its challenge to the Department’s denial. When an agency is charged with enforcing a statute, such as the Department here, the courts defer to the agency’s reasonable interpretation of that statute “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). 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). Indiana imposes an excise tax called “the state gross retail tax” (“sales tax”) on retail transactions made in Indiana, which include transactions of renting or furnishing rooms, lodgings or other accommodations. IC 6-2.5-2-1(a); IC 6-2.5-4-4; 45 IAC 2.2-2-1. In addition, pursuant to IC 6-9-8-2, a county innkeeper’s tax is also imposed on such transactions at the county level. These taxes are borne by the person or organization who uses the accommodation. 45 IAC 2.2-4-8. The person who is engaged in renting or furnishing rooms, lodgings or other accommodations is a retail merchant and an agent for the state. As such, the person is required to collect the taxes on the gross receipts from such transactions. See IC 6-2.5-2-1(b); IC 6-2.5-9-3; 45 IAC 2.2-4-8. The person or organization who uses the accommodation may be able to claim an exemption or exception, such as IC 6-9-8-4, concerning such retail transaction. An exemption or exception, however, is a matter of legislative grace. A statute which provides such exemption or exception is strictly construed against the taxpayer. Indiana Dep’t of State Revenue, Sales Tax Division v. RCA Corp., 310 N.E.2d 96, 97 (Ind. Ct. App. 1974). “[W]here such an exemption is claimed, the party claiming the same must show a case, by sufficient evidence, which is clearly within the exact letter of the law.” Id. at 101 (internal citations omitted). Further, Sales Tax Information Bulletin 41 (June 2019), 20190731 Ind. Reg. 045190367NRA, provides additional guidance and applies to the tax period in question, in relevant part: The Department conducted an initial review of Taxpayer’s claim and supporting documentation. The Department determined that Taxpayer was not entitled to the refund and explained in part: Taxpayer protested the refund denial. Referencing Sales Tax Information Bulletin 41, Taxpayer in this case argued that it was “entitled to the refund, because there is an agreement in place with the hotels.” Taxpayer offered several third-party rate agreements, three (3) sample invoices, and its calculation of refund to support its protest in addition to Sales Tax Information Bulletin 41. Alternatively, Taxpayer argued that it was “entitled to the refund because it did in fact rent rooms for more than 30 continuous days and an agreement with each lodging provider is not required by statute.” As mentioned, during the initial review, the Department found that (i) Taxpayer did not have any lease agreements to rent rooms on a continuous basis with any of the hotels and (ii) no individual room was rented for 30 or more days. Taxpayer, to the contrary, argued that it was entitled to the full refund because “there is an agreement in place with the hotels” and “it did in fact rent rooms for more than 30 continuous days and an agreement with each lodging provider is not required by statute.” Upon review, however, Taxpayer is mistaken. First, Taxpayer’s supporting documents – namely, the rate agreements – were signed by third-party service providers, not Taxpayer. In other words, Taxpayer did not enter the agreements with these hotels to lease or rent these rooms to be used by its employees. Taxpayer provided no contracts or agreements which were signed by Taxpayer to substantiate that it rented or leased rooms on a continuous basis with any of the hotels. Rather, the third-party service provider entered into contractual arrangements with the hotels and were compensated for the services performed. Second, these rate agreements speak for themselves. They were not leases or rental agreements. Such rate agreements oblige hotels to block (or guarantee) some rooms with specified accommodation for a period of time at a certain rate plus commission. If the hotels were not able to meet the obligation, they were required to purchase rooms from other hotels approved by the third-party service provider pursuant to the agreements. Any cancellation with a qualified notice to hotels before 6:00PM each day were permitted with no additional costs under such rate agreements. Even if, for the sake of argument, Taxpayer was not required to sign any lease or rental agreements to rent a specified number of rooms on a continuous basis with any of the hotels, Taxpayer’s supporting documents failed to substantiate that it actually rented rooms for more than thirty (30) continuous days. For example, among Taxpayer’s three sample invoices, one invoice demonstrated that the guest arrived on June 30, 2022, and departed on July 3, 2022. The guest stayed in the hotel for a total of three days. Similarly, the remaining two (2) sample invoices showed the guests arrived on June 30, 2022, and departed on July 1, 2022. Both guests stayed only one day. Subsequently, Taxpayer submitted additional supporting documentation, including Excel worksheets and the invoices to support its refund calculation. A review of the supporting documentation, however, demonstrated that its employees stayed at the hotels in question from one day up to 26 days. In other words, none of the documents substantiated that Taxpayer actually rented rooms for more than thirty (30) continuous days. Taxpayer’s reliance of its supporting documents thus was misplaced. To conclude, given the totality of the circumstances, in the absence of other verifiable supporting documentation, the Department is not able to agree that Taxpayer was entitled to a full refund. Under IC 6-2.5-2-1(a), IC 6-2.5-4-4, 45 IAC 2.2-2-1, and IC 6-9-8-2, the Department properly denied the claim for refund. FINDING Taxpayer’s protest is respectfully denied. June 9, 2025 Replaces Finding Document: New