in-20250730-IR-045250363NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 02-20231259 Corporate Income Tax For the Years 2018, 2019, 2020 HOLDING Business failed to establish that it was not responsible to remit taxes owed. ISSUE

I. Corporate Income Tax – Imposition.

Authority: IC 6-3-4-13; IC 6-8.1-5-1; Dept. of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579; Indiana Dept. of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463; Lafayette Square Amoco, Inc. v. Indiana Dept. of State Revenue, 867 N.E.2d 289; 45 IAC 3.1-1-66; 45 IAC 3.1-1-67. Taxpayer argues that it was not required to withhold and remit corporate income tax. STATEMENT OF FACTS Taxpayer is a franchise business that operates combined convenience stores and gas stations in Indiana. The Department of Revenue (“Department”) conducted an audit of sales, corporate income, and withholding tax for Taxpayer for the years 2018, 2019, and 2020. Taxpayer sold fuel from metered pumps and also made retail sales from the convenience store, including typical items such as cigarettes and other tobacco products, sunglasses, lottery tickets, candy, gum, and grocery items. The Department’s audit resulted in the assessment of additional sales, corporate income, and withholding tax, penalty and interest. Taxpayer protested the assessment of corporate income tax. An administrative hearing was held on Taxpayer’s protest and this Letter of Findings follows. Additional facts will be presented as needed.

I. Corporate Income Tax – Imposition.

DISCUSSION Taxpayer is a franchise and stated that it has a contract with the Parent Company, which states that Parent Company is in charge of accounting and payments, purchases of fuel, taxes, and licenses. 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 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) and Lafayette Square Amoco, Inc. v. Indiana Dept. of State Revenue, 867 N.E.2d 289, 292 (Ind. Tax Ct. 2007). Consequently, a taxpayer is required to provide documentation explaining and supporting his or her challenge that the Department’s position is wrong. Further, “[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). Thus, all interpretations of Indiana tax law contained within this decision shall be entitled to deference. As stated in 45 IAC 3.1-1-66 and 45 IAC 3.1-1-67, Subchapter S corporations are generally not subject to tax, however annual returns must be filed by any Subchapter S corporation incorporated in Indiana or having income from Indiana sources. Subchapter S income is passed through to its shareholders, which are subject to tax on their distributive shares of the Subchapter S corporation income. The audit report states, “[T]axpayer had one nonresident shareholder and failed to file a composite tax return as well as pay the withholding tax due for the nonresident shareholder for calendar year 2019.” IC 6-3-4-13(j) requires S Corporations with nonresident shareholders to file a composite return and report the amount withheld. Taxpayer argued that the gas sales were never controlled by Taxpayer, were never collected by Taxpayer, and that Parent Company controlled all the sales numbers and therefore should not be included in Taxpayer’s income for both the sales tax audit and the S-Corp. Taxpayer argued in the administrative hearing that it is the responsibility of Parent Company to remit all taxes on behalf of Taxpayer, according to the franchise contract.  Subsequent to the hearing, Taxpayer provided the contract between Taxpayer and Parent Company. In the contract, Taxpayer is referred to as “Franchisee” and Parent Company is referred to as “Franchisor.” The contract states: The contract clearly states that the tax liability lies with Taxpayer and not parent Company. Absent additional explanation or documentation, Taxpayer has not met its burden to show that the assessment is incorrect, as required by IC 6-8.1-5-1(c). FINDING Taxpayer’s protest is denied. May 1, 2025 Replaces Finding Document: New