in-20250730-IR-045250365NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE SUPPLEMENTAL MEMORANDUM OF DECISION 04-20231943 Sales and Use Tax  For the Year 2019 HOLDING Based on additional verifiable supporting documents provided, Company demonstrated that the O2 gas monitors directly used by employees, who directly participated in its steel manufacturing process, were exempt from sales and use tax. ISSUE

I. Sales and Use Tax – Refund.

Authority: IC 6-2.5-2-1; IC 6-2.5-3-4; IC 6-8.1-5-4; IC 6-8.1-9-1; Indiana Dep’t of State Revenue v. RCA Corp., 310 N.E.2d 96 (Ind. Ct. App. 1974); Scopelite v. Indiana Dep’t of Local Gov’t Fin., 939 N.E.2d 1138 (Ind. Tax Ct. 2010); Indiana Dep’t of State Rev. v. Caterpillar, Inc., 15 N.E.3d 579 (Ind. 2014); 45 IAC 2.2-5-8; Memorandum of Decision 04-20231943 (February 9, 2024). Company continued to argue that it was entitled to an additional refund because its purchase and use of tangible personal property were either exempt from tax or non-taxable. STATEMENT OF FACTS Taxpayer is a company operating a manufacturing facility in Indiana. Taxpayer requested a sales tax refund for 2019. After an initial review, the Indiana Department of Revenue (“Department”) granted a $107,618.88 refund based on verifiable invoices submitted and denied the remainder. Taxpayer protested the partial refund denial. A hearing was held. The Department issued the Memorandum of Decision 04-20231943 (February 9, 2024) (“MOD”), 20240424 Ind. Reg. 045240137NRA, and granted an additional $162.12 refund. Subsequently, Taxpayer submitted additional documents to request a rehearing. The rehearing was granted. This supplemental final determination results and incorporates all applicable facts and law stated and referenced in the MOD. DISCUSSION The Department issued the MOD and granted a $162.12 refund based on verifiable documents. Taxpayer continued to protest the partial refund denial. The issue therefore is whether Taxpayer sufficiently demonstrated that it was entitled to an additional refund. As explained in the MOD, a person must timely file a refund claim and demonstrate that it “has paid more tax than [it] determines is legally due for a particular taxable period.” IC 6-8.1-9-1(a). To that end, the person must keep books and records, including all source documents, “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.” IC 6-8.1-5-4(a). Also as mentioned, Indiana imposes a sales tax on retail transactions and a complementary use tax on tangible personal property that is stored, used, or consumed in the state. IC 6-2.5-2-1 et seq. All purchases of tangible personal property by persons engaged in the direct production of tangible personal property are taxable unless specifically exempted under Indiana law. 45 IAC 2.2-5-8. An exemption from use tax is granted for transactions where the sales tax was paid at the time of purchase under IC 6-2.5-3-4. A statute which provides a tax exemption is strictly construed against the taxpayer. Indiana Dep’t of State Revenue 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. When a taxpayer challenges taxability in a specific instance, the taxpayer is required to provide documents 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). When an agency is charged with enforcing a statute, 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). Throughout the rehearing process, Taxpayer referencing several revised Excel worksheets and its employee’s affidavits to support its $10,705.76 refund and the refund on tax paid for the O2 gas monitors. Taxpayer stated that “the $10,705.76 represents of the aggregate of monthly use tax due for intercompany charges for corporate software” as “bookkeeping or accounting entry.” In particular, Taxpayer argued that the Department “did not request supporting documentation or explanation for the said use tax.” In addition, Taxpayer also argued that it was entitled to refund of tax paid for the O2 gas monitors because they were exempt under 45 IAC 2.2-5-8(c)(2)(F). Taxpayer provided several photographs requested to support its refund claim regarding the O2 gas monitors subsequently after the rehearing. Upon review, first, based on the additional documents submitted, the Department is prepared to agree that Taxpayer demonstrated that some O2 gas monitors were directly used by employees who directly participated in its steel manufacturing process and were exempt from sales and use tax pursuant to 45 IAC 2.2-5-8(c)(2)(F). The O2 gas monitors used by others, employees or otherwise, who did not directly participate in Taxpayer’s direct production process, remain taxable. As to the $10,705.76 refund request, it should be noted that Taxpayer here was the claimant who requested the refund and was required to substantiate its refund claim. That is, Taxpayer was required to keep books and records, including “all source documents necessary to determine the tax, including invoices, register tapes, receipts, and canceled checks.” Referencing its revised Excel worksheets, Taxpayer relied on its employee’s affidavit to support the $10,705.76 refund. However, upon review, Taxpayer’s reliance of its documents to support its $10,705.76 refund was misplaced. Any information initially entered and subsequently changed or modified by the employee with respect to the revised Excel worksheets submitted during the rehearing cannot be verified without the source documents. Without the source documentation, Taxpayer’s affidavit was self-serving. As such, the Department is not able to agree that Taxpayer was entitled to such refund. To conclude, given the totality of the circumstances, the Department is prepared to agree that Taxpayer was entitled to a refund for tax paid on the O2 gas monitors that were directly used by employees, who directly participated in Taxpayer’s steel manufacturing process, pursuant to 45 IAC 2.2-5-8(c)(2)(F). FINDING Taxpayer’s protest is sustained in part and respectfully denied in part. Taxpayer was entitled to a refund for tax paid on the O2 gas monitors that were directly used by employees, who directly participated in Taxpayer’s steel manufacturing process. May 2, 2025 Replaces Finding Document: New