in-20250730-IR-045250366NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 04-20242653 Use Tax For Tax Years 2020-2021 HOLDING Business has met the burden of proving that the Department’s assessment was incorrect. ISSUE

I. Sales Tax – Imposition.

Authority: IC 6-2.5-3-2; IC 6-8.1-5-1; Dept. of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579; Graham Creek Farms v. Indiana Dept. Of State Revenue, 819 N.E.2d 151; Indiana Dept. of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463; Indianapolis Fruit Co. v. Dept. of State Revenue, 691 N.E.2d 1379; Lafayette Square Amoco, Inc. v. Indiana Dept. of State Revenue, 867 N.E.2d 289 45 IAC 2.2-4-13; 45 IAC 2.2-5-8. Taxpayer protested the imposition of sales tax on certain transactions. STATEMENT OF FACTS Taxpayer is an Indiana business in the meat processing industry. As the result of an audit, the Indiana Department of Revenue (“Department”) determined that Taxpayer had not accurately remitted use tax during the tax years 2020 and 2021. The Department therefore issued proposed assessments for use tax, penalty, and interest for those years. Taxpayer protested the imposition of use tax on some of the transactions determined to be taxable by the Department. An administrative hearing was held, and this Letter of Findings results. Further facts will be supplied as required.

I. Sales Tax – Imposition.

DISCUSSION Taxpayer protests the imposition of sales tax during the tax years 2020 and 2021. Taxpayer protests that the utilities it purchased during the audit period were predominantly used in an exempt manner and were therefore wholly exempt from sales and use taxes. Taxpayer is only protesting audit adjustments made due to the adjustment of the predominant usage exemption regarding the cooler and freezer equipment. 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 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). An assessment is presumed valid. A taxpayer must provide documentation explaining and supporting that the Department’s position is wrong. 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). Taxpayer contends that its previously approved status as qualifying for the predominant use exemption for utilities was revoked via the audit because the Department incorrectly determined that it was not predominantly an Industrial Processor. Use tax is imposed by IC 6-2.5-3-2(a), which states: Additionally, 45 IAC 2.2-5-8(a) provides: Taxpayer states that they were entitled to the predominant use exemption found at 45 IAC 2.2-4-13, which states: (Emphasis added). The supplemental audit stated, “it was determined during the original audit that the prior utility study included equipment that would not qualify as production equipment. The prior electric utility study included of [sic] cooler and freezer equipment. During a tour of the facility, the taxpayer stated the cooler and freezer equipment was used to store finished goods.” Taxpayer stated in its protest: “The fact that a natural process can happen on its own, however, does not prevent it from constituting production.” Graham Creek Farms v. Indiana Dept. Of State Revenue, 819 N.E.2d 151, 158 (Ind. T.C. 2004). The temperature was actively inducing a change in the meat rather than merely being incidental to proper storage. Indianapolis Fruit Co. v. Dept. of State Revenue, 691 N.E.2d 1379 (Ind. T.C. 1998) Thus, the 7-day hanging period for meat still constitutes as part of the production process. In conclusion, Taxpayer has established that it qualifies for the predominant use exemption for utilities with the addition of the cooler and freezer equipment under 45 IAC 2.2-4-13. CONCLUSION Taxpayer’s protest is sustained regarding the predominant use exemption for utilities. May 1, 2025 Replaces Finding Document: New