in-20250625-IR-045250302NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE FINAL ODER DENYING REFUND: 04-20251449; 04-20251450 Sales Tax For the Tax Years 2022 and 2023 HOLDING Nonprofit Organization failed to demonstrate that it was entitled to the refund of Indiana sales tax, which it collected and remitted. ISSUE

I. Sales Tax – Refund.

Authority: IC 6-2.5-2-1; IC 6-2.5-5-26; IC 6-2.5-6-13; IC 6-2.5-6-14.1; IC 6-2.5-8-8; IC 6-2.5-9-3; IC 6-8.1-5-4; IC 6-8.1-9-1; 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 15-9-2. Taxpayer protests the refund denials of sales tax which it collected and remitted to the Indiana Department of Revenue. STATEMENT OF FACTS Taxpayer is an Indiana nonprofit organization. In early 2024, Taxpayer filed two separate refund claims and requested a total $2,702.15 refund of sales tax it remitted during 2022 and 2023. The Indiana Department of Revenue (“Department”) reviewed and denied Taxpayer’s request. Taxpayer protested the refund denials and requested that the Department make the final decision without an administrative hearing. This final determination ensues and additional facts will be provided as necessary.

I. Sales Tax – Refund.

DISCUSSION The Department denied Taxpayer’s refund requests and explained in relevant part: Taxpayer, to the contrary, disagreed and argued that it was entitled to the refund of sales tax it collected and erroneously remitted to the Department. The issue therefore is whether Taxpayer’s supporting documents demonstrated that it was entitled to the refund and the Department erred in denying the claims. IC 6-8.1-9-1(a) affords a taxpayer a statutory 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. The Department generally “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 thus is required to provide documentation to explain and support his or her challenge to the Department’s denial. When an agency is charged with enforcing a statute, such as the Department here, the Indiana jurisprudence defers 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 “sales tax” on retail transactions made in Indiana. IC 6-2.5-2-1(a). A person who acquires property in a retail transaction (a “retail purchaser”) is liable for the sales tax on the transaction. IC 6-2.5-2-1(b). “The retail merchant shall collect the tax as agent for the state.” Id. When a purchaser claims the purchase “is exempt from the state gross retail [] tax[], the purchaser may issue an exemption certificate to the seller instead of paying the tax.” IC 6-2.5-8-8(a). The “seller accepting a proper exemption certificate under [IC 6-2.5-8-8] has no duty to collect or remit the state gross retail [] tax on that purchase.” Id. Otherwise, as an agent for the State of Indiana, the seller “holds those taxes in trust for the state and is personally liable for the payment of those taxes, plus any penalties and interest attributable to those taxes, to the state.” IC 6-2.5-9-3. As a general rule, all purchases of tangible personal property are taxable unless specifically exempted by Indiana law. A statutory provision, such as IC 6-2.5-5-26, which provides a tax exemption, however, 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). Because the retail merchant – the agent for the state – is required to collect and remit the sales tax – a trust tax – on the retail transaction from the purchaser, the retail merchant is often tasked with customer’s requests of refund when the retail merchant erroneously collects the tax. Under those circumstances, IC 6-2.5-6-14.1 specifically explains that the “retail merchant is not entitled to a refund of state gross retail [tax] . . . unless the retail merchant refunds those taxes to the person from whom they were collected.” (Emphasis added). In other words, when the retail merchant indeed refunds the sales tax – which it previously collected – to its customer, the retail merchant may be entitled to the refund of sales tax from the state. Nonetheless, the purchaser who is liable for paying the tax at the time of the transaction always has the statutory right to file a refund claim with the Department pursuant to IC 6-8.1-9-1 and 45 IAC 15-9-2. IC 6-2.5-6-13 further instructs the purchaser to do so, which provides: Taxpayer in this instant case referenced the Sales Tax Information Bulletin 10 (June 2023), which states in part: Taxpayer in its protest letter stated, in part: Upon review, however, Taxpayer is mistaken. Taxpayer in this case seemingly argued that (i) it was a nonprofit organization, (ii) its sales in 2022 and 2023 were exempt from sales tax, and (iii) it was entitled to the refund of sales tax – the trust tax it collected from its customers – pursuant to IC 6-2.5-5-26. Assuming that Taxpayer qualified for a nonprofit organization and qualified for such exemption when conducted its sales in 2022 and 2023, Taxpayer was not the purchaser of the tangible personal property and did not pay the sales tax on such purchases at that time. Rather, Taxpayer, as the agent for the state, was the seller who collected the sales tax from its customers (namely purchasers) and remitted such tax to the state. Therefore, Taxpayer’s reliance of the information is misplaced. As mentioned, “where 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.” In particular, without verifiable supporting documents to substantiate that (i) Taxpayer’s sales were exempt from such sales tax and/or (ii) Taxpayer indeed has refunded the sales tax in question to its customers, the Department is not able to agree that Taxpayer was entitled to the refund of sales tax – a trust tax – “unless the retail merchant refund[ed] those taxes to the person from whom they were collected.” IC 6-2.5-6-14.1. The $2,702.15 refund claimed by Taxpayer thus was properly denied. To conclude, Taxpayer was not entitled to the $2,702.15 refund of the sales tax – a trust tax – it collected unless the overpayments were first refunded to the purchasers. In the absence of other verifiable supporting documents, Taxpayer’s supporting documentation was not sufficient to substantiate that Taxpayer refunded the sales tax – a trust tax – to the person from whom they were collected. FINDING Taxpayer’s protest is respectfully denied. April 11, 2025 Replaces Finding Document: New