in-20250430-IR-045250169NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE LETTER OF FINDINGS: 04-20251022  Tax Administration For the Tax Years 2020 – 2022 HOLDING Indiana Company demonstrated that ten-percent penalties should be abated. ISSUE

I.    Tax Administration – Penalties.

Authority: IC 6-8.1-5-1; IC 6-8.1-5-4; IC 6-8.1-10-2.1; Scopelite v. Indiana Dep’t of Local Gov’t Fin., 939 N.E.2d 1138 (Ind. Tax Ct. 2010); 45 IAC 15-11-2. Taxpayer requests that the penalties be abated. STATEMENT OF FACTS Taxpayer, an Indiana limited liability company, is a licensed electrical and solar contractor that services residential, commercial, and industrial properties. Taxpayer has a retail location in Indiana. The Indiana Department of Revenue (“Department”) audited Taxpayer’s tax returns and business records for tax years 2020, 2021, and 2022. Ultimately, the audit resulted in additional sales and use taxes, interest, and penalties. Taxpayer protested the imposition of penalties and requested that the Department make the final determination without a hearing. This Letter of Findings results.

I.    Tax Administration – Penalties.

DISCUSSION Pursuant to the audit, the Department assessed ten-percent penalties because the audit found that Taxpayer failed to (i) collect the sales tax on its Indiana sales and (ii) remit sales tax or use tax on assets it purchased and used during the course of its business. Taxpayer requested that the penalties to be abated. 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 [D]epartment can determine the amount, if any, of the person’s liability for that tax by reviewing those books and records. The records [] include all source documents necessary to determine the tax, including invoices, register tapes, receipts, and canceled checks.” The person also “must allow inspection of the books and records and returns by the [D]epartment or its authorized agents at all reasonable times.” IC 6-8.1-5-4(c). When the person subject to the listed tax fails to keep books and records, under IC 6-8.1-5-1(b), the Department “shall make a proposed assessment of the amount of the unpaid tax on the basis of the best information available to the [D]epartment” if the Department “reasonably believes that a person has not reported the proper amount of tax due.” All tax assessments are prima facie evidence that the Department’s claim for the unpaid tax is valid; the taxpayer bears the burden of proving that any assessment is incorrect. IC 6-8.1-5-1(c). The taxpayer is required to provide documentation explaining and supporting its challenge that the assessment is wrong. 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). Pursuant to IC 6-8.1-10-2.1(a)(3), the Department may assess a ten (10) percent penalty if the taxpayer “incurs, upon examination by the department, a deficiency that is due to negligence.” 45 IAC 15-11-2(b) further states: 45 IAC 15-11-2(c) further states, (1) the nature of the tax involved; (2) judicial precedents set by Indiana courts; (3) judicial precedents established in jurisdictions outside Indiana; (4) published department instructions, information bulletins, letters of findings, rulings, letters of advice, etc.; (5) previous audits or letters of findings concerning the issue and taxpayer involved in the penalty assessment. Taxpayer in this case paid the audit assessments in full and requested that the penalties imposed by the Department be abated. Taxpayer stated in part: Upon review, Taxpayer’s supporting documents demonstrated that it has a good filing history, although Taxpayer misunderstood the distinction between lump sum and time and materials contracts. In addition, Taxpayer demonstrated that its over-collection of use tax on some of its transactions demonstrates good faith to pay the correct amount of taxes. Based on these factors and the totality of circumstances, the Department agrees that the penalties should be abated. FINDING Taxpayer’s protest of the imposition of penalties is sustained. February 28, 2025 Replaces Finding Document at: New