ATTORNEYS FOR PETITIONER: E. KENDRICK SMITH, JOHN M. ALLAN, JONES DAY, Atlanta, GA; KRISTEN M. CARROLL, KIGHTLINGER & GRAY, LLP, Indianapolis, IN.
ATTORNEYS FOR RESPONDENT: GREGORY F. ZOELLER, ATTORNEY GENERAL OF INDIANA, JOHN P. LOWREY, DEPUTY ATTORNEY GENERAL, Indianapolis, IN.
ORDER ON PARTIES' CROSS-MOTIONS FOR SUMMARY JUDGMENT
Martha Wentworth, Judge Indiana Tax Court.
Lowe's Home Centers, LLC (Lowes) challenges the Indiana Department of State Revenue's assessment of Indiana's gross retail tax (sales tax) on construction material it incorporated into its customers' real property during the tax years ending on December 31, 2007, 2008, and 2009 (the years at issue). The matter, currently before the Court on the parties' cross-motions for summary judgment, presents one issue for the Court to decide: did Lowes properly self-assess and remit use tax on that construction material or was it required to collect sales tax from its customers on it? The Court holds that Lowes properly self-assessed and remitted use tax on the construction material.
FACTS AND PROCEDURAL HISTORY
Lowes is a national home improvement retail chain that operates stores in Indiana. (See, e.g., Resp't Mot. Summ. J. (" Resp't Des'g Evid." ), Ex. 1 ¶ ¶ 1, 9.) Generally speaking, when Lowes purchased tangible personal property (i.e., merchandise) during the years at issue to sell in its Indiana stores, it did not pay any sales tax pursuant to Indiana's purchase for resale exemption set forth in Indiana Code § 6-2.5-5-8. When Lowes sold that tangible personal property, however, it collected sales tax from its customers and remitted it to the Department. The amount of sales tax Lowes collected was calculated using the retail price of the tangible personal property sold. See generally Ind. Code § 6-2.5-1-5(a)-(b) (2007) (amended 2009); Ind. Code § 6-2.5-2-1 (2007); Ind. Code § 6-2.5-2-2 (2007) (amended 2008).
During the years at issue, Lowes also performed real property improvement services as a general contractor. (Resp't Des'g Evid., Ex. 1 ¶ ¶ 1, 4.) For example, Lowes might have been engaged to install
a new roof on, or new kitchen cabinets in, a customer's home. Lowes performed these services pursuant to installation contracts with its customers. (Resp't Des'g Evid., Exs. 1 ¶ ¶ 4, 9; 1:G.) The installation contracts provided that Lowes would furnish both the construction material -- typically pulled from its store inventory -- and the labor to complete the specified projects. (See, e.g., Resp't Des'g Evid., Exs. 1:G at 1, 1:K at 21-23, 1:L at 21.) Lowes subsequently self-assessed and remitted use tax to the Department on the construction material it furnished under the installation contracts. (Resp't Des'g Evid., Ex. 1:D at 3-4.) Lowes calculated the amount of use tax it owed using its cost to acquire the construction material (i.e., its wholesale cost). (Resp't Des'g Evid., Ex. 1:D at 3-4.)
In November of 2010, the Department completed an audit of Lowes. During the course of the audit, the Department determined that instead of self-assessing and remitting use tax on the construction material furnished under the installation contracts, Lowes should have collected sales tax from its customers using the retail cost of the construction material. (See Resp't Des'g Evid., Ex. 1:D at 3-4.) As a result, the Department issued proposed sales tax assessments against Lowes, including penalties and interest. (Resp't Des'g Evid., Ex. 1:B.)
Lowes subsequently filed a protest with the Department. On June 28, 2011, after conducting an administrative hearing, the Department issued a Letter of Findings denying Lowes's protest. On November 29, 2011, after conducting a rehearing, the Department again denied Lowes's protest in a Supplemental Letter of Findings.
Lowes initiated this original tax appeal on December 7, 2012. Both Lowes and the Department subsequently filed motions for summary judgment. The Court held a hearing on those motions on October 24, ...