FOR PETITIONER: MARK J. RICHARDS, MATTHEW J. EHINGER, JAMES R. BETLEY, ICE MILLER LLP, Indianapolis, IN.
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 Blood Wentworth,
This matter is before the Court on the parties' cross-motions for summary judgment regarding whether the calculation of Indiana's bad debt deduction excludes market discount income. The Court finds that it does not.
FACTS AND PROCEDURAL HISTORY
The following facts are not in dispute. During the 2007, 2008, and 2009 tax years, Superior Auto, Inc., an automobile dealership with locations in Indiana, Ohio, and Michigan, sold cars to customers with poor or limited credit on a " buy here pay here" basis. (See Pet'r Des'g Evid., Aff. Walter W. Nims (" Nims Aff." ) ¶ ¶ 5-6; Resp't Des'g Evid., Confd'l Ex. 2 (" Resp't Confd'l Ex. 2" ) at 3.) Superior Auto financed its customers' purchase prices of the cars as well as the applicable sales tax due pursuant to installment sale contracts. (See Nims Aff. ¶ 6; Pet'r Des'g Evid., Confd'l Aff. Steven L. Goldberg (" Goldberg Aff." ) at Ex. C.) Superior Auto then remitted sales tax on the full price of the car to the Department. (See Nims Aff. ¶ 6; Resp't Confd'l Ex. 2 at 4.)
Shortly after these sales, Superior Auto sold its installment sale contracts and assigned all its rights and obligations thereunder to SAC Finance, Inc., a related entity with its principal place of business in Fort Wayne, Indiana. (See, e.g., Nims Aff. ¶ 6; Pet'r Confd'l Ex. 1, Ex. C at 3; Reply Supp. Resp't Cross-Mot. Summ. J. (" Resp't Reply Br." ) at 1-2; Resp't Confd'l Ex. 2 at 3.) SAC purchased the installment sale contracts without recourse for 70% of the amount originally financed. (See Nims Aff. ¶ 6; Resp't Confd'l Ex. 2 at 3.) In other words, SAC purchased the installment sale contracts at a 30% market discount from their face value. (See Nims Aff. ¶ 7; Resp't Confd'l Ex. 2 at 3.) Some of the installment sale customers subsequently defaulted on their contracts. (See Nims Aff. ¶ 12; Goldberg Aff. ¶ 7.)
SAC filed three claims with the Department seeking a refund of the Indiana sales tax that Superior Auto paid, but that upon default became an uncollectible receivable to SAC. (See Nims Aff. ¶ ¶ 13, 18.) After holding an administrative hearing, the Department issued a Letter of Findings that denied SAC 30% of each refund claim. (See Resp't Confd'l Ex. 2 at 4; Pet'r Am. Supp'l Pet. Original Tax Appeal, Exs. A-C.)
On July 16, 2010, SAC initiated an original tax appeal challenging the Department's partial denial of its 2007 and 2008 refund claims. On February 11, 2011, SAC initiated another appeal challenging the Department's partial denial of its 2009 refund claim. The Court subsequently consolidated
the two appeals. On June 15, 2011, SAC filed a motion for summary judgment. The Department filed a cross-motion for summary judgment on November 3, 2011. The Court conducted a hearing on the parties' motions on January 13, 2012. Additional facts will be supplied as necessary.
STANDARD OF REVIEW
Summary judgment is proper when the designated evidence demonstrates that no genuine issues of material fact exist and the moving party is entitled to judgment as a matter of law. Ind. Trial Rule 56(C). " Cross-motions for summary judgment do not alter this standard." SAC Fin., Inc. v. Indiana Dep't of State Revenue (SAC I),894 N.E.2d 1116, 1118 (Ind.Tax Ct. 2008) (citation omitted), review denied. The resolution of a case by summary judgment is particularly appropriate when, as here, the relevant facts are undisputed and only ...