R.R. DONNELLEY & SONS COMPANY, Petitioner,
INDIANA DEPARTMENT OF STATE REVENUE, Respondent
ATTORNEYS FOR PETITIONER: MARK J. RICHARDS, MATTHEW J. EHINGER, ICE MILLER LLP, Indianapolis, IN.
ATTORNEYS FOR RESPONDENT: GREGORY F. ZOELLER, ATTORNEY GENERAL OF INDIANA; EVAN W. BARTEL, DEPUTY ATTORNEY GENERAL, Indianapolis, IN.
ORDER ON PARTIES' CROSS-MOTIONS FOR SUMMARY JUDGMENT
Martha Blood Wentworth, Judge.
R.R. Donnelley & Sons Company has appealed the Indiana Department of State Revenue's assessments of Indiana use tax on its purchases of shipping pallets for the 2007, 2008, and 2009 tax years (the years at issue). The matter is currently before the Court on the parties' cross-motions for summary judgment, which present one issue for the Court to decide: whether RR Donnelley's purchases of shipping pallets are exempt from use tax under Indiana Code § 6-2.5-5-9(d) (" Nonreturnable Container Exemption" ). The Court finds that they are not.
FACTS AND PROCEDURAL HISTORY
The following facts are not in dispute. RR Donnelley is a Delaware corporation headquartered in Chicago, Illinois. (Pet'r Des'g Evid., Ex. 1 ¶ 3.) Among other things, RR Donnelley prints advertising inserts and other materials for its retailer customers. (Pet'r Des'g Evid., Ex. 2 (hereinafter " Taylor Aff." ) ¶ ¶ 3-4.) RR Donnelley then ships these printed materials for its retailer customers to approximately 2000 newspaper companies throughout the United States. (Taylor Aff. ¶ ¶ 4, 12.) In turn, the newspaper companies distribute the printed materials on behalf of the retailers. (Taylor Aff. ¶ 4.)
During the years at issue, RR Donnelley purchased pallets from Perfect Pallets, Inc. as containers for shipping the printed materials. (Taylor Aff. ¶ ¶ 6, 12.) RR Donnelley provided Perfect Pallets with sales and use tax exemption certificates for the pallets it purchased. (See Pet'r Confd'l Des'g Evid., Ex. B at 0177.) RR Donnelley was under no obligation to return the pallets to Perfect Pallets, under no obligation to require its retailer customers to return the pallets, and under no obligation to restrict the subsequent use of the pallets. (See Taylor Aff. ¶ ¶ 9-11; Pet'r Des'g Evid., Ex. 7 (hereinafter " Haag Aff." ) ¶ ¶ 5-7.) Further, RR Donnelley was under no obligation to track the pallets or notify Perfect Pallets as to their location after shipment. (See Pet'r Des'g Evid., Ex. 5 (hereinafter " Haag Dep." ) at 42; Taylor Aff. ¶ ¶ 12-13; Ex. 6 (hereinafter " Taylor Dep." ) at 10, 30-32, 36.) RR Donnelly subsequently sold the pallets to its retailer customers or attempted to recover the cost of the pallets from its retailer customers in the freight charge. (See Pet'r Des'g Evid., Ex. 2B at 0112, 0122, 0133, 0146; Taylor Dep. at 27; Resp't Des'g Evid., Ex. B at 5.)
Generally speaking, Perfect Pallets successfully recovers more than 50 percent of the pallets it sells nationwide. (See Haag Dep. at 38-39.) With respect to the newspaper companies, Perfect Pallets retrieved those pallets in one of two ways. First, Perfect Pallets knows the newspaper companies' schedules and therefore would regularly send a truck to pick up the pallets from the newspaper companies. (Haag Dep. at 23-24.) Second, because the pallets were affixed with Perfect Pallet's name and phone number, the newspaper companies could call Perfect Pallets and request that the pallets be picked up. (Haag Dep. at 9-10, 21, 23.)
In September of 2010, the Department completed an audit of the years at issue. As a result of the audit, the Department issued proposed assessments of use tax, interest, and penalties against RR Donnelley because it failed to pay sales tax on its purchase of the pallets. (See Pet'r Confd'l Des'g Evid., Ex. B at 0172-0175.) The Department determined that because the pallets RR Donnelley purchased were later returned to Perfect Pallets, the pallets were not entitled to the Nonreturnable Container Exemption and therefore subject to use tax. (See Pet'r Confd'l Des'g Evid., Ex. B at 0178.)
On December 15, 2010, RR Donnelley timely protested the Department's proposed assessments. (See Pet'r Confd'l Des'g Evid., Ex. C.) On January 5, 2012, after conducting an administrative hearing, the Department issued a Letter of Findings denying RR Donnelley's protest. (See Pet'r Des'g Evid., Ex. D.) On January 23, 2012, RR Donnelley requested a rehearing. (See Pet'r Des'g Evid., Ex. E.) The Department denied RR Donnelley's request on February 7, 2012. (See Pet'r Des'g Evid., Ex. F.)
On March 9, 2012, RR Donnelley filed this original tax appeal. RR Donnelley and the Department subsequently filed motions for summary judgment. The Court held a hearing on the motions on November 12, 2013. Additional facts will be supplied when necessary.
STANDARD OF REVIEW
Summary judgment is appropriate when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Ind. Trial Rule 56(C). In reviewing a motion for summary judgment, this Court will construe all properly asserted facts and reasonable inferences drawn therefrom in favor of the non-moving party. See Scott Oil Co. v. Indiana Dep't of State Revenue,584 N.E.2d 1127, 1128-29 (Ind.Tax Ct. 1992). Cross-motions for summary judgment do not alter ...