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Thermo-Cycler Industries, Inc. v. Indiana Department of State Revenue

Tax Court of Indiana

June 15, 2017

THERMO-CYCLER INDUSTRIES, INC., Petitioner,
v.
INDIANA DEPARTMENT OF STATE REVENUE, Respondent.

          ATTORNEY FOR PETITIONER: ANDREW R. WOLF THE WOLF LAW OFFICE Michigan City, IN.

          ATTORNEYS FOR RESPONDENT: CURTIS T. HILL, JR. ATTORNEY GENERAL OF INDIANA JESSICA R. GASTINEAU EVAN W. BARTEL WINSTON LIN DEPUTY ATTORNEYS GENERAL Indianapolis, IN.

          ORDER ON PARTIES' CROSS-MOTIONS FOR SUMMARY JUDGMENT

          Martha Blood Wentworth, Judge.

         Thermo-Cycler Industries, Inc. has challenged the Indiana Department of State Revenue's final determination assessing it with unpaid Indiana sales and use tax liabilities for the 2008, 2009, and 2010 tax years (the years at issue). The matter is currently before the Court on the parties' cross-motions for summary judgment and presents just one issue for the Court to decide: whether the Department's assessments are void as a matter of law because of the audit procedures it employed. Upon review, the Court finds that they are not.

         FACTS AND PROCEDURAL HISTORY

         Thermo-Cycler, a manufacturer of heating equipment, is located in LaPorte County, Indiana. (Resp't Des'g Evid. Supp. Partial Mot. Summ. J. ("Resp't Des'g Evid."), Ex. 15 ¶¶ 1, 10.) In July of 2010, the Department notified Thermo-Cycler that in August it would be conducting a compliance audit for tax years 2007 through 2009 and indicated that it would need access to, among other things, Thermo-Cycler's federal income tax returns, sales reports showing total and exempt sales, and withholding tax forms. (Resp't Des'g Evid., Ex. A at Ex. 1.) At Thermo-Cycler's request, however, the audit start date was postponed several times. (See, e.g., Pet'r Des'g Evid., Ex. A at Exs. 2-7.) In the meantime, Thermo-Cycler did not provide the Department with access to any of the requested records. (See Pet'r Des'g Evid., Ex. A at Ex. 7.)

         At the beginning of January 2011, the Department sent Thermo-Cycler a letter stating that it was necessary for the audit to be completed by the end of the month and warned that if the requested records were not forthcoming, it would complete the audit based on the "best information available." (Pet'r Des'g Evid., Ex. A at Ex. 7.) There was no further communication between Thermo-Cycler and the Department until April of 2011 when the Department issued both an audit summary and Proposed Assessments against Thermo-Cycler imposing approximately $70, 000 in sales and use tax liabilities for the 2008, 2009, and 2010 tax years. (See Pet'r Des'g Evid., Ex. A at 71-72, Ex. B at Exs. 2-3; Resp't Confd'l Des'g Evid., Ex. B ¶ 7, Ex. E ¶ 5, Ex. 11.) The Department's Proposed Assessments were based on figures it extrapolated from Thermo-Cycler's 2007-2009 federal tax returns. (See Pet'r Des'g Evid., Ex. B at 17.)

         Thermo-Cycler subsequently protested the Proposed Assessments, claiming that they were void as a matter of law because the Department did not follow the statutorily-prescribed audit procedure. (See, e.g., Pet'r Des'g Evid., Ex. A at Ex. 8.) In the alternative, Thermo-Cycler claimed that the amount of the tax liabilities set forth in the Proposed Assessments were improper because they were based on certain erroneous mathematical calculations. (See, e.g., Pet'r Des'g Evid., Ex. A at Ex. 8.) After conducting a hearing on the protest, the Department issued a Letter of Findings in which it denied Thermo-Cycler's void as a matter of law argument, but granted that portion of Thermo-Cycler's protest relating to the propriety of the mathematical calculations subject to a supplemental audit. (See, e.g., Pet'r Des'g Evid., Ex. A at Ex. 8.) After the supplemental audit was completed, the Department issued revised Proposed Assessments that reduced Thermo-Cycler's total sales and use tax liabilities for the years at issue to approximately $62, 000. (See Resp't Des'g Evid., Ex. D ¶¶ 4-5; Resp't Confd'l Des'g Evid., Exs. 10, 12.)

         Thermo-Cycler filed an original tax appeal on October 19, 2011. In 2013, while the case was pending, the Department conducted a second supplemental audit of Thermo-Cycler and reduced the Proposed Assessments again, to approximately $16, 000.[1] (See Resp't Des'g Evid., Ex. C ¶¶ 4-5; Resp't Confd'l Des'g Evid., Exs. 9, 13.) On July 19, 2016, Thermo-Cycler and the Department filed cross-motions for summary judgment.[2] Additional facts will be supplied as necessary.

         STANDARD OF REVIEW

         Summary judgment is proper only 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). When reviewing a motion for summary judgment, the 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 this standard. Horseshoe Hammond, LLC v. Indiana Dep't of State Revenue, 865 N.E.2d 725, 727 (Ind. Tax Ct. 2007), review denied.

         LAW

         The Department is charged with the administration, collection, and enforcement of Indiana's sales and use taxes. See Ind. Code § 6-8.1-1-1 (2011) (amended 2013); Ind. Code § 6-8.1-3-1 (a) (2011). Accordingly, the Department "may audit any returns filed in respect to [those] taxes . . . and may investigate any matters relating to [those] taxes." Ind. Code § 6-8.1 -3-12(a) (2011).

         When conducting an audit, the Department may "inspect any books, records, or property of any taxpayer which is relevant to the determination of the taxpayer's tax liabilities!.]" Ind. Code § 6-8.1-4-2(a)(3) (2011). To that end, every person subject to the sales or use taxes "must keep books and records so the [D]epartment can determine the amount, if any, of [his] liability for th[ose] tax[es] by reviewing those books and records." Ind. Code § 6-8.1-5-4(a) (2011). The taxpayer must allow inspection of his books, records, and returns by the Department at all reasonable times. I.C. § 6-8.1- 5-4(c). When the taxpayer fails to maintain or provide the Department with his records, the Department may determine the taxpayer's tax liability based on the best ...


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