ATTORNEY FOR PETITIONER:    ATTORNEYS FOR RESPONDENT:
F. PEN COSBY    STEVE CARTER
ATTORNEY AT LAW    ATTORNEY GENERAL OF INDIANA
Indianapolis, IN     Indianapolis, IN
    
    JOEL SCHIFF
    DEPUTY ATTORNEY GENERAL
    Indianapolis, IN
______________________________________________________________________
     IN THE INDIANA TAX COURT

INDIANAPOLIS WELDING SUPPLY, INC.,                                     )
                                                                            )
    Petitioner,                                                             )
                                                                            )
    v.                                                                      )   Cause No. 49T10-0011-TA-119
                                                                            )
INDIANA DEPARTMENT OF STATE                                                 )
REVENUE,                                                                    )
                                                                            )
    Respondent.                                                             )    
______________________________________________________________________

ON APPEAL FROM A FINAL DETERMINATION OF
THE INDIANA DEPARTMENT OF STATE REVENUE

NOT FOR PUBLICATION
January 6, 2005

FISHER, J.

    Indianapolis Welding Supply, Inc. (IWS) appeals the final determination of the Indiana Department of State Revenue (Department) which assessed it with unpaid sales and use tax for the 1993, 1994, and 1995 tax years (years at issue). The issue for the Court to decide is whether IWS is entitled to a public transportation exemption.
FACTS AND PROCEDURAL HISTORY

    IWS sells welding supplies and gases used in the industrial and medical fields. Specifically, IWS sells oxygen, nitrogen, nitrous oxide, hydrogen, compressed air, acetylene, propane, carbon dioxide, argon, helium and other rare/specialty gases in both the liquid and gaseous forms. IWS owns cryogenic tanks and high-pressure cylinders in which it packages its gases. When a customer purchases gases, it may either lease the tanks from IWS or use its own tanks. When a customer leases a tank from IWS, IWS delivers the filled tank to its customer. If a customer owns its own tanks, IWS sells the gases in the liquid bulk state, where IWS takes liquid gas and pumps it into the holding tank at its customer’s site.
    After conducting an audit, the Department determined that IWS had not paid sales tax on its purchases of transportation equipment and repair parts. Thus, for the years at issue, the Department assessed IWS with use tax in the amount of $23,901.35. IWS protested the assessments; the Department issued a Letter of Findings on June 16, 2000, upholding the assessments. See footnote
    IWS initiated an original tax appeal on November 14, 2000 and a trial was held on November 17, 2003. While the parties filed written briefs with the Court, they waived oral argument. Additional facts will be supplied as necessary.



ANALYSIS AND OPINION
Standard of Review

This Court reviews the Department’s final determinations de novo. Ind. Code Ann. § 6-8.1-5-1(h) (West 2004). Therefore, the Court is not bound by either the evidence presented or the issues raised at the administrative level. See Snyder v. Indiana Dep't of State Revenue, 723 N.E.2d 487, 488 (Ind. Tax Ct. 2000), review denied.
Tax exemption statutes are strictly construed in favor of the state and against the taxpayer. See Foursquare Tabernacle Church of God in Christ v. State Bd. of Tax Comm’rs, 550 N.E.2d 850, 854 (Ind. Tax Ct. 1990). Therefore, the burden is upon the one claiming the exemption to show that the property clearly falls within the exemption statute. Id. (citing LeSea Broadcasting Corp. v. State Bd. of Tax Comm’rs, 525 N.E.2d 637, 638 (Ind. Tax Ct. 1988) (quoting Indiana Ass’n of Seventh-Day Adventists v. State Bd. of Tax Comm’rs, 512 N.E.2d 936, 938 (Ind. Tax Ct. 1987))). However, the Court will not read an exemption provision so narrowly as to defeat its application to a case rightly within its ambit. See Tri-States Double Cola Bottling Co. v. Indiana Dep't of State Revenue, 706 N.E.2d 282, 283-84 (Ind. Tax Ct. 1999). See footnote
Discussion

Indiana imposes sales tax “on retail transactions made in Indiana.” Ind. Code Ann. § 6-2.5-2-1(a) (West 2004). Indiana also imposes a use tax – which is the functional equivalent of the sales tax – on the acquisition of certain non-exempt tangible personal property that escapes sales tax, usually because the property was acquired in a transaction that occurred outside of Indiana. See Rhoade v. Indiana Dep't of State Revenue, 774 N.E.2d 1044, 1047-48 (Ind. Tax Ct. 2002).
Indiana Code § 6-2.5-5-27 provides that
[t]ransactions involving tangible personal property and services are exempt from the state gross retail tax, if the person acquiring the property or service directly uses or consumes it in providing public transportation for persons or property.

Ind. Code Ann. § 6-2.5-5-27 (West 2004). A carrier provides “public transportation” when it “move[s], transport[s], or carr[ies] [] persons and/or property for consideration.” Ind. Admin. Code tit. 45, r. 2.2-5-61 (1992) (1996). IWS claims that its purchases of transportation equipment and replacement parts are exempt from sales and use tax.
    In 1994, this Court explained that in order to qualify for the public transportation exemption, “someone other than the transporter must own the property being transported.” Nat’l Serv-All, Inc. v. Indiana Dep't of State Revenue, 644 N.E.2d 954, 956 (Ind. Tax Ct. 1994). Furthermore, “[i]f a taxpayer is not predominately [sic] engaged in transporting the property of another, it is not entitled to the exemption.” Panhandle E. Pipeline Co. v. Indiana Dep't of State Revenue, 741 N.E.2d 816, 819 (Ind. Tax Ct. 2001)
(emphasis added), review denied. See footnote
    IWS claims that it is entitled to the public transportation exemption because its customers own the gas prior to it being delivered to them. ( See Pet’r Br. at 10, 12.) The Department claims, on the other hand, that IWS’s customers do not own the gas until it has been delivered to them. (See Resp’t Br. at 8-11.) Thus, in the Department’s view, the gas IWS delivers is its own product, and IWS is not engaged in public transportation. The Court is left, therefore, with the task of determining at what point IWS’s customers own the gas they purchase from IWS.
In an effort to support its claim that its customers own the gas prior to delivery, IWS submitted a delivery invoice indicating “FOB: OUR DOCK.” See footnote ( See J. Ex. 4, Dep. Ex. 2.) The Department, however, asserts that although the billing invoice “contain[s] the terms ‘F.O.B: OUR DOCK’, the actual operation [of IWS] is not consistent with those terms” and delivery is part of the bargain between IWS and its customers. (Resp’t Br. at 8, 10.) To support its claim, the Department submitted three IWS service agreements. (See J. Ex. 4, Dep. Exs. 3-5.)
Ownership is a malleable concept; “[i]n addition to possession, the chief incidents of ownership . . . are the rights of use and enjoyment, and of disposition.” Nat’l Serv-All Inc., 644 N.E.2d at 957 (internal quotations omitted) (citation omitted). Because IWS did not have an explicit agreement designating when ownership of the gas transferred from IWS to its customers, the Court will refer to the law of sales for guidance in determining the ownership status of the parties. See Monarch Beverage Co. v. Indiana Dep't of State Revenue, 589 N.E.2d 1209, 1212 (Ind. Tax Ct. 1992); see also A.G.G. Enters., Inc. v. Washington County, Oregon, 145 F. Supp. 2d 1215, 1223-24 (D. Or. 2001) (refuse hauler’s contract specifically stated that it would not acquire title to materials loaded onto its vehicles and/or equipment; court found “no reason why ownership, and the risks it entails, [could] not be a matter of contract between the hauler and customer.”). Furthermore, the Court will look to the written agreements as well as the entire transaction to determine the intent of the parties. See Hardware Wholesalers, Inc. v. Indiana Dept. of State Revenue, 597 N.E.2d 1339, 1344 (Ind. Tax Ct. 1992), rev’d on other grounds, 622 N.E.2d 930 (Ind. 1993).
When a “contract requires or authorizes [a] seller to send [] goods to [a] buyer but does not require him to deliver them at destination, title passes to the buyer at the time and place of shipment[.]” Ind. Code Ann. § 26-1-2-401(2)(a) (West 2004). Alternatively, “if the contract requires delivery at destination, title passes on tender there.” A.I.C. § 26-1-2-401(2)(b). Therefore, in this instance, the determination of ownership hinges on whether IWS was required to deliver the gas to its customers.
In reviewing the billing invoice and service agreements, the Court follows the rules of contract construction. “Like the language of a statute, the language of a contract is generally given its plain and ordinary meaning, unless the contract makes clear the parties intended a different meaning.” Nat’l Serv-All, Inc., 644 N.E.2d at 957. Furthermore, “[t]he court must accept an interpretation of the contract which harmonizes its provisions as opposed to one which causes them to be conflicting.” McCae Mgmt. Corp. v. Merchants Nat’l Bank & Trust Co. of Indianapolis, 553 N.E.2d 884, 887 (Ind. Ct. App. 1990) (citation omitted).
    In reviewing the evidence, one service agreement states that “[IWS] shall deliver the [e]quipment within twenty-four (24) hours after verbal order from [the customer]. This delivery requirement applies twenty-four (24) hours per day, seven (7) days per week. . . . Equipment and [s]upplies shall be delivered to locations specified by [the customer].” (J. Ex. 4, Dep. Ex. 5 (emphases added).) Another service agreement states that “[IWS] agrees to supply [customer’s] requirements of [gas] utilizing a bulk method of delivery to buyer’s location(s)[.]” (J. Ex. 4, Dep. Ex. 3 (emphasis added).) The delivery notice, along with the “FOB: OUR DOCK” stamp, includes a statement that “[t]he above material will remain the property of [IWS] until final payment has been made.” (J. Ex. 4, Dep. Ex. 1,2.) Additionally, IWS charges all of its customers a delivery fee, regardless of whether they choose to waive delivery and pick up the orders themselves. (See J. Ex. 4, Pet’r Dep. Ex. A at 7-8.)
The Court concludes that delivery was part of the bargain between IWS and its customers. To find otherwise, the Court would have to reject the plain meaning of the language contained in the service agreements – they explicitly call for IWS to deliver the ordered product to the customer’s destination. Moreover, because the delivery invoice is not signed by the customer until delivery has been completed, the Court simply cannot find that IWS customers accepted the “FOB: OUR DOCK” delivery terms. See footnote See Mason Metals Co. v. Indiana Dep't of State Revenue, 590 N.E.2d 672, 675 (Ind. Tax Ct. 1992) (“[t]he substance, rather than the form, of transactions determines their tax consequences" (citing Meridian Mortgage Co. v. State, 395 N.E.2d 433, 440 (Ind. Ct. App. 1979), rev. denied)). Accordingly, the Court finds that IWS was required to deliver the gas to its customer’s destination; therefore, IWS owned the gas at the time it was being transported, and it is not entitled to the public transportation exemption. See Sam & Mac, Inc. v. Treat, 783 N.E.2d 760, 765 (Ind. Ct. App. 2003) (court found that when seller did not deliver property to an agreed upon destination point, title did not pass to the buyer).

CONCLUSION

    For the aforementioned reasons, the Court AFFIRMS the Department’s final determination.



Footnote: The Department initially assessed IWS for unpaid sales and use taxes totaling $29,780.10; IWS’s protest was sustained with respect to issues not raised in this appeal, resulting in its liability being reduced by $5,878.75. ( See J. Ex. 2 at 2; J. Ex. 3 at 4-11.)

Footnote: “Generally, exemptions are granted when there is an expectation of a benefit which will inure to the public by reason of the exemption.” Foursquare Tabernacle Church of God in Christ v. State Bd. of Tax Comm’rs, 550 N.E.2d 850, 854 (Ind. Tax Ct. 1990).

Footnote: At one point in its brief, IWS states that “it is essential that this Court point out to the Department that [the predominance requirement] is not the law in the State of Indiana.” (Pet’r Br. at 12.) Nay; this Court’s prior holdings explain that the public transportation exemption is an “all-or-nothing” exemption – either the taxpayer is predominantly engaged in transporting the property of another, or it is not entitled to the exemption. See, e.g., Panhandle E. Pipeline Co. v. Indiana Dep't of State Revenue, 741 N.E.2d 816, 819 (Ind. Tax Ct. 2001), review denied; Meyer Waste Sys. Inc. v. Indiana Dep't of State Revenue, 741 N.E.2d 1, 9 (Ind. Tax Ct. 2000), review denied; Indiana Waste Sys. of Indiana, Inc. v. Indiana Dep't of State Revenue, 644 N.E.2d 960, 961 (Ind. Tax Ct. 1994).

Footnote: The term “FOB: OUR DOCK” means that IWS must, at its dock, “ship the goods . . . and bear the expense and risk of putting them into the possession of the carrier.” Ind. Code Ann. § 26-1-2-319 (2004).

Footnote: Furthermore, it defies common sense to believe that customers who are required to pay a delivery charge would nonetheless willingly accept the risk of transporting volatile gases themselves.