ATTORNEYS FOR PETITIONER:    ATTORNEYS FOR RESPONDENT:
STEVEN D. GROTH    STEVE CARTER
RONALD M. SOSKIN    ATTORNEY GENERAL OF INDIANA
BOSE McKINNEY & EVANS LLP     Indianapolis, IN
Indianapolis, IN    
    LINDA I. VILLEGAS
    DEPUTY ATTORNEY GENERAL
    Indianapolis, IN
______________________________________________________________________
     IN THE INDIANA TAX COURT

THOMAS R. GALLIGAN,                                                    )
                                                                            )
    Petitioner,                                                             )
                                                                            )
    v.                                                                      )   Cause No. 49T10-9907-TA-172
                                                                            )
INDIANA DEPARTMENT OF STATE                                                 )
REVENUE,                                                                    )
                                                                            )
    Respondent.                                                             )    

Whether the Department has erred in imposing sales and/or use tax on certain IP transactions?

personally liable for IP’s outstanding 1993 sales and use tax liability.See footnote

Ind. Code Ann. § 6-2.5-4-1(b)(1),(2) (West 1994) (amended 2003). Thus, because selling at retail requires the transfer of tangible personal property, the sale of services generally falls outside the scope of taxation because no transfer of tangible personal property occurs. Howland v. Indiana Dep’t of State Revenue, 790 N.E.2d 627, 628 (Ind. Tax Ct. 2003).
In its audit report, the Department assessed sales tax on approximately 15 different transactions in which it believed IP sold dirt, sand, and rock to its customers, but failed to collect sales tax thereon (i.e., at the time of sale). To support its assessment, the Department cites to the 15 IP invoices which merely state “1 ton sand;” “145 loads of dirt;” “4 loads topsoil.” (See Resp’t Ex. 1 at 5, 8-10.) In addition, the Department’s auditor testified at trial that the way the invoices read led him to believe that IP was selling sand, dirt, and topsoil. (See Trial Tr. at 95.)
At trial, however, Galligan testified that IP did not sell such items to its customers, but merely delivered them. More specifically, Galligan explained that during the years at issue, IP was in the business of digging sewer lines, water lines, streets and roads. (Trial Tr. at 17.) As part of that process, it was necessary for IP to dispose of the dirt that it had excavated. (Trial Tr. at 27.) The dirt was available to anyone for the taking. (Trial Tr. at 27.) IP never purchased the dirt for resale. (Trial Tr. at 29.) In those instances where someone wanted the dirt but was unable to transport it, IP would haul the dirt for them to the desired location. (See Trial Tr. at 28-29.) IP would charge these customers a hauling fee per load, but there was never a charge for the dirt. (Trial Tr. at 29.) Consequently, Galligan claims that the subject transactions do not constitute selling at retail, but rather a service, and are therefore not taxable. See footnote
    As the Department correctly asserts, Galligan bears the burden of proving the proposed assessment is wrong. See Clifft v. Indiana Dep’t of State Revenue, 748 N.E.2d 449, 452 (Ind. Tax Ct. 2001). Here, the Department claims that Galligan failed to meet his burden. Indeed,
[Galligan] claimed in conclusory fashion that [the transactions at issue] represented hauling of the tangible personal property and no sale occurred. There is nothing to corroborate [Galligan’s] testimony. Therefore, [having] submitted no documentation to verify that the transaction was not the sale of tangible personal property, the auditor correctly assessed sales tax.

(Resp’t Br. at 7 (internal citation omitted).) The Court disagrees.

    When a taxpayer claims he is not within the ambit of taxation, he must present a prima facie case in order to meet his burden of proof. Longmire v. Indiana Dep’t of State Revenue, 638 N.E.2d 894, 898 (Ind. Tax Ct. 1994). A prima facie case is one in which the evidence is " 'sufficient to establish a given fact and which if not contradicted will remain sufficient.' " Id. (internal citation omitted). In this case, Galligan’s testimony at trial constituted direct and reasonable evidence that the subject transactions did not involve a retail sale of tangible personal property. Indeed, Galligan, as IP’s president, possessed first-hand knowledge as to what the nature of IP’s business was as well as how it conducted that business. See Indiana Sugars, Inc. v. State Bd. of Tax Comm’rs, 683 N.E.2d 1383, 1387 (Ind. Tax Ct. 1997) (holding that the sworn testimony of a witness who had personal knowledge of corporate procedures regarding the mailing of documents and who stated that he personally placed a return in the mail on or before the due date constituted sufficient evidence to prove timely mailing).
Once the taxpayer has presented a prima facie case, the duty to go forward with that evidence may shift several times. Longmire, 638 N.E.2d at 898 (citation omitted). Thus, it was incumbent on the Department to rebut Galligan’s prima facie case. Instead, the Department merely argues that more evidence was required from Galligan. See footnote This does not constitute a rebuttal.
The Court finds that on the basis of the evidence presented, the subject transactions are not retail sales subject to taxation. The Department’s audit report, as it relates to this issue, is therefore REVERSED. Accordingly, on remand, the Department

is instructed to remove these transactions from its audit report.See footnote

(b) [To that end, t]he following guidelines have been developed:

(1) Delivery charge separately stated with F.O.B. destination See footnote – taxable.

(2) Delivery charge separately stated with F.O.B. origin – non[-]taxable.

(3) Delivery charge separately stated where no F.O.B. has been established – non[-]taxable.

(4) Delivery charges included in the purchase price are taxable.

Ind. Admin. Code tit. 45, r. 2.2-4-3 (1992) (footnote added).
Neither party disputes the fact that the subject delivery charges were separately stated on the invoices listed in the audit report. (See Trial Tr. at 59.) (See also Resp’t Br. at 7.) Rather, the parties dispute the delivery terms of the stone. Galligan, on the one hand, provided detailed testimony at trial that the stone in the subject transactions was delivered to IP by common carriers that were hired by the quarries themselves, that the stone was delivered to IP F.O.B. origin and, because the title to the stone passed upon transfer of the material from the quarries to the common carriers, if the common carrier had an accident and lost the stone, the common carrier was required to reimburse IP for the stone. (Trial Tr. at 59-60.) The Department, on the other hand, claims that because there is nothing “[o]ther than [Galligan’s] own self-serving testimony” to corroborate the fact that the delivery terms were F.O.B. origin, the assessments must therefore stand. (Resp’t Br. at 8.)
    As stated earlier, Galligan, as IP’s president, is personally knowledgeable as to how IP conducted its business. Accordingly, Galligan’s testimony that IP received its shipments of stone F.O.B. origin constitutes reasonable evidence that such was the
case. The Department failed to rebut this evidence. See footnote Accordingly, the Department’s audit report finding that these transactions are taxable is REVERSED. The Department is instructed, on remand, to remove these transactions from its audit report.

Ind. Admin. Code tit. 45, r. 2.2-3-20 (1992). The second regulation the Department cites to is Indiana Administrative Code title 45, rule 2.2-3-16, which provides that “[l]iability for Indiana use tax shall be reduced by a credit for the amount of any sale, purchase, or use tax paid to any other state, territory or possession of the United States with respect to the tangible personal property on which Indiana use tax applies.” Ind. Admin. Code tit. 45, r. 2.2-3-16 (1992). Based on the terms of these regulations, the Department asserts that IP’s only remedy “is to file for a refund of the Kentucky tax taken in error.” (Resp’t Br. at 8.) See footnote The Department is incorrect.
    The Department may issue rules and regulations to implement a statute, and those rules and regulations have the force of law. C & C Oil Co. v. Indiana Dep’t of State Revenue, 570 N.E.2d 1376, 1381 (Ind. Tax Ct. 1991) (internal citation omitted). The Department cannot, however, enlarge or vary by its rules and regulations the power conferred on it by the legislature or create a rule out of harmony with the statute. Id. (internal citation omitted). Indiana Code § 6-2.5-3-5(a) makes no mention that the credit against Indiana use tax is only applicable to situations in which a taxpayer has purchased property in another state and personally brings it back to Indiana. To the extent that the restriction is contained in the Department’s administrative regulations, the restriction is inharmonious with the plain and ordinary meaning of Indiana Code § 6-2.5-3-5(a). The Department’s audit report with respect to the taxability of these subject transactions is therefore REVERSED. See footnote The Department is instructed, on remand, to remove these transactions from its audit report.

Ind. Admin. Code tit. 45, r. 2.2-3-12(a) and (b) (1992). Consequently, in order for IP to receive the exemption that Galligan claims it is entitled to, Galligan must produce evidence that IP obtained an exemption certificate from the exempt organization and that it issued that exemption certificate to the supplier at the time of purchase. See id. See also Greensburg Motel Assoc., L.P. v. Indiana Dep't of State Revenue, 629 N.E.2d 1302, 1304 (Ind. Tax Ct. 1994) (stating that tax exemptions are strictly construed against the taxpayer and in favor of the state and the taxpayer bears the burden to show that it is entitled to the exemption). There is no better way to prove this than to submit into evidence the copies of the contested invoices and actual exemption certificates themselves. See footnote
While Galligan did not present the applicable exemption certificates at trial, he nevertheless asserts that he has “proven by a preponderance of the evidence that at the time of these purchases, [IP] had been issued an exemption certificate, and had provided an exemption certificate to its suppliers to obtain the exemption.” (Pet’r Br. at 18.) More specifically, he claims “he has presented . . . invoices, [] personal knowledge, and [his testimony regarding] the customs and practices of his vendors, all tending to show that exemption certificates were obtained by [IP] for the jobs described.” (Pet’r Br. at 18 (emphasis added).) For instance, at trial, Galligan presented copies of three invoices from vendors on which someone had written the words “tax-exempt.” (Pet’r Exs. H, J, and M.) In addition, he testified, generally, that any time IP wanted to make a tax-exempt purchase from its vendors, IP was required to provide an exemption certificate; if it did not provide the certificate, the vendors would then charge sales tax. (Trial Tr. at 43, 54.)
This evidence is insufficient to prove that IP received exemption certificates and presented them to its vendors at the time of purchase of the property at issue. An invoice or testimony that states something is “tax-exempt,” without any supporting factual basis, does not necessarily make it so. Such a statement is nothing more than a conclusion. A taxpayer’s conclusory statements do not constitute probative evidence and the Court will therefore not be persuaded thereby. See footnote See Anderson v. Indiana Dep’t of State Revenue, 758 N.E.2d 597, 600 n.2 (Ind. Tax Ct. 2001), review denied; Sterling Mgmt.-Orchard Ridge Apartments v. State Bd. of Tax Comm’rs, 730 N.E.2d 828, 833 (Ind. Tax Ct. 2000) (footnote added).