ATTORNEY FOR PETITIONER:
B. KEITH SHAKE
HENDERSON DAILY WITHROW & DEVOE
ATTORNEYS FOR RESPONDENT:
ATTORNEY GENERAL OF INDIANA
DEPUTY ATTORNEY GENERAL
INDIANA TAX COURT
1 STOP AUTO SALES, INC., )
COMPANY, Successor in Merger with
v. ) Cause No. 49T10-9809-TA-108
INDIANA DEPARTMENT OF )
STATE REVENUE, )
ORDER ON PETITION FOR REHEARING
March 31, 2003
In its petition for rehearing, 1 Stop Auto Sales, Inc. (1 Stop) requests
the Court to reconsider Parts I and III of its opinion in 1
Stop Auto Sales, Inc., v. Indiana Dept of State Revenue, 779 N.E.2d 614
(Ind. Tax Ct. 2002). The Court, being duly advised, holds that 1
Stop shall take nothing by its petition for rehearing on Part I.
The Court, however, grants 1 Stops petition for rehearing on Part III in
order to clarify its holding in 1 Stop.
PROCEDURAL HISTORY AND ANALYSIS
As the Court previously explained in 1 Stop Auto Sales, 1 Stop is
an Indiana corporation that sells vehicles to the public on a buy-here-pay-here basis,
which means that purchasers of 1 Stops vehicles (Consumers) may purchase a vehicle
under an installment contract with no money down. In these instances, 1
Stop does not collect sales tax from the Consumers on the purchase price
of the vehicle at the time of the sale. Rather, it loans
the sales tax to the Consumers then remits the entire amount of sales
tax due to the Department. In turn, when 1 Stop collects payments
from the Consumers, it applies a pro-rata share of each payment to cover
the sales tax it previously remitted to the Department on the sale.
From time to time, the Consumers default on their contracts with 1 Stop.
1 Stop characterizes the outstanding receivables from these contracts as uncollectible, or
bad debt. In this case, the Department denied 1 Stops attempt to
deduct its bad debt from its gross retail income under Indiana Code Section
6-2.5-6-9, Indianas Bad Debt statute, for the 19941997 tax years.
See footnote The Court,
however, held that 1 Stop was entitled to a bad debt deduction and
that its deduction must equal its Indiana uncollectible receivables that were
as an uncollectible debt for federal tax purposes during the particular reporting period.
1 Stop Auto Sales, 779 N.E.2d at 621 (citing Ind. Code §
6-2.5-6-9(a)(3) (1998) (emphasis added)).
1 Stop seeks a rehearing because under federal accounting procedure, it was required
to offset its federal bad debt deduction by the value of the vehicles
it repossessed. In so doing, 1 Stops federal bad debt deduction was
virtually eliminated because the aggregate value of the vehicles it repossessed for the
years at issue nearly equaled the amount it deducted as federal bad debt.
1 Stop argues that if its Indiana bad debt deduction must equal
its federal bad debt deduction, it will receive little to no relief from
its Indiana bad debt under the Bad Debt statute. (Petition for Rehg
Indiana Code Section 6-2.5-6-9(a)(3) provides that a retail merchants bad debt deduction must
equal its Indiana uncollectible receivables that were written off as bad debt for
federal tax purposes. I.C. § 6-2.5-6-9(a)(3). The Legislature has not defined
the phrase written off. However, [w]here a word in a statute is
undefined by statute or case law . . ., the Court gives the
word its plain and ordinary meaning; the Court may do so by referring
to a dictionary. Beta Steel Corp. v. Dept of Loc. Govt Fin.,
780 N.E.2d 439, 443 (Ind. Tax Ct. 2002). A write off is
not a deduction. Indeed, to write off an item means [t]o remove
(an asset) from the books, esp. as a loss or expense[.] Blacks
Law Dictionary 1603 (7th ed. 1999). To deduct an item, however, means
to subtract it from gross income or adjusted gross income when calculating taxable
income. Subaru-Isuzu Automotive, Inc. v. Indiana Dept of State Revenue, 782 N.E.2d
1071, 1071 (Ind. Tax Ct. 2003).
The plain language of Indiana Code Section 6-2.5-6-9(a)(3) allows 1 Stop to deduct
the amount of its uncollectible Indiana receivables that were written off as an
uncollectible debt for federal tax purposes during the particular reporting period. I.C.
§ 6-2.5-6-9(a)(3) (emphasis added). Thus, for the purposes of Indianas Bad Debt
statute, 1 Stop may deduct an amount equal, in part, to the amount
of its uncollectible Indiana receivables it removed from its books as a loss
for federal tax purposes, not merely the amount it deducted as federal bad
For the reasons stated, 1 Stop shall take nothing by its petition for
rehearing on Part I of 1 Stop Auto Sales. The Court GRANTS
1 Stops Petition for Rehearing on part III of 1 Stop Auto Sales.
IT IS THEREFORE ORDERED, ADJUDGED AND DECREED that judgment be entered accordingly.
SO ORDERED this 31st day of March, 2003.
Thomas G. Fisher, Judge
Indiana Tax Court
B. Keith Shake
Henderson Daily Withrow & Devoe
One Indiana Square, Ste. 2600
Indianapolis, IN 46204
Attorney General of Indiana
By: Joel Schiff
Deputy Attorney General
Indiana Government Center South, Fifth Floor
402 West Washington Street
Indianapolis, Indiana 46204-2770
Indianas Bad Debt statute provides that retail merchants who remit Indiana sales
tax on uncollectible receivables can deduct such receivables from their gross retail income.
Chrysler Fin. Co., LLC, v. Indiana Dept of State Revenue, 761 N.E.2d
909, 914 (Ind. Tax Ct. 2002).