ATTORNEY FOR PETITIONER:
B. KEITH SHAKE
HENDERSON DAILY WITHROW & DEVOE
Indianapolis, IN
ATTORNEYS FOR RESPONDENT:
STEVE CARTER
ATTORNEY GENERAL OF INDIANA
Indianapolis, IN
DEPUTY ATTORNEY GENERAL
Indianapolis, IN
_____________________________________________________________________
IN THE
INDIANA TAX COURT
_____________________________________________________________________
1 STOP AUTO SALES, INC., )
COMPANY, Successor in Merger with
)
Petitioner, )
)
v. ) Cause No. 49T10-9809-TA-108
)
INDIANA DEPARTMENT OF )
STATE REVENUE, )
)
Respondent. )
_____
FOR PUBLICATION
March 31, 2003
FISHER, J.
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 Dep’t 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 Stop’s 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 Stop’s 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 Stop’s attempt to
deduct its bad debt from its gross retail income under Indiana Code Section
6-2.5-6-9, Indiana’s “Bad Debt” statute, for the 1994–1997 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
written off
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 Stop’s 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 Reh’g
at 3–4.)
Indiana Code Section 6-2.5-6-9(a)(3) provides that a retail merchant’s 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. Dep’t of Loc. Gov’t 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[.]” Black’s
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 Dep’t 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 Indiana’s 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
debt.
CONCLUSION
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 Stop’s 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
Distribution:
B. Keith Shake
Henderson Daily Withrow & Devoe
One Indiana Square, Ste. 2600
Indianapolis, IN 46204
Steve Carter
Attorney General of Indiana
By: Joel Schiff
Deputy Attorney General
Indiana Government Center South, Fifth Floor
402 West Washington Street
Indianapolis, Indiana 46204-2770
Footnote:
Indiana’s 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 Dep’t of State Revenue, 761 N.E.2d
909, 914 (Ind. Tax Ct. 2002).