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Attorney at Law         Attorney General of Indiana
Indianapolis, Indiana
                             VINCENT S. MIRKOV
Deputy Attorney General
                            Indianapolis, Indiana

ROBERT J. SELL,                                                   )    
             Petitioner,                                               )
v.                                                                     ) No. 49T10-9706-TA-00161
DEPARTMENT OF STATE REVENUE,                                           )                                             
                         Respondent.                                   )


June 15, 1998


    Robert J. Sell appeals the denial of his claim for refund filed with the Department of State Revenue (Department). At issue is whether the Department may assess Sell with collection costs and fees associated with the issuance of a tax warrant.
    Sell was the sole shareholder of The Rose, Inc., an Indiana corporation. The

corporation operated a restaurant in LaGrange, Indiana. The restaurant's manager failed to remit certain sales and employment withholding taxes to the Department for the 1989, 1990, and 1991 tax years. Sell discovered this problem, and on October 30, 1991, Sell contacted the Department by mail offering to pay the tax liability alone, which totaled (independent of any interest and penalties) approximately $6784.96. Over the next several months, Sell made payments on this liability.
    On December 9, 1991, the Department sent a letter to Sell's representative (an accounting firm) rejecting Sell's offer. In this letter, the Department stated its position that it would not waive Sell's liability for the interest and penalties associated with the failure to remit the sales and employment withholding taxes.See footnote 1 In February and March 1992, apparently unbeknownst to Sell, the Department issued a number of demand notices. All but two of these demand notices were incorrectly addressed to Bob Sell, The Rose, 725 Wiggens Ferry Drive D, St. Louis MO 63141-6572. It is unclear where the two remaining demand notices were sent. The copies of those two demand notices have the address 105 N. Detroit, LaGrange, IN 46761 handwritten under the name Bob Sell. After issuing the demand notices, in April 1992, the Department issued tax warrants as part of its collection efforts.
    Later in 1992, Sell's representative contacted the Department again. The Department reiterated its position that it would not waive the penalties and interest. However, the Department did not advise Sell's representative that it had issued

demand notices or tax warrants in this correspondence. Sell apparently was not advised of this development.
    In 1994, Sell finally became aware of the Department's contention that he still had a tax liability. Additional correspondence between Sell's representative and the Department ensued. On February 19, 1997, the Department collected $5313.68 from Sell pursuant to the tax warrants filed five years previously in LaGrange County. On March 13, 1997, Sell filed a claim for refund for this amount alleging that the tax warrants had been filed improperly. On April 18, 1997, the Department denied Sell's refund claim. This original tax appeal ensued. Both parties have moved for summary judgment.See footnote 2

Standard of Review
    This Court reviews the Department's final determinations de novo and is not bound by the evidence or the issues raised at the administrative level. See Ind. Code Ann. § 6-8.1-9-1(d) (West Supp. 1997); Indianapolis Fruit Co. v. Department of State Revenue, 691 N.E.2d 1379, 1382 (Ind. Tax Ct. 1998). Summary judgment is only appropriate where there is no genuine issue of material fact. See Ind. T.R. 56(C); Roehl Transp., Inc. v. Department of State Revenue, 653 N.E.2d 539, 541 (Ind. Tax Ct. 1995). Cross motions for summary judgment do not alter this standard. See Roehl Transp., 653 N.E.2d at 541.

    Sell has been assessed with certain collection costs and fees associated with the issuance of tax warrants. See Ind. Code Ann. § 6-8.1-8-2(b); 6-8.1-8-4(b) (West Supp. 1997). The question for the Court's resolution is whether this assessment was lawful. The Court concludes that it was not.
    In 1989, the Indiana General Assembly amended section 6-8.1-8-2(a) to read:
        Except as provided in IC 6-8.1-5-3, the department must issue a demand     notice for the payment of a tax and any interest or penalties accrued on the tax,     if a person files a tax return without including full payment of the tax or if the     department, after ruling on a protest, finds that a person owes a tax before the     department issues a tax warrant.

(emphasis added).
The plain language of this provision requires the Department to issue a demand notice before it issues a tax warrant. Without a valid demand notice, there can be no valid tax warrant. With no valid tax warrant, there can be no assessment of collection costs and fees associated with the issuance of tax warrants. In this case, the Department concedes that all but two of the demand notices were mailed to the incorrect address (i.e. the St. Louis address). These demand notices are therefore invalid. Consequently, any tax warrants issued concerning a tax liability reflected in those demand notices are invalid. Therefore, any associated collection costs and fees are invalid.
    The two remaining demand notices present greater difficulty. Copies of these demand notices contain the correct address (i.e., the 105 N. Detroit address). However, this address is handwritten, and the rest of the demand notice is obviously

computer generated. In addition, Sell tenders an affidavit in which he states that he never received the demand notices, and that he left a forwarding order with the United States Post Office so that any correspondence sent to the 105 N. Detroit address would have reached him.See footnote 3
    On these facts, the Court finds that there is no evidence that the demand notices were properly mailed. The Department has not designated any evidence from which this Court as fact-finder could reasonably conclude that the demand notice was properly mailed. The fact that the proper address was handwritten on a computer generated form hardly establishes proper mailing. Therefore, the Court concludes that the demand notices were invalid. Consequently, the tax warrants were invalid, thereby making the associated collection costs and fees invalid as well.
    Sell further complains that the Department should be required to refund the $5,313.68 that Sell involuntarily paid because those funds were collected pursuant to an invalid tax warrant. The Court disagrees. If Sell has an outstanding tax liability, the Department is entitled to apply the funds it collected to that tax liability. The Court is aware that there may be situations where the Department's collection efforts are so egregious as to shock the conscience, thus requiring the return of funds unlawfully collected, despite the presence of an unpaid tax liability. This case is not one of them.

    For the reasons stated above, this Court DENIES the Department's motion for

summary judgment. This Court sua sponte REMANDS this cause to the Department for a recalculation of Sell's total tax liability (including interest and penalties) without the collection costs and fees associated with the issuance of the tax warrants. The Department is further ORDERED to apply Sell's payment (both voluntary and involuntary) to that tax liability and to refund any overpayment (with associated interest provided by statute). Because this Court REMANDS this case, Sell's motion for summary judgment is DENIED. The Court retains jurisdiction over this cause and ORDERS the parties to file status reports with the Court thirty-one days from this ORDER indicating whether there are any further issues for the Court's determination. Thereafter, the Court will enter final judgment.

                                Thomas G. Fisher, Judge
                                Indiana Tax Court


Paul S. Ward
Attorney at Law
4321 East 82nd Street, Suite C.
Indianapolis, Indiana 46250

Jeffrey A. Modisett
Attorney General of Indiana
By: Vincent S. Mirkov
Deputy Attorney General
Indiana Government Center South, Fifth Floor
402 West Washington Street
Indianapolis, Indiana 46204-2770

Footnote:     1 Apparently, Sell's representative never communicated the Department's position to him.
Footnote:     2 In an order dated April 9, 1998, this Court stated that it would not consider any issues in Sell's cross motion for summary judgment that were not raised in the Department's summary judgment motion.
Footnote:     3 Of course, receipt of the correspondence by the addressee is not a necessary condition to proof of proper mailing.

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