ATTORNEYS FOR PETITIONER: ATTORNEYS FOR RESPONDENT:
DAVID S. RICHEY KAREN M. FREEMAN-WILSON
RANDOLPH G. HOLT ATTORNEY GENERAL OF INDIANA
PARR RICHEY OBREMSKEY Indianapolis, IN
Indianapolis, IN JOEL SCHIFF
DEPUTY ATTORNEY GENERAL
INDIANA TAX COURT
CARROLL COUNTY RURAL ELECTRIC )
MEMBERSHIP CORPORATION, )
v. ) Cause No. 49T10-0003-TA-32
INDIANA DEPARTMENT OF )
STATE REVENUE, )
ON APPEAL FROM A FINAL DETERMINATION OF THE
INDIANA DEPARTMENT OF STATE REVENUE
August 10, 2000
Petitioner Carroll County Rural Electric Membership Corporation (REMC) challenges the Indiana Department of
State Revenues (Department) final determination granting REMCs protest for tax years 1995 through
1997 (tax years) but stating that REMCs publication in the future would be
subject to the gross retail (sales) and use taxes. In this original
tax appeal, the Department presents the following issue for the Courts consideration:
whether the Court has jurisdiction to hear a taxpayers appeal from a final
determination where the Department sustains the taxpayers protest but announces that the taxpayers
purchases no longer will be exempt from the gross retail and use taxes.
FACTS AND PROCEDURAL HISTORY
REMC is an Indiana rural electric membership corporation. Each month, REMC purchases
a publication titled the Electric Consumer and distributes it to all of its
members. Following an audit, the Department proposed assessments of deficiencies in REMCs
use taxes for the tax years based upon REMCs use of the Electric
Consumer. REMC protested the proposed assessment, contending that its publication is a newspaper
that qualifies it for exemption from gross retail and use taxes pursuant to
Ind. Code Ann. § 6-2.5-5-17 (West 2000) (newspaper exemption).
The Department conducted
an administrative hearing on April 28, 1999. On January 14, 2000, the
Department issued a Letter of Findings stating in part:
Taxpayers publication does not meet all of the regulatory requirements to be considered
a newspaper exempt from the gross retail tax.
In the past, the Indiana Department of Revenue has allowed Taxpayers publication exemption
from the gross retail tax as a newspaper. Since the Indiana Department
of Revenue is now changing its position, the imposition of the gross retail
[and use] tax[es] on Taxpayers publication will be prospective only.
(Tax Appeal Pet., Ex. 1 at 7.) ANALYSIS AND OPINION
On March 10, 2000, REMC filed an original tax appeal with this Court
seeking reversal of the Departments determination that its future purchases and use of
the Electric Consumer would not qualify for the newspaper exemption. On May
17, 2000, the Department filed a motion to dismiss, along with a brief
in support thereof. REMC, on May 25, 2000, responded with a motion
and brief opposing dismissal of the action. A hearing on the motion
to dismiss was conducted on June 12, 2000, at the conclusion of which
the Court took the matter under advisement.
The Department moves to dismiss this original tax appeal for lack of subject
matter jurisdiction pursuant to T.R. 12(B)(1). Also, the Department asserts that REMC
failed to state a claim upon which relief can be granted pursuant to
T.R. 12(B)(6). The Court will consider each claim in turn.
I. Subject Matter Jurisdiction
Every action has three jurisdictional elements: (1) jurisdiction of the subject matter;
(2) jurisdiction of the person; and (3) jurisdiction of the particular case.
See Schafer v. Sellersburg Town Council, 714 N.E.2d 212, 215 (Ind. Ct. App.
1999), trans. denied. Subject matter jurisdiction is the power of a
court to hear and determine the general class of cases to which the
proceedings before it belong. Musgrave v. State Bd. of Tax Commrs, 658
N.E.2d 135, 138 (Ind. Tax Ct. 1995). Whether a court has subject
matter jurisdiction depends on whether the type of claim advanced by the petitioner
falls within the general scope of authority conferred upon the court by constitution
or statute. Id.
The general scope of authority conferred upon the Tax Court is governed by
Ind. Code Ann. § 33-3-5-2(a)(1) (West 1996). This section provides that the
Tax Court is a court of limited jurisdiction, having exclusive jurisdiction over any
case that arises under the tax laws of [Indiana] and that is an
initial appeal of a final determination made by the Department. REMCs appeal
meets both jurisdictional prerequisites. First, REMC challenges the Departments assessment and collection
of Indianas gross retail and use taxes. Second, REMC appeals initially from
a final determination issued by the Department. Thus, REMCs appeal falls within
the general scope of authority granted to this Court.
The Department also raises the ripeness issue. Whether a claim is ripe
for review concerns the Courts subject matter jurisdiction.
Cf. Wax N Works
v. City of St. Paul, 213 F.3d 1016, 1020 (8th Cir. 2000) (noting
that district court should have dismissed claim pursuant to Fed. R. Civ. P.
12(b)(1) because case was not ripe for adjudication). Ripeness relates to the
degree to which the defined issues in a case are based on actual
facts rather than on abstract possibilities, and are capable of being adjudicated on
an adequately developed record. Indiana Dept of Envtl. Management v. Chemical Waste
Management, Inc., 643 N.E.2d 331, 336 (Ind. 1994).
See footnote As stated in
Law Dictionary 1328 (7th ed. 1999), ripeness is the circumstance existing when a
case has reached, but has not passed, the point when the facts have
developed sufficiently to permit an intelligent and useful decision to be made.
Cf. Meinders v. Weber, 604 N.W.2d 248, 263 (S.D. 2000) (Ripeness involves
the timing of judicial review and the principle that judicial machinery should be
conserved for problems which are real and present or imminent, not squandered on
problems which are abstract or hypothetical or remote.) (citation and internal quotation omitted).
When ruling upon a ripeness challenge, the Court must consider: (1)
the fitness of the issues for judicial decision; and (2) the hardship to
the parties of withholding court consideration. Rene ex rel. Rene v. Reed,
726 N.E.2d 808, 822 (Ind. Ct. App. 2000) (citation omitted).
The Court finds that the present case is ripe for review.
REMC claims that the Department erroneously found that its publication, the Electric Consumer,
does not meet the regulatory requirements to be considered a newspaper exempt from
the gross retail and use taxes. In reaching this decision, the Department
first listed the regulatory requirements found in Ind. Admin. Code tit. 45, r.
2.2-5-26 (1996), which in relevant part provides:
(a) General rule. In general, sales of all publications irrespective of format are
taxable. The exemption provided by this rule is limited to sales of
(b) Application of general rule. For purposes of the state gross retail tax,
the term newspaper means only those publications which are:
(1) commonly understood to be newspapers;
(2) published for the dissemination of news of importance and of current interest to
the general public, general news of the day, and information of current events;
(3) circulated among the general public;
(4) published at stated short intervals;
(5) entered or are qualified to be admitted and entered as second class mail
matter at a post office in the county where published; and
(6) printed for resale and are sold.
(e) Publications issued monthly, bimonthly, or at longer or irregular intervals are generally not
considered to be newspapers.
The Department then proceeded to apply each of the six elements to the
facts as regards the content, publication, circulation and distribution of the
For example, the Department found that subsection (b)(3) was not met because
the Electric Consumer was primarily circulated via automatic mailings to REMCs members.
The Department concluded that, while members of the general public could subscribe to
the publication, this fact was not effectively publicized . . . and there
is no evidence that very many people actually pay the subscription rate to
obtain the publication. (Tax Appeal Pet., Ex. 1 at 6.)
Thus, the Department determined that the Electric Consumer does not circulate among the
general public. As a second example, the Department found that the Electric
Consumer is issued monthly, a fact inconsistent with a newspapers definition pursuant to
subsection (b)(4) and section (e). A monthly publication interval, the Department
observed, is too long an interval for it to be considered a newspaper.
Rather, monthly publications are generally considered magazines and not entitled to the
newspaper exemption from the gross retail [and use] tax[es]. (Tax Appeal Pet., Ex.
1 at 7.)
The substantive issue on appeal is simple and straightforward: whether REMCs publication
qualifies as a newspaper. The Department considered the facts sufficiently developed for
purposes of deciding whether the Electric Consumer met the regulatory definition of a
newspaper. Further, the Department was satisfied with the factual development of the
case before it to the extent that it announced that the gross retail
and use taxes would prospectively apply to REMCs purchases and use of the
Having reviewed the record in this case, the Court finds
that a sufficient factual basis for REMCs challenge exists. Therefore, the Court
concludes that the substantive issue before it is fit for judicial decision.
In addition, it would be a burdensome waste of REMCs resources to deny
hearing its appeal on ripeness grounds. The Department suggests that REMC should
protest and seek to enjoin collection of the gross retail and use taxes
or, in the alternative, seek a refund. However, as counsel for REMC
makes clear, either option would be cumbersome, inefficient and unsatisfactory:
And so [REMC is] left in a dilemma as to . . .
whether [it] should . . . collect and pay the [gross retail] tax
or remit the use tax, as the case may be, and whether [REMC
is] going to be subject to penalties and interest for failure to pay
that if [it] decide[s] not to, or go through the burdensome process of
collecting, paying it, [and] asking for a refund. In the case of
[gross retail] tax, the publisher wouldnt be entitled to ask for a refund
until the consumer asked for a refund from them then.
(Hrg Tr. at 9.)See footnote This potential burden is too great a hardship
on REMC and its customers.II. Jurisdiction Over the Particular Case
In light of this conclusion and because the facts have been sufficiently developed
and the substantive issue is fit for judicial decision, the Court finds that
REMCs original tax appeal is ripe for review. The Court has subject
matter jurisdiction over this case.
The Department also based its motion to dismiss on an alleged failure of
REMC to state a claim upon which relief can be granted under T.R.
12(B)(6). While the Department appears to incorrectly apply its ripeness argument to
this standard, its motion can be read to challenge the Courts jurisdiction over
the particular case. Jurisdiction over the particular case refers to the right,
authority, and power to hear and determine a specific case within the class
of cases over which a court has subject matter jurisdiction. Adler v.
Adler, 713 N.E.2d 348, 352 (Ind. Ct. App. 1999) (quoting Harp v. Indiana
Dept of Highways, 585 N.E.2d 652, 659 (Ind. Ct. App. 1992)). Whether
a court has jurisdiction to hear a specific case depends upon the existence
of particular facts contained within the case. See id.; see also Dixon
v. Siwy, 661 N.E.2d 600, 605 n.10 (Ind. Ct. App. 1996) (discussing key
distinctions between subject matter jurisdiction and jurisdiction over the particular case). The
appropriate means for challenging a courts jurisdiction over a particular case is a
T.R. 12(B)(6) motion. See Browning v. Walters, 620 N.E.2d 28, 31 (Ind.
Ct. App. 1993).
Ind. Code Ann. § 33-3-5-11(a) (West 1996) states If a taxpayer fails to
comply with any statutory requirement for the initiation of an original tax appeal,
the tax court does not have jurisdiction to hear the appeal. Thus,
if REMC had failed to comply with a statutory prerequisite before filing its
appeal, the Court would lack jurisdiction to consider this particular case. In
the present case, the Department claims that REMC has skipped all of the
statutory steps because no tax has been assessed, so that there is no
tax for REMC to protest or enjoin collection of and no tax paid
for which a refund can be sought. As far as future protests or
refund claims are concerned, the Department is correct. However, future protests or
refund claims are not at issue in this case. They do not
concern whether the Court has jurisdiction over the case currently before it.
REMC has completed all the statutory requirements to bring this appeal. Therefore,
the Department has failed to demonstrate that the Court lacks jurisdiction over this
For the aforementioned reasons, the Departments motion to dismiss is DENIED.
Indiana imposes an excise tax, known as the state gross retail tax,
on retail transactions made in the state.
See Ind. Code Ann. §
6-2.5-2-1(a) (West 2000). A complementary excise tax, the use tax, is imposed
on tangible personal property stored, used or consumed in Indiana. See id.,
§ 6-2.5-3-2(a). Section 6-2.5-5-17 provides Sales of newspapers are exempt from the
state gross retail tax. Under Ind. Code Ann. § 6-2.5-3-4(a)(2) (West 2000),
tangible personal property is exempt from the use tax if it is acquired
in a transaction that is wholly or partially exempt from the gross retail
tax and the property is being used, stored, or consumed for the purpose
for which it was exempted. Thus, the newspaper exemption applies to both
the gross retail and use taxes. While use tax was assessed in
this case, the Courts opinion will refer to both gross retail and use
The Court may not issue advisory opinions.
See INS Investigations Bureau,
Inc. v. Lee, 709 N.E.2d 736, 742 (Ind. Ct. App. 1999), trans. denied;
Community Hosps. of Ind., Inc. v. Estate of North, 661 N.E.2d 1235, 1239
(Ind. Ct. App. 1996), trans. denied. But cf. Indiana Dept of Envtl.
Management v. Chemical Waste Management, Inc., 643 N.E.2d 331, 337 (Ind. 1994) (noting
that Supreme Court can and does issue decisions which are, for all practical
purposes, advisory opinions). A decision in a case that is not ripe
for adjudication would effectively be an advisory opinion beyond this Courts subject matter
jurisdiction. Cf. Edwards v. Schuh, 5 S.W.3d 829, 831 (Tex. App. 1999)
(A court has no jurisdiction to render an advisory opinion on a controversy
that is not yet ripe or to decide a case on speculative, hypothetical
or contingent fact situations.).
For a thorough review of the ripeness doctrine in the federal context,
Wright et. al, Federal Practice and Procedure §§ 3532-3532.6 (1984 &
Supp. 2000). Several sources shape contemporary ripeness decisions at the federal level, starting
with the need for an actual case or controversy under U.S. Const. art.
III, § 2. See id., § 3532.1. In deciding ripeness
claims, other prudential considerations include: (1) the need to defer to other
branches of government; (2) avoidance of unnecessary constitutional decisions; (3) comity to state
institutions; and (4) statutory severability. See id. The Indiana Supreme Court in
Chemical Waste Management observed that the Indiana Constitution lacks the cases and controversies
language of U.S. Const. art. III, § 2 but that the separation of
powers language in [Ind. Const. art. III, § 1] fulfills an analogous function
in our own judicial activity, or lack thereof. 643 N.E.2d at 336-37.
This Court, in
Emmis Publishing Corp. v. Indiana Department of State Revenue,
612 N.E.2d 614, 623 (Ind. Tax Ct. 1993), reconsideration denied, held that subsection
(b)(2) is null and void because it unconstitutionally discriminates on the basis of
the content of speech.
The Department appears to view the facts in two polarized perspectives.
In the Letter of Findings, it cites to specific facts that bring REMCs
publication outside the regulatory definition of a newspaper. In contrast, during the
hearing on its motion to dismiss, the Department argues that there are no
specific facts . . . . [The Department is] putting out in
[its Letter of Findings] what would be characterized as maybe dicta . .
. that could be used in the future . . . .
[I]ts not a determination on the actual facts of the case . .
. . (Hrg Tr. at 5-6.) In other words, the Department
seems to say that the Letter of Findings in this case should be
viewed as a hypothetical that puts REMC on notice that it may be
subject to the sales and use taxes in the future. This is
absurd. Either the facts are or are not sufficiently developed for determining
that REMCs publication is a newspaper. If the Department was offering a
hypothetical or was truly leaving the door open as to whether the publication
in question would in the future be deemed a newspaper, it could and
should have done so in more certain terms. In this case, the
Department applied the facts to the regulations and firmly concluded that the publication
did not qualify as a newspaper. Moreover, the Letter of Findings is
intended to provide the public with guidance on the Departments official position concerning
specific issues. (Tax Appeal Pet., Ex. 1 at 4.) The publication
of the Letter of Findings is a prerequisite for the Department before it
can change its position as to the interpretation of a tax, where the
change would increase the taxpayers liability.
See Ind. Code Ann. § 6-8.1-3-3(b)
(West 2000). It is clear from the Letter of Findings that REMCs
protest was sustained only because the Departments position represented a change in its
interpretation of the sales and use taxes that would increase REMCs tax liability.
Thus, the Department cannot now be heard to argue that the Letter
of Findings was insignificant or had no meaningful impact; it was much more
than a hypothetical.
See generally Ind. Code Ann. §§ 6-2.5-6-13 & -14 (West 2000) (listing
prerequisites for refunds to persons and retail merchants); Ind. Code Ann. §§ 6-8.1-5-1
& -9-1 (West 2000) (describing process for protesting assessments and filing refund claims);
and Ind. Code Ann. §§ 6-8.1-10-1 & -2.1 (describing interest and penalty liability