ATTORNEYS FOR PETITIONER: ATTORNEYS FOR RESPONDENT:
TIMOTHY V. HOFFMAN STEVE CARTER
CAMILLE CRIBARO-MELLO ATTORNEY GENERAL OF INDIANA
SANCHEZ & DANIELS Indianapolis, IN
ROBERT B. WENTE
DEPUTY ATTORNEY GENERAL
INDIANA TAX COURT
DAIMLERCHRYSLER CORPORATION, )
v. ) Cause No. 49T10-0307-TA-38
INDIANA DEPARTMENT OF )
STATE REVENUE, )
ORDER ON PARTIES CROSS-MOTIONS
FOR SUMMARY JUDGMENT
NOT FOR PUBLICATION
November 10, 2004
DaimlerChrysler Corporation (DaimlerChrysler) challenges the Indiana Department of State Revenues (Department) final determinations
that it is not entitled to a refund of Indiana gross retail (sales)
tax that it paid in 1999 and 2000 (the years at issue).
The matter is currently before the Court on the parties cross-motions for summary
judgment. The sole issue for the Court to decide is whether, pursuant
to Indianas sales tax statutes, DaimlerChrysler is entitled to a refund of sales
tax that it reimbursed to purchasers of its automobiles pursuant to Indianas Lemon
FACTS AND PROCEDURAL HISTORY
The material facts as they relate to this case are undisputed. DaimlerChrysler
is a Delaware corporation with its principal place of business located in Auburn
Hills, Michigan. DaimlerChrysler manufactures vehicles that are distributed to automobile dealers where
they are offered for sale to the public.
During the years at issue and pursuant to Indianas Lemon Law, DaimlerChrysler bought-back
numerous vehicles from their purchasers because the vehicles were, in some way, impaired.
DaimlerChrysler also reimbursed the purchasers for the sales tax they paid when
they purchased the vehicles.
In 2002 and 2003, DaimlerChrysler timely filed four claims for refund of sales
tax with the Department.
Specifically, DaimlerChrysler sought to recover the sales tax
it reimbursed to the purchasers during the years at issue. The Department
denied DaimlerChryslers claims.
DaimlerChrysler initiated this original tax appeal on July 25, 2003. The Department
filed a motion for summary judgment on April 12, 2004. DaimlerChrysler filed
its motion for summary judgment on May 19, 2004. The Court conducted
a hearing on the parties motions on July 30, 2004. Additional facts
will be supplied as necessary.
STANDARD OF REVIEW
This Court reviews the Departments denial of refund claims de novo. Ind.
Code Ann. § 6-8.1-9-1(d) (West Supp. 2004). Accordingly, the Court is bound
by neither the evidence nor the issues presented at the administrative level.
See Williams v. Indiana Dept of State Revenue, 742 N.E.2d 562, 563 (Ind.
Tax Ct. 2001).
Summary judgment is only appropriate where no genuine issues of material fact exist
and the moving party is entitled to judgment as a matter of law.
Ind. Trial Rule 56(C); Williams, 742 N.E.2d at 563. Cross-motions for
summary judgment do not alter this standard. Id.
DISCUSSION AND ANALYSIS
Because resolution of the issue in this case involves the interpretation of both
Indianas sales tax refund statutes and its Lemon Law statutes, the Court will
briefly highlight the relevant provisions of those statutes before addressing the parties arguments.
Indianas Gross Retail (Sales) Tax Act
Indiana imposes an excise tax, known as the state gross retail (sales) tax,
on retail transactions made within the state. Ind. Code Ann. § 6-2.5-2-1
(West 2004). A person who acquires property in a retail transaction is
liable for the sales tax on the transaction and shall pay the tax
to the retail merchant as a separate added amount to the consideration in
the transaction. Id. The retail merchant collects the tax as an
agent for the state. Id.
A person is entitled to a refund of sales tax from the Department
if: 1) the tax was erroneously or illegally collected by a retail
merchant; 2) the retail merchant remitted the tax to the Department; 3) the
retail merchant did not refund the taxes to the person; and 4) the
person properly applied for the refund with the Department. See Ind. Code
Ann. § 6-2.5-6-13 (West Supp. 2004). A retail merchant is entitled to
a refund of sales tax from the Department if the retail merchant -
who erroneously or illegally collected the tax - makes a refund of the
sales tax to the person who initially paid it. See Ind. Code
Ann. § 6-2.5-6-14 (West 2004) (repealed 2004).
Indianas Motor Vehicle Protection Act
The Indiana Motor Vehicle Protection Act, also known as Indianas Lemon Law, provides,
generally, that if a motor vehicle suffers from a nonconformity within its first
eighteen months or 18,000 miles, the manufacturer must correct the nonconformity. See
Ind. Code Ann. § 24-5-13-8 (West 2004). See also Ind. Code Ann.
§ 24-5-13-6 (West 2004) (defining nonconformity); Ind. Code Ann. § 24-5-13-7 (West 2004)
(defining the term of protection). If the nonconformity cannot be corrected, the
buyer is entitled to a replacement vehicle or a refund. Ind. Code
Ann. § 24-5-13-10 (West 2004).
If the buyer elects to receive a refund, the manufacturer must refund the
full contract price of the vehicle, including all credits and allowances for any
trade-in vehicle and less a reasonable allowance for use. Ind. Code Ann.
§ 24-5-13-11(a) (West 2004). In addition, the manufacturer must also reimburse the
purchaser for the following costs:
(1) All sales tax.
(2) The unexpended portion of the registration fee and excise tax that has
been prepaid for any calendar year.
(3) All finance charges actually expended.
The cost of all options added by the authorized dealer.
Id. at (c).The Parties Arguments
All responsibilities and
liabilities under the Lemon Law rest solely with the manufacturer of the vehicles.
Ind. Code Ann. § 24-5-13-24 (West 2004). Indeed, [n]othing in [the
Motor Vehicle Protection Act] imposes any liability on a dealer or creates a
cause of action by a consumer against a dealer, and a manufacturer may
not, directly or indirectly, expose any franchised dealer to liability for a vehicles
Both parties admit that Indiana Code § 6-2.5-6-14 is silent with respect to
whether a manufacturer is entitled to a refund of sales tax on a
Lemon Law buyback. Consequently, the parties debate focuses on how, in light
of Indianas Lemon Law, that silence should be construed to mean that manufacturers
are - or are not - entitled to receive a refund under that
DaimlerChrysler asserts that the intent of Indianas Lemon Law is to abrogate the
initial sale and place all parties in pre-purchase status. (Petr Cross-Mot. for
Summ. J. at 5 (stating that [j]ust as the consumers are put in
their pre-purchase position by receiving a full refund of incidental costs, including sales
tax, [DaimlerChrysler] should also be placed in that same position).) (See also
Oral Argument Tr. at 4-5, 9.) To support this assertion, DaimlerChrysler explains
that because automobile dealers cannot be sued under Indianas Lemon Law,
it basically says to a manufacturer . . . that if you produce
a car that is not up to snuff, you must buy it back,
including the sales tax, as if you were the one that directly sold
th[e] car to the consumer.
(Oral Argument Tr. at 3-4 (emphasis added).) As a result, DaimlerChrysler continues,
under the Lemon Law, manufacturers step into the shoes of the dealers who,
as retail merchants, actually collected and remitted the sales tax to the Department
in the first instance. (See Petr Cross-Mot. for Summ. J. at 5
(citing Chrysler Fin. Co., LLC v. Indiana Dept of State Revenue, 761 N.E.2d
909 (Ind. Tax Ct. 2002), review denied.) Because DaimlerChrysler stands in the
same shoes as its dealers, it is a retail merchant engaged in selling
at retail and, therefore,  entitled to a refund of sales tax it
paid to consumers. (Petr Cross-Mot. for Summ. J. at 4.)
The Courts Holding
In contrast, the Department argues that the intent behind Indianas Lemon Law is
not to return all involved to a pre-purchase status. Instead, the Department
argues that it is clear, by the terms of Indianas Lemon Law, that
the legislature intended for the manufacturers reimbursements of sales tax, registration fees and
excise taxes, finance charges, and the costs of all options added by the
authorized dealer, to be penal in nature. As a result, the refund
provisions of Indiana Code § 6-2.5-6-13 and § 6-2.5-6-14 do not contain any
language that would allow a manufacturer to recoup expenses that the legislature intended
. . . as a penalty for introducing defective goods into the stream
of commerce. (Respt Br. In Supp. of [its] Mot. for Summ. J.
As the parties have agreed, resolution of this case hinges on the
intent behind Indianas Lemon Law. This presents a question of statutory construction.
The primary goal of statutory construction is to ascertain the legislatures intent.
Johnson County Farm Bureau Co-op Assn, Inc. v. Indiana Dept of State
Revenue, 568 N.E.2d 578, 580 (Ind. Tax Ct. 1991), affd, 585 N.E.2d 1336
(Ind. 1992). To do so, the Court examines the language of the
statute and its context, history, subject matter, and purpose. See id. at
581. See also Sangralea Boys Fund, Inc. v. State Bd. of Tax
Commrs, 686 N.E.2d 954, 956-58 (Ind. Tax Ct. 1997), review denied.
As Indianas Court of Appeals has explained:
[l]emon [l]aws have been enacted across the country in response to the problem
that once the buyer has bought a lemon, the dealer or manufacturer, for
any number of reasons, is either unwilling or unable to take all steps
necessary toward giving the buyer what the dealer and the manufacturer promised:
a defect free, safe and reliable automobile reasonably worth its purchase price.
Gen. Motors Corp. v. Zirkel, 602 N.E.2d 1069, 1071 (Ind. Ct. App. 1992)
(internal quotation and citation omitted), revd on other grounds by 613 N.E.2d 30
(Ind. 1993). Thus, lemon laws are policy-driven statute[s] aimed at the long-standing
problems resulting from the unequal playing field between consumers and manufacturers. Church
v. Chrysler Corp., 585 N.W.2d 685, 689 (Wis. Ct. App. 1998).
Consumer protection statutes like Indianas Lemon Law are to be liberally construed in
favor of the consumer. See, e.g., Johnson v. Scandia Assocs., Inc., 641
N.E.2d 51, 56 (Ind. Ct. App. 1994) (stating that [i]mplied warranties are imposed
by operation of law for the protection of the consumer, and they must
be liberally construed in favor of the consumer), revd on other grounds by
717 N.E.2d 24 (Ind. 1999); Ind. Code Ann. § 24-5-0.5-1 (West Supp. 2004)
(providing that because the statutes contained within Indianas Deceptive Consumer Sales Act serve
to protect consumers, they shall be liberally construed).
It is clear from its language that the primary purpose of Indianas Lemon
Law is to make consumers whole by returning them to pre-purchase status.
A.I.C. § 24-5-13-11. Tangential to this purpose, however, is the goal of
getting vehicle manufacturers to improve quality control. DaimlerChryslers position that manufacturers, like
consumers, should be allowed to return to pre-purchase status defeats this goal.
Lemon laws must have teeth in order to be effective. See Royster
v. Toyota Motor Sales, USA, Inc., 750 N.E.2d 531, 535 (Ohio 2001) (stating
that to work well, lemon laws need a harsh remedy at a time
certain). Consequently, the fact that a manufacturer may experience some financial discomfort
as a result of its Lemon is inconsequential. Collins v. Mullinax East,
Inc., 795 N.E.2d 68, 72 (Ohio Ct. App. 2003). Under Indianas Lemon
Law, the consumer gets back exactly what it paid as a result of
the transaction. The manufacturer, however, must pay out more than it ever
received originally. This financial discomfort is intended for a reason: it
provides the incentive - or the teeth - for manufacturers to improve the
quality of their product.
In light of this, DaimlerChryslers argument that it has stepped into the shoes
of its dealers is incorrect for two reasons. First, DaimlerChryslers reliance on
this Courts holding in Chrysler Financial is misplaced. In that case, this
Court held that when several automobile dealers assigned to Chrysler all their rights
and interests in installment contracts with their consumers, they also assigned their statutory
rights to sales tax deductions under Indianas Bad Debt statute. Chrysler Fin.
Co., LLC v. Indiana Dept of State Revenue, 761 N.E.2d 909, 911-13 (Ind.
Tax Ct. 2002), review denied. Specifically, this Court explained that
It is a well-settled principle of contract law that a valid assignment gives
the assignee neither greater nor lesser rights than those held by the assignor.
In other words, assignee stands in the shoes of the assignor.
Therefore, it does not matter whether Chrysler actually is a retail merchant, or
whether it was the person who paid or owed the sales tax; as
the assignee, Chrysler stands in the shoes of the Dealers, and the parties
do not dispute that the Dealers are retail merchants, or that the sales
tax was paid. The Dealers assigned their rights to Chrysler when they
executed the contracts. Because Chrysler stands in the Dealers shoes, Chrysler has
a right to the sales tax deduction under the Bad Debt Statute.
Id. at 914 (internal citations, quotations, and footnote omitted). CONCLUSION
DaimlerChrysler has taken the holding of Chrysler Financial out of context. In
that case, there was an actual assignment of rights between the parties from
which another right subsequently flowed. In this case, there is no assignment
of any rights or interests from the dealers to DaimlerChrysler. There being
no assignment in the first instance, there cannot be a subsequent right which
flows therefrom. In other words, DaimlerChrysler does not step into the shoes
of the dealer just because it wants to.
Even assuming the dealers assigned a right to DaimlerChrysler in this case, under
Indiana Code § 6-2.5-6-13 and § 6-2.5-6-14 they could only assign the right
to a refund if the sales tax was either erroneously or illegally collected
in the first instance. Such is not the case here: at
the point and date of sale, the sales tax was properly and legally
collected. Allowing DaimlerChrysler a refund of sales tax reimbursed under the terms
of the Lemon Law expands the language of the refund statutes to include
situations that surpass retail transactions between a retail merchant and a buyer.
For the above stated reasons, DaimlerChrysler is not entitled to a refund of
sales tax that it reimbursed purchasers of its vehicles under Indianas Lemon Law.
Consequently, the Court GRANTS summary judgment in favor of the Department and
SO ORDERED this 10th day of November, 2004.
Thomas G. Fisher, Judge
Timothy V. Hoffman
SANCHEZ & DANIELS
333 West Wacker Drive, Suite 500
Chicago, IL 60606
Attorney General of Indiana
By: Robert B. Wente
Deputy Attorney General
Indiana Government Center South, Fifth Floor
402 West Washington Street
Indianapolis, IN 46204-2770
DaimlerChrysler filed four claims for refund of sales tax for the
following periods: 1) October thru December of 1999 in the amount of
$25,000; 2) January thru March of 2000 in the amount of $26,500; 3)
April thru September of 2000 in the amount of $36,060.93; and 4) July
thru December of 2000 in the amount of $29,000. (
See Respt Designation
of Evidence  In Supp. of [Its] Mot. for Summ. J. at Exs.
3 - 10.)
In conjunction with its sales tax, Indiana also imposes a use
tax on goods that are used, stored or consumed within the state.
See Ind. Code Ann. § 6-2.5-3-2 (West 2004). Indianas use tax complements
Indianas sales tax in that it ensures that non-exempt retail transactions (particularly out-of-state
retail transactions) that escape sales tax liability are nevertheless taxed. See USAir,
Inc. v. Indiana Dept of State Revenue, 623 N.E.2d 466, 46869 (Ind. Tax
Ct. 1993). The responsibility of payment and collection of use tax is
similar to that of the sales tax. See Ind. Code Ann. §
6-2.5-3-6(c) (West 2004). Use tax, however, is not at issue in this
To hold otherwise, DaimlerChrysler complains, penalizes DaimlerChrysler and results in a
windfall to the Department: [w]ithout granting a refund of the sales tax
amount, it is as if that amount has been paid twice - first
by the dealer, who remitted the amount pursuant to the sale of the
vehicle, and second by [DaimlerChrysler], who is mandated by statute to refund the
sales tax amount to the consumer. (Petr Cross-Mot. for Summ. J. at
The Court notes that when DaimlerChrysler filed its initial complaint in
this case, it also alleged that the Departments denial of its claims for
refund violated the U.S. and Indiana Constitutions, constituted unjust enrichment and conversion, and
that it (DaimlerChrysler) was equitably subrogated to the rights of the purchasers of
its vehicles. (
See Petr Pet. for Judicial Review at 4-11.) The
Department seeks summary judgment with respect to these issues. (See Respt Mot. for
Summ. J.; Respt Br. In Supp. of [its] Mot. for Summ. J. at
13-16.) DaimlerChrysler admits that these issues can be determined as a matter
of law. (Petr Cross Mot. for Summ. J. at 2; Petr Resp.
to [Respt] Mot. for Summ. J. at 5.)
Statutes are clothed with the presumption of constitutionality until clearly overcome by a
contrary showing. State Bd. of Tax Commrs v. Town of St. John,
702 N.E.2d 1034, 1037 (Ind. 1998). Based on the parties briefs filed
with Court, summary judgment is GRANTED in favor of the Department and AGAINST
DaimlerChrysler with respect to these additional issues.