PETITIONER APPEARING PRO SE: ATTORNEYS FOR RESPONDENT:
LYNN A. CROUSE KAREN M. FREEMAN-WILSON
Brownsburg, IN ATTORNEY GENERAL OF INDIANA
DAVID A. ARTHUR
DEPUTY ATTORNEY GENERAL
INDIANA TAX COURT
LYNN A. CROUSE, )
v. ) Cause No. 49T10-9805-TA-52
INDIANA DEPARTMENT OF )
STATE REVENUE, )
ON APPEAL FROM A FINAL DETERMINATION
OF THE INDIANA DEPARTMENT OF REVENUE
NOT FOR PUBLICATION
December 14, 2000
Lynn Crouse challenges the Indiana Department of State Revenues (Department of Revenue) finding
that Crouse owes controlled substance excise tax (CSET). Crouse raises two issues
for this Courts review:
whether he possessed the marijuana such that he is liable for the controlled
substance excise tax (CSET) on it; and
whether the assessment should be set aside because the assessment period
listed on the notice of jeopardy assessment was not the same date that
the marijuana was confiscated.
FACTS AND PROCEDURAL HISTORY
In November of 1993, Crouse leased a storage unit to store equipment for
his engraving business. In February of 1994, before the term of his
lease expired, he moved his equipment from the storage unit. Thereafter, Crouse
allowed Louis Rodriquez, an acquaintance, to store furniture there.
A few weeks later, Rodriquez called Crouse to tell him that his brother-in-law,
Frank Lozano, would pick up the furniture. On March 16, 1994, Crouse
picked up Lozano from the airport and arranged a motel and rental car
for him. Crouse took Lozano to the motel. On the next
day, March 17, 1994, Crouse picked up Lozano and took him to his
During the time when the above events were occurring, Detective James W. Creekbaum,
the coordinator of a drug task force in Hendricks County, had Crouse under
surveillance. Creekbaum had Crouse under surveillance because Creekbaum knew that Crouse owned
a trophy shop in Brownsburg and Creekbaum had received information about a planned
delivery of 118 pounds of marijuana to a trophy shop in Brownsburg.
On March 17, 1994, Creekbaum and other officers followed Crouse and Lozano to
Upon arriving at Crouses house, the officers found both Crouse and Lozano inside
and asked them where the marijuana was located. The officers executed a
search warrant and found two grams of marijuana in the house. While
Crouse and Lozano were in the officers presence, the officers permitted a conversation
between the two of them. Thereafter, in exchange for an agreement that
Crouse and Lozano would receive immunity from prosecution for their involvement with marijuana
that the police sought, Crouse told the police that there were 2000 pounds
of marijuana located in Crouses storage unit. (Respt Ex. A.)
The detectives, Crouse, and Lozano proceeded to the storage unit where they called
the owner to open the gate. Once the gate was opened, Crouse
took them to the unit and opened it with his key. Therein,
they found the 2000 pounds of marijuana.
On December 2, 1996, the Department of Revenue filed a jeopardy assessment notice
and a demand against Crouse alleging that he owed CSET and a penalty
on 45,945.80 grams of the marijuana found in his storage shed on the
night in question. (States Ex. B.) The Department of Revenue assessed
Crouse with CSET liability of $160,810.30 and a 100% nonpayment penalty of $160,810.30
for a total of $321,620.60. (States Ex. B.) A warrant was
also issued that added accrued interest in the amount of $154.20, a collection
fee of $16,081.03, and a clerks charge of $3.00, for a total of
$337,858.83. (States Ex. C.) Interest was accruing at the rate of
$30.84 per day. (States Ex. C.) On January 15, 1997, Crouse
filed a written protest challenging the Department of Revenues CSET assessment. (States
Ex. D.) Following a hearing, the Department of Revenue issued its letter
of findings denying Crouses protest. (States Ex. E.) Crouse filed a
petition for rehearing and the Department of Revenue denied it. (States Ex.
F & G.) On May 22, 1998, Crouse initiated an original tax
appeal in this Court. Thereafter, this Court conducted a trial and heard
arguments of counsel. Additional facts will be provided as necessary.
ANALYSIS AND OPINION
Standard of Review
This Court reviews final determinations of the Department de novo and is bound
neither by the evidence nor the issues raised at the administrative level.
See Ind. Code Ann. § 6-8.1-5-1(h) (West 2000); Hall v. Department of State
Revenue, 720 N.E.2d 1287, 1289 (Ind. Tax Ct. 1999). Although statutes that
impose tax are to be strictly construed against the State, in Indiana, [t]he
burden of proving that the proposed assessment is wrong rests with the person
against whom the proposed assessment is made. Ind. Code Ann. § 6-8.1-5-1(b);
See also Horrall v. Indiana Dept of State Revenue, 687 N.E.2d 1219, 1221
(Ind. Tax Ct. 1997), review denied; Longmire v. Indiana Dept of State Revenue,
638 N.E.2d 894, 898 (Ind. Tax Ct. 1994). To meet his burden
of proof, the taxpayer must present a prima facie case (one in which
the evidence is sufficient to establish a given fact and which if not
contradicted remains sufficient). Longmire, 638 N.E.2d at 898. Once the taxpayer
has presented a prima facie case, the duty to go forward with the
evidence may shift several times. Id. However, the burden of proof
does not shift. Cf. Thorntown Telephone Co., Inc. v. State Bd of
Tax Comm'rs 629 N.E.2d 962, 965 (Ind. Tax Ct. 1994).
The first issue is whether Crouse possessed the marijuana such that he is
liable for the CSET on it. Crouse asserts that he was not
in possession of the marijuana because he did not know that it was
in his storage unit until Lozano told him about it while the detectives
were at his house on March 17, 1994. Therefore, Crouse argues that
he is not liable for the CSET on the marijuana.
This Court first notes that neither Crouse nor Creekbaum gave accounts of the
events that were highly credible. For example, when Crouse was asked why
he did not tell the police that he did not personally know where
the marijuana was located and that he was merely relaying what Lozano had
told him, Crouse answered that the deal had been made and he
did not feel that he needed to protect himself. (Oral Argument Tr.
at 18-19.) In addition, Crouses lack of suspicion when an acquaintance called
him prior to Lozanos arrival and told him to keep [his] eyes out
does not weigh in favor of his credibility. (Trial Tr. at 32.)
At the Oral Argument, Crouse testified that instead he was told [k]eep
your eyes open and on em. (Oral Argument Tr. at 19.)
His failure to question that directive bodes no better for his credibly than
his failure to question the statement that he first asserted was made to
him. Moreover, during that same conversation, the acquaintance told Crouse that they
were coming into town and Crouse did not question who was coming other
than Lozano. (Trial Tr. at 32.) In addition, Crouses trial testimony
is inconsistent with his position in his Post-trial Reply Brief regarding whether he
knew that there were other individuals at the motel with Lozano. Compare (Petr
Post-trial Reply Br. at 2) (Crouse stated that the reason that Lozano was
impeccably dressed was that three other individuals that were at the motel were
supposed to do the loading and unloading of furniture for Lozano) with (Trial
Tr. at 33, 42, 64) (Crouse testified that no one else was with
Lozano at the motel). Finally, Crouse asserts that he did not know
Lozano before his arrival prior to the day in question. (Trial Tr.
at 57-58.) However, Crouse helped Lozano after they were both released by
the police by giving Lozano money for a plane ticket and driving him
to the airport in St. Louis, Missouri. (Trial Tr. at 40, 43,
59) This is suspect because according to Crouse, Lozano was the one
who stored the marijuana in Crouses storage unit and nearly got Crouse arrested
in connection therewith. (Trial Tr. at 41-42.) When asked about this
at the oral argument, Crouse answered that he was under stress, wanted it
to end, and that he took him to the airport simply because he
asked. (Oral Argument Tr. at 21.) Neither Crouses nor Creekbaums
See footnote testimony
was overwhelmingly convincing. However, upon balancing the credibility of the witnesses, this
Court finds overall that Detective Creekbaums testimony was more credible than Crouses testimony.
This Court now addresses whether Crouse possessed the marijuana found in his storage
shed. The imposition of CSET is governed by Ind. Code Ann Section
6-7-3-5, which provides in relevant part that the tax
is imposed on controlled substances that are:
II. Assessment Date
in Indiana in violation of IC 35-48-4 or 21 U.S.C. 841 through 21
When a taxpayer does not have actual possession in a CSET case, constructive
possession can be shown when a taxpayer shows intent and the capability to
maintain dominion and control over the controlled substance. Hurst v. Department of
Revenue, 721 N.E.2d 370, 374 (Ind. Tax Ct. 1999); Hall v. Department of
State Revenue, 720 N.E.2d 1287, 1290 (Ind. Tax Ct. 1999). [P]roof of
a possessory interest in the premises in which contraband is found is adequate
to show the capability to maintain control and dominion over the contraband.
Carnes v. State, 480 N.E.2d 581, 585 (Ind. Ct. App. 1985)(original emphasis).
The requisite intent to possess entails knowledge of the presence and character of
the substance in question. Mills v. State, 379 N.E.2d 1023, 1029 (Ind.
Tax Ct. 1978). In this regard, a showing of exclusive control over
the premises on which the substance is found is adequate to sustain a
finding of knowing possession. Id. Such exclusive control raises the inference
that the owner had knowledge of the items' presence and character, since it
was probably introduced onto the premises by his agency. Id. However,
such knowledge may not be reasonably inferred where access to and control of
the premises is non-exclusive. Id. In cases of non-exclusive possession, numerous
additional circumstances have been deemed sufficient to allow a trier of fact to
reasonably draw the requisite inference of the defendant's knowledge of the presence and
character of the contraband. Carnes, 480 N.E.2d at 586. Generally, the
additional circumstances tending to buttress such an inference include: 1) incriminating statements
by the petitioner; 2) attempted flight or furtive gestures; 3) a drug manufacturing
setting; 4) proximity of the petitioner to the drugs; 5) drugs
in plain view; and 6) location of contraband in close proximity to items
owned by the petitioner. Hall, 720 N.E.2d at 1290; Hurst, 721 N.E.2d
at 375; Carnes, 480 N.E.2d at 586.
In Hall and Hurst this Court resolved issues involving the taxpayers constructive possession
of marijuana. In both of those cases, this Court concluded that the
facts and evidence did not demonstrate that the taxpayer had dominion and control
over the marijuana. In Hall, Keith Hall and his wife Mary were
assessed with CSET for marijuana found in the basement of their home as
a result of a search by the police. Hall, 720 N.E.2d at
1288, 1291-92. On appeal to this Court the issue was whether Mary
had possessed the marijuana. Id. at 1291. The police found the
marijuana in a basement room that was locked and to which Mary did
not have a key. Id. This Court noted that the evidence,
which showed that Mary constructively possessed the marijuana, included: Mary co-owned the residence
where the marijuana was found; Mary washed laundry near the room where the
marijuana was found, and the smell of marijuana emanated through the house.
Id. at 1292. Nonetheless, this Court held that Mary did not have
knowledge of the marijuana because it was kept behind a closed door that
was locked. See Id. at 1291. Moreover, this Court held that
Mary did not have the ability to maintain dominion or control over the
marijuana. Id. at 1291-92. In Hall, this Court based much
of its decision upon the fact that the door was locked and the
taxpayer did not have a key; thus, she did not have the ability
to access the marijuana.
In Hurst, a truck driver carrying a load of marijuana called the taxpayer,
after which the taxpayer met the truck driver and led the truck driver
back to his house. Hurst, 721 N.E. at 372. After the
truck driver arrived at the taxpayers home, but before the truck driver could
exit the truck, the taxpayer exited his vehicle and started to walk toward
the truck. Id. While the taxpayer was on his way to the
truck, the police arrested him. Id. The driver of the truck
did not have an opportunity to communicate with the taxpayer. Id.
This Court held that there was no evidence that the taxpayer intended to
maintain dominion and control over the marijuana because the taxpayer could only guess
that the truck contained marijuana as he was arrested before he could communicate
with the truck driver and he did not lease or drive the truck.
Id. at 375-76. In both Hall and Hurst this Court indicated
that possessory interests in property were important factors in determining whether there was
constructive possession. See Hurst, 721 N.E.2d at 376; Hall, 720 N.E.2d at
First, this Court looks to whether Crouse had the ability to maintain dominion
and control over the marijuana in the storage unit. This Court concludes
that Crouse did have the ability to maintain dominion and control over marijuana
because he had a possessory interest in the storage unit as the lessee
of it and he possessed a key to it. See Hall, 720
N.E.2d at 1290; Hurst, 721 N.E.2d at 374; Carnes, 480 N.E.2d at 585.
Next, the Court looks to whether Crouse had the intent to maintain dominion
and control over the marijuana. Crouse seems to contend that he did
not have knowledge of the marijuana, and therefore, he could not have intended
to maintain dominion and control over it. Crouse asserts that he shared
possession of the storage unit because he claims that he gave Rodriguez a
key and the gate pass to the storage unit. Crouse asserts that
on March 16th or 17th, 1994, Lozano used the gate pass and key
that Crouse had given to Rodriguez to place the marijuana in Crouses storage
unit without Crouses knowledge. Because Crouse asserts that his possession of the
premises was not exclusive, he claims that his knowledge of the presence of
the marijuana cannot be reasonably inferred. However, Crouse has not presented any
evidence, besides his own testimony, demonstrating that anyone else had access to the
unit. There is no evidence, such as a written sublease, that he
subleased the unit to Rodriquez. Crouse merely claims that Rodriguez gave him
$100 for his end. (Trial Tr. at p. 30.) There is
also no evidence to corroborate Crouses testimony that he gave Rodriguez the pass
and a key, and this Court does not find Crouses testimony credible.
See Milburn v. Milburn, 694 N.E.2d 738, 740 (Ind. Ct. App. 1998) (holding
that [i]n reaching its decision, the trial court must review self-serving and uncorroborated
testimony by the claimant with caution and scrutiny"), trans. denied. Consequently, this
Court holds that Crouse had exclusive possession. Therefore, Crouses exclusive possession of
the premises allows this Court to infer that he had knowledge of the
marijuana and its presence in the storage unit. See Mills, 379 N.E.2d
Even assuming arguendo that Crouse did not have exclusive possession, there are additional
factors that support his knowledge. Crouses knowledge of the marijuana is demonstrated
by the fact that he told the police that the marijuana was located
in his storage unit. See Hall, 720 N.E.2d at 1290; Hurst, 721
N.E.2d at 375. This incriminating statement made by Crouse is additional evidence
that buttresses the inference that he knew that the marijuana was located in
the storage unit. See Hall, 720 N.E.2d at 1290. On the
day in question, Crouse did not tell the police that his identification of
the location of the marijuana was not based upon his personal knowledge.
His assertion, after the assessment of the tax, that he had no personal
knowledge that the marijuana was in his storage unit until Lozano told him
on the day in question, is not convincing to this Court. Therefore,
even if his possession was non-exclusive, the statement to the police telling them
where the marijuana was located demonstrates that he had knowledge of the marijuanas
presence in his storage shed.
The evidence shows that Crouse had the intent and the capability to maintain
dominion and control over the marijuana. Consequently, the evidence presented demonstrates that
Crouse had constructive possession of the marijuana. Therefore, Crouse has not presented
a prima facie case showing that he did not possess the marijuana.
The next issue is whether the assessment should be set aside because the
assessment period listed on the notice of jeopardy assessment was not
the same date that the marijuana was confiscated. Crouse argues that this
defect warrants the reversal of the assessment.
The notice of proposed assessment has various functions. First, it informs the
taxpayer that the Department of Revenue believes that the taxpayer owes tax.
Ind. Code Ann. § 6-8.1-5-1(a) (West 2000). It also serves as prima
facie evidence that the Department of Revenue's claim is valid and places the
burden of proving that the proposed assessment is wrong on the person against
whom the proposed assessment is made. IC § 6-8.1-5-1(b). This has
the practical effect of forcing the taxpayer to come forward with evidence demonstrating
that the claim is invalid. Horrall, 687 N.E.2d at 1221. In
addition, the notice of proposed assessment provides information concerning written protest procedures.
IC § 6-8.1-5-1(c). Finally, the notice begins the running of the sixty-day
period in which a taxpayer must file a written protest or else lose
his right to challenge the assessment. IC § 6-8.1-5-1(c).
Slight factual errors in the notice of proposed assessment given to a taxpayer
may not have an impact on the substantive question of the taxpayers liability.
Horrall, N.E.2d at 1221-22. There is no statutory requirement that a
notice of proposed assessment contain completely accurate information concerning the basis for the
Department of Revenue's belief. Id. at 1222. Nor is there any
evidence that the legislature intended the Department of Revenue to be bound by
factual representations contained in a notice of proposed assessment. Id. However,
as this Court has stated before, there may be certain situations where factual
errors in the notice of proposed assessment will prejudice taxpayers. Id.
In those instances, this Court will undoubtedly have adequate remedies at its disposal
to cure any prejudice, short of holding the notice of assessment invalid.
In Horrall, the taxpayer claimed that his assessment was fatally defective because the
assessment period was a day that the taxpayer could not have been in
possession of the marijuana because he was incarcerated. Id. at 1221. This
Court held that this factual error in the notice of proposed assessment did
not impact the substantive question of the taxpayers liability. Id. at 1221-22.
Therefore, the assessment was valid. Id. at 1222.
Crouse argues that he should not be liable for the tax because the
assessment period was not the same date that the marijuana was discovered and
confiscated by the police. The assessment period on the notice of assessment
was November 27, 1996. (States Ex. B.) The marijuana was discovered and
confiscated on March 17, 1994. The functions set forth in the statute
demonstrate that the notice of proposed assessment is an important procedural device.
Horrall, 687 N.E.2d at 1221. Crouse did not fail to file a written
protest, nor did he present evidence that the preparation of his case was
negatively affected by the error in the date listed on the notice for
the assessment period. As such, Crouse has not demonstrated that he was
prejudiced by the error in the period date listed on the notice of
assessment. Therefore, the factual error in the notice of proposed assessment given
to Crouse does not impact the substantive question of Crouse's tax liability.
See id. at 1221-22. Consequently, Crouses claim that the assessment should be set
aside is without merit.
Because Crouse possessed the marijuana found in his storage unit and the error
regarding the assessment date did not prejudice him, this Court concludes that the
Department of Revenue properly assessed Crouse for the CSET. The Department of
Revenues finding is therefore AFFIRMED in all respects.
This Court notes that Crouse also briefly contended at both his
trial and oral argument that the CSET statute was unconstitutional because he claims
that it is a criminal statute and therefore he was entitled to indigent
counsel. (Trial Tr. at 5-6); (Oral Argument Tr. at 2.) This
Court denied Crouses request for indigent counsel.
Crouse also briefly asserted at the oral argument that the burden should not
be on him to show that the assessment is improper, rather it should
be on the State to show that the assessment was proper. He
bases this argument on changes to the federal law. This Court reminds
Crouse that he is being assessed under Indiana state law, not federal law.
It is up to our state legislature, not this Court, to make
a similar change if it deems it appropriate. This Court follows law
currently in effect that places the burden on the person against whom the
proposed assessment is made to prove that the proposed assessment is wrong.
Ind. Code Ann. § 6-8.1-5-1(b) (West 2000); Horrall v. Indiana Dept of State
Revenue, 687 N.E.2d 1219, 1221 (Ind. Tax Ct. 1997). Therefore, Crouses contention
is without merit. See id.
Creekbaums testimony spun an incredible tale of international drug dealing and
threats against his life that were not corroborated by any other witnesses or
evidence. He also testified that he suspected that a semi-truck that he
spotted during surveillance was carrying the marijuana but he had testified earlier that
he was looking for 118 pounds of marijuana that were headed for Brownsburg.
It would be odd for a police officer to be looking for
the arrival of 118 pounds in such a large vehicle. As such,
his testimony regarding the arrival 118 pounds of marijuana in a very large
vehicle like a semi-truck seems highly unlikely and thus does not weigh in
favor of Creekbaums credibility.
The Department of Revenue correctly points out that the later assessment
date was actually favorable to Crouse because he was taxed at the rate
of $3.50 per gram of marijuana, which was the effective rate in November
of 1996. Respt Post Trial Brief at 4; Respt Ex. B;
Code Ann. § 6-7-3-6 (b)(1)&(2) (West 2000). Prior to July 1, 1996
the taxation rate was $40 per gram for marijuana. IC § 6-7-3-6(a)(1) (West
Supp. 1993); Clifft v. Indiana Department of Revenue, 660 N.E.2d 310, 312 (Ind.
1995). In addition, as the Department of Revenue points out, the date
of 1996 for the assessment period saved Crouse interest charges that he would
have incurred from March 17, 1994, to November 27, 1996. (Respt Post-trial
Brief at 4.)
This Court notes that pursuant to
Ind. Code Ann. Section 6-8.1-10-1(a)
(West 2000) Crouse is liable for all interest that has accrued or will