DEPARTMENT OF STATE REVENUE

04-20080556P.LOF

Letter of Findings Number: 08-0556P

Use Tax

For the Tax Years 2005-2007

ISSUE

Taxpayer protests the imposition of the ten percent negligence penalty.

STATEMENT OF FACTS

Taxpayer is an Indiana taxpayer. After an audit, the Indiana Department of Revenue (Department) issued proposed assessments for use tax, interest, and ten percent negligence penalties for the 2005, 2006, and 2007 tax years. The Department found that Taxpayer had made a variety of purchases on which the Indiana sales tax was not paid at the time of purchase nor was use tax remitted to the Department. Taxpayer requests abatement of the penalty on the use tax assessment for the "6000 gallon nitrogen tank."

DISCUSSION

Taxpayer protests the imposition of the penalty on the use tax assessment for the "6000 gallon nitrogen tank." The Department refers to IC § 6-8.1-10-2.1(a)(3), which provides "if a person... incurs, upon examination by the department, a deficiency that is due to negligence... the person is subject to a penalty."

The Department refers to 45 IAC 15-11-2(b), which states:

Negligence, on behalf of a taxpayer is defined as the failure to use such reasonable care, caution, or diligence as would be expected of an ordinary reasonable taxpayer. Negligence would result from a taxpayer's carelessness, thoughtlessness, disregard or inattention to duties placed upon the taxpayer by the Indiana Code or department regulations. Ignorance of the listed tax laws, rules and/or regulations is treated as negligence. Further, failure to read and follow instructions provided by the department is treated as negligence. Negligence shall be determined on a case by case basis according to the facts and circumstances of each taxpayer.

The Department may waive the negligence penalty as provided in 45 IAC 15-11-2(c), in pertinent part, as follows:

The department shall waive the negligence penalty imposed under IC 6-8.1-10-1 if the taxpayer affirmatively establishes that the failure to file a return, pay the full amount of tax due, timely remit tax held in trust, or pay a deficiency was due to reasonable cause and not due to negligence. In order to establish reasonable cause, the taxpayer must demonstrate that it exercised ordinary business care and prudence in carrying out or failing to carry out a duty giving rise to the penalty imposed under this section.

In this case, Taxpayer incurred an assessment which the Department determined was due to negligence under 45 IAC 15-11-2(b), and so was subject to a penalty under IC § 6-8.1-10-2.1(a). While Taxpayer has argued that it was a misunderstanding of the taxability of the "6000 gallon nitrogen tank," which led to the use tax assessment, Taxpayer has not demonstrated reasonable cause beyond its mere assertion of a misunderstanding. Nonetheless, Taxpayer has not provided sufficient grounds in its protest to justify the Department's waiver of penalty.

FINDING

The taxpayer's penalty protest is denied.

DIN: 20081217-IR-045080922NRA

Composed: May 06,2024 12:27:09AM EDT

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