DEPARTMENT OF STATE REVENUE
Letter of Findings Number: 41-20130139 and 42-20130142
International Fuel Tax Agreement (IFTA) and
International Registration Plan (IRP)
Tax Years: 2009 – 2011
NOTICE: Under IC § 4-22-7-7, this document is required to be published in the Indiana Register and is effective on its date of publication. It shall remain in effect until the date it is superseded or deleted by the publication of a new document in the Indiana Register. The publication of this document will provide the general public with information about the Department's official position concerning a specific issue.
I. International Fuel Tax Agreement – Assessment.
Authority: IC § 6-6-4.1-4(a); IC § 6-6-4.1-14(a); IC § 6-6-4.1-20; IC § 6-6-4.1-24(b); IC § 6-8.1-3-14; IC § 6-8.1-5-4(a); IFTA Articles of Agreement, § R530 (2013); IFTA Articles of Agreement, § R1210 (2013); Procedures Manual, § P510 (2013); IFTA Procedures Manual, § P540 (2013); IFTA Procedures Manual, § P550 (2013).
Taxpayer protests the assessment of additional tax.
Authority: IC § 6-6-4.1-14; IC § 6-8.1-5-1; IC § 9-28-4-6; IRP § 1005 (2013); IRP § 1010 (2013); IRP Audit Procedures Manual, §603 (2012); IRP Audit Procedures Manual, §901 (2012); Lafayette Square Amoco, Inc. v. Indiana Dep't of State Revenue, 867 N.E.2d 289 (Ind. Tax Ct. 2007).
Taxpayer protests the assessment, which was based on the same information that produced the IFTA assessment.
STATEMENT OF FACTS
Taxpayer is a Kentucky motor carrier. Taxpayer chose Indiana as its base jurisdiction for purposes of the International Fuel Tax Association ("IFTA") and the International Registration Plan ("IRP"). The Department of Revenue ("Department") conducted an IFTA and IRP audit, which resulted in the assessment of additional IFTA taxes and IRP fees. Taxpayer protested the proposed assessments. A hearing followed, where Taxpayer supplied further documents to the Department. This Letter of Findings results. Additional facts will be provided as necessary.
I. International Fuel Tax Agreement – Assessment.
The Department conducted an audit and determined that Taxpayer owed additional IFTA fuel taxes for that year. The Department concluded that Taxpayer did not provide the necessary records. Due to the lack of documentation, the Department assessed tax based upon the best information available. Taxpayer protests the Department's assessment of motor carrier fuel taxes pursuant to IFTA.
IFTA is an agreement between various United States jurisdictions and Canada allowing for the equitable apportionment of previously collected motor carrier fuel taxes. The agreement's stated goal is to simplify the taxing, licensing, and reporting requirements of interstate motor carriers such as Taxpayer. The agreement itself is not a statute but was implemented in Indiana pursuant to the authority specifically granted under IC § 6-6-4.1-14(a) and IC § 6-8.1-3-14.
Taxpayer operated trucks in Indiana. As such, it operated on Indiana highways and consumed motor fuel. Therefore, the Taxpayer was subject to motor carrier fuel IFTA taxes. IC § 6-6-4.1-4(a).
Tax assessments of motor carrier fuel tax under IFTA are presumed to be valid. IC § 6-6-4.1-24(b). The taxpayer bears the burden of proving that any assessment is incorrect. Id. The taxpayer has a duty to maintain books and records and present them to the Department for review upon the Department's request. IC § 6-6-4.1-20; IC § 6-8.1-5-4(a).
IFTA Articles of Agreement, § R1210.300 (2013) provides the standard for determining whether a proposed assessment may successfully be challenged by the licensee. "The assessment made by a base jurisdiction pursuant to this procedure shall be presumed to be correct and, in any case where the validity of the assessment is questioned, the burden shall be on the licensee to establish by a fair preponderance of evidence that the assessment is erroneous or excessive." Id.
Taxpayer, as an IFTA licensee, is subject to the rules of IFTA. According to the IFTA Procedures Manual, § P540 (2013) states that:
.100 Licensees shall maintain detailed distance records which show operations on an individual-vehicle basis. The operational records shall contain, but not be limited to:
.005 Taxable and non-taxable usage of fuel;
.010 Distance traveled for taxable and non-taxable use; and
.015 Distance recaps for each vehicle for each jurisdiction in which the vehicle operated.
.200 An acceptable distance accounting system is necessary to substantiate the information reported on the tax return filed quarterly or annually. A licensee's system at a minimum, must include distance data on each individual vehicle for each trip and be recapitulated in monthly fleet summaries. Supporting information should include:
.005 Date of trip (starting and ending);
.010 Trip origin and destination;
.015 Route of travel (may be waived by base jurisdiction);
.020 Beginning and ending odometer or hubodometer reading of the trip (may be waived by base jurisdiction);
.025 Total trip miles/kilometers;
.030 Miles/kilometers by jurisdiction;
.035 Unit number or vehicle identification number;
.040 Vehicle fleet number;
.045 Registrant's name; and
.050 may include additional information at the discretion of the base jurisdiction. (Emphasis added).
The IFTA Procedures Manual at § P550 (2013) provides that:
.100 The licensee must maintain complete records of all motor fuel purchased, received, and used in the conduct of its business.
.200 Separate totals must be compiled for each motor fuel type.
.300 Retail fuel purchases and bulk fuel purchases are to be accounted for separately.
.400 The fuel records shall contain, but not be limited to:
.005 The date of each receipt of fuel;
.010 The name and address of the person from whom purchased or received;
.015 The number of gallons or liters received;
.020 The type of fuel; and
.025 The vehicle or equipment into which the fuel was placed.
The Department's auditor requested that Taxpayer provide daily trip reports to document mileage, which Taxpayer was required to maintain under the IFTA Procedures Manual; however, Taxpayer did not provide this information. Taxpayer was also not able to provide any of the following: beginning/ending of trip odometer readings; actual routes of travel; and fuel receipts. Therefore, Taxpayer's recordkeeping was determined to be inadequate.
Taxpayer's general manager initially stated during the audit that they did not keep records after six months because of DOT rules, apparently referring to 49 C.F.R. § 395.1. However, Taxpayer's owner says that Taxpayer does have the records, but that the records are missing or misplaced due to Taxpayer moving its business location twice in 2010.
During the hearing, Taxpayer provided "trip sheets" to the Department, which Taxpayer claims would back up their original returns. However, the "trip sheets" are still inadequate, as they are reports generated from Taxpayer's own system and are not source documents. They also do not include origins and destinations of trips.
Taxpayer claims that fuel receipts were not provided because they are in boxes somewhere, but they are not readily available as a result of the business's move to a new location. Taxpayer argues that tax was obviously paid at the pump, so even though they cannot produce the receipts, it does not mean that Taxpayer did not pay the taxes.
Part of the requirements of being an IFTA licensee is maintaining records such as fuel receipts per § P550 and detailed distance records with supporting documentation per § P540 of the IFTA Procedures Manual (2013). According to the IFTA Procedures Manual, § P510 (2013) states that:
.100 The licensee is required to preserve the records upon which the quarterly tax return or annual tax return is based for four years from the tax return due date or filing date, whichever is later, plus any time period included as a result of waivers or jeopardy assessments.
.200 Failure to provide records demanded for audit purposes extends the four year record retention requirement until the records are provided.
.300 Records may be kept on microfilm, microfiche, or other computerized or condensed record storage system acceptable to the base jurisdiction. (Emphasis added).
§ P530.100 (2013) goes on to provide that: "Failure to maintain records upon which the licensee's true liability may be determined or to make records available upon proper request may result in an assessment as stated in IFTA Articles of Agreement Section R1200."
IFTA Articles of Agreement, § R1210 (2013) states that:
.100 In the event that any licensee
.005 fails, neglects, or refuses to file a tax return when due;
.010 fails to make records available upon written request by the base jurisdiction; or
.015 fails to maintain records from which the licensee's true liability may be determined,
the base jurisdiction shall proceed in accordance with .200 and .300.
.200 On the basis of the best information available to it, the base jurisdiction shall:
.005 determine the tax liability of the licensee for each jurisdiction and/or
.010 revoke or suspend the license of any licensee who fails, neglects or refuses to file a tax report with full payment of tax when due, in accordance with the base jurisdiction's laws.
Both .200.005 and .200.010 may be utilized by the base jurisdiction. For purposes of assessment pursuant to .100.010 or .100.015, the base jurisdiction must issue a written request for records giving the licensee thirty (30) days to provide the records or to issue a notice of insufficient records. (Emphasis added).
It is Taxpayer's responsibility to maintain specific, detailed, and accurate information concerning its fuel purchases and jurisdiction miles. In the absence of complete source documentation, the Department's best information available audit assessment is reasonable and supported by law and the IFTA Audit Manual procedures. Taxpayer has not "established by a fair preponderance of the evidence that the assessment is erroneous or excessive." IFTA Articles of Agreement, § R1210.300 (2013).
Taxpayer's protest is respectfully denied.
Taxpayer protests the imposition of IRP fees for the tax year 2010. The IRP is a program for registering commercial vehicles that operate within member jurisdictions, including Indiana. The Indiana Code permits Indiana to join the IRP agreement ("the Plan") via IC § 6-6-4.1-14 and IC § 9-28-4-6. IC § 6-6-4.1-14(a) states in relevant part:
The commissioner or, with the commissioner's approval, the reciprocity commission created by IC 9-28-4
may enter into the International Registration Plan, the International Fuel Tax Agreement, or other reciprocal agreements with the appropriate official or officials of any other state or jurisdiction to exempt commercial motor vehicles licensed in the other state or jurisdiction from any of the requirements that would otherwise be imposed by this chapter...
IC § 9-28-4-6 states in relevant part:
(a) The department of state revenue, on behalf of the state, may enter into reciprocal agreements providing for the registration of vehicles on an apportionment or allocation basis with the proper authority of any state, any commonwealth, the District of Columbia, a state or province of a foreign country, or a territory or possession of either the United States or of a foreign country.
(b) To implement this chapter, the state may enter into and become a member of the International Registration Plan or other designation that may be given to a reciprocity plan developed by the American Association of Motor Vehicle Administrators.
Taxpayer operated "units" in Indiana and other states, but Taxpayer selected Indiana as its base jurisdiction, pursuant to Article IV of the Plan (2013). In conjunction with the IFTA audit, the Department conducted an IRP audit under the terms of Articles XV and XVI of the Plan (2013) and the International Registration Plans Audit Procedures Manual.
The Department selected 2010 as the registration year to audit. The Department determined that taxpayer owed additional IRP fees based upon the same documentation that was provided to calculate the IFTA assessment. Taxpayer again argues that it cannot locate the records and that the taxes were already paid. These issues are discussed in detail above.
§ 1005 of the Plan (2013) provides that:
(a) The Base Jurisdiction shall require a Registrant to preserve all Operational Records on which the Registrant's application for apportioned registration is based for a period of 3 years following the close of the Registration year to which the application pertains and to make these records available for examination by the Base Jurisdiction at its request.
(b) Records may be kept on microfilm, microfiche, or other computerized or condensed record storage system acceptable to the Base Jurisdiction. (Emphasis added).
§ 1010 of the Plan (2013) goes on to provide that:
The Base Jurisdiction may impose an assessment on a Registrant that fails to maintain records in accordance with the APM or that fails to provide records within 30 calendar days of the issuance of a written request by the Base Jurisdiction. Such an assessment shall be based on the Base Jurisdiction's estimate of the Registrant's true liability as determined from evidence furnished by the Registrant or available to the Base Jurisdiction from its own or other sources.
Taxpayer supplied the same records to dispute the assessment of additional IRP fees, which are similarly inadequate for the purposes of IRP. Additionally, Taxpayer argues that it should not be subject to 100 percent assessment for inadequate records. § 901 of the International Registration Plan Audit Procedures Manual (2012) provides in relevant part that:
(b) The Registrant must maintain and make available adequate records to support the apportioned registration application; otherwise, the privilege to apportion can be denied.
(c) Any Registrant failing to maintain adequate records from which true liability can be determined is subject to an estimated fee assessment, 100[ percent] fee assessment to the Base Jurisdiction, the application of penalty as prescribed by the laws of the Base Jurisdiction, and/or the cancellation of registration.
(See also §603(a) of the International Registration Plan Audit Procedures Manual (2012))
It is Taxpayer's responsibility to maintain specific, detailed, and accurate information concerning its fuel purchases and jurisdiction miles. In the absence of complete source documentation, the Department's best information available audit assessment and a 100 percent fee assessment is reasonable and supported by law and the Plan and its Audit Procedures Manual. The taxpayer bears the burden of proving that any assessment is incorrect, and Taxpayer has failed to meet that burden. IC § 6-8.1-5-1(c); Lafayette Square Amoco, Inc. v. Indiana Dep't of State Revenue, 867 N.E.2d 289, 292 (Ind. Tax Ct. 2007).
Taxpayer's protest is respectfully denied.
Posted: 07/31/2013 by Legislative Services Agency
Composed: May 25,2016 9:05:19AM EDT
version of this document.