DEPARTMENT OF STATE REVENUE
Letter of Findings Number: 04-20130160P
For Tax Year 2009, 2010, 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 It shall remain in effect until the date it is superseded or deleted by the publication of a new document in the Indiana Register.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. Tax Administration–Penalty.
Taxpayer protests the imposition of a ten percent penalty.
STATEMENT OF FACTS
Taxpayer is a business with operations in Indiana. The Indiana Department of Revenue ("Department") determined that Taxpayer had not timely remitted its use tax for the tax years 2009, 2010, and 2011. The use tax arose from Taxpayer's delivery drivers purchasing fuel in Indiana tax exempt without Taxpayer's knowledge. The Department issued proposed assessments for a ten percent negligence penalty and interest. Taxpayer protested the imposition of the penalty. An administrative hearing was held and this letter of findings results. Further facts will be supplied as required.
I. Tax Administration–Penalty.
The Department issued proposed assessments for penalty on failure to timely remit use tax for 2009, 2010, and 2011. Taxpayer protests that it had a fully staffed Sales Tax Department with four full time employees to ensure compliance with the 31 states in which taxpayer operates. Taxpayer also states that it no longer operates a fleet of delivery trucks so that the non-taxable fuel will not be purchased in Indiana. Taxpayer protests the imposition of penalty and requests a waiver of that penalty.
The Department refers to IC § 6-8.1-10-2.1, which states in relevant parts:
(a) If a person:
. . .
(5) is required to make a payment by electronic funds transfer (as defined in IC 4-8.1-2-7
), overnight courier, or personal delivery and the payment is not received by the department by the due date in funds acceptable to the department;
the person is subject to a penalty.
. . .
(d) If a person subject to the penalty imposed under this section can show that the failure to file a return, pay the full amount of tax shown on the person's return, timely remit tax held in trust, or pay the deficiency determined by the department was due to reasonable cause and not due to willful neglect, the department shall waive the penalty.
. . . .
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 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.
The Department considered Taxpayer's failure to timely remit use tax constituted negligence and so imposed penalty under IC § 6-8.1-10-2.1(a). As a result of the protest process, Taxpayer has affirmatively established that it acted reasonably in its efforts to comply with Indiana's tax filing requirements, as required by 45 IAC 15-11-2
(c). The penalty will be waived. However, the Department takes this opportunity to notify Taxpayer that it is now aware of its use tax obligations and that penalty may be imposed if this scenario occurs again.
Taxpayer's protest is sustained.
Posted: 08/28/2013 by Legislative Services Agency
Composed: Apr 21,2014 6:02:55AM EDT
version of this document.