NOTICE: IC § 6-8.1-3-3.5 and IC § 4-22-7-7 require the publication of this document in the Indiana Register. This document provides the general public with information about the Department's official position concerning a specific set of facts and issues. This document is effective as of its date of publication and remains in effect until the date it is superseded or deleted by the publication of another document in the Indiana Register. The "Holding" section of this document is provided for the convenience of the reader and is not part of the analysis contained in this Letter of Findings.

Sole proprietor did not establish that his failure to remit sales tax was due to reasonable cause and not due to negligence.

I. Tax Administration- Negligence Penalty.

Authority: IC § 6-2.5-2-1; IC § 6-8.1-5-1; IC § 6-8.1-10-2.1; Dept. of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579, 583 (Ind. 2014); Indiana Dept. of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463 (Ind. 2012); Lafayette Square Amoco, Inc. v. Indiana Dept. of State Revenue, 867 N.E.2d 289 (Ind. Tax Ct. 2007); 45 IAC 2.2-2-2; 45 IAC 15-11-2.

Taxpayer protests the imposition of a negligence penalty.

Taxpayer is a sole proprietor that performs transactions involving marketing campaigns and various printed materials. Following a sales and use tax audit, the Indiana Department of Revenue ("Department") concluded that Taxpayer failed to properly remit sales tax collected on sold items for the tax years at issue. The Department issued a proposed assessment for sales tax, interest, and a negligence penalty. Taxpayer submitted a protest requesting a waiver of the penalty. An administrative hearing was held and this Letter of Findings results. Further facts will be supplied as required.

I. Tax Administration- Negligence Penalty.

As a threshold issue, it is Taxpayer's responsibility to establish that the existing tax assessment is incorrect. As stated in IC § 6-8.1-5-1(c), "The notice of proposed assessment is prima facie evidence that the department's claim for the unpaid tax is valid. The burden of proving that the proposed assessment is wrong rests with the person against whom the proposed assessment is made." Indiana Dept. of State Revenue v. Rent-A-Center East, Inc., 963 N.E.2d 463, 466 (Ind. 2012); Lafayette Square Amoco, Inc. v. Indiana Dept. of State Revenue, 867 N.E.2d 289, 292 (Ind. Tax Ct. 2007). Consequently, a taxpayer is required to provide documentation explaining and supporting his or her challenge that the Department's position is wrong. Further, "[W]hen [courts] examine a statute that an agency is 'charged with enforcing. . .[courts] defer to the agency's reasonable interpretation of [the] statute even over an equally reasonable interpretation by another party.'" Dept. of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579, 583 (Ind. 2014). Thus, all interpretations of Indiana tax law contained within this decision, as well as the preceding audit, shall be entitled to deference.

Taxpayer protests the imposition of penalties pursuant to IC § 6-8.1-10-2.1. Penalty waiver is permitted if a taxpayer shows that failure to pay the full amount of the tax was due to reasonable cause and not due to willful neglect. 45 IAC 15-11-2(b) clarifies the standard for the imposition of the negligence penalty as follows:

The standard for waiving the negligence penalty is given at 45 IAC 15-11-2(c) as follows:

The Department's audit report states, among other things, that Taxpayer was not registered with the Department for sales tax collection and remittance. Taxpayer collected sales tax but failed to remit the sales tax to the Department. IC § 6-2.5-2-1 creates the statutory duty to collect sales tax:

Taxpayer's protest letter states in part that he "had no training on taxes, accounting or many other skill sets needed to be a successful small business owner." Taxpayer also states that his accountant "seldom reminded [Taxpayer] that there were steps to take to be compliant [.]" Lastly, Taxpayer argues that "the process to have an Indiana tax ID issued" was unclear to him.

As noted above, Taxpayer collected Indiana sales tax on transactions but failed as an agent for the state of Indiana to remit that sales tax to the Department as required. Taxpayer was aware of his obligation to remit the sales tax, stating in his protest letter that he knew he "had to do something to rectify this situation" but that "it was just not clear to [Taxpayer] where to start."

After an analysis of the law and the applicable facts, the Department finds that Taxpayer has not demonstrated that he exercised ordinary business care and prudence. Taxpayer has thus failed to establish reasonable cause to waive the penalty.

Taxpayer's protest is denied.

Posted: 08/30/2017 by Legislative Services Agency