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 This document is effective on its date of publication and remains in effect until the date it is superseded or deleted by the publication of another document in the Indiana Register.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 contain in this Letter of Findings.

Indiana Motor Carrier was unable to establish by a "fair preponderance of the evidence" that the Department's assessment of additional International Fuel Taxes, based on the best information available, was incorrect; Indiana Motor Carrier did not maintain accurate or complete records and the Department was unable to conduct a true mileage audit.

I. International Fuel Tax Agreement - Fuel Tax 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, § R530.100 (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.

Taxpayer is an Indiana motor carrier. Taxpayer chose Indiana as its base jurisdiction for purposes of the International Fuel Tax Agreement ("IFTA") and the International Registration Plan ("IRP"). The Indiana Department of Revenue ("Department") conducted an audit which resulted in the assessment of additional IFTA fuel taxes.

Taxpayer disagreed with the assessment and submitted a protest to that effect. An administrative hearing was conducted during which Taxpayer's representative explained the basis for the protest. This Letter of Findings results.

I. International Fuel Tax Agreement - Fuel Tax Assessment.

The Department conducted an audit and determined that Taxpayer owed additional 2013 IFTA fuel taxes. The Department's audit concluded that Taxpayer was unable to provide the complete 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, Taxpayer was subject to motor carrier fuel taxes under the IFTA. IC § 6-6-4.1-4(a).

Tax assessments of motor carrier fuel tax under the 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:

The IFTA Procedures Manual at § P550 (2013) provides that:

The Department found that Taxpayer's mileage records were inaccurate and/or incomplete. The Department's audit report explained that Taxpayer had "low internal controls in place to ensure that reported total and jurisdiction miles were accurately tracked and reported."

The Department's audit report pointed out what it regarded as Taxpayer's record keeping deficiencies:

• Taxpayer did not have beginning and ending quarterly odometer vehicle records;

• The drivers' trip reports were created and completed by Taxpayer's office staff before each trip took place;

• Taxpayer's drivers did not record beginning and ending odometer readings;

• Taxpayer's drivers did not report "unloaded" miles;

• Taxpayer did not have consistent methods for filing its drivers' fuel information;

• Taxpayer's hand written summary reports "had variances to the reported miles on the IFTA 101" (Quarterly Fuel Use Tax Schedule);

• Taxpayer included "invalid receipts" for all quarters.

The Department's audit report also noted that Taxpayer had undergone a change in its management and personnel. As explained in the report, "During the audit period the [Taxpayer] had management in place that no longer work for the organization" and that the records reviewed had been "stored and organized by the previous staff." However, the audit also noted that Taxpayer had recently "upgraded and improved the [record keeping] system in order to improve tracking and reporting."

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:

§ 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:

Taxpayer points out that it has undergone a management change, that it has remedied many of the shortcomings pointed out in the audit report, and that it has improved its record-keeping procedures.

The Department is not unsympathetic to Taxpayer's past management and employee issues. However, the only issue in this Letter of Findings is whether or not Taxpayer has established that the assessment is "wrong." IC § 6-6-4.1-24(b). In doing so it is fair to point out that it is Taxpayer's responsibility to maintain specific, detailed, and accurate information concerning its fuel purchases and jurisdiction miles. In the absence of complete and accurate 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 "establish[ed] 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.

February 28, 2018