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 This document is effective as of its date of publication and remains in effect until the date it is superseded or deleted by the publication of another document in the Indiana Register.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.

Company was responsible for the tax imposed on the distribution of tobacco products since the company purchased tobacco products for resale from an unlicensed distributor outside of Indiana.

I. Other Tobacco Products Tax–Imposition.

Authority: IC § 6-8.1-5-1; IC § 6-7-2-2; IC § 6-7-2-7; IC § 6-8.1-10-2.1; IC § 6-8.1-10-1; Dept. of State Revenue v. Caterpillar, Inc., 15 N.E.3d 579 (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 15-11-2.

Taxpayer protests the Department's proposed assessment of tax.

Taxpayer is a company that purchased tobacco products (Other Tobacco Products--OTP) from an unlicensed out-of-state distributor. As a result of this, the Indiana Department of Revenue ("Department") issued to Taxpayer proposed assessments for OTP taxes, penalties, and interest for the years 2013-2016. Taxpayer protested the Department's proposed assessments. An administrative telephone hearing was held and this Letter of Findings results. Further facts will be supplied as required.

I. Other Tobacco Products Tax–Imposition.

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.

The Department conducted an investigation/audit of Taxpayer for the years 2013 through 2016. The Department found that Taxpayer did not have an Indiana OTP license and that Taxpayer did not complete OTP tax returns. The Department found that Taxpayer was purchasing OTP from unlicensed out-of-state distributors. Taxpayer, in its protest letter, states that the Department's basis for the assessment was that Taxpayer purchased from suppliers that "were not registered with [the] State of Indiana. Your department is telling [Taxpayer] that it is the job of retailer to check who is registered with [the] State of Indiana and who is not." Taxpayer states that "[i]t is unfair on the part of State of Indiana to transfer their job to retailers. It should be the job of State of Indiana who has the power to take legal action against them." Taxpayer's protest letter concludes by noting that Taxpayer has "informed all the suppliers that they must get registered with [the] State of Indiana and give [Taxpayer] proof of registration." Taxpayer provided copies of the letters that it subsequently sent to the distributors.

Turning to the applicable law which was added by the legislature in 1987, IC § 6-7-2-2 states:

Since Taxpayer purchased tobacco products for resale from distributors outside of Indiana that did not have a distributor license, then Taxpayer is deemed by statute to be a distributor. Further, IC § 6-7-2-7 states:

In applying the above statutes to Taxpayer's case, the following conclusions are reached: Taxpayer purchased tobacco products for resale from an unlicensed distributor from outside of Indiana. By statute Taxpayer is deemed a distributor. Next, under Indiana law, a distributor is liable for the tax imposed on the distribution of tobacco products in Indiana. Thus Taxpayer is responsible for the tax. Regarding Taxpayer's statements that "[y]our department is telling [Taxpayer] that it is the job of the retailer to check who is registered" the Department notes the following. It is the law that creates the legal requirements, not the Department. And that law, in the case at hand, requires Taxpayer to pay the taxes pursuant to the governing statutes. The Department further notes that taxpayers are required to be aware of the applicable laws that govern them–hence the reason that 45 IAC 15-11-2 states "Ignorance of the listed tax laws, rules and/or regulations is treated as negligence." Additionally, when protesting a proposed tax assessment, IC § 6-8.1-5-1(c) states that taxpayers bear the burden of proof. In the case at hand, Taxpayer has failed to meet its burden of proof under IC § 6-8.1-5-1(c). Taxpayer's protest is denied.

Similarly, Taxpayer's representative at the hearing stated that the penalty was being protested. The penalty statute can be found at IC § 6-8.1-10-2.1. Again, Taxpayer did not develop any argument regarding the penalty. Taxpayer's protest of the penalty is also denied. Lastly, the Department notes that interest, pursuant to IC 6-8.1-10-1(e), cannot be waived.

Taxpayer's protest is denied.

February 28, 2018