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 This document is effective on its date of publication and remains in effect until the date it is superseded or deleted by the publication of another document in the Indiana Register.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

Indiana Motor Carrier was unable to establish that the Department's assessment of additional International Fuel Tax, based on the best information available, was incorrect; Motor Carrier was unable to provide verifiable mileage records, and the Department was unable to conduct a true mileage audit.

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, § R1210.100 (2017); IFTA Articles of Agreement, § R1210.300 (2017); IFTA Procedures Manual, § P510 (2017); IFTA Procedures Manual, § P530.100 (2017); IFTA Procedures Manual, § P540 (2017); IFTA Procedures Manual, § P550.100 (2017); International Fuel Tax Agreement, https://www.fin.gov.on.ca/en/tax/ifta/.

Taxpayer protests the assessment of additional IFTA fuel tax.

Taxpayer is an Indiana motor carrier which - according to publicly available information - provides for the removal and disposal of hazardous and non-hazardous waste materials such as industrial solvents and contaminated soil. Taxpayer provides its services to customers in Indiana, Ohio, Michigan, Kentucky, and Illinois.

Taxpayer operates 15 vehicles which travel both interstate and intrastate highways in providing its disposal services. Taxpayer chose Indiana as its base jurisdiction for purposes of the International Fuel Tax Association ("IFTA") and the International Registration Plan ("IRP"). The Indiana Department of Revenue ("Department") conducted an IFTA and IRP audit, which resulted in the assessment of additional 2017 IFTA taxes and IRP fees.

Taxpayer disagreed with the IFTA assessment and submitted a protest to that effect. In its protest submission, Taxpayer asked for a "Final Determination without a hearing." After considering both Taxpayer's protest and the information contained within the audit file, this Letter of Findings addressing the assessment of additional IFTA fuel tax results.

The IRP assessment is addressed at Letter of Findings 42-20200115 (March 20, 2020).

I. International Fuel Tax Agreement - Assessment.

The Department conducted a fuel tax audit and determined that Taxpayer owed additional 2017 IFTA fuel taxes. The Department found that although Taxpayer employed a third-party's mileage "tracking system" for it vehicles, the third-party could only provide reports for two years from the date of request. Moreover, the Department noted that Taxpayer failed to employ its own internal controls to assure that the distances captured by the third-party tracking system could be verified.

The Department found that Taxpayer's records "were not compliant and have been rated as inadequate." 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. International Fuel Tax Agreement, https://www.fin.gov.on.ca/en/tax/ifta/ (last visited March 12, 2020). 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 while on those highways. Therefore, the Taxpayer was subject to Indiana motor carrier fuel taxes under the IFTA. 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 (2017) 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, § P530 (2017) in part, imposes upon licensees the responsible to maintain verifiable mileage and fuel purchase records:

(Emphasis added).

The IFTA Procedures Manual at § P550.100 (2017) imposes upon licensees the responsibility of maintaining and then providing verifiable fuel purchase and fuel consumption records.

The Procedures Manual allows licensees to maintain these records in various ways. Taxpayer does not disagree the third-party's mileage tracking records were deficient. In such cases, in the absence of a functional, verifiable "tracking system," IFTA Procedures Manual, § P540.100 (2017), provides:

In the absence or failure to provide mileage and fuel records, IFTA Procedures Manual, § P530.100 (2017) states 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."

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 (2017). According to the IFTA Procedures Manual, § P510 (2017) provides in part that:

§ P530.100 (2017) 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 (2017) in relevant part, states that:

(Emphasis added).

The Department assessed additional IFTA fuel taxes pursuant to the terms of - - and as required - by the IFTA Articles of Agreement and the IFTA Procedures Manual. Taxpayer lays its failure to maintain and provide the records requested during the audit at the feet of its former third-party service provider. Taxpayer explains that its third-party service provider had assured Taxpayer that it was "compliant with all regulations related to [Department of Transportation] and IFTA reporting." According to Taxpayer, it "was only through this audit that we learned otherwise." Taxpayer further explains that it recently changed its third-party vendor and that it has now verified that the replacement vendor's computer program "does in fact meet the reporting requirements."

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 verifiable 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.

March 20, 2020