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 This document is effective on its date of publication and remains in effect until the date it is superseded or deleted by the publication of another document in the Indiana Register.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

Motor Carrier failed to provide verifiable records required under the IFTA and Indiana tax law to support that it was entitled to a tax credit for fuel tax paid by its non-Indiana affiliate or member jurisdictions.

I. International Fuel Tax Agreement Tax - Burden of Proof.

Authority: IC § 6-6-4.1-4; IC § 6-6-4.1-14; IC § 6-6-4.1-20; IC § 6-6-4.1-24; IC § 6-8.1-3-14; IC § 6-8.1-5-1; IC § 6-8.1-5-4; International Fuel Tax Agreement, https://www.iftach.org/manual2020.php; Scopelite v. Indiana Dep't of Local Gov't Fin., 939 N.E.2d 1138 (Ind. Tax Ct. 2010); Wendt LLP v. Indiana Dep't of State Revenue, 977 N.E.2d 480 (Ind. Tax Ct. 2012).

Taxpayer protests the assessment of additional IFTA tax.

Taxpayer is a transportation and logistics company doing business in Indiana and outside of Indiana. The Indiana Department of Revenue ("Department") audited Taxpayer's business records for tax year 2018, International Fuel Tax pursuant to the International Fuel Tax Agreement (IFTA). Based on the information available at the time of the audit, the audit determined that Taxpayer owed additional fuel tax plus penalty and interest.

Taxpayer protested the assessment. A hearing was held. Taxpayer requested, and was granted, additional time to provide verifiable supporting documentation. This final determination results.

I. International Fuel Tax Agreement Tax - Burden of Proof.

During the audit, the Department reviewed Taxpayer's business records pursuant to IFTA and IC § 6-6-4.1-4. The audit resulted in an assessment of additional fuel tax, interest, and penalty.

Taxpayer disagreed, stating the following:

According to Taxpayer, its non-Indiana affiliate operates the referenced "bulk fuel system" in another member jurisdiction. Therefore, the issue is whether Taxpayer's supporting documents demonstrate that the audit assessment was incorrect.

IFTA is an agreement between various United States jurisdictions and Canadian provinces allowing for the equitable apportionment of previously collected motor carrier fuel taxes. International Fuel Tax Agreement, https://www.iftach.org/manual2020.php (last visited June 21, 2022). 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.

Indiana mandates that every person who is subject to a listed Indiana tax, including fuel tax, must keep books and records, including all source documents, "so that the department can determine the amount, if any, of the person's liability for that tax by reviewing those books and records." IC § 6-8.1-5-4(a); IC § 6-6-4.1-20. Thus, the person subject to fuel tax has a duty to maintain books and records and present them to the Department for review upon request. IC § 6-6-4.1-20. The taxpayer "who fails to keep the books and records as required by IC 6-8.1-5 is subject to the penalty imposed under IC 6-8.1-10-4." Id.

Additionally, "If the [D]epartment reasonably believes that a person has not reported the proper amount of tax due, the [D]epartment shall make a proposed assessment of the amount of the unpaid tax on the basis of the best information available to the [D]epartment." IC § 6-8.1-5-1(b). Assessments of motor carrier fuel tax under IFTA are presumed to be valid. IC § 6-6-4.1-24(b). In addressing any challenges to those assessments, the taxpayer bears the burden of proving that any assessment is incorrect. Id.; see also IC § 6-8.1-5-1(c). Thus, the taxpayer is required to provide verifiable documentation explaining and supporting its challenge that the Department's assessment is wrong. Poorly developed and non-cogent arguments are subject to waiver. Scopelite v. Indiana Dep't of Local Gov't Fin., 939 N.E.2d 1138, 1145 (Ind. Tax Ct. 2010); Wendt LLP v. Indiana Dep't of State Revenue, 977 N.E.2d 480, 486 n.9 (Ind. Tax Ct. 2012).

In this instance, prior to the hearing and subsequently after the hearing, the Department requested that Taxpayer provide the following:

Taxpayer was unable to provide the above-requested supporting documents. Specifically, in this instance, Taxpayer referenced its non-Indiana affiliate's purchases invoices and a summary of the listed transactions which was generated by its internal computer system. According to Taxpayer, that summary - including "Date, Time, Pump, Unit, Odometer, Location, Product, Gallons, [and] Amount" - supported (1) Taxpayer's payments of its fuel purchase from its affiliate and (2) Taxpayer paid tax on those transactions in another member jurisdiction. As such, Taxpayer maintained that it was entitled to the tax credit for fuel tax paid to its non-Indiana affiliate which is located in another member jurisdiction.

Upon review, however, Taxpayer's supporting documents demonstrated otherwise. The invoices showed that Taxpayer's affiliate - not Taxpayer - purchased and paid for the fuel in another member jurisdiction. Taxpayer was not able to substantiate its assertion because according to Taxpayer, "the payments are inter-company transactions so there is no cash exchanging hands."

It should be noted that Taxpayer and its non-Indiana affiliate are separate legal entities doing business in different member jurisdictions. In this case, Taxpayer admitted, "there is no cash exchanging hands" between Taxpayer and its non-Indiana affiliate. Clearly, Taxpayer's supporting documentation showed that Taxpayer did not pay the tax to another member jurisdiction for the fuel in question. As such, the Department is not able to agree that Taxpayer was entitled to the additional tax credit.

In short, given the totality of the circumstances, in the absence of other verifiable supporting documents, the Department is not able to agree that Taxpayer met its burden of proof as required under IC § 6-8.1-5-1(c).

Taxpayer's protest is respectfully denied.

June 22, 2022