NOTICE: IC 4-22-7-7 permits the publication of this document in the Indiana Register. The publication of this document provides the general public with information about the Indiana Department of Revenue's official position concerning a specific set of facts and issues. The "Holding" section of this document is provided for the convenience of the reader and is not part of the analysis contained in this Final Order Denying Refund.

Individual was not entitled to a refund of Indiana sales tax paid on the purchase of a spa.

I. Sales Tax - Claim for Refund.

Authority: IC 6-8.1-9-1; IC 6-2.5-2-1; IC 6-2.5-13-1; IC 6-2.5-1-21.5; IC 6-2.5-5-18; Dep't of Revenue, State of Indiana v. Kimball International, Inc., 520 N.E.2d 454 (Ind. Ct. App. 1988); Stump v. Ind. Dep't. of State Revenue, 777 N.E.2d 799 (Ind. Tax Ct. 2002); 45 IAC 2.2-2-1; Sales Tax Information Bulletin 48 (October 2020).

Taxpayer protests the denial of a claim for refund of sales tax collected on the purchase of a spa.

Taxpayer protests the Indiana Department of Revenue's ("Department") denial of his claim for refund of the sales tax paid on the purchase of a spa. Taxpayer initially filed his protest without providing the full Protest Submission Form ("Form"). The Department then reached out to Taxpayer regarding the incomplete Form, and the Taxpayer submitted the Form requesting a "Final determination without a hearing." The Form also states that in waiving his right to a hearing "the taxpayer asks the Department to make its decision based on the written protest and documentation (if any) the taxpayer presents along with the protest . . . ." This Final Order Denying Refund results. Further facts will be provided as necessary.

I. Sales Tax - Claim for Refund.

Taxpayer states in his protest letter that he purchased a spa and that he "could have requested a prescription from my family doctor . . . [b]ut being a primary physician I would not have thought he would have the expertise to make a convincing statement to IDOR supporting my claim" for refund for the spa. Taxpayer states that instead he contacted "two (2) surgeons who have operated on me on two separate, unrelated times." After stating what the two surgeries were regarding, Taxpayer states "[a]ll of these injuries required lengthy rehabilitation and pain management, of which a spa relieved much of the stress of tissue and fragmentation."

The Department determined Taxpayer was not entitled to a refund. In its refund denial letter, dated August 19, 2022, the Department explained:

The Department's denial letter also references to "Information Bulletin #48-Sales Tax Application to Medical Professionals" in denying Taxpayer's refund request.

Turning to the applicable law, IC 6-8.1-9-1(a) affords a taxpayer a statutory right to file a claim for refund. This statute provides, in part:

Indiana imposes an excise tax called "the state gross retail tax" or "sales tax" on retail transactions made in Indiana. IC 6-2.5-2-1(a); 45 IAC 2.2-2-1. A retail sale is sourced to Indiana and subject to Indiana sales tax when the transaction is a "retail sale" and the product is received by the purchaser at the business' location in Indiana. IC 6-2.5-13-1(d)(1). A retail merchant that has a physical presence in Indiana shall collect the tax as an agent for the State. IC 6-2.5-2-1(b). Since Taxpayer is arguing that the purchase of the spa should be exempt, it should also be noted that tax exemptions are strictly construed against the taxpayer. Dep't of Revenue, State of Indiana v. Kimball International, Inc., 520 N.E.2d 454, 456 (Ind. Ct. App. 1988). The taxpayer has the burden of establishing qualification under the terms of the exemption. Id.

As noted, the Department's denial letter references to Sales Tax Information Bulletin 48 (October 2020), 20201202 Ind. Reg. 045200595NRA. That information bulletin provides guidance regarding licensed practitioners and medical supplies and equipment. The bulletin explains in part II (Definitions):

Section III of the bulletin, "Sales of Durable Medical Equipment, Devices, Drugs, and Other Supplies," states (emphasis added):

Sales Tax Information Bulletin 48 states that items such as hot tubs "would typically not be exempt," Taxpayer nonetheless argues that "this spa is only a 2 person spa, and could not be used for entertaining or any other event other than pain relief." Taxpayer provided two letters from doctors. The first letter, dated June 13, 2022, states in relevant part: "It is my medical opinion that a hot tub or home spa may be beneficial to help relieve musculoskeletal back pain." The second letter, dated June 14, 2022, states that Taxpayer is "a patient under my medical care for orthopaedic conditions" and that the "use of warm water therapy is very beneficial for painful joints," and further that Taxpayer "would benefit from an orthopaedic standpoint in purchasing a hot tub because this would allow him to do this." Both letters are dated after the purchase of the spa, and neither letter is a prescription.

Thus, Taxpayer's protest fails on the first issue, namely, Taxpayer purchased the spa without a prescription. A prescription is one of the requirements under IC 6-2.5-5-18(c). But, as will be seen below, even if (for the sake of argument) Taxpayer had a prescription before the purchase of the spa, his refund claim still would be denied since the spa is not exempt under Indiana law.

The taxability of the spa is seen by examining an Indiana Tax Court case, Stump v. Ind. Dep't. of State Revenue, 777 N.E.2d 799 (Ind. Tax Ct. 2002). The facts in that case involving a van were as follows:

The Indiana Tax Court further stated:

The Indiana Tax Court stated, "There is nothing inherently healing or remedial about a van that would make it appropriate only for handicapped people; indeed, vans are driven everyday by handicapped and non-handicapped people alike." Id. at 802. Similarly, spas are used by people with and without mobility issues or joint pain issues. The spa does not meet any of the criteria found in IC 6-2.5-5-18.

For the reasons outlined in this Order, Taxpayer's protest is denied. Taxpayer did not have a prescription as required under IC 6-2.5-5-18 (instead Taxpayer had two letters from physicians dated after his purchase of the spa). And as noted, even if Taxpayer had a prescription, the spa would not be exempt as explained by the analysis found in the Stump case.

Taxpayer's protest is denied.

May 9, 2023