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 This document is effective on its date of publication and remains in effect until the date it is superseded or deleted by the publication of another document in the Indiana Register.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

Individual's failure to file a return and failure to properly sign a bill of sale do not constitute fraud but do merit assessment of a negligence penalty.

I. Gross Retail Tax - Penalty Assessment.

Authority: IC 6-8.1-5-1; IC 6-8.1-10-2.1; IC 6-8.1-10-4; Wendt LLP v. Indiana Dep't of State Revenue, 977 N.E.2d 480 (Ind. Tax Ct. 2012); Scopelite v. Indiana Dep't of Local Gov't Fin., 939 N.E.2d 1138 (Ind. Tax Ct. 2010); Lafayette Square Amoco, Inc. v. Indiana Dep't of State Revenue, 867 N.E.2d 289 (Ind. Tax Ct. 2007); 45 IAC 15-5-7.

Taxpayer argues that she is not liable for the penalty assessed by the Indiana Department of Revenue ("Department").

Taxpayer is an Indiana resident who purchased a vehicle with a cashier's check. She states that she purchased the vehicle on November 30, 2021, and totaled the car three weeks later, before she was able to register it with the Bureau of Motor Vehicles ("BMV"). After receiving a letter on February 22, 2022, from her insurance company stating that the vehicle was a total loss, Taxpayer was told to obtain a salvage title before she could receive payment from the insurance company. That day, Taxpayer took the car title and the insurance letter to the BMV and was scheduled to meet with a fraud investigator. After the meeting, Taxpayer was assessed tax on the vehicle purchase, as well as a one hundred percent fraud penalty. Taxpayer paid the tax and protests the fraud penalty. Taxpayer waived her right to a protest hearing. This Letter of Findings therefore results from documentation provided with the protest filing. Additional facts will be provided as necessary.

I. Gross Retail Tax - Penalty Assessment.

The issue is whether Taxpayer is liable for a fraud penalty. Taxpayer is only challenging the penalty, not the sales tax on the vehicle purchase.

As a threshold issue, all tax assessments are prima facie evidence that the Department's claim for unpaid tax is valid; the taxpayer bears the burden of proving that any assessment is incorrect. IC 6-8.1-5-1(c); Lafayette Square Amoco, Inc. v. Indiana Dep't of State Revenue, 867 N.E.2d 289, 292 (Ind. Tax Ct. 2007). 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).

A one hundred percent fraud penalty was applied to Taxpayer after she failed to pay sales tax on the cash purchase of the vehicle. IC 6-8.1-10-4 provides the necessary conditions for a fraud penalty assessment:

To prove fraud, the Department must show five elements are met as outlined in 45 IAC 15-5-7(f)(3):

Here, Taxpayer purchased a vehicle in cash and provided the Department with the original bill of sale from the purchase. This bill of sale was signed by the seller on November 29, 2021, but was not countersigned by Taxpayer until February 22, 2022, the same day she received a letter from her insurance company and attempted to obtain title from the BMV. Taxpayer claims in her protest letter that she purchased the vehicle on November 30, 2021, which qualifies as a misrepresentation of a material fact. Her failure to file and remit payment also qualifies as an injury. However, Taxpayer's lack of knowledge or of a guilty mental state shows that fraud is inappropriate in this case.

Taxpayer stated that this was her first cash purchase of a vehicle. This inexperience would explain why the bill of sale was not signed upon the vehicle's receipt or at the time of payment to the seller. Likewise, the star next to the buyer's name on the bill of sale suggests that someone else pointed out to Taxpayer that her signature was required to finalize the document. Finally, Taxpayer providing this document to her insurance company, the BMV, and the Department without removing these errors suggests that this was not an attempt to defraud the state but is instead a misunderstanding of contract law. The scienter element of fraud is not inherent from the presence of other fraud elements. Given the totally of the circumstances, the scienter element of fraud has not been met.

Because Taxpayer's actions did not rise to the level of scienter, the imposition of the fraud penalty was inappropriate. However, Taxpayer may be subject to the negligence penalty under IC 6-8.1-10-2.1. For the relevant period, it states:

Given the lack of an initial filing and the error in signing the bill of sale, Taxpayer was clearly negligent as provided by IC 6-8.1-10-2.1. Taxpayer will be assessed a ten percent negligence penalty.

Taxpayer's protest is sustained in part and a new assessment for negligence will be issued.

August 23, 2023