W&J Leasing, Inc. v. Indiana Department of State Revenue, Cause No. 49T10-0509-TA-77 (Ind. Tax 12/15/2006)
| Decision Date | 15 December 2006 |
| Docket Number | Cause No. 49T10-0509-TA-77 |
| Parties | W&J LEASING, INC., Petitioner, v. INDIANA DEPARTMENT OF STATE REVENUE, Respondent. |
| Court | Indiana Tax Court |
DAN R. DUNBAR, DUNBAR & ROMACK, Indianapolis, IN, ATTORNEY FOR PETITIONER.
STEVE CARTER, ATTORNEY GENERAL OF INDIANA, ANDREW W. SWAIN, SPECIAL COUNSEL, TAX SECTION, JENNIFER E. GAUGER, DEPUTY ATTORNEY GENERAL, Indianapolis, IN, ATTORNEYS FOR RESPONDENT.
W&J Leasing, Inc. (WJ) has appealed the Indiana Department of State Revenue's (Department) final determination denying its claim for refund of Indiana sales/use tax paid for period from December 1995 through December 1997 (the period at issue). The matter, currently before the Court on the parties' cross-motions for summary judgment, presents the following issue for the Court's review: whether the lease payments WJ received from leasing its aircraft during the period at issue are subject to Indiana sales tax pursuant to Indiana Code § 6-2.5-4-10(a).
The following facts are not in dispute. WJ is an Indiana corporation located in Edinburgh, Indiana. During the period at issue, WJ owned a small aircraft that was titled, registered, and hangared in Indiana. Beginning sometime in December of 1995, WJ leased the aircraft to Amos-Hill Associates, Inc. (Amos-Hill), another Indiana corporation located in Edinburgh. Amos-Hill was the sole lessee of the aircraft during the period at issue. Approximately 98% of Amos-Hill's use of the aircraft during the period at issue occurred in interstate travel.
In February of 1996, WJ remitted to the Department "Indiana sales and/or use tax" in the amount of $10,062.71: $9,298.19 on its purchase of the aircraft and $764.52 on certain other purchases.1 (Cf. Jt. Stip. of Facts at 3, ¶ 19 with Pet'r Resp. Br. at 3; Resp't Br. at 3 (footnote added).) After subsequently conducting an audit of WJ, however, the Department determined that the $10,062.71 WJ remitted was in error because "tax does not apply to the purchase of property for [the purpose of] leasing" it to another. (See Resp't Designation of Evidence, Ex. B at 5-6.) Nevertheless, the Department determined that WJ was required to collect sales tax from Amos-Hill on the aircraft's lease payments during the period at issue and, because it did not, WJ was responsible for the sales tax thereon (including penalties and interest) in the amount of $21,632.44.2 Finally, the Department also determined that WJ owed $36.04 in use tax on certain items it purchased in 1996 and $45.84 in use tax on certain items it purchased in 1997. As a result, the Department issued an assessment against WJ totaling $15,822.49.3
WJ paid the assessment on April 4, 2003. On November 30, 2004, WJ filed a claim with the Department seeking a refund of both the $10,062.71 and the $15,822.49. The Department denied WJ's claim for refund on June 28, 2005.
WJ initiated this original tax appeal on September 16, 2005. On May 31, 2006, the Department filed a motion for summary judgment. WJ filed a response brief on June 30, 2006.4 The Court conducted a hearing on September 18, 2006. Additional facts will be supplied as necessary.
Summary judgment is appropriate only where no genuine issues of material fact exist and the moving party is entitled to judgment as a matter of law. Ind. Trial Rule 56(C). Cross-motions for summary judgment do not alter this standard. Snyder v. Indiana Dep't of State Revenue, 723 N.E.2d 487, 488 (Ind. Tax Ct. 2000), review denied.
Indiana imposes an excise tax, known as the state gross retail (or sales) tax, on certain sales made in Indiana. See IND. CODE ANN. § 6-2.5-2-1(a) (West 1995). This tax is not imposed on all sales taking place within Indiana, but rather on only those sales that constitute "retail transactions." Id. See also Monarch Beverage Co. v. Indiana Dep't of State Revenue, 589 N.E.2d 1209, 1210 (Ind. Tax Ct. 1992). Pursuant to Indiana Code § 6-2.5-4-10(a), "[a] person . . . is a retail merchant making a retail transaction when he rents or leases tangible personal property to another person." IND. CODE ANN. § 6-2.5-4-10(a) (West 1995) (amended 2004). See also IND. ADMIN. CODE tit. 45. r. 2.2-4-27(b) (1996) ().
The Department claims that, pursuant to Indiana Code § 6-2.5-4-10(a), it is unequivocally clear that the lease payments WJ received from Amos-Hill during the period at issue are subject to sales tax. (See Resp't Br. at 6 ().)5 WJ claims, on the other hand, that the lease payments it received from Amos-Hill are not taxable because the lease transaction does not constitute a retail transaction and is therefore not subject to sales tax. In the alternative, WJ contends that the lease payments WJ received from Amos-Hill are not subject to sales tax pursuant to the Commerce Clause of the United States Constitution.
WJ argues that because it purchased and took possession of the aircraft outside Indiana, it was not a retail merchant making a retail transaction when it then leased the aircraft to Amos-Hill (and was therefore not required to collect and remit Indiana sales tax on the lease payments it received from Amos-Hill). (See Pet'r Resp. Br. at 4.)6 During oral argument, however, WJ changed its argument somewhat:
In this case[,] we believe there are issues of material fact. We've never stipulated as to the lease itself, we've never stipulated anything as to the terms of the lease, we've never stipulated that the lease was entered into in the state of Indiana, and we think all of that is critical to the taxation of the lease stream that then follows it, so we believe that's a significant issue alone enough to overturn any summary judgment motion. . . . [The lease stream would be subject to Indiana sales tax] if this was an Indiana transaction. We have not stipulated that this was an Indiana transaction. The property was purchased [out-of-state], it was delivered [out-of-state], possession was taken [out-of-state], and the lease [with Amos-Hill] theoretically could've been entered into [out-of-state] before any of this lease stream took place. None of that has been stipulated or agreed upon yet. . . . If this lease was entered into in the state of Texas when the property was still located in Texas, this is a Texas transaction. The property then moved to a different state. Well, the sales tax doesn't move around from state to state with this piece of property. The [lease] transaction could well have occurred before the property was moved to Indiana and we've never stipulated to where this property was located or when the lease was even entered into.
(Oral Argument Tr. at 8, 10 (emphases added).) Thus, WJ now believes that the lease payments it received from Amos-Hill are subject to Indiana sales tax if, and only if, the lease was actually signed in Indiana. In turn, WJ asserts that because it has not yet stipulated as to where the lease was signed, there is a genuine issue as to a material fact that precludes summary judgment in the Department's favor.7 The Court disagrees.
In moving for summary judgment in this case, the Department designated as evidence its audit summary, proposed assessments against WJ, as well as the parties' Joint Stipulation of Facts. This designated evidence more than adequately provides prima facie evidence that WJ, an Indiana corporation, leased its aircraft (which was titled and registered in Indiana) to another Indiana corporation, Amos-Hill.8 See A.I.C. § 6-2.5-2-1(a); A.I.C. § 6-2.5-4-10(a) () (footnote added). As a result, the burden shifted to WJ "to show the existence of a genuine issue of material fact by specifically setting forth contrary facts either in affidavits, depositions, testimony, or as otherwise provided in T.R. 56(C)." Scott Oil Co. v. Indiana Dep't of State Revenue, 584 N.E.2d 1127, 1129 (Ind. Tax Ct. 1992) (citation omitted).
While WJ maintains that where the lease was signed is material to the resolution of this case (i.e., if the lease was signed in Indiana, the lease transaction is subject to tax; if the lease was signed outside Indiana, the lease transaction is not subject to tax), it has not shown that there is a genuine issue as to this material fact.9 Rather, WJ attempts to create a genuine issue as to this fact by simply indicating that it has not yet stipulated as to where the lease was signed. (See Oral Argument Tr. at 8, 10.) With nothing more than the statement that "maybe the lease was signed in Indiana, maybe it wasn't," however, the factual issue is not genuine; it is hypothetical. As this Court has previously explained, statements "expressing mere possibilities . . . are insufficient to establish a genuine issue of material fact." C & C Oil Co. v. Indiana Dep't of State Revenue, 570 N.E.2d 1376, 1379 (Ind. Tax Ct. 1991) (citation omitted).
WJ has made no showing that its lease was signed outside of Indiana. As a result, it has not shown that there are any genuine issues of material fact that would preclude summary judgment in the Department's favor.
In the alternative, WJ argues that the lease payments it received from Amos-Hill are not subject to sales tax because the imposition of such violates the Commerce Clause of the United States Constitution. (Pet'r Resp. Br. at 6.) See also IND. CODE ANN. § 6-2.5-5-24(b) (West 1995) (...
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