Alloy Custom Prods., Inc. v. Ind. Dep't of State Revenue
| Decision Date | 16 February 2015 |
| Docket Number | No. 49T10–1102–TA–00017.,49T10–1102–TA–00017. |
| Citation | 26 N.E.3d 1078 |
| Parties | ALLOY CUSTOM PRODUCTS, INC., Petitioner, v. INDIANA DEPARTMENT OF STATE REVENUE, Respondent. |
| Court | Indiana Tax Court |
Craig M. McKee, Wilkinson, Goeller, Modesitt, Wilkinson & Drummy, LLP, Terre Haute, IN, Attorney for Petitioner.
Gregory F. Zoeller, Attorney General of Indiana, John P. Lowrey, Deputy Attorney General, Indianapolis, IN, Attorneys for Respondent.
FISHER
, Senior Judge.
Alloy Custom Products, Inc. has challenged the Indiana Department of State Revenue's (Department) final determination denying it a refund of the Indiana sales tax it paid on utilities it consumed while “rehabilitating” cryogenic tanker trailers between September 2006 and March 2010 (the period at issue). The matter is currently before the Court on the parties' cross-motions for summary judgment.
Alloy's facility, located near Delphi, Indiana, consists of three separate buildings. (Resp't Des'g Evid., Ex. 1 ¶ 1, Ex. 3 at 1, 3, Ex. 7 at 8–10.) One building is used solely for the manufacture of new tanker trailers. (Resp't Des'g Evid., Ex. 1 ¶ 1, Ex. 7 at 8–10.) The second building is used solely for the rehabilitation of used tanker trailers. (Resp't Des'g Evid., Ex. 1 ¶ 1, Ex. 7 at 8–10.) The third building is used for the sandblasting and repainting of rehabilitated tanker trailers. (Resp't Des'g Evid., Ex. 1 ¶ 1, Ex. 7 at 8–10.) While each building has its own electric meter, all three buildings share a single natural gas meter. (Resp't Des'g Evid., Ex. 1 ¶ 2, Ex. 7 at 10–11.)
Alloy's Rehabilitation Process
Alloy states that through its rehabilitation process, it not only refurbishes the bottle's vacuum, but it also might upgrade the tanker trailer to current industry standards. (See Resp't Des'g Evid., Ex. 1 ¶ 1, Ex. 4 at 1–2 (), Ex. 6 at 5 ().) A rehabilitation can extend a trailer's useful life by approximately four to six years. (See Resp't Des'g Evid., Ex. 7 at 5.)
When a trailer is brought in for rehabilitation, Alloy first purges it with nitrogen gas, ensuring that it contains no hazardous gases and that it poses no threat of explosion. (See Resp't Des'g Evid., Ex. 7 at 16.) Alloy then inspects the trailer's various systems (e.g., vacuum, piping, engine drive, exterior chassis, and inner vessel). (See Resp't Des'g Evid., Ex. 7 at 16–18.) Once it completes its inspection, Alloy presents the owner with an estimate of the recommended work necessary (and cost) to rehabilitate the trailer. (See Resp't Des'g Evid., Ex. 7 at 19.) If the owner accepts the estimate, Alloy orders the necessary parts and materials needed to complete the work and schedules each rehabilitation task within its computer system.2 (See Resp't Des'g Evid., Ex. 7 at 20.)
After stripping the trailer down to its bottle and removing all sub-assemblies and several other components, Alloy sandblasts everything to remove paint, rust, and mill scale.3 (See Resp't Des'g Evid., Ex. 4 at 1–3, Ex. 7 at 22–23.) Next, Alloy repairs the leaks within the bottle and the vacuum system and completes any replacement of, or repair work on, the sub-assemblies. (See Resp't Des'g Evid., Ex. 7 at 25–26.) All sub-assemblies are pre-fit to the tank to ensure a proper fit. (See Resp't Des'g Evid., Ex. 7 at 26.)
Before reinstalling the sub-assemblies, Alloy primes and paints the trailer to the owner's specifications, using a polyurethane enamel paint. (See Resp't Des'g Evid., Ex. 7 at 27–29.) Once dry, Alloy reinstalls all other components and then conducts warm/cold retention tests, engine run tests, piping leak tests, and air and brake system checks. (See Resp't Des'g Evid., Ex. 7 at 30.) The trailer is then ready for delivery back to its owner. (See Resp't Des'g Evid., Ex. 7 at 30.)
A typical rehabilitation process takes approximately 750 man-hours over a six to eight week period. (Boatman Aff. ¶ 7.) A cryogenic tanker trailer can be rehabilitated three or four times. (See Resp't Des'g Evid., Ex. 7 at 7.)
On October 8, 2009, Alloy filed four Forms ST–200 (“Utility Sales Tax Exemption Application”) and a Form GA–110L (“Claim for Refund”) with the Department covering the period between September 2006 and September 30, 2009. (See Resp't Des'g Evid., Ex. 1 ¶¶ 2–3.) In those Forms, Alloy asserted that its metered purchases of electric and gas should have been exempt from sales tax because it consumed those utilities in its manufacturing and rehabilitation process. (See Resp't Des'g Evid., Ex. 1 ¶¶ 2–3.) On April 2, 2010, Alloy filed a second Form GA–110L seeking a refund of sales tax it paid on its metered purchases of electric and gas between October 1, 2009 and March 31, 2010. (See Resp't Des'g Evid., Ex. 1 ¶ 3.)
The Department subsequently conducted a review of Alloy's business and approved the exemption and refund for the electric metered purchases on the building used for the manufacture of new tanker trailers. The Department denied the exemption and refund, however, for the other two electric meters (i.e., the meters on the two buildings used for the rehabilitation of used tanker trailers). (See Resp't Des'g Evid., Ex. 1 ¶ 4, Ex. 3 at 3–5.) With respect to the gas meter, the Department approved a partial exemption and refund in the amount of 45% (i.e., the amount of gas it determined was consumed in the building used to manufacture new trailers). (See Resp't Des'g Evid., Ex. 1 ¶ 4, Ex. 3 at 3–5.)
Alloy subsequently protested the Department's determination. In a Letter of Findings dated December 1, 2010, the Department denied Alloy's protest.
On February 25, 2011, Alloy filed an original tax appeal. Both Alloy and the Department subsequently filed motions for summary judgment. The Court conducted a hearing on their cross-motions on December 3, 2012. Additional facts will be provided when necessary.
Summary judgment is appropriate only when the designated evidence demonstrates that 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. Horseshoe Hammond, LLC v. Indiana Dep't of State Revenue, 865 N.E.2d 725, 727 (Ind. Tax Ct.2007), review denied.
Indiana imposes an excise tax, known as the state sales tax, on retail transactions made within the state. Ind.Code § 6–2.5–2–1(a) (2006)
. “The person who acquires property in a retail transaction is liable for the tax on the transaction[.]” I.C. § 6–2.5–2–1(b).
In an effort to encourage industrial growth and to limit the effect of tax pyramiding, the Indiana legislature has enacted several statutes that exempt from sales tax certain purchases of tangible personal property that are used or consumed in the production of other tangible personal property. See, e.g., Harlan Sprague Dawley, Inc. v. Indiana Dep't of State Revenue, 605 N.E.2d 1222, 1225, 1228 (Ind. Tax Ct.1992)
. The exemption at issue in this case, found at Indiana Code § 6–2.5–4–5, provides that retail sales of electricity and natural gas by a public utility to a purchaser that uses that electricity and gas in its manufacturing process are not subject to sales tax. See Ind.Code § 6–2.5–4–5(a) –(c) (2006) (amended 2012). The exemption only applies, however, if the electricity and gas are consumed by the purchaser “as an essential and integral part of an integrated process that produces tangible personal property and those sales are separately metered ... or[,] if those sales are not separately metered[, the electricity and natural gas is] predominately used by the purchaser for [manufacturing].” I.C. §...
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Merch. Warehouse Co. v. Ind. Dep't of State Revenue
...tangible personal property[.]" SeeInd. Code§ 6–2.5–4–5(c)(3) (2009) (amended 2012). SeealsoAlloy Custom Prods., Inc. v. Indiana Dep't of State Revenue, 26 N.E.3d 1078, 1082 n.4 (Ind. Tax Ct. 2015) (explaining the difference between an exclusion and an exemption). As this Court has previousl......