CARROLL CTY. RURAL ELEC. MEM. CORP. v. DEPT. OF STATE REV.

• Decision Date: 10 August 2000
• Docket Number: No. 49T10-0003-TA-32.,49T10-0003-TA-32.
• Citation: 733 N.E.2d 44
• Parties: CARROLL COUNTY RURAL ELECTRIC MEMBERSHIP CORPORATION, Petitioner, v. INDIANA DEPARTMENT OF STATE REVENUE, Respondent.
• Court: Indiana Tax Court

733 N.E.2d 44

CARROLL COUNTY RURAL ELECTRIC MEMBERSHIP CORPORATION, Petitioner, v. INDIANA DEPARTMENT OF STATE REVENUE, Respondent.

No. 49T10-0003-TA-32.

Tax Court of Indiana.

August 10, 2000.

David S. Richey, Randolph G. Holt, Parr Richey Obremskey & Morton, Indianapolis, IN, Attorneys for Petitioner.

Karen M. Freeman-Wilson, Attorney General of Indiana, Joel Schiff, Deputy Attorney General, Indianapolis, IN, Attorneys for Respondent.

FISHER, J.

Petitioner Carroll County Rural Electric Membership Corporation (REMC) challenges the Indiana Department of State Revenue's (Department) final determination granting REMC's protest for tax years 1995 through 1997 (tax years) but stating that REMC's publication in the future would be subject to the gross retail (sales) and use taxes. In this original tax appeal, the Department presents the following issue for the Court's consideration: whether the Court has jurisdiction to hear a taxpayer's appeal from a final determination where the Department sustains the taxpayer's protest but announces that the taxpayer's purchases no longer will be exempt from the gross retail and use taxes.

FACTS AND PROCEDURAL HISTORY

REMC is an Indiana rural electric membership corporation. Each month, REMC purchases a publication titled the ELECTRIC CONSUMER and distributes it to all of its members. Following an audit, the Department proposed assessments of deficiencies in REMC's use taxes for the tax years based upon REMC's use of the ELECTRIC CONSUMER. REMC protested the proposed assessment, contending that its publication is a newspaper that qualifies it for exemption from gross retail and use taxes pursuant to IND.CODE ANN. § 6-2.5-5-17 (West 2000) (newspaper exemption).¹ The Department conducted an administrative hearing on April 28, 1999. On January 14, 2000, the Department issued a Letter of Findings stating in part:

Taxpayer's publication does not meet all of the regulatory requirements to be considered a newspaper exempt from the gross retail tax.

In the past, the Indiana Department of Revenue has allowed Taxpayer's publication exemption from the gross retail tax as a newspaper. Since the Indiana Department of Revenue is now changing its position, the imposition of the gross retail [and use] tax[es] on Taxpayer's publication will be prospective only.

(Tax Appeal Pet., Ex. 1 at 7.)

On March 10, 2000, REMC filed an original tax appeal with this Court seeking reversal of the Department's determination that its future purchases and use of the ELECTRIC CONSUMER would not qualify for the newspaper exemption. On May 17, 2000, the Department filed a motion to dismiss, along with a brief in support thereof. REMC, on May 25, 2000, responded with a motion and brief opposing dismissal of the action. A hearing on the motion to dismiss was conducted on June 12, 2000, at the conclusion of which the Court took the matter under advisement.

ANALYSIS AND OPINION

The Department moves to dismiss this original tax appeal for lack of subject matter jurisdiction pursuant to T.R. 12(B)(1). Also, the Department asserts that REMC failed to state a claim upon which relief can be granted pursuant to T.R. 12(B)(6). The Court will consider each claim in turn.

I. Subject Matter Jurisdiction

Every action has three jurisdictional elements: (1) jurisdiction of the subject matter; (2) jurisdiction of the person; and (3) jurisdiction of the particular case. See Schafer v. Sellersburg Town Council, 714 N.E.2d 212, 215 (Ind.Ct.App.1999),

trans. denied. "Subject matter jurisdiction is the power of a court to hear and determine the general class of cases to which the proceedings before it belong." Musgrave v. State Bd. of Tax Comm'rs, 658 N.E.2d 135, 138 (Ind. Tax Ct.1995). Whether a court has subject matter jurisdiction "depends on whether the type of claim advanced by the petitioner falls within the general scope of authority conferred upon the court by constitution or statute." Id.

The general scope of authority conferred upon the Tax Court is governed by IND.CODE ANN. § 33-3-5-2(a)(1) (West 1996). This section provides that the Tax Court is a court of limited jurisdiction, having "exclusive jurisdiction over any case that arises under the tax laws of [Indiana] and that is an initial appeal of a final determination" made by the Department. REMC's appeal meets both jurisdictional prerequisites. First, REMC challenges the Department's assessment and collection of Indiana's gross retail and use taxes. Second, REMC appeals initially from a final determination issued by the Department. Thus, REMC's appeal falls within the general scope of authority granted to this Court.

The Department also raises the ripeness issue. Whether a claim is ripe for review concerns the Court's subject matter jurisdiction.² Cf. Wax `N Works v. City of St. Paul, 213 F.3d 1016, 1020 (8th Cir.2000)

(noting that district court should have dismissed claim pursuant to FED. R.CIV.P. 12(b)(1) because case was not ripe for adjudication). "Ripeness relates to the degree to which the defined issues in a case are based on actual facts rather than on abstract possibilities, and are capable of being adjudicated on an adequately developed record." Indiana Dep't of Envtl. Management v. Chemical Waste Management, Inc., 643 N.E.2d 331, 336 (Ind. 1994).³ As stated in BLACK'S LAW DICTIONARY 1328 (7th ed.1999), ripeness is the "circumstance existing when a case has reached, but has not passed, the point when the facts have developed sufficiently to permit an intelligent and useful decision to be made." Cf. Meinders v. Weber, 604 N.W.2d 248, 263 (S.D.2000) ("Ripeness involves the timing of judicial review and the principle that judicial machinery should be conserved for problems which are real and present or imminent, not squandered on problems which are abstract or hypothetical or remote.") (citation and internal quotation omitted). When ruling upon a ripeness challenge, the Court must consider: (1) "the fitness of the issues for judicial decision"; and (2) "the hardship to the parties of withholding court consideration." Rene ex rel. Rene v. Reed, 726 N.E.2d 808, 822 (Ind.Ct.App.2000) (citation omitted).

The Court finds that the present case is ripe for review. REMC claims that the Department erroneously found that its publication, the ELECTRIC CONSUMER, does not meet the regulatory requirements to be considered a newspaper exempt from the gross retail and use taxes. In reaching this decision, the Department first listed the regulatory requirements found in IND. ADMIN. CODE tit. 45, r. 2.2-5-26 (1996), which in relevant part provides:

(a) General rule. In general, sales of all publications irrespective of format are taxable. The exemption provided by this rule is limited to sales of newspapers.

(b) Application of general rule. For purposes of the state gross retail tax, the term "newspaper" means only those publications which are:

(1) commonly understood to be newspapers;

(2) published for the dissemination of news of importance and of current interest to the general public, general news of the day, and information of current events;⁴

(3) circulated among the general public;

(4) published at stated short intervals;

(5) entered or are qualified to be admitted and entered as second class mail matter at a post office in the county where published; and

(6) printed for resale and are sold.

* * *

(e) Publications issued monthly, bimonthly, or at longer or irregular intervals are generally not considered to be newspapers.

The Department then proceeded to apply each of the six elements to the facts as regards the content, publication, circulation and distribution of the ELECTRIC CONSUMER. For example, the Department found that subsection (b)(3) was not met because the ELECTRIC CONSUMER was primarily circulated via automatic mailings to REMC's members. The Department concluded that, while members of the general public could subscribe to the publication, this fact was not "effectively publicized . . . and there is no evidence that very many people actually pay the subscription rate to obtain the publication." (Tax Appeal Pet., Ex. 1 at 6.) Thus, the Department determined that the ELECTRIC CONSUMER does not circulate among the general public. As a second example, the Department found that the ELECTRIC CONSUMER is issued monthly, a fact inconsistent with a newspaper's definition pursuant to subsection (b)(4) and section (e). A monthly publication interval, the Department observed, is "too long an interval for it to be considered a newspaper. Rather, monthly publications are generally considered magazines and not entitled to the newspaper exemption from the gross retail [and use] tax[es]." (Tax Appeal Pet., Ex. 1 at 7.) The substantive issue on appeal is simple and straightforward: whether REMC's publication qualifies as a newspaper. The Department considered the facts sufficiently developed for purposes of deciding whether the ELECTRIC CONSUMER met the regulatory definition of a newspaper. Further, the Department was satisfied with the factual development of the case before it to the extent that it announced that the gross retail and use taxes would prospectively apply to REMC's purchases and use of the ELECTRIC CONSUMER.⁵ Having reviewed the record in this case, the Court finds that a sufficient factual basis for REMC's challenge exists. Therefore, the Court concludes that the substantive issue before it is fit for judicial decision.

In addition, it would be a burdensome waste of REMC's resources to deny hearing its appeal on ripeness grounds. The Department suggests that REMC should protest and seek to enjoin collection of the gross retail and use taxes or, in the alternative, seek a refund. However, as counsel for REMC makes clear, either option would be cumbersome, inefficient and unsatisfactory:

And so [REMC is] left in a dilemma as to . . . whether [it] should . . . collect and pay the [gross retail] tax or remit the use tax, as the case may be,

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