Dav-Con, Inc. v. State Bd. of Tax Com'rs, DAV-CO

• Decision Date: 14 December 1994
• Docket Number: DAV-CO,No. 45T10-9307-TA-00044,INC,45T10-9307-TA-00044
• Citation: 644 N.E.2d 192
• Parties: , Petitioner, v. STATE BOARD OF TAX COMMISSIONERS, Respondent.
• Court: Indiana Tax Court

Page 192

644 N.E.2d 192

DAV-CON, INC., Petitioner, v. STATE BOARD OF TAX COMMISSIONERS, Respondent.

No. 45T10-9307-TA-00044.

Tax Court of Indiana.

Dec. 14, 1994.

Kenneth D. Reed, Abrahamson, Reed & Adley, Hammond, for petitioner.

Pamela Carter, Atty. Gen., Ted J. Holaday, Deputy Atty. Gen., Indianapolis, for respondent.

FISHER, Judge.

The Petitioner, Dav-Con, Inc. (Dav-Con), appeals the final determination of the Respondent, the State Board of Tax Commissioners (the State Board), valuing Dav-Con's business personal property for the March 1, 1992, assessment.

ISSUES

I. Whether the State Board erred in assessing Dav-Con for property that Dav-Con held in its storage facility but did not own.

II. Whether the State Board's valuation of not-owned inventory in Dav-Con's possession was supported by substantial evidence.

III. Whether the State Board erred in denying Dav-Con an enterprise zone inventory credit.

IV. Whether the State Board erred in denying Dav-Con an interstate commerce exemption.

V. Whether the State Board erred in imposing a 20 percent undervaluation penalty on Dav-Con for failing to report the property at issue.

FACTS AND PROCEDURAL HISTORY

Dav-Con is an Illinois corporation engaged in the business of steel processing and storage. It does business in Indiana and has operated a plant in Hammond for over eight years.

In the regular course of business, Dav-Con receives steel from its customers, processes the steel by applying treatments such as blast cleaning and cold finishing, and makes the steel available for pick up. In the event a customer does not wish to pick up its steel immediately after processing, Dav-Con has a storage facility and will store the customer's steel for a rental stipend. Dav-Con also rents space in its storage facility to customers who are not in need of Dav-Con's processing services, but simply require a place to store their steel. Dav-Con does not take title to the steel it processes and/or stores.

For the March 1, 1992, assessment, Dav-Con filed a Business Tangible Personal Property Assessment Return (Form 103) in which it reported that: 1) it did not hold, possess, or control any consigned or not-owned inventory; 2) it did not own, hold, possess, or control any personal property in a public warehouse or other storage place; and 3) it had business personal property with an assessed value of $25,410. Based on these responses, Dav-Con did not file a Return of Not-Owned Property (Form 103-N) or a Confidential Return of Personal Property in Warehouses, Grain Elevators, or Other Storage Places claimed to be Exempt from Assessment (Form 103-W).

Subsequently, the State Board reviewed Dav-Con's Form 103 pursuant to IND.CODE 6-1.1-14-3. During the course of the review, a State Board field auditor examined Dav-Con's sales journal and invoices, which revealed that Dav-Con stored steel for seven different companies on March 1, 1992. Dav-Con, however, had not reported the steel on its Form 103. Because the steel appeared to be unassessed, the field auditor checked the North Township Assessor's files to determine whether any of the seven companies had reported the steel for assessment. Three of the companies had reported their steel; the remaining four companies had not. Consequently, the field auditor recommended to the State Board that Dav-Con be assessed for the steel that had not been reported by the four companies (the property at issue).

To determine the assessed value of the property at issue, the field auditor contacted the four companies and asked them to report the value of their steel in Dav-Con's storage facility on March 1, 1992. After receiving written responses from the four companies, the field auditor determined that Dav-Con had underreported the assessed value of its business personal property by $140,170. Accordingly, the field auditor recommended to the State Board that Dav-Con's business personal property assessment be increased to $165,580 ($25,410 + $140,170) and that Dav-Con be assessed an undervaluation penalty equal to twenty percent of the underreported amount.

On April 20, 1993, the State Board held a hearing on Dav-Con's assessment. In its final determination, the State Board adopted the field auditor's recommendation and increased Dav-Con's assessment to $165,580. Further, it denied Dav-Con's request for an enterprise zone inventory credit, as well as Dav-Con's claims for exemption under IND.CODE 6-1.1-10-29, 29.3, and 30 (the interstate commerce exemptions). Finally, the State Board imposed the twenty percent undervaluation penalty on Dav-Con.

Dav-Con now appeals to this court. Additional facts will be provided as necessary.

DECISION AND ANALYSIS

STANDARD OF REVIEW

"The State Board is accorded great deference when acting within the scope of its authority, and the Tax Court will reverse the State Board's final determination only when it is unsupported by substantial evidence, constitutes abuse of discretion, exceeds statutory authority, or is arbitrary or capricious." Paul Heuring Motors, Inc. v. State Bd. of Tax Comm'rs (1993), Ind.Tax, 620 N.E.2d 39, 40. "Like any other party appealing an administrative decision, the taxpayer bears the burden to show the State Board's assessment was inaccurate." Id.

I

Dav-Con offers three arguments to support its claim that the State Board erred in assessing it for the not-owned property that it held in its storage facility. The court rejects all three.

First, Dav-Con cites IND.CODE 6-1.1-2-4 for the proposition that the State Board has no authority to levy an assessment against a possessor of tangible property. I.C. 6-1.1-2-4 provides:

(a) The owner of any tangible property on the assessment date of a year is liable for the taxes imposed for that year on the property.

(b) A person holding, possessing, controlling, or occupying any tangible property on the assessment date of a year is liable for the taxes imposed for that year on the property unless:

(1) he establishes that the property is being assessed and taxed in the name of the owner; or

(2) the owner is liable for the taxes under a contract with that person.

(Emphasis added). Dav-Con contends that while this statute explicitly provides that the State Board may hold a possessor of tangible property liable for taxes, it makes no mention of whether the State Board may levy an assessment against a possessor of tangible property. Consequently, Dav-Con argues, the State Board has no authority to levy an assessment against a mere possessor of tangible property.

Dav-Con's argument must fail. Statutes must be "reasonably and fairly interpreted so as to give [them] efficient operation, and to give effect if possible to the expressed intent of the legislature." State v. Griffin (1948), 226 Ind. 279, 79 N.E.2d 537, 540. Further, statutes "should not be wantonly narrowed, limited or emasculated and rendered ineffective, absurd or nugatory." Id. A tax is a pecuniary burden imposed by a government. Black's Law Dictionary 1307 (5th ed. 1979). An assessment is a calculation of the rate and amount of taxes due. Id. at 106. Thus, the authority to tax is meaningless without the authority to assess, and the meaning of the word "taxes," as used in I.C. 6-1.1-2-4(b), necessarily includes the levy of an assessment to collect those taxes. Because the principles of taxation and assessment are parallel, reading I.C. 6-1.1-2-4 to permit a possessor to be taxed, but not assessed, would emasculate the statute.

Moreover, this court has already permitted the State Board to use I.C. 6-1.1-2-4(b) to levy an assessment against a possessor of tangible property. State Line Elevator, Inc. v. State Bd. of Tax Comm'rs (1988), Ind.Tax, 528 N.E.2d 501, 502 (a proper "assessment was made under I.C. 6-1.1-2-4(b) on the basis that State Line [was] a possessor who [had] not established that 'the property [was] assessed and taxed in the name of the owner.' "). See also State Bd. of Tax Comm'rs v. Jewell Grain Co. (1990), Ind., 556 N.E.2d 920, 922 (quoting State Line Elevator, 528 N.E.2d at 502). In sum, when a possessor of tangible property can be taxed, a possessor of tangible property can be assessed for that tax. ¹

Second, Dav-Con contends that even if an assessment can be levied against a possessor of tangible property, the State Board still erred in assessing the property at issue to Dav-Con. Dav-Con reasons that: 1) the State Board cannot levy an assessment against a person who has no obligation to file a Form 103-N; and 2) it had no obligation to file a Form 103-N because it had no way of knowing who owned the property at issue. Therefore, Dav-Con argues, given the facts of this case, the State Board could not assess it for the property at issue.

Indiana's personal property tax system is a self assessment system. It relies heavily on the full disclosure and accurate reporting of property by taxpayers. Indeed, 50 I.A.C. 4.2-2-5(c) provides:

The person holding, possessing, or controlling any tangible property in any capacity, which property is subject to taxation under this article, is required to file and attach with the return a complete listing on Form 103-N ... of all not owned property. The listing is to be filed in the taxing district where the property is located and must include the name and address of the owner, model, description, location, quantities on hand, date of installation, value (if known) per this article and any other information requested on the appropriate form.

This regulation is unambiguous. It specifies who must file a Form 103-N and what information must be included on the Form 103-N. When an administrative rule is unambiguous, there is no need to apply any rules of construction except that words and phrases shall be taken in their plain, ordinary, and usual sense. See Paul Heuring Motors, 620 N.E.2d at 42; Rogers v. State Board of Tax Comm'rs (1991), Ind.Tax, 565 N.E.2d 398, 402 (rules of statutory construction apply to construction of...