Horseshoe Hammond v. Dept. of State Revenue
| Decision Date | 01 May 2007 |
| Docket Number | No. 49T10-0411-TA-53.,49T10-0411-TA-53. |
| Citation | 865 N.E.2d 725 |
| Parties | HORSESHOE HAMMOND, LLC, f/k/a Horseshoe Hammond, Inc., Petitioner, v. INDIANA DEPARTMENT OF STATE REVENUE, Respondent. |
| Court | Indiana Tax Court |
Tax Section, Jennifer E. Gauger, Deputy Attorney General, Indianapolis, IN, Attorneys for Respondent.
ORDER ON PARTIES' CROSS-MOTIONS FOR SUMMARY JUDGMENT
Horseshoe Hammond, LLC (Horseshoe) challenges the final determination of the Indiana Department of State Revenue (Department) denying its claim for refund of use taxes paid during the year ending December 31, 2001 (the year at issue). The matter is currently before the Court on the parties' cross-motions for summary judgment. The sole issue for the Court to decide is whether Horseshoe's provision of complimentary merchandise and meals to some of its casino patrons during the year at issue was subject to Indiana's sales or use tax.
Horseshoe is an Indiana corporation with its principal place of business in Hammond, Indiana. During the year at issue, Horseshoe, a licensed riverboat operator, operated an excursion gaming boat from its dock on Lake Michigan. In conjunction with its gaming operations, Horseshoe also operated a gift shop, as well as several restaurants and bars, from its dock.
During the year at issue, Horseshoe periodically provided complimentary merchandise and/or meals to certain casino patrons who were members of its "Player's Club."1 Horseshoe's reason for offering the complimentary merchandise and meals was "to cultivate customer relations so that customers w[ould] stay on the property, come to the property, or return to the property."2 (Pet'r Post Hr'g Br. at 3 (footnote added).) Horseshoe remitted Indiana use tax to the Department on these complimentary offerings (based on their advertised retail prices).
On March 13, 2003, Horseshoe filed a claim with the Department requesting a refund of, among other things, the $87,635.17 in use tax it remitted on the complimentary merchandise and meals. When Horseshoe had not received a final determination from the Department on its refund claim by November 30, 2004, it initiated this original tax appeal. Horseshoe filed a motion for summary judgment on September 12, 2005, and the Department filed its response brief on January 19, 2006.3 The Court conducted a hearing on the matter on July 21, 2006. Additional facts will be supplied as necessary.
This Court reviews the Department's denial of claims for refund de novo. IND.CODE ANN. § 6-8.1-9-1(d) (West 2007). Accordingly, the Court is bound by neither the evidence nor the issues presented at the administrative level. Snyder v. Indiana Dep't of State Revenue, 723 N.E.2d 487, 488 (Ind. Tax Ct.2000), review denied.
Summary judgment is only appropriate 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); Snyder, 723 N.E.2d at 488. Cross-motions for summary judgment do not alter this standard. Williams v. Indiana Dep't of State Revenue, 742 N.E.2d 562, 563 (Ind. Tax Ct.2001).
Indiana imposes an excise tax, known as the state sales tax, on retail transactions made within the state. IND.CODE ANN. § 6-2.5-2-1(a) (West 2001). A retail transaction occurs when, inter alia, a retail merchant in the ordinary course of his regularly conducted trade or business acquires tangible personal property for the purpose of resale and transfers that property to another person for consideration. See IND.CODE ANN. § 6-2.5-4-1(a), (b) (West 2001).
Indiana also imposes a complementary tax, known as the use tax, on the use, storage, or consumption of tangible personal property in Indiana. See IND.CODE ANN. § 6-2.5-3-2 (West 2001). The use tax is complementary to the sales tax because it ensures that non-exempt retail transactions that have escaped sales tax liability are nonetheless taxed.4 See USAir, Inc. v. Indiana Dep't of State Revenue, 623 N.E.2d 466, 468-69 (Ind. Tax Ct.1993) (footnote added).
Indiana's legislature has also provided a variety of exemptions from these complementary taxes. See IND.CODE ANN. §§ 6-2.5-5-1 to -38.2 (West 2001). While these exemptions are specifically delineated as exemptions from sales tax, they are also applicable to the use tax.5 See IND.CODE ANN. § 6-2.5-3-4(a)(2) (West 2001) (footnote added). See also Rotation Prods. Corp. v. Dep't of State Revenue, 690 N.E.2d 795, 798 n. 5 (Ind. Tax Ct.1998).
When Horseshoe purchased merchandise for resale in its gift shop, it was not required to pay Indiana sales tax on those retail transactions. See IND.CODE ANN. § 6-2.5-8-8 (West 2001) (). (See also Pet'r Br. in Supp. of [Its] Mot. for Summ. J. (hereinafter, Pet'r SJ Br.) at 5 (citation omitted); Resp't Restatement of Facts at 3 (footnote omitted).) When Horseshoe subsequently resold that merchandise to its casino patrons, those transactions were subject to sales tax. See A.I.C. § 6-2.5-4-1(a), (b).
With respect to the merchandise that Horseshoe offered to Player's Club members on a complimentary basis during the year at issue, Horseshoe concedes that it owes use tax thereon. (See Pet'r SJ Br. at 8.) Horseshoe asserts, however, that it miscalculated the amount of use tax it owed and is therefore entitled to a refund of its overpayment. The Department, on the other hand, advances two alternative arguments as to why it believes Horseshoe is not entitled to the refund. First, it claims that in providing the complimentary merchandise to casino patrons, Horseshoe was, in fact, making retail transactions that were subject to sales tax. In the alternative, the Department argues that Horseshoe properly calculated and remitted use tax on the complimentary merchandise.
The Department first claims that in providing complimentary merchandise to casino patrons, Horseshoe was making a retail transaction "in disguise." (See Resp't Br. in Reply to Pet'r Reply Br. (hereinafter, Resp't Br.) at 9-10.) More specifically, the Department argues that pursuant to Indiana Code § 6-2.5-4-1, Horseshoe: (1) acquired merchandise for the purpose of reselling it to its customers; and (2) while it did not transfer the complimentary merchandise for money, it nonetheless transferred it for consideration, that consideration being the patrons' continued "gaming activity and customer loyalty." (See Resp't Br. at 7, 9.) As a result, the Department asserts that Horseshoe is not entitled to the refund of use tax it remitted.6
To support its argument that Horseshoe received consideration for the complimentary merchandise, the Department relies on an excerpt from this Court's opinion in Monarch Beverage Company v. Indiana Department of State Revenue, 589 N.E.2d 1209 (Ind. Tax Ct.1992). (See Resp't Br. at 7-8.) That excerpt states:
[t]he concept of consideration evolved from the law of contracts. In order to have a legally binding contract there must generally be an offer, acceptance, and consideration. Consideration is essential to every contract. Indiana has long held that consideration in the form of money is not essential to a binding contract. A mere promise is sufficient as consideration if it is the result of a bargained for exchange. Moreover, a benefit to the promisor or a detriment to the promisee is sufficient as consideration. The doing of an act by one at the request of another which may [be] a detrimental inconvenience, however slight, to the party doing it or [] a benefit, however slight, to the party at whose request it is performed, is legal consideration for a promise by such requesting party.
(Resp't Br. at 8 (quoting Monarch Beverage Co. v. Indiana Dep't of State Revenue, 589 N.E.2d 1209, 1212 (Ind. Tax Ct.1992) (internal citations and quotation omitted)).) Accordingly, the Department is convinced that "[i]n this matter, there was consideration [because t]here was a benefit to the Players Club members—free ... merchandise [and t]here was a detriment to Horseshoe—the cost of providing the free ... merchandise." (Resp't Br. at 8.) The Court, however, does not find the Department's argument convincing.
As this Court explained in Monarch Beverage, consideration—no matter what its form—consists of a bargained-for exchange. See Monarch Beverage Co., 589 N.E.2d at 1212. See also Tolliver v. Mathas, 538 N.E.2d 971, 974 (Ind.Ct.App. 1989). This means that the essence of the transaction must involve an exchange that has been agreed to. See Monarch Beverage Co., 589 N.E.2d at 1212 (). See also Bogigian v. Bogigian, 551 N.E.2d 1149, 1151 (Ind. Ct.App.1990) (). Here, there is no evidence demonstrating that Horseshoe and its Player's Club members bargained for "continued gaming activity and customer loyalty" in exchange for the benefit of complimentary merchandise flowing to the casino patrons to the detriment of Horseshoe. In other words, the casino patrons never agreed or promised Horseshoe that they would continue their gaming activity in exchange for free merchandise.7 Likewise, while Horseshoe hoped its provision of complimentary meals would assist in cultivating customer relationships, it never promised complimentary merchandise to anyone: the provision of complimentary merchandise was a purely discretionary act.
Because Horseshoe and the recipients of the complimentary merchandise did not bargain for "continued gaming activity and customer...
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