Hyatt Corp. v. Department of State Revenue

• Decision Date: 24 June 1998
• Docket Number: No. 49T10-9601-TA-00001,49T10-9601-TA-00001
• Citation: 695 N.E.2d 1051
• Parties: HYATT CORP., Petitioner, v. DEPARTMENT OF STATE REVENUE, Respondent.
• Court: Indiana Tax Court

Page 1051

695 N.E.2d 1051

HYATT CORP., Petitioner, v. DEPARTMENT OF STATE REVENUE, Respondent.

No. 49T10-9601-TA-00001.

Tax Court of Indiana.

June 24, 1998.

Barton T. Sprunger, Mark J. Richards, Ice Miller Donadio & Ryan, Indianapolis, for Petitioner.

Jeffrey A. Modisett, Attorney General, and Marilyn S. Meighen, Deputy Attorney General, Indianapolis, for Respondent.

FISHER, Judge.

Hyatt Corp. (Hyatt) appeals a final determination of the Department of State Revenue (Department) denying its claim for refund for use taxes paid on its food purchases during 1986 through 1988.

FACTS AND PROCEDURAL HISTORY

Hyatt operates a major hotel chain. In the course of its hotel business, Hyatt purchases unprepared food in order to prepare and serve complimentary meals to members of its Regency Club and its employees. Hyatt paid use tax on the food that it purchased during 1986 through 1988. Subsequently, the Department audited Hyatt and issued a notice of proposed assessment concerning unrelated tax liabilities for the years at issue. See IND.CODE ANN. § 6-8.1-5-1(a) (West Supp.1997). Hyatt filed a written protest. See id. § 6-8.1-5-1(c). The Department held a hearing on the matter and issued its final determination in a letter of findings dated October 29, 1993.

In its letter of findings, the Department determined that Hyatt had an unpaid tax liability. In the course of the proceedings, Hyatt asserted that it erroneously paid use tax of $12,305.36 on its food purchases and that it was entitled to set off that amount against the assessment. The Department concluded that Hyatt's purchases of food were taxable and therefore denied Hyatt's attempt to set off the use tax it had already paid against the assessment. On March 11, 1994, Hyatt paid the assessment. On April 18, 1994, Hyatt filed a claim for refund for the $12,305.36, plus interest, for the use tax paid on the food purchases. On October 6, 1995, the Department denied Hyatt's refund claim. On January 4, 1996, Hyatt filed this original tax appeal. Both parties have moved for summary judgment.

ANALYSIS AND OPINION

Standard of Review

This Court reviews the Department's final determinations de novo and is not bound by

the evidence or the issues raised at the administrative level. See id. § 6-8.1-9-1(d); Indianapolis Fruit Co. v. Department of State Revenue, 691 N.E.2d 1379, 1382 (Ind.Tax Ct.1998). Summary judgment is only appropriate when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. See IND. T.R. 56(C); Roehl Transp., Inc. v. Department of State Revenue, 653 N.E.2d 539, 541 (Ind.Tax Ct.1995). Cross motions for summary judgment do not alter this standard. See Roehl Transp., 653 N.E.2d at 541.

Discussion

At the outset, the Court notes that there is an issue concerning the timeliness of Hyatt's claim for refund.

(a) If a person has paid more tax than the person determines is legally due, the person may file a claim for refund with the department. In order to obtain the refund, the person must file the claim within three years after the latter of the following:

(1) The due date of the return.

(2) The date of payment

Id. § 6-8.1-9-1(a). In this case, Hyatt's claim for refund was filed in 1994, approximately six years after payment of the use tax was presumably made. ¹ However, in its answer, the Department admitted that Hyatt filed a timely claim for refund. This constitutes a judicial admission that binds the Department. ² See State v. Hladik, 158 Ind.App. 223, 302 N.E.2d 544, 548-49 (1973); T.R. 8(D). The Court also notes that the running of the limitations period presents no problem with respect to this Court's subject matter jurisdiction because this Court's jurisdiction does not depend on when the claim for refund is filed with the Department, but rather when the appeal is filed in this Court. See IND.CODE ANN. § 6-8.1-9-1(c) (West Supp.1997).

The Court now turns to the merits of Hyatt's claim. Indiana imposes an excise tax (sales or gross retail tax) on retail transactions in Indiana. See id. § 6-2.5-2-1 (West 1989). Indiana also imposes a complementary excise tax (use tax) on tangible personal property stored, used, or consumed in Indiana. See id. § 6-2.5-3-2; see also USAir, Inc. v. Department of State Revenue, 623 N.E.2d 466, 468-69 (Ind.Tax Ct.1993). A variety of exemptions from these complementary taxes are available. ³ See IND.CODE ANN. §§ 6-2.5-5-1 to -38.2 (West 1989 & Supp.1997). Like any other tax exemptions, these exemptions are strictly construed against the taxpayer, see Sony Music Entertainment, Inc. v. State Bd. of Tax Comm'rs, 681 N.E.2d 800, 801 (Ind.Tax Ct.1997), review denied, and the taxpayer bears the burden of demonstrating entitlement to the exemption. See id. However, "[w]hen construing an exemption, ... the court must always bear the legislature's intent in mind to avoid reading the exemption so narrowly its application is defeated in cases rightly within its ambit." Harlan Sprague Dawley, Inc. v. Department of State Revenue, 605 N.E.2d 1222, 1225 (Ind.Tax Ct.1992). In addition, "[w]hen an enactment, including a tax exemption statute, is clear and unambiguous, the plain language governs." J & J Vending, Inc. v. Department of State Revenue, 673 N.E.2d 1203, 1206 (Ind.Tax Ct.1996). This means that courts should not employ the policy of strict construction to contradict the plain language of an exemption provision. The Indiana General Assembly is presumed to have meant what it said.

Hyatt claims that its purchases of food are exempt from use tax under IND.CODE ANN. § 6-2.5-5-20 (West 1989) (amended 1989). The version of section 6-2.5-5-20

applicable to the tax years in issue ⁴ provided:

(a) Sales of food for human consumption are exempt from the state gross retail tax.

(b) For purposes of this section, the term "food for human consumption" includes:

(1) cereals and cereal products;

(2) milk and milk products, including ice cream;

(3) meat and meat products;

(4) fish and fish products;

(5) eggs and egg products;

(6) vegetables and vegetable products;

(7) fruit and fruit products, including fruit juices;

(8) sugar, sugar substitutes, and sugar products;

(9) coffee and coffee substitutes;

(10) tea, cocoa, and cocoa products;

(11) spices, condiments, extracts, and salt; and

(12) oleomargarine

(c) For purposes of this section, the term "food for human consumption" does not include:

(1) candy, confectionery, and chewing gum;

(2) alcoholic beverages;

(3) cocktail mixes;

(4) soft drinks, sodas, and other similar beverages;

(5) medicines, tonics, vitamins, and other dietary supplements;

(6) water, mineral water, carbonated water and ice;

(7) pet food;

(8) food furnished, prepared, or served for consumption at a location, or on equipment, provided by the retail merchant;

(9) food served by a retail merchant off his premises;

(10) food sold by a retail merchant who ordinarily bags, wraps, or packages the food for immediate consumption on or near the merchant's premises, including food sold on a "take out" or "to go" basis; and

(11) food sold through a vending machine or by a street vendor.

Subsection 6-2.5-5-20(a) exempts purchases of "food for human consumption" from Indiana sales and use tax. Section 6-2.5-5-20(b) defines "food for human consumption." Subsection 6-2.5-5-20(c) excludes certain types of foods and transactions from the "food for human consumption" definition. See J & J Vending, Inc., 673 N.E.2d at 1205. Therefore, if Hyatt's food purchases fall within the statutory definition of "food for human consumption" and are not excluded from that definition, then Hyatt is entitled to the exemption.

The Department does not dispute that the food that Hyatt purchased consisted of meat, eggs, fish, fruit, etc. and products of the same, which are included under the definition of "food for human consumption" in subsection 6-2.5-5-20(b). Therefore, the resolution of this case turns on whether Hyatt's purchases are excluded from the definition of "food for human consumption" by subsection 6-2.5-5-20(c).

In its brief, the Department does not argue that any specific provision of subsection 6-2.5-5-20(c) operates to exclude Hyatt's purchases of food from the definition of "food for human consumption." Rather, the Department argues that Hyatt does not fall within the class of persons that the legislature intended section 6-2.5-5-20 to benefit because "Hyatt Corporation is not a member of the poor or working class." According to the Department, because Hyatt is not a member of the poor or working class, allowing Hyatt to receive the exemption will not serve the legislative purpose of mitigating the regressivity of sales tax on food. ⁵ See The Department also points out the fact that no sales tax is triggered when Hyatt provides meals to its employees and to its Regency Club members. According to the Department, this fact means that Hyatt's food purchases were taxable. In support of this contention, the Department argues that the purpose of the "Indiana Tax Code" is to tax the last point of sale. In this case, in the Department's view, because Hyatt does not sell the meals it provides, Hyatt's food purchases from its suppliers were last point of sale and, as a result, are taxable. The Department also contends that if Hyatt's food purchases are not taxed, Hyatt will escape taxation entirely. Additionally, in the Department's view, applying the exemption to Hyatt's food purchases will not further the legislative purpose of avoiding tax pyramiding. See Rotation Prods. Corp. v. Department of State Revenue, 690 N.E.2d 795, 798 n. 6 (Ind.Tax Ct.1998) (discussing tax pyramiding and legislative efforts to mitigate its effects). Lastly, the Department argues that because Hyatt did not intend to resell the food it purchased, its food purchases are taxable.

Taxpayers Lobby, Inc. v. Orr, 262 Ind. 92, 311 N.E.2d 814, 817-18 (1974).

As stated above, section 6-2.5-5-20(c) excludes certain items...