Indiana Dept. of State Revenue v. Indianapolis Transit System, Inc.

• Decision Date: 18 November 1976
• Docket Number: No. 2--675A137,2--675A137
• Citation: 356 N.E.2d 1204,171 Ind.App. 299
• Parties: INDIANA DEPARTMENT OF STATE REVENUE, Appellant (Defendant below), v. INDIANAPOLIS TRANSIT SYSTEM, INC., Appellee (Plaintiff below). . 1
• Court: Indiana Appellate Court

Page 1204

356 N.E.2d 1204

171 Ind.App. 299

INDIANA DEPARTMENT OF STATE REVENUE, Appellant (Defendant below), v. INDIANAPOLIS TRANSIT SYSTEM, INC., Appellee (Plaintiff below).

No. 2--675A137.

Court of Appeals of Indiana, First District. ¹

Nov. 18, 1976.

Theodore L. Sendak, Atty. Gen., Joseph J. Reiswerg, Deputy Atty. Gen., Indianapolis, for appellant.

Lawrence McTurnan, Indianapolis (Bredell, Martin & McTurnan, Indianapolis, of counsel), for appellee.

LYBROOK, Judge.

Defendant-appellant, Indiana Department of State Revenue (State) appeals from judgment in favor of plaintiff-appellee, Indianapolis Transit System, Inc. (ITS). State presents the following issues for our review:

(1) Whether the Court's Finding of Fact (4), which reads:

'4. Shortly after the passage of the sales and use tax by the Indiana Legislature, Mr. James H. Armington, Treasurer of the Indianapolis Transit System, inquired of the Indiana Department of State Revenue, as to whether the Plaintiff Corporation would be exempt under the provisions of Burns' Indiana Statutes, Anno., Sec. 64--2654(b)(4), and was advised by said Department that the Corporation was exempt in its purchases which were made in the operation of its business. Thereafter, the Corporation claimed exemption from the sales and use tax for all of its purchases which were reasonably and necessarily incurred in the operation of its business. These purchases upon which an exemption was claimed included the items set forth in Exhibit A to the Complaint filed by the Plaintiff.' (Emphasis supplied).

was supported by sufficient evidence.

(2) Whether the Court's Finding of Fact (8), which reads:

'8. In addition, the parties have agreed that with respect to claim for refund of similar taxes which have been paid by the Plaintiff and collected by the Department from and after December 31, 1970, to date, that this portion of the case should be severed and heard at a later time.' was supported by sufficient evidence.

(3) Whether the Court's Conclusion of Law, which reads:

'The law is with the Plaintiff and against the Defendant in that the purchases which were claimed as exempt by the Plaintiff and unexempt by the Defendant, which resulted in this litigation, were exempt by virtue of Burns' Indiana, Statutes, Anno., Sec. 64--2654(b)(4), and that the charter bus service of the Plaintiff, did not constitute a lease so as to be taxable, but was a simple charter, whereby the Plaintiff retained absolute and permanent control over its buses at all times during the charter trips. Furthermore, there were no elements of a lease present in the charter bus service. The only distinction between those passengers of the Plaintiff Corporation riding as individuals and passengers riding on a charter bus line was that the latter had a common destination.' (Emphasis supplied).

is contrary to the evidence and the law.

The facts most relevant to this appeal reveal that on November 30, 1971, State sent to ITS a Notice of Tax due in the amount of.$11,717.11. The notice explained the tax due arose from 'failure of taxpayer to report revenue for 'charter' bus rental in taxable sales and failure to report personal property purchased and not used directly for public transportation as being subject to the use tax.' ITS is a corporation engaged in providing public transportation in the City of Indianapolis and is certified by the Public Service Commission of Indiana.

Several years prior to the receipt of this notice, on June 24, 1964, shortly after the announcement of the Indiana Sales and Use Tax, James Armington, the Treasurer of ITS, allegedly communicated with a representative of State and was advised by this representative that ITS would be exempt from the sales and use tax. In light of this exemption ITS did not report or pay sales and use tax on all items purchased which were reasonable and necessary to the furnishing of public transportation. ITS also did not report or pay any sales and use tax on receipts from its charter bus service.

After an audit State determined that ITS owed tax for the tax years of 1968, 1969 and 1970 on revenue from the charter bus service and personal property purchased. ITS paid this tax under protest and paid an additional sum which represented sales and use taxes for similar items for the 1971 tax year.

On May 5, 1972, ITS filed a Complaint for Recovery of Improperly Collected Taxes. On December 19, 1974, trial was held, de novo, and on December 27, 1974, judgment was entered in favor of ITS. From this judgment, defendant appeals.

I.

The first issue for our consideration is whether the trial Court's Finding of Fact (4) was supported by sufficient evidence. State maintains that since the cause was a trial de novo, any prior representations made by State which were offered and admitted into evidence were done so improperly and constituted error. When confronted with an allegation of insufficiency of evidence, this court as a reviewing tribunal, neither weighs the evidence nor resolves questions of witness' credibility but considers only the evidence most favorable to the appellee, together with all reasonable inferences deducible therefrom, and will sustain the judgment if there is substantial evidence of probative value to establish the findings. Hidden Valley Lake, Inc. v. Kersey (1976), Ind.App., 348 N.E.2d 674.

In the case at bar Armington's testimony directly supports the finding in question. State did not object to Armington's testimony until he was asked about the conclusions of the Hearing Examiner. Armington's testimony coupled with the stipulated facts amply support the finding.

Additionally, State complains that it was reversible error for the trial court to admit into evidence the letter which was referred to in Armington's testimony. In support of this position State cites Coffey v. Wininger (1973), Ind.App., 296 N.E.2d 154, in which Judge Hoffman writing for the court, held that hearsay evidence consisting of a letter would not be admissible into evidence under the public record exception to the hearsay rule where there was no proof of the authenticity; however, in Coffey, supra, as in the case at bar, even assuming the letter had been erroneously admitted, the erroneous admission of inadmissible hearsay evidence will not be cause for reversal where such evidence is merely cumulative in nature. Armington's testimony coupled with the stipulated facts is ample evidence to support the Court's Finding of Fact (4). The letter was merely cumulative.

II.

The second issue for our consideration is whether the Court's Finding of Fact (8) was supported by sufficient evidence. State argues that, 'There is no evidence in the record that there were ever any stipulations as to such a fact and matter.' We do not need to decide whether there was a stipulation. The court's finding does not mention a stipulation, it merely states that the parties have 'agreed' that the portion of the case from and after December 31, 1970, should be severed and heard at a later time. There is direct evidence in the record which supports this finding.

'Q. Now, Mr. Armington, aside from the amounts that were paid on December 28, 1971, are you making claim for additional amounts in this protest? (The December 28th payment was for tax years ending December 31, 1970.)

'A. Yes.

'Q. Have you been paying taxes to the State on items similar to those purchased?

'A. Yes, we have.

'Q. The same that is set forth in Exhibit 'A'?

'A. Yes, we have.

'MR. KAGAN: (Attorney for the State) I object. This isn't really relevant. They have asked for a refund and these other items are not in litigation here.

'THE COURT: Well, it might be simpler if you waited to see what the Court did. If it rules in your favor, you might file a Supplementary Complaint to bring it up to date. If the Court ruled against you, you wouldn't have to.

'MR. McTURNAN: That would be satisfactory.

'THE COURT: Is that agreeable with the State?

'MR. KAGAN: Yes.'

(Explanations in Brackets added.)

It appears obvious that this evidence supports the finding in question. This court does not weigh the evidence, we will only reverse when the evidence is uncontradicted and will support no reasonable inference in the trial court's favor. City of Beech Grove v. Schmith (1975), Ind.App., 329 N.E.2d 605.

III.

The third issue for our consideration is whether the Court's Conclusion of Law is contrary to the evidence and the law. Initially State questions whether various items purchased by ITS and claimed as being exempt are in fact exempt from Indiana State Gross Retail Tax. IC 1971, 6--2--1--37, et seq. (Burns Code Ed.). First, it should be noted that in construing the relevant statutory language granting the claimed exemptions, we are bound by the established rule of construction that in the presence of ambiguity the language of the statute must be strictly construed against the party claiming the exemption. Indiana Department of State Revenue v. American Dairy of Evansville (1975), Ind.App., 338 N.E.2d 698; Indiana Department of State Revenue v. RCA Corporation (1974), Ind.App., 310 N.E.2d 96.

The trial court found that ITS was entitled to take exemptions under IC 1971, 6--2--1--39(b)(4) (Burns Code Ed.) which reads:

'(b) Nor shall the state gross retail tax apply to any of the following transactions:

4. From the sale and from the storage, use or other consumption in this state of tangible personal property or service which is directly used or consumed in the rendering of public transportation of persons or property.'

The State argues that the items claimed by ITS as being exempt are not 'directly used or consumed in the rendering of public transportation of persons or property.' Appellant points to RCA, supra, where this court determined that air conditioning equipment used to maintain environmental conditions at a level conducive to the manufacture of color television tubes was not 'directly used' in 'direct production' within the meaning...