Indiana Dept. of State Revenue v. Indiana Gamma Gamma of Alpha Tau Omega, Inc.

• Decision Date: 28 August 1979
• Docket Number: No. 1-1177A282,1-1177A282
• Citation: 394 N.E.2d 187,181 Ind.App. 664
• Parties: INDIANA DEPARTMENT OF STATE REVENUE, Donald H. Clark, Commissioner, Defendant-Appellant, v. INDIANA GAMMA GAMMA OF ALPHA TAU OMEGA, INCORPORATED, Plaintiff-Appellee.
• Court: Indiana Appellate Court

Page 187

394 N.E.2d 187

181 Ind.App. 664

INDIANA DEPARTMENT OF STATE REVENUE, Donald H. Clark Commissioner, Defendant-Appellant, v. INDIANA GAMMA GAMMA OF ALPHA TAU OMEGA, INCORPORATED Plaintiff-Appellee.

No. 1-1177A282.

Court of Appeals of Indiana, First District.

Aug. 28, 1979.

William M. Evans, G. Pearson Smith, Jr., Bose & Evans, Indianapolis, for defendant-appellant.

Charles B. Huppert, Huppert & Wilcox, Howard S. Wilcox, Jr., Indianapolis, for plaintiff-appellee.

LYBROOK, Judge.

Defendant-appellant Indiana Department of State Revenue (Department) appeals a judgment entered in Vigo Superior Court in favor of plaintiff-appellee Indiana Gamma Gamma of Alpha Tau Omega, Incorporated (ATO).

ATO is organized and operated as a not-for-profit corporation which owns and operates a college fraternity house and acts as the legal entity of the fraternity chapter called Indiana Gamma Gamma of Alpha Tau Omega and located at Rose-Hulman Institute of Technology (Rose-Hulman), a not-for-profit educational institution of higher learning.

In July, 1972, ATO brought suit against the Department for a refund of taxes and for a declaratory judgment, alleging that:

1) ATO had been compelled to make Indiana gross income tax payments and was wrongfully denied a refund, and it is wholly exempt from such tax under Ind.Code 6-2-1-7.

2) Certain of ATO's purchases are exempt from the Indiana gross retail tax and use tax under Ind.Code 6-2-1-39. ¹

3) ATO was entitled to a refund of Indiana gross retail tax which it had paid to the State on food sold to Rose-Hulman students but which it had not collected from the students, and these food transactions are exempt from the gross retail tax under Ind.Code 6-2-1-39.

ATO argued that it is organized and operated exclusively for educational purposes and is, therefore, wholly exempt from the gross income tax. ATO claimed that it is not a predominantly social organization and, hence, certain of its purchases are exempt from the gross retail tax. Finally, ATO maintained that the meals it furnishes to Rose-Hulman students are exempt from the gross retail tax under the statute that exempts the furnishing of food by non-profit colleges to their students. ²

The Department contended that ATO is a social organization and, therefore, is only partially exempt from the gross income tax, and is not exempt from the gross retail tax on personal property purchased for its own use and consumption. Finally, the Department argued that the gross retail tax exemption for food furnished by non-profit colleges to their students does not apply to food furnished by fraternities.

This cause was tried to the court and, in response to the Department's pretrial request, the trial court entered special findings under Ind.Rules of Procedure, Trial Rule 52(A), accompanied by the following judgment:

"IT IS HEREBY ORDERED, ADJUDGED AND DECREED by the Court, as follows, to-wit:

1. That Plaintiff, Indiana Gamma Gamma of Alpha Tau Omega, Inc., is hereby exempt from paying Indiana Gross Income Tax under the provisions of I.C. § 6-2-1-7(i)(1).

2. That Plaintiff, Indiana Gamma Gamma of Alpha Tau Omega, Inc., is hereby exempt from paying Indiana Sales and Use Tax on its purchase under the provisions of I.C. § 6-2-1-39(b)(8).

3. That Plaintiff, Indiana Gamma Gamma of Alpha Tau Omega, Inc., is hereby exempt from collecting and paying over to the Defendant, Indiana Department of State Revenue, sales tax and use tax under the provisions of I.C. § 6-2-1-39(b) (7) for food said Plaintiff sells or furnishes to students in attendance at the college where it is chartered and affiliated, namely, Rose-Hulman Institute of Technology.

4. That the Plaintiff, Indiana Gamma Gamma of Alpha Tau Omega, Inc., recover from the Defendant, Indiana Department of State Revenue, the aggregate sum of Two Thousand Nine Hundred Sixty-Five Dollars and Seventy-Six Cents ($2,965.76) together with interest and costs of this action.

5. That students in attendance at Rose-Hulman Institute of Technology are exempt from paying sales and use tax for food and beverages purchased from, or furnished by, Plaintiff, Indiana Gamma Gamma of Alpha Tau Omega, Inc."

The Department initiated its appeal to this court and moved for a stay of execution pending the outcome. After oral argument, we entered an order suspending the relief granted by the judgment and staying any execution or other proceedings on the judgment until further order of this court.

The Department's appeal of the trial court's denial of its motion to correct errors raises these issues for review:

1) Did the trial court err in concluding that ATO is wholly exempt from the gross income tax because it failed to find, and could not have found, that ATO is exclusively educational?

2) Did the trial court err in concluding that certain ATO purchases are exempt from the gross retail tax because it failed to find, and could not have found, that ATO is not predominantly social, and because said conclusion conflicts with its findings of fact?

3) Did the trial court err in concluding ATO's food sales to students are exempt from the gross retail tax because it failed to find, and could not have found, that ATO is a college or university, and because its findings respecting control of ATO by Rose-Hulman are irrelevant and not supported by sufficient evidence?

4) Was the declaratory relief granted by the trial court outside the scope of its subject matter jurisdiction?

We reverse.

We must first address the Department's contention that the trial court lacked subject matter jurisdiction to grant declaratory relief respecting ATO's liability for paying the gross income tax and for paying and collecting the gross retail tax.

In relation to ATO, the trial court's judgment contained five pronouncements: 1) that ATO is exempt from paying the gross income tax; 2) that ATO is to recover the gross income tax it has paid; 3) that ATO is exempt from paying the gross retail tax on some of its purchases; 4) that ATO is exempt from collecting the gross retail tax on its food sales to Rose-Hulman students; and 5) that ATO is to recover the amount it has paid to the Department as gross retail tax on these food sales.

The Department contends that the three grants of declaratory relief are contrary to law because they contravene the prescribed statutory method of challenging the imposition of these taxes. The Department argues that the prescribed method is to pay the tax and seek a refund under two applicable statutes.

In relation to the gross income tax, Ind.Code 6-2-1-19 states, in part:

"(a) If any person considers that he has paid to the department for any year An amount which is in excess of the amount legally due from him for that year under the terms of this act (6-2-1-1 6-2-1-53), He may apply to the department, by petition in writing, at any time within three (3) years after the payment for the annual period for which such alleged overpayment has been made, for a correction of the amount so paid by him to the department, and For a refund of the amount which he claims has been illegally collected and paid. In such petition, he Shall set forth the amount which he claims should be refunded, and the reasons for such claim. The department shall promptly consider such petition, and may grant such refund in whole or in part, or may wholly deny the same. If denied in whole or in part, the petitioner shall be forthwith notified of such action of the department, and of its grounds for such denial. The department may in its discretion, grant the petitioner a further hearing with respect to such petition. Any person improperly charged with any tax provided for under the terms of this act, and required to pay the same, may recover any amount thus improperly collected, together with interest, In a civil action or suit against the department in the circuit or superior court of the county of his residence or business location and if he has no such residence or business location, then in the Marion circuit or superior court. The state hereby consents to such suits in said courts and no others and said courts are hereby granted exclusive jurisdiction of said suits:

(d) No injunction to restrain or delay the collection of any tax claimed to be due under the provisions of this act shall be issued by any court, but in all cases in which, for any reason, it be claimed that any such tax about to be collected is wrongful or illegal in whole or in part, the remedy, except as otherwise expressly provided in this act, shall be by payment and action to recover such tax as provided in this section." (Emphasis added.)

Ind.Code 6-2-1-51 makes the above language applicable to the gross retail tax as follows:

"(c) The state gross retail tax and the use tax shall not be subject to the exemptions allowed by section 5(6-2-1-6) of this act. All other provisions of this act in respect to the gross income tax relative to the filing of returns, the auditing of returns, investigation, determination, notification, assessment and collection of tax liability, examination of taxpayer's books and records, legal proceedings, court actions, remedies, privileges and relief available to the department and to the taxpayer, statutes of limitation, hearings, assessments, refunds, remittances imposing penalties and interest, keeping and preservation of records by the department, confidential treatment of taxpayers' returns, duties of secretary of state and treasurer of state, the administration of the act, definitions, validity and separability of provisions not in conflict or inconsistent with the specific provisions of this act in respect to the state gross retail tax and the use tax, shall be applicable to the imposition and collection of such taxes and the administration of such taxes by the department: Provided, however, That refund shall not be made to any retail merchant of any amount of such taxes collected by the retail merchant from a...