Indianapolis Welding Supply, Inc. v. Indiana Department of State Revenue
| Decision Date | 06 January 2005 |
| Docket Number | 49T10-0011-TA-119 |
| Parties | INDIANAPOLIS WELDING SUPPLY, INC., Petitioner, v. INDIANA DEPARTMENT OF STATE REVENUE, Respondent. |
| Court | Indiana Tax Court |
ATTORNEYS FOR RESPONDENT: STEVE CARTER ATTORNEY GENERAL OF INDIANA, JOEL SCHIFF DEPUTY ATTORNEY GENERAL
Indianapolis Welding Supply, Inc. (IWS) appeals the final determination of the Indiana Department of State Revenue (Department) which assessed it with unpaid sales and use tax for the 1993, 1994 and 1995 tax years (years at issue). The issue for the Court to decide is whether IWS is entitled to a public transportation exemption.
IWS sells welding supplies and gases used in the industrial and medical fields. Specifically, IWS sells oxygen, nitrogen nitrous oxide, hydrogen, compressed air, acetylene, propane, carbon dioxide, argon, helium and other rare/specialty gases in both the liquid and gaseous forms. IWS owns cryogenic tanks and high-pressure cylinders in which it packages its gases. When a customer purchases gases, it may either lease the tanks from IWS or use its own tanks. When a customer leases a tank from IWS, IWS delivers the filled tank to its customer. If a customer owns its own tanks, IWS sells the gases in the liquid bulk state, where IWS takes liquid gas and pumps it into the holding tank at its customer’s site.
After conducting an audit, the Department determined that IWS had not paid sales tax on its purchases of transportation equipment and repair parts. Thus, for the years at issue, the Department assessed IWS with use tax in the amount of $23,901.35. IWS protested the assessments; the Department issued a Letter of Findings on June 16, 2000, upholding the assessments.[1]
IWS initiated an original tax appeal on November 14, 2000 and a trial was held on November 17, 2003. While the parties filed written briefs with the Court, they waived oral argument. Additional facts will be supplied as necessary.
This Court reviews the Department’s final determinations de novo. Ind. Code Ann. § 6-8.1-5-1(h) (West 2004). Therefore, the Court is not bound by either the evidence presented or the issues raised at the administrative level. See Snyder v. Indiana Dep't of State Revenue, 723 N.E.2d 487, 488 (Ind. Tax Ct. 2000) review denied.
Tax exemption statutes are strictly construed in favor of the state and against the taxpayer. See Foursquare Tabernacle Church of God in Christ v. State Bd. of Tax Comm’rs, 550 N.E.2d 850, 854 (Ind. Tax Ct. 1990). Therefore, the burden is upon the one claiming the exemption to show that the property clearly falls within the exemption statute. Id. (citing LeSea Broadcasting Corp. v. State Bd. of Tax Comm’rs, 525 N.E.2d 637, 638 (Ind. Tax Ct. 1988) (quoting Indiana Ass’n of Seventh-Day Adventists v. State Bd. of Tax Comm’rs, 512 N.E.2d 936, 938 (Ind. Tax Ct. 1987))). However, the Court will not read an exemption provision so narrowly as to defeat its application to a case rightly within its ambit. See Tri-States Double Cola Bottling Co. v. Indiana Dep't of State Revenue, 706 N.E.2d 282, 283-84 (Ind. Tax Ct. 1999).[2]
Indiana imposes sales tax “on retail transactions made in Indiana.” Ind. Code Ann. § 6-2.5-2-1(a) (West 2004). Indiana also imposes a use tax – which is the functional equivalent of the sales tax – on the acquisition of certain non-exempt tangible personal property that escapes sales tax, usually because the property was acquired in a transaction that occurred outside of Indiana. See Rhoade v. Indiana Dep't of State Revenue 774 N.E.2d 1044, 1047-48 (Ind. Tax Ct. 2002).
Ind. Code Ann. § 6-2.5-5-27 (West 2004). A carrier provides “public transportation” when it “move[s], transport[s], or carr[ies] [] persons and/or property for consideration.” Ind. Admin. Code tit. 45, r. 2.2-5-61 (1992) (1996). IWS claims that its purchases of transportation equipment and replacement parts are exempt from sales and use tax.
In 1994, this Court explained that in order to qualify for the public transportation exemption, “someone other than the transporter must own the property being transported.” Nat’l Serv-All, Inc. v. Indiana Dep't of State Revenue, 644 N.E.2d 954, 956 (Ind. Tax Ct. 1994). Furthermore, “[i]f a taxpayer is not predominately [sic] engaged in transporting the property of another, it is not entitled to the exemption.” Panhandle E. Pipeline Co. v. Indiana Dep't of State Revenue, 741 N.E.2d 816, 819 (Ind. Tax Ct. 2001) (emphasis added), review denied.[3]
IWS claims that it is entitled to the public transportation exemption because its customers own the gas prior to it being delivered to them. (See Pet’r Br. at 10, 12.) The Department claims, on the other hand, that IWS’s customers do not own the gas until it has been delivered to them. (See Resp’t Br. at 8-11.) Thus, in the Department’s view, the gas IWS delivers is its own product, and IWS is not engaged in public transportation. The Court is left, therefore, with the task of determining at what point IWS’s customers own the gas they purchase from IWS.
In an effort to support its claim that its customers own the gas prior to delivery, IWS submitted a delivery invoice indicating “FOB: OUR DOCK.”[4] (See J. Ex. 4, Dep. Ex. 2.) The Department, however, asserts that although the billing invoice “contain[s] the terms ‘F.O.B: OUR DOCK’, the actual operation [of IWS] is not consistent with those terms” and delivery is part of the bargain between IWS and its customers. (Resp’t Br. at 8, 10.) To support its claim, the Department submitted three IWS service agreements. (See J. Ex. 4, Dep. Exs. 3-5.)
Ownership is a malleable concept; “[i]n addition to possession, the chief incidents of ownership... are the rights of use and enjoyment, and of disposition.” Nat’l Serv-All Inc.,644 N.E.2d at 957 (internal quotations omitted) (citation omitted). Because IWS did not have an explicit agreement designating when ownership of the gas transferred from IWS to its customers, the Court will refer to the law of sales for guidance in determining the ownership status of the parties. See Monarch Beverage Co. v. Indiana Dep't of State Revenue, 589 N.E.2d 1209, 1212 (Ind. Tax Ct. 1992); see also A.G.G. Enters., Inc. v. Washington County, Oregon, 145 F.Supp.2d 1215, 1223-24 (D. Or. 2001) (). Furthermore, the Court will look to the written agreements as well as the entire transaction to determine the intent of the parties. See Hardware Wholesalers, Inc. v. Indiana Dept. of State Revenue, 597 N.E.2d 1339, 1344 (Ind. Tax Ct. 1992), rev’d on other grounds, 622 N.E.2d 930 (Ind. 1993).
When a “contract requires or authorizes [a] seller to send [] goods to [a] buyer but does not require him to deliver them at destination, title passes to the buyer at the time and place of shipment[.]” Ind. Code Ann. § 26-1-2-401(2)(a) (West 2004). Alternatively, “if the contract requires delivery at destination, title passes on tender there.” A.I.C. § 26-1-2-401(2)(b). Therefore, in this instance, the determination of ownership hinges on whether IWS was required to deliver the gas to its customers.
In reviewing the billing invoice and service agreements, the Court follows the rules of contract construction. “Like the language of a statute, the language of a contract is generally given its plain and ordinary meaning, unless the contract makes clear the parties intended a different meaning.” Nat’l Serv-All, Inc., 644 N.E.2d at 957. Furthermore, “[t]he court must accept an interpretation of the contract which harmonizes its provisions as opposed to one which causes them to be conflicting.” McCae Mgmt. Corp. v. Merchants Nat’l Bank & Trust Co. of Indianapolis, 553 N.E.2d 884, 887 (Ind.Ct.App. 1990) (citation omitted).
In reviewing the evidence, one service agreement states that (J. Ex. 4, Dep. Ex. 5 (emphases added).) Another service agreement states that “[IWS] agrees to supply [customer’s] requirements of [gas] utilizing a bulk method of delivery to buyer’s location(s)[.]” (J. Ex. 4, Dep. Ex. 3 (emphasis added).) The delivery notice, along with the “FOB: OUR DOCK” stamp, includes a statement that “[t]he above material will remain the property of [IWS] until final payment has been made.” (J. Ex. 4, Dep. Ex. 1,2.) Additionally, IWS charges all of its customers a delivery fee, regardless of whether they choose to waive delivery and pick up the orders themselves. (See J. Ex. 4, Pet’r Dep. Ex. A at 7-8.)
The Court concludes that delivery was part of the bargain between IWS and its customers. To...
To continue reading
Request your trial