Mid-America Mailers, Inc. v. State Bd. of Tax Com'rs, MID-AMERICA

• Decision Date: 15 August 1994
• Docket Number: No. 45T10-9211-TA-00089,MID-AMERICA,45T10-9211-TA-00089
• Parties: MAILERS, INC., Petitioner, v. STATE BOARD OF TAX COMMISSIONERS, Respondent.
• Court: Indiana Tax Court

Page 380

639 N.E.2d 380

MID-AMERICA MAILERS, INC., Petitioner, v. STATE BOARD OF TAX COMMISSIONERS, Respondent.

No. 45T10-9211-TA-00089.

Tax Court of Indiana.

Aug. 15, 1994.

Kenneth D. Reed, Abrahamson, Reed & Adley, Hammond, for petitioner.

Pamela Carter, Atty. Gen., Joel Schiff, Deputy Atty. Gen., Indianapolis, for respondent.

FISHER, Judge.

The Petitioner, Mid-America Mailers, Inc. (Mid-America), appeals the final determination of the Respondent, the State Board of Tax Commissioners (the State Board) assessing non-owned business personal property to Mid-America for the March 1, 1991, assessment date.

ISSUES

I. Whether the First Amendment to the United States Constitution bars imposition of the property tax on the non-owned business personal property.

II. Whether the State Board properly determined the tax and assessed it to Mid-America as a non-owner in possession.

III. Whether Mid-America is entitled to an exemption from the tax under the Commerce Clause of the United States Constitution.

FACTS

Mid-America is an Indiana corporation with offices and operating facilities in Hammond. The company provides mailing services to businesses, not-for-profit organizations, and political groups from several midwestern states. Customers send Mid-America their advertisements, fund raising requests, and various solicitations (collectively, the printed materials). Mid-America places these printed materials into appropriate mailing envelopes and mails them in bulk. The customers are responsible for printing their materials and shipping them to Mid-America. The customers also give Mid-America mailing instructions, including addresses and mailing dates. Mid-America does not pay for the printed materials and it cannot sell them or otherwise dispose of them except to mail them in accord with customer instructions. If, however, a customer decides not to send its printed materials, for whatever reason, Mid-America is then free to dispose of the printed materials as scrap. Mid-America scraps approximately 25 percent of the printed materials it receives. On some occasions, Mid-America is able to sell the scrap paper, and on other occasions, it must pay to have the scrap hauled away.

At the time Mid-America filed its 1991 business personal property tax return for non-owned property, Form 103N, it possessed customers' printed materials, but did not disclose them on the return. The State Board later conducted an audit, determined Mid-America possessed customers' printed materials on March 1, 1991, and assessed business personal property tax against Mid-America.

Mid-America stores the printed materials on pallets. The State Board's hearing officer initially estimated the cost of the printed materials at one dollar per pound. Ultimately, however, the State Board changed the cost to $1,425 per pallet. This figure was based on the average per pallet amount contained in an insurance claim Mid-America filed after a fire that occurred a few months before the assessment date. The State Board and Mid-America agreed on the average number of pallets Mid-America possessed and the average percentage of scrapped material, and the State Board's calculations led to a total assessed value of $492,910, an amount Mid-America contests.

Mid-America now appeals. Additional facts will be supplied as necessary.

DISCUSSION AND DECISION

STANDARD OF REVIEW

The court accords great deference to the State Board when the State Board is acting within the scope of its authority. Centrium Group v. State Bd. of Tax Comm'rs (1992), Ind.Tax, 599 N.E.2d 242, 243 (citing Rogers v. State Bd. of Tax Comm'rs (1991), Ind.Tax, 565 N.E.2d 398, 399). A State Board final determination is reversible only when it is unsupported by substantial evidence, constitutes an abuse of discretion, exceeds statutory authority, or is arbitrary and capricious. Hatcher v. State Bd. of Tax Comm'rs (1992), Ind.Tax, 601 N.E.2d 19, 20 (quoting Bailey Seed Farms, Inc. v. State Bd. of Tax Comm'rs (1989), Ind.Tax, 542 N.E.2d 1389, 1391). Like all other parties appealing an administrative decision, the taxpayer bears the burden to show the inaccuracy of the State Board's assessment. See Meridian Hills Country Club v. State Bd. of Tax Comm'rs (1987), Ind.Tax, 512 N.E.2d 911, 913 (quoting State Bd. of Tax Comm'rs v. Traylor (1967), 141 Ind.App. 324, 228 N.E.2d 46, 52, trans. denied ).

I

Because the printed materials derive their value, not only from the paper on which they are printed, but also from the printing itself, Mid-America sees the imposition of the tax as a violation of Mid-America's First Amendment free speech rights. This is a rather creative argument.

Although " '[r]egulations which permit the government to discriminate on the basis of content of the message cannot be tolerated under the First Amendment,' " Arkansas Writers' Project, Inc. v. Ragland (1987), 481 U.S. 221, 229-30, 107 S.Ct. 1722, 1728, 95 L.Ed.2d 209, 220 (quoting Regan v. Time, Inc. (1984), 468 U.S. 641, 648-49, 104 S.Ct. 3262, 3266-67, 82 L.Ed.2d 487), there is no allegation the property tax, IND.CODE 6-1.1-2-1, is content based. Moreover, "[i]t is beyond dispute that the States and the Federal government can subject [the press] to generally applicable economic regulations without creating constitutional problems." Emmis Publishing Corp. v. Indiana Dep't of State Revenue (1993), Ind.Tax, 612 N.E.2d 614, 617 (quoting Minneapolis Star & Tribune Co. v. Minnesota Comm'r of Revenue (1983), 460 U.S. 575, 581, 103 S.Ct. 1365, 1369, 75 L.Ed.2d 295, 302) (alteration added and in original). ¹

The property tax, which applies to "tangible property," IND.CODE 6-1.1-2-4, is a "generally applicable economic regulation." Indeed, Mid-America itself reported and paid the tax on leased vehicles and equipment in its possession on March 1, 1991. That the printed materials have messages is utterly irrelevant. The tax applies with equal force to motor vehicles, manufacturing/office equipment, and paper, with or without printed messages, and regardless of the content of any message. ² First Amendment concerns are implicated when a tax "is directed at, or presents the danger of suppressing, particular ideas." Emmis, 612 N.E.2d at 617 (quoting Leathers v. Medlock (1991), 499 U.S. 439, 453, 111 S.Ct. 1438, 1447, 113 L.Ed.2d 494, 507-08). The property tax is not in any way directed at suppressing any ideas, and imposition of the tax on the printed materials does not offend the First Amendment.

II

Mid-America next contends that it cannot be held liable for the tax because it lacked a "possessory interest" in the printed materials. Mid-America does not contest that it actually possessed the printed materials on the assessment date; it merely asserts its possession is insufficient to trigger liability. Mid-America is mistaken.

The State Board is obligated to "see that all property assessments are made in the manner provided by law." IND.CODE 6-1.1-35-1; Bielski v. Zorn (1994), Ind.Tax, 627 N.E.2d 880, 885. "Except as otherwise provided by law, all tangible property which is within the jurisdiction of this state on the assessment date of a year is subject to assessment and taxation for that year." IND.CODE 6-1.1-2-1 (emphasis added). These rules place an affirmative duty on the State Board to assess all assessable property. See State Bd. of Tax Comm'rs v. South Shore Marina (1981), Ind.App., 422 N.E.2d 723, 730.

Within IND.CODE 6-1.1, " 'tangible property' means real property and personal property as those terms are defined in [IC 6-1.1-1]." IND.CODE 6-1.1-1-19. IND.CODE 6-1.1-1-11 defines personal property as:

(1) nursery stock that has been severed from the ground;

(2) florists' stock of growing crops which are ready for sale as pot plants on benches;

(3) billboards and other advertising devices which are located on real property that is not owned by the owner of the devices;

(4) motor vehicles, mobile houses, airplanes, boats, and trailers;

(5) foundations (other than foundations which support a building or structure) on which machinery or equipment is installed; and

(6) all other tangible property (other than real property) which is being:

(i) held for sale in the ordinary course of a trade or business;

(ii) held, used, or consumed in connection with the production of income; or

(iii) held as an investment.

....

(Emphasis added). The printed materials are pieces of paper with printing on them: in other words, they are tangible property. Preparing the printed materials for mailing is Mid-America's main source of income, and the materials therefore constitute tangible property "held, used, or consumed in connection with the production of income" within the meaning of IC 6-1.1-1-11.

The law determining liability for taxation of tangible property in this state is clear:

(a) The owner of any tangible property on the assessment date of a year is liable for the taxes imposed for that year on the property.

(b) A person holding, possessing, controlling, or occupying any tangible property on the assessment date of a year is liable for the taxes imposed for that year on the property unless:

(1) he establishes that the property is being assessed and taxed in the name of the owner; or

(2) the owner is liable for the taxes under a contract with that person.

When a person other than the owner pays any property taxes as required by this section, that person may recover the amount paid from the owner, unless the parties have agreed to other terms in a contract.

IND.CODE 6-1.1-2-4. This statute is unambiguous, and in enacting it, the legislature made clear its policy decision to give the State Board "the discretion to tax either the owner or the possessor unless the possessor can prove the owner is being taxed, or the owner has accepted liability for the tax under contract." Jewell Grain Co., 556 N.E.2d at 922 (emphasis added). Mid-America did not attempt to prove either that the various owners of the printed materials were being taxed or...