Monarch Steel Co., Inc. v. State Bd. of Tax Com'rs, 49T10-9111-TA-00060
| Decision Date | 16 April 1993 |
| Docket Number | No. 49T10-9111-TA-00060,49T10-9111-TA-00060 |
| Parties | MONARCH STEEL COMPANY, INCORPORATED, Petitioner, v. STATE BOARD OF TAX COMMISSIONERS, Respondent. |
| Court | Indiana Tax Court |
Kenneth D. Reed, Hammond, for petitioner.
Pamela Carter, Atty. Gen., Ted J. Holaday, Deputy Atty. Gen., Indianapolis, for respondent.
The Petitioner, Monarch Steel Company, Inc. (Monarch), appeals from three final determinations by the Respondent, the State Board of Tax Commissioners (the State Board), assessing Monarch's business personal property for the March 1, 1987, 1988, and 1990 assessment dates. Monarch claims the State Board wrongly failed to grant it exemptions for personal property stored in interstate commerce under IND.CODE 6-1.1-10-29, 6-1.1-10-29.3, 6-1.1-10-29.5, and 6-1.1-10-30 (the interstate commerce exemptions), and raises three issues for the court's review:
I. Whether the State Board's final determination for the March 1, 1989, assessment is at issue.
II. Whether all cutting Monarch performs on the steel in its inventory is "processing" under the interstate commerce exemptions.
III. Whether Monarch is liable for undervaluation penalties under IND.CODE 6-1.1-37-7(e) for the 1990 assessment.
The parties are no strangers to this court. Monarch and the State Board have been litigating Monarch's entitlement to the interstate commerce exemptions for several years, leading to two written opinions from this court, Monarch Steel Co. v. State of Indiana Tax Comm'rs (1988), Ind.Tax, 527 N.E.2d 1171 (Monarch I ), and Monarch Steel Co. v. State of Indiana Tax Comm'rs (1989), Ind.Tax, 545 N.E.2d 1148 (Monarch II ).
As in the previous appeals, the operative facts reveal that Monarch, an Indiana corporation, operates a steel service center. Monarch purchases large pieces of steel from manufacturers both inside and outside Indiana. It then resells the steel to customers both inside and outside Indiana. Sometimes Monarch is a simple broker and makes no changes to the steel, but it often uses a torch to cut the steel into smaller pieces prior to shipping. See Monarch II, 545 N.E.2d at 1149; Monarch I, 527 N.E.2d at 1172. In some cases, Monarch cuts the steel on a template to customer size and shape specifications, see Monarch II, 545 N.E.2d at 1149, while at other times, Monarch cuts the steel into basic geometric shapes with ninety degree angles. Additional facts will be supplied as necessary.
At the outset, Monarch claims the State Board's final determination for the March 1, 1989, assessment is part of this original tax appeal. The chronology of the litigation, however, reveals otherwise.
Monarch's 1989 assessment was pending review before the State Board when this court issued its October 25, 1989, decision in Monarch II and remanded the 1987 assessment to the State Board. Monarch believed the State Board was required to review the 1989 assessment in accord with the decision in Monarch II, but that the State Board was not doing so. Accordingly, Monarch filed a petition for clarification with this court on September 13, 1990, asking whether Monarch II applied to 1989. Fifteen days later, on September 28, 1990, the State Board issued its final determination for 1989. On October 23, 1990, the court issued an order reminding the parties that tax years stand alone and that Monarch was free to file an original tax appeal for 1989 if it believed the State Board's actions were improper. On September 30, 1991, the State Board issued its final determinations for the 1987, 1988, and 1990 assessments. On November 13, 1991, Monarch appealed from both the September 28, 1990, and the September 30, 1991, final determinations.
"If a taxpayer fails to comply with any statutory requirement for the initiation of an original tax appeal, the tax court does not have jurisdiction to hear the appeal." IND.CODE 33-3-5-11(a). The State Board Regardless of the pending status of the 1987, 1988, and 1990 assessments on September 28, 1990, Monarch was obliged to pursue the rights triggered by the State Board's final determination of the 1989 assessment in a timely fashion. That Monarch believed 1989 was part of the instant appeal simply because 1989 was before the State Board at the same time other years were before the State Board does not make it so: it is the date of the final determination that matters. Without a timely filing under IC 6-1.1-15-5(d), the court is without jurisdiction over the 1989 assessment, and the State Board's final determination of the 1989 assessment is simply not at issue. See Sherry Designs, Inc. v. State Bd. of Tax Comm'rs (1992), Ind.Tax, 589 N.E.2d 285, 286.
issued its final determination for the 1989 assessment on September 28, 1990, and the time for Monarch to file its appeal from that action expired forty-five days later on November 12, 1990. IND.CODE 6-1.1-15-5(d); Ball Stores, Inc. v. State Bd. of Tax Comm'rs (1974), 262 Ind. 386, 393, 316 N.E.2d 674, 676-78. 1 Monarch did not appeal, however, until November 13, 1991, a year and a day too late
When reviewing a final determination of the State Board, the court's function is to determine whether the State Board's action " 'is supported by substantial evidence, is an abuse of discretion, is arbitrary or capricious, or is in excess of the State Board's authority.' " Lakeview Country Club v. State of Indiana Bd. of Tax Comm'rs (1991), Ind.Tax, 565 N.E.2d 392, 394 (quoting Hatcher v. State Bd. of Tax Comm'rs (1990), Ind.Tax, 561 N.E.2d 852, 853). The parties remain in litigation because they have consistently given different interpretations to the language in the interstate commerce exemptions, under which taxability or exempt status generally hinges on the "processing" or "packaging" the taxpayer performs on the property at issue. Specifically, the interstate commerce exemptions provide in relevant part:
6-1.1-10-29 Manufacturer's or processor's property stored in instate warehouse for shipment to out-of-state destination
(a) As used in this section, "manufacturer" or "processor" means a person that performs an operation or continuous series of operations on raw materials, goods, or other personal property to alter the raw materials, goods, or other personal property into a new or changed state or form. The operation may be performed by hand, machinery, or a chemical process directed or controlled by an individual. The terms include a person that dries or prepares grain for storage or delivery. (Emphasis added.)
(b) Personal property owned by a manufacturer or processor is exempt from property taxation if the owner is able to show by adequate records that the property is stored and remains in its original package in an in-state warehouse for the purpose of shipment, without further processing, to an out-of-state destination. (Emphasis added.)
(c) Personal property that is manufactured in Indiana and that would be exempt under subsection (b), except that it is not stored in its original package, is exempt from property taxation if the owner can establish in accordance with exempt inventory procedures, regulations, and rules of the state board of tax commissioners that the property:
(1) is ready for shipment without additional manufacturing or processing, except for packaging; and
(2) will be damaged or have its value impaired if it is stored in its original package. (Emphasis added.) 2
6-1.1-10-29.3 Personal property shipped into state for transshipment out of state
Personal property shipped into Indiana is exempt from property taxation if the owner or possessor is able to show by adequate records that the property:
(1) is stored in an in-state warehouse for the purpose of transshipment to an out-of-state destination; and
(2) is ready for transshipment without additional manufacturing or processing, except repackaging. (Emphasis added.) 3
6-1.1-10-30 Property in original package in warehouse for transshipment
(1) the property is owned by a nonresident of this state;
(2) the owner is able to show by adequate records that the property has been shipped into this state and placed in its original package in a public or private warehouse for the purpose of transshipment to an out-of-state destination; and
(3) the property remains in its original package and in the public or private warehouse. (Emphasis added.)
For purposes of this subsection, a nonresident is a taxpayer who places goods in the original package and into the stream of commerce from outside of the state of Indiana.
(1) the property has been placed in its original package in a public or private warehouse for the purpose of shipment to an out-of-state destination;
(2) the property remains in its original package and in the public or private warehouse; and
(3) the property had been ordered and is ready for shipment in interstate commerce to a specific known destination to which the property is subsequently shipped. (Emphasis added.)
If a property tax exemption is claimed under this subsection for property which is not shipped to the specific known destination as required under subdivision (3), the taxpayer shall file an amended personal property tax return for the year for which the exemption for that property was claimed.
(1) the property has been placed in its original package in a public warehouse;
(2) the property was transported to that public warehouse by a common, contract, or private carrier;
(3) the owner is able to show by adequate records that the property is held in the public warehouse for purposes of transshipment to an...
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