U-Haul v. Indiana Dept. of State Revenue

• Decision Date: 25 November 2008
• Docket Number: No. 49T10-0603-TA-20.,49T10-0603-TA-20.
• Citation: 896 N.E.2d 1253
• Parties: U-HAUL CO. OF INDIANA, INC., Petitioner, v. INDIANA DEPARTMENT OF STATE REVENUE, Respondent.
• Court: Indiana Tax Court

896 N.E.2d 1253

U-HAUL CO. OF INDIANA, INC., Petitioner, v. INDIANA DEPARTMENT OF STATE REVENUE, Respondent.

No. 49T10-0603-TA-20.

Tax Court of Indiana.

November 25, 2008.

Mark J. Richards, Barton T. Sprunger, Ice Miller LLP, Indianapolis, IN, Attorneys for Petitioner.

Steve Carter, Attorney General of Indiana, John D. Snethen, Deputy Attorney General, Indianapolis, IN, Attorneys for Respondent.

ORDER ON PARTIES' CROSS-MOTIONS FOR SUMMARY JUDGMENT

FISHER, J.

U-Haul Company of Indiana, Inc. (U-Haul Indiana) has challenged the final determination of the Indiana Department of State Revenue (Department) assessing it with an additional gross income tax liability for the tax years ending March 31, 1999, March 31, 2000, and March 31, 2001 (the years at issue). The matter is currently before the Court on the parties' cross-motions for summary judgment. While the parties have raised several issues, the Court finds the following to be dispositive:

I. Whether the Department timely mailed its proposed assessment to U-Haul Indiana for the year ending March 31, 1999 (the 1999 tax year); and

II. Whether the Department's retroactive imposition of gross income tax, based on its admitted change in interpretation of that tax, was proper.

FACTS AND PROCEDURAL HISTORY

The U-Haul Rental System (U-Haul System), rents assorted moving equipment to the public for use throughout the United States and Canada. (Pet'r Designation of Evidence (hereinafter, Pet'r Des'g Evid.) Ex. 1 ¶¶ 4, 8.) See also U-Haul Co. of Ind., Inc. v. Indiana Dep't of State Revenue (U-Haul I), 784 N.E.2d 1078, 1079-80 (Ind. Tax Ct.2002). The U-Haul System is composed of four groups: (1) Fleet Owners, (2) Rental Companies, (3) Rental Dealers, and (4) U-Haul International (UHI). These groups are bound together through a series of contractual relationships, with UHI controlling the form, terms, and conditions of each contract.

The Fleet Owners own and supply the moving equipment to the U-Haul System for rental purposes. The Fleet Owners entrust their equipment to the U-Haul System in exchange for a percentage of the gross rental income collected by the Rental Dealers from the public.

The Rental Companies merchandise and supervise the maintenance and repair of the rental equipment. The Rental Companies are responsible for establishing and servicing Rental Dealers for the U-Haul System in territories assigned to them by UHI. The Rental Companies receive a percentage of the gross rental income collected by Rental Dealers located in their territories.

The Rental Dealers are the local business entities that display and rent the moving equipment to the public. The Rental Dealers make weekly deposits of all rental income collected from the public to a depository bank account belonging to UHI. Rental Dealers also receive a percentage of the gross rental income they collect from the public upon the leasing of the moving equipment.

UHI provides clearinghouse, accounting, computer, management analysis, and other services to the U-Haul System in accordance with its contracts with the Fleet Owners and the Rental Companies. In addition, UHI is responsible for distributing the contractual percentages of the gross rental income collected by the Rental Dealers to the other members of the U-Haul System.

U-Haul Indiana is an Indiana corporation that functions as a Rental Company within the U-Haul System. For each of the years at issue, U-Haul Indiana timely filed consolidated gross income tax returns, which reported its gross income tax liability along with that of U-Haul Leasing and Sales Company (U-Haul Leasing) and one other member of the U-Haul System.¹ U-Haul Indiana's return reported that U-Haul Leasing's gross income tax liability was zero based upon a Letter of Findings issued by the Department to U-Haul Leasing on March 26, 1986 (1986 LOF). (See Pet'r Des'g Evid. Ex. E.)²

After auditing U-Haul Indiana, the Department concluded that U-Haul Leasing actually owed gross income tax for the years at issue. As a result, the Department assessed U-Haul Indiana with additional gross income tax liabilities (including interest and penalties) for each of those years.³ On April 21, 2003, U-Haul Indiana protested the assessments. On February 17, 2006, the Department issued a Letter of Findings (2006 LOF) affirming the assessments but waiving the penalties.

On March 9, 2006, U-Haul Indiana initiated an original tax appeal. U-Haul Indiana filed a motion for summary judgment on January 9, 2007. The Department filed a cross-motion for summary judgment on April 2, 2007. The Court conducted a hearing on the parties' motions on June 8, 2007. Additional facts will be supplied as necessary.

STANDARD OF REVIEW

Summary judgment is only proper when the designated evidence demonstrates that no genuine issues of material fact exist and the moving party is entitled to judgment as a matter of law. Ind. Trial Rule 56(C). When reviewing a motion for summary judgment, the Court will construe all properly asserted facts and reasonable inferences drawn therefrom in favor of the nonmoving party. See Scott Oil Co. v. Indiana Dep't of State Revenue, 584 N.E.2d 1127, 1128-29 (Ind. Tax Ct.1992) (citation omitted). Consequently, if there is any doubt as to what conclusion the Court could reach, then the Court will conclude that summary judgment is improper, given that it is neither a substitute for trial nor a means for resolving factual disputes or conflicting inferences following from undisputed facts. See Owens Corning Fiberglass Corp. v. Cobb, 754 N.E.2d 905, 909 (Ind.2001) (citations omitted); Scott Oil, 584 N.E.2d at 1128 (citations omitted). Cross-motions for summary judgment do not alter this standard. Horseshoe Hammond, LLC v. Indiana Dep't of State Revenue, 865 N.E.2d 725, 727 (Ind. Tax Ct.2007), review denied.

DISCUSSION AND ORDER

I. Whether the Department timely mailed the proposed assessment for the 1999 tax year to U-Haul Indiana

During the 1999 tax year, Indiana Code § 6-8.1-5-2 established the statute of limitations for issuing proposed assessments for the collection of unpaid tax. That statute, in relevant part, provided that "the [D]epartment may not issue a proposed assessment ... more than three (3) years after the latest of the date the return is filed[ ] or ... the due date of the return[.]" IND.CODE ANN. § 6-8.1-5-2(a)(1) (West 1999). The parties do not dispute that U-Haul Indiana filed its tax return for the 1999 tax year on or before January 15, 2000. Thus, the Department was required to send its proposed assessment with respect to the additional 1999 liability (1999 proposed assessment) to U-Haul Indiana on or before January 15, 2003. See id. See also IND.CODE ANN. § 6-8.1-5-1(a) (West 1999).

U-Haul Indiana claims that the Department has failed to meet this requirement. (See Pet'r Br. in Supp. of [its] Mot. for Summ. J. (hereinafter, Pet'r Br.) at 40-45.) To support its claim, U-Haul Indiana offered the affidavit of George R. Olds, the Senior Assistant General Counsel of U-Haul Indiana. (See Pet'r Des'g Evid. Ex. 1.) Mr. Olds averred that, in late February 2003, U-Haul Indiana received an Audit Report explaining the additional tax liability for each of the years at issue and the proposed assessments for the tax years ending March 31, 2000 and March 31, 2001 (the 2000 and 2001 tax years). (Pet'r Des'g Evid. Ex. 1 ¶¶ 22-23.) Mr. Olds explained that when U-Haul Indiana had not received a proposed assessment for the 1999 tax year by April 21, 2003, it filed a protest as to the 2000 and 2001 tax years only. (Pet'r Des'g Evid. Ex. 1 ¶ 24.) In fact, Mr. Olds averred that U-Haul Indiana neither received, nor was aware of, the 1999 proposed assessment until it was "furnished" with a copy of that assessment in August 2005. (Pet'r Des'g Evid. Ex. 1 ¶¶ 24-25.)

U-Haul Indiana's designated evidence prima facie⁴ raises a rebuttable presumption as to the Department's non-mailing of the 1999 proposed assessment. (See Pet'r Des'g Evid. Ex. 1 ¶¶ 22-25.) See also American Family Ins. Group v. Ford, 155 Ind.App. 573, 293 N.E.2d 524, 526-27 (1973) (explaining that evidence indicating that a letter was not received raises the rebuttable presumption of non-mailing). Nevertheless, the Department's designated evidence regarding its conformance with its routine business practices has rebutted that presumption. But see KLR Inc. v. Indiana Unemployment Ins. Review Bd., 858 N.E.2d 115, 118-19 (Ind.Ct. App.2006) (explaining that evidence of non-receipt of a mailing can rebut the presumption of mailing).

More specifically, the Department has submitted the depositions of Lisa Lafferty, Davetta Ploughe, and Beverly Hendy and Ms. Lafferty's affidavit. (See Resp't Designation of Evidence (hereinafter Resp't Des'g Evid.) Exs. 4, 6; Pet'r Des'g Evid. Exs. 5-6.) All three women, who were directly involved with the processing of U-Haul Indiana's 1999 proposed assessment, testified as to what the Department's normal business practices were regarding the mailing of proposed assessments to taxpayers. Ms. Ploughe explained that when a proposed assessment is printed, its print date is usually different from its issuance date because the Department's computer system automatically assigns each assessment with an issuance date that is three to seven days beyond its print date. (Pet'r Des'g Evid. Ex. 5 at 14:8-12.) After the proposed assessment is printed, a copy of the original is made and is placed in the taxpayer's file. (Pet'r Des'g Evid. Ex. 5 at 21:19-25, 22:1, 41.) The proposed assessment is then mailed. (Pet'r Des'g Evid. Ex. 5 at 14:17-22.) While the Department generally mails the Audit Report along with the proposed assessment to taxpayers, it deviates from this practice (i.e., it will mail the proposed assessment only) when the statute of limitations for mailing the assessment is near expiration. (Pet'r Des'g Evid. Ex. 5 at 8:17-25, 9:1-13.) If a proposed assessment is returned to the Department in the...