Video Tape Exchange Coop of America, Inc. v. Indiana Dept. of State Revenue, 82T05-8609-TA-00009

• Decision Date: 14 November 1986
• Docket Number: No. 82T05-8609-TA-00009,82T05-8609-TA-00009
• Citation: 512 N.E.2d 476
• Parties: VIDEO TAPE EXCHANGE COOP OF AMERICA, INC., individually, and on behalf of a class of taxpayers similarly, Plaintiff, v. INDIANA DEPARTMENT OF STATE REVENUE, Defendant.
• Court: Indiana Tax Court

Page 476

512 N.E.2d 476

VIDEO TAPE EXCHANGE COOP OF AMERICA, INC., individually, and on behalf of a class of taxpayers similarly, Plaintiff, v. INDIANA DEPARTMENT OF STATE REVENUE, Defendant.

No. 82T05-8609-TA-00009.

Tax Court of Indiana.

Nov. 14, 1986.

Jay D. Walden, Buthod, Longest, Clark, Rietman & Steedman, Evansville, for plaintiff.

Linley E. Pearson, Atty. Gen., Dan S. LaRue, Deputy Atty. Gen., Indianapolis, for defendant.

ORDER

FISHER, Judge.

The Court having heretofore taken "Petitioner's Petition to Enjoin Collection of Tax" under advisement now makes the following specific findings of fact:

1. Petitioner is a corporation engaged in the business of renting video tapes to the general public.

2. Petitioner's officer James R. Williams made inquiry regarding sales tax as applied to the rental of video tapes to Department of Revenue employee in Evansville, Indiana whose identity is at present unknown.

3. Petitioner's officer James R. Williams received a photocopy of the statute with commentary by editors of Commerce Clearing House which is attached to "Petition to Enjoin Collection of Tax" as Exhibit A.

4. As a result of aforesaid paragraphs 2 and 3, Petitioner's officer James R. Williams had such a state of mind that he believed that he was not required to collect nor remit sales tax because of renting of video tapes.

5. Petitioner has an accountant who is used regularly but who was not consulted regarding sales tax as to the rental of video tapes until after Petitioners officer was advised of the audit by the Respondent because he was under the impression that collection and remittance of the tax were not required.

6. Respondent asserts that there is due the approximate total sum of $33,552.86 in taxes, penalties, and interest as of June 10, 1986.

7. Petitioner has not paid any of said sum.

8. The tax alleged to be due includes sales tax due on items of personal property purchased by the Petitioner and the owing of which tax is not contested.

9. The collection of tax, interest, and penalties alleged to be due by reason or rental of video tapes pending this original tax appeal would work a hardship on Petitioner and may require Petitioner to cease operations.

10. Petitioner has in its inventory approximately 9,000 video tapes with an approximate value of $20.00 each.

11. Petitioner had a distributable net income of approximately $43,000 in 1985.

12. Respondent has voluntarily agreed to forego collection efforts in absence of any injunction until approximately November 25, 1986.

I.C. 33-3-5-11(c) provides after a hearing, the Tax Court may grant the injunction, if the Tax Court finds that:

(a) the issues raised by the original tax appeal are substantial;

(b) the petitioner has a reasonable opportunity to prevail in the original tax appeal;

(c) the equitable considerations favoring the enjoining of the collection of the tax outweigh the state's interest in collecting the tax pending the original tax appeal.

The Court has little problem finding and does find that the issue in the original tax appeal is substantial. Whether the rental of video tape is subject to sales tax will have substantial statewide impact and is an issue this Court should lay to rest. The issue will seem to turn on how the word "broadcast" should be interpreted as used in I.C. 6-2.5-4-10(c)(2). While counsel have suggested to the Court construction of the word "broadcast" in other cases, no authority either way has been offered to the Court in connection with this petition. While the issue may be easily resolved at trial on the merits, it nevertheless is yet an issue in the case.

The Court likewise has no difficulty in finding and does find that the equitable considerations favoring the enjoining of the collection of the tax outweigh the State's interest in collecting the tax pending the original tax appeal.

The Petitioner is basing its...