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Electricity used by a restaurant group to run equipment that holds and preserves food that will be combined for customers qualified for the consumption exemption from Indiana sales and use tax. The relevant exemption for electricity applies when a taxpayer engages in production, has an integrated production process, and the electricity used is essential and integral to the integrated production. The restaurants’ preparation and combination of food into entrees for customers was a process of producing food items into new marketable products. The preparation, preservation, and combination of food items constituted an integrated production process during which the electricity was used. The use of electricity to preserve items at certain temperatures was essential and integral to the process of producing entrees. As a result, the purchases of electricity qualified for the consumption exemption.(Aztec Partners, LLC v. Indiana Dept. of Revenue, Indiana Tax Court, No. 49T-1210-SC-00067, June 23, 2015)


On June 15, 2015, Representative Jason Chaffetz (R-UT) introduced the Remote Transactions Parity Act (RTPA) of 2015 in the U.S. House of Representatives. The bill – similar to the Marketplace Fairness Act (MFA) of 2015 – pertains to sales and use taxcollection obligations for remote sellers, but the RTPA contains some differences and several additional provisions. Unlike the MFA’s $1 million small seller exception, the RTPA’s small seller exception is as follows: first year: $10 million; second year: $5 million; third year: $1 million. The exception goes away in the fourth year. Furthermore, under the RTPA sellers utilizing an electronic marketplace are not considered small sellers and are not entitled to the exception, no matter the year. Under the RTPA, sellers would not be audited by states where they don’t have a physical presence. There would be a three year statute of limitations for assessments on remote sellers. The bill would enable remote sellers to refund over-collected tax to customers. The RTPA also specifies that a state would not be authorized to impose a sales and use tax collection requirement on remote sellers until it has certified multiple software providers that are certified in all states seeking to impose authorization requirements. The RTPA would also allow customers to pursue refunds of over-collected tax from remote sellers. However, RTPA does not preempt states from imposing sales and use taxes on remote sellers that do not have physical presence under this definition. It merely authorizes states to impose sales and use tax on remote sellers without a physical presence. Under the RTPA, if a seller has nexus under existing law, including Quill v. North Dakota, then the state may still impose a sales and use tax collection requirement.  The bill is assigned to the Judiciary Committee just like the MFA.  On July 1, 2015 it was referred to the Subcommittee on Regulatory Reform, Commercial And Antitrust Law. (H.R. 2775, the Remote Transactions Parity Act of 2015)


UPDATE: This bill failed to pass during the 114th Congressional Session running from January 3, 2015 to January 3, 2017.  Therefore, this bill has died and would need to be reintroduced to be considered and voted on.


Indiana Governor Mike Pence has signed the State Biennial Budget Bill, which requires the Indiana Department of Revenue to establish a tax amnesty program for taxpayers having an unpaid tax liability for a listed tax that was due and payable for a tax period ending before January 1, 2013. The amnesty program will take place from September 15 through November 16, 2015 and will apply to all tax types managed by the Department. Penalties, interest and collection fees on unpaid tax liabilities will be waived for qualified participants in the amnesty program. The Department will not seek civil or criminal prosecution and shall not issue or will withdraw an assessment or notice previously issued. The Department will release tax liens that have been imposed on existing liabilities. Any additional taxes due under the amnesty must be paid or a payment plan entered into before the conclusion of the amnesty program.  Any taxpayer who participated inthe 2005 prior amnesty is barred from the 2015 amnesty. Any participant in the 2015 amnesty will be barred from participating in any future amnesty. Taxpayers who benefited from the Streamlined Sales Tax Amnesty program are also ineligible.  If eligible taxpayers do not participate in the amnesty and additional taxes are deemed due, additional penalties will apply. 


The Indiana Department of Revenue has issued emergency rules regarding the tax amnesty program. The emergency rules list the eligibility requirements and restrictions for participating in the tax amnesty program. Taxpayers with unpaid income tax, sales tax, withholding tax, inheritance tax, estate tax and generation-skipping transfer tax liabilities are eligible to participate in the amnesty program. Taxpayers who are known to be eligible will receive notice by September 15, 2015. Per the rules, an eligible taxpayer who fails to participate may be subject to a doubling of penalties owed on unpaid tax liabilities. Taxpayers can pay tax liabilities in a lump-sum payment or through an amnesty payment plan agreement. An amnesty payment plan agreement requires that the base tax due be paid in full to the department by June 15, 2016. A taxpayer who fully complies with the terms of an amnesty agreement is eligible to have his or her tax warrant(s) expunged, at the discretion of the department. The department will not expunge a warrant if it finds that the warrant was issued based on the taxpayer’s fraudulent, intentional or reckless conduct. To have a warrant expunged, a taxpayer must submit to the department an amnesty expungement request form.


For more information, you can visit the state's amnesty program web page.


(H.B. 1001, Laws 2015, effective July 1, 2015; Governor Pence Announces Tax Amnesty to Be Conducted in Fall 2015, Indiana Gov. Mike Pence, June 29, 2015; LSA Document #15-240(E), Indiana Department of Revenue, July 27, 2015)


An Indiana industrial gas producer was not entitled to the state’s manufacturing sales tax exemption on equipment used to produce gases because the product does not go through a substantial change. In order to qualify for the exemption, materials used in the processing of the product must result in a substantially different end product. The producer converts gases from liquid to gaseous form and combines gases. The Department of Revenue found that the producer essentially combines gases to produce its end-product, and there was insufficient information to establish that the final product has undergone a “substantial change.”(Letter of Findings No. 04-20120346, Indiana Department of Revenue, November 26, 2014)


A retailer that also acts as a general contractor was not liable for Indiana sales tax on construction materials it incorporated into its customers’ real property because the retailer properly assessed use tax on the wholesale cost of the construction materials. Sales tax must be collected when a seller purchases tangible personal property for resale then transfers title to the property for consideration. Title does not pass where tangible personal property is put in a condition required by contract terms before the property’s sale is complete. The retailer entered intolump-sum installation contracts and used its own inventory as construction materials in the services it performed. A lump-sum contract does not lose its character even if there is a separate estimate for the materials and the labor.  A key finding was that the contractor retained title to all excess materials and was also liability for any overruns unless a change order was agreed to by the customer.  The materials lost their identity as tangible personal property when they were converted to real property, and the retailer did not transfer tangible personal property to its customers. (Lowe’s Home Centers, LLC v. Indiana Department of Revenue, Indiana Tax Court, No. 49T10-1201-TA-6, December 19, 2014)



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