American United Life Insurance Company v. Indiana Department of State Revenue , 84 N.E.3d 1244 ( 2017 )

ATTORNEYS FOR PETITIONER: ATTORNEYS FOR RESPONDENT:
NATHAN J. HAGERMAN CURTIS T. HILL
TAMMARA D. PORTER ATTORNEY GENERAL OF INDIANA
TAFT, STETTINIUS, & HOLLISTER LLP WINSTON LIN
Indianapolis, IN PARVINDER K. NIJJAR
DEPUTY ATTORNEYS GENERAL
Indianapolis, IN
IN THE
INDIANA TAX COURT FILED
Oct 27 2017, 3:57 pm
CLERK
AMERICAN UNITED LIFE INSURANCE ) Indiana Supreme Court
Court of Appeals
COMPANY, ) and Tax Court
)
Petitioner, )
)
v. ) Cause No. 49T10-1610-TA-00053
)
INDIANA DEPARTMENT OF )
STATE REVENUE, )
)
Respondent. )
ORDER ON PARTIES’ CROSS-MOTIONS FOR
SUMMARY JUDGMENT
FOR PUBLICATION
October 27, 2017
WENTWORTH, J.
American United Life Insurance Company (“AUL”) has appealed the Indiana
Department of State Revenue’s partial denial of its claim for refund of Indiana use tax
paid for the 2012, 2013, and 2014 tax years. AUL’s appeal is currently before the Court
on the parties’ cross-motions for summary judgment. In resolving those cross-motions,
the Court finds in favor of AUL.
FACTS AND PROCEDURAL HISTORY
AUL is an Indiana insurance company with its principal place of business in
Indianapolis, Indiana. (Pet’r Des’g Evid., Ex. A ¶ 1.) AUL purchased computer software
from out-of-state vendors for use in its Indiana operations. (Pet’r Des’g Evid., Ex. C at
1-2.)
The software was delivered to AUL and first loaded on its servers located in
Texas. (Pet’r Des’g Evid., Ex. C at 2.) AUL remitted use taxes1 to the Texas
Comptroller2 on the purchase price of the computer software at the rate of 8.25%. (See
Pet’r Des’g Evid., Ex. A ¶¶ 14, 39-40, 45, Ex. C at 2, Ex. D at 1.) The 8.25% tax rate
represented 6.25% for state-level use tax and the remaining 2% for local-level use
taxes. (Pet’r Des’g Evid., Ex. D at 1.) Because it used the software in Indiana, AUL
also paid Indiana use tax on the purchase price of the software at the rate of 7%. (Pet’r
Des’g Evid., Ex. A ¶ 15, Ex. D at 1.)
AUL filed a claim for refund of the Indiana use tax it paid for the periods ending
December 21, 2012 through September 30, 2014, claiming it was entitled to a credit
1
During the years at issue, Texas imposed both a sales tax on the sale, lease, or license of a
computer program deemed to be tangible personal property and a complementary use tax on
the storage, use, or other consumption of a taxable item in the state of Texas. See TEX. TAX
CODE ANN. §§ 151.009, 151.010, 151.051, 151.101 (West 2012); 34 TEX. ADMIN. CODE §
3.308(b)(2) (2012). Also, during the years at issue, local jurisdictions in Texas imposed their
own sales and use taxes. See TEX. TAX CODE ANN. §§ 321.103, 321.104 (West 2012); 34 TEX.
ADMIN. CODE § 3.346(f).
2
During the hearing on the parties’ cross-motions for summary judgment, counsel for AUL
responded to a question from the Court that AUL may have paid some of the taxes at issue to
vendors. (See Hr’g Tr. at 6-10.) Nonetheless, the designated evidence indicates that AUL paid
the Texas Comptroller. (See Pet’r Des’g Evid., Ex. A ¶¶ 14, 39-40, 45, Ex. C at 2, Ex. D at 1-
2.) Despite the Department’s urging, a genuine issue cannot be raised by supposition. (See
Hr’g Tr. at 27-33.) See C & C Oil Co. v. Indiana Dep’t of State Revenue, 570 N.E.2d 1376,
1379 (Ind. Tax Ct. 1991) (stating that neither suppositions nor hypotheticals are sufficient to
create a genuine issue of material fact).
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against the full amount of Indiana use tax paid because it paid Texas use tax on the
same purchase. (See Pet’r Des’g Evid., Ex. A ¶¶ 4-5, 14-16, Ex. C at 1.) On February
26, 2015, the Department denied the refund claim, which AUL protested. (Pet’r Des’g
Evid., Ex. A ¶¶ 17-18.) On December 9, 2015, after conducting a hearing, the
Department sustained AUL’s protest, granting the refund pending verification of the
amount of Texas tax paid. (Pet’r Des’g Evid., Ex. A ¶¶ 19-20.) On August 24, 2016, the
Department sent AUL a letter indicating that it would issue a credit equal to the amount
AUL paid to Texas for the 6.25% state-level tax, but not for the 2% local-level tax.
(Resp’t Des’g Evid., Ex. A, Confd’l Ex. 1 at 1; Pet’r Des’g Evid., Ex. D at 1.)
On October 3, 2016, AUL filed its original tax appeal. AUL moved for summary
judgment on April 17, 2017, and on June 14, 2017, the Department filed its response
and cross-motion for summary judgment. (Pet’r Mot. Summ. J. at 1; Resp’t Resp. Pet’r
Mot. Summ. J. & Cross Mot. Summ. J. (“Resp’t Br.”) at 1.)
One day before the summary judgment hearing, the Department filed a “Motion
to Designate [the] Affidavit of Ray Langenberg” (“Motion to Designate”). (See Resp’t
Mot. Des’g Aff. Ray Langenberg (“Resp’t Mot. Des’g”) at 1.) The Department explained
that Langenberg was Special Counsel for Tax Litigation for the Texas Comptroller of
Public Accounts and that his averments would clarify the Comptroller’s interpretation
and application of Texas use tax. (Resp’t Mot. Des’g at 1.) AUL objected to the
Department’s Motion to Designate and moved to strike the proffered affidavit as
untimely filed and unduly prejudicial. (See Objection Resp’t Mot. Des’g Aff. Ray
Langenberg & Pet’r Mot. Strike at 2-3 (citing Ind. Trial Rule 56(C), (E), and (I)).)
The Court conducted a hearing on the parties’ cross-motions for summary
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judgment on August 4, 2017. Additional facts will be supplied as necessary.
STANDARD OF REVIEW
Summary judgment is appropriate when there are no genuine issues of material
fact and the moving party is entitled to judgment as a matter of law. Ind. Trial Rule
56(C). 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. “[W]hen ruling on a motion for summary judgment, this Court will
only consider properly designated evidence that would be admissible at trial.” Miller
Pipeline Corp. v. Indiana Dep’t of State Revenue, 995 N.E.2d 733, 736 (Ind. Tax Ct.
2013) (citations omitted).
ANALYSIS
The Department’s Motion to Designate
As a preliminary matter, the Court must rule on the Department’s Motion to
Designate. The proper time to submit designated evidence for purposes of summary
judgment is governed by Indiana Trial Rule 56(C), which requires a party opposing
summary judgment to designate its “response and any opposing affidavits” within 30
days after the serving of a motion for summary judgment. T.R. 56(C). See also HomEq
Servicing Corp. v. Baker, 883 N.E.2d 95, 98-99 (Ind. 2008) (indicating a trial court
cannot consider summary judgment filings subsequent to the 30-day period). Here,
AUL filed its motion for summary judgment on April 17, 2017. After extensions of time,
the Department was required to submit its response and designated evidence on or
before June 14, 2017. The Department’s Motion to Designate was filed on August 3,
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2017, not only long beyond the deadline, but also just one day before the hearing.
Accordingly, the Court DENIES the Department’s Motion to Designate.
The Parties’ Cross-Motions for Summary Judgment
The heart of the parties’ cross-motions for summary judgment concerns whether
Indiana Code § 6-2.5-3-5 (“Credit Statute”) applies only to state-level taxes and not to
local-level taxes. The Credit Statute states:
A person is entitled to a credit against the use tax imposed on the
use, storage, or consumption of a particular item of tangible personal
property equal to the amount, if any, of sales tax, purchase tax, or
use tax paid to another state, territory, or possession of the United
States for the acquisition of that property.
IND. CODE § 6-2.5-3-5 (2012) (emphasis added). Thus, eligibility for the credit has two
components: (1) the type of tax (“sales tax, purchase tax, or use tax”), and (2) the
payee of the tax (“paid to another state, territory, or possession of the United States”).
See I.C. § 6-2.5-3-5.
1. Type of Tax
The Credit Statute explicitly allows a credit for the payment of three types of
taxes: “sales tax, purchase tax, or use tax.” I.C. § 6-2.5-3-5. The Department
contends, however, that only a state-level sales, purchase, or use tax is creditable, not
a local-level tax. (See Resp’t Br. at 3-5.) In support, the Department explains that the
use of the word “state” later in the Credit Statute suggests a distinction between state-
level and local-level taxes by omitting the word “local.” (See Resp’t Br. at 3-5; Hr’g Tr.
at 37-38.) It seems, therefore, that the Department asks the Court to rewrite the Credit
Statute to reflect its narrow interpretation of the permissible types of creditable taxes by
inserting the word “state” in a different place in the statute – “of [state] sales tax,
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purchase tax, or use tax,” and in doing so, excluding local-level taxes as creditable.
This, the Court cannot do.
The Court must apply the law as written and will not impermissibly encroach on
the legislative function by reading into it language that is not present. See Day v. State,
57 N.E.3d 809, 812 (Ind. 2016) (explaining that “[i]f [statutory] language is clear and
unambiguous, [courts] simply apply its plain and ordinary meaning, heeding both what it
‘does say’ and what it ‘does not say’”) (citations omitted). The Legislature’s placement
of the word “state” in the Credit Statute lacks both proximity to and an antecedent
position before the three listed creditable tax types; therefore, it does not modify or limit
them. See I.C. § 6-2.5-3-5. See e.g., THE CHICAGO MANUAL OF STYLE § 5.78 at 224
(16th ed. 2010) (explaining that “an adjective that modifies a noun . . . usually precedes
it” but may immediately follow it). Furthermore, this same lack of proximity indicates that
the Legislature’s omission of any reference to local tax in relation to the word “state,”
cannot be interpreted to exclude local-level taxes from the three types of creditable
taxes. See DeKalb Cnty. E. Cmty. Sch. Dist. v. Dep’t of Local Gov’t Fin., 930 N.E.2d
1257, 1260 (Ind. Tax Ct. 2010) (stating that “[w]hen the language of a statute is clear
and unambiguous, the Court may not expand or contract [its] meaning . . . by reading
into it language to correct any supposed omissions or defects”). Accordingly, because
the Legislature chose not to include language limiting the three types of creditable taxes
to state-level taxes, the Court declines to do so.
2. Payee
The Credit Statute also explicitly requires the sales tax, purchase tax, or use tax
to be “paid to another state, territory, or possession of the United States” to be
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creditable against Indiana’s tax. See I.C. § 6-2.5-3-5. The designated evidence shows
that AUL paid use tax of 8.25% on the purchase price of its computer software to the
Texas Comptroller, 2% of which satisfied the local-level use tax imposed by a Texas
municipality. (See Pet’r Des’g Evid., Ex. A ¶¶ 39-40, 45, Ex. D at 1.) Indeed, Texas law
states that
The comptroller shall administer, collect, and enforce any tax
imposed by a municipality under [the Municipal Sales and Use Tax
Act]. The taxes imposed under [the Municipal Sales and Use Tax
Act] and the tax imposed [the Limited Sales, Excise, and Use Tax
Act] shall be collected together, if both taxes are imposed.
TEX. TAX CODE ANN. § 321.301 (West 2012). See also TEX. TAX CODE ANN. §§ 151.001,
321.001 (West 2012) (naming Chapter 151 of the Texas Tax Code the “Limited Sales,
Excise, and Use Tax Act” and Chapter 321 the “Municipal Sales and Use Tax Act”).
AUL asserts that its payment to the Texas Comptroller constitutes a payment to
“another state,” making it eligible for a refund of the full 7% use tax paid to Indiana.
(See Pet’r Reply Supp. Summ. J. & Resp. Resp’t Cross Mot. Summ. J. at 3-6.) On the
other hand, the Department claims that AUL is not eligible for a refund of 2% of the tax
paid to the Texas Comptroller because it was not “paid to another state,” but rather to a
local municipality - the Comptroller acting merely as the collection conduit. (See Resp’t
Br. at 5-6.) Specifically, the Department explains that the tax paid by AUL to the Texas
Comptroller was ultimately distributed to local municipalities and the plain language of
the Credit Statute does not list a local municipality as an eligible payee for purposes of
the credit. (See Resp’t Br. at 5-6.)
The Credit Statute indicates the critical fact is simply the identity of the payee,
i.e., who is the tax “paid to,” restricting that payee to “another state, territory, or
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possession of the United States.” See I.C. § 6-2.5-3-5. Accordingly, even though the
Texas Comptroller distributes a portion of AUL’s payment to the Texas municipality that
imposed the local-level use tax, the plain language of the Credit Statute does not
require, as the Department urges, looking beyond the payee to the ultimate recipient of
the tax. Had the Legislature intended a different meaning, it easily could have said so,
but it did not, and the Court declines to rewrite the statute to alter its plain meaning.
See Ind. Alcohol & Tobacco Comm’n v. Spirited Sales, LLC, 79 N.E.3d 371, 376 (Ind.
2017) (stating that “[w]e may not add new words to a statute which are not the
expressed intent of the legislature”) (emphasis added) (citations omitted).
Consequently, the Credit Statute applies to a use tax paid to, as the case is here, a
state other than Indiana.3
CONCLUSION
For the aforementioned reasons, the Court DENIES the Department’s Motion to
Designate Affidavit of Ray Langenberg. In addition, to the extent that AUL paid one of
the three creditable types of taxes to the Texas Comptroller, the Court GRANTS AUL’s
Motion for Summary Judgment and DENIES the Department’s Cross-Motion for
3
Further, AUL claimed that the Department’s partial denial of the use tax credit violates the
Commerce Clause of the United States Constitution. (See Pet’r Br. at 10 (citing Comptroller of
the Treasury of Maryland v. Wynne, 135 S.Ct. 1787, 1805 (2015) (holding that a personal
income tax scheme that allowed a credit against a state income tax but not a local or county
income tax violated the dormant Commerce Clause)).) The Court will not address this
constitutional claim having found in AUL’s favor on other grounds.
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Summary Judgment. Accordingly, AUL is entitled to a credit for the full amount of
Indiana use tax it paid during the years at issue.
SO ORDERED this 27th day of October 2017.
Martha Blood Wentworth, Judge
Indiana Tax Court
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