The Indiana Department of State Revenue erred in concluding that a natural gas-fired power plant in Terre Haute was subject
to the Utility Services Use Tax, ruled the Indiana Tax Court Wednesday.
The tax court released two opinions with the same cause number, Mirant Sugar Creek, LLC v. Indiana Department of State Revenue, No. 71T10-0803-TA-18, in which the court addressed three issues: the department’s motion to strike in its entirety the affidavit of Mirant Sugar Creek’s senior tax analyst and e-mails between her and the tax analyst with the State Revenue department; if Mirant obtained a ruling from the department in those e-mails providing the company wasn’t subject to the USUT; and whether Mirant’s purchases of natural gas in July 2006 were subject to the USUT.
Mirant purchases natural gas from an out-of-state vendor, which it uses to produce electricity that it sells to an out-of-state customer who resells the electricity to its customers.
In August 2006, the department and Mirant exchanged e-mails about whether the company was subject to the USUT. Mirant paid the tax in July 2006, but didn’t pay it any more because it believed it shouldn’t be subject to it. It filed a claim for a refund, which the department denied.
In a not-for-publication opinion, Tax Judge Thomas Fisher denied the department’s motion to strike the affidavit and e-mails. In the for publication opinion, Judge Fisher determined that the department didn’t rule that Mirant did not have to pay the USUT. The e-mails exchanged indicate that Mirant sought a generic opinion as to whether a generator’s natural gas purchases were subject to the tax. There is also no indication that the e-mails between the parties were published in the Indiana Register. When the department is to be bound by the ruling it issues, it must be published in the register.
Although Judge Fisher denied Mirant’s cross-motion for summary judgment on that issue, he ruled in favor of the company that its natural gas purchases in July 2006 weren’t subject to the USUT. The judge examined the part of the relevant statute that says the retail consumption of utility services in Indiana is exempt from the USUT if the “gross receipts from the transaction aren’t taxable under Indiana Code 6-2.3-3 and the utility services are consumed for the purposes for which the gross receipts were excluded from taxation.”
In 2006, the statute provided that gross receipts don’t include a wholesale sale to another generator or reseller of utility services; the statute was amended in 2008 to provide a sale of utility services is a wholesale sale if the utility services are natural gas and the buyer consumes the natural gas in the direct production of electricity to be sold by the buyer.
“The General Assembly’s 2008 amendment of the statute clarifies what transactions are to be considered wholesale sales with respect to the purchase of utility services for consumption,” he wrote. “It is for this reason, that the Court finds the General Assembly, through its 2008 amendment of the statute, simply clarified its original intent.”
Mirant was generating and selling electricity to others, and purchased natural gas in order to generate electricity to sell to another entity. As such, Mirant’s purchases of natural gas weren’t subject to the USUT pursuant to I.C. sections 6-2.3-3-5 and 6-2.3-5.5-4(2).
Judge Fisher ordered the department to refund the USUT taxes Mirant paid for July 2006.