ILNews

Supreme Court rules AOL required to pay online use taxes

Back to TopCommentsE-mailPrintBookmark and Share

The Indiana Supreme Court has held that companies purchasing online promotional materials from outside the state must pay a use tax when those materials are distributed within Indiana.

In Indiana Department of State Revenue v. AOL, LLC, No. 49S10-1108-TA-514, the court unanimously reversed a decision by former Indiana Tax Court Judge Tom Fisher.

The case involves online service provider AOL that mailed software and promotional materials to new and prospective clients. AOL didn’t physically manufacturer the CD or final promotional packages, but contracted with third-party vendors outside Indiana to produce and assemble the individual components and final packages. None of the out-of-state vendors paid sales or use taxes on the CD packages or promotional materials, and once completed the final packages were sent to customers throughout the United States, including Indiana.

AOL paid use taxes to the Indiana Department of Revenue between January 2003 and June 2007, based on the number of CD packages and promotional materials sent to prospective Indiana customers. In 2006 and 2007 AOL asked for two refunds totaling $371,464 for use taxes it had paid. After an investigation, the state agency denied both requests and AOL appealed. The Tax Court reversed the department’s determinations in 2011, finding the company owned all the raw materials provided and had not purchased any tangible personal property in a retail transaction with the out-of-state providers.

The revenue department argued that AOL purchased the CD packages and promotional materials in retail transactions and later used them in Indiana, while AOL argued it did not acquire those items in any retail transaction because it merely purchased the assembly and printing services.

Chief Justice Randall T. Shepard wrote that the heart of this case turns on provisions of Indiana Code 6-2.5-4-1, specifically, I.C. 6-2.5-4-1(b)’s use of the phrase “that property” which the chief justice said suggests that a retailer must acquire tangible personal property and then transfer that same property to a purchaser for either sales or use taxes to apply. The following provision (c)(1) goes on to say that “for the purposes of determining what constitutes selling at retail, it does not matter whether… the property is transferred in the same form as when it was acquired.”

The chief justice wrote that given the tension between the phrase “that property” and I.C. 6-2.5-4-1(c)(1), the court believes the sole purpose of I.C. 6-2.5-4-1(c)(1) is to prevent a person from arguing that a merchant was not selling at retail merely because the merchant changed the form of the property between acquiring it and transferring it.

Finding that the materials were being sold at retail, the court determined the transactions between AOL and its assembly houses and letter shops constituted retail transactions that triggered Indiana’s use tax once AOL used that property in Indiana.


 

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in Indiana Lawyer editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT
Subscribe to Indiana Lawyer
  1. Or does the study merely wish they fade away? “It just hasn’t risen substantially in decades,” Joan Williams, director of the Center for WorkLife Law at the University of California Hastings College of the Law told Law360. “What we should be looking for is progress, and that’s not what we’re seeing.” PROGRESS = less white males in leadership. Thus the heading and honest questions here ....

  2. One need not wonder why we are importing sex slaves into North America. Perhaps these hapless victims of human trafficking were being imported for a book of play with the Royal Order of Jesters? https://medium.com/@HeapingHelping/who-are-the-royal-order-of-jesters-55ffe6f6acea Indianapolis hosts these major pervs in a big way .... https://www.facebook.com/pages/The-Royal-Order-of-Jesters-National-Office/163360597025389 I wonder what affect they exert on Hoosier politics? And its judiciary? A very interesting program on their history and preferences here: https://www.youtube.com/watch?v=VtgBdUtw26c

  3. Joseph Buser, Montgomery County Chief Prosecutor, has been involved in both representing the State of Indiana as Prosecutor while filing as Representing Attorney on behalf of himself and the State of Indiana in Civil Proceedings for seized cash and merchandise using a Verified Complaint For Forfeiture of Motor Vehicle, Us Currency And Reimbursement Of Costs, as is evident in Montgomery County Circuit Court Case Number 54C01-1401-MI-000018, CCS below, seen before Judge Harry Siamas, and filed on 01/13/2014. Sheriff Mark Castille is also named. All three defendants named by summons have prior convictions under Mr. Buser, which as the Indiana Supreme Court, in the opinion of The Matter of Mark R. McKinney, No. 18S00-0905-DI-220, stated that McKinney created a conflict of interest by simultaneously prosecuting drug offender cases while pocketing assets seized from defendants in those cases. All moneys that come from forfeitures MUST go to the COMMON SCHOOL FUND.

  4. I was incarcerated at that time for driving while suspended I have no felonies...i was placed on P block I remember several girls and myself asking about voting that day..and wasn't given a answer or means of voting..we were told after the election who won that was it.

  5. The number one way to reduce suffering would be to ban the breeding of fighting dogs. Fighting dogs maim and kill victim dogs Fighting dogs are the most essential piece of dog fighting Dog fighting will continue as long as fighting dogs are struggling to reach each other and maul another fih.longaphernalia

ADVERTISEMENT