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Tax exemption doesn't apply to hotel utilities

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The Indiana Supreme Court was split today in its ruling on whether a hotel was entitled to a sales tax exemption on utilities it purchased during 2004 and 2005. The majority held the exemption that allows hotels to skip paying sales tax on tangible personal property - soap and shampoo - used by guests, doesn't extend to utilities because the hotel, and not the guests, uses those utilities.

The issue arose in Indiana Department of Revenue v. Kitchin Hospitality, LLC, No. 49S10-0808-TA-474, after the Indiana Tax Court held for the years at issue, the utilities consumed in Kitchin Hospitality's hotels guest rooms qualified for the tangible personal property exemption.

Indiana Code Section 6-2.5-5-35 was amended in 1992 to exempt hotels from paying sales tax on tangible items used or consumed by guests. The 1992 exemption, which the opinion refers to as the Section 35 Exemption, didn't define "tangible personal property." In 2003, while adopting the "Streamlined Sales and Use Tax Agreement" (SSUTA), the legislature included a definition of it in I.C. Section 6-2.5-1-27. The 2003 definition defined tangible personal property to include electricity, water, gas, steam, and pre-written computer software. The language of the 1992 exemption wasn't changed until 2007 when the legislature specified that the exemption doesn't apply to electricity, water, gas, or steam transactions. The change came after this litigation began.

The majority analyzed the language of the 1992 exemption differently than the Tax Court, which concluded the language of the exemption didn't require a hotel guest to directly consume the utilities. The high court ruled tangible personal property must be used up or otherwise consumed during the occupation of the rooms and must be used up or consumed by a guest. Not reading it in this manner could lead to cleaning supplies or the water used to clean the hotel sheets to become exempt from sales tax, wrote Justice Frank Sullivan for the majority.

"Reading the 2007 amendment to the Section 35 Exemption as a clarification of the law is consistent with the purpose of Indiana's adoption of the (Streamlined Sales Tax Project) and its model provisions - to simplify and modernize the administration and collection of the state's sales and use taxes," he wrote. "Thus the Legislature in all likelihood enacted the definition of "tangible personal property" in I.C. § 6-2.5-1-27 to bring the state into compliance with the SSUTA, not to render utilities eligible for the Section 35 Exemption."

The hotels had single electric, water, and gas meters for the entire facility and the hotels didn't monitor each guest's usage. The utilities are used up or consumed in the guest rooms whether they are occupied or vacant, so they are used up by the hotel and not the guests, wrote the justice.

The majority reversed the Indiana Tax Court's decision and affirmed the Indiana Department of Revenue's decision to deny Kitchin exemptions from sales tax under I.C. Section 6-2.5-5-35.

Justice Brent Dickson dissented in a separate opinion with which Justice Robert Rucker concurred, believing the facts and law of the case warrant the deferral to the determination of the Tax Court which was created to "consolidated tax-related litigation in one court of expertise," Justice Dickson wrote.

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  • Supreme Court Not Tax Savvy
    Well the Indiana Supreme Court just proved that its tax expertise is sorely lacking. Why is it not apparent to them that when the legislature change this applicable statute when the taxpayer filed in court, that the law must have been flawed. What would the ordinary person read here? Shame on them. When the legislature changed the definition to comply with the SST, how hard is it to read through the current law and find all instances of "Tangible personal property?" Then if that instance was not to be exempt, adjust it then. While that is what they "meant" to do, they did not and the Supreme Court in essence, sanctioned that.

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  1. Good luck, but as I have documented in three Hail Mary's to the SCOTUS, two applications (2007 & 2013),a civil rights suit and my own kicked-to-the-curb prayer for mandamus. all supported in detailed affidavits with full legal briefing (never considered), the ISC knows that the BLE operates "above the law" (i.e. unconstitutionally) and does not give a damn. In fact, that is how it was designed to control the lawyers. IU Law Prof. Patrick Baude blew the whistle while he was Ind Bar Examiner President back in 1993, even he was shut down. It is a masonic system that blackballs those whom the elite disdain. Here is the basic thrust:https://en.wikipedia.org/wiki/Blackballing When I asked why I was initially denied, the court's foremost jester wrote back that the ten examiners all voted, and I did not gain the needed votes for approval (whatever that is, probably ten) and thus I was not in .. nothing written, no explanation, just go away or appeal ... and if you appeal and disagree with their system .. proof positive you lack character and fitness. It is both arbitrary and capricious by its very design. The Hoosier legal elites are monarchical minded, and rejected me for life for ostensibly failing to sufficiently respect man's law (due to my stated regard for God's law -- which they questioned me on, after remanding me for a psych eval for holding such Higher Law beliefs) while breaking their own rules, breaking federal statutory law, and violating federal and state constitutions and ancient due process standards .. all well documented as they "processed me" over many years.... yes years ... they have few standards that they will not bulldoze to get to the end desired. And the ISC knows this, and they keep it in play. So sad, And the fed courts refuse to do anything, and so the blackballing show goes on ... it is the Indy way. My final experience here: https://www.scribd.com/document/299040062/Brown-ind-Bar-memo-Pet-cert I will open my files to anyone interested in seeing justice dawn over Indy. My cases are an open book, just ask.

  2. Looks like 2017 will be another notable year for these cases. I have a Grandson involved in a CHINS case that should never have been. He and the whole family are being held hostage by CPS and the 'current mood' of the CPS caseworker. If the parents disagree with a decision, they are penalized. I, along with other were posting on Jasper County Online News, but all were quickly warned to remove posts. I totally understand that some children need these services, but in this case, it was mistakes, covered by coorcement of father to sign papers, lies and cover-ups. The most astonishing thing was within 2 weeks of this child being placed with CPS, a private adoption agency was asking questions regarding child's family in the area. I believe a photo that was taken by CPS manager at the very onset during the CHINS co-ocerment and the intent was to make money. I have even been warned not to post or speak to anyone regarding this case. Parents have completed all requirements, met foster parents, get visitation 2 days a week, and still the next court date is all the way out till May 1, which gives them(CPS) plenty of to time make further demands (which I expect) No trust of these 'seasoned' case managers, as I have already learned too much about their dirty little tricks. If they discover that I have posted here, I expect they will not be happy and penalized parents again. Still a Hostage.

  3. They say it was a court error, however they fail to mention A.R. was on the run from the law and was hiding. Thus why she didn't receive anything from her public defender. Step mom is filing again for adoption of the two boys she has raised. A.R. is a criminal with a serious heroin addiction. She filed this appeal MORE than 30 days after the final decision was made from prison. Report all the facts not just some.

  4. Hysteria? Really Ben? Tell the young lady reported on in the link below that worrying about the sexualizing of our children is mere hysteria. Such thinking is common in the Royal Order of Jesters and other running sex vacays in Thailand or Brazil ... like Indy's Jared Fogle. Those tempted to call such concerns mere histronics need to think on this: http://www.msn.com/en-us/news/us/a-12-year-old-girl-live-streamed-her-suicide-it-took-two-weeks-for-facebook-to-take-the-video-down/ar-AAlT8ka?li=AA4ZnC&ocid=spartanntp

  5. This is happening so much. Even in 2016.2017. I hope the father sue for civil rights violation. I hope he sue as more are doing and even without a lawyer as pro-se, he got a good one here. God bless him.

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