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Tax court: Fees not subject to utility receipt tax

May 2, 2016

The Indiana Tax Court found a utility’s nontaxable connection fees were separated from taxable receipts on its returns and were therefore not subject to Indiana’s utility receipt tax.

In October of 2012 Hamilton Southeastern Utilities challenged the Department of Revenue’s utility receipt tax assessments on receipts from its connection fees. The utility claimed its fees were not taxable under Indiana Codes 6-2.3-1-4 or 6-2.3-3-10. In an opinion in August 2015, the Tax Court said the fees were not gross receipts under 6-2.3-1-4 because they were not received in consideration for the retail sale of utility services for consumption and were not gross receipts under Indiana 6-2.3-3-10. However, the DOR also claimed Hamilton Southeastern did not separate its connection fees from taxable receipts on its returns.

Hamilton Southeastern filed for summary judgment on that issue in Hamilton Southeastern Utilities Inc. v Indiana State Department of Revenue, 49T10-1210-TA-00068, and the Indiana Tax Court granted it. Judge Marsha Blood Wentworth said when Hamilton Southeastern filed its forms, it necessarily had to divide the fees from the receipts in order to fill out the form correctly. Also, the amount of fees was not reported as taxable receipts.

However, the DOR claimed Hamilton Southeastern did not satisfy 6.2-3-3-2 because the statute requires taxpayers to separately state both their taxable and nontaxable receipts on their returns. Wentworth said that’s not the case, only separation is required.

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