The Indiana Department of State Revenue must reimburse an Indianapolis insurance company the full amount of use tax it paid in Texas after the Indiana Tax Court ruled Friday that the tax the company paid in Texas qualifies for a credit under Indiana statute.
After purchasing computer software from out-of-state vendors to use at its Indiana operations, Indianapolis-based American United Life Insurance Company loaded the software onto its servers located in Texas and remitted use taxes on the purchase price of the software to the Texas comptroller at a rate of 8.5 percent. The insurance company also paid use tax on the purchase price in Indiana at a rate of 7 percent.
However, AUL later filed a claim for a refund of the Indiana use tax it paid for the periods ending Dec. 21, 2012 through Sept. 20, 2014. The insurance company argued it was entitled to a credit against the full use tax paid in Indiana because it paid a use tax in Texas on the same purchase.
The Indiana Department of Revenue granted AUL’s requested refund pending verification of the amount paid in Texas, then sent a letter saying it would issue a credit equal to the 6.25 percent state-level Texas use tax, but not on the 2 percent local-level Texas tax. In response, AUL filed a tax appeal in American United Life Insurance Company v. Indiana Department of State Revenue, 49T10-1610-TA-53, and moved for summary judgment. The department also filed a cross-motion for summary judgment.
Then, one day before the summary judgment hearing, the department moved to designate the affidavit of Ray Langenberg, special counsel in the Texas comptroller’s office who was meant to “clarify the Comptroller’s interpretation and application of Texas use tax.” AUL objected and moved to strike the affidavit.
In a Friday opinion, Indiana Tax Court Judge Martha Wentworth found in favor of the insurance company on all pending motions. Wentworth first denied the motion to designate Langenberg’s affidavit as untimely filed.
The judge then went on to hold that under Indiana’s credit statute, Indiana Code section 6-2.5-3-5, both the state- and local-level Texas use taxes are creditable to AUL because the statute does not qualify the applicable types of taxes as “state” taxes. Rather, the statute says a person is entitled to a credit on “sales tax, purchase tax, or use tax paid to another state, territory, or possession of the United States… .”
“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,” Wentworth wrote. “…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.”
Similarly, Wentworth held that “the plain language of the Credit Statute does not require…looking beyond the payee to the ultimate recipient of the tax.” Thus, even though the Texas comptroller acted “merely as the collection conduit” of a municipal tax, AUL paid a use to a state other than Indiana, as is required by the statute.