Indiana Department of State Revenue v. AOL, LLC
2012 Ind. LEXIS 32
| Ind. | 2012Background
- AOL, LLC contracted with outside vendors for CD-ROM packages containing its software and promotional materials; assembly and mailing were done outside Indiana.
- AOL supplied raw materials ( CDs, paper, ink, etc.) to various contractors who assembled final CD-ROM packages and promotional materials, which were mailed to Indiana residents.
- The CD-ROM packages and materials were purchased by contractors and then delivered to AOL, with AOL paying for the final products; the contractors applied graphics and imprinted codes.
- All production steps occurred outside Indiana; none of the vendors paid Indiana sales or use taxes on these transactions.
- Between 2003 and 2007 AOL paid use taxes to Indiana based on the number of packages and materials sent to Indiana residents; later claimed refunds for 2003-2006 and 2006-2007.
- Indiana Tax Court held AOL purchased tangible personal property in retail transactions for use in Indiana and thus use tax applied; Tax Court reversed on the Department’s determinations.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether AOL purchased tangible personal property in retail transactions | AOL did not purchase final products; it only bought assembly/printing services | The assembly/printing suppliers sold at retail or via section 6-2.5-4-1(c) form change | Yes; AOL purchases constituted retail transactions triggering use tax |
| Whether Section 6-2.5-3-2(d) governs AOL's transactions | Morton line abrogated; section not applicable before its effective date | Section 6-2.5-3-2(d) abrogates Morton and covers such scenarios | Section 6-2.5-3-2(d) applied; still supports retail transaction result |
Key Cases Cited
- Morton Bldgs., Inc. v. Ind. Dep't of State Revenue, 819 N.E.2d 913 (Ind. Tax Ct. 2004) (Morton rejected for materials consumed outside Indiana)
- Ameritech Publ’g, Inc. v. Ind. Dep’t of State Revenue, 916 N.E.2d 752 (Ind. Tax Ct. 2009) (Ameritech II; materials ultimately used in Indiana constitute retail sale)
- Ameritech Publ’g, Inc. v. Ind. Dep’t of State Revenue, 855 N.E.2d 1096 (Ind. Tax Ct. 2006) ( Ameritech I; materials transferred to printer still retail sale)
- Monarch Beverages Co., Inc. v. Ind. Dep’t of State Revenue, 589 N.E.2d 1209 (Ind. Tax Ct. 1992) (parts/materials transformed into final product; form does not control retail sale)
- Belterra Resort Ind., LLC v. Ind. Dep't of State Revenue, 935 N.E.2d 174 (Ind. 2010) (tax-law interpretation; use vs sales tax framework)