Tannins of Indianapolis, LLC v. Indiana Department of State Revenue
2014 Ind. Tax LEXIS 10
| Ind. T.C. | 2014Background
- Tannins (d/b/a Tastings) operates a wine bar using Enomatic sample-dispensing machines that require programmed tasting cards to operate.
- Customers pay Tannins to load a dollar amount onto a tasting card; Tannins charges the loaded amount plus sales tax at the time of loading.
- Customers use the card to obtain two-ounce wine samples; remaining card balances are refundable by Tannins (including tax).
- The Indiana Department audited Tannins for 2009–2011, assessed use tax on purchases of the tasting cards, and the Department upheld the assessments after protest.
- Tannins appealed, claiming the cards were purchased for resale and thus exempt under Ind. Code § 6-2.5-5-8(b).
- At trial Tannins showed accounting treatment as inventory and inclusion of card cost in sample pricing but produced no receipts or evidence showing customers were separately charged for the cards.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether tasting cards qualify for purchase-for-resale exemption | Tannins: cards were resold to customers; accounted as inventory and cost passed to customers | Dept.: no evidence customers separately bargained for or were separately charged for cards; resale not shown | Cards not resold within meaning of § 6-2.5-5-8(b); exemption denied |
| Whether separately bargained-for proof is required | Tannins: timing of delivery (cards given before samples) makes separate-bargaining test inapplicable; reliance on AOL for broader standard | Dept.: separate-bargaining requirement established by precedent controls resale analysis | Timing of delivery does not alter the separately bargained-for requirement; precedent controls |
| Whether AOL case removes separately bargained-for test | Tannins: AOL requires only showing of a retail transaction, not separate bargaining | Dept.: AOL addressed whether a taxable retail transaction occurred; different statutory language and not controlling on exemption proof | AOL inapplicable; different statutory contexts and does not supplant resale test |
| Whether cards changed form upon loading/programming such that they could not be resold | Tannins: cards not changed in form | Dept.: did not dispute unchanged form; focus is on proof of resale | Court accepted that form was unchanged but held exemption still fails for lack of resale evidence |
Key Cases Cited
- Brambles Indus., Inc. v. Indiana Dep’t of State Revenue, 892 N.E.2d 1287 (Ind. Tax Ct. 2008) (separately bargained-for test for resale exemption)
- Miles, Inc. v. Indiana Dep’t of State Revenue, 659 N.E.2d 1158 (Ind. Tax Ct. 1995) (separate-bargaining and invoice evidence relevant to resale)
- Indiana Bell Tel. Co. v. Indiana Dep’t of State Revenue, 627 N.E.2d 1386 (Ind. Tax Ct. 1994) (invoices as evidence of resale)
- USAir, Inc. v. Indiana Dep’t of State Revenue, 542 N.E.2d 1033 (Ind. Tax Ct. 1989) (separately bargained-for requirement applied)
- Indiana Dep’t of State Revenue v. AOL, LLC, 963 N.E.2d 498 (Ind. 2012) (addressed whether a taxable retail transaction occurred; distinguished from resale-exemption analysis)