Taxpayer is an Indiana company,which provides landscape, lawn care, and related maintenance services in thespring, summer, and fall. In the winter, Taxpayer does snow plowing and iceremoval.
In 2011, the Indiana Department ofRevenue ("Department") conducted a sales/use tax audit of Taxpayerfor 2008 through 2010 tax years. …
The Department's audit assessedsales tax on "salt applications" on the ground that the transactionswere "unitary transactions." The audit noted that:
During the winter months [Taxpayer]applies salt to customers' roads, sidewalks, and parking lots. [Taxpayercharges] one price for this transaction, separating on the invoice amounts forsnow plowing. Some invoices read "shovel and salt". When a combined,single charge for material and labor is invoiced as one amount this isconsidered a unitary transaction which is subject to sales tax. For a saltspreading application... the salt cannot be purchased separately from thecompany and applied by the customer. The company only does the application, sothe labor and material are indivisible. Because the salt is not transferreduntil it is applied, the application charges must be included in one retailprice. This gross retail income is therefore subject to sales tax.
Taxpayer, to the contrary, claimedthat it simply performed "ice removal" services. Thus, as services,those transactions are not subject to sales tax pursuant to 45 IAC 2.2-4-2.
…
In this instance, Taxpayer offers"snow plowing" and "ice removal" in winter. To ensure thecomplete removal of ice, it applies salt to remove the ice on the ground. Thus,in conjunction with rendering services, Taxpayer also transfers tangiblepersonal property for a consideration. Pursuant to the above mentioned statutesand regulations, Taxpayer is a retail merchant and should have collected andremitted sales tax on the retail transactions.
At the hearing, Taxpayer argued thatit primarily provides non-taxable services. Taxpayer asserted that it has twocategories of customers. The first category of customers supplies salt/sand andTaxpayer only provides labor. The second category of customers do not supplysalt/sand; rather, they pay Taxpayer to plow snow and also remove ice usingTaxpayer's materials when needed. Thus, the customers who supply salt toTaxpayer paid Taxpayer by the hour for labor only; for the customers in thesecond category, Taxpayer charged them one price per visit for ice removalwhich included both labor and materials (salt). Referring to 45 IAC 2.2-4-2, Taxpayer maintained that itperformed services based on customers' specifications. Specifically, Taxpayerasserted that even if it transferred the tangible personal property to itscustomers when performing the "ice removal," its "iceremoval" satisfies the four requirements outlined in 45 IAC 2.2-4-2(a) and thus its "iceremoval" is not subject to sales tax. To support its protest, Taxpayerprovides additional documentation, including sample contracts and invoices,sample purchase invoices of salt, and a summary of cost of sales for 2012 taxyear.
For the first category of customerswho supplied salt/sand to Taxpayer, the Department agrees that Taxpayer hasprovided sufficient documentation to demonstrate that it simply performednon-taxable services. No tangible personal property is transferred as a result.Thus, Taxpayer's protest of the assessment concerning the first category ofcustomers is sustained.
As to the second category ofcustomers, however, Taxpayer's documentation is not sufficient to demonstratethat it satisfies the four requirements outlined in 45 IAC 2.2-4-2(a). Specifically, Taxpayer'scontracts and invoices contained two separate line items – Snow Plowing and IceRemoval (including salt). Taxpayer's invoices clearly state that ice removalincluding salt, which is tangible personal property. Thus, the audit correctlyconcluded that ice removal is a unitary transaction pursuant to IC §6-2.5-1-1(a) and 45 IAC 2.2-1-1(a). Taxpayer argued that 45 IAC 2.2-4-2(a) should apply but it did notillustrate the application. Specifically, Taxpayer's documentation fails toshow that the charge of salt is less than 10 percent compared with the servicecharge. Thus, in the absence of other supporting documentation, the Departmentis not able to agree with Taxpayer that ice removal is a non-taxable service.
http://www.in.gov/legislative/iac/20121031-IR-045120561NRA.xml.html
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