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Friday, July 16, 2010

Ind. Courts - One NFP today from Tax Court

AWHR America's Water Heater Rentals, LLC v. Indiana Dept. of State Revenue (NFP) - AWHR rented water heaters to its customers. The question is whether it should have collected sales tax from its Indiana customers. Judge Fisher writes:

On appeal, AWHR argues that the Department's assessment of sales tax against it is erroneous for two reasons. First, AWHR asserts that because it never transferred possession and control of the water heaters to its customers, it did not “lease” them. In the alternative, AWHR claims that the water heaters were real property, not tangible personal property. * * *

Accordingly, the Court finds that AWHR's customers had the requisite possession of, and control over, AWHR's water heaters to characterize the transactions as lease transactions.

In the alternative, AWHR argues that its transactions were not subject to sales tax because “[t]o the extent [it was] . . . 'renting' [the] installed water heaters, it was renting an interest in realty[,]” not tangible personal property. * * *

Assuming AWHR was leasing real property and therefore not required to collect sales tax from its customers on the transactions, it owes sales tax to the Department for a different, although somewhat related, reason. Indeed, as the Department‟s aforementioned informational bulletins explain, water heaters, prior to their installation, are tangible personal property. * * * Accordingly, AWHR should have paid sales tax on its purchase of the water heaters from AEP.

Posted by Marcia Oddi on July 16, 2010 01:12 PM
Posted to Ind. Tax Ct. Decisions