Friday, September 11, 2015
Ind. Decisions - Tax Court posts one today, filed Sept. 10
In Rent-A-Center, Inc. v. Indiana Department of State Revenue, a 22-page order on parties' cross-motions for summary judgment, Judge Wentworth writes:
Rent-A-Center East, Inc. (RAC East) challenges the Indiana Department of State Revenue’s assessment of adjusted gross income tax (AGIT) for the 2003 tax year. The matter is currently before the Court on the parties’ cross-motions for summary judgment. The dispositive issue is whether the Department properly determined that RAC East must file a combined income tax return with two of its corporate affiliates for the 2003 tax year. The Court finds that the Department’s determination was not proper. * * *
The Department has claimed that RAC East must file a combined income tax return with its affiliates because it “used Indiana’s roadways to deliver . . . and offer its products to residents all over the state” and then it improperly avoided its Indiana AGIT liability by “siphon[ing ] the money it earned in Indiana to [RAC West] and [RAC Texas].” (See Hr’g Tr. at 15, 20.) While the Court is aware that a taxpayer may use its business structure and transfer pricing policies to lower its state income tax liability, the evidence designated in this case simply does not indicate that RAC East has engaged in any improper tax avoidance measures. See, e.g., Carmax Auto Superstores W. Coast, Inc. v. S. C. Dep’t of Revenue, 767 S.E.2d 195, 200-01 (S.C. 2014) (holding that a taxing official’s bald assertions and descriptions of how it recalculated a taxpayer’s income tax liability failed to show that the statutory formula did not fairly represent the taxpayer’s in-state business activities). Furthermore, it is undisputed that the Transfer Pricing Study established arm’s-length rates for RAC East’s Intercompany Transactions and that the royalty and management fee payments were consonant with the Transfer Pricing Study’s rates. Moreover, the designated evidence as well as the parties’ stipulations do not show that RAC East’s Intercompany Transactions can be disregarded because they lacked a valid business purpose or economic substance. Consequently, RAC East’s 2003 separate return fairly reflected its Indiana source income. The Court, therefore, GRANTS summary judgment in favor of RAC East and AGAINST the Department.
Posted by Marcia Oddi on September 11, 2015 01:14 PM
Posted to Ind. Tax Ct. Decisions