Indiana – Resale Exemption Applied to Gift Certificates

SALT Report 1826 – The Indiana Department of Revenue issued a letter of finding regarding a Taxpayer’s purchases of gift certificates.  During an audit, it was discovered that the Taxpayer had not paid sales tax on its purchases of the gift certificates which resulted in a use tax assessment. The Taxpayer paid the assessment in protest and filed a claim for redetermination.

In the appeal, the Taxpayer claimed that the gift certificates were purchased for resale and should not be subject to sales or use tax in accordance with IC §6-2.5-5-8(b) which states that,

“Transactions involving tangible personal property other than a new motor vehicle are exempt from the state gross retail tax if the person acquiring the property acquires it for resale, rental, or leasing in the ordinary course of the person’s business without changing the form of the property.”

The Taxpayer provided documentation supporting its claim that the gift certificates were purchased from its corporate office for the amount stated on the certificate. The certificates were later resold to the end user for the same amount.  Also, the Taxpayer claimed that sales tax had already been paid by the corporate office when they purchased the materials used to manufacture the gift certificates.

The Department determined that the Taxpayer met its burden of proof demonstrating that the gift certificates were purchased for resale and that the assessment of use tax was incorrect.  The Department removed the gift certificates from the audit and the Taxpayer was granted a refund.

For Further Information:

Indiana Department of Revenue – Letter of Findings No. 04-20110623