The Indiana Tax Court held that a retailer was permitted to seek sales and use tax refunds of tax collected from its customers before refunding the tax to its customers. In Fresenius USA Marketing, Inc. v. Indiana Dep’t of State Revenue, No. 49T10-1008-TA45 (Ind. Tax Ct. 2012), a retailer sold dialysis equipment to customers and collected and remitted sales tax to the Indiana Department of Revenue (the Department). The retailer filed refund claims alleging that the equipment was exempt durable medical equipment but did not refund the tax to its customers. The Department denied the refund claim and the retailer appealed to the Indiana Tax Court.
The refund statute at issue provided that “a retail merchant is not entitled to a refund of state gross retail or use tax unless the retail merchant refunds those taxes to the person from whom they were collected.” Ind. Code 6-2.5-6-14.1 (emphasis added). The Department argued that the statute required that the merchant refund the claimed over-collected tax to its customers prior to seeking a refund. The court disagreed and found that the statute does not limit the merchant’s ability to seek a refund; it only limits the merchant’s ability to receive the refunded tax (if it is determined that the merchant is entitled to the refund). Therefore, the statute limiting the merchant’s ability to receive the money (if the merchant is entitled to the money), does not limit a merchant’s ability to seek a refund.