State Tax Audit Assessments and Burden of Proof: REVERSED and REMANDED!!!
span style="font-family: inherit;">In a previous post, I wrote about the Indiana Rent-A-Center court case and the South Carolina Carmax court case regarding who has the burden of proof when an audit assessment is issued, or more specifically, when the state attempts to require a taxpayer to use an alternative apportionment method or combined reporting.In regards to the Indiana Rent-A-Center case, the Indiana Supreme Court has ruled that the notice of proposed assessment issued by the Indiana Department of Revenue against Rent-A-Center East, Inc., based both on the Department's reasonable belief that the taxpayer had not reported the proper amount of tax due and on the best information available, was prima facie evidence that the Department's claim for the unpaid tax was valid, with the burden of proving the proposed assessment incorrect resting with the taxpayer against whom the assessment was made. In so holding, the Supreme Court reversed and remanded the Indiana Tax Court decision. Indiana Department of State Revenue v. Rent-A-Center East, Inc., Ind. S. Ct., Dkt. No. 49S10-1112-TA-683, 03/09/12In regards to the South Carolina Carmax case, the South Carolina Court of Appeals has held that Carmax did not bear the burden of proving that an alternate apportionment method, proposed by the Department of Revenue was not reasonable, and that the Department was required to establish that its proposed method was "not only appropriate, but more appropriate than any competing methods." The Court did deny Carmax's assertion that the standard of proof was clear and convincing evidence, and remanded the case for reconsideration under a preponderance of evidence standard. CarMax Auto Superstores West Coast, Inc., v. South Carolina Department of Revenue. No. 4953 (S.C. Ct. App. Mar. 14, 2012).These cases seem to be going in opposite directions. We will have to wait and see how they play out.
Brian Strahle is the owner of LEVERAGE SALT, LLC where he provides state and local tax technical services to accounting firms, law firms and tax research organizations across the United States. He also writes a weekly column in Tax Analysts State Tax Notes entitled, "The SALT Effect." For more info, visit his website: www.leveragestateandlocaltax.com
You can reach Brian at firstname.lastname@example.org.
Because state and local taxes are deceptively simple and endlessly complicated.