Sales Tax State Activity Update - June 2004

No Free Throws For Basketball Calendars in Indiana

Mid-America Publishing, Inc. took orders for customized basketball calendars with the University of Indiana’s logo and schedule attached. Mid-America alleged the production of the customized calendars was incidental to the advertising services offered to the University as its official licensed publisher, especially since the unaltered calendars were delivered to their patrons as promotional items.

The Indiana tax court determined that the publishers action was a retail transaction, which is subject to the State’s excise tax, also referred to as a gross retail tax.

During the the years in question, the Indiana Code defined a taxable retail transaction as “a transaction of a retail merchant that constitutes selling at retail as is described in IC 6-2.5-4-1.”

Indiana Code section 6-2.5-4-1 depicts a “selling at retail” as:

A person is engaged in selling at retail when, in the ordinary course of his regularly conducted trade or business, he:

(1) acquires tangible personal property for the purpose of resale; and

(2) transfers that property to another person for consideration.

According to the State’s Code, selling at retail requires the transfer of tangible personal property. However, Mid-America’s “transaction” by definition of the sale is considered a mixed transaction. Mixed transactions may occur where tangible personal property is sold in order to complete a service contract, thus “dunking” Mid-Americas concept of the basketball calendars being an exempt service transaction. The calendars were subject to tax.

The full text is available at: http://www.in.gov/judiciary/opinions/wpd/03160402.tgf.doc

(Indiana Tax Court, Cause No. 49T10-9912-TA-239) 06/04

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