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Department of Revenue May Have a “Ruff” Time in Court

The Indiana Department of Revenue is being sued for compensatory damages regarding a 2009 tax case. The case, Garwood v. Indiana, revolves around a $125,000 tax liability, including interest, owed by the taxpayer. The taxpayer was in the business of breeding and selling dogs and did not properly remit sales tax during the period in question. Since the taxpayer could not make the payment, the Department of Revenue seized her assets, which included: 240 dogs, cash and uncashed checks.

Here’s where things get interesting. In an attempt to liquidate the taxpayer’s assets, the Department of Revenue sold all 240 dogs to the Humane Society for a measly $300. According to the taxpayer, the fair market value of the dogs far exceeded the tax owed, even though the Department of Revenue sold the dogs at a bargain. So, in 2011, the taxpayer filed a refund claim for the difference between the tax owed and the value of the dogs, over $120,000!

How did the Department of Revenue respond? They sent the taxpayer a check for $175, stating that a refund cannot be derived from the sale of goods or services. Instead of a refund, the Department of Revenue contended the taxpayer should be seeking compensatory damages in court. The taxpayer agreed and decided to take the matter to court and the state of Indiana agreed to hear the case.

To be continued when an update is available…


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