Capacity Builders, Inc.

16-31

On September 14, 2009, the Department assessed the Taxpayer for gross receipts tax and interest for the tax periods from March 31, 2004 through March 31, 2008.  The Taxpayer was also assessed for withholding tax, penalty and interest.  The Taxpayer filed a protest to the assessment of gross receipts tax and penalty on October 9, 2009.  The Taxpayer did not protest anything regarding the withholding assessment.  The Taxpayer did not file gross receipts returns for the periods at issue.  The Department mailed the Taxpayer a Notice of Limited Scope Audit Commencement which provided that the Taxpayer was required to provide any nontaxable transaction certificates (NTTCs) within 60 days or by September 5, 2008.  The Taxpayer provided the Department with 3 timely NTTCs, two Type 5 certificates, and one Type 6.  During the period at issue, the Taxpayer was an S corporation and out of state business providing retail store setup, remodeling, installation of fixtures, and other related construction-related services for construction contractors.  The Taxpayer was not able to obtain NTTCs from all the contractors he did business with in the allotted time frame, and did not dispute at hearing that the receipts from transactions with those contractors are not deductible and therefore subject to tax.  Upon finalizing the audit, after the 60 day period had elapsed, the Department informed the Taxpayer that the Type 5 and Type 6 NTTCs were the wrong type because the Taxpayer was a staffing company.  The Taxpayer testified that the services performed for the contractors who provided the NTTCs at issue were resold and the construction project was subject to gross receipts tax upon completion.  At the hearing, the Department conceded that a properly executed Type 5 NTTC is valid, but argued that one of the Type 5 certificates presented by the Taxpayer was not properly executed because the contractor did not put the Taxpayer’s information on the certificate.  The hearing officer found that, because the Taxpayer accepted the certificate in good faith and was not told of the error when he faxed it to the Department in the 60 day period, the NTTC would be allowed to support the deduction.  The Department also argued that a Type 6 did not apply because the Taxpayer was not a licensed contractor, but the hearing officer found that a Type 6 was allowable in this situation because the services were performed for a contractor.  The hearing officer ordered that the part of the assessment related to the NTTCs presented be abated.  The Taxpayer’s protest was granted in part and denied in part.