Silver House Trading Company

00-13

Taxpayer is engaged in selling Native American jewelry, pottery and paintings. In 1993 the Taxpayer entered into a joint venture with a Colorado business to purchase and sell Native American jewelry throughout the west. In November 1995, the Department began a field audit of Taxpayer. Because Taxpayer’s records were “in disarray” and the auditors were unable to determine which sales were made outside the state, all Taxpayer’s bank deposits were treated as taxable receipts. Taxpayer filed a protest maintaining that most of its sales were wholesale or out-of-state sales and that a number of deposits made to Taxpayer’s bank account were loan proceeds. Based on additional information provided by the Taxpayer, the Department agreed to a partial abatement. As to the remaining receipts, the hearing officer found there was sufficient evidence to show that certain bank deposits represented proceeds from a loan to the joint venture. The Taxpayer did not meet its burden of proving its right to additional adjustments for out-of-state sales. Held: The Taxpayer’s protest is partially granted with respect to the loan proceeds. In all other respects, the Taxpayer’s protest is denied.