Pete’s Top Quality Landscaping, LLC

16-11

On August 14, 2015, the Department assessed the Taxpayer for the tax periods from January 31, 2008 through July 31, 2014.  The assessment was for gross receipts tax, withholding tax, and compensating tax, as well as penalty and interest on each of those assessed taxes.  On November 12, 2015, the Taxpayer filed a protest of the assessment.  At the hearing, the Taxpayer announced that it was no longer protesting the assessment on withholding tax and compensating tax, so the only issue remaining was the protest of the assessment for gross receipts tax.  During the period in question, the Taxpayer was selling firewood and other items to its customers, which included restaurants and other landscape companies.  The Taxpayer accepted nontaxable transaction certificates (NTTCs) from several of its customers and did not include receipts from those sales in its gross receipts.  The Department audited the Taxpayer and disallowed deductions for sales of firewood that the Taxpayer made to various restaurants because the restaurants were not reselling the firewood, but using it for cooking and/or heating.  The Taxpayer acknowledged that it owned some of the assessed gross receipts tax because it failed to obtain NTTCs from some of the other landscapers to whom it was selling.  The Taxpayer argued that it should be allowed to deduct the receipts for which it had NTTCs because they were accepted in good faith, even though it knew the restaurants were using the firewood and not selling it.  The Taxpayer asserted that it had contacted the Department prior to accepting the NTTCs from the restaurants to make sure that they were applicable, and that two Department employees assured them that they were applicable.  The Department argued that the NTTCs were invalid because the restaurants were using the firewood, not reselling it, and the Taxpayer was aware of this. Further, the Department argued that good faith did not apply and the Taxpayer was required to take more action to understand the NTTCs rather than blindly accepting them.  The Taxpayer countered that it took more action by contacting the Department on more than one occasion.  The hearing officer found that the NTTCS were accepted in good faith, so the gross receipts tax assessed on that portion was ordered to be abated, as was the penalty and interest related to that portion of the assessed amount.  The rest of the assessment remained.  The Taxpayer’s protest was granted in part and denied in part.