FISHER, J.
Come now the parties on the Indiana Department of State Revenue's (Department) motion to dismiss. The Court, having held a hearing and being duly advised in the premises, now DENIES the Department's motion.
The following facts are undisputed. In February 2009, the Office of the Indiana Attorney General and the Department began investigating Virginia and Kristin Garwood's (hereinafter, "the Garwoods") business activities to determine whether they were conducting sales of puppies and not remitting the Indiana sales and income tax due on the sales. (See Resp't Des'g Evid. Ex. 5 ¶ 3.) The Department ultimately determined that the Garwoods were indeed conducting sales and that their "actions were jeopardizing the collection of Indiana sales and income tax[.]" (Resp't Mem. Law Supp. Mot. Dismiss (hereinafter, "Resp't Br.") at 5.) As a result, on May 29, 2009, the Department obtained from the Superior Court of Marion County a warrant to search the Garwoods' Harrison County residential and commercial properties and seize certain items related to the puppy sales. (Resp't Des'g Evid. Ex. 1.) The Department also generated four jeopardy tax assessments for the Garwoods' purported income tax liabilities
The following day, the Department sold all 240 of the dogs and puppies to the Humane Society of the United States for a total of $300.00.
On June 8, 2009, the Department filed a "Verified Petition for Proceedings Supplemental" in the Harrison Circuit Court. (Hr'g Tr. Ex. 1 at 4.) On June 10, 2009, the Garwoods timely protested their jeopardy assessments to the Department. (Petrs' Des'g Evid. Ex. 7.) See also 45 IND.ADMIN. CODE 15-5-8(c) (2007) (see http://www.in.gov/legislative/iac/) (requiring taxpayers to protest a jeopardy assessment within twenty days after the assessment is made). On June 22, 2009, the Department issued a letter stating that:
(Petrs' Des'g Evid. Ex. 8.)
On June 29, 2009, the Garwoods filed with this Court a "Verified Petition for Judicial Review of a Final Determination by the [Department]" (petition) and a "Petition to Enjoin the Collection of Tax Pending the Original Tax Appeal" (injunction).
Subject matter jurisdiction, the power of a court to hear and determine a particular class of cases, is not conferred upon a court by consent or agreement of the parties to litigation. See K.S. v. State, 849 N.E.2d 538, 540 (Ind.2006); State v. Sproles, 672 N.E.2d 1353, 1356 (Ind.1996). Rather, it can only be conferred upon a court by the Indiana Constitution or by statute. See Sproles, 672 N.E.2d at 1356.
This Court has subject matter jurisdiction over all "original tax appeals." IND.CODE ANN. § 33-26-3-3 (West 2010). Indeed, this Court has "exclusive jurisdiction over any case that arises under the tax laws of Indiana and that is an initial appeal of a final determination made by... the [Department] with respect to a listed tax (as defined in Indiana Code § 6-8.1-1-1)[.]" IND.CODE ANN. § 33-26-3-1 (West 2010). When litigants do not exhaust their administrative remedies (i.e., obtain a final determination from the Department), however, this Court cannot address their claims. See, e.g., Goldstein v. Ind. Dep't of Local Gov't Fin., 876 N.E.2d 391, 393-94 (Ind. Tax Ct.2007).
The Department has presented two alternative reasons as to why the Court lacks subject matter jurisdiction over the Garwoods' petition. First, the Department contends that the Indiana Supreme Court case of State ex rel. Indiana Department of Revenue v. Deaton (Deaton II), 755 N.E.2d 568 (Ind.2001) controls the outcome of this matter. (See Resp't Br. at 7-10.) Alternatively, the Department contends that the Garwoods' failure to exhaust their administrative remedies by filing a claim for refund with the Department has deprived this Court of its ability to address the claims presented in their petition. (See Resp't Br. at 10-13.) The Court will address each of these arguments in turn.
The Department maintains that Deaton II stands for the proposition that its jeopardy tax warrants are the final
Deaton II, 755 N.E.2d at 571 (emphasis added). Therefore, the fact that the taxpayers in that case protested the proposed assessment with the Department, but not this Court, was crucial. See id. at 570. Indeed, the tax warrant in that case was equivalent to a judgment because the taxpayer's challenges to the validity of the underlying assessment had concluded. See id. (stating "[w]hen a tax warrant that embodies an unappealed final determination of the Department is recorded in the judgment record of a county court ... the warrant becomes a `judgment lien' of that court") (emphasis added).
Here, unlike in Deaton II, the Garwoods have attempted to contest the validity of the jeopardy tax assessments with both the Department and this Court. Admittedly, Indiana Code § 6-8.1-5-3, on its face, provides no opportunity to contest jeopardy tax assessments; nevertheless, the Indiana Supreme Court has pronounced that taxpayers like the Garwoods may challenge jeopardy tax assessments pursuant to Indiana Code § 6-8.1-5-1. Clifft v. Ind. Dep't of State Revenue, 660 N.E.2d 310, 317-18 (Ind.1995).
The Court now turns to the Department's alternative claim, that the Garwoods' failure to file a claim for refund with the Department now precludes their challenge with this Court. To resolve this issue, the Court must determine whether the Garwoods' appeal to this Court both "arises under the tax laws" of this state and "is an initial appeal of a final determination made by ... the [Department] with respect to a listed tax (as defined in Indiana Code § 6-8.1-1-1)[.]" A.I.C. § 33-26-3-1. The Court finds that the Garwoods' appeal satisfies both of these requirements.
"A case `arises under' the tax laws of Indiana ... if the case principally involves collection of a tax or defenses to that collection." Deaton II, 755 N.E.2d at 571 (citing Sproles, 672 N.E.2d at 1357). The claims presented in the Garwoods' petition indisputably arise under the tax laws of this state, as they involve the
With respect to the second requirement, a final determination is an order that determines the rights of, or imposes obligations on, the parties as a consummation of the administrative process. BP Prods. N. Amer., Inc. v. Dep't of Local Gov't Fin., 774 N.E.2d 122, 126 (Ind. Tax Ct.2002) (citation omitted), review denied. The Department maintains that because the Garwoods have not filed a claim for refund with the Department, there is no final determination to place their appeal before the Court. More specifically, the Department claims that "[t]he State's jeopardy tax assessment remedy is a pure pay to play' system." (Resp't Br. at 12.) As a result, "the taxpayer must first pay the taxes assessed, request [] a refund, and then if dissatisfied with the outcome of the refund request, [ ] seek judicial review." (Resp't Br. at 12.) The Court disagrees for the following reasons.
First, Indiana Code § 6-8.1-5-3 is silent as to the manner by which a taxpayer may challenge the validity of a jeopardy assessment. See A.I.C. § 6-8.1-5-3. Second, the claim for refund statute makes no mention of jeopardy tax assessments. See IND.CODE ANN. § 6-8.1-9-1 (West 2007). Third, nearly fifteen years ago, Indiana's Supreme Court unambiguously explained that taxpayers may challenge jeopardy assessments through the administrative procedures provided under Indiana Code § 6-8.1-5-1. See Clifft, 660 N.E.2d at 317-18. Fourth, the Department's own regulation, enacted in 1987, provides that taxpayers "may protest [a jeopardy assessment] within twenty (20) days after the assessment is made." 45 I.A.C. 15-5-8(c). Consequently, through its argument, the Department attempts to eliminate one administrative path to the Tax Court when there are actually at least two. See A.I.C. § 6-8.1-5-1 (the protest process); A.I.C. § 6-8.1-9-1 (the claim for refund process). This Court, however, will not sanction such actions.
The Department assessed the Garwoods with liabilities for Indiana's income and sales taxes, both of which are listed taxes under Indiana Code § 6-8.1-1-1. See Ind.Code Ann. § 6-8.1-1-1 (West 2007.) The Garwoods timely protested those assessments with the Department in conformity with Indiana Code §§ 6-8.1-5-1 and 6-8.1-5-3, 45 I.A.C. 15-5-8, and Clifft. The Department subsequently issued a letter, without holding a hearing, advising the Garwoods that the relief they sought was in the Harrison Circuit Court.
The Department's remaining 12(B) claims are premised on the same logic as its 12(B)(1) claim: namely, that Deaton II controls and that there is no appealable final determination in this case.
For the above stated reasons, the Department's motion to dismiss is DENIED in its entirety.
SO ORDERED.