In its final ruling of 2014, the Indiana Tax Court held that the Department of Revenue could not wrongly confiscate a taxpayer’s inventory, sell the inventory for pennies on the dollar, and avoid a refund by arguing the Court lacked jurisdiction to hear the claim.  The Court in Garwood v. Indiana Department of Revenue notes that this is the fourth opinion in two appeals filed by Taxpayer, who in 2009 was the target of several jeopardy tax assessments asserting that she owed $125,000 in sales tax, penalties, and interest on sales of dogs.  Taxpayer couldn’t pay, so the Department seized her inventory – 240 dogs – in addition to $1,260 in cash and $1,325 in uncashed checks.  On the following day, the Department sold all 240 dogs to the U.S. Humane Society for $300.  The Tax Court later ruled that the jeopardy assessments were void as a matter of law.  (I have discussed the history and rulings of prior Tax Court rulings in Garwood’s appeals here and here, including an earlier defeat of the Department’s motion to dismiss for lack of jurisdiction.)

In 2011, Taxpayer filed a refund claim, arguing the Department owed her a refund of nearly $123,000 – the difference between the sales tax due and the appraised value of her dogs and the seized cash and checks.  The Department paid her $175.48.  Later, the Department reimbursed her for the cash and checks.

The Department asserted that tax payments cannot be made by providing goods (such as animal inventory) or services.  Taxpayer was asking for more money than she had paid in tax.  Accordingly, the Department reasoned, Taxpayer was seeking compensatory damages – a claim that should be litigated in a county court.

Because Taxpayer’s claim “arose from the Department’s seizure and subsequent sale of her animal inventory pursuant to invalid jeopardy assessments,” Taxpayer could prosecute her claim for compensatory damages.  Slip op. at 5.  Even if providing goods or services is not a tax payment, the Court could provide relief.  The Court would hear the case.