ATTORNEYS FOR PETITIONER:                          ATTORNEYS FOR RESPONDENT:
FRANCINA A. DLOUHY                                 GREGORY F. ZOELLER
J. DANIEL OGREN                                    ATTORNEY GENERAL OF INDIANA
DANIEL R. ROY                                      ANDREW W. SWAIN
FAEGRE BAKER DANIELS LLP                           CHIEF COUNSEL TAX SECTION
Indianapolis, IN                                   EVAN W. BARTEL
                                                   DEPUTY ATTORNEY GENERAL
                                                   Indianapolis, IN

                                                                              FILED
                                IN THE                                    Jul 15 2016, 2:02 pm

                                                                              CLERK
                          INDIANA TAX COURT                               Indiana Supreme Court
                                                                             Court of Appeals
                                                                               and Tax Court




FRESENIUS USA MARKETING, INC.,                    )
                                                  )
       Petitioner,                                )
                                                  )
                     v.                           ) Cause No. 49T10-1008-TA-00045
                                                  )
INDIANA DEPARTMENT OF                             )
STATE REVENUE,                                    )
                                                  )
       Respondent.                                )


       ORDER ON PARTIES’ CROSS-MOTIONS FOR SUMMARY JUDGMENT

                                   FOR PUBLICATION
                                     July 15, 2016

WENTWORTH, J.

       Fresenius USA Marketing, Inc. has appealed the Indiana Department of State

Revenue’s denial of its claim for refund of gross retail (sales) tax remitted on its sales of

durable medical equipment and supplies to Indiana clinics between January 1, 2004,

and October 31, 2007 (the Period at Issue). The matter, currently before the Court on

the parties’ cross-motions for summary judgment, presents one dispositive issue:

whether the Department is bound by its published ruling interpreting the exemption
provided by Indiana Code § 6-2.5-5-18(a).

                        FACTS AND PROCEDURAL HISTORY

       Fresenius is a Delaware corporation that sells, among other things, dialysis

machines, dialyzers, fistula needles, blood lines, compression dressings and bandages,

intravenous sets, and syringes. (Pet’r App. (hereinafter, “Pet’r Des’g Evid.”), Ex. 1 ¶¶ 1-

2.) During the Period at Issue, Fresenius sold its dialysis equipment to clinics in Indiana

that used it to provide dialysis treatment to patients with prescriptions or standing orders

from licensed practitioners authorized to issue them. (See Pet’r Des’g Evid., Ex. 1 ¶¶ 2-

3, 9-10, 14.)

       Fresenius collected sales tax on the medical equipment and supplies it sold to

the clinics and remitted the tax to the Department. (Pet’r Des’g Evid., Ex. 1 ¶ 15.) On

December 16, 2007, Fresenius filed a claim for refund with the Department, and on

June 7, 2010, the Department denied Fresenius’s claim. (See Pet’r Des’g Evid., Ex. 8.)

       On August 21, 2010, Fresenius initiated an original tax appeal. The Department

moved to dismiss Fresenius’s appeal on February 17, 2011, claiming that, among other

things, Fresenius lacked standing. See Fresenius USA Mktg., Inc. v. Indiana Dep’t of

State Revenue, 970 N.E.2d 801, 803 (Ind. Tax Ct. 2012), review denied. On June 1,

2012, this Court denied the Department’s motion. See id. at 806.

       On November 25, 2013, Fresenius and the Department each filed cross-motions

for summary judgment.1 The Court conducted a hearing on the motions on March 20,

2014. Additional facts will be supplied if necessary.

1
   In its motion for summary judgment, the Department also argued (for a second time) that
Fresenius lacks standing to bring its appeal. (See, e.g., Resp’t Br. Supp. Mot. Summ. J.
(“Resp’t Br.”) at 5-6.) The Court has already rejected this argument and finds no basis to
reverse its decision. See Fresenius USA Mktg., Inc. v. Indiana Dep’t of State Revenue, 970
N.E.2d 801, 804-05 (Ind. Tax Ct. 2012), review denied.
                                             2
                                   STANDARD OF REVIEW

         Summary judgment is appropriate when there are no genuine issues of material

fact and the moving party is entitled to judgment as a matter of law. Ind. Trial Rule

56(C). In reviewing a motion for summary judgment, this Court will construe all properly

asserted facts and reasonable inferences drawn therefrom in favor of the non-moving

party. See Scott Oil Co. v. Indiana Dep’t of State Revenue, 584 N.E.2d 1127, 1128-29

(Ind. Tax Ct. 1992). Cross-motions for summary judgment do not alter this standard.

Horseshoe Hammond, LLC v. Indiana Dep’t of State Revenue, 865 N.E.2d 725, 727

(Ind. Tax Ct. 2007), review denied.

                                               LAW

         Indiana imposes a sales tax on all retail transactions made in Indiana. See IND.

CODE § 6-2.5-2-1(a) (2016). Indiana’s Legislature, however, has expressly exempted

certain retail transactions from the imposition of sales tax. See generally IND. CODE §§

6-2.5-5-1 to -41 (2004). For example, the exemption at issue states:

                Sales of durable medical equipment, prosthetic devices,
                artificial limbs, orthopedic devices, dental prosthetic devices,
                eyeglasses, contact lenses, and other medical supplies and
                devices are exempt from the [sales] tax, if the sales are
                prescribed by a person licensed to issue the prescription.

IND. CODE § 6-2.5-5-18(a) (2004) (amended 2010) (the Durable Medical Equipment

Exemption).

         The Legislature provided the Department with authority to interpret the statutes

governing the listed taxes,2 but limited the effect of its interpretations as follows:

             No change in the department’s interpretation of a listed tax may
             take effect before the date the change is:
                (1) adopted in a rule under this section; or
2
    Indiana’s sales tax is a “listed tax.” See IND. CODE § 6-8.1-1-1 (2004) (amended 2005).
                                                 3
                (2) published in the Indiana Register under IC 4-22-7-7(a)(5),
                    if IC 4-22-2 does not require the interpretation to be
                    adopted as a rule;
           if the change would increase a taxpayer’s liability for a listed tax.

IND. CODE § 6-8.1-3-3(b) (2004). In 1998, the Department interpreted the predecessor

to the Durable Medical Equipment Exemption3 to apply to sales of medical equipment

made to healthcare service providers for treating patients with a prescription. See 21

Ind. Reg. 2656-59 (Apr. 1, 1998) (Revenue Ruling ST 98-02) (the 1998 Ruling). (See

also Pet’r Des’g Evid., Ex. 10.) After the Period at Issue, the Department issued two

Revenue Rulings in 2008 that again exempted healthcare service providers’ purchases

of durable medical equipment and supplies under the Durable Medical Equipment

Exemption.       See Ind. Reg. LSA Doc. No. 08-387 (May 28, 2008) (see

http://www.in.gov/legislative/register/irtoc.htm) (Revenue Ruling #2008-03ST); Ind. Reg.

LSA Doc. No. 09-39 (Jan. 1, 2009) (see http://www.in.gov/legislative/register/irtoc.htm)

(Revenue Ruling #2008-17 ST). (See also Pet’r Des’g Evid., Exs. 15-16.) Thereafter,

however, the Department revoked the two 2008 Revenue Rulings and replaced them

with two new Revenue Rulings that changed its interpretation of the Durable Medical

Equipment Exemption to exempt only sales made directly to patients with a prescription.

See    Ind.   Reg.    LSA    Doc.    Nos.    09-980,    09-981     (Dec.   23,     2009)   (see

http://www.in.gov/legislative/register/irtoc.htm) (Revenue Rulings #2009-16 ST and

#2009-17 ST); Ind. Reg. LSA Doc. Nos. 10-159, 10-160 (Mar. 24, 2010) (see

http://www.in.gov/legislative/register/irtoc.htm) (Revenue Rulings #2010-01 ST and

3
   The prior version of the Durable Medical Equipment Exemption read as follows: “Sales of
artificial limbs, orthopedic devices, dental prosthetic devices, eyeglasses, contact lenses, and
other medical equipment, supplies, and devices are exempt from the [sales] tax, if the sales are
prescribed by a person licensed to issue the prescription.” IND. CODE § 6-2.5-5-18(a) (1998)
(amended 2003). The subsequent amendment to the Durable Medical Equipment Exemption
has no bearing on the outcome of this matter.
                                               4
#2010-02 ST). (See also Pet’r Des’g Evid., Exs. 17-20.)

                                         ANALYSIS

       On appeal, Fresenius claims it is entitled to the Durable Medical Equipment

Exemption because the Department must follow its interpretation of the exemption set

forth in its 1998 Ruling. (See Pet’r Br. Supp. Mot. Summ. J. (“Pet’r Br.”) at 8-17.) The

Department contends, however, that it is not required to follow the 1998 Ruling

because: 1) it is not an interpretation of the statutes governing the listed taxes that binds

the Department under Indiana Code § 6-8.1-3-3(b), and 2) it was not issued to

Fresenius. (See, e.g., Hr’g Tr. at 57-63; Resp’t Reply Supp. Mot. Summ. J. (“Resp’t

Reply Br.”) at 6-8.)

                                               I.

       The Department argues first that it is bound by Indiana Code § 6-8.1-3-3(b) only

when it interprets a statute by promulgating a regulation.        (See Hr’g Tr. at 57-63.)

Accordingly, the Department maintains that because the 1998 Ruling is not a regulation,

it is not bound to follow it. (See Hr’g Tr. at 57-63.)

       The Court is not persuaded by the Department’s argument for two reasons.

First, the Department’s own regulation interpreting its administrative duties, powers, and

responsibilities clarifies that the Department is not limited to interpreting a statute

through a regulation, explaining that “[t]he department provides advice to taxpayers in

many different forms.” 45 IND. ADMIN. CODE 15-3-2(d)(1) (2004). Second, the Court has

previously addressed this issue and determined that

           Indiana Code § 6-8.1-3-3 requires the Department to interpret the
           statutes governing Indiana's listed taxes, but the methods by which
           it may do so are varied. For example, in some cases the
           Department may issue binding [Letters of Findings (“LOFs”)] or

                                               5
          [Letters of Advice (“LOAs”)] interpreting the listed taxes; in other
          cases, it may issue non-binding LOAs. When the Department is to
          be bound by the rulings it issues, whether in the form of a LOF or a
          LOA, however, that ruling must eventually be published in the
          Indiana Register.

Mirant Sugar Creek, LLC v. Indiana Dep’t of State Revenue, 930 N.E.2d 697, 700 (Ind.

Tax Ct. 2010) (emphases added).        The Department’s interpretation of the Durable

Medical Equipment Exemption contained in the 1998 Ruling was published in the

Indiana Register; accordingly, the Department is bound by it.

                                            II.

       Next, the Department claims that Fresenius cannot rely on its interpretation of the

Durable Medical Equipment Exemption in its 1998 Ruling because regulation 45 IAC

15-3-2(d)(3) states that “‘only the taxpayer to whom the ruling was issued is entitled to

rely on it.’” (See Resp’t Reply Br. at 7 (citation omitted).) The Department’s argument

fails, however, for three reasons.

       First, the Department cites to Norrell Services, Inc. v. Indiana Department of

State Revenue, 816 N.E.2d 517 (Ind. Tax Ct. 2004) as support for its position that only

the taxpayer to whom a ruling is issued is entitled to rely on it. (See Resp’t Reply Br. at

6-7; Hr’g Tr. at 53-55, 69-70.) In Norrell, the Department had issued two Letters of

Findings to the same taxpayer: the first taking one position and the second regarding

subsequent years taking a different position. See Norrell Servs., Inc. v. Indiana Dep’t of

State Revenue, 816 N.E.2d 517, 518-19 (Ind. Tax Ct. 2004), review denied. The Court

held that Indiana Code § 6-8.1-3-3(b) prohibited the Department from applying the

changed interpretation in the second Letter of Findings to the years before it was

published in the Indiana Register. See id. at 519-20. Because Norrell did not address

the binding effect of rulings on different taxpayers, which is the factual posture in this
                                            6
case, the Norrell case is not applicable.

       Second, the plain language of Indiana Code § 6-8.1-3-3(b) states that “[n]o

change in the department's interpretation of a listed tax may take effect before the date

the change is: (1) adopted in a rule under this section; or (2) published in the Indiana

Register . . . if the change would increase a taxpayer’s liability for a listed tax.” I.C. § 6-

8.1-3-3(b). If the Legislature had intended this provision to apply only to the taxpayer to

whom the published ruling was issued, it could have used the definite article (i.e., “the”

taxpayer) rather than the indefinite article (i.e., “a” taxpayer). See THE CHICAGO MANUAL

OF STYLE   §§ 5.69-5.70 at 222-23 (16th ed. 2010) (explaining that the use of an indefinite

article points to nonspecific objects, things, or persons that are not distinguished from

the other members of a class; the use of a definite article points to a definite object that

is so well understood that it does not need description).

       Finally, the Department claims that its own regulation indicates that the taxpayer

to whom a ruling is issued is alone entitled to rely on it. (See Resp’t Reply Br. at 7

(citing 45 I.A.C. 15-3-2(d)(3)).) The Department’s claim, however, relies on only one

isolated portion of its regulation, ignoring the remainder of the provision that expressly

permits other taxpayers than the taxpayer to whom the ruling was issued to rely on its

rulings:

               Since the department publicizes summaries of rulings which it
               makes, other taxpayers with substantially identical factual
               situations may rely on the publicized rulings for informational
               purposes in preparing returns and making tax decisions.
               Generally, department publications may be relied on by any
               taxpayer if their fact situation does not vary substantially from
               those facts upon which the department based its publication. If
               a taxpayer relies on a publicized ruling and the department
               discovers, upon examination, that the fact situation of the
               particular taxpayer is different in any material respect from that

                                              7
              situation on which the original ruling was issued, the ruling will
              afford the taxpayer no protection and the examination will apply
              to all open years under the statutes.

45 I.A.C. 15-3-2(d)(3) (emphases added).             Accordingly, to the extent Fresenius

establishes that its facts are “substantially identical” to the facts in the 1998 Ruling, the

Department is bound to follow it.

        Fresenius designated evidence demonstrating that its facts are substantially

identical to those in the 1998 Ruling.4 (Compare Pet’r Des’g Evid., Ex. 1 ¶¶ 1-14 with

Ex. 10.)    Moreover, the Department did not demonstrate that Fresenius’s factual

situation varied in some material respect to the facts set forth in the 1998 Ruling. (See

generally Resp’t Br. Supp. Mot. Summ. J.; Resp’t Br. Resp. Pet’r Mot. Summ. J.; Resp’t

Reply Br.) Indeed, the Department has stipulated, among other things, that Fresenius

has facts identical to the facts in the 1998 Ruling.         For example, the parties have

stipulated that, like the taxpayer in the 1998 Ruling, Fresenius sold medical equipment

and supplies to healthcare service providers to treat patients, that the healthcare service

providers used the equipment to treat patients with prescriptions for its use,5 and that

federal law required the equipment to be used by licensed practitioners or under a

licensed practitioners’ direction. (Compare Pet’r Des’g Evid., Ex. 1 ¶¶ 1-11, 14 with Ex.


4
   Fresenius also claimed that four other Letters of Findings supported its position. (See Pet’r
Br. Supp. Mot. Summ. J. at 10-13; Pet’r App. (hereinafter, “Pet’r Des’g Evid.”), Exs. 11-14.) A
review of those Letters of Findings, however, reveals that they all concern distinguishable sales
transactions. (Compare Pet’r Des’g Evid., Exs. 11-14 (regarding sales between healthcare
service providers and their patients) with supra p. 2 and Ex. 10 (regarding sales between
corporate entities and healthcare service providers).)
5
   The Department challenged the applicability of the 1998 Ruling, claiming it failed to examine
whether the purchaser of the medical equipment was the actual patient to whom it was
“prescribed.” (See, e.g., Resp’t Br. at 7-9; Resp’t Br. Resp. Pet’r Mot. Summ. J. at 3-6, 10-11.)
This claim, however, is unpersuasive because it asks the Court to adopt the Department’s new
interpretation of the Durable Medical Equipment Exemption, not the binding interpretation of the
exemption set forth in its 1998 Ruling. (Compare Pet’r Des’g Evid., Exs. 17-20 with Ex. 10.)
                                               8
10.) Thus, Fresenius has established that its facts are substantially identical to the facts

in the Department’s 1998 Ruling.

       Even though the 1998 Ruling was not issued to Fresenius, it was entitled to rely

on it because it demonstrated factual similarity. Because it did not rebut Fresenius’s

showing of similarity, the Department is bound by its interpretation in its 1998 Ruling.

Consequently, while the Department is not entitled to summary judgment on this basis,

Fresenius is.

                                      CONCLUSION

       For the foregoing reasons, the Court GRANTS summary judgment in favor of

Fresenius and against the Department. According to Indiana Code § 6-2.5-6-14.1, this

case is remanded to the Department to grant Fresenius’s refund claim and refund the

sales tax Fresenius remitted together with all applicable interest after Fresenius

provides the Department with verification that it has refunded to its customers the full

amount of sales tax it erroneously collected from them during the Period at Issue.

       SO ORDERED this 15th day of July 2016.


                                                        Martha Blood Wentworth, Judge
                                                        Indiana Tax Court




DISTRIBUTION: Francina A. Dlouhy, J. Daniel Ogren, Daniel R. Roy, Andrew W.
Swain, Evan W. Bartel

                                             9
