The Indiana Tax Court recently examined in Aztec Partners, LLC v. Ind. Dep’t of State Revenue, No. 49T10-1210-SC-00067, 2015 Ind. Tax LEXIS 29 (Ind. Tax Ct. June 23, 2015), whether electricity that Aztec Partners, LLC (“Aztec”), who operates nineteen Qdoba Mexican Restaurants in Indiana, used to power electrical equipment was subject to Indiana sales tax. The Court found it was not and reversed the Department of State Revenue’s (the “Department”) final determination and remanded the case.
At Aztec’s Qdoba Restaurants, employees prepare food items that are ultimately combined and served as entrées. Those food items are held and preserved in electrical equipment, such as food warmers and cooling systems, until they are combined into entrées and sold. The electrical equipment is not used to cook the food. In June 2011, Aztec filed twelve refund claims with the Department for the refund of sales tax paid on the electricity used to power electrical equipment. The Department denied the refunds finding that the electricity was taxable. Aztec protested the refund denial. Thereafter, the Department held a hearing and issued a Memorandum of Decision on August 24, 2012 denying that protest. Aztec initiated an original tax appeal.