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Covance Laboratories Incorporated and Covance Central Laboratory Services LP (collectively, “Covance”) operate pharmaceutical/research and development facilities in Indiana. In the course of conducting their research and development activities, Covance consumes electricity, natural gas, and water (“utilities”).
Covance filed claims with the Indiana Department of Revenue (“DOR”), seeking refunds of the sales and use tax it remitted on its utility purchases between January 1, 2011, and December 31, 2018. In filing those refund claims, Covance relied on Indiana Code § 6-2.5-5-40, which generally exempts certain purchases of tangible personal property that are used in qualifying research and development activities. After touring Covance’s facilities, however, the DOR only granted the refunds in part.
Covance filed several administrative protests. The DOR denied the protests and upheld its partial refunds. In doing so, the DOR explained in its letters of finding that Indiana Code § 6-2.5-5-40 only allowed a “dollar-for-dollar” exemption for utilities consumed in an integrated production process.
Covance subsequently initiated an original tax appeal, claiming that the DOR’s interpretation of Indiana Code § 6-2.5-5-40 was incorrect and that the statute actually allows a 100% exemption as long as the utilities are predominately used for research and development activities. Both Covance and the DOR have filed motions for summary judgment.
Hearing will be held remotely via videoconference.