STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

JOHN L. BURKHEAD, )

)

Petitioner, )

)

vs. ) CASE NO. 75-1062

) HONORABLE REUBIN ASKEW, Governor of )

the State of Florida, in His Capacity ) as Head of the Department of Revenue ) of the State of Florida, J. ED STRAUGHN, ) Executive Director of the Department of ) Revenue of the State of Florida, and JOE )

J. ROUSSEAU, Director, Division of ) Miscellaneous Tax, of the Department of ) Revenue of the State of Florida, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, G. Steven Pfeiffer, held a public hearing in this case on September 24, 1976, in Pensacola, Florida.

APPEARANCES

For Petitioner: Robert Hart

Pensacola, Florida

For Respondent: John L. Burkhead

Harold F. X. Purnell Tallahassee, Florida

On June 6, 1975, John L. Burkhead ("Petitioner" hereafter) filed a Petition for Review of Agency Determination with the Division of Administrative Hearings. Petitioner contested an assessment of $49,875.44 in special fuel taxes, plus a penalty of $4987.54. The Petition was received in evidence at the hearing as Hearing Officer's Exhibit 1. The Answer filed by the Department of Revenue ("Respondent" hereafter) was received in evidence as Hearing Officer's Exhibit

1. A final hearing was originally scheduled to be conducted on September 25, 1975. Due to the pendency of settlement negotiations, the hearing was continued, and when the negotiations failed to result in a final settlement, the final hearing was scheduled by notice dated July 15, 1976.

   
   

   John L. Burkhead appeared as a witness on his own behalf. The Respondent called no witnesses. Hearing Officer's Exhibits 1 - 5, Joint Exhibits 1 - 3, and Petitioner's Exhibits 1 - 6 were received into evidence at the hearing. An affidavit signed by Buford Hagler was received as a part of the record in the case subsequent to the hearing. The parties have submitted Post Hearing Memoranda of Law in the form of letters to the undersigned.

   Six separate items of special fuel tax assessments were at issue between the parties prior to the hearing. The first item involved 29,166 gallons of diesel fuel which was sold to local oil field drillers. The second item involved 161,900 gallons of diesel fuel sold to Ard Oil Company. The third item involved 11,700 gallons of fuel sold to Hagler Grocery. The fourth item involved 5,000 gallons of diesel fuel which Petitioner contended was lost due to mixing of diesel fuel with gasoline. The fifth item involved 5,000 gallons of diesel fuel which Petitioner contended was lost due to spillage. The sixth item involved 52,207 gallons of diesel fuel which Petitioner contended was lost due to unaccounted spillage and flushing. At the hearing the parties stipulated that special fuel taxes were not due on the sales to oil field drillers, which are reflected in invoices received in evidence as Joint Exhibit 1. Subsequent to the hearing the Respondent has agreed that special fuel taxes are not due with respect to the second, third, fourth and fifth items.

   
   

   Since testimony was taken and arguments were heard respecting each of the items, findings and conclusions are included with respect to each. Only the sixth item remains in dispute. Petitioner contends that 52,207 gallons of diesel fuel was lost due to normal spillage and flushing of hoses and tanks.

   Respondent contends it is Petitioner's obligation to specifically account for all diesel fuel that comes into its possession.

   
   

   FINDINGS OF FACT

   
   

   1. The Petitioner holds a valid special fuel dealer's license issued by the Respondent. The license was issued during approximately March, 1972.

      
      

   2. The Respondent conducted an audit of Petitioner's sales operations, and assessed special fuel taxes, plus penalty, on approximately 264,973 gallons of special fuel for which the Respondent contended inadequate account was given.

      
      

   3. 29,166 gallons of the special fuel involved in the assessment was sold to local oil field drillers. These sales are reflected in invoices which were received in evidence as Joint Exhibit 1. This fuel was used for industrial and commercial purposes, and not for the propulsion of motor vehicles on the public highways of the State of Florida.

      
      

   4. 161,900 gallons of the special fuel involved in this assessment was sold to Ard Oil Company, Summerdale, Alabama. Petitioner had every reason to believe that Ard Oil Company held a valid license as a dealer of special fuels in the State of Florida. Petitioner took reasonable steps to insure himself as to Ard's status, and received no instructions from the Respondent as to steps that could be taken to identify persons who were not properly licensed as special fuel dealers.

      
      

   5. 11,700 gallons of the special fuel involved in this assessment was sold to Hagler Grocery. All subsequent sales made by Hagler Grocery were for off- road, agricultural uses.

      
      

   6. During July, 1973, 5,000 gallons of the Petitioner's special fuel was mistakenly mixed with gasoline. The mixing rendered the special fuel unusable, and it was emptied onto Petitioner's property. This 5,000 gallons of fuel was never sold by the Petitioner, and was never used.

      
      

   7. On one occasion during the period of the audit, 5,000 gallons of special fuel leaked from one of the Petitioner's storage tanks due to a valve

      being left open erroneously. This fuel was never sold by the Petitioner, and was never used.

      
      

   8. During the period covered by the audit involved in this case, the Petitioner sold more than 5,000,000 gallons of special fuel. The Petitioner donates approximately 2,000 - 3,000 gallons of fuel yearly to the local fire department for training purposes. The Petitioner rinses his tanks periodically to keep down the lead content, and this results in some loss in special fuel. The Petitioner loses approximately 5 gallons of special fuel in each loading operation. The Petitioner made effort to account for all special fuel which came into his possession. Less than one percent of the fuel that came into his possession during the audit period has not been accounted for. It is reasonable to conclude, that 52,207 gallons of the Petitioner's special fuel was lost due to spillage, flushing operations, and donations to the local fire department. There was no evidence offered at the hearing from which it could be determined that any unaccounted fuel was used for a taxable purpose, or for any purpose.

      
      

      CONCLUSIONS OF LAW

      
      

   9. The Division of Administrative Hearings has jurisdiction over the parties to this action, and over the subject matter.

      
      

   10. Provisions respecting the Florida State tax on special fuels are set out in Florida Statutes, Chapter 206, Part II. Florida Statutes, s. 206.87 provides in pertinent part as follows:

       
       

       "(1) An excise tax of eight cents per gallon is hereby imposed upon every gallon of special fuel used or sold in this state for use. Unless expressly provided to the contrary in this part, every sale shall be deemed to be for use in this state. This levy of tax is upon the consumer

       but shall be paid upon the first sale or transfer of title within this state by a dealer, except as expressly provided in this part, who shall act as agent for the state in the collection of said tax whether he be the ultimate seller or not.

       
       

       1. The following sales shall not be subject to the tax herein imposed:

          1. Sales by a dealer when the special fuel is delivered for home, industrial, commercial agricultural, or marine purposes, for consump- tion other than use, or for resale pursuant to paragraph (c) hereof."

             
             

   11. "Use" is defined in 206.86(5) as follows:

       
       

       "'Use' means the placing of special fuel into any receptical on a motor vehicle from which fuel is supplied for the propulsion thereof."

       
       

   12. The special fuel described in paragraphs 3, 4, and 5 of the Findings of Fact in this order was not sold for a taxable use. The motor fuel described in paragraphs 6, 7, and 8 of the Findings of Fact was not sold.

   13. The Respondent's assessment of $49,875.44 in special fuel taxes, plus penalty of $4,987.54 should be withdrawn, and the Petitioner should be found to be without liability for the special fuel taxes assessed by the Respondent.

       
       

       RECOMMENDED ORDER

       
       

   14. Based upon the foregoing Findings of Fact and Conclusions of Law, it

is,

RECOMMENDED:

That the Florida Department of Revenue enter an order withdrawing the

assessment of special fuel taxes in the amount of $49,875.44 plus penalty of

$4,987.54, and finding the Petitioner, John L. Burkhead, to be without liability for these taxes.

RECOMMENDED this 6th day of December, 1976, in Tallahassee, Florida.

G. STEVEN PFEIFFER, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304

(904) 488-9675

COPIES FURNISHED:

Harold F. X. Purnell, Esquire

Assistant Attorney General Robert D. Hart, Jr., Esquire Department of Legal Affairs Post Office Box 12585

The Capitol Pensacola, Florida 32573 Tallahassee, Florida 32304

Docket for Case No: 75-001062

Orders for Case No: 75-001062