STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

ASSOCIATED DRY GOODS CORPORATION, )

a Virginia Corporation, d/b/a ) ROBINSON'S OF FLORIDA, )

)

Petitioner, )

)

vs. ) CASE NO. 75-1147

) THE DEPARTMENT OF REVENUE OF THE ) STATE OF FLORIDA, )

)

Respondent. )

)

RECOMMENDED ORDER

THIS CAUSE came on to be heard upon due notice to parties at Room 103, Collins Building, Department of Administration, Division of Administrative Hearings, Tallahassee, Florida, at 10:00 A.M., September 4, 1975, before the undersigned Hearing Officer.

APPEARANCES

For Petitioner: James D. Beasley Esquire

CARROTHERS, BEASLEY, AUSLEY, McMULLEN, McGEHEE and PROCTOR

Post Office Box 391 Tallahassee, Florida

For Respondent: Larry Levy, Esquire

Assistant Attorney General Department of Legal Affairs The Capitol

Tallahassee, Florida 32304 STATEMENT OF ISSUES

The validity of documentary stamp tax assessment and penalty against the Petitioner under Sections 201.08(2) and 201.17(2), Florida Statutes, respectively.

The parties had no motions to be considered prior to the presentation of evidence.

The parties stipulated that it would be appropriate for the Hearing Officer to include in his Recommended Order a statement that the constitutional issues raised by the Petitioner in its petition, although not appropriate for consideration in this proceeding, should be preserved in the event of appeal to the Courts. The stipulation was accepted by the Hearing Officer.

The parties stipulated that the amount of tax assessed against the Petitioner in the sum of $17,925.00, and the amount of the asserted penalty in the sum of $17,925.00 are appropriate and correctly computed for the period from commencement of operations by Petitioner to March, 1975, the date of the proposed notice of assessment of tax and penalty by the Respondent, provided that the assessment of tax and penalty is determined to be valid. The stipulation was accepted by the Hearings Officer.

The Hearing Officer amended paragraph 2 of his Order, dated August 5, 1975, to change the word "Motion" to the word "Petition" so that paragraph 2 thereof would read as follows:

"The Respondent's Motion to Strike paragraph

15 of the Petition is granted, without prejudice."

The parties had no witnesses to present, and proceeded solely on presentation of oral argument. It was acknowledged by the parties that the only contested issue of fact in the case is the determination of the identification of the document or documents upon which the Respondent seeks to impose the tax pursuant to Section 201.08(2), F.S. The proposed notice of assessment did not indicate whether the Respondent bases its proposed tax solely on the revolving charge agreements used by Petitioner, or the sales tickets which petitioner utilizes in carrying out such agreements, or both. The Respondent asserted at the hearing that both documents were used as a basis for the tax assessment and this was uncontested by Petitioner.

In view of the fact that Exhibit A to the Petition which purports to be a credit application and a retail charge agreement utilized by the Petitioner did not reflect the retail charge agreement, a complete copy of this document was offered and admitted into evidence as Petitioner's Exhibit 1. Petitioner's Exhibit No. 2 is a copy of its sales slip.

Accordingly, based upon the pleadings, the aforesaid documentary evidence and concessions of counsel at the hearing, the following findings of fact are made:

FINDINGS OF FACT

1. Petitioner is incorporated under the laws of the State of Virginia and is registered to conduct business in the State of Florida. Robinson's of Florida is a Division of Petitioner, and is currently engaged in the sale of merchandise and retail through four Robinson's of Florida department stores situated in the Florida counties of Pinellas, Orange, Hillsborough and Seminole.

   
   

2. Respondent is an agency of the State of Florida whose duties include the assessment of taxes and penalties imposed under Chapter 201, F.S.

   
   

3. An unspecified portion of Robinson's retail sales in Florida is made pursuant to revolving charge agreements between Robinson's and its customers.

   
   

4. These sales are made under retail charge agreements (Petitioner's Exhibit 1) which provide that in consideration of credit to be extended by Robinson's of Florida, the customer agrees to pay the full amount owing on the account within 25 days from the billing date of each monthly statement or monthly payments of not less than the payment required by a table included in the agreement which lists minimum monthly payments based upon the unpaid balance of the account. The agreement further provides that in case of a failure to pay the minimum payment due on the monthly statement, that the amount shown as the new balance on the monthly statement shall at the option of Robinson's become due and payable immediately. It provides that the charge card issued to the customer may be terminated or revoked at any time and must be surrendered to Robinson's upon demand. It states that the agreement constitutes a "revolving account" within the meaning of Section 2 subsection 8 of the Florida Retail Installment Sales Act, Chapter 59-414, Laws of Florida, 1959.

   
   

5. Each time a customer purchases merchandise pursuant to a Robinson's revolving charge account, he executes a sales ticket (petitioner's Exhibit No. 2 and Exhibit B to Petition) which includes the following printed statement on the face of the ticket. "I agree to pay the total amount of this sales check in accordance with my credit arrangements with you."

6. During March, 1975, Respondent conducted an audit of all of Robinson's revolving charge account sales records in its Florida stores. As a result of the audit, Respondent issued to Petitioner a proposed notice of assessment of tax and penalty under Chapter 201, F.S., dated March 20, 1975, (Exhibit C to Petition). The proposed notice of assessment requested payment of documentary stamp taxes in the amount of $17,925.00, pursuant to Section 201.08(2), F.S., and a penalty in -- the same amount pursuant to Section 201.17(2), F.S., (Exhibit's C & E to Petition).

   
   

7. Petitioner requested and was afforded an opportunity to meet with a representative of Respondent for the purpose of objecting to the aforementioned assessment of taxes and penalty on May 6, 1975, in St. Petersburg, Florida. Subsequent to this conference, Petitioner received a letter dated May 9, 1975, from Respondent reaffirming the proposed total assessment and penalty in the total amount of $35,850.00 (Exhibit E to Petition).

   
   

8. No evidence has been presented that documentary tax stamps for the sales in question were purchased, affixed to, or placed on the instruments in question.

   
   

   CONCLUSIONS OF LAW

   
   

9. Respondent's proposed assessment of documentary stamp taxes in the amount of $17,925.00 was validly made in accordance with the provisions of Section 201.08(2), F.S., which provides as follows:

   
   

   "(2) On promissory notes, nonnegotiable notes, written obligations to pay money, or other compensation, made executed, delivered, sold, transferred, or assigned in the state, in con- nection with sales made under retail charge account services, incident to sales which are not conditional in character and which are not secured by mortgage or other pledge of purchaser,

   the tax shall be fifteen cents on each one hundred dollars fraction thereof of the gross amount

   of the indebtedness evidenced by said instruments, payable quarterly on such forms and under such rules and regulations as may be promulgated by

   the department of revenue. No documentary stamps shall be required to be attached to instruments under the provisions of this subsection."

10. It is considered that, when taken together, Petitioner's retail charge agreement and sales tickets, constitute "written obligations to pay money" in connection with sales made under retail charge account services, incident to sales which are not conditional in character, and which are not secured by mortgage or other pledge of the purchaser. Petitioner contends that the retail charge agreement constitutes the whole transaction, and that the sales ticket is a mere commercial convenience evidencing the receipt of merchandise, relying on the case of Maas Brothers, Inc. v. Dickinson, 195 So.2d 193 (1957), which reversed a decision of the District Court of Appeal, First District, in the case of Maas Brother's Inc. v. Green, 182 So.2d 683 (Fla. App. 1st District 1966). In that case, the District Court had held that the "flexible charge account agreements" used by Maas Brothers were subject to Florida documentary stamp taxes under Section 201.08(1), F.S.. The charge account agreements in the Green case contained a retained title provision which exempted the agreements from documentary stamp taxes under 201.08(2) by reason of their conditional character. In the instant case, there clearly is no retention of title to the personal property purchased under the revolving charge accounts.

    
    

11. Petitioner also contends, however, that under Section 673.105, F.S., a promise or order to pay is not unconditional if it is subject to or governed by another agreement, and therefore, because Respondent is basing its assessment upon both retail charge agreement and the sales tickets, the transactions are conditional in character. Although this may be a current statement of negotiable instruments law, it is not necessarily applicable to transactions and sales made in revolving charge account transactions which virtually always embrace two or more instruments. Although the sales slips in question contain the language, "I agree to pay the total amount of the sales check in accordance with my credit arrangements with you" (emphasis supplied), it is not considered that, even if Section 673.105 were deemed applicable to the transactions, it could be construed that two separate agreements are involved in Petitioner's sales. On the contrary, the master agreement and each sales ticket are parts of one transaction and, taken together, are clearly unconditional in character by their terms. In fact, Section 520.31(8), F.S., in defining "revolving accounts" under the Retail Installment Sales Act, states in part: "Revolving account" or "account" means an instrument or instruments prescribing the terms of retail installment transactions which may be made thereafter from time to time pursuant thereto,...." (emphasis supplied). This language of the statute clearly contemplates multiple documents fixing the rights and obligations of the parties ink such transactions. It

    is considered that the sales in question were completed upon the execution of the sales slip although the amount of each payment was to be fixed later by the schedule set forth in the retail charge agreement.

    
    

12. The proposed assessment of a penalty in the amount of

    $17.925.00 is not justified in view of the express language of Section 201.08(2), F.S., which reads in part as follows "...no documentary stamps shall be required to be attached to instruments under the provisions of this subsection", and Section 201.17(2) which states as follows:

    
    

    1. Any document, instrument, or paper upon which the tax under this chapter is imposed and which, upon audit or at time of recordation, does not bear the proper value of stamps shall subject

       the person or persons liable for the tax upon the document, instrument or paper to:

       1. Purchase of the stamps not affixed; and

       2. Payment of penalty to the department of revenue equal to the purchase price of the stamps not affixed. This penalty is to be in addition

          to and not in lieu of any other penalty imposed by law."

          
          

          By the quoted provision of the basic taxing statute, Section 201.08(2) there is no requirement that documentary stamps be attached to written obligations to pay money which fall within the purview of the statute. Neither is there any requirement in other provisions of Chapter 201 which would obligate the taxpayer to purchase such stamps for the transactions in question. Section 201.01, although requiring the levy, collection, and payment of taxes specified in Chapter 201, provides only that the documentary stamp taxes required under Chapter 201 shall be affixed to and placed on all recordable instruments, requiring documentary stamps according to law, prior to recordation (emphasis supplied). There is no requirement for recordation of the instruments in question.

          
          

13. Section 201.17(2) imposes the penalty for any document, instrument, or paper upon which the tax is imposed and which upon audit or at time of recordation does not bear the proper value of stamps (emphasis supplied). Accordingly, since Section 201.08(2), specifically exempts the taxpayer from attaching documentary stamps to the taxed instruments, the penalty provision is inapplicable by its terms and cannot be imposed. The Respondent asserts that a reason for not requiring documentary tax stamps to be attached to instruments under Section 201.08(2) is because the

tax is computed and payable quarterly on the aggregate of the total retail transactions completed during the three month period, and that, it therefore would be impracticable to purchase and affix documentary stamps on each transaction. This may be true, but the fact remains that the penalty can be based only upon a discovery that the taxable documents do not bear documentary stamps. If the statute which imposes the tax specifically exempts such documents from attachment of stamps, there can be no penalty assessed. Respondent asserts that the statute should not be given its literal meaning. However, the statute, being penal in nature, must be strictly construed.

RECOMMENDATION

It is recommended:

1. That the proposed assessment of documentary stamp taxes against the Petitioner in the amount of $17,925.00 under Section 201.08(2), Florida Statutes, be determined valid, and that collection thereof be made in accordance with appropriate law and regulations.

   
   

2. That the proposed assessment of a penalty against thee Petitioner in the amount of $17,925.00 under Section 201.17(2), Florida Statutes, be determined invalid and set aside.

DONE and ORDERED this 30th day of September, 1975, in Tallahassee, Florida.

THOMAS C. OLDHAM

Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304

(904) 488-9675

COPIES FURNISHED:

Larry Levy, Esquire James D. Beasley, Esquire

Assistant Attorney General P.O. Box 391

Department of Legal Affairs Tallahassee, Florida

The Capitol For the Petitioner Tallahassee, Florida 32304

For the Respondent

================================================================= AGENCY FINAL ORDER

=================================================================

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

ASSOCIATED DRY GOODS CORPORATION,

a Virginia Corporation, d/b/a ROBINSON'S OF FLORIDA,

Petitioner,

vs. CASE NO. 75-1147

THE DEPARTMENT OF REVENUE OF THE STATE OF FLORIDA,

Respondent.

/

FINAL ORDER

This cause comes before the Department of Revenue after hearing having been held pursuant to Chapter 120, Florida Statutes, before a Hearing Examiner of the Division of Administrative Hearings. Said Hearing Examiner has heretofore submitted to the Department a recommended order and, as required by Chapter 120, the Department has allowed counsel for the respective parties the opportunity to file written exceptions to such recommended order. The Respondent, through its counsel, has filed exceptions, but the Petitioner has not.

The Department of Revenue has determined that the exceptions filed by the Respondent are well taken and accordingly rules as follows.

1. Pages 1, 2, 3, 4 and 5 are adopted in haec verba. Page 6 is adopted in haec verba down to paragraph number 2. Paragraph number 2 commencing on page 6 and continuing through part of page

8 is hereby rejected. On page 8, paragraph number 1 is adopted in haec verba and paragraph number 2 is hereby rejected.

All those parts which have been adopted in haec verba herein shall become and are hereby deemed to be the final order of the Department. Those parts commencing on page 6 with paragraph number 2 and continuing thereafter which have been rejected shall not become a part of the final order of the Department. The Department is of the view that the Hearing Examiner interpreted Section 201.17(2), F.S., incorrectly and that such section does authorize the imposition of penalty in those documentary stamp tax situations covered under Section 201.08(2), F.S. Section 201.17(2) provides:

"Any document, instrument, or paper upon which the tax under this chapter is imposed and which, upon audit or, at time of recordation, does not bear the proper value of stamps shall subject the person or persons liable for the tax upon the docu- ment, instrument or paper to:

1. Purchase of the stamps not affixed; and

2. Payment of penalty to the department of revenue equal to the purchase price of the stamps not affixed. This penalty is to be in addition to and not in lieu of any other penalty imposed by law." (e.s.)

It is the Department's view that the language in the statute does require the imposition of penalty where the tax is not paid on revolving charge account instruments. The statute quite clearly refers to any document, instrument or paper upon which the tax under this Chapter is imposed. Section 201.08(2), F.S., is not exempted from that language, but rather is embraced therein.

The discovery of such omitted tax is specifically allowed either upon audit or at time of recordation. This, too, would embrace the tax provided for in Section 201.08(2), F.S. Additionally, the language of the statute does not say that such instruments do "not bear stamps" but instead uses the language "does not bear the proper value of stamps." The recommended order suggests that the former language is found in the statute instead of the latter.

Furthermore, the construction of the statute placed thereon by the Hearing Examiner would mean that the Department could not even collect the tax due and owing, because paragraph (2)(a) of the statute as a first part of the penalty provision requires the purchase of stamps not affixed. Thus, if paragraph (2)(b) does not apply to Section 201.08(2), F.S., tax then neither could paragraph (2)(a) apply.

The recommended order incorrectly interprets the meaning of the last sentence of Section 201.08(2), F.S., which states:

"No documentary stamps shall be required to be attached to instruments under the provisions of this subsection."

The Hearing Examiner considered this sentence to mean that stamps did not have to be purchased. It does not so state. It merely states that the stamps are not required to be attached to the instruments. The stamps instead are attached to the general ledger or general account cards or some other appropriate book or record of the taxpayer, and it is common knowledge that the taxes imposed under Chapter 201, F.S., can only be paid through the purchase of stamps. Accordingly, it is hereby ORDERED

1. That the proposed assessment of documentary stamp taxes against the Petitioner in the amount of $17,925 under Section 201.08(2), F.S., is valid and collection thereof shall be made in accordance with appropriate law and regulations.

   
   

2. That the proposed assessment of a penalty against the Petitioner in the amount of $17,925 under Section 201.17(2), F.S., is valid and collection thereof shall be made in accordance with appropriate law and regulations.

*

* NOTE: Document filed with DOAH 7/26/76 undated and unsigned.

Docket for Case No: 75-001147

Orders for Case No: 75-001147