STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

SILVER SPRINGS SHORES, INC., )

a FLORIDA Corporation, )

)

Petitioner, )

)

vs. ) CASE NO. 76-2044

) FLORIDA DEPARTMENT OF REVENUE, )

)

Respondent. )

)

FINAL ORDER

This action commenced upon the filing by the Respondent, Florida Department of Revenue, of a Notice of Proposed Assessment dated September 15, 1976.

APPEARANCES

For Petitioner: Willard Ayres, Esquire

AYERS, CLUSTER, CURRY, MEFFERT, & MCCALL

Ocala, Florida

For Respondent: Silver Springs Shores, Inc.

Florida Department of Revenue Harold F. X. Purnell, Esquire Tallahassee, Florida,

The Respondent is seeking to assess documentary stamp taxes, surtaxes, penalties and interest in a total amount of $13,002.10 against the Petitioner, Silver Springs Shores, Inc. Petitioner filed a petition for hearing in accordance with Section 120.57, Florida Statutes (1976 Supp.). The Respondent forwarded the petition to the Division of Administrative Hearings for the assignment of a hearing officer, and the scheduling of a hearing. Respondent filed an Answer to the petition, and the parties engaged in discovery. The final hearing was originally scheduled to be conducted on February 18, 1977.

Upon motion of the Respondent the hearing was continued and rescheduled for April 25, 1977.

The issue raised through the petition was whether certain real estate transactions were "package deals" within the meaning of Rule 12A-4.13(22), Florida Administrative Code. Shortly before the scheduled hearing counsel for the Petitioner advised the undersigned that Petitioner conceded that the transactions were package deals within the meaning of the rule, but that Petitioner wished to challenge the validity of the rule. This understanding is set out in a letter dated April 25, 1977, from the undersigned to all counsel of record. The pleadings, answers to interrogatories, and responses to requests for admissions are the only evidence in this case. The parties have submitted Memoranda of Law respecting the validity of Rule 12A-4.13(22), Florida Administrative Code.

FINDINGS OF FACT

1. Petitioner is in the land development business. Petitioner sold residential lots to various purchasers and contracted through a sister corporation to construct homes on the lots. At the time the lots were conveyed no improvements had been made. Petitioner placed documentary tax stamps and documentary surtax stamps upon the deeds reflecting the consideration for the deeds as the price of the lots. Respondent contends that stamps should have been placed on the deeds reflecting the consideration as the price of the lots plus improvements. Accordingly Respondent is proposing to assess additional stamp taxes, surtaxes, penalties and interest upon the Petitioner in the total amount of $13,002.10.

   
   

2. The pleadings, answers to interrogatories and responses to requests for admissions establish that unless Rule 12A-4.13(22), Florida Administrative Code is invalid, Petitioner is liable for the taxes Respondent proposes to assess. The transactions which form the basis of the proposed assessment are package deals within the meaning of the Rule.

   
   

   CONCLUSIONS OF LAW

   
   

3. The Division of Administrative Hearings has jurisdiction over the subject matter of this action, and over the parties. Section 120.56, Florida Statutes (1976 Supp.). The Petitioner is substantially affected by the Respondent's Rule 12A-4.13(22).

4. Rule 12A-4.13(22) provides as follows: "Joint Venture Contracts, Package Deals:

   Where corporations engaged in the business

   of land development for residential pur- poses conduct their operations in conjunc- tion with sister corporations (or even same corporations) engaged in building homes, and one individual is controlling shareholder and principal officer of all corporations, tax is required on the

   deeds based upon the total price that home purchaser pays for house and lot and not limited to portion of consideration

   attributable to the lot. The tax attaches at the time the deed or other instrument of conveyance is delivered, irrespective of the time the sale is made or the instrument is recorded. The critical factor is the intention of the parties.

   
   

   Petitioner contends that the rule constitutes an invalid exercise by the Respondent of authority delegated by the Legislature.

   
   

5. Rule 12A-4.13(22) was adopted in order to implement the provisions of Sections 201.01, 201.02, and 201.021, Florida Statutes (1975). These statutes provide for the imposition of documentary stamp taxes and surtaxes upon documents through which an interest in real estate is conveyed. The amount of the tax is based upon the consideration for the conveyance. The Respondent was given authority to adopt rules and regulations for the enforcement and administration of the statutes. Section 201.11, Florida Statutes (1975).

6. Petitioner contends that the Respondent's effort to impose taxes based upon improvements that were not on the lot at the time of the conveyance is an invalid exercise of the Respondent's rule making authority. Petitioner finds support in the case of Young America Builders v. Department of Revenue, Case Number 75-1839-CA (8th Judicial Circuit of Florida, Order entered November 17, 1976). In that case the court held the Rule void under circumstances which appear legally equivalent to the circumstances of this case. The court did not set out any reasons for finding the rule invalid, and the decision has been appealed by the Florida Department of Revenue.

   
   

7. The Florida documentary stamp tax statutes follow, in all respects pertinent here, the language of the Federal Revenue Act, which prior to its repeal was set out at 26 U.S.C. Section 4361. The Florida Statutes have been given the same construction which was given the Federal Act by the Federal courts. Choctawhatchee Electric Cooperative, Inc. v. Green, 132 So.2d 556, 558 (Fla. 1961); Gay v. Inter-County Telephone and Telegraph Co., 60 So.2d 22, 23 (Fla. 1952); Rasberry v. Dickinson, 243 So.2d 236, 237 (1 D.C.A. Fla. 1971). In interpreting the Federal Act as it related to package deals, the United States Court of Claims concluded that the critical factor in determining the amount of the tax is the intention of the parties at the time of execution and recordation of the instrument. Raccoon Development, Inc. v. United States, 391 F.2d 610, 613 (Ct. Cl. 1968). The court rejected the contention that the value of improvements to be erected subsequent to execution and recordation of the instrument could have no effect upon taxability. The court stated: (at pp 613, 614)

   
   

   "It is not disputed that the documentary stamp tax due is measured by the net consideration paid for the realty conveyed where the consideration is definite in amount ... They [the purchasers] were neither offered nor

   did they bargain for anything other than a home, including a lot, at that price [the total purchase price].

   Accordingly, the lot was in realty an inseparable part of what ... [the purchasers] bought. The lump sum purchase price that they paid is therefore the proper measure of documentary stamp tax liability."

   
   

   This decision was followed in First Development Corporation of America v. Department of Revenue, Case Number 70-1974 (12th Judicial Circuit, Order entered August 17, 1972). The Second District Court of Appeal affirmed the First Development decision citing Raccoon Development, Inc. as authority. First Development Corporation of America v. State of Florida Department of Revenue,

   286 So.2d 233 (2 D.C.A. Fla. 1973). The decision in Young American Builders v. Department of Revenue, supra, represents an unexplained departure from this line of authority.

   
   

8. Rule 12A-4.13(22) provides that the critical factor in determining whether a given transaction is or is not a package deal is the intention of the parties. This interpretation of the documentary stamp tax and surtax statutes is consistent with the decisions in Raccoon Development, Inc., and First Development Corporation. Nothing in the statute requires a contrary result.

7. Rule 12A-4.13(22), Florida Administrative Code is a valid exercise of delegated legislative authority. The Notice of Proposed Assessment issued by the Respondent should be enforced.

FINAL ORDER

Based upon the foregoing Findings of Fact and Conclusions of Law, it is, ORDERED:

1. Rule 12A-4.13(22), Florida Administrative Code constitutes a valid exercise by the Florida Department of Revenue of rule making authority delegated by the Legislature in accordance with Sections 201.01, 201.02, 201.021, 201.11, Florida Statutes (1975).

   
   

2. The Notice of Proposed Assessment issued by the Florida Department of Revenue on September 15, 1976 is valid and should be enforced.

DONE and ORDERED this 30th day of June, 1977, 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 Ms. Liz Cloud Department of Legal Affairs Department of State The Capitol 403 East Gaines Street Tallahassee, Florida 32304 Tallahassee, Florida

Willard Ayres, Esquire Mr. Carroll Webb

P. O. Box 1148 Executive Director

Ocala, Florida 32670 Administrative Procedure Committee

Room 120, Holland Building Tallahassee, Florida 32304

Docket for Case No: 76-002044

Orders for Case No: 76-002044