STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

BIZJET, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 77-466

)

DEPARTMENT OF REVENUE, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, James E. Bradwell, held a public hearing in this cause on May 27, 1977, in West Palm Beach, Florida. The Petitioner herein has challenged the Department's determination of sales taxes allegedly due under Chapter 212, Florida Statutes.

APPEARANCES

For Petitioner: Rod Tennyson, Esquire

Ombres, Powell & Tennyson, P.A. Suite 600 Clematis Building

208 Clematis Street

West Palm Beach, Florida 33401

For Respondent: Patricia S. Turner, Esquire

Assistant Attorney General Department of Legal Affairs The Capitol

Tallahassee, Florida 32304

Based upon my observation of the witnesses and their demeanor while testifying, the arguments of counsel and the memoranda of law received from the parties and which have been considered by me in preparation of this recommended order, I hereby make the following:

FINDINGS OF FACT

1. Pursuant to Chapter 212, Florida Statutes, the Respondent entered a sales tax assessment in the amount of one thousand four hundred sixty-one and eighty-two one hundredths dollars ($1,461.82) against the Petitioner. In support thereof, Respondent takes the position that payments of $300.00 per charter hour of flying time by the Petitioner to owners of aircraft in order that Petitioner may use said aircraft to provide charter services to third parties are payments for the rental of tangible personal property and therefore subject to a sales tax pursuant to Chapter 212, Florida Statutes. Petitioner on the other hand, takes the position that it is the agent of the owners of the aircraft and as such, provides services which are exempt from taxation pursuant to Department of Revenue Rule 12A-1.71(8), Florida Administrative Code.

2. Mr. Robert Capen, President of the Petitioner, testified that Petitioner has verbal arrangements to utilize the services of two jet aircraft to further its charter services. As a charter service, Petitioner transports third persons to a certain destination and provides the fuel and crew in return for an amount ranging from $300.00 to $750.00 per charter hour, depending on the length of the flight. The amount for services paid by third persons are made payable by check or other credit memos to Petitioner and said amounts are reported as income to the Internal Revenue Service. Pursuant to the verbal agreement with the aircraft owners, Petitioner guarantees that the aircraft will be chartered to third persons three hundred (300) hours annually. In return therefor, Petitioner pays the aircraft owners $300.00 per charter hour on a monthly basis. In addition thereto, Petitioner provides crews, maintains, schedules and operates the aircraft for the owners and is responsible for the proper licensing and certification of the aircraft for charter flights. For these services, Petitioner received a management fee in the total amount of

   $7,500.00 per month from the two owners of the aircraft. Based on the $300.00 per charter hour fee which is paid by Petitioner to the owners, Respondent entered its assessment claiming that the services provided by Petitioner constitute a "lease or rental" as provided in Section 212.02(2)(a), Florida Statutes. Respondent also points out that the legislative intent as enunciated by the state is that every person is exercising a taxable privilege when leasing or renting tangible property within Florida as set forth in Chapter 212.05, Florida Statutes, and that a tax therefore must be imposed on the gross proceeds of all rentals or leases of tangible personal Property, citing Section 212.11(3), Florida Statutes and Department of Revenue Rule 12A-1.71(1), Florida Administrative Code.

   
   

3. Based on the facts adduced at the hearing including the testimony of Messrs. Capen, Nelson Brown and James Santimaw, President, Secretary and Treasurer respectively, it appears that this case is governed by the statutory authority contained in Section 212, Florida Statutes, as implemented by Respondent's Rule 12A-1.71, Florida Administrative Code. Although Petitioner urges that its services amount to the creation of an agency relationship between the aircraft owners, the relevant facts tend to show otherwise. For example, Petitioner provides fuel and crew while third persons did not take possession of nor exert any control over the aircraft. As stated, Petitioner charges and receives an amount ranging from $500.00 to $750.00 per charter hour directly from third persons who have no dealings whatsoever with the aircraft owners. In the absence of any evidence tending to show that any type of agency relationship existed other than the statements advanced by Mr. Robert Brown during the course of the hearing, I hereby conclude that the Petitioner's contention that the services which it renders to third parties amount to a rental of tangible property and is therefore a taxable service within the meaning of Chapter 212, Florida Statutes. Petitioner's final argument that its charter service amounts to a brokerage arrangement was also considered however this argument must also fall as there was no credible evidence tending to establish that the Petitioner was in any manner acting as broker for anyone other than itself.

   
   

   CONCLUSIONS OF LAW

   
   

4. The Division of Administrative Hearings has jurisdiction over this subject matter and the parties to this action. Section 120.57(1), Florida Statutes.

   
   

5. The parties to this proceeding were duly noticed pursuant to the notice provisions of Chapter 120, Florida Statutes.

6. The authority of the Respondent, Department of Revenue, is derived from Chapter 212, Florida Statutes.

   
   

7. The $300.00 per hour fee paid to the aircraft owners by Petitioner to use aircraft to transport third persons to a particular destination, constitutes payment for the rental of tangible personal property pursuant to Sections 212.02(2)(a) and (6)(g), Florida Statutes, and Department of Revenue Rule 12A- 1.07(37), Florida Administrative Code.

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of law as recited above, it is recommended that the assessment referred to herein he upheld as a valid assessment.

RECOMMENDED this 7th day of July, 1977, in Tallahassee, Florida.

JAMES E. BRADWELL

Hearing Officer

Division of Administrative Hearings

530 Carlton Building Tallahassee, Florida 32304 (904) 488-9675

COPIES FURNISHED:

Patricia S. Turner, Esquire Assistant Attorney General Department of Legal Affairs The Capitol

Tallahassee, Florida 32304

Rod Tennyson, Esquire

Ombres, Powell & Tennyson, P.A. Suite 600, Clematis Building

208 Clematis Street

West Palm Beach, Florida 33401

Robert L. Shevin Attorney General The Capitol

Tallahassee, Florida 32304

Docket for Case No: 77-000466

Orders for Case No: 77-000466