STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

SCHOOLEY CADILLAC, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 77-1457

)

DEPARTMENT OF REVENUE, )

STATE OF FLORIDA, )

)

Respondent. )

)

RECOMMENDED ORDER

A hearing was held in the above-captioned matter, after due notice, at Miami, Florida, on November 10, 1977, before the undersigned Hearing Officer.

APPEARANCES

For Petitioner: Robert W. Jensen and

James Adams, Esquire

186 Southwest 13th Street Miami, Florida 33130

For Respondent: Edwin J. Stacker, Esquire

Assistant Attorney General Department of Legal Affairs The Capitol

Tallahassee, Florida 32304 ISSUE PRESENTED

Petitioner's alleged liability for sales tax, interest and penalties under Chapter 212, Florida Statutes, as set forth in Notice of Proposed Assessment, dated June 23, 1977.

FINDINGS OF FACT

1. Petitioner Schooley Cadillac, Inc. is a dealer in Cadillac automobiles in West Palm Beach, Florida. The firm requires its salesmen to purchase a new Cadillac automobile each year. When a salesman decides to acquire the new automobile, an order is placed with the Cadillac Motor Car Division and delivery is made some eight to ten weeks thereafter. During the interim period, the salesman's used automobile is placed in petitioner's used car department and sold to a customer. State sales tax is collected by petitioner and remitted to respondent based on sales of the used cars. Title to the used car is transferred from the salesman to petitioner at the time it is resold. Although there is no contract or purchase agreement executed between the salesman and petitioner for the purchase of the new automobile, he is credited with the sale price of the used car on the books of the petitioner at the time the used car is sold. When the salesman's new car arrives, an invoice is prepared that reflects

   the amount credited to the salesman for the used car on the purchase price of the new car as a "previous trade." State sales tax is collected by petitioner and paid to the state on the price of the new automobile, less the amount credited for the used automobile. Petitioner handles a lesser number of transactions for General Motors retirees and a few winter residents using basically the same procedures involving purchases of new automobiles and prior sale of the individual's used car. In such cases, however, title to the used car is normally transferred to petitioner prior to its sale. (Testimony of Eichhorn)

   
   

2. Respondent's tax examiner examined the books of petitioner in 1977 and determined that credit should not have been allowed for the price of the used automobiles in determining the amount of sales tax payable to the state because he viewed the amounts credited for the used automobiles as "down payments" rather than "trade-ins." Based upon 33 such transactions which took place between May 1, 1974 through April 30, 1977, a Notice of Proposed Assessment was prepared and sent to petitioner on August 2, 1977, in which delinquent sales tax in the amount of $9,814.44 was claimed, together with a penalty in the amount of

   $2,367.19, and interest through June 23, 1977, in the amount of $1,703.79, for a total assessment of $13,885.39. A prior Notice of Proposed Assessment in a somewhat larger amount had been scaled down after certain credits had been allowed to the petitioner. The 33 transactions in question involved 24 sales to petitioner's salesmen and the remainder to General Motors retirees or regular customers. As a result of the proposed assessment, petitioner filed its petition for an Administrative Hearing in the matter. At the hearing, petitioner conceded that tax was payable on three of the transactions in which used vehicles were not sold by the petitioner. These three transactions involved the purchase of new automobiles for the price of $7,500 and $5,200 respectively, and the purchase of a motorcycle for $375, thus making a total of

   $13,075 upon which petitioner acknowledges sales tax in the amount of 4 percent is due. Such tax amounts to $523, plus applicable interest and penalties thereon. (Testimony of Eichhorn, Elliot, Exhibits 1-2)

   
   

   CONCLUSIONS OF LAW

   
   

3. Respondent asserts sales tax, penalties and interest against petitioner under Chapter 212, Florida Statutes, upon the transactions referred to in the foregoing Findings of Fact, Sections 212.05, 212.06, and 212.07 provide generally that a sales tax of 4 percent of the sales price of each article of tangible personal property sold at retail in this state shall be collected by dealers from the purchaser or consumer in applicable transactions, and thereafter remitted to the state. Section 212.12(2) provides for specific penalties for failure to pay the tax when due and Section 212.13(3) requires the payment of a specified amount of interest on delinquent amounts from the date due until paid.

   
   

4. In determining the "sale price" of the property in order to arrive at the amount of tax due, Section 212.02(4) provides that such price means the total amount paid for tangible personal property, but that trade-ins or discounts "allowed and taken at the time of sale shall not be included within the purview of this subsection." Section 212.09 reads in part as follows:

   
   

   "212.09 Trade-ins deducted.--

   1. Where used articles are taken in trade, or a series of trades, as a credit or part payment on the sale of new articles, the tax levied by this chapter shall be paid on the

      sales price of the new article, less the credit for the used article taken in trade."

      
      

      Further, Rule 12A-1.07(1)(a), Florida Administrative Code, provides in part that "The sale, including occasional or isolated sales, . . . is taxable at the rate of 4 percent of the full sales price, less any credit allowed for a used motor vehicle taken in trade Rule 12A-1.74(1), dealing with the sale of new articles, provides that:

      
      

      "Where used articles are taken in trade, or a series of trades, as a credit or part payment on the sale of new articles, the tax levied by Chapter 212, F.S., shall be paid on the sales price of the new article, less

      credit for the used article taken in traded."

      
      

5. The above statutory and regulatory provisions make it clear that the amount allowed for "trade-ins" as a part payment on the sales price of a new item of personal property is deductible in arriving at the amount taxable by the state. In all the contested transactions under consideration here, the value of the used automobile was credited against the cost of the new item and therefore sales tax is payable only on the reduced sales price. Respondent argues that such a "trade-in" allowance should not be permitted in the instant transactions because no sales contracts on the new automobiles existed which would obligate the owner of the new automobiles to purchase the new automobile at the time the used automobile was sold to the petitioner. However, respondent concedes that it is not necessary that the used automobile be turned over to a dealer on the same day that the new automobile is picked up. In essence, respondent is contending that two separate sales transactions took place here, i.e., the purchase of a used automobile by petitioner and the sale of the new automobile at a later date to the same individual who had previously sold the used automobile to the petitioner. Respondent's argument must fall because it is uncontrovertible that the salesman and other individuals in question were not paid cash for used automobiles, but the amounts representing the value of same were credited on the new purchases. Further, even though there may not have been a contractual obligation on the part of those individuals to purchase a new automobile, the facts show that in the instant transactions they did so and, therefore, such an argument cam have no bearing on the sales under consideration. Whether the value of the used automobile is termed a "trade-in," "advance trade," or a "part payment" on the invoice reflecting the sale of the new automobile is insignificant. The operative facts show that the purchaser of the new automobile was given a credit on the purchase price of the new automobile. The pertinent provisions of Chapter 212 contemplate that such credit shall be deducted from the sales price of the new article in arriving at the amount of sales tax.

   
   

6. In view of the fact that the petitioner concedes liability for tax amounting to $523, it is concluded that an assessment in that amount, plus any applicable penalty and interest, is due and payable to respondent.

RECOMMENDATION

That petitioner Schooley Cadillac, Inc. be held liable for sales tax under Chapter 212, Florida Statutes, in the amount of $523, plus an appropriate amount for penalty and interest thereon.

Done and Entered this 7th day of December, 1977, in Tallahassee, Florida.

THOMAS C. OLDHAM

Hearing Officer

Division of Administrative Hearings

530 Carlton Building Tallahassee, Florida 32304

COPIES FURNISHED:

Robert W. Jensen and James Adams, Esquires

186 Southeast 13th Street Miami, Florida 33130

Edwin J. Stacker, Esquire Assistant Attorney General Department of Legal Affairs The Capitol

Tallahassee, Florida 32304

Docket for Case No: 77-001457

Orders for Case No: 77-001457