STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

AIR JAMAICA LTD. and TACA )

INTERNATIONAL AIRLINES, )

)

Petitioners, )

)

vs. ) CASE NOS. 78-0141

) 78-1010

STATE OF FLORIDA, DEPARTMENT OF ) REVENUE, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, K. N. Ayers, held a public hearing in the above styled cases on May 31, 1978 at Miami, Florida.

APPEARANCES

For Petitioner John B. Ostrow, Esquire Air Jamaica: 1428 Brickell Avenue

Miami, Florida 33131

For Petitioner Morton H. Silver, Esquire Taca Post Office Box 522965 International Esco Building

Airlines: Miami, Florida 33152

For Respondent: E. Wilson Crump II

Assistant Attorney General Department of Legal Affairs Post Office Box 5557 Tallahassee, Florida 32304

By Petition filed January 17, 1978 Air Jamaica Ltd., Petitioner, contests the assessment in the amount of $35,291.54 in sales tax, penalties and interest assessed against it by Respondent on the purchase of prepared food delivered to the planes at Miami, Florida and served to passengers after leaving the State of Florida.

At the hearing Taca International Airlines (Taca) who had received a similar assessment, filed a Motion to Intervene in these proceedings alleging the same issues were involved. This motion was denied because Taca's intervention in Case No. 78-141 could not resolve the separate assessment rendered Taca.

Thereafter, with the consent of all parties, Taca's Motion to Intervene was accepted as a Petition for Hearing with the parties stipulating that, if the purchase of prepared food by Taca at Miami, Florida for consumption outside

Florida is a taxable transaction tide correct total purchase on which the tax is computed is $161,329.72.

Air Jamaica's Motion to Amend Petition to include reference to 49 USC 1513(a) and (b) was granted.

The Petitioners further stated that they objected to the rule which interpreted the statute so as to make sales of meals for consumption outside of Florida taxable under Chapter 212 Florida Statutes. When asked to be specific as to which rule Petitioners were attempting to challenge they requested that ruling on the rule challenge be reserved until later in the hearing. Thereafter the parties presented testimony and no further reference was made to the rules of the Respondent.

The two cases were consolidated for hearing, one witness was called by Air Jamaica, one witness was called by Taca and one witness was called by the Department of Revenue.

FINDINGS OF FACT

1. During the three year period from October 1, 1974 through September 30, 1977 Air Jamaica purchased prepared meals from Jerry's Caterers at Miami (Jerry's) in the total amount of $740,760.04 and Taca purchased prepared meals from Jerry's in the total amount of $161,379.72.

   
   

2. Sales tax, penalty and interest through March 20, 1978 were assessed against Air Jamaica in the amount of $35,291.54 on the total paid for meals from Jerry's.

   
   

3. Sales tax plus interest through November 20, 1977 were assessed against Taca in the amount of $9,359.86 on the total paid for meals from Jerry's. These figures are accepted as accurately representing 4 percent of the cost of meals purchased plus interest and penalties.

   
   

4. The operations with respect to the meals were identical for both Air Jamaica and Taca. Prepared meals were delivered to the aircraft by Jerry's in trays holding 25 meals. These trays are supplied with heating elements and act as ovens in which the meals are heated. When placed aboard the aircraft by Jerry's' employees the trays holding meals intended to be served hot are plugged into electrical outlets on the plane. Prepared food delivered to the aircraft by Jerry's intended to be served cold obviously are not plugged into the electrical outlets.

   
   

5. Air Jamaica departs from Miami and serves only Montego Bay and Jamaica. Taca departs from Miami and serves the cities of Belize, El Salvador, Nicaragua and Panama.

   
   

6. Some 30 to 50 minutes after leaving Miami each company serves a meal for which no separate charge is made to the passenger. At the time these meals are served the aircraft is well outside the boundaries of Florida and either over Cuba or international waters.

   
   

7. Although no separate charge is made for the meal served the cost of the meal, like every other operational and administrative cost, is considered in arriving at the air fare charged to the passenger for the transportation from Miami to destination.

8. Jerry's bills the airlines for the number of meals delivered at a wholesale price of $3.48 per meal for meals served to first class passengers and

   $2.19 for meals served to economy passengers. Each airline provided Jerry's with tax resale certificates which relieved Jerry's from the collection of sales tax on meals delivered to the aircraft.

   
   

   CONCLUSIONS OF LAW

   
   

9. The sole issue in this case is whether the consumption of the meals outside the state of Florida exempts these meals from the sales tax which would otherwise apply. The Petitioners also contend that, if taxable, the tax imposed should be prorated on the percentage of operating miles the aircraft is operated in Florida of its total miles operated. However, this principle, which is applicable to sales taxes for certain supplies and equipment purchased by aircraft which fly in interstate commerce, is not applicable in this case as none of the meals involved are consumed in Florida. Therefore the meals are exempt from tax by virtue of being consumed outside Florida or they are subject to sales tax.

   
   

10. Chapter 212 Florida Statutes establishes the various transactions that are subject to sales or use tax. There is no question but the meals are personal property of a nature subject to sales tax and if purchased for consumption in Florida would be subject to a 4 percent sales tax. Section

    212.05 Florida Statutes provides in pertinent part:

    
    

    It is hereby declared to be the legislative intent that every person is exercising a taxable privilege who engages in the business of selling tangible personal property at retail in this state....For the exercise of said privilege a tax is levied on each taxable transaction or incident

    and shall be due and payable...as follows: (1)(a) At the rate of 4 percent of the

    sales price of each item or article of tangible personal property when sold at retail in this state....

11. Section 212.06 Florida Statutes provides in pertinent part: (1)(a) The aforesaid tax at the rate of 4 percent

    of the retail sales price as of the moment of sale, 4 percent of the cost price as of the moment of purchase, or 4 percent of the cost price as of the moment of com- mingling with the general mass of property

    in this state, as the case may be, shall be collectible from all dealers as herein defined on the sale at retail, the use, the consumption, the distribution and the storage for use or consumption in this state of tangible personal property.

    (2)(c) The term "dealer" is further defined

    to mean every person, as used in this chapter, who sells at retail, or who offers for sale at retail, or who has in his possession for

    sale or retail, or for use, or consumption, or distribution, or storage to be used or consumed in this state, tangible personal property as defined herein.

    (3) Every dealer making sales, whether within or outside the state, of tangible personal property, for distribution, storage, or use or other consumption in this state, shall at the time of making sales, collect the tax imposed by this chapter from the purchaser.

    (5)(a) It is not the intention of this chapter to levy a tax upon tangible personal property imported, produced or manufactured in this state for export, provided that tangible personal property shall not be considered as being imported, produced or manufactured for export unless the importer, producer or

    manufacturer delivers the same to a licensed exporter for exporting, or to a common car- rier for shipment outside the state or mails the same by United States mail to a destina- tion outside the state....

    (6) It is, however, the intention of this chapter to levy a tax on the sale at retail, the use, the consumption, the distribution, and the storage to be used or consumed in this state of tangible personal property after it has come to rest in this state and has become a part of the mass property of this state. (Emphasis added).

    
    

12. Section 212.07 provides in pertinent part:

    
    

    1. Dealers shall, as far as practicable, add the amounts of the tax imposed under this chapter to the sales price and the tax shall be separately stated as Florida tax on any charge tickets, sales slips, invoices or other tangible evidence of sale, and such

       tax shall constitute a part of such price, charge or proof of sale which shall be a debt from the purchaser or consumer to

       the dealer, until paid, and shall be recoverable at law in the same manner as other debts. Any dealer who shall neglect, fail or refuse to collect the tax herein provided upon any, every and all retail sales made by him or his agents or employees of tangible personal property which is subject to the tax imposed by this chapter shall be liable for and pay the tax himself.

    2. Any dealer who shall fail, neglect or refuse to collect the tax herein provided, either

    by himself or through his agents or employees, shall, in addition to the penalty of being liable for and paying the tax himself, be

    guilty of a misdemeanor of the second degree, punishable as provided in s775.082 or s775.083.

    
    

13. The cardinal rule in statutory construction is to determine the intent of the legislature. Dickenson v. Bradley, 298 So.2d 352 (Fla. 1974). Where the legislative intent as evidenced by this statute is plain and unambiguous, there is no necessity for any construction or interpretation of the statute, and courts need only give effect to the plain meaning of its terms. State v. Egan, 287 So.2d 1 (Fla. 1973)

    
    

14. As noted in those parts of the statute above quoted the tax is clearly intended to be levied on sales made in Florida or complementary use tax imposed on tangible personal property purchased outside the state but used in Florida.

    
    

15. Tax laws are to be construed strongly in favor of the taxpayer and against the government and all ambiguities and doubts are to be resolved in favor of the taxpayer. Maas Bros. Inc. v. Dickinson, 195 So.2d 193 (Fla. 1967)

    
    

16. The sales tax statute should be construed in its entirety and as a whole giving significant effect to all provisions of the statute. 30 Fla Jur, Statutes, s116 and cases there cited. When this is done, Section 212.07(2) would require the airlines, if the meals deliverd on board for use or consumption outside Florida are taxable, to include the sales tax on these meals separately stated as part of the price of the ticket. Failure to do so, pursuant to Section 212.07(3) would constitute a misdemeanor. Such an interpretation would directly conflict with 49 USC 1513 which provides in pertinent part:

    
    

    1. No State (or political subdivision thereof...) shall levy or collect a tax, fee, head charge, or other charge, directly or indirectly, on persons travelling in air commerce or on the sale of air transportation or on the gross receipts derived therefrom; except that any State (or political subdivision...) which levied a tax, fee, head charge, or other charge, directly or indirectly, on persons traveling in air commerce or on the carriage of persons traveling in air commerce or on the sale of air transportation or on the gross

       receipts derived therefrom prior to May 21, 1970, shall be exempt from the provisions of this subsection until December 31, 1973.

    2. Nothing in this section shall prohibit a State... from the levy or collection of taxes other than those enumerated in subsection (a) of this section, including property taxes, net income taxes, franchise taxes, and sales or use taxes

       on the sale of goods or services; and nothing in this section shall prohibit a State...owning

       or operating an airport from levying or collect- ing reasonable rental charges, landing fees, and other service charges from aircraft operators for the use of airport facilities.

17. Not only would Section 212.07(2) violate the Supremacy Clause of the

    U.S. Constitution if applied to tickets sold to passengers in interstate or foreign commerce, but also would be in derogation of Section 212.06(5)(a) which states Chapter 212 is not intended to levy a tax on exports "delivered to a common carrier for shipment outside the state." Here it is undisputed that the property on which Respondent has levied a tax is used or consumed outside Florida and is carried there by a common carrier.

    
    

18. The rule of construction in such cases is that if the courts can, by any fair, strict or liberal construction, find for the two provisions a reasonable field of operation without destroying their evident intent and meaning, preserving the force of both, and construing them in harmony with the whole course of legislation on the subject, it is their duty to do so. State ex rel School Board v. Department of Education, 317 So.2d 68 (Fla. 1975)

    
    

19. It is also incumbent upon the courts, when construing a statute, if possible, to construe the statute in such a manner as would be consistent with the Constitution, and in such a way as to remove it furtherest from constitutional infirmity. Carter v. Sparkman, 335 So.2d 802 (Fla. 1976)

    
    

20. Additionally it is noted that no separate charge is made by the airlines for the meals served to passengers and the passenger pays the approved fare whether or not he partakes of or consumes the meal served. Accordingly there is no "sale" to the ultimate consumer upon whom Chapter 212 levies the responsibility to pay the tax.

    
    

21. Despite the statutory provisions above quoted, the Respondent has enacted Rule 12A-1.11 (12) Florida Administrative Code which appears to hold to the contrary in providing:

    
    

    Meals furnished by transportation companies free of charge to their passengers are taxable to the transportation companies if delivered to the transportation companies in this state, even though they may be consumed outside this state.

    
    

22. This constitutes an administrative construction of the statute which, when placed on a statute by the state administrative officer charged with the responsibility for its enforcement, is entitled to great weight, Green v. Stuckeys of Fanning Springs, 99 So.2d 867 (Fla. 1957); Heftler Constr. Co. & Subsidiaries v. Dept. of Revenue, 334 So.2d 129 (Fla. 3 DCA 1976); and will not be overturned unless erroneous or in clear conflict with the statute. McKinney v. State, 83 So.2d 875 (Fla. 1955).

    
    

23. However, when in conflict with the statute such a rule cannot stand. From the above quoted provisions of the statute it is clear that the legislature, in enacting Chapter 212 Florida Statutes, did not intend to tax meals delivered to an interstate carrier for consumption outside the State of Florida and Rule 12A-1.11 (12) FAC imposing such a tax is in conflict with the statute and, therefore, void.

    
    

24. Here we do not reach the issue whether the legislature may impose a sales tax on meals delivered to an interstate carrier in this state without conflicting with the federal statute regarding taxes imposed on passengers in interstate commerce. It is sufficient to say that the legislature intended only to tax personal property used or consumed in this state and did not levy a tax

on property delivered to a common carrier to be consumed outside the state of Florida.

From the foregoing it is concluded that the prepared meals delivered to Petitioners Air Jamaica Ltd. and Taca International Airlines for consumption outside the State of Florida are not subject to the Florida sales tax. It is therefore

RECOMMENDED that the assessments levied against Air Jamaica Ltd. and Taca International Airlines be dismissed.

DONE and ENTERED this 11th day of July, 1978.

K. N. AYERS, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304

(904) 488-9675

COPIES FURNISHED:

John B. Ostrow, Esquire

MAPLOW SHOFI ORTMAYER SMITH & SPANGLER

2nd Floor, Brickell Executive Tower 1428 Brickell Avenue

Miami, Florida 33131

1. Wilson Crump II, Esquire Assistant Attorney General

   Department of Legal Affairs, Tax Division

   P.O. Box 5557 Tallahassee, Florida 32301

   
   

   Morton H. Silver, Esquire

   P.O. Box 522965, Esco Bldg. Miami, Florida 33152

   
   

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

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

   STATE OF FLORIDA DEPARTMENT OF REVENUE

   
   

   AIR JAMAICA LIMITED, and TACA INTERNATIONAL AIRLINES,

   
   

   Petitioners,

   
   

   vs. CASE NO. 78-141

   CASE NO. 78-1010

   STATE OF FLORIDA DEPARTMENT OF REVENUE,

   
   

   Respondent.

   /

   
   

   DEPARTMENT OF REVENUE'S RECOMMENDED ORDER

   
   

   Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, K. N. Ayers, held a public hearing in the above- styled cases on May 31, 1978 at Miami, Florida.

   
   

   APPEARANCES

   
   

   For Petitioner John B. Ostrow, Esquire Air Jamaica: 1428 Brickell Avenue

   Miami, Florida 33131

   
   

   For Petitioner Taca Morton H. Silver, Esquire Internatinoal P. O. Box 522965, Esco Bldg Airlines: Miami, Florida 33152

   
   

   For Respondent: E. Wilson Crump, II

   Assistant Attorney General Dept of Legal Affairs

   P. O. Box 5557

   Tallahassee, Florida 32304

   
   

   By Petition filed January 17, 1978 Air Jamaica Ltd., Petitioner, contests the assessment in the amount of $35,291.54 in sales tax, penalties and interest assessed against it by Respondent on the purchase of prepared food delivered to the planes at Miami, Florida and served to passengers after leaving the State of Florida.

   
   

   At the hearing Taca International Airlines (Taca), who had received a similar assessment, filed a Motion to Intervene in these proceedings alleging the same issues were involved. This motion was denied because Taca's intervention in Case No. 78-141 could not resolve the separate assessment rendered Taca.

   
   

   Thereafter, with the consent of all parties, Taca's Motion to Intervene was accepted as a Petition for Hearing with the parties stipulating that, if the purchase of prepared food by Taca at Miami, Florida for consumption outside

   Florida is a taxable transaction the correct total purchase on which the tax is computed is $161,329.72.

   
   

   Air Jamaica's Motion to Amend Petition to include reference to 49 USC 1513(a) and (b) was granted.

   
   

   The Petitioners further stated that they objected to the rule which interpreted the statute so as to make sales of meals for consumption outside of Florida taxable under Chapter 212, Florida Statutes. When asked to be specific as to which rule Petitioners were attempting to challenge they requested that ruling on the rule challenge be reserved until later in the hearing. Thereafter the parties presented testimony and no further reference was made to the rules of the Respondent.

   
   

   The two cases were consolidated for hearing, one witness was called by Air Jamaica, one witness was called by Taca and one witness was called by the Department of Revenue.

   
   

   FINDINGS OF FACT

   
   

   During the three year period from October 1, 1974 through September 30, 1977 Air Jamaica purchased prepared meals from Jerry's Caterers at Miami (Jerry's) in the total amount of $740,760.01 and Taca purchased prepared meals from Jerry's in the total amount of $261,379.72.

   
   

   Sales tax, penalty and interest through March 20, 1978 were assessed against Air Jamaica in the amount of $35,291.54 on the total paid for meals from Jerry's.

   
   

   Sales tax plus interest through November 20, 1977 were assessed against Taca in the amount of $9,359.86 on the total paid for meals from Jerry's. These figures are accepted as accurately representing 4% of the cost of meals purchased plus interest and penalties.

   
   

   The operations with respect to the meals were identical for both Air Jamaica and Taca. Prepared meals were delivered to the aircraft by Jerry's in trays holding 25 meals. These trays are supplied with heating elements and act as ovens in which the meals are heated. When placed aboard the aircraft by Jerry's employees the trays holding meals intended to be served cold obviously are not plugged into the electrical outlets.

   
   

   Air Jamaica departs from Miami and serves only Montego Bay and Jamaica.

   Taca departs from Miami and serves the cities of Belize, El Salvador, Nicaragua and Panama.

   
   

   Some 30 to 50 minutes after leaving Miami each company serves a meal for which no separate charge is made to the passenger. At the time these meals are served the aircraft is well outside the boundaries of Florida and either over Cuba or international waters.

   
   

   Although no separate charge is made for the meal served the cost of the meal, like every other operational and administrative cost, is considered in arriving at the air fare charged to the passenger for the transportation from Miami to destination.

   
   

   Jerry's bills the airlines for the number of meals delivered at a wholesale price of $3.48 per meal for meals served to first class passengers and $2.19 for

   meals served to economy passengers. Each airline provided Jerry's with tax resale certificates which relieved Jerry's from the collection of sales tax on meals delivered to the aircraft.

   
   

   CONCLUSIONS OF LAW

   
   

   1. Nonexempt sales of tangible personal property in Florida are subject to a 4% sales tax, under Florida Statutes, Section 212.05(1), regardless of where the property may be later used or consumed. The recommendation to the contrary by the hearing officer is based on the statutory phrase, "in this state" which applies only to certain taxable privileges under the compensating use tax sections of the statutes where sales occur in other jurisdictions, but those other taxable privileges are exercised in Florida.

      
      

   2. Although the taxable privilege of selling tangible personal property is what is taxed under Florida Statutes, Section 212,05(1), petitioners may be taxed on the he purchases of their meals from Jerry's Caterers, Inc. because they are unable to show that tax has been paid to the vendor. Florida Statutes 212.07(9).

      
      

   3. The sales from Jerry's Caterers, Inc. to petitioners are not sales for resale (American Air Lines, Inc. v. Department of Revenue, 319 N.E. 2d 28 (Ill. 1974). Since there is no resale to the customer, Florida Statutes Section 212.07(2),(3) do not require a separate statement of the tax as grant of the price of the ticket, contrary to the holding of the hearing officer.

      
      

   4. Subsection (b) of 49 USC 1513 specifically allows sales taxes to be levied by the states against sales of goods or services to airline companies, contrary to the conclusion of the hearing examiner. Therefore there is nothing in this provisions inconsistent with the state sales tax laws as herein applied. Therefore, the supremacy clause of the United States Constitution imposes no barrier to taxation.

      
      

   5. Since the meals in question are consumed during international flights and are not delivered to foreign destinations they are not "exports." Swann and Finch Co. v. United States, 190 U.S. 143, 23 S.Ct. 702 (1902); Shell Oil Co v. State Board of Equalization, 51 Cal. Rptr. 524, 414 P.2d 820, 64 C.2d 713 (1966); Collection of Revenue v. J.L. Richard & Co., 247 So. 2d 151 (La. 4 Cir. Ct. App. 1971), cert. refused 248 So. 2d 586 (La. 1971). See also Fred McGilvray, Inc. v. Askew, 340 So. 2d 475 (Fla. 1976). Since the meals in question are not for "export," the provisions of Florida Statutes, Section 212.06(5)(a) do not apply contrary to the holding of the hearing officer.

      
      

   6. Section 12A-1.11(12), Florida Administrative Code contemplates taxation, reading:

      
      

      Meals furnished by transportation companies free of charge to their passengers are taxable to the transportation companies

      if delivered to the transportation com- panies in this state, even though they may be consumed outside this state.

      
      

      This is a valid regulation, and the hearing officer has no authority to hold otherwise in a proceeding under Florida Statutes, Section 120.57.

   7. The meals in question do not constitute "parts" of the aircraft in foreign commerce, and hence are not subject to the partial exemption under Florida Statutes, Section 212.08(9). Section 12A-I.64(6), Florida Administrative Code.

Wherefore, it is ordered, that the proposed assessments be sustained. Done and Ordered this 9th day of November, 1978.

HARRY L. COE, JR., EXECUTIVE DIRECTOR DEPARTMENT OF REVENUE

Docket for Case No: 78-000141

Orders for Case No: 78-000141