STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

JOHN RICHARD MARSON and )

JUNE PERRY MARSON, )

)

Petitioner, )

)

vs. ) CASE NO. 78-392

) STATE OF FLORIDA, DEPARTMENT ) OF REVENUE, )

)

Respondent. )

)

RECOMMENDED ORDER

A hearing was held in the above captioned matter, after due notice, at Miami, Florida, on February 12, 1979, before the undersigned Hearing Officer.

APPEARANCES

For Petitioner: Richard A. Burt, Esquire

527 Ingraham Building Miami, Florida 33131

For Respondent: William D. Townsend, Esquire

Assistant Attorney General The Capitol, Room LL04 Tallahassee, Florida 32304

ISSUE

Petitioners' liability for sales tax, penalty and interest as set forth in revised notice of proposed assessment dated February 1, 1978.

FINDINGS OF FACT

1. On September 15, 1975, Miles L. Johnson, a Beverage Agent with the Division of Alcohol and Tobacco, Department of Business Regulation, conducted a surveillance of premises occupied by Petitioners located at 4440 Southwest 64th Court, Dade County, Florida. Shortly after 8:00 a.m., he observed one Andy Tucker arrive and enter the residence and later exit the same carrying something which he placed in the trunk of a car. He then reentered the house. Agent Johnson looked in the trunk and observed that it contained numerous cartons of cigarettes. Tucker again exited from the residence carrying a case of cigarettes which he also placed in the trunk. He then drove to another house, followed by Johnson, who observed him take the cigarettes into a garage.

   Johnson then prepared an affidavit and obtained a warrant from the Dade County Circuit Court to search the Marson residence for un-taxed cigarettes. Johnson gave the warrant to another agent, John Fay, to serve the same upon the Marsons. Johnson later arrived at the residence and observed that Marson had a copy of the warrant in his possession and that Fay had his copy and was executing the

   return thereon. Johnson was informed by officers at the residence that 420 cartons of cigarettes, marijuana and contraband liquor had been found in the house. The agents also had found certain records in the form of invoices from a cigarette distributor in North Carolina indicating purchases of a large amount of cigarettes, together with handwritten notes showing the sale of cigarettes to a large number of individuals, Johnson observed that the cigarettes had North Carolina excise tax stamps, but no Florida tax stamps thereon. The Marsons were thereafter arrested and the cigarettes and other materials were seized and retained by the Beverage Agents. No return was made on the search warrant, however, due to the fact that the Department's copy of the warrant was inadvertently left in the Marson residence and was never recovered (testimony of Johnson).

   
   

2. Agent Victor E. Sosa of the Department of Business Regulation was assigned to prepare an excise tax warrant on the cigarettes seized from the Marson residence. For this purpose, he used the case report prepared by Agent Miles Johnson. Thereafter, the report was forwarded to the Department of Revenue. It contained information to the effect that 24, 171 cartons of un- taxed cigarettes allegedly sold by the Petitioners were subject to State sales tax. Respondent's auditor thereafter issued a formal demand to the Marsons to produce records concerning cigarette transactions, but they did not produce any such records pursuant to the request. The auditor proceeded to prepare an estimated proposed assessment on the basis of the information provided by the Department of Business Regulation. Notice of proposed assessment of tax, penalties and interest under Chapter 212, Florida Statutes, in the total amount of $6,094.08 was issued to Petitioners on December 27, 1977 (Testimony of Sosa, Pooley, Tompkins, Respondent's Exhibits 1, 2).

   
   

   CONCLUSIONS OF LAW

   
   

3. The Respondent predicates its proposed assessment of sales and use tax under Chapter 212, Florida Statutes. Although not stated specifically therein, the assessment presumably is based on Section 212.05, which imposes a four percent tax on the sales price of tangible personal property sold at retail or stored for use or consumption in this state. The audit period stated in the notice of proposed assessment is September 1, 1974, through August 31, 1977.

   
   

4. Section 212.12(6)(b) provides pertinently as follows:

   
   

   (b) In the event any dealer or other person charged herein fails or refuses to make his records available for inspection so that no audit or examination has been made of the books and records of such dealer or person, fails or refuses to register as a dealer or fails to make a report and pay the taxes provided by this chapter . . . it shall be the duty of the department to make an assessment from an estimate based upon the best information then available to it for the taxable period of retail sales of such dealer . . . or of the cost price of all articles of tangible personal property imported by the dealer for use or consumption or distribution or storage

   to be used or consumed in this state, together with interest, plus penalty, if

   such have accrued, as the case may be. Then the department shall proceed to collect such taxes, interest and penalty on the basis of such assessment, which shall be considered prima facie correct; and the burden to show the contrary shall rest upon the dealer, seller, owner or

   lessor, as the case may be. (Emphasis added)

   
   

   Respondent concedes that the estimated assessment in this case was based solely on information contained in an investigator's report furnished by the Department of Business Regulation. Information in the report relative to un-taxed cigarettes apparently was predicated on records seized from the Marson residence during the search conducted on September 15, 1975 by beverage agents. However, neither the investigative report nor the records were produced at the hearing.

   Petitioners have challenged the estimated assessment on the ground that it is based solely on hearsay evidence.

   
   

5. Although Respondent has broad authority under Section 212.12(6)(b) to make an estimated assessment in appropriate cases, it is limited to the use of "the best information then available to it." Here, the best information concerning Petitioners' alleged cigarette transactions obviously would be the records seized by the Department of Business Regulation. There was no showing by Respondent that any effort was made to obtain such records. As a result, no opportunity was provided Petitioners prior to or at the hearing to contest the accuracy of the information upon which proposed assessment was based or even to disassociate themselves from the seized records which purported to show they had sold un-taxed cigarettes. Under such circumstances, it is considered that Respondent has failed to provide a proper and adequate basis for its proposed assessment against Petitioners.

   
   

6. In view of the foregoing conclusions, it is considered unnecessary to address Petitioners' motion to suppress evidence emanating from the search and subsequent seizure by agents of the Department of Business Regulation.

RECOMMENDATION

That the proposed assessment against Petitioners be withdrawn.

DONE AND ORDERED in Tallahassee, Leon County, Florida, this 1st day of June, 1979.

THOMAS C. OLDHAM

Hearing Officer

Division of Administrative Hearings Room 101, Collins Building

530 Carlton Building Tallahassee, Florida 32301 (904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 1st day of June, 1979.

COPIES FURNISHED:

William D. Townsend, Esq. Assistant Attorney General The Capitol, Room LL04 Tallahassee, Florida 32304

Richard A. Burt, Esq.

527 Ingraham Building Miami, Florida 33131

Docket for Case No: 78-000392

Orders for Case No: 78-000392