STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

HOUSING BY VOGUE, INC., and ) MOBILE HOME INDUSTRIES, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 78-1637

) STATE OF FLORIDA, DEPARTMENT ) OF REVENUE, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a hearing was held before Charles C. Adams, a Hearing Officer with the Division of Administrative Hearings, at Room 103, Collins Building, Tallahassee, Florida, at 9:30 a.m., March 8, 1979.

APPEARANCES

For Petitioners: John C. Cooper, Esquire

Douglass, Powell & Davey Post Office Box 1674 Tallahassee, Florida 32302

For Respondent: Linda C. Procta, Esquire

Assistant Attorney General Department of Legal Affairs The Capitol, LL04 Tallahassee, Florida 32304

ISSUE

Whether or not the Petitioners are responsible for the payment of tax, penalty and interest under the terms of the Respondent's Notice of Proposed Assessment of February 9, 1978, as revised June 12, 1978, which assessment was made pursuant to Chapter 212, Florida Statutes.

FINDINGS OF FACT

1. This cause comes on for consideration based upon the Petition for Administrative Hearing filed in behalf of the Petitioners, Housing by Vogue, Inc., and Mobile Home Industries, Inc., against the State of Florida, Department of Revenue, as Respondent. The case was subsequently referred to the State of Florida, Division of Administrative Hearings, for formal hearing in accordance with the terms of Subsection 120.57(1), Florida Statutes.

   
   

2. Mobile Home Industries, Inc., is a Florida corporation and Housing by Vogue, Inc., is a wholly-owned subsidiary of the former-named corporation.

3. The Respondent, State of Florida, Department of Revenue, is an agency of the State which has as its responsibility the investigation and enforcement of the tax laws of the State of Florida, to include Chapter 212, Florida Statutes.

   
   

4. The facts reveal that on October 2, 1974, the Petitioners submitted a bid to the State of Florida, State Board of Education, for the purpose of contracting to execute and complete construction of the project identified as, "Relocatable InstructIonal Space for the Department of Education, Tallahassee, Florida." A copy of that bid proposal is found as Petitioners' Exhibit No. 2 admitted into evidence. The specifications and drawings of that project may be found as Petitioners' Exhibit Number 1 admitted into evidence. In accordance with the instructions of the owner, the bid proposal stated a lump-sum bid price in the amount of $119,250.00 and, in addition, contained certain itemized costs.

   
   

5. The Petitioners' bid was accepted and a contract was entered into between the Petitioners and the State of Florida, State Board of Education. A copy of that contract and other contract items may be found as the Petitioners' Composite Exhibit No. 3 admitted into evidence. The contract was modified by proposal of the project engineer, upon suggestion of the contractor. A copy of this statement of suggested changes may be found in the Petitioners' Exhibit Number 4 admitted into evidence. The suggested changes were allowed and certain change orders were entered as shown through the Petitioners Exhibit Number 5 admitted into evidence.

   
   

6. The project went forward as contemplated and under the terms and conditions of the contract, modules were fabricated by the Petitioners in their plant at Lake City, Florida. These modules were subsequently transported from the plant at Lake City to a location at Woodville, Florida, which is located in Leon County, Florida. The method of transportation was by the process of towing, with the modules being moved on the highway by virtue of a series of wheels and axles attached to the module proper. Once the modules were placed in the location in Woodville, Florida, the wheels and axles were removed and the modules were "set up," utilizing two methods to accomplish this task. Some of the modules were put on traditional footings and foundations similar to those involved in the "set up" of mobile homes, in the sense that footings were prepared and the modules were placed on concrete blocks and tie-down straps were attached to the bottom cross beams and secured by hellical anchors. The second method for placing the modules was to utilize a large hellical anchor device in lieu of the concrete blocks and tie downs.

   
   

7. The modules themselves had fixed floors with interchangeable wall panels to allow assembly and re-assembly in various configurations for the purpose of instructional classroom space.

   
   

8. After the modules had been arranged in an initial configuration, in accordance with the terms and conditions of the contract the modules were disassembled and placed in a different configuration at the site location in Woodville, Florida.

   
   

9. The realty upon which these modules were located was a school ground and plant owned by the Leon County School Board, Leon County, Florida. The ownership of the modules was in the State of Florida, State Board of Education. The testimony in the course of the hearing did not indicate in any way that the Leon County School Board either was a party to the contract between the Petitioners and the State of Florida, State Board of Education, nor in any sense was granted ownership of the subject modules.

10. Section 212.05, Florida Statutes, provides for the imposition of a four percent (4 percent) sales tax on the sale of articles of tangible personal property at retail within the State of Florida. The sale of the modules under the terms and conditions of the contract constituted a sale of tangible personal property by the Petitioners to the State of Florida, State Board of Education. Therefore, absent some specific exemption to the contrary, a sales tax was due.

    
    

11. There does exist in law a partial exemption. This conclusion is reached after examination of the language of Subsection 212.08(6), Florida Statutes, which states:

    
    

    "212.08 Sales, rental, storage, use tax; specified exemptions.--The sale at retail, the rental, the use, the consumption, the distribution, and the storage to be used or consumed

    in this state of the following tangible personal property are hereby specifically exempt

    from the tax imposed by this chapter.

    (6) EXEMPTIONS; POLITICAL SUBDIVISIONS, COMMUNICATIONS.--There shall also be exempt from the tax imposed by this chapter sales made to the United States Government, the state,

    or any county, municipality or political sub- division of this state; provided this exemption shall not include sales of tangible personal property made to contractors employed either directly or as agents of any such government

    or political subdivision thereof when such tangible personal property goes into or becomes a part of public works owned by such government or political subdivision thereof, except public works in progress or for which bonds or revenue certificates have been validated on or before August 1, 1959; . . ."

    
    

12. Under the language of the introductory portion of Section 212.08, Florida Statutes, and the specific provisions of Subsection 212.08(6), Florida Statutes, the sale which has been made to the State of Florida is exempt from tax implications, with the exception that the materials and supplies necessary for the fabrication of the modules, transportation of those modules and installation of the modules were tangible personal property which went into public works owned by the State of Florida, and as such were not exempt from taxation. (A public works is defined as "such works as are by statute authorized to be constructed for public purposes by the State or its agencies are generally regarded as public works." 26 Fla.Jur.section 2, citing to 43 Am. Jur., Public Works and Contracts section 2 as annotated at 92 ALR 835. From this definition, the modules which are used as instructional classroom space are considered to be public works within the meaning of Subsection 212.08(6), Florida Statutes.)

    
    

13. It is unclear what the specific costs were on the question of the increments of expense for materials and supplies incurred by the Petitioners in carrying out their contract; however, it would be necessary for the Respondent to impose a tax together with a penalty and interest premised upon calculations made after determining Petitioners' cost items. This opinion is held notwithstanding the stipulation on the part of the parties (at the beginning of

    the hearing) to the effect that $4,048.57 in tax was in dispute, together with interest of $794.32 effective June 12, 1978, and additional interest at 47 cents per day from June 13, 1978, plus a penalty. In summary, there would be due tax, a penalty of 25 percent (such penalty being subject to further reduction) and interest on the amount which is the aggregate of the cost of materials and supplies used in the fabrication, transportation and installation of the subject modules. See Subsections 212.12(2) and (3), Florida Statutes.

    
    

14. One final item should be considered. The parties in the course of their presentation and argument relied on various interpretations to be given Rule l2A-1.5l Florida Administrative Code, as a basis for their contention of tax liability or no liability. That provision would not have application to the facts sub judice, because the rule only applies to "sales to or by contractors who repair, alter, improve and construct real property". The installation of these modules which are the property of the State of Florida, State Board of Education, on realty which is owned by the Leon County School Board, of Leon County, Florida, does not constitute an action in which sales are made to or by contractors involved in the repair, alteration, improvement or construction of real property. While the modules as installed do constitute public works, they do not constitute repair, alteration, improvement or construction to real property. To consider this project to be one governed by Rule12A-1.5l, Florida Administrative Code, it would be necessary for the modules to be owned by the same entity which owns the property on which they are installed, as opposed to the facts in this case whereby ownership of the modules and real property are held by separate entities. In their present status, the modules are merely items of tangible personal property owned by the State of Florida, State Board of Education, which may be utilized at any location in accordance with the terms of their ownership.

    
    

    CONCLUSIONS OF LAW

    
    

15. The Division of Administrative Hearings has jurisdiction over the parties and the subject matter of this cause.

    
    

16. Based upon a full consideration of the facts herein, it is concluded as a matter of law that the Petitioners are responsible for the payment of tax, penalty and interest for the amount of costs incurred by these Petitioners for the necessary materials and supplies incidental to the fabrication, transportation and installation of the modules which are the subject of the contract between the Petitioners and the State of Florida, State Board of Education. See Subsections 212.12(2) and (3) and 212.08(6), Florida Statutes.

RECOMMENDATION

It is recommended that the Petitioners, Housing by Vogue, Inc., and Mobile Home Industries, Inc., be required to pay tax, a penalty of 25 percent and interest for those items of materials and supplies incidental to the fabrication, transportation and installation of the modules which are the subject matter of the contract in this dispute.

DONE AND ENTERED this 2nd day of April, 1979, in Tallahassee, Florida.

CHARLES C. ADAMS

Hearing Officer

Division of Administrative Hearings

Room 101, Collins Building

MAILING ADDRESS: 530 Carlton Building Tallahassee, Florida 32304

(904) 488-9675

COPIES FURNISHED:

John C. Cooper, Esquire Douglass, Powell & Davey Post Office Box 1674 Tallahassee, Florida 32302

Linda C. Procta, Esquire Assistant Attorney General Department of Legal Affairs The Capitol, LL04 Tallahassee, Florida 32304

John D. Moriarty, Esquire Department of Revenue

Room 104, Carlton Building Tallahassee, Florida 32304

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

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

STATE OF FLORIDA, DEPARTMENT OF REVENUE TALLAHASSEE, FLORIDA

HOUSING BY VOGUE, INC., and MOBILE HOME INDUSTRIES, INC.,

Petitioner,

vs. CASE NO. 78-1637

STATE OF FLORIDA, DEPARTMENT OF REVENUE,

Respondent.

/

FINAL ORDER

TO: John C. Cooper, Esquire Attorney for Petitioners Douglass, Powell & Davey Post Office Box 1674 Tallahassee, Florida 32302

Linda C. Procta, Esquire Attorney for Respondent Assistant Attorney General Department of Legal Affairs The Capitol, LL04 Tallahassee, Florida 32304

You will please take notice that the Governor and Cabinet of the State of Florida, acting as head of the Department of Revenue and its meeting on the 26th day of June, 1979, approved the Recommended Order of the Division of Administrative Hearings dated April 2, 1979. This constitutes final agency action by the Department of Revenue.

John D. Moriarty, Esquire Department of Revenue

Room 104, Carlton Building Tallahassee, Florida 32304

CERTIFICATE OF SERVICES

I HEREBY CERTIFY that a true and correct copy of the foregoing Notice was furnished by mail to John C. Cooper, Esquire, Douglass, Powell & Davey, Post Office Box 1674, Tallahassee, Florida 32302, Attorney for Petitioner; by hand delivery to Linda C. Procta, Esquire, Assistant Attorney General, Department of Legal Affairs, The Capitol, LL04, Tallahassee, Florida 32304, Atorney for Respondent and Charles C. Adams, Esquire, Hearing Officer, Division of Administrative Hearings, Room 530, Carlton Building, Tallahassee, Florida 32301, this 27th day of June, 1979.

John D. Moriarty, Esquire

================================================================= FURTHER ORDER UPON

RECONSIDERATION OF RECOMMENDED ORDER

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

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

HOUSING BY VOGUE, INC. and ) MOBILE HOME INDUSTRIES, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 78-1637

)

STATE OF FLORIDA, )

DEPARTMENT OF REVENUE, )

)

Respondent. )

)

FURTHER ORDER UPON RECONSIDERATION OF RECOMMENDED ORDER

CASE STATEMENT

On August 29, 1978, the named Petitioners in this cause filed a Petition for an administrative hearing pursuant to Subsection 120.57(1), Florida Statutes. The Petition set forth grounds contesting the Respondent's Notice of Proposed Assessment, issued on June 12, 1978, for the audit period December 1, 1974, through November 30, 1977. A hearing de novo was conducted on March 8, 1979, to consider the matters in dispute, and on April 2, 1979, a recommended order was entered which would require the Petitioner to pay tax, a penalty of twenty-five (25) percent and interest on the items enumerated in the recommended order. Subsequent to that time, the Respondent entered its final order, on June 26, 1979, which approved the assessment.

The Petitioner took an appeal from the final order of the Department of Revenue and in an opinion filed January 27, 1981, in the First District Court of Appeal, State of Florida, Case No. 00-348, which opinion was dated January 21, 1981, the final order was upheld.

Following the entry of this order, the District Court entered a further order in that matter which order vacated its prior opinion and remanded the cause. This latter order by the Court was entered in response to an amendment to the Petitioner/Appellant's motion for rehearing. The order vacating and remanding was entered after consideration of Rule 12A-1.94, Florida Administrative Code, dating from June 3, 1980, which by its provisions defined the term "public works" related to public works contracts. In view of that development which occurred beyond the point of the hearing de novo; the time of the entry of the recommended order and the entry of the final order, the District Court relinquished jurisdiction to the Hearing Officer for purposes of reconsideration of the recommended order "in the light of" the aforementioned Rule and further relinquished jurisdiction to the Department of Revenue for reconsideration of its final order from which the present appeal was taken.

After receipt and review of the Court's order of remand dated March 5, 1981, an order was entered by the undersigned on March 9, 1981, establishing a prehearing conference for March 20, 1981, to consider the method to be utilized in addressing the Court's instructions. That prehearing conference was held on

March 20, 1981, and a further order was entered on that date setting forth the method to be utilized in the task of reconsidering the prior recommended order. A copy of the March 20, 1981, order is attached to the present order as Exhibit "A" and by such attachment is made a part of this order.

Through the process of the March 20, 1981, order of the Hearing Officer directed to the method to be utilized in considering the case on remand, memoranda have been offered by counsel for the parties and those memoranda and argument are being submitted with this supplementary recommended order.

(The record of the initial hearing of March 8, 1979, together with the associated exhibits in the case are now to be found with those materials on appeal before the First District Court of Appeal.)

FINDINGS OF FACT

1. The findings of fact related to evidential matters found in the recommended order dated April 2, 1979, as upheld by the final order of the Department of Revenue shall serve as the evidential facts for the reconsideration of this case, by the act of attaching a copy of that recommended order to this order and by such attachment, incorporating the matters found by reference. That attachment becomes Exhibit "B" to this order. Those ultimate facts found in the recommended order shall remain in effect, except to the extent necessary to promote changes to those ultimate findings, which changes would be made "in light of" Rule 12A-l.94, Florida Administrative Code.

   
   

   CONCLUSIONS OF LAW

   
   

2. The Division of Administrative Hearings has jurisdiction to enter this order in keeping with the March 4, 1981, order of remand entered by the First District Court of Appeal.

   
   

3. Rule 12A-1.94, Florida Administrative Code, 1/ having an effective date of June 3, 1980, did not exist at the time the contracts in question were entered into; notice of proposed assessment was made; hearing de novo was held; recommended order was entered and final order was entered. Consequently, the threshold question concerning the applicability of this Rule to the facts of the present case is whether the Rule may be applied retroactively or retrospectively to the dispute. To answer this question, the rules of construction associated with statutes on the subject of retrospective application have import in construing the administrative rule. See 1 F1a. Jur. 2d, Administrative Law, section 57.

   
   

4. Under the previously related analogy for Rule 12A-1.94, Florida Administrative Code, to have application to these facts, it would have to have a clear statement within the rule which indicates the intent of the agency to apply the rule retroactively and this is particularly true when the parties, as here, have looked to a different body of law in an effort to resolve this controversy and wherein the application of the new rule might bring about a result which differs from the decision made in keeping with statutes and rules in effect at the time the dispute arose. See Thayer v. State, 335 So.2d 815 (Fla. 1976).

   
   

5. An examination of Rule 12A-1.94, Florida Administrative Code, leads to the conclusion that it was never the intention to apply this rule retroactively, and in view of the fact that the rule post dates the events in this hearing, Rule 12A-1.94, Florida Administrative Code, has no application to this case.

6. Moreover, the statute in question, i.e., Chapter 212, Florida Statutes, and in particular Subsection 212.08(6), Florida Statutes, gave sufficient guidance in the face of the record which was made at the hearing to allow a determination on the question of what is meant by "public works" related to construction contracts with those deliniated governmental agencies and the District Court recognized this fact by virtue of its original opinion in this case. Therefore, any effort to promote the definition of "public works" set forth in Rule 12A-1.94, Florida Administrative Code, to resolve the present dispute is both unnecessary and contrary to the established principle that the law in effect at the time a dispute arises shall be utilized absent a clear statement that a new rule or law shall be applied retrospectively.

   
   

7. This matter is not a situation in which the Petition for rehearing has been granted and the cause remanded to consider the dispute in "the light of" curative legislation designed to remedy defects in law involved in the proceeding before the lower tribunal, as alluded to in State v. Hospital District of Hardee County, 201 So.2d 69 (Fla. 1967). In the present case, unlike that case, valid legislation existed subject to interpretation by the executive branch of government through the process of properly exercising its discretion through the adjudication of the dispute by formulating a sufficient record to support its conclusions on what is meant by the term "public works." The underlying legislation was not so defective or inadequate as to demand curative legislation before the terms and conditions of that legislation could be carried out.

   
   

8. In the absence of the need for curative legislation, as a precondition to proceeding to judgment, Rule 12A-1.94, Florida Administrative Code, reference its possible retroactive application, must be examined on the face of the rule and when it so regarded its application can only be seen to be prospective in nature.

In summary, Rule 12A-1.94, Florida Administrative Code, should not be applied retrospectively and the prior result should be allowed to stand.

DONE and ENTERED this 29th day of April, 1991, in Tallahassee, Florida.

CHARLES C. ADAMS

Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32301 904/488-9675

Filed with the Clerk of the Division of Adminstrative Hearings this 29th day of April, 1981.

ENDNOTE

1/ 12A-1.94 Public Works Contracts.

1. This rule shall govern the taxability of transactionsin which contractors manufacture or purchase supplies and materials for use in public

   works, as that term is referred to in Section 212.08(6), Florida Statutes. This rule shall not apply to non public works contracts as those contracts are governed under the provisions of Rule 12A-1.151, F.A.C. In applying this rule, the following definitions are used.

   1. "Contractor" is one who is engaged in the repair, alteration, improvement or construction of real property. Contractors include, but are not limited to, persons engaged in building, electrical, plumbing, heating, painting, decorating, ventilating, paperhanging, sheet metal, roofing, bridge, road, waterworks, landscape, pier or billboard work. This definition includes subcontractors.

   2. "Public Works" are defined as construction projects in which a private contractor or subcontractor agrees to repair, alter, improve or construct real property owned by a governmental body. Such contracts shall include, but not be limited to, building, electrical, plumbing, heating, painting, decorating, ventilating, paperhanging, sheet metal, roofing, bridge, road, waterworks, landscape, pier or billboard contracts.

   3. "Real property" within the meaning of this rule includes all fixtures and improvements to real property. The status of a project as an improvement or affixture to real property is determined by the objective and presumed intent of the parties, based on the nature and use of the project and the degree of affixation to realty. Mobile homes and other mobile buildings are deemed fixtures if they (1) bear RP license tags, or (2) have the mobile features (such as wheels and/or axles) removed, and are placed on blocks or footings and permanently secured with anchors, tie-down straps or similar devices.

2. The purchase or manufacture of supplies or materials bythe contractor for incorporation into a public works project istaxable to the contractor since he is the ultimate consumer.

3. The purchase or manufacture of tangible personal property for resale to a governmental body is exempt from tax. The contractor should give his resale certificate to his suppliers in the manner provided by Rule 12A-1.38, F.A.C.

(4)(a) The Department will determine whether a particular transaction is governed by subsection (2) or by subsection (3) of this rule based on the general nature of the transaction as a whole. The Department will give special consideration to those provisions which govern the status of the tangible personal property prior to its affixation to real property. Such provisions include provisions which govern bidding, indemnification, inspection, acceptance, delivery, payment, storage, and assumption of the risk of damage or loss for the tangible personal property prior to its affixation to real property. Assumption of the risk of damage or loss is a paramount consideration. A party which is required to post a bond or obtain insurance covering damage or loss will be deemed to have assumed these risks.

1. The determination of whether a particular transaction is governed by subsection (2) or by subsection (3) of this rule will be based on the substance, rather than the form or terminology, of the transaction. Purely formal recitations concerning the passage of title to tangible personal property will not be considered determinative.

2. If it appears from the contract provisions that the governmental body has become obligated to purchase specifically identified goods, and bear the risk of their damage or loss, prior to their affixation to real property, then the transaction will be governed by subsection (3) of this rule. Otherwise, she transaction will be governed by subsection (2) of this rule.

1. Contractors who manufacture materials for incorporation into public works shall be liable for tax in the manner provided in Rule 12A-1.51(5), F.A.C.

2. Contractors who supply raw materials such as rock, shell, fill dirt and similar materials for incorporation into public works shall be liable for tax in the manner provided in Rule 12A-1.51(11)-(14), F.A.C.

COPIES FURNISHED:

John C. Cooper, Esquire Douglass, Powell & Davey Post Office Box 1674 Tallahassee, Florida 32302

Linda C. Procta, Esquire Assistant Attorney General Department of Legal Affairs The Capitol, Room LL04 Tallahassee, Florida 32301

Docket for Case No: 78-001637

Orders for Case No: 78-001637