vs. ) CASE NO. 79-247
Respondent. )
Pursuant to notice, a hearing was held before Charles C. Adams, a Hearing Officer with the Division of Administrative Hearings, at Room 359, State Office Building, 1350 N.W. 12th Avenue, Miami, Florida, on May 9, 1979.
For Petitioner: Martha J. Cook, Esquire
c/o Spieth, Bull, McCurdy & Newell 1190 Union Commerce Building Cleveland, Ohio 44115
Mr. Richard Miller Laventhol & Horwath
Whether the Respondent, Holiday Inn Oceanside/Cleveland Caribbean, Inc., is liable for the payment of $10,176.18, together with a penalty of 5 percent and interest accruing daily as claimed in the audit by the Petitioner, State of Florida, Department of Revenue, for the period September 1, 1975, through August 31, 1970.
This cause comes on for consideration based upon the Respondent, Holiday Inn Oceanside/Cleveland Caribbean, Inc.`s challenge to the tax audit conducted by the Petitioner, State of Florida, Department of Revenue, covering the period September 1, 1975, through August 31, 1978. The claim of the audit is for sales tax due pursuant to Chapter 212, Florida Statutes, and its
supporting rules found in the Florida Administrative Code. The audit document showing the Proposed Notice of Assessment of Tax, Penalties and Interest may be found as the Petitioner's Exhibit A admitted into evidence.
Although the audit document originally claimed tax in the amount of
$29,600.37, at the commencement of the hearing the amount remaining in dispute was $15,288.75, together with a penalty of 5 percent and interest accruing until date of payment. During the hearing, a stipulation was entered into between the parties to the effect that, of the remaining disputed tax, penalty and interest,
$5,112.57, together with the applicable penalty and interest was acknowledged to be owed by the Respondent. Therefore, there remains in dispute the amount of
$10,176.18, with a 5 percent penalty and interest accruing until date of payment.
This amount of tax, penalty and interest claimed represents the difference between the tax rate which the Petitioner has applied in this assessment process and the tax rate that the Respondent claims to be applicable. The Petitioner claims that a tax rate of 4.5 percent against total receipts, in keeping with the authority of Rule 12A-1.57(3), Florida Administrative Code.
The Respondent counters that position by offering its own formula arrived at in view of the nature of its prices charged its customers, and that tax rate is 4.1666667 percent.
The sales in question during the audit period pertain to sales of alcoholic and malt beverage in the lounges of the Respondent's licensed premises located in Dade County, Florida.
The facts reveal that the sale of all alcoholic beverages in the time period at issue were made in increments of a quarter dollar ($.25). These quarter-dollar increments included the imposition of sales tax. As example:
SALES PRICE | TAX | TOTAL |
$ .48 | $.02 | $ .50 |
.72 | .03 | .75 |
.96 | .04 | 1.00 |
1.20 | .05 | 1.25 |
1.44 | .06 | 1.50 |
1.68 | .07 | 1.75 |
Although the tax was computed on the sales price and this system was made known to the public by prominently displaying the price list, which list indicated that the beverage prices included tax; the Respondent did not separate the increment of the total price into categories of sales price and tax at the time of each transaction. Consequently, the books audited in the process of making the claim for assessment only demonstrated the total sales price of a given day's alcoholic beverage sales as an aggregate and did not reflect the tax as a separate item from the sales price. To this aggregate amount the Respondent applied its tax rate formula of 4.166667 by taking the amount of total receipts for the day and dividing by 1.04666667 to get gross sales. The gross sales were then subtracted from the amount of total receipts to obtain the figure for tax collected. This method was rounded off to the nearest penny on each day of computation.
The Petitioner, as stated before, relies on Rule 12A-1.57(3), Florida Administrative Code, as a basis for its claim that the rate of tax should be 4.5 percent. That provision states:
(3) Dealers in alcoholic and malt beverages are required to remit the actual tax collected to the State. In some instances, however, it may be impractical for such dealers to separately record the sales price of the beverage and the tax collected thereon. In such cases, dealers may elect to report tax
on the following basis. Package stores who sell no mixed drinks should remit the tax at
4.3 percent of total receipts and dealers who sell mixed drinks or a combination of mixed drinks and packaged goods should remit the tax at the rate of 4.5 percent of total receipts.
In those instances where the sales price and the tax have not been separately recorded but where it can be demonstrated that the public has been put on notice by means of price lists posted prominently throughout the establishment that the total charge includes tax, the dealer may deduct the tax from the total receipts to arrive at the appropriate tax and gross sales figures using the method shown below:
Total receipts divided by the tax rate = gross sales. For example, a package store which sells no mixed drinks and whose total receipts are $2,000 would compute sales as follows:
$2,000 divided by 1.043 percent = gross sales $1,917.54 tax collected 82.46
A dealer who sells drinks or a combination of drinks and package goods and whose total receipts are $2,000 would compute sales as follows:
$2,000 divided by 1.045 percent = gross sales $1,913.87 tax collected 86.12
When the public has hot been put on notice through the posting of price lists that tax is included in the total charge, tax shall be computed by multiplying total receipts by the applicable rates referred to in
this rule.
In the mind of the Petitioner, by failing to segregate the total amounts collected into the categories of sales price and tax and then to remit the tax collected as a separate item, the Respondent is relegated to the utilization of Rule 12A-1.57(3), Florida Administrative Code, in remitting its tax. Under its theory, the Petitioner has taken the total receipts recorded in the Respondent's work sheets and divided those total receipts by the formula
1.045 percent to get gross sales and then subtracted the gross sales from the amount of total receipts to get the amount of tax that should have been collected, and then made a further subtraction of the tax which the Respondent
remitted, from the tax formula which the Petitioner claims to be due on the transactions to arrive at the tax presently outstanding. This amount being the figure referenced above. From that computation, the amount of penalty and interest has been claimed. (By its position the Petitioner does not seem to question the fact that the public has been put on notice by price lists posted throughout the establishment that the total charge reflected on the price lists includes tax, as referred to in the subject Rule 12A-1.57(3), Florida Administrative Code.)
According to the Respondent, the reason for the utilization of the rate of 4.1666667 percent was the fact that all beverages having a break in price increments of a quarter-dollar ($.25), it is mathematically impossible for the proper effective rate being charged on all beverages sold in the lounges to vary from their tax rate of 4.1666667 percent because each increment of increase has the same ratio of sales price to tax. The Respondent argues that to claim a rate of 4.5 percent causes the collection in excess of the amount allowed by Chapter 212, Florida Statutes.
After considering the position of the parties, the Respondent is found to be correct in its position.
The overall scheme of Chapter 212, Florida Statutes, calls for the taxation of sales of tangible personal property at a rate of 4 percent, see Section 212.05, Florida Statutes. A further refinement of that theory is found in Subsection 212.12(10), Florida Statutes, which creates a bracketing system for sales representing the various fractions of a dollar in amount. This bracketing system thereby causes imposition of a sales tax greater than 4 percent in some transactions.
The Petitioner is granted further authority to refine the system of taxation by those provisions of Subsections 212.17(6) and 212.18(2), Florida Statutes, which state in turn:
212.17(6) The department shall have the power to make, prescribe and publish reasonable rules and regulations not inconsistent with this chapter, or the other laws, or the constitution of this state, or the United States, for the enforcement of the provisions of this chapter and the collection of revenue hereunder, and such rules and regulations shall when enforced be deemed to be reasonable and just.
212.18(2) The department shall administer and enforce the assessment and collection of the taxes, interest, and penalties imposed by this chapter. It is authorized to make and publish such rules and regulations not inconsistent with this chapter, as it may deem necessary
in enforcing its provisions in order that there shall not be collected on the average more than the rate levied herein. The department is authorized to and it shall provide by rule and regulation a method for accomplishing this end. It shall prepare instructions to all persons required by this
chapter to collect and remit the tax to guide such persons in the proper collection and remission of such tax and to instruct such persons in the practices that may be necessary for the purpose of enforcement of this chapter and the collection of the tax imposed hereby. The use of tokens in the collection of this tax is hereby expressly forbidden and prohibited.
It can be seen that the Petitioner has the authority to promulgate the necessary rules for the accomplishment of the purpose of Chapter 212, Florida Statutes, but is restricted in this task by being prohibited from making rules and regulations which are inconsistent with this chapter or other statutes within the laws of the State of Florida or the Constitution of the United States or the Constitution of the State of Florida and it is further restricted from imposing rules or regulations which cause the tax to be collected on the average more than the rate levied in Chapter 212, Florida Statutes.
While it is clear that the legislature intended to keep the effective rate of tax as near the 4 percent level as possible, it is also evident that the system contemplated a segregation of the amount collected in a sale as sales price, and the amount of tax applied to the sale at the point of the transaction. This is a means of accountability that helps insure that the proper remittance of tax due on each and every retail sales occurs. However, the preeminent charge to the Petitioner is the duty to collect the tax at a rate which most closely approximates the 4 percent called for, without abandoning responsibility or the close monitoring of the records of a given taxpayer.
When considered in the overall context of the purpose of Chapter 212, Florida Statutes, the method which the Respondent used to collect and remit tax, does not violate the conditions of Chapter 212, Florida Statutes, nor the rules designed to enforce that chapter. The tax rate of 4.1666667 percent has been proven to be correct, in the sense of more closely approximating the 4 percent tax rate called for than the application of a tax rate of 4.5 percent. The correctness is established because the increments charged for alcoholic beverages are always in the amount of a quarter-dollar ($.25) and each increment of increase carries the same tax rate. This fact, when considered with the additional fact that the break-out of the tax in the price structure as established by the Respondent, is in keeping with the tables of the bracket system found in Subsection 212.12(10), Florida Statutes, is sufficiently convincing to demonstrate the propriety of the Respondent's position.
Nonetheless, a further examination of the Petitioner's argument is indicated. The focus of the Petitioner's position is Rule 12A-1.57(3), Florida Administrative Code, and a detailed reading of this rule reveals that dealers who have properly put the public on notice that their sales prices include tax, "may" elect to remit tax by using the formula of the rate of 4.5 percent of total receipts as the tax due. The use of the word "may" in this instance creates an option on the part of the Respondent, an option which it has elected not to proceed under and by the facts of this case, the alternate method which the Respondent used in computing this tax, i.e., the rate 4.1666667 percent is efficacious.
Finally, the Petitioner has advanced the argument that the formula found in Rule 12A-1.57(3), Florida Administrative Code, is unique to that rule and may not be utilized unless the prerequisite factors are shown and unless the
tax rate factor 4.5 percent is part of the formula. Even though the formula as expressed in Rule 12A-1.57(3), Florida Administrative Code, may have legitimate application to some cases, it is not preemptive in its scope and it would not prohibit the Respondent in this case from using the formula and substituting the rate of tax of 4.1666667 percent for the rate of 4.5 percent in that part of the formula.
In summary, the Petitioner has failed to demonstrate its entitlement to the tax, penalty and interest under its claim founded on Rule 12A-1.57(3), Florida Administrative Code.
(Petitioner in this cause had submitted Proposed Findings of Fact, Conclusions of Law and a Recommendation in the case styled, Holiday Inn Oceanside/Cleveland Caribbean, Inc., Petitioner, vs. State of Florida, Department of Revenue, Respondent, D.O.A.H. Case No. 70-1003R, and in doing so made reference to matters which have been considered in the present case.
Therefore, to the extent that those matters are not inconsistent with this Recommended Order they have been utilized. To the extent that those proposals are inconsistent with this Recommended Order they are specifically rejected.
The Respondent has also submitted Proposed Findings of Fact, Conclusions of Law and a Recommended Order and to the extent that those matters are not inconsistent with this Recommended Order they have been utilized. To the extent that those proposals are inconsistent with this Recommended Order they are specifically rejected.)
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the subject matter and parties to this action.
Based upon a full consideration of the facts herein, it is concluded as a matter of law that the Petitioner's claim for tax in the amount of
$10,176.18, together with penalty and interest arising out of the Respondent's sale of alcoholic beverages in its lounges during the audit period September 1, 1975, through August 31, 1978, is not well founded; and the Respondent is found to have rendered the proper amount of tax due on those transactions involved in the Petitioner's claim of tax, penalty and interest set out herein. See Chapter 212, Florida Statutes.
It is recommended that the Respondent, Holiday Inn Oceanside/Cleveland Caribbean, Inc., be relieved from further responsibility to pay the amount of tax, $10,176.18 and the 5 percent penalty and interest accruing on that amount of tax.
DONE AND ENTERED this 29th day of June, 1979, in Tallahassee, Florida.
CHARLES C. ADAMS, Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301
Martha J. Cook, Esquire Department of Revenue
c/o Spieth, Bell, McCurdy & Newell 1190 Union Commerce Building Cleveland, Ohio 44115
Mark J. Wolff, Esquire and Howard E. Roskin, Esquire
