STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DANIEL JAMES EBBECKE, )

)

Petitioner, )

)

vs. ) CASE NO. 79-772

)

STATE OF FLORIDA, )

DEPARTMENT OF REVENUE, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, James E. Bradwell, held a public hearing in this case on October 29, 1980, in Fort Myers, Florida. 1/

APPEARANCES

For Petitioner: Jerald J. Chlipala, Esquire

ENGEL, FRIED & CHLIPALA, P.A.

4388 Palm Beach Boulevard Ft. Myers, Florida 33905

For Respondent: Linda C. Procta, Esquire

Assistant Attorney General Department of Legal Affairs The Capitol Room LL04 Tallahassee, Florida 32301

STATEMENT OF THE ISSUES

The issue posed herein is whether or not the Petitioner remitted to Respondent, pursuant to Chapter 212.05(1), Florida Statutes, the, proper amount of sales tax on the boat "Captain Deebold" which was purchased on November 29, 1976. A related issue, assuming that the proper sales taxes were not remitted by Petitioner, is whether or not a levy of penalty and interest is warranted under the circumstances.

FINDINGS OF FACT

1. Based upon my observation of the witnesses and their demeanor while testifying, the documentary evidence received, legal memoranda submitted by the parties and the entire record compiled herein, the following relevant facts are found.

   
   

2. Petitioner purchased the vessel "Captain Deebold" on November 29, 1976, and alleged that the purchase price of the boat was $20,000.00. Accordingly, Petitioner remitted to the Department sales taxes based on the declared value of

   $20,000.00.

3. Respondent maintained that the subject boat was purchased for the sum of $75,000.00 and has, therefore, issued an assessment against Petitioner for the additional taxes, penalty and interest.

   
   

4. By letter dated November 29, 1978, Respondent's Revenue Investigator, Leslie J. Smithling, advised Petitioner that a routine verification concerning his purchase of the subject boat revealed a transaction amount of $75,000.00 upon which the four percent Florida Sales Tax is $3,000.00. Petitioner was further advised therein that his remittance in the amount of $4,202.00 was due no later than December 15, 1979. Taxes, penalties and interest were calculated as follows:

   
   

   Purchase Price	$75,000.00
   Tax Rate	4%
   Tax	$ 3,000.00
   Minus Tax Paid
   (Based on $20,000.00)	$ 800.00
   Tax Due	$ 2,200.00
   Administrative Penalty
   (Ch. 212.12[2], F.S.)	$ 550.00

   Fraud Penalty

   (Ch. 212.12[2], F.S.) $ 1,100.00

   Interest: 1% per month from 8/1/77 to 12/1/77

   16% Plus $.72 daily thereafter

   Total Interest Accrued $ 352.00

   
   

   Total Tax, Penalties &

   Interest Due $ 4,202.00

   
   

5. In support of its position that the true purchase price of the boat was only $20,000.00, Petitioner points out that the seller of the boat, Frank Deebold, had neglected the boat and had only made repairs that were absolutely necessary to operate the vessel. Thus, when Petitioner purchased the vessel, numerous repairs were made to make it seaworthy including 1) repaired electrical wiring; 2) sealed the deck seams; 3) reconnected the port fuel tank;

   4) repaired the clutch in the port engine; 5) repaired leaks in the starboard stern quarter; 6) replaced and rebolted the chines; 7) replaced a section of the keel; 8) rebuilt the main clutch; 9) caulked deck; 10) replaced or repaired the winch on the anchor; 11) reworked and/or repaired the engine room, including insulation, lighting, lining, painting and hauling. To perform these repairs, Petitioner places the value on materials utilized at approximately $18,000.00. Additionally, Petitioner estimated that the value of his labor involved in making the approximately $25,000.00.

   
   

6. The articles of agreement for the purchase of the boat provides in pertinent part as follows:

   
   

   Witnesseth, that if the said party of the second part shall (purchaser) first make the payments and perform the covenants

   hereinafter mentioned on his part to be made and performed, the said party of the first part (seller) hereby covenants and agrees to convey and assure to the said party of the second part, his heirs, personal represent-

   atives or assigns, clear of all encumbrances, whatever by a good and sufficient bill of sale the Oil Screw vessel, Captain Deebold, o/n294675, gross tons-36, its equipment, hull, machinery, present insurance policies and business including fifty or more used rods and reels, one 3.5 KW Lister auxiliary generator, used and in need of repair, spare Jabsco water pump (used and in need of repair), spare 24 volt DC alternator, spare

   24 volt DC main engine starter, spare stub shaft, three spare propellers (used and in need of repair) and a spare UHF Pierce- Simpson radio transceiver (used and in need of repair) and the said party of the second part hereby covenants and agrees to pay to the said party of the first part the sum of seventy-five thousand and 00/100 ($75,000.00) dollars in the manner following. . . .

   
   

7. Nevertheless, Petitioner stressed that inasmuch as the Articles of Agreement provided that the seller only required Petitioner to maintain insurance coverage in the amount of $50,000.00 indicating that the purchase price was something less than $75,000.00 and in fact was no more than $50,000. Pursuant to the Articles of Agreement, the amount insurance coverage required was $50,000.00.

   
   

8. Petitioner also declared that included in the $75,000.00 purchase price were other items which included the business (dock space), and reduced prices for miscellaneous supplies and fuel prices. In this regard, an examination of the Articles revealed that these items were provided Petitioner on a cost plus basis and the dock space was leased for an amount based on a rebate of the percentage of ticket sales or charter fees received.

   
   

9. Petitioner ultimately sold the boat for 95,000.00. Petitioner initially tried to sell the boat for the sum of $105,000.00 of which $10,000.00 represented the value he (Petitioner) placed on the business. An examination of the accounting records introduced indicated that Petitioner placed the sum of

   $75,000.00 as the purchase price for the boat.

   
   

10. Petitioner thought that his estimation of the labor and materials necessary to properly repair the boat were items that could be used as a setoff to reduce the amount of taxes due. Petitioner testified that he, in no way, intended to defraud the Respondent of taxes properly due and owing. Petitioner's testimony in this regard is credited.

    
    

    CONCLUSIONS OF LAW

    
    

11. The Division of Administrative Hearings jurisdiction over the subject matter and the parties to this action. Chapter 120.57(1), Florida Statutes.

    
    

12. The parties were duly noticed pursuant to the notice provisions of Chapter 120, Florida Statutes.

    
    

13. The authority of the Respondent is derived from Chapter 212, Florida Statutes, and Rule Chapter 12A, Florida Administrative Code. Chapter 212.02(2) provides in pertinent part that:

    "Sale" means and includes:

    1. Any transaction of title or possession, or both, exchange, barter, lease or rental conditional or otherwise, in any manner or by any means whatsoever, of tangible personal property for a consideration.

       
       

14. Tangible personal property taxes are, levied at the rate of four percent of the sale, price of each item or article when sold at retail in this state. Chapter 212.05 Florida Statutes. Additionally, no title certificate issued on any boat etc., until there has been filed evidence of the payment of tax as provided in Chapter 212, and all transfers of titles to boats are presumed to be transactions until otherwise shown. Chapter 212.06 Statutes.

    
    

15. Finally, the sale including occasional or isolated use, consumption or storage for use in this state of motor vehicles is taxable at the rate of four percent of the full sale price, less any credit allowed for a used motor vehicle taken in trade, but without any deductions for federal taxes, freight, handling, delivery, commission, repossessions, advertising, future free service or any other expense or costs whatsoever. Unless the purchaser provides a bill of sale from the seller which shows actual selling price of the vehicle, the Department of Revenue's will be presumed correct. While 12A-1.07(1)(a), Florida Administrative Code.

    
    

16. With the above cited statutes and rules for guidance and consideration as to the proper amount of tax Petitioner should have remitted, the undersigned concludes that taxes should have been remitted to Respondent on the basis of the

    $75,000.00 absent a showing by Petitioner, which was not made herein, that a lower purchase price was paid. In this regard, consideration was given to the Department's own statutes and rules which reflect that the sale includes the total purchase price without any deduction for any other expense or cost whatsoever [Rules 12A-1.07(1)(a), Florida Administrative Code.] Thus, the fact that Petitioner was only required to maintain insurance in the amount of

    $50,000.00 is in no way helpful to establish that that figure ($50,000.00) reflected a purchase price lower than the $75,000.00 purchase price cited in the Articles of Agreement which is considered the most persuasive indication as to the exact sales price. Additionally, the accounting records entered herein also reflect a purchase price by Petitioner for the subject boat in the amount of

    $75,000.00. These figures tend to be more in keeping with the $75,000.00 purchase price as maintained by Respondent.

    
    

17. Cost price is further defined as the actual cost of tangible personal property without any deductions therefrom on account of cost of materials used, labor or service costs, transportation charges, or any expense whatsoever. Chapter 212.02(5), Florida Statutes. Cost price and purchase price are considered synonymous. U.S. Gypsum Co. v. Green, 110 So.2d 409 (1959). And, Respondent's estimate of purchase price, after a review of all available records, is clothed with a presumption of corrections. No contrary showing was offered by Petitioner.

    
    

18. Petitioner failed to remit to Respondent the proper amount of sales tax due on the boat purchased on November 29, 1976. Accordingly, Petitioner is liable for taxes and interest due based on the $75,000.00 purchase price from the date of purchase until payment is made less a proper credit for taxes previously paid pursuant to Chapter 212.05(1)(a) and (b), Florida Statutes.

19. Chapter 212.12(2), Florida Statutes, provides that a taxpayer, like Petitioner, is liable for payment of an additional administrative penalty not to exceed 25 percent of the aggregate taxes due for failure to timely remit taxes when due. This penalty has been held to be discretionaly in certain circumstances. Based on Petitioner's good-faith belief that the $20,000.00 declared value properly reflected the actual value of the boat in view of the extensive repairs made to the boat, it is concluded that an administrative penalty of only 5 percent of the aggregate taxes due is proper pursuant to Chapter 212.12(2), Florida Statutes.

    
    

20. Chapter 212.12(2), Florida Statutes, provides in pertinent part that a taxpayer who files a false or fraudulent return or willfully intends to evade payment of taxes lawfully imposed, shall be liable for payment of a specific penalty of fifty percent of the tax bill. Based on Petitioner's credited testimony to the effect that he, at no time, attempted to evade the payment of taxes properly due and owing, it is concluded that the imposition of a penalty for filing a false or fraudulent return within the meaning of Chapter 212.12(2), Florida Statutes, is not warranted under the circumstances herein.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that:

1. Petitioner remit to the Respondent the proper interest as set forth herein in paragraph 4 of the Conclusions of Law.

   
   

2. Petitioner remit to the Respondent an administrative penalty of 5 percent of the aggregate taxes due as set forth herein in Paragraph 5 of the Conclusions of Law.

   
   

3. Petitioner not be held liable for payment of for allegedly filing a "false or fraudulent" return for reasons set forth herein in Paragraph 6 of the Conclusions of Law.

RECOMMENDED this 27th day of February 1981, in Tallahassee, Florida.

JAMES E. BRADWELL

Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

FILED with the Clerk of the Division of Administrative Hearings this 27th day of February 1981.

ENDNOTE

1/ Pursuant to leave, the parties were allowed through December 15, 1980, to submits memoranda in support of their respective positions. Memoranda were received and considered by me in preparation of this Recommended Order. To the

extent that the proposed findings are not incorporated herein, said findings were deemed either irrelevant or not supported by the evidence of record. The parties waived the thirty (30) day requirement for issuance of a Recommended Order as set forth in Chanter 23-5.402, Florida Administrative Code.

COPIES FURNISHED:

Jerald J. Chlipala, Esquire ENGEL, FRIED & CHLIPALA, P.A.

4388 Palm Beach Boulevard Ft. Myers, Florida 33905

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

Docket for Case No: 79-000772

Orders for Case No: 79-000772