STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

GOLD STAR DELICACY SHOP, INC., )

a Florida corporation, )

)

Petitioner, )

)

vs. ) CASE NO. 79-1132

) STATE OF FLORIDA, DEPARTMENT OF ) REVENUE, )

)

Respondent. )

)

RECOMMENDED ORDER

This is an action pursuant to Section 120.57, Florida Statutes (1979), wherein Petitioner challenges the assessment by Respondent, Department of Revenue.

APPEARANCES

For Petitioner: Mark J. Wolff, Esquire

Sharber, Shevin, Rosen, Shapo & Heilbronner, P.A.

30th Floor, First Federal Building One Southeast Third Avenue

Miami, Florida 33131

For Respondent: Linda C. Procta, Esquire

Department of Legal Affairs The Capitol, LL04 Tallahassee, Florida 32301

Having considered all testimony, evidence, and argument of counsel the Hearing Officer finds the following:

FINDINGS OF FACT

1. Petitioner is a corporation organized and existing under the laws of Florida with its sole place of business located at 6186 Southwest 8th Street, Miami, Florida. Petitioner operates a delicatessen and restaurant in the same building at the above location.

   
   

2. Petitioner's restaurant prepares food to be served to paying customers who consume that food at tables provided in the restaurant for that purpose. This food is served by waiters and waitresses who prepare guest checks which separately indicate the amount of sales tax charged thereon.

   
   

3. Petitioner's delicatessen sells unprepared food to customers who do not consume that food on the premises and for whom no eating facilities are provided. The items sold by Petitioner's delicatessen are grocery-type items.

   A common cash register serves the two facilities, which cash register has a separate key for the sale of delicatessen items and a separate key for the sale of restaurant items. The restaurant and delicatessen occupy the same general space and are not separated by a wall or other physical barrier.

   
   

4. Petitioner's Exhibit 4 contains a list of those items sold on the delicatessen or grocery side of Petitioner's business. The accuracy of that list was not challenged in this proceeding and it is found as a matter of fact that those items on Petitioner's Exhibit 4 accurately reflect the items sold by Petitioner across his delicatessen counter. That list includes items such as bread, rolls, bagels, milk, beer, soda, catsup, canned goods and various meats such as salami, bologna, franks, fish and ham.

   
   

5. Petitioner collects sales tax for those items sold in the restaurant portion of the business and does not collect sales tax on those items sold in the delicatessen portion of the business. The taxable and nontaxable items are segregated and distinguished on the cash register tapes. Petitioner has so conducted his business from its inception in 1959 through the audit period in question. Throughout that period of time Petitioner regularly maintained separate and distinct records sufficient to allocate sales between taxable restaurant sales and nontaxable delicatessen or grocery sales. Petitioner's tax returns have reflected this behavior for the above period of time. When the business first opened Mr. Leo Hoffman, the owner of Petitioner corporation, contacted the Department of Revenue by telephone and was told that the foregoing method of operation was proper. Petitioner has always filed tax returns reflecting this activity and such returns were apparently not questioned until the audit at issue here. The period of time for which Petitioner was audited in this cause was January 1, 1976, to December 31, 1978.

   
   

6. On March 12, 1979, Respondent issued a proposed sales and use tax delinquency assessment against Petitioner in the amount of $40,018.14. This assessment was based on the total sales revenue generated by both of Petitioner's enterprises and did not allocate sales revenue between the delicatessen portion of the business and the restaurant portion of the business. On May 10, 1979, the Respondent issued a revised proposed sales tax delinquency assessment against Petitioner in the amount of $33,259.20. This revised assessment was based on the total sales revenue generated by both of Petitioner's separate enterprises and did not allocate sales revenue between the delicatessen portion of the business and the restaurant portion of the business.

   
   

7. Petitioner did pay approximately $12,000 in sales tax for the subject audit period. That was the sales tax Petitioner believed he owed for the restaurant portion of his business. The additional assessment is apparently the sales tax (with penalty and interest) Respondent believes is owed for the delicatessen portion of Petitioner's business.

   
   

8. The items sold on the delicatessen side of Petitioner's business represent approximately 75 percent of his gross revenue. The items sold on the restaurant, or taxable side of Petitioner's business, represents approximately

   25 percent of his gross revenue.

   
   

9. The assessment by Respondent against Petitioner was based, at least in part, upon Rule 12A-1.11(1), Florida Administrative Code.

   
   

10. Petitioner holds a restaurant license from the State of Florida, Division of Hotels and Restaurants. Petitioner also holds a retail sales license from Dade County for its delicatessen operation.

    CONCLUSIONS OF LAW

    
    

11. The Division of Administrative Hearings has jurisdiction over this cause.

    
    

12. Section 212.08, Florida Statutes, provides that the sale at retail of ". . . foods and drinks for human consumption . . ." are specifically exempt from the sales tax imposed by Chapter 212, Florida Statutes. It further provides in Section 212.08(1) and Section 212.08(1)(a) that the foods and drinks so exempt from the sales tax do not include

    
    

    [f]oods and drinks served, prepared, or sold in or by restaurants, drugstores, lunch counters, cafeterias, hotels, or other like places of business or by any business or place required by law to be licensed by the Division of Hotels and Restaurants of the Department of Business Regulation;

    
    

13. The issue in this cause is not whether Petitioner should pay a sales tax on the food and drink served on the restaurant side of his business. Both parties agree that such sales tax should be paid and, in fact, for the audit period and all other years of operation, such tax has apparently been paid. The issue in this cause is whether the delicatessen or grocery side of Petitioner's business falls within any of the categories listed in subsection 212.08(1)(a), Florida Statutes, thus removing the items sold on that side of the business from the sales tax exemption. In that context it has not been proposed that the delicatessen or grocery side of Petitioner's business is a restaurant, drugstore, lunch counter, cafeteria, hotel or other like place of business. It has been proposed that the delicatessen or grocery side of Petitioner's business falls within the category of businesses licensed by the Division of Hotels and Restaurants, thus removing those sales from the sales tax exemption. Petitioner's business is indeed licensed by the Division of Hotels and Restaurants of the Department of Business Regulation. The restaurant part of Petitioner's operation clearly requires such a license. However, in determining whether that fact is dispositive of this case there are two critical questions of law.

    
    

14. First, does the statement in subsection 212.08(1)(a), Florida Statutes, that sales of food and drink by a business licensed by the Division of Hotels and Restaurants are removed from the sales tax exemption mean that where there are two distinct and separable operations, one requiring such a license and one, hypothetically, not requiring such a license, sales by the second part of the operation are nevertheless removed from the sales tax exemption? The answer to that question is in the negative. It is the apparent intent of the legislature to remove from the sales tax exemption just those items of food and drink sold in restaurant-type facilities. The statute itself in subsection 212.08(1)(a) lists restaurants, drugstores, lunch counters, cafeterias, hotels or other like places of business and then as a catchall, includes ". . . any business required . . . to be licensed by the Division of Hotels and Restaurants. . . ." Surely it was not the intent of the legislature that, when one business conducts two distinct and separable operations that sales tax should be paid on that part of the operation which would ordinarily be exempt from sales tax but for the existence of a Hotel and Restaurant license necessary fro the conduct of the companion operation. The more reasonable interpretation of the statute is that so long as the operations are sufficiently distinct and

    separable that sales tax may reasonably and accurately be allocated to the operation which has been removed from the sales tax exemption, such distinction between the operations should be drawn for sales tax purposes.

    
    

15. The second question is whether Petitioner's delicatessen or grocery operation, as it is conducted, requires a license from the Division of Hotels and Restaurants? Section 509.241(2)(a) provides that

    
    

    Every building . . . or any rooms or divisions in a building . . . or any place whatsoever, that is maintained and operated as a place where food is regularly prepared, served, or sold for immediate consumption on or in the vicinity of the premises is defined as, and shall be licensed as, a public food service establishment.

    
    

    The delicatessen or grocery side of Petitioner's operation does not fall within that license requirement. Those items of food sold across the delicatessen counter by Petitioner are not sold for immediate consumption on or in the vicinity of the premises. They are in the nature of grocery items that are sold for the same purposes as an ordinary grocery store would sell such food items.

    Indeed, the items sold by Petitioner's delicatessen or grocery operation are generally identical to items sold by grocery stores which items have not been removed from the sales tax exemption found in Section 212.08(1).

    
    

16. Therefore, it is concluded that the items of food and drink sold by Petitioner on the delicatessen or grocery side of his business are items exempted from the Florida sales tax by Section 212.08, Florida Statutes. It is further concluded that the sale of those items is not removed from the sales tax exemption by the coincidental existence of a license by the Division of Hotels and Restaurants of the Department of Business Regulation for Petitioner's companion restaurant operation.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions of Law, it is, therefore, RECOMMENDED:

To the extent that the assessment for unpaid sales tax is based upon sales made by the delicatessen or grocery side of Petitioner's business, such assessment is invalid and should be withdrawn.

DONE AND ENTERED this 4th day of June 1980 in Tallahassee, Florida.

CHRIS H. BENTLEY

Hearing Officer

Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 4th day of June 1980.

COPIES FURNISHED:

Mark J. Wolff, Esquire Sparber, Shevin, Rosen,

Shapo & Heilbronner, P.A.

First Federal Building, 30th Floor One Southeast Third Avenue

Miami, Florida 33131

Linda C. Procta, Esquire Department of Legal Affairs Office of the Attorney General The Capitol, LL04

Tallahassee, Florida 32304

Docket for Case No: 79-001132

Orders for Case No: 79-001132