STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

RESTLAWN, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 80-192

)

DEPARTMENT OF REVENUE, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, this cause was heard by Linda M. Rigot, the assigned Hearing Officer of the Division of Administrative Hearings, on March 27, 1980, in Jacksonville, Florida.

After qualification by the undersigned, the Petitioner, Restlawn, Inc., was represented by its Comptroller, Cynthia Savage. E. Wilson Crump, II, Esquire, Tallahassee, Florida appeared on behalf of the Respondent, Department of Revenue.

Petitioner contests a proposed notice assessment of taxes under Chapter 212, Florida Statutes, resulting from an audit by the Respondent. Ms. Savage testified on behalf of the Petitioner; and Peggy Bowen, Tax Auditor for the State of Florida, Department of Revenue, testified on behalf of the Respondent.

FINDINGS OF FACT

1. Petitioner's business activities include the sale of tangible personal property such as caskets and burial vaults. The written sales contract utilized by Petitioner sets forth the amount of sales tax and includes that sum in the total amount which the customer agrees to pay. The contracts are in the form of a note, containing a promise to pay, and were sold at discount by the Petitioner at certain times during the audit period. The contracts require a down payment and installment payments thereafter.

   
   

2. The contracts further contain a clause allowing the customer three days in which to cancel the contract, under which circumstances the customer is reimbursed all moneys paid by him to Petitioner. Under Petitioner's retained- title, conditional-sale contract, if the customer cancels the contract or stops making payments at any time subsequent to the initial three-day period, Petitioner retains all sums which have been paid to it by the customer.

   
   

3. Petitioner's business practice is to pay its salesmen commission from the down payment on a contract.

   
   

4. Petitioner operates on the accrual method of accounting, and its sales tax liability is entered on its books at the time of the sale. Petitioner pays the total sales tax due at the time that it enters into the contract.

5. When a contract is cancelled (after the initial three-day cancellation period), Petitioner claims a credit against its current liability for the full amount of sales tax charged on the transaction when it files its sales tax report for the month, even though at least the down payment, and frequently additional payments, has been collected from the customer.

   
   

6. On audit, Respondent allowed full credit for the amount of sales tax when a contract had been cancelled within the three-day cancellation period, but disallowed that portion of the credits claimed which related to the down payments and installments which the Petitioner retained when a contract was cancelled after the three-day period. Respondent did allow, however, a credit for taxes attributable to the unpaid balance under each cancelled contract.

   
   

   CONCLUSIONS OF LAW

   
   

7. Section 212.02(4), Florida Statutes (1979), defines "sales price" as:

   
   

   . . . [T]he total amount paid for tangible personal property, including . . . any amount for which credit is given to the purchaser by the seller, without any deduction therefrom on account of the cost of the property sold, the cost of materials used, labor or service cost, interest charged, losses or any other expense whatsoever.

   
   

   Clearly, the commissions paid to the salesmen by the Petitioner herein are part of the sales price and are included therein for the purpose of computing taxation.

   
   

8. Section 212.06(1)(a), Florida Statutes (1979), requires that: "The full amount of the tax on credit sales, installment sales, and sales made on any kind of deferred payment plan shall be due at the moment of the transaction in the same manner as a cash sale." Petitioner herein has correctly paid to the Respondent the full amount of tax on the entire sales price, including commissions, at the time of entry into the contract.

   
   

9. Section 212.17, Florida Statutes (1979), provides that in certain situations, a dealer who has paid the tax on tangible personal property sales may take credit against subsequent liability. Subsection (2) allows a dealer to take credit "for the tax paid by him on the unpaid balance due him when he repossesses. . ." property sold by him. Clearly, credit is restricted to the tax on the unpaid balance. Petitioner is correct that this subsection does not apply in the instant cause, since Petitioner does not repossess the personal property sold by it. Subsection (3) permits a dealer to take credit "for any tax paid by him on the unpaid balance due on worthless accounts "

   Clearly, the credit allowed a dealer under this subsection is also restricted to credit for tax paid on the unpaid balance. Petitioner argues that Subsection

   (3) is also inapplicable to it. In so arguing, Petitioner fails to understand that unless Petitioner falls within one of the subsections of Section 212.17, Florida Statutes, then it can take no credit at all--even for taxes paid on the unpaid balance.

   
   

10. The provisions of Section 212.17, Florida Statutes, have been strictly construed. Estate of W. T. Grant Co. v. Lewis, 358 So.2d 76 (1 DCA Fla. 1978), aff'd 370 So.2d 764 (Fla. 1979). Since the Respondent has willingly taken the

    position that Subsection (3) applies to the Petitioner, then the Petitioner benefits to the extent of being able to claim credit for the tax paid by it on the unpaid balance of a cancelled contract.

    
    

11. Petitioner further argues that credit should be given for tax paid on commissions, since the Petitioner makes little money on contracts if they are cancelled after the down payment and/or only a few installment payments. Petitioner's decision to pay sales commissions from the down payment on each contract, however, is its own personal decision. Whether the commission is paid from the down payment or paid pro rata from each installment payment, the commission still represents part of the sales price upon which tax must be paid. Since neither the down payment nor any installment payment is returned to the customer after cancellation, such payments are taxable to the Petitioner.

RECOMMENDATION

Based upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED THAT:

The Department of Revenue enter its final order disallowing to Petitioner a credit for taxes attributable to amounts retained by it upon the cancellation of its installment sales contracts.

DONE AND ORDERED in Tallahassee, Leon County, Florida, this 29th day of May, 1980.

LINDA M .RIGOT

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 29th day of May, 1980.

COPIES FURNISHED:

Ms. Cynthia Savage Comptroller Restlawn, Inc.

2600 Ribualt Scenic Dr Post Office Box 9306 Jacksonville, FL 32208

E. Wilson Crump, II, Esq. Assistant Attorney General Department of Legal Affairs The Capitol

Tallahassee, FL 32301

John D. Moriarty, Esq. Deputy General Counsel Department of Revenue

Room 104, Carlton Building Tallahassee, FL 32301

Mr. Randy Miller Executive Director Department of Revenue

Room 102, Carlton Building Tallahassee, FL 32301

Docket for Case No: 80-000192

Orders for Case No: 80-000192