STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
STATE OF FLORIDA )
DEPARTMENT OF REVENUE, )
)
Petitioner, )
)
vs. ) CASE NO. 80-1295
)
MODERN PLATING CORP., )
)
Respondent. )
)
RECOMMENDED ORDER
Pursuant to notice the Division of Administrative Hearings, by its duly designated Hearing Officer, K. N. Ayers, held a public hearing in the above styled case on 13 August 1980 at Clearwater, Florida.
APPEARANCES
For Petitioner: Barbara S. Harmon, Esquire
Assistant Attorney General Department of Legal Affairs The Capitol, Room LL04 Tallahassee, Florida 32301
For Respondent: Elizabeth J. Daniels, Esquire
Post Office Box 368 Clearwater, Florida 33517
By Petition for Formal Hearing, Modern Plating Corporation, (Respondent or MPC), contests the proposed assessment of tax, penalties and interest alleged due from it by the Department of Revenue, (Petitioner or DOR), in Notice of Proposed Assessment dated March 11, 1980. Here MPC filed a Petition for Formal Hearing Under Chapter 120 and DOR filed an Answer. When the Notice of Hearing was issued by the Hearing Officer it was captioned Department of Revenue v.
Modern Plating Corp.
By Motion for Realignment of Parties filed 1 August 1980 Petitioner, by and through its attorney, requested the caption of this case be changed to show MPC as Petitioner and DOR as Respondent. At the hearing this motion was denied.
Thereafter one witness was called by Petitioner, three witnesses were called by Respondent and four exhibits were admitted into evidence. The facts in this case are not in dispute.
FINDINGS OF FACT
Modern Tool and Die, (MTD), is a privately held corporation engaged in manufacturing equipment. In 1965 they started the manufacture of bumper guards which required electroplating. They entered into agreements with MPC pursuant
to which MTD erected two buildings adjacent to their plant which they leased to MPC in which to do the electroplating of the bumper guards.
MPC is also a privately held corporation and there is no common ownership of these two companies.
The two buildings built for MPC's occupancy were partitioned, compartmented and wired as desired by MPC and at its expense. Florida Power Corporation supplied electricity to the complex through the main transformer of MTD.
In 1965 and to a lesser extent now, electricity rates per kilowatt-hour (kwh) were lowered with increased usage of electricity. Since both MTD and MPC are large users of electricity they obtain a cheaper rate if all electricity used is billed from the master meter serving MTD. Accordingly, and at the recommendation of the power company, additional transformers and meters were placed at the two buildings occupied by MPC and read monthly at or about the same time the master meter is read by the power company. The kw used at the two buildings is forwarded by MPC to MTD each month. The latter, upon receipt of the power company bill, computes the cost of the power per kwh and in turn bills MPC for its portion of the bill based upon the usage forwarded by MPC to MTD.
Upon the commencement of this working agreement between these two companies in 1965 MPC, pursuant to an oral lease, has paid rent to MTD monthly at the rate of approximately $2,400 per month. It has also paid to MTD its pro rata cost for the electricity used each month. The rent is invoiced each month on the first of the month as in Exhibit 3 and paid by the 10th by MPC. Sales tax is added to the rent and remitted to DOR.
Electricity usage is also invoiced by MTD to MPC on or about the 20th of the month and paid by MPC on or about the first of the following month. (Exhibit 4). Sales tax on the electricity used is paid by MTD to Florida Power Company who presumably remits this to DOR.
During the 15 years these two companies have shared the cost of electric power they have been audited numerous times; the arrangement was made known to the auditors; and no auditor, prior to the present, suggested that the cost of electricity was part of the rent paid by MPC upon which sales tax was due.
Notice of Proposed Assessment (Exhibit 1) in the amount of $9,747.34 is based upon the cost of electricity billed to MPC during the period of the audit December 1, 1976 through November 30, 1979 multiplied by 4 percent sales tax plus penalties and interest. The parties stipulated to the accuracy of this amount. They differ only as to whether the tax is owed.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties and the subject matter of these proceedings.
DOR contends that since MPC petitioned for a hearing MPC had the burden of proceeding initially and has the ultimate burden of proof in these proceedings. The principal authority cited to support this position is National Sun Control Company v. Department of Revenue, DOAH No. 77-1080 entered 22 November 1977 in which the Governor and Cabinet as head of the Department of
Revenue adopted the proposed order submitted by the Department and containing this legal conclusion.
In National Sun Control the Hearing Officer took the position that, although the case was styled with National Sun Control as Petitioner, it was incumbent upon the Department to present a prima facie case that some tax was owed by the tax payer before the latter had to present any defenses he may have to avoid the tax. After finding the facts the Hearing Officer ruled as a matter of law that the taxpayer in National Sun Control owed the taxes as alleged in the Notice of Proposed Assessment. That finding was approved by the Department in its proposed order submitted to the Governor and Cabinet. Also contained in this proposed order was the legal conclusion that the taxpayer had the burden of proof that no tax was owed.
Interpretation of the law by the agency administering it is given great weight by the courts. United States Gypsum Company v. Green, 110 So.2d
409 (Fla. 1959). Such interpretations which are a necessary part of the holding of the case should be binding in subsequent administrative hearings under the doctrine of stare decisis. However, the ruling made in the National Sun Control case was not necessary to the decision that the taxpayer owed the tax and this ruling, therefore, constituted dictum.
Because of this and the understanding of the undersigned that, under the APA, the Department of Revenue should be treated the same as other state agencies the motion to realign the parties was denied.
In instituting a proceeding to recover unpaid taxes from a taxpayer the DOR usually discovers the deficiency during an audit. If the taxpayer cannot satisfy the auditor that no tax is owed the taxpayer is sent a Notice of Proposed Assessment and is given the opportunity to request an informal conference with DOR representatives. If this conference does not resolve the matter, then the taxpayer is entitled to request a formal hearing pursuant to Section 120.57(1), Florida Statutes. Until the taxpayer has been afforded his right to an administrative hearing, the agency, pursuant to the APA, cannot take final agency action from which it may initiate steps to recover the taxes alleged to be due. Then during the hearing process, DOR, like any other agency which has issued a notice of alleged violation, notice of tax due, or administrative complaint has the burden of presenting a prima facie case before the Respondent must present his defenses, if any.
Prior to the administrative hearing (if a hearing is requested by the taxpayer) DOR cannot take action to collect the taxes allegedly owed. This hearing is an integral step in the agency's decision-making process. McDonald
v. Department of Banking and Finance, 346 So.2d 569 (Fla. 1 DCA 1977). At this stage it is incipient agency action which will mature into an order, following the hearing, that the taxpayer does or does not owe the taxes as alleged. Department of General Services v. Willis, 344 So.2d 580 (Fla. 1st DCA 1977). Prior to the completion of the hearing and rendering of a final order there is no presumption that the taxpayer owes taxes. Maas Brothers v. Dickinson, 195 So.2d 193 (Fla. 1967). Nor, absent a showing by DOR of some taxable transaction, can there be a burden upon a taxpayer to prove he owes no taxes.
As stated in O'Neil v. Pallot, 257 So.2d 59.61 (Fla. 1st DCA 1972):
It is only after an administrative hearing with all of the procedural safeguards has been had that a pre-
sumption of correctness can be indulged in by the courts as to any administrative action which is quasi-judicial in character.
The APA prescribes the process by which disputed facts are found. McDonald, supra. By protesting the Notice of Proposed Assessment and requesting a hearing MPC has said I do not concur that taxes are owed. If DOR presents no evidence at the administrative hearing and MPC stands moot there is no evidence upon which the Hearing Officer can find that taxes are owed by MPC. Since findings of fact must be supported by competent substantial evidence it is difficult to understand DOR's position that it is not the Petitioner when it is a party to proceedings in which it seeks to collect taxes from a party. A prima facie case must be established that taxes are owed before such a finding can be made.
Here the style of the case, as proposed by DOR in its answer to the petition for hearing, was changed by this Hearing Officer to show DOR as Petitioner and MPC as Respondent. Normally the Petitioner in an administrative proceeding is the first to present evidence. Here DOR is seeking an order that MPC owes the taxes as alleged. As in court proceedings, the burden of proof, apart from statute, is on the party asserting the affirmative of an issue before an administrative tribunal. Balino v. HRS, 348 So.2d 349 (Fla. 1st DCA 1977). The burden of proving a basis for disciplinary action against an employee rests with the appointing authority and is not altered by the fact employee has to "appeal" to get a hearing. Fitzpatrick v. City of Miami Beach, 328 So.2d 578 (3rd DCA 1976). In a hearing for termination of disability retirement benefits, burden of proving the retired policeman was no longer totally and permanently disabled to perform some useful and efficient service for his former employer, police department, was on the Division of Retirement and not on the police officer. Amico v. Division of Retirement, 352 So.2d 556 (1st DCA 1977)
With the first witness called DOR presented a prima facie case that the books and records of MPC were audited and these books and records showed sales taxes had not been paid on the electricity which MPC had bought from MTD. Absent this prima facie case there would have been nothing for Respondent herein to rebut to escape liability for paying the taxes Petitioner alleges are owing.
Assuming arquendo that the Notice of Proposed Assessment can be considered to carry with it a presumption of correctness, it would fit the definition of "Presumptions" in Section 90.301, Florida Statutes, as a rebuttable presumption. Section 90.302 classifies rebuttable presumptions as either:
A presumption affecting the burden of producing evidence and requiring the trier of fact to assume the existence of the presumed fact, unless credible evi- dence sufficient to sustain a finding of the nonexistence of the presumed fact is introduced, in which event, the existence or nonexistence of the presumed fact shall be determined from the evidence without regard to the presumption; or
A presumption affecting the burden of proof that imposes upon the party against whom it operates the burden of
proof concerning the nonexistence of the presumed fact.
Petitioner appears to take the position that the Notice of Proposed Assessment fits into category (2) above and places upon the Respondent the burden of proving the proposed assessment is not correct. Even if this position is correct DOR will still have to introduce into evidence the proposed assessment before the presumption comes into being. For that reason alone DOR should be the Petitioner when it is seeking to collect taxes it claims are owed.
Section 212.031, Florida Statutes, relates to sales taxes on commercial realty and provides in pertinent part:
(1)(a) It is declared to be the legis- lative intent that every person is exercising a taxable privilege who engages in the business of renting, leasing, or letting any real property unless such property is:
[Exceptions not applicable here]
* * *
(c) For the exercise of such privi- lege a tax is levied in the amount equal to 4 percent of and on the total rent charged for such real property by the person charging or collecting the rental.
* * *
(3) The tax imposed by this section shall be in addition to the total amount of the rental and shall be charged by the lessor or person receiving the rent in and by a rental arrangement with the lessee or person paying the rental and shall be due and payable at the time of the receipt of such rental payment by the lessor . . . .
Here sales tax on the rental paid pursuant to the oral lease has been paid since 1965. Rule 12A-1.70(3) Florida Administrative Code, provides in pertinent part:
The tax shall be paid by the tenant on all considerations due and payable for the privilege of occupancy on or after July 1, 1969, notwithstanding the fact that the lease or rental contract may have been executed prior to July 1, 1969.
Respondent's position that the furnishing of electricity to the lessee by the lessor is part of the rent paid for the leased premises is not consonant with the facts presented at the hearing and noted above. Absent some connection between the joint purchase of electricity and the rental of the buildings occupied, the sharing of electricity costs cannot be deemed rent. The evidence was clear that the continued occupancy of the premises is not conditioned on or related to the use of electricity in the building. The cost for electricity is directly proportional to the amount used. Both the lease and the sharing of the
electricity costs are independent agreements between the parties. Neither of these oral contracts is void or voidable because of the Statute of Frauds or for any other reason.
Section 212.081(3)(b) , Florida Statutes, provides in pertinent part:
It is also the legislative intent that there shall be no pyramiding or duplication of excise taxes levied by the state under this chapter . . . .
To require Respondent to pay sales tax on the invoice amount of its share of the electricity used, upon which sales tax has already been paid, would be contrary to the legislative intent above quoted.
Petitioner cites several cases supporting its position. In one line of cases the tenant agrees in the lease to pay ad valorem taxes on the property. This is clearly a benefit flowing to the lessor and is properly subject to sales tax as consideration paid for the privilege of occupying the premises.
Relieving the lessor of his obligation to pay taxes which will be due and payable whether or not the premises are occupied is quite different from the tenant paying for the electricity he uses. No consideration flows to the lessor by lessee paying for the electricity it uses. If it used no electricity there would be no reimbursement to the landlord and the landlord would receive no benefit from the lessee paying for its own use of electricity.
Petitioner also cites cases involving the tenant paying to the landlord a percentage of sales as consideration for the occupancy of the leased premises. Again this is a benefit flowing to the landlord and is clearly subject to sales tax as "rent" under the definition of Rule 12A-1.70(3), Florida Administrative Code.
Ryder Truck Rental v. Bryant, 170 So.2d 822 (Fla. 1964) is cited by Petitioner for the proposition that no pyramiding of taxes occurs if sales taxes are levied upon vehicles purchased solely for the purpose of renting them to customers. Perhaps Rule 12A 1.71(2), Florida Administrative Code, was not in being when that case was decided or was not made known to the Court. That rule, which is presumed to be the Department of Revenue's interpretation of the statute they enforce, states:
Equipment purchased solely for rental purposes is exempt at the time of its acquisition.
This rule has nullified the holding in Ryder, supra.
Here the only benefit flowing to the lessor from the sharing-of-the- electricity arrangement is a slight reduction in MTD's electricity costs which result from the lower rates with increased usage. The current trend in this energy-conscious environment is away from encouraging large users of electricity by lower rates for higher usage. Therefore, the benefit if it still exists, is considerably less than it was in former years.
From the foregoing it is concluded that by paying its pro rata share for the electricity used by it, Respondent is not paying additional rent to MTD upon which it would be required to pay sales tax. Accordingly, the proposed
assessment for sales tax on the electricity used by Respondent is invalid and should be withdrawn. It is therefore
RECOMMENDED that the Notice of Proposed Assessment of Tax, Penalties and Interest issued to Modern Plating Corporation on March 11, 1980 in the amount of
$9,747.34 be withdrawn and this case dismissed.
Entered this 2nd day of September, 1980.
COPIES FURNISHED:
Barbara S. Harmon, Esquire Assistant Attorney General Department of Legal Affairs The Capitol, Room LL04 Tallahassee, Florida 32301
Elizabeth J. Daniels, Esquire
P. O. Box 368
Clearwater, Florida 33517
N. AYERS 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 2nd day of September, 1980.
================================================================= AGENCY FINAL ORDER
=================================================================
STATE OF FLORIDA, DEPARTMENT OF REVENUE TALLAHASSEE, FLORIDA
MODERN PLATING CORP.,
Petitioner,
vs. CASE NO. 80-1295
STATE OF FLORIDA, DEPARTMENT OF REVENUE,
Respondent.
/
FINAL ORDER
Pursuant to notice the Division of Administrative Hearings, by its duly designated Hearing Officer, K. N. Ayers, held a public hearing in the above styled case on 13 August 1980 at Clearwater, Florida.
APPEARANCES
For Petitioner: Elizabeth J. Daniels, Esquire
Post Office Box 368 Clearwater, Florida
For Respondent: Barbara S. Harmon, Esquire
Assistant Attorney General Department of Legal Affairs The Capitol Room LL04 Tallahassee, Florida 32301
By Petition for Formal Hearing, Modern Plating Corporation contests the proposed assessment of tax, penalties and interest alleged due from it by the Department of Revenue in Notice of Proposed Assessment dated March 11, 1980. Here MPC filed a Petition for Formal Hearing under Chapter 120 and DOR filed an Answer. When the Notice of Hearing was issued by the Hearing Officer it was captioned Department of Revenue v. Modern Plating Corp.
By Motion for Realignment of Parties filed 1 August 1980 DOR by and through its attorney, requested the caption of this case be changed to show MPC as Petitioner and DOR as Respondent. At the hearing this motion was denied.
Thereafter one witness was called by DOR, three witnesses were called by MPC and four exhibits were admitted into evidence. The facts in this case are not in dispute.
FINDINGS OF FACT
Modern Tool and Die, (MTD), is a privately held corporation engaged in manufacturing equipment. In 1965 they started the manufacture of bumper guards which required electroplating. They entered into agreements with MPC pursuant to which MTD erected two buildings adjacent to their plant which they leased to MPC in which to do the electroplating of the bumper guards.
MPC is also a privately held corporation and there is no common ownership of these two companies.
The two buildings built for MPC's occupancy were partitioned, compartmented and wired as desired by MPC and at its expense. Florida Power Corporation supplied electricity to the complex through the main transformer of MTD.
In 1965 and to a lesser extent now, electricity rates per kilowatt-hour (kwh) were lowered with increased usage of electricity. Since both MTD and MPC are large users of electricity they obtain a cheaper rate if all electricity used is billed from the master meter serving MTD. Accordingly, and at the recommendation of the power company, additional transformers and meters were placed at the two buildings occupied by MPC and read monthly at or about the same time the master meter is read by the power company. The kwh used at the
two buildings is forwarded by MPC to MTD each month. The latter, upon receipt of the power company bill, computes the cost of the power per kwh and in turn bills MPC for its portion of the bill based upon the usage forwarded by MPC to MTD.
Upon the commencement of this working agreement between these two companies in 1965 MPC, pursuant to an oral lease has paid rent to MTD monthly at the rate of approximately $2,400 per month. It has also paid MTD its pro rata cost for the electricity used each month. The rent is invoiced each month on the first of the month as in Exhibit 3 and paid by the 10th by MPC. Sales tax is added to the rent and remitted to DOR.
Electricity usage is also invoiced by MTD to MPC on or about the 20th of the month and paid by MPC on or about the first of the following month. (Exhibit 4). Sales tax on the electricity used is paid by MTC to Florida Power Company who presumably remits this to DOR.
During the 15 years these two companies have shared the cost of electric power they have been audited numerous times; the arrangement was made known to the auditors; and no auditor, prior to the present, suggested that the cost of electricity was part of the rent paid by MPC upon which sales tax was due.
Notice of Proposed Assessment (Exhibit 1) in the amount of $9,747.34 is based upon the cost of electricity billed to MPC during the period of the audit December 1, 1976, through November 30, 1979, multiplied by 4 percent sales tax plus penalties and interest. The parties stipulated to the accuracy of this amount. They differ only as to whether the tax is owed.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties and over the subject matter of these proceedings.
The Hearing Officer's denial of DOR's Motion for Realignment of Parties was erroneous.
The actions of administrative officials within the scope of their authority are presumed to be correct. 73 C.J.C. Public Administrative Bodies and Procedures, Section 63. This applies to action by taxing officials. The Legislature has stated that tax assessments are prima facie correct throughout the tax statutes. See Section 199.232(5)(b), F.S. (involving intangible personal property tax); Section 212.14, F.S. (involving sales and use tax); Section 206.075, F.S. (involving motor fuel tax); and Section 214.06(1) and (2),
F.S. (Tax Administration Act). See also, Section 201.06, F.S., tax).
A virtually unanimous rule in court proceedings is that the party bringing the action has the burden to go initially forward with the evidence.
The burden of proof of plaintiff's claim must be carried by the plaintiff.
Ness v. Cowdery, 149 So. 33 (Fla. 1933). The defendant has no duty to go forward with evidence until the plaintiff establishes a prima facie case. Greenfield Real Estate Inc. Corp. v. Merritt, 348 So.2d 1199 (Fla. 3rd D.C.A. 1977). In administrative proceedings, the burden of proof ordinarily rests on an applicant for relief, benefits, or a privilege, or on the one making charges.
73 C.J.S. Public Administrative bodies and Procedures Section 124. A taxpayer challenging an ad valorem tax assessment before an administrative board has the
burden of proof, because the taxpayer's claim for relief constitutes the "affirmative" side of the issue. Withers v. Metropolitan Dade County, 290 So.2d
573 (Fla. 3rd D.C.A. 1974). See also, Walker v. State Dept. of Transportation, 352 So.2d 126 (1st D.C.A. Fla. 1977), and Green v. Wisner, 119 So.2d 814, 816 (Fla. 2d D.C.A.) 1960), holding that the taxpayer had the "burden of explanation."
The United States Supreme Court case of Helvering v. Taylor, 293 U.S. 507 (1935) involved a writ of certiorari to review a judgment reversing an order of the Federal Board of Tax Appeals. The Court stated, "Unquestionably the burden of proof is on the taxpayer to show that the commissioner's determination is invalid." 293 U.S. at 515.
At least one Florida court has held that a notice of assessment, issued by the Department of Revenue, does not put the state in the sword-wielder position. In Department of Revenue v. First Federal Savings and Loan Association, 256 So.2d 524 (Fla. 2nd D.C.A. 1971) the issue of venue was raised in a dispute between the Department of Revenue and a taxpayer over the Department's assessment of intangible tax. The court held that venue must lie in the county in which the Department of Revenue maintained its official headquarters and stated:
It undisputedly appears that the only action taken by the Department of Revenue was to send a "formal notice assessment and demand" for delinquent intangible taxes, specifying the amount and date due. The notice further advised that the tax should be paid "to avoid the service of a tax warrant to effect collection. . . ." We think this "notice" was a mere naked demand, and we perceive a material distinction between such a demand and affirmative action to enforce that demand. There was, in our view, no "official action" within the contemplation of the aforementioned rule upon which venue in Lee County could be predicated.
Now arguendo, there may have been a threat to enforce the aforesaid demand by tax warrant. But there was no assertion that a warrant would certainly be sought nor was a deadline given therefore. We construe the "threat," therefore, as contingent rather than real and anticipatory rather than imminent. In fact, it is hardly more than a recitation of a possible legal remedy available for enforcement of the demand.
The question to be answered in these cases may be said to be whether the state is the initial sword-wielder in the matter and whether the plaintiff's action is in the nature of a shield against the state's thrust. If so, then the suit may be maintained in the country wherein the blow has been or is immenently about to be laid
on. On the other hand if plaintiff is the prime mover in the premises against a passive or dormant state or state agency then venue lies properly in the county wherein the state of the agency maintains its official headquarters. Appellant's plea of privilege herein should have been honored. (e.s.)
In the case of National Sun Control Company v. State of Florida, Department of Revenue, Division of Administrative Hearings, Case No. 77-1080, the Department of Revenue issued a Final Order, wherein it held that, in challenging a sales tax assessment, the taxpayer bears the burden of proof. The law in Florida is well established that contemporaneous construction of a statute by those charged with its enforcement and interpretation is entitled to great weight, and that the courts will not depart from such construction unless it is clearly erroneous. United States Gypsum Company v. Green, 110 So.2d 409 (Fla.
1959); Warnock v. Florida Hotel and Restaurant Commission, 178 So.2d 917 (Fla. 3rd D.C.A. 1965); Green v. Hood, 120 So.2d 223 (Fla. 2d. D.C.A. 1960); Kirk v.
Western Contracting Corp., 216 So.2d 503 (Fla. 1st D.C.A. 1969).
The Hearing Officer's Recommended Order quickly dismissed this reasoning by stating that the National Sun Control ruling on burden of proof constituted dictum. However, the approval by Florida's Governor and Cabinet following the long-established rules concerning presumption of correctness of tax assessments and burden of proof cannot be ignored.
An additional reason supporting the proposition that the burden of proof is on the taxpayer is that the transactions upon which the tax is levied are the taxpayer's transactions. All information and records which would be relevant in determining the validity of the assessment are peculiarly within the taxpayer's control. See Balino v. Dept. of Health and Rehabilitative Services, 348 So.2d 349 (Fla. 1st D.C.A. 1977).
Section 212.031, Florida Statutes, relates to sales taxes on commercial realty and provides in pertinent part:
(1)(a) It is declared to be the legislative intent that every person is exercising a taxable privilege who engages in the business of renting, leasing, or letting any real property unless such property is:
[Exceptions not applicable here]
* * *
(c) For the exercise of such privilege a tax is levied in the amount equal to 4 percent of and on the total rent charged for such real property by the person charging or collecting the rental.
* * *
(3) The tax imposed by this section shall be in addition to the total amount of the rental and shall be charged by the lessor or person receiving the rent in and by a rental arrangement with the lessee or person paying the rental and shall be due and payable at the time of the receipt of such rental payment by the lessor . . .
Here sales tax on the rental paid pursuant to the oral lease has been paid since 1965. Rule 12A-170(3), Florida Administrative Code, provides in pertinent part:
The tax shall be paid by the tenant on all considerations due and payable for the privilege of occupancy or after July 1,
1969, notwithstanding the fact that the lease or rental contract may have been executed prior to July 1, 1969.
Respondent's position that the furnishing of electricity to the lessee by the lessor is part of the rent paid for the leased premises is not consonant with the facts presented at the hearing and noted above. Absent some connection between the joint purchase of electricity and the rental of the buildings occupied, the sharing of electricity costs cannot be deemed rent. The evidence was clear that the continued occupancy of the premises is not conditioned on or related to the use of electricity in the building. The cost for electricity is directly proportional to the amount used. Both the lease and the sharing of the electricity costs are independent agreements between the parties. Neither of these oral contracts is void or voidable because of the Statute of Frauds or for any other reason.
Section 212.081(3)(b), Florida Statutes, provides in pertinent part:
It is also the legislative intent that there shall be not pyramiding or duplication of excise taxes levied by the state under this chapter. . . .
To require Petitioner to pay sales tax on the invoice amount of its share of electricity used, upon which sales tax has already been paid, would be contrary to the legislative intent above quoted.
Respondent cites several cases supporting its position. In one line of cases the tenant agrees in the lease to pay ad valorem taxes on the property. This is clearly a benefit flowing to the lessor and is properly subject to sales tax as consideration paid for the privilege of occupying the premises.
Relieving the lessor of his obligation to pay taxes which will be due and payable whether or not the premises are occupied is quite different from the tenant paying for the electricity he uses. No consideration flows to the lessor by lessee paying for the electricity it uses. If it used no electricity there would be no reimbursement to the landlord and the landlord would receive no benefit from the lessee paying for its own use of electricity.
Respondent also cites cases involving the tenant paying to the landlord a percentage of sales as consideration for the occupancy of the leased premises. Again, this is a benefit flowing to the landlord and is clearly subject to sales tax as "rent" under the definition of Rule 12A-1.70(3), Florida Administrative Code.
Here the only benefit flowing to the lessor from the sharing-of-the- electricity arrangement is a slight reduction in MTD's electricity costs which result from the lower rates with increased usage. The current trend in this energy-conscious environment is away from encouraging large users of electricity
by lower rates for higher usage. Therefore, the benefit, if it still exists, is considerably less than it was in former years.
From the foregoing it is concluded that by paying its pro rata share for the electricity used by its, Petitioner is not paying additional rent to MTD upon which it would be required to pay sales tax. Accordingly, the proposed assessment for sales tax on the electricity used by Petitioner is invalid and should be withdrawn. It is therefore
ORDERED that the Notice of Proposed Assessment of Tax, Penalties and Interest issued to Modern Plating Corporation on March 11, 1980, in the amount of $9,747.34 be withdrawn.
DONE THIS 1st day of December, 1980.
RANDY MILLER EXECUTIVE DIRECTOR
| Issue Date | Proceedings |
|---|---|
| May 16, 1981 | Final Order filed. |
| Sep. 02, 1980 | Recommended Order sent out. CASE CLOSED. |
| Issue Date | Document | Summary |
|---|---|---|
| Dec. 01, 1980 | Agency Final Order | |
| Sep. 02, 1980 | Recommended Order | Petitioner should withdraw attempt to collect penalties/back taxes due on lease/power sharing arrangement. There was no benefit from lessor to lessee shown. |
