vs. ) CASE NO. 84-4203
Respondent. )
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 April 1, 1985, at Clearwater, Florida.
Peacock & Cope, P.A. 2348 Sunset Point Road
By Petition dated October 17, 1984, Clearwater Operating Corporation, Petitioner, seeks a refund of $17,389.12 paid under protest by Petitioner for unpaid sales taxes accrued by Petitioner's former tenant. As grounds for denying the refund, the Comptroller, Respondent, alleges the taxpayer took over the establishment and continued operations using the inventory of supplies and food left by the previous business owner.
At the hearing Petitioner called two witnesses, the parties stipulated to the testimony of a third witness if called, and two exhibits were admitted into evidence. There is no real dispute regarding the facts here involved.
Proposed findings submitted by the parties, to the extent incorporated herein, are adopted; otherwise, they are rejected as cumulative, redundant, immaterial, or unnecessary to the conclusions reached. Legal conclusions inconsistent with those herein contained are rejected.
Petitioner is the owner and operator of Quality Inn Royal in Clearwater, Florida, and is the owner of an adjacent building that housed AGE Royal Pub, Inc., doing business as Royal Pub Lounge and Restaurant on July 1, 1983.
In 1983 Royal Pub Lounge and Restaurant was operated by Glenn H. Hatch,
M.D. (retired), under a lease from Petitioner. During this same period Petitioner, as a special promotion, had accepted guests under an arrangement which included breakfast as part of their package. It also had members of the Philadelphia Phillies baseball team as guests, with arrangement with the team to allow the players to charge their meals at the restaurant to their rooms. On July 12, 1983, eighty-three rooms were occupied.
On July 12, 1983, Hatch failed to open the restaurant. When contacted he advised he was not going to continue operating the restaurant and pub. At this time Hatch was in arrears in rent by more than $11,000 and the food and liquor inventory totaled $2,787.15 (Exhibit 1). In order to allow it to comply with its contractual agreements with its guests, Petitioner, on July 12, 1983, entered into an agreement with Hatch (Exhibit 2) whereby Hatch surrendered his right to occupy the premises, Petitioner released Hatch from all liabilities under the lease, and Hatch agreed to hold Petitioner harmless from all liens perfected against Hatch before July 12, 1983. At this time, Petitioner was primarily concerned with providing breakfast to its guests as it had contracted to do and needed the restaurant open to comply with these contracts.
The restaurant and lounge remained closed on July 12, but Petitioner purchased additional supplies, hired personnel, and opened the restaurant on July 13, 1983, and operated the restaurant, serving breakfast and lunch to guests, for approximately one week, when a new tenant was obtained to take over the restaurant and lounge. During the period the restaurant was operated by Petitioner it closed each afternoon around 2:00 p.m. Total sales during this period was $1,352.54. The food consumed at the restaurant during this one-week operation cost approximately $500 and labor costs were approximately $1,000.
Pursuant to a city ordinance making the landlord responsible for unpaid utility bills of a tenant, Petitioner was required to pay the City of Clearwater
$2,469.21 for electricity used on the premises before July 13, 1983.
On or about August 2, 1983, the Department of Revenue filed a warrant for collection of Sales and Use taxes against AGH Royal Pub, Inc., d/b/a Royal Pub Lounge and Restaurant for unpaid Sales and Use taxes for a period of time ending July 12, 1983, in an amount of approximately $17,000. This warrant became a lien on the supplies at the facility on August 19, 1983, when recorded. On December 23, 1983, Petitioner satisfied this lien by paying $17,389.12 in order that the new tenant could get a liquor license.
On June 30, 1983, Petitioner served upon Hatch at Royal Pub Restaurant and Lounge a Notice of Delinquency in Rent in the amount of $7,825 through June 30, 1983. This notice required lessee to pay this sum within 30 days or give up possession of the premises. Petitioner had a statutory lien upon the inventory of food and liquor of the lessee superior to any lien acquired subsequent to the bringing of the property on the leased premises.
Following successful negotiations with the new tenant to operate the restaurant and lounge, Petitioner became aware of the sales tax liability
incurred during Hatch's operation of the facility when the new tenant was denied a liquor license because of the unpaid sales tax by his predecessor. In order to get the restaurant and lounge in operation by an independent operator, Petitioner paid the taxes under protest. Prior to the denial of the liquor license to the successor operator of Royal Pub Lounge and Restaurant, Petitioner was not aware of a tax liability incurred by Hatch nor could it have ascertained the existence of such liability by the exercise of due diligence. Records of delinquent sales taxes are confidential and not available to persons in the position of the landlord (Stipulation).
Petitioner is a limited partnership which owns several motels. These motels are operated by McClellan Marsh Management Corp., which has interlocking directors, with some officers common to Petitioner. Although many of these motels have restaurant facilities on the premises, these facilities are' always operated by lessees who are wholly independent of the lessor.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has juris- diction over the parties to, and the subject matter of, these proceedings. Section 212.02(2), Florida Statutes, defines "sale" to mean and include:
Any transfer 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.
Pursuant to this definition, the personal property owned by Dr. Hatch at the Royal Pub Lounge and Restaurant was sold to Petitioner when the agreement contained in Exhibit 2 was reached. Hatch transferred to Petitioner all of his interest in the restaurant and lounge and agreed to hold Petitioner harmless from all liens perfected against him prior to July 12, 1983, and in consideration therefor Petitioner released Hatch from all obligations under his lease.
Section 212.10(1), Florida Statutes, provides:
(1) If any dealer liable for any
tax, interest, or penalty levied here- under shall sell out his business or stock of goods, he shall make a final return and payment within 15 days after the date of selling the busi- ness; his successor, successors, or assigns shall withhold a sufficient portion of the purchase money to safely cover the account of such taxes, interest, or penalties due
and unpaid until such former owner shall produce a receipt from the department showing that they have been paid or a certificate stating that no taxes, interest, or penalty are due. If the pur- chasers of a business or stock
of goods shall fail to withhold a sufficient amount of the pur-
chase money as above provided, he shall be personally liable for the payment of the taxes, interest, and penalties accruing and unpaid on account of the operation of the business by
any former owner, owners, or assigns.
The statutory provision is further augmented by Rule 12A-1.55(1), Florida Administrative Code, which provides:
(1) When any dealer under Chapter 212, F.S., sells his business or stock of goods, he shall make a final return and pay any tax, interest or penalty due within fifteen days after the date of sale. It shall be the duty of the purchaser of the business
or stock of goods to obtain from the
seller a written statement from the Department of Revenue showing the amount of any unpaid tax, interest or penalty as of the date of the
sale of business, and the purchaser shall with- hold a sufficient portion of the purchase
money to cover the amount of such unpaid taxes, interest and/or penalties until the seller shall produce a receipt from the Department
of Revenue showing that said amount has been paid. If no taxes, penalty or interest are due by the seller, the seller shall present to the purchaser a statement from the Department of Revenue to that effect.
If the purchaser of a business or stock of goods shall fail to withhold sufficient amount of the purchase money as above pro- vided, he shall be personally liable for the payment of taxes, interest and penalties accruing and unpaid on account of the operation of the business by any
former owner, owners or assigns.
This rule constitutes the agency's interpretation of Section 212.10, Florida Statutes, and is entitled to great weight. Natelson v. Department of Insurance, 454 So.2d 31 (Fla. 1st DCA 1984), Sans Souci v. Division of Land Sales, Etc., 421 So.2d 623 (Fla. 1st DCA 1982).
Although the parties stipulated that the landlord (here Petitioner) could not have obtained from the Department of Revenue information regarding sales taxes due from the operator of the Royal Pub Lounge and Restaurant up to the date that Hatch went out of business, both the statute and rule implied that the seller of the business could obtain such a statement. It is submitted that this is not so within a short period of time such as was involved in this case. While no evidence was presented in this regard, common sense dictates that the Department of Revenue would issue no receipt for sales taxes paid to July 12, 1983, until after an audit had been conducted and the owner of the business had paid the taxes found due by such an audit. Nor could Petitioner protect itself
from liability for sales taxes owed except through indemnity from the seller. Since the liens for sales taxes owed had not been perfected, it would appear that Exhibit 2 provided no safety net for Petitioner.
From the foregoing it is concluded that Petitioner was the successor in operating the Royal Pub Lounge and Restaurant, that the agreement between Petitioner and Hatch was a contract for the sale of the business to Petitioner, and that the sales tax was properly levied against Petitioner as the successor to the business which had accrued liability for unpaid sales taxes. It is
RECOMMENDED that the Petition of Clearwater Operating Corporation for the refund of $17,359.12 be denied.
ENTERED this 6th day of May, 1985, at Tallahassee, Florida.
K. N. AYERS Hearing Officer
Filed with the Clerk of the Division of Administrative Hearings this 6th day of May, 1985.
Peggy Burke BeVille, Esquire Peacock & Cope, P.A.
Edwin Bayo, Esquire Assistant Attorney General Department of Legal Affairs The Capitol, Room 1601 Tallahassee, Florida 32301
Honorable Gerald A. Lewis Comptroller of Florida The Capitol
