STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

EASTERN FEDERAL CORPORATION, )

)

Petitioner, )

)

vs. ) CASE NO. 86-1437

)

OFFICE OF THE COMPTROLLER, )

STATE OF FLORIDA, )

)

Respondent, )

)

RECOMMENDED ORDER

Pursuant to notice, an administrative hearing was held before William R. Cave, Hearing Officer with the Division of Administrative Bearings on August 25, 1986 in Tallahassee, Florida. The issue for determination is whether Petitioner is entitled to a refund of sales tax allegedly overpaid during the period of time from September, 1983 through May, 1985 and for the period of time covered by a previous audit dated October, 1982.

APPEARANCES

For Petitioner: Gordon D. Cherr, Esquire

Post Office Drawer 229 Tallahassee, Florida 32302

For Respondent: Daniel C. Brown, Esquire

Assistant Attorney General Department of Legal Affairs Tax Section, The Capitol Tallahassee, Florida 32301

BACKGROUND

In this proceeding, Petitioner is challenging the Respondent's denial of its applications for refund of sales tax allegedly overpaid during the period of time from September, 1982 through May, 1985 and for the period of time covered by a previous audit dated October 1, 1982 and alleges that it has shown "proof to the contrary" in accordance with Rule 12A- 1.11(37), Florida Administrative Code that its effective tax rate for each period of time relevant to this matter is less than the presumptive effective tax rate effective during the relevant periods.

In support of its position, Petitioner presented the testimony of Paul Lloyd and Ted Harrison. Petitioner's Exhibits A through L were received into evidence. Respondent objected to the admission of Petitioner's Exhibits M through Q on the ground that Petitioner had failed to comply with Section 90.956, Florida Statutes. The undersigned reserved ruling on Respondent's objections and allowed the parties to submit written memorandums with the understanding that should the objection be sustained and the exhibits not be

received into evidence then all testimony in regard to those exhibits would be stricken. Having heard argument of counsel and reviewed the memorandums of law, the Respondent's objections to the admission of Petitioner's Exhibits M through Q are sustained and the exhibits and all testimony regarding the exhibits are excluded from the evidence.

Respondent presented no witnesses. Respondent's Exhibit A was received into evidence.

The parties submitted posthearing Proposed Findings of Fact and Conclusions of Law. A ruling on each proposed finding of fact has been made as reflected in the Appendix to this Recommended Order.

FINDINGS OF FACT

1. Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found:

   
   

2. Petitioner, a corporation headquartered in Charlotte, North Carolina, is in the business of operating movie theatres both within and without the State of Florida. At these theatres Petitioner Operates concession stands which sell both candy items and drinks in various sizes at different prices to persons who frequent the theatres.

   
   

3. For the period of time from September, 1985 through May, 1985, Petitioner remitted to the Department of Revenue sales tax on the total taxable value of all taxable items sold at its concession stands in all of its Florida theatres, in accordance with the presumptive effective rate of tax of 5.63 percent contained in Rule 12A-1.11(37), Florida Administrative Code.

   
   

4. As a result of an audit for a previous period dated October 1, 1982, Petitioner remitted to the Department of Revenue the amount of $10,637.00 for sales tax on taxable items sold at its concession stands during this audit period in accordance with the presumptive effective tax rate of 4.5 percent as contained in Rule 12A-1.11(37), Florida Administrative Code during the audit period.

   
   

5. On August 15, 1985, Petitioner filed with the Department of Revenue, as agent for Respondent, two (2) applications for sales tax refund in the amount of

   $16,876.52 and $10,637.00. The applications were dated August 13, 1985, and were timely filed.

   
   

6. During the refund periods at issue in this matter, the Petitioner: (a) posted and charged flat prices for the various items offered for sale, which prices included sales tax (b) kept records of daily and weekly sales of taxable items at each of its Florida theatres (c) kept records of daily attendance at each movie shown by each Florida theatre and (d) kept records of weekly calculations, through inventory analysis, of sales of drinks and candy items, including the number, size and price of each item sold at each of its Florida theatre.

   
   

7. During the refund periods at issue in this matter, the Petitioner did not maintain cash registers at its concession stands in its Florida theatres and did not maintain records made contemporaneously with the sale of taxable items from the concession stands which separately itemized the amounts of sales tax collected on each sale transaction occurring at the theatres' concession stands. Rather, Petitioner chose, for its own convenience, to operate a "cash

   box" operation at each of its concession stands in its Florida theatres and willingly remitted sales tax to the Department of Revenue pursuant to the presumptive effective tax rate contained in Rule 12-1.11(37), Florida Administrative Code for the relevant periods.

   
   

8. In April, 1985, Petitioner placed computerized cash registers in each of its Florida theatre concession stands. These cash registers provided tapes of each individual transaction each day, specifically recording each taxable and nontaxable sale and the amount of sales tax due on each taxable sale with a daily summation on each tape at each theatre.

   
   

9. Rule 12A-1.11(37), Florida Administrative Code, requires concessionaires such as Petitioner to remit sales tax at a rate of 5.63 percent of taxable sales under the present 5 percent statutory sales tax schedule and at

   4.5 percent of taxable sales under the previous statutory sales tax schedule unless a concessionaire, through its records, shows another effective rate by "proof to the contrary".

   
   

10. Petitioner produced an effective tax rate of 5.13 percent for the month of April 1985, for all its Florida theatres by dividing the total sales tax collected during April, 1985 by the total taxable sales during April, 1985, as evidenced by the cash register tapes from all of Petitioner's concession stands in Florida. Petitioner then used that tax rate as a base to retroactively reconstruct an effective tax rate for the refund periods by assuming that the product sales mix (product mix of products sold) and the transactional sales mix (the number of items purchased together in a single transaction by a customer) experienced during the refund periods were the same as that experienced during the month of April, 1985.

    
    

11. There was no competent evidence that the product sales mix or the transactional sales mix experienced during the refund periods were the same as that experienced during the nonth of April, 1985.

    
    

12. There is insufficient evidence in the record to support Petitioner's reconstructed effective tax rates that were used to calculate the refunds. Therefore, Petitioner has failed to show "proof to the contrary" that its reconstructed effective tax rates are correct or that the presumptive effective tax rate contained in Rule 12A-1.11(37), Florida Administrative Code were incorrect for the refund periods at issue in this matter.

    
    

    CONCLUSIONS OF LAW

    
    

13. The Division of Administrative Hearings has jurisdiction over the parties to, and the subject matter of, this proceeding. Section 120.57(1), Florida Statutes (1985).

    
    

14. Section 215.26(1), Florida Statutes, authorizes the Comptroller to refund moneys paid into the State Treasury which constitutes (a) an overpayment

    (b) a payment where no tax is due (c) any payment made in error. Petitioner contends that it is entitled to a refund of $27,513.52 1/ due to an overpayment of sales tax that resulted from Petitioner remitting sales tax based on the presumptive effective tax rate contained in Rule 12A-1.11(37), Florida Administrative Code when there was "proof to the contrary" that a less effective tax rate was applicable to Petitioner during the refund periods at issue in this matter.

15. Rule 12A-1.11(37), Florida Administrative Code requires concessionaires such as Petitioner to remit all sales tax collected, but in no event shall the tax amount to less than 5.63 percent of the gross taxable sales under the present statutory sales tax schedule or less than 4.5 percent of the gross taxable sales under the previous statutory sales tax schedule absent proof to the contrary. Therefore, if the actual sales tax collected is less than 5.63 percent or 4.5 percent, whichever is applicable, of the gross taxable sales then the concessionaire must have proof, such as cash register tapes that separately itemize the amount of sales tax collected on each item sold or other sufficient proof to support the lesser amount of sales tax remitted or an application for refund of sales tax already paid.

    
    

16. Since Petitioner seeks a refund of tax already paid it has the burden of establishing its entitlement to the refund. Here, Petitioner has failed to sustain its burden, and its application must be denied.

RECOMMENDATION

Based on the findings of fact and conclusions of law recited herein, it is RECOMMENDED that the Comptroller enter his final order DENYING Petitioner's refund applications.

Respectfully submitted and entered this 25th day of September, 1986, in Tallahassee, Leon County, Florida.

WILLIAM R. CAVE

Hearing Officer

Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32301

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 25th day of September, 1986.

ENDNOTE

1/ Petitioner's refund applications filed with the Department of Revenue and denied by the Respondent totaled $27,513.52, however, Petitioner amended its request for refund at the hearing to $20,820.57 which is based on calculations not in evidence.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 86-1437

The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties in this case.

Rulings on Proposed Findings of Fact Submitted by the Petitioner

1.-2. Adopted in Findings of Fact 1 and 2, however any fact not specifically adopted is rejected as being immaterial and irrelevant.

1. The first two sentences adopted in Finding of Fact

   5. The last sentence rejected as immaterial and irrelevant or not comporting to the substantial competent evidence in the record.

2. The first sentence adopted in Finding of Fact 8. The balance of paragraph 4 is rejected as argument or immaterial and irrelevant.

   *4. Adopted in Findings of Fact 7 and 9.

3. Adopted in Finding of Fact 4.

6.-8. Rejected as immaterial and irrelevant.

1. Rejected as immaterial and irrelevant except for issue which is set out in background.

2. Rejected as not comporting to the substantial competent evidence in the record except for reports set out in Finding of Fact 5.

3. Rejected as not comporting to the substantial competent evidence in the record.

Rulings on Proposed Findings of Fact Submitted by the Respondent

1. Adopted in Findings of Fact 1 and 2.

2. Adopted in Findings of Fact 3 and 4.

3. Adopted in Findings of Fact 5 and 6.

4. The first sentence rejected as being a statement rather than a fact. Second sentence rejected as not comporting to the substantial competent evidence in the record.

5.-10. Adopted generally in Findings of Fact 9-11.

COPIES FURNISHED:

Hon. Gerald Lewis, Comptroller Department of Banking and Finance Office of Comptroller

The Capitol

Tallahassee, Florida 32301

Gordon D. Cherr, Esquire Post Office Drawer 229 Tallahassee, Florida 32302

Daniel C. Brown, Esquire Assistant Attorney General Department of Legal Affairs Tax Section, The Capitol Tallahassee, Florida 32301

*There are two paragraphs numbered 4.

Docket for Case No: 86-001437

Orders for Case No: 86-001437