STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

JAMES B. BEAM DISTILLING COMPANY, )

)

Petitioner, )

)

vs. ) CASE NO. 86-3625

) DEPARTMENT OF BUSINESS REGULATION ) DIVISION OF ALCOHOLIC BEVERAGES ) AND TOBACCO, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, this cause came on for formal hearing before P. Michael Ruff, duly designated Hearing Officer, in Tallahassee, Florida. The appearances were as follows:

APPEARANCES

For Petitioner: Morton Siegel, Esquire

SIEGEL, MOSES & SCHOENSTADT

10 East Huron

Chicago, Illinois 60611

For Respondent: Louisa E. Hargrett, Esquire

Staff Attorney

Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32399-1007

This cause arose upon a petition filed by James B. Beam Distilling Company seeking a special excise tax classification license, pursuant to the provisions of Section 564.06, Florida Statutes. The Respondent agency initially denied that petition based upon its view that the State of Indiana, by the pertinent statutes cited herein, imposes discriminatory taxes or requirements on alcoholic beverages manufactured or bottled outside its boundaries (including those manufactured or bottled in Florida) or provides agricultural price supports or other economic incentives or advantages exclusively for alcoholic beverages produced within its boundaries. Additionally, the Respondent denied the petition on the basis that Section 464.06(9) also provides that the special excise tax rates involved herein shall not apply to alcoholic beverages manufactured or bottled in states (here, Indiana), which provide export subsidies for agricultural products used in making said alcoholic beverages.

The cause came on for hearing as noticed. At the hearing Petitioner Beam presented three exhibits, all of which were admitted into evidence. No witnesses were presented in this case involving the petition of James B. Beam Distilling Co., although at the hearing one witness was called on behalf of

Jacquin-Florida Distilling Co. The case involving Jacquin-Florida Distilling cc., Case No. 86-3626, has, however, since been voluntarily dismissed.

The parties ordered a transcript of the proceedings and availed themselves of the opportunity to brief the issue of the Hearing Officer's jurisdiction in this matter with respect to authority to rule on the constitutional issues raised and concerning his authority to entertain this case and render a Recommended Order in the absence of disputed issues of material fact. Those briefs were timely submitted and an Order was entered May 26, 1987, finding that inasmuch as the parties agreed to the submission of this case to the Hearing Officer for a Recommended Order in the absence of a dispute of material fact, in accordance with Section 120.57, Florida Statutes, that the Hearing Officer accepted jurisdiction to determine the non- constitutional issues raised by the parties. After that Order was entered, the parties timely submitted their Proposed Recommended Orders, as agreed, on June 5, 1987.

The issue to be resolved in this proceeding concerns whether the Petitioner's application for a special excise tax classification license, pursuant to Section 564.06, Florida Statutes, should be granted. Included within that general issue is the question of whether the State of Indiana, where the beverage products for which the special excise tax classification is sought are bottled, imposes a discriminatory tax on alcoholic beverages manufactured or bottled outside of Indiana, or provides agricultural price supports, economic incentives or advantages, or export subsidies for agricultural products, related to or used in the making of such alcoholic beverages within the State of Indiana.

FINDINGS OF FACT

1. On July 15, 1986, James B. Beam Distilling Co., domiciled in Clermont, Kentucky, applied, pursuant to Section 564.06, Florida Statutes, for a special excise tax classification which that provision allows to alcoholic beverages which contain one-half of one percent or more of alcohol by volume and less than

   17.259 percent alcohol by volume. See specifically Section 564.06(2) and 564.06(10)(a), Florida Statutes. The products for which Beam seeks the special excise tax classification are made exclusively from citrus fruit and sugar cane, but are bottled by the Petitioner in the State of Indiana.

   
   

2. Sections 7.1-3-12-3 and 7.1-3-12-4 of the Indiana Code Annotated provide for the issuance of a "small winery permit" to be issued to wine making establishments which produce table wine from grapes, other fruits or honey produced in the State of Indiana and which annually produce 100,000 gallons or less of said table wine. Section 7.1-4-4-1, Indiana Code Annotated, provides that the excise tax rate per gallon for small winery permit holders is 27 cents per gallon, as contrasted to the base gallonage tax rate of 47 cents per gallon for alcoholic beverages produced from products originating without the State of Indiana or which beverages are produced and/or bottled outside the State of Indiana or which applies to producers of more than 100,000 gallons of such table wine.

   
   

3. Section 7.1-3-10-13, Indiana Code Annotated, allows proprietors of package liquor stores to allow customers to sample wines made by small wineries (of less than 100,000 gallons annual production) located in Indiana. The Indiana Code provision does not allow for sampling at package stores of other types of alcoholic beverages, including those produced and/or bottled in other states, including Florida. The sampling of such beverages is an incentive for customers to purchase the wine sampled.

   CONCLUSIONS OF LAW

   
   

4. The Division of Administrative Hearings has jurisdiction over the parties to and the subject matter of this proceeding by agreement of the parties, even though there are no disputed issues of material fact. Section 120.57, Florida

   Statutes.

   
   

5. Sections 564.06(2) and (10), Florida Statutes, authorize a special excise tax rate for alcoholic beverages containing one-half of one percent or more alcohol by volume and less than 17.259 percent alcohol by volume, provided the alcoholic content is manufactured from citrus fruits. Specifically, those fruits are varieties of the species vitis rotundifolia, vitis aestivalis ssp. simpsoni, vitis aestivalis ssp. smalliana, vitis shuttleworthii, vitis munsoniana, vitis berlandieri, citrus products, citrus by-products, sugar cane or sugar cane by-products.

   
   

6. Section 564.06(9), Florida Statutes, in turn provides that the special excise tax rate shall not apply, however, to alcoholic beverages manufactured in states which impose discriminatory taxes or requirements on alcoholic beverages manufactured or bottled outside their boundaries (including Florida) or to alcoholic beverages manufactured or bottled in states which provide agricultural price supports or other economic incentives or advantages exclusively for alcoholic beverages produced within those states' boundaries. That Subsection also provides that the special excise tax shall not apply to alcoholic beverages manufactured or bottled in states which provide export subsidies for agricultural products used in making the said alcoholic beverages.

7. Sections 7.1-3-10-13, 7.1-3-12-3, 7.1-3-12-4 and 7.1-4- 4-1, Indiana

Code Annotated, do provide economic incentives and advantages exclusively for alcoholic beverages manufactured within the State of Indiana and, pursuant to Section 564.06(9), disqualify the Petitioner from receiving the tax exemption provided therein and concomitantly the special excise tax classification license sought. The State of Indiana provides a 20 percent per gallon reduction in excise taxes for wines manufactured from Indiana products by an Indiana winery. Such lower tax rate is a direct economic advantage provided exclusively to alcoholic beverages produced within the State of Indiana of Indiana products.

1. The State of Indiana additionally allows wines manufactured from Indiana products by an Indiana winery to be provided for on-premises wine tastings by package liquor stores. By excluding other wines from the on- premises tasting advantage, the State of Indiana is thus providing an additional, economic incentive or advantage to wines manufactured within the State of Indiana by providing an opportunity for customers to thus gain an incentive to purchase the Indiana-manufactured wines.

   
   

2. It is thus concluded that the State of Indiana, where the Petitioner's products at issue are bottled, imposes discriminatory taxes in favor of Indiana- produced beverages made from Indiana products and other economic incentives or advantages exclusively for alcoholic beverages, such as those at issue, produced within the borders of Indiana. Thus the special excise tax classification license which entitles the Petitioner to the Florida tax exemption at issue should be denied.

RECOMMENDATION

Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, and the pleadings and arguments of counsel, it is, therefore

RECOMMENDED that a Final Order be entered denying the application of James

1. Beam Distilling Co. for a special excise tax classification license.

   
   

   DONE and ORDERED this 2nd day of 1987, in Tallahassee, Florida.

   
   

   P. MICHAEL RUFF Hearing Officer

   Division of Administrative Hearings The Oakland Building

   2009 Apalachee Parkway

   Tallahassee, Florida 32399-1550

   (904) 488-9675

   
   

   Filed with the Clerk of the Division of Administrative Hearings this 2nd day of July, 1987.

   
   

   APPENDIX TO RECOMMENDED ORDER, CASE NO. 86-3625

   
   

   Respondent's Proposed Findings of Fact: 1-3. Accepted.

   Petitioner's Proposed Findings of Fact:

   
   

   1. Rejected as not dispositive of the material issues presented.

   2. Rejected as immaterial to the resolution of the material issues presented.

3-4. Rejected as not material to the resolution of the issues presented and as subordinate to the Findings of Fact of the Hearing Officer.

5. Rejected as not supported by the evidence of record in this proceeding. Counsel for Petitioner did indicate in a post-hearing letter to the Hearing Officer that the Indiana Statute referenced in Paragraph 5 of the Proposed Findings of Fact authorizing the lower tax for small wineries and small winery products has been repealed effective September 1, 1987 (not September 1, 1986 as stated in the Proposed Findings of Fact number 5). The Petitioner's counsel cited a synoptic paragraph in a "Commerce Clearing House" publication as the source of this information. The Hearing Officer, however, cannot under Section 90.202, Florida Statutes, or any other provision, take official notice of the synopsis report of possible action of the Indiana Legislature referenced in the Commerce Clearing House publication excerpt, supplied post-hearing, as an attachment to Petitioner's counsel's letter. The point is that there is no competent, substantial evidence of record and admitted as evidence in this proceeding which would establish that the subject Statute has indeed been repealed, nor that all the Indiana Statutes at issue have been repealed which provide for tax advantages or economic incentives or advantages. Thus, inasmuch as the subject matter of Paragraph 5 of Petitioner's Proposed Findings of Fact is not supported by competent, substantial evidence admitted in the record of this proceeding, that Proposed Finding of Fact is rejected.

COPIES FURNISHED:

Morton Siegel, Esquire SIEGEL, MOSES & SCHOENSTADT

10 East Huron Chicago, IL 60611

Louisa E. Hargrett, Esquire Staff Attorney

Department of Business Regulation

725 South Bronough Street Tallahassee, Florida 32399-1007

James Kearney, Secretary Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32399-1007

Thomas A. Bell, Esquire General Counsel

Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32399-1007

Daniel Bosanko, Director Division of Alcoholic Beverages

and Tobacco

Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32399-1007

Docket for Case No: 86-003625

Orders for Case No: 86-003625