vs. ) CASE NO. 90-3669
Respondent. )
Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, Claude B. Arrington, held a formal hearing in the above-styled case on January 29, 1991, in Miami, Florida.
For Respondent: Lealand L. McCharen, Esquire
Whether Respondent improperly assessed taxes, interest and penalties against Petitioner.
On January 11, 1988, Respondent issued to Petitioner a "Notice of Delinquent Tax Penalty and Interest Due and Assessed" in relation to Petitioner's alleged purchase of an aircraft on January 28, 1986. This Notice reflected that Respondent had estimated the value of the aircraft as being
$35,520. Following Petitioner's protest of the Notice, Respondent issued its "Notice of Reconsideration" which upheld the assessment of the tax as a use tax. Thereafter, Petitioner requested a formal administrative hearing to challenge the assessment, and this proceeding followed.
At the formal hearing, Petitioner testified on his own behalf, and had two exhibits marked for identification. Petitioner's Exhibit 1 was not moved into evidence by Petitioner (but it was subsequently accepted into evidence as Respondent's Exhibit 10). Petitioner's Exhibit 2 was accepted into evidence.
Respondent presented the testimony of Mr. Lance Cain, Respondent's employee who investigated the underlying transaction and who prepared the subject assessment. Respondent introduced 11 exhibits, each of which was accepted into evidence.
A transcript of the proceedings has been filed. At the request of the parties, the time for filing post-hearing submissions was set for more than ten days following the filing of the transcript. Consequently, the parties waived the requirement that a recommended order be rendered within thirty days after the transcript is filed. Rule 22I-6.031, Florida Administrative Code. Rulings on the parties' proposed findings of fact may be found in the Appendix to this Recommended Order.
On January 22, 1986, American Aviation Resources, Inc., sold an airplane to Munur Yurtsever, a resident of Brazil. This aircraft was a Hansa jet model HFB-320 with U.S. registration number N71DL (the subject aircraft).
On January 28, 1986, Mr. Yurtsever transferred title of the subject aircraft to Petitioner, Selcuk Yetimoglu. At the time of the transfer, the subject aircraft was in the State of Florida undergoing repairs. At all times pertinent to this proceeding, Mr. Yetimoglu resided at 20530 Jacaranda Road, Cutler Ridge, Miami, Florida, in a residence owned by Mr. Yurtsever.
The aircraft bill of sale dated January 28, 1986, reflects that Mr. Yetimoglu was the purchaser of the subject aircraft and that Mr. Yurtsever was the seller. The bill of sale recited that the consideration paid was $20.00 and other good and valuable consideration. While the bill of sale reflects that Mr. Yetimoglu resided in Miami, Florida, the bill of sale does not state that the sale occurred in the State of Florida.
On January 29, 1986, Mr. Yetimoglu applied to the U.S. Federal Aviation Administration (FAA) for the registration of the subject aircraft in his name.
On March 13, 1986, Mr. Yetimoglu wrote to the FAA regarding the registration and stated, in pertinent part, as follows:
Mr. Munur Yurtsever sold the aircraft to me on January 28, 1986, five days after he bought the aircraft from American Aviation Resources, Inc. when he found out that the government of Brazil did not give him a (sic) permission to import the aircraft and that he could not register the aircraft in the United States because he was not a citizen of the United States.
By letter dated May 15, 1986, Mr. Yetimoglu provided the FAA proof that the subject aircraft had not been registered in Brazil.
Mr. Yetimoglu was the record owner of the subject aircraft between January 28, 1986, and March 13, 1987. On March 13, 1987, Mr. Yetimoglu sold the subject aircraft back to Mr. Yurtsever. The bill of sale identifies the purchaser as being:
Munur Yurtsever
Rico Taxi Aereo Ltda. Av. Mal. Camara 160-GR.
Rio de Janeiro - RJ Brazil
On April 8, 1987, Mr. Yetimoglu wrote the FAA and stated, in pertinent part:
... I request cancelation of U.S. registra- tion for the aircraft ... because I sold the aircraft back to Rico Taxi Aereo Ltda. ...
On January 11, 1988, Respondent issued to Petitioner a "Notice of Delinquent Tax Penalty and Interest Due and Assessed" (Notice of Assessment) based on the transaction involving Mr. Yetimoglu, Mr. Yurtsever, and the subject aircraft. The Notice of Assessment contained the following statement: "This Department has information that you purchased the following aircraft. However, there is no evidence of payment of Florida Sales and/or Use Tax". The Notice of Assessment reflected that Respondent had, pursuant to Section 212.12(5)(b), Florida Statutes, estimated the value of the aircraft as being $320,000 and assessed the following taxes, interest, and penalties:
Florida State Sales/Use Tax 5% $16,000.00 (Estimated) Per 212.06(8), F.S.
Penalty 5% per month; Maximum 25% of 4,000.00 (25%) Tax Due
Per Section 212.12(2), F.S.
Additional Penalty 11,840.00 (50%) Per 212.12(2)(a), F.S.
Interest = 1% per month from date of 3,680.00 (23%) Purchase To Date of Payment
Per Section 212.12(3), F.S.
Less Tax Paid -----------------
TOTAL DUE WITH THIS NOTICE $35,520.00
Respondent requested that Mr. Yetimoglu provide it information and documentation as to the value of the aircraft. Mr. Yetimoglu contends that he paid Mr. Yurtsever nothing for the aircraft, that the title was transferred to him and registered in the FAA in his name so that the aircraft could be test flown after it was repaired, and that Mr. Yurtsever had paid $100,000 for the aircraft. There was no evidence as to the sales price that Mr. Yetimoglu paid for the aircraft other than Mr. Yetimoglu's testimony.
Respondent estimated that the reasonable value of the subject aircraft on January 28, 1986, was $320,000. This estimate was based on an appraisal prepared for Respondent and assumed that the aircraft was in a scrapped or junked condition. Respondent generally uses a standard reference work on the
value of aircraft to assist it in estimating the value of the subject aircraft. Because of its age and model, the subject aircraft is no longer listed in this standard reference. In support of his contention that Mr. Yurtsever paid
$100,000 for the aircraft, Mr. Yetimoglu provided Respondent with a copy of a wire transfer of funds from Mr. Yurtsever to American Aviation Resources, Inc. in the amount of $100,000. However, there was no documentation provided that established that the $100,000 constituted the entire purchase price paid by Mr. Yurtsever. The dispute between the parties as to the value of the aircraft is resolved by finding, based on the greater weight of the evidence, that the reasonable value of the aircraft at the times pertinent to this proceeding was
$320,000.00.
In December 1986, while Mr. Yetimoglu was the record owner, the subject aircraft engaged in international flight between the Turks and Caicos Islands and the State of Florida.
Respondent's Notice of Redetermination, dated February 26, 1990, upheld the Notice of Assessment on the basis that the underlying transaction was subject to use tax pursuant to Section 212.06(8), Florida Statutes. The issue to be resolved was framed by the Notice of Redetermination as being: "The only issue involved pertains to a use tax assessment upon an aircraft brought into this country". This determination was based, in part, upon a letter to Respondent from an attorney who was representing Mr. Yetimoglu at the time the letter was written. 1/ The letter implied that the aircraft was brought into Florida after the title was transferred to Mr. Yetimoglu, and provided, in pertinent part, as follows:
The transferor of the aircraft, Munur Yurtsever, is a nonresident alien. His inten- tion is to deliver the plane to a purchaser outside the country. Mr. Yurtsever advises that the F.A.A. will not allow the plane to be flown in this country unless it is owned by a
U.S. resident. As it was imperative to fly the plane here in order to prepare it for its flight outside the country, Mr. Yurtsever transferred the plane to his partner, Selcuk Yetimoglu, who is a resident of the United States. ...
At the formal hearing, Mr. Yetimoglu established that the aircraft was in Florida undergoing repairs at the time the title was transferred to him. Prior to and at the formal hearing, Respondent asserted the position that use taxes, interest, and penalties were due for this transaction. In its post- hearing submittal, Respondent, for the first time in this proceeding, contends that sales taxes, interest and penalties are due for this transaction.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over this matter. Section 120.57(1), Florida Statutes.
Section 212.06(8), Florida Statutes, the statutory provision cited by Respondent as its authority for the assessment of the tax against Mr. Yetimoglu, provides, in pertinent part, as follows:
(8) Use tax will apply and be due on tangible personal property imported or caused to be imported into this state for use, consumption, distribution, or storage to be used or consumed in this state ...
Section 212.02, Florida Statutes, provides the following definition pertinent to this proceeding:
(4) "Cost price" means the actual cost of articles of tangible personal property without any deductions therefrom on account of the cost of materials used, labor or service costs, transportation charges, or any expenses whatsoever.
* * *
"Sale" means and includes:
(a) Any transfer of title or possession, or both, exchange, barter, license, lease, or rental, conditional or otherwise, in any manner or by any means whatsoever, of tangible personal property for a consider- ation.
* * *
"Sales price" means the total amount paid for tangible personal property, including any services that are a part of the sale, valued in money, whether paid in money or otherwise ...
* * *
"Use" means and includes the exercise of any right or power over tangible personal property incident to the ownership thereof, or interest therein, except that it does not include the sale at retail of that property in the regular course of business.
The term "use tax" referred to in this chapter includes the use, the consumption, the distribution, and the storage as herein defined.
Section 212.05(1), Florida Statutes, provides, in pertinent part, as follows:
It is hereby declared to be the legislative intent that every person is exercising a taxable privilege who engages in the business of selling tangible personal property at retail in this state, ...
For the exercise of such privilege, a tax is levied on each taxable transaction or incident, which tax is due and payable as follows:
1.a. At the rate of 6 percent of the sales price of each item or article of tangible per- sonal property when sold at retail in this state, computed on each taxable sale for the purpose of remitting the amount of tax due the state, and including each and every retail sale.
b. Each occasional or isolated sale of an aircraft ... which is required to be regis- tered, licensed, titled, or documented in this state or by the United States Government shall be subject to tax at the rate provided in this paragraph.
* * *
At the rate of 6 percent of the cost price of each item or article of tangible personal property when the same is not sold but is used, consumed, distributed, or stored for use or consumption in this state.
The record in this proceeding establishes that Mr. Yetimoglu held title to the subject aircraft and permitted it to engage in international flight. These acts are sufficient to constitute "use" within the meaning of Chapter 212, Florida Statutes. However, the greater weight of the evidence is that Mr. Yetimoglu did not import the subject aircraft or cause it to be imported into this state. Rather, the aircraft was imported into the State of Florida by either Mr. Yurtsever or by American Aviation Resources, Inc., and it was in the State of Florida at the time the title was transferred to Mr. Yetimoglu by Mr. Yurtsever. Consequently, it is concluded that Mr. Yetimoglu is not liable, under the facts of this case, for a use tax on this aircraft levied pursuant to Section 212.06(8), Florida Statutes, because that provision imposes the use tax "on tangible personal property imported or caused to be imported into this state for use ... ". (Emphasis added.)
Because the title of the subject aircraft was transferred to Mr. Yetimoglu, it is concluded that the transaction constituted a "sale" as defined by Section 212.02(16), Florida Statutes. Because the subject aircraft was in the State of Florida at the time of the transfer, it is concluded the transaction is subject to the assessment of sales taxes under the provisions of Section 212.05(1)(a), Florida Statutes.
It was not until the facts of this case were fully presented at the de novo formal hearing that it became apparent to Respondent that sales tax, instead of use tax, should be assessed. It can be reasonably concluded that prior to the hearing Respondent acted in reliance upon Petitioner's representations in determining its position as to the nature of the taxes that should be imposed.
Respondent correctly argues in its post-hearing submittal that sales and use taxes complement one another. Respondent could have, had it so elected, based the assessment in the alternative, i.e., pursuant to the sales tax
provisions or pursuant to the use tax provisions. See, Wanda Marine Corporation
v. State of Florida, Department of Revenue, 305 So.2d 65 (Fla. 1st DCA 1974). This case, however, does not involve an assessment based on such an alternate theory of authority. The Notice of Assessment and the Notice of Redetermination clearly stated that the tax was being assessed under the use tax provisions of Chapter 212, Florida Statutes. The parties prepared and presented their respective cases at the formal hearing based on the contention that the transaction was subject to taxation pursuant to the use tax provisions. Respondent should not be permitted to argue for the first time in its post- hearing submittal that the tax should be assessed under the sales tax provisions and not the use tax provisions. Such a change in position deprives Mr. Yetimoglu of a meaningful opportunity to challenge Respondent's position and denies him fundamental due process.
Respondent further argues that the amount Petitioner would owe based on a liability for sales tax (including interest and penalties) is the same as that for use tax. That argument is based on the assumption that Mr. Yetimoglu paid to Mr. Yurtsever the sum of $320,000 for the aircraft, the amount Respondent determined to be its estimated value. However, sales tax on the subject transaction would be computed on the basis of the aircraft's "sales price" (a term defined by Section 212.02(16), Florida Statutes) whereas use tax would be computed on the aircraft's "cost price" (a term defined by Section 212.02(4), Florida Statutes). While Respondent established the reasonable value of the aircraft based on its estimates and appraisal, the only evidence as to the sales price was Mr. Yetimoglu's testimony that he paid nothing for the aircraft. Section 214.06(2), Florida Statutes, creates a rebuttable presumption as follows:
(2) If a taxpayer fails to file a tax return, the department shall determine the amount of tax due according to its best judgment and information, and it shall issue a notice of deficiency to the taxpayer, setting forth the amount of tax and any penalties proposed to be assessed. The amount so determined by the department shall be prima facie correct and shall be prima facie evidence of the correct- ness of the amount of tax due.
It is not necessary to determine whether Mr. Yetimoglu's testimony that he paid nothing for the aircraft would be sufficient to rebut the presumption created by Section 214.06(2), Florida Statutes, because the amount of the sales price Mr. Yetimoglu paid to Mr. Yurtsever was not at issue in this proceeding. The amount of the sales price paid by Mr. Yetimoglu would have been an issue if Respondent had provided adequate notice that it contended that the transaction should be assessed pursuant to the sales tax provisions. Since Respondent's notices to Petitioner clearly expressed that Respondent was making the assessment on the authority of the use tax provisions, the "cost price" of the aircraft was at issue, not its "sales price". Because the assessment for interest and the assessment for penalties are dependent on the amount of the underlying taxes, the issue as to whether interest and penalties were properly assessed is moot.
Based on the foregoing, it is concluded that the transaction was not subject to use tax, that the dispute cannot be resolved based on Mr. Yetimoglu's liability under the sales tax provisions, and that the subject assessment should be withdrawn.
Based upon the foregoing Findings of Fact and Conclusions of Law, it is recommended that a Final Order be entered which withdraws the subject assessment.
RECOMMENDED in Tallahassee, Leon County, Florida, this 11th day of March, 1991.
CLAUDE B. ARRINGTON
Filed with the Clerk of the Division of Administrative Hearings this 11th day of March, 1991.
1/ Respondent also had available to it certain records which indicate that the subject aircraft was brought into Florida for repairs on January 6, 1986, and was in Florida when title was transferred to Mr. Yetimoglu on January 28, 1986.
APPENDIX TO RECOMMENDED ORDER, CASE NO. 90-3669
The following rulings are made on the proposed findings of fact submitted on behalf of the Petitioner.
All proposed findings of fact submitted on behalf of the Respondent have been adopted in material part by the Recommended Order.
4726 S. W. 67th Avenue Miami, Florida 33155
Lealand L. McCharen, Esquire Mark T. Aliff, Esquire Department of Legal Affairs The Capitol-Tax Section
Joseph C. Mellichamp Assistant Attorney General Department of Legal Affairs The Capitol, Tax Section
J. Thomas Herndon Executive Director Department of Revenue
All parties have the right to submit written exceptions to this Recommended Order. All agencies allow each party at least 10 days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should contact the agency that will issue the final order in this case concerning agency rules on the deadline for filing exceptions to this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the final order in this case.
