STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS )

REGULATION, DIVISION OF ) ALCOHOLIC BEVERAGES AND TOBACCO, )

)

Petitioner, )

vs. ) CASE NO. 92-4204

)

HEMINGWAY'S OYSTER BAR & )

CARIBEAN BBQ, INC., d/b/a )

TOWNSENDS PLANTATION AND )

DOC TOMMY'S TAVERN, )

)

Respondent. )

) DEPARTMENT OF BUSINESS )

REGULATION, DIVISION OF ) ALCOHOLIC BEVERAGES AND TOBACCO, )

)

Petitioner, )

vs. ) CASE NO. 92-4205

)

HEMINGWAY'S OYSTER BAR & )

CARIBEAN BBQ, INC., d/b/a ) TOWNSENDS FISH HOUSE, OYSTER BAR ) AND TAVERN, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a final hearing in the above-styled matter was held on September 30, 1992, in Orlando, Florida, before Joyous D. Parrish, a designated Hearing Officer of the Division of Administrative Hearings. The parties were represented at the hearing as follows:

APPEARANCES

For Petitioner: Miguel Oxamendi

Assistant General Counsel Department of Business

Regulation

725 South Bronough Street Tallahassee, Florida 32399-1007

For Respondent: Richard S. Wright

Suite 1550, Firstate Tower

255 South Orange Avenue Orlando, Florida 32801

and Clay M. Townsend

35 W. Michigan Street Orlando, Florida 32806

STATEMENT OF THE ISSUES

The issue in Case no. 92-4204 is whether the Respondent correctly reported and remitted the alcoholic beverage surcharge for the audit period of July 1, 1990 through March 31, 1991. The amount claimed by the Department for this case is $5,767.82.

The issue in Case no. 92-4205 is whether the Respondent correctly reported and remitted the surcharge for the audit period of July 1, 1990 through March 31, 1991. The amount of the audit deficiency alleged by the Department for this case is $4,952.48.

PRELIMINARY STATEMENT

Case no. 92-4204 began on February 7, 1992, when the Department of Business Regulation, Division of Alcoholic Beverages and Tobacco (Department) issued a notice to show cause that alleged Respondent had failed to comply with reporting requirements and had failed to remit a surcharge as specified by Section 561.501, Florida Statutes. The amount of the surcharge deficiency was estimated from an audit of the period July 1, 1990 through March 31, 1991. On April 13, 1992, a proposed consent agreement was rejected by the Department.

Case no. 92-4205 began on February 7, 1992, when the Department issued another notice to show cause with regard to a second restaurant operated by Respondent. That notice specified that, with regard to the reporting for the same period, the audit estimated a deficiency of $4,952.48, A proposed consent agreement in connection with this case was rejected by the Department on May 4, 1992.

Both cases were forwarded to the Division of Administrative Hearings for formal proceedings on July 7, 1992. By order and notice of hearing entered July 23, 1992, the cases were consolidated for hearing and scheduled for September 30, 1992. At the hearing, the Department presented the testimony of Perry Kirkland, supervisor of the Department's Orlando office, and Maria Bailey, a tax auditor employed by the Department. The Department's exhibits numbered 1 through 4 were admitted into evidence.

Tom Smith, a bartender and bar manager employed by the Respondent, Susan MacKay, one of Respondent's general managers, and Clay Townsend, an owner and officer for Respondent, testified on behalf of the Respondent. Its exhibits numbered 1 through 4 were admitted into evidence. Respondent requested, and official recognition was taken, of a page of the Florida Administrative Weekly, volume 17, No. 2, January 11, 1991. That page is included with the exhibits maintained with this record.

A portion of the transcript of the proceedings was filed on October 13, 1992. That excerpted portion transcribed the testimony of Maria Bailey. After the hearing, the parties filed proposed recommended orders which have been considered in the preparation of this order. Specific rulings on the proposed findings of fact are included in the attached appendix.

FINDINGS OF FACT

Based upon the testimony of the witnesses and the documentary evidence received at the hearing, the following findings of fact are made:

1. The Department is the state agency charged with the responsibility of enforcing and administering Chapter 561, Florida Statutes.

   
   

2. Respondent is the owner and holder of two alcoholic beverage licenses. License no. 58-01411 which is a 4COP SRX license is for Hemingway's Oyster Bar and Caribbean Barbeque, Inc. doing business as Townsend's Fish House, Oyster Bar & Tavern (Fish House). The business location for that license is 35 West Michigan Street, Orlando, Florida.

   
   

3. The second license, license no. 58-02757, is also a 4COP SRX license for Hemingway's Oyster Bar and Caribbean Barbeque, Inc. doing business as Townsend's Plantation and Doc Tommy's Tavern (Plantation). That business location is 604 E. Main Street, Apopka, Florida.

   
   

4. Following the enactment of Section 561.501, Florida Statutes, the Department issued a form designated DBR 44-005E that directed alcoholic beverage licensees to elect a method of reporting and computing the beverage surcharge. The form directed licensees to specify whether the beverage surcharge would be paid based upon purchases or based upon sales.

   
   

5. For vendors utilizing the sales method, form DBR 44-005E required a certification of the inventory of alcoholic beverages on hand before opening for business July 1, 1990. Respondent elected to utilize the sales method.

   
   

6. The Fish House inventory certified that it had 351.05 gallons of beer (241 bottled, 110.05 draft), 79.48 gallons of wine, and 172.82 gallons of liquor on hand as of the date noted.

   
   

7. The Plantation certified it had 183.84 gallons of beer, 139.14 gallons of wine, and 99.46 gallons of liquor.

   
   

8. In May, 1991, auditors employed by the Department met with Respondent's employees at each of the licensed premises. An audit for the period July, 1990 through March, 1991, utilizing the depletion method was chosen since the licensee had elected the sales method for reporting and remitting the beverage surcharge.

   
   

9. In performing the audit at the Plantation location, the Department accepted that 74.66 gallons of liquor, 39.85 gallons of wine, and 567 gallons of draft beer were used in food preparations and were, therefore, not included in the gallons reported for surcharge purposes (cooking allowance).

   
   

10. The invoices for suppliers at the Plantation were reviewed for the following categories of purchases: draft beer, beer (presumably bottled or canned), wine coolers, wine, and liquor.

    
    

11. By adding the total of all purchases for the audit period to the beginning inventory, the Department calculated a total volume for the Plantation. In theory, by subtracting the ending inventory from the total volume resulted in the amounts of beverages consumed.

12. From that amount the Department subtracted the cooking allowance noted above, and a spillage amount provided for by rule. As it is presumed some spillage occurs in the mixing and serving of beverages, the rule provides for an offset for spillage by beverage category.

    
    

13. Following the procedure outlined above, the auditor calculated that for the audit period, the Plantation had sold 720 gallons of draft beer, 1731.61 gallons of beer, 8.55 gallons of wine coolers, 1090.70 gallons of wine, and

    546.27 gallons of liquor.

    
    

14. When compared to the reports filed by the Plantation, the auditor determined that in each category noted, the licensee had under reported the volumes sold. The difference for each category was: 494.01 gallons of draft beer, 788.25 gallons of beer, 8.55 gallons of wine coolers, 642.01 gallons of wine, and 244.93 gallons of liquor. The total additional surcharge which should have been remitted based upon the difference not reported was $5,767.82.

    
    

15. The auditors used the same approach when reviewing the records for the Fish House. The cooking allowance accepted by the Department for the Fish House was 1400 gallons beer, 67.38 gallons wine, and 9.50 gallons liquor. The spillage allowance was calculated as provided by rule. Additionally, a collection allowance was given for the Fish House in the amount of $195.85.

    
    

16. After computing the totals as described above, the auditor found a difference in each of the categories reviewed. After applying the surcharge to the unreported sales amount, the Fish House was cited for a shortage of

    $4,952.48.

    
    

17. The Fish House management claimed, as part of the volume unaccounted for, drinks which were deemed complimentary or free. However, such beverages should have been included in the volume reported as a sale.

    
    

18. Respondent also claimed that the spillage allowance provided for by rule was arbitrarily low. Also unconsidered were the losses to inventory due to theft. When such losses are deemed minimal, the theft may go unreported to police or insurance. Cumulatively such losses may be significant.

    
    

19. Also unconsidered in reconciling the inventory was the industry practice of "over pours." While discouraged by Respondent, it is not uncommon for bartenders to pour more than the standard measurement of liquor for a good customer. If so, the Respondent's practice of looking to the number of sales to determine ounces sold would have resulted in an under estimating of the ounces dispensed.

    
    

20. The auditors did not review the sales tapes or other sales records to confirm the surcharge amounts.

    
    

21. The Respondent was unaware of the audit method which would be used to review the surcharge accounting.

    
    

22. No insurance or police reports were made for the loss or stolen inventory claimed by Respondent.

    
    

    CONCLUSIONS OF LAW

    
    

23. The Division of Administrative Hearings has jurisdiction over the parties to and the subject matter of these proceedings.

24. Section 561.501, Florida Statutes, provides, in pertinent part:

    
    

    1. Notwithstanding s. 561.50 or any other provision of the Beverage Law, a surcharge of

       10 cents is imposed upon each ounce of liquor and each 4 ounces of wine, and a surcharge of

       4 cents is imposed on each 12 ounces of beer sold at retail for consumption on premises licensed by the division as an alcoholic beverage vendor.

    2. The vendor shall report and remit payment to the division each month by the 15th of the month following the month in which the surcharges are imposed. For purposes of compensating the retailer for the keeping of prescribed records and the proper accounting and remitting of surcharges imposed under this section, the retailer shall be allowed to deduct from the payment due the state 1 percent of the amount of the surcharge due. Retail records shall be kept on the quantities of all liquor, wine, and beer purchased, inventories, and sales. However, a collection allowance is not allowed on any collections that are not timely remitted. If by the 20th of the month following the month in which the surcharges are imposed, reports and remittances are not made, the division shall assess a late penalty of up to $10 per day or

       1 percent of the amount due per day for each day after the 20th of the month, whichever is greater. The division shall establish, by rule, the required reporting, collection, and accounting procedures. Records must be maintained for 3 years. Failure to accurately and timely remit surcharges imposed under this section is a violation of the Beverage Law.

       
       

25. Section 561.01(9), Florida Statutes, provides:

    
    

    "Sale" and "sell" mean any transfer of an alcoholic beverage for a consideration, any gift of an alcoholic beverage in connection with, or as a part of, a transfer of property other than an alcoholic beverage for a consideration, or the serving of an alcoholic beverage by a club licensed under the Beverage Law.

    
    

26. The Department promulgated rules related to the surcharge on the sale of alcoholic beverages for consumption as directed by Section 561.501, Florida Statutes. The first rule, enacted as an emergency rule to be effective July 1, 1990, provided for an allowance for spillage by each category of beverage sold. Respondent has been given the benefit of a reduction for spillage in accordance with the rule.

27. The Department later promulgated Rule 7A-4.063, Florida Administrative Code, which provided that a surcharge would not be due on any alcohol that is documented as missing as a result of reported theft (confirmed by a police report) or as a result of a casualty loss (confirmed by an insurance claim or report). Respondent was not given an allowance for losses under this provision.

    
    

28. In applying the statutes and rules to the subject case, the Department correctly determined that the licensee failed to accurately report and remit surcharges for alcoholic beverages sold and consumed on the licensed premises. By under estimating the number of ounces sold, the licensee reported an unreasonably low volume of sales. Whether the underestimating was affected by over pours, spillage or theft does not relieve the licensee's responsibility to correctly calculate and report ounces sold and consumed on premises. The statute clearly specifies that the surcharge is to be applied and imposed based upon the ounces of each type of beverage sold. The Department's audit method appropriately estimated the volume sold. Respondent has not provided an acceptable explanation for the volume not reported. Accordingly, Respondent is responsible for the audit surcharges computed.

RECOMMENDATION

Based on the foregoing, it is RECOMMENDED:

That the Department of Business Regulation, Division of Alcoholic Beverages and Tobacco enter a final order in case no. 92-4204 requiring the Respondent to remit an additional surcharge in the amount of $5,767.82. For case no. 92-4205, the Department should require the Respondent to remit an addition surcharge amount of $4,952.48.

DONE and ENTERED this 7th day of January, 1993, in Tallahassee, Leon County, Florida.

JOYOUS D. PARRISH

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 7th day of January, 1993.

APPENDIX TO CASE NOS. 92-4204 AND 92-4205

RULINGS ON THE PROPOSED FINDINGS OF FACT SUBMITTED BY THE PETITIONER: 1. Paragraphs 1, 2, 3, 5, 6, 7, 9, 13, 17, 18, 21, and 22

are accepted.

1. Paragraph 4--the first sentence is accepted; otherwise rejected as irrelevant or comment.

2. Paragraph 8 is rejected as irrelevant.

3. Paragraphs 10, 11, and 12 are rejected as irrelevant or argument.

4. Paragraph 14 is rejected as irrelevant.

5. Paragraph 15 is rejected as repetitive, unnecessary or irrelevant.

6. Paragraph 16 is rejected as argument.

7. Paragraphs 19 and 20 are rejected as irrelevant.

RULINGS ON THE PROPOSED FINDINGS OF FACT SUBMITTED BY THE RESPONDENT:

1. Paragraphs 1 and 2 are accepted.

2. Paragraph 3 is rejected as irrelevant.

3. Paragraph 4 is rejected as contrary to the weight of credible evidence.

1. Paragraph 5 is rejected as contrary to the weight of the evidence or irrelevant.

2. Paragraph 6 is rejected as irrelevant.

3. Paragraph 7 is rejected as irrelevant or contrary to governing law or rule.

NOTE: Respondent mistakenly has alleged facts or circumstances more appropriately raised by a rule challenge procedure. Section 120.57(1) hearings do not resolve issues related to the lawfulness of rules. Further, challenges to unpromulgated agency policy should be challenged as an unpromulgated rule.

Such challenges are not appropriate to this type of proceeding.

COPIES FURNISHED:

Miguel Oxamendi

Asst. General Counsel

Dept. of Business Regulation 725 S. Bronough Street Tallahassee, FL 32399-1007

Richard S. Wright Firstate Tower, Ste. 1550

255 S. Orange Avenue Orlando, FL 32801

Clay M. Townsend

35 W. Michigan St.

Orlando, FL 32806

Richard W. Scully, Executive Director Dept. of Business Regulation

725 S. Bronough Street Tallahassee, FL 32399-1007

Donald D. Conn, General Counsel Dept. of Business Regulation 725 S. Bronough Street Tallahassee, FL 32399-1007

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

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.

Docket for Case No: 92-004204

Orders for Case No: 92-004204