STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

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

)

Petitioner, )

vs. ) CASE NO. 93-0322

)

SOUTHEAST CENTRAL, INC., ) d/b/a PIRATES DEN SEAFOOD CAFE, )

)

Respondent. )

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

)

Petitioner, )

)

vs. ) CASE NO. 93-0329

)

CENTRAL RESTAURANTS, INC., )

d/b/a SEAFOOD PLACE, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, Don W. Davis, held a formal hearing in the above- styled case on June 23, 1993, in Jacksonville, Florida.

APPEARANCES

For Petitioner: Miguel Oxamendi, Esquire

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

For Respondents: Robert Domin, President

Southeast Central, Inc. Central Restaurants, Inc. 4359 Roosevelt Boulevard

Jacksonville, Florida 32210

STATEMENT OF THE ISSUES

The issue for determination is whether Respondents' alcoholic beverage licenses should be disciplined for violation of Chapter 561, Florida Statutes. Resolution of this issue requires a determination of whether Respondents correctly reported and remitted alcoholic beverage surcharges required for the audit period of July 1, 1990 through March 31, 1991.

Petitioner claims that Respondent Southeast Central, Inc., was deficient in reporting, surcharge payments, and penalties for the period July 1, 1990, through March 31, 1991, in the total amount of $4,121.80, contrary to Section 561.501, Florida Statutes.

Similarly, Petitioner alleges that Respondent Central Restaurants, Inc., was deficient in reporting, surcharge payments, and penalties for the same period in the total amount of $96.72.

PRELIMINARY STATEMENT

By Notice of Informal Conference and Notice to Show Cause dated July 31, 1992, Petitioner alleged Respondents failed to timely file surcharge reports and remit collected surcharges to Petitioner as required by Section 561.501, Florida Statutes, thereby subjecting their licenses to disciplinary action pursuant to provisions of Section 561.29 and Section 210.16, Florida Statutes.

Respondents requested formal administrative hearings and the matters were transferred to the Division of Administrative Hearings for conduct of formal proceedings pursuant to Section 120.57(1), Florida Statutes. The cases were consolidated and set for final hearing on March 12, 1993.

At the final hearing, Respondents presented the testimony of two witnesses and four evidentiary exhibits. Petitioner presented five evidentiary exhibits and testimony of two witnesses.

Transcript of the final hearing was filed on July 19, 1993. Proposed findings of fact submitted by the parties are addressed in the appendix to this recommended order.

FINDINGS OF FACT

1. Respondents are two corporations. Southeast Central Inc., operating as the Pirate's Den Seafood Cafe, holds license number 26-03346 SRX, series 4-COP, for premises located at 5023

   Central Restaurants, Inc., operating as the Seafood Place, holds license number 26

   Jacksonville, Florida. Robert Domin is president, sole corporate officer and sole stockholder of both corporations.

   
   

2. Petitioner's auditor performed audits with regard to records of both Respondents, following their random selection by Petitioner, to verify Respondents' compliance with surcharge requirements imposed by Section 561.501, Florida Statutes, on the retail sales of "on premise consumption" of alcoholic beverages on licensed premises. The audits covered the period of July 1, 1990 through March 31, 1991, for both Respondents, and were performed during the period of early July through August 2, 1991.

3. Alcoholic beverage licensees are afforded an opportunity to elect to report and pay the surcharge by either the purchase method or the sales method. Under the purchase method, a licensee pays the surcharge on alcoholic beverages purchased from authorized distributors. Under the sales method, licensees pay the surcharge on alcoholic beverages sold for consumption on the premises.

   
   

4. Each Respondent submitted Petitioner's form DBR 44-005E, reflecting their election of the sales method. Form DBR 44-005E also requires disclosure of the licensee's inventory of alcoholic beverages on hand prior to opening of business on July 1, 1990.

   
   

5. A licensee's reporting under the sales method is audited by the Sales Depletion Method. Under this methodology, a beginning inventory is ascertained. Second, purchases made by the licensee for the audit period are computed.

   Third, an ending inventory for the audit period is ascertained. Fourth, Gross Gallonage Available For Sale is computed by adding the beginning inventory to the purchases made during the audit period and then subtracting the ending inventory. Fifth, the Net Gallonage Available For Sale during the audit period is calculated by subtracting from the Gross Gallonage an allowance for spillage and a cooking adjustment. The end result is termed the Adjusted Sales Gallonage from which amount the amount of surcharge owed for the audit period is determined.

   
   

6. Respondents' beginning inventory figures were provided by their employee, Heather Scrape. This finding is further supported by the identification of Scrape's handwriting on Respondents' exhibit number 2 at the final Hearing by Respondent's president as being that of Scrape. The figures written on the exhibit by Scrape correspond to figures earlier provided by Respondents to Petitioner on Form DBR 44-005E and corroborate testimony of Petitioner's auditor that Scrape provided Petitioner's audit personnel with beginning inventory information for Respondents. Scrape, no longer employed by Respondents, still lives and works in the area although she did not testify at the final hearing.

   
   

7. Distributor invoices at each Respondent location were used to determine alcoholic beverage purchases by each Respondent for the audit period. The ending inventory for the audit period for each Respondent was provided to Petitioner's auditor by Respondents. The auditor considered a spillage allowance of 10 percent for draft beer and five percent for liquor, bottled or canned beer, wine coolers and wine. The spillage allowance is enunciated in Emergency Rule 7AER 90-5, effective July 1, 1990, and also codified in Rule 7A- 4.063, Florida Administrative Code. Respondents provided no documentation for cooking adjustment amounts.

   
   

8. The audit for Respondent Southeast Central, Inc., revealed a deficiency in surcharge reporting and payment of $3,294.15 with a late penalty due in the amount of $827.65. The audit for Respondent Central Restaurants, Inc., revealed a deficiency of $84.24 with a late penalty of $16.85 which, after adjustment for spillage allowance, totalled $96.72. At request of Respondents, Petitioner's auditor returned to the premises of each licensee and re-conducted the audit.

   No substantial corrections were made as a result of this effort with the minor exception of discovery of additional invoices on the premises of Respondent Southeast Central Inc., which increased, by a minor sum, the surcharge amount and penalty to the current amounts.

9. The deficiency for Respondent Southeast Central, Inc., represents 55 percent of the total surcharge due for the audit period. The deficiency for Respondent Central Restaurants represents 14 percent of the total surcharge due for the audit period.

   
   

10. Petitioner's Form DBR 44-005S states that the surcharge is to be calculated on gallons and/or ounces by reporting licensees. A conversion calculation sheet is provided on the back of the form to assist retailers in converting alcoholic beverage measurements into gallons.

    
    

11. Respondents' cash registers record the price and number of alcoholic beverages sold in terms of units, i.e., three glasses of beer, two bottles of beer, one glass of wine, etc. Respondents predetermined how many ounces of an alcoholic beverage should be in a particular drink. Respondents then used this ideal measurement or standard in calculating the surcharge due. The calculation involved multiplying the ideal standard or measurement by the units recorded through the cash registers as sold. There is no actual record made of the amount of alcoholic beverage in a unit sale.

    
    

12. Sometime after August 2, 1991, Respondents provided Petitioner's auditor with a copy of a beginning July 1, 1990 inventory report for Respondent Southeast Central, Inc., derived from application of the ideal measurement or standard as a multiplier of units of recorded sales. This action by Respondents followed completion of Petitioner's initial audits and notice to Respondents of delinquency in surcharge payment amounts. Respondents presented no explanation as to why this inventory was not provided to Petitioner's auditor in the course of her initial audit. The inventory document was also not authenticated in accordance with Section 90.901, Florida Statutes, and is not credited at this time for establishing a beginning inventory for Respondent Southeast Central, Inc., at variance with the beginning inventory reported for this Respondent on Petitioner's form DBR 44-005E.

    
    

13. Petitioner permits vendors a period of 30 days within which to remit delinquent surcharge payments following notice of delinquency. Neither Respondent complied with Petitioner's demands to remit delinquent surcharge payments discovered as the result of Petitioner's audit.

    
    

    CONCLUSIONS OF LAW

    
    

14. The Division of Administrative Hearings has jurisdiction over the parties and the subject matter. Section 120.57(1), Florida Statutes.

    
    

15. Section 561.501, Florida Statutes, imposing a surcharge on the sale of alcoholic beverages, reads in pertinent part as follows:

    
    

    561.501 Surcharge on sale of alcoholic bever- ages for consumption on the premises; penalty.

    
    

    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 sur-

       charge 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 payments to the division each month by the 15th of the month following the month in which the sur- charges are imposed. For purposes of compen- sating 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 per- cent 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.

    
    

16. The sale which is the subject of the surcharge is defined by Section 561.01(9), Florida Statutes, as follows:

    
    

    (9) "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.

    
    

17. Respondents contend that Petitioner's failure to use the inventory report prepared by Respondents and presented to Petitioner's auditor after completion of her initial audit is erroneous. While Petitioner's use of the beginning inventory provided on Form DBR 44-005E may result in the calculation of a higher surcharge, it must be remembered that Respondents' president identified Ms. Scrape's handwriting on Respondents' exhibit number 2 (the July 1, 1990 inventory report). The exhibit contains Scrape's handwriting, verified by Respondents' president, and sets forth the same beginning inventory amounts reflected on Form DBR 44-005E (Petitioner's Election Form). This corroboration of the amounts depicted on the election form filed by Respondents as the alcoholic beverage beginning inventory, further establishes the credibility of those figures. Respondents' argument is unpersuasive.

    
    

18. Petitioner bears the burden of proving the allegations of the Notice To Show Cause by clear and convincing evidence. Ferris v. Turlington, 510 So.2d

    292 (Fla. 1987). Petitioner has met that burden. The proof establishes that Respondent Southeast Central, Inc., was deficient in reporting, surcharge

    payments, and penalties for the period July 1, 1990, through March 31, 1991, in the total amount of $4,121.80, contrary to Section 561.501, Florida Statutes.

    Similarly, the proof establishes that Respondent Central Restaurants, Inc., was deficient in reporting, surcharge payments, and penalties for the same period in the total amount of $96.72.

    
    

19. Petitioner argues for the imposition of a $1,000 civil penalty upon each Respondent for violation of Chapter 561, Florida Statutes, in addition to requiring payment of the additional surcharge and penalties which, as the result of this proceeding, have been proven to be due. Imposition of such additional civil penalty appears to be authorized by the last sentence of Section 561.510(2), Florida Statutes, noted above which states that "[f]ailure to accurately and timely remit surcharges imposed under this section is a violation of the Beverage Law."

    
    

20. Additionally, Section 561.29(3), Florida Statutes, provides:

    
    

    The division may impose a civil penalty against a licensee for any violation mentioned in the Beverage Law, or any rule issued pursuant thereto, not to exceed $1,000 for violations arising out of a single transaction. If the licensee fails to pay the civil penalty, his license shall be suspended for such period of time as the division may specify. The funds so collected as civil penalties shall be deposited in

    the State General Revenue Fund.

    
    

21. Imposition of a civil penalty by Petitioner pursuant to the foregoing statute appears to lie within the discretion of Petitioner. In view, however, of the penalty amounts already determined to be due from Respondents pursuant to Section 561.501(2), Florida Statutes, recommendation of the additional civil penalties urged by Petitioner is declined.

RECOMMENDATION

Based on the foregoing, it is hereby

RECOMMENDED that a Final Order be entered requiring payment by Respondent in Case No. 93-0322 in the amount of $4,121,80, the amount of total tax and liabilities claimed by Petitioner to be due; and requiring payment by Respondent in Case No. 93-0329 of the amount of $96.72, the amount of the total tax and liabilities claimed by Petitioner to be due in that case.

DONE AND ENTERED this 4th day of August, 1993, in Tallahassee, Leon County, Florida.

DON W. DAVIS

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 4th day of August, 1993.

APPENDIX TO THE RECOMMENDED ORDER IN CASE NO. 93-0322

The following constitutes my specific rulings, in accordance with Section 120.59, Florida Statutes, on findings of fact submitted by the parties.

Petitioner's Proposed Findings. 1.-5. Accepted, not verbatim.

6.-7. Rejected, subordinate to HO findings.

8.-13. Accepted, not verbatim. Respondent's Proposed Findings.

1.-7. Accepted, not verbatim.

8.-12. Rejected, subordinate to HO findings.

1. Rejected, not relevant although this is a duty of the auditor.

2. Accepted.

3. Rejected, argumentative.

4. Rejected, no evidence presented as to theft or overpouring. Further, Respondents were given benefit of spillage allowance.

17.-18. Rejected, weight of the evidence.

COPIES FURNISHED:

Miguel Oxamendi, Esquire Assistant General Counsel Department of Business and Professional Regulation Northwood Centre

1940 North Monroe Street Tallahassee, FL 32399-0792

Robert Domin, President Southeast Central, Inc. Central Restaurants, Inc. 4359 Roosevelt Boulevard

Jacksonville, Florida 32210

Jack McCray General Counsel

Department of Business and Professional Regulation Northwood Centre

1940 North Monroe Street Tallahassee, FL 32399-0792

George Stuart, Secretary Department of Business and Professional Regulation Northwood Centre

1940 North Monroe Street Tallahassee, FL 32399-0792

John Harris, Director

Division of Alcoholic Beverages Department of Business and Professional Regulation Northwood Centre

1940 North Monroe Street Tallahassee, FL 32399-0792

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: 93-000322

Orders for Case No: 93-000322