STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

IBERIA AIRLINES OF SPAIN/IBERIA ) LINEAS AREAS DE ESPANA, S.A., )

)

Petitioner, )

)

vs. ) CASE NO. 94-2792

) STATE OF FLORIDA, DEPARTMENT OF ) REVENUE, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was conducted in this case at Miami, Florida, on August 30, 1995, before Michael M. Parrish, an Administrative Law Judge of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Celestino Pena, Esquire

Iberia Airlines of Spain

1441 Brickell Avenue, Suite D Miami, Florida 33131

and

Benjamin K. Phipps, Esquire The Phipps Firm

Post Office Box 1351 Tallahassee, Florida 32302

For Respondent: Francisco M. Negron, Jr., Esquire

Office of the Attorney General The Capitol, Tax Section Tallahassee, Florida 32399-1050

and

Elizabeth T. Bradshaw, Esquire Office of the Attorney General The Capitol, Tax Section Tallahassee, Florida 32399-1050

STATEMENT OF THE ISSUE

The issue in this case is whether consumer certificates of exemption previously issued by the Department of Revenue to Iberia Lineas Aereas de Espana, S.A., should be revoked.

PRELIMINARY STATEMENT

By Notice of Intent to Revoke dated April 8, 1994, the Department of Revenue ("Department") advised Iberia Lineas Aereas de Espana, S.A. ("Iberia")

of the Department's intention to revoke Iberia's two consumer certificates of exemption. 1/ Iberia timely requested a formal hearing and the matter was referred to the Division of Administrative Hearings. 2/ Several hearing dates were scheduled and then canceled at the request of the parties as the parties made several unsuccessful efforts to submit the case for decision on the basis of a stipulated record. Ultimately, a formal hearing was held on August 30, 1995.

At the formal hearing the Department presented the testimony of two witnesses and offered three exhibits, all of which were received in evidence. Iberia did not present the testimony of any witnesses, but it did offer three exhibits, all of which were received in evidence. At the request of the Department, official recognition was taken of certain treaty materials. The parties also stipulated to a number of undisputed facts. At the conclusion of the hearing the parties requested, and were granted, 30 days from the filing of the hearing transcript within which to file their proposed recommended orders.

A transcript of the proceedings at the formal hearing was filed with the Hearing Officer on September 13, 1995. At the request of Iberia, the deadline for filing proposed recommended orders was extended to November 3, 1995, on which date both parties filed proposed recommended orders containing proposed findings of fact and conclusions of law.

On November 1, 1995, Iberia filed a motion seeking to reopen the record in this case. As grounds for the motion, Iberia stated that it wished to offer additional evidence to refute an issue the Department allegedly raised for the first time during the course of the formal hearing on August 30, 1995. In the months that followed, a great deal of time and effort was devoted to the motion to reopen the record. Numerous memorandums, responses, and replies were filed by the parties. Two motion hearings were conducted to hear argument on the motion.

On August 14, 1996, an order was issued denying Iberia's motion to reopen the record. In view of the time that had passed since the filing of the parties' proposed recommended orders and in view of the fact that both parties were represented by legal counsel who had been engaged or assigned after the formal hearing, 3/ the parties were allowed until August 30, 1996, within which to file supplemental proposed recommended orders. Both parties filed supplemental proposed recommended orders. 4/

FINDINGS OF FACT

1. Iberia is a foreign air carrier owned and controlled by the government of Spain. Iberia is an agency or instrumentality of the government of Spain. Iberia is not an agency or instrumentality of the United States Government, nor is it an agency or instrumentality of any of the states of the United States or of any county, municipality, or political subdivision of any such state. Iberia operates flights to and from several states of the United States, including Florida. Iberia purchases items for use within Florida.

   
   

2. The Department of Revenue is the agency of the State of Florida which is authorized to administer the collection of taxes and the issuance of consumer certificates of exemption pursuant to Chapter 212, Florida Statutes.

   
   

3. The two consumer certificates of exemption at issue in this proceeding were issued to Iberia by the Department on September 21, 1990. Both have an expiration date of September 21, 1995. 5/ One of the subject certificates

   indicates that Iberia is exempt as a "Federal" organization. The other indicates that Iberia is exempt as a "Government" organization.

   
   

4. The Department has continuously treated Iberia as an exempt organization since at least September 3, 1975, when the Department issued Iberia's first consumer certificate of exemption. That certificate indicated that Iberia was considered a "Federal" organization.

   
   

5. Iberia has never received any express representations from the Department as to its future entitlement to a consumer certificate of exemption.

   
   

6. All of the consumer certificates of exemption issued to Iberia have been issued as a result of some form of mistake or misunderstanding by functionaries of the Department, because Iberia has never been eligible for a consumer certificate of exemption under the provisions of Chapter 212, Florida Statutes. 6/

   
   

7. No other foreign airline or foreign air carrier currently holds a consumer certificate of exemption issued by the Department.

   
   

   CONCLUSIONS OF LAW

   
   

8. The Division of Administrative Hearings has jurisdiction over the subject matter of and the parties to this proceeding. Sec. 120.57(1), Fla. Stat.

   
   

9. Each of the consumer certificates of exemption at issue in this case is a "license" within the meaning of the definitions at Section 120.52(9), Florida Statutes (1995). In Capeletti Brothers, Inc. v. State, Department of Transportation, 362 So.2d 346 (Fla. 1st DCA 1978), the court concluded that proceedings "for revocation of a contractor's certificate of qualification are in effect license revocation proceedings. . . ." See also Cirnigliaro v. Florida Police Standards and Training Commission, 409 So.2d 80 (Fla. 1st DCA 1982), involving the revocation of a law enforcement officer's certification.

   
   

10. In a license revocation proceeding the agency bears the burden of proof with respect to the grounds for the revocation. See Associated Home Health Agency v. State, Department of Health and Rehabilitative Services, 453 So.2d 104 (Fla. 1st DCA 1984), in which the court concluded, at page 106: "In a revocation proceeding, the agency has the burden of proving the allegations of its administrative complaint justifying a license revocation." See also Dubin v. Department of Business Regulation, 262 So.2d 273 (Fla. 1st DCA 1972).

    
    

11. "The authority to issue a certificate includes the authority to revoke the certificate." Cirnigliaro v. Florida Police Standards and Training Commission, 409 So.2d 80 (Fla. 1st DCA 1982), at page 83, citing State Board of Education v. Nelson, 372 So.2d 114 (Fla. 1st DCA 1979). Further, Section 212.084(3), Florida Statutes, provides: "If the department determines that an entity no longer qualifies for an exemption, it shall revoke the tax exemption certificate of the entity."

    
    

12. The certificates of exemption issued to Iberia purport to have been issued pursuant to Section 212.08(6), Florida Statutes. That statutory provision reads as follows, in pertinent part:

    
    

    (6) Exemptions; political subdivisions.- There are also exempt from the tax imposed by this chapter sales made to the United

    States Government, a state, or any county, municipality, or political subdivision of a state when payment is made directly to the dealer by the governmental entity.

    
    

13. Exemptions in tax laws are strictly construed against the party claiming them. Florida Department of Revenue v. Canaveral Port Authority, 642 So.2d 1097 (Fla. 5th DCA 1994); Mikos v. City of Sarasota, 636 So.2d 83 (Fla. 2d DCA 1994); Capital City Country Club, Inc. v. Tucker, 613 So.2d 448 (Fla. 1993); State Department of Revenue v. Anderson, 403 So.2d 397 (Fla. 1981). Strict construction of the language of Section 212.08(6), Florida Statutes, quoted above does not permit an interpretation of the statutory language that would encompass a foreign country or a political subdivision of a foreign country. Strict construction of the subject language requires that the term "state" as used therein be construed as meaning one of the states of the United States of America.

    
    

14. Iberia is, and has been at all times material, an agency or instrumentality of the government of a foreign country; specifically the government of Spain. Iberia is not, and never has been, an agency or instumentality of the United States Government. Similarly, Iberia is not, nor has it ever been, part of any state government nor part of any county, municipality, or political subdivision of a state. Iberia is not, and never has been, eligible for exemption from taxes under Section 212.08(6), Florida Statutes. There is no other provision of Chapter 212, Florida Statutes, under which Iberia is, or ever was, eligible for exemption from taxes. The original issuance of a certificate of exemption to Iberia and all renewals of such certificates of exemption were based on a mistake of law by the Department. Accordingly, the certificates should be revoked.

    
    

15. Iberia argues that the Department is estopped from revocation of the certificates because of Iberia's long reliance on the tax exempt status granted by the Department. The circumstances of this case are insufficient to make out a case for application of the doctrine of estoppel. Here Iberia has been relying on an agency mistake of law; not on an agency mistake of fact. Such reliance is an insufficient basis for barring revocation of the certificates that should never have been issued. See, generally, State Department of Revenue

v. Anderson, 403 So.2d 397 (Fla. 1981). See also Cirnigliaro v. Florida Police Standards and Training Commission, 409 So.2d 80 (Fla. 1st DCA 1982), in which the court affirmed the agency's revocation of a certificate which had been mistakenly issued to a truthful, but nevertheless ineligible, applicant.

RECOMMENDATION

On the basis of all of the foregoing, it is RECOMMENDED that the Department of Revenue issue a Final Order in this case revoking each of the consumer certificates of exemption previously issued to Iberia.

DONE AND ENTERED this 11th day of October, 1996, at Tallahassee, Leon County, Florida.

MICHAEL M. PARRISH

Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675 SUNCOM 278-9675

Fax Filing (904) 921-6847

Filed with the Clerk of the Division of Administrative Hearings this 11th day of October, 1996.

ENDNOTES

1/ The record in this case reveals that on September 21, 1990, the Department issued to Iberia two consumer certificates of exemption. The record does not reveal why two certificates were issued to the same entity on the same day.

2/ Iberia filed a document titled "Petition For Administrative Hearing." Apparently as a result of the title of that document, when the case was docketed with the Division of Administrative Hearings it was styled as Iberia (Petitioner) versus Department of Revenue (Respondent). Inasmuch as this is a license revocation proceeding initiated by the Department, the case should have been styled otherwise. To avoid confusion at this late date in the proceedings, the style has been left unchanged and in this Recommended Order the parties have been referred to by name, rather than as Petitioner or Respondent.

3/ At the formal hearing Iberia was represented by Celestino Pena, Esquire, and the Department was represented by Francisco M. Negron, Jr., Esquire. Since the filing of Iberia's motion seeking to reopen the record, Iberia has been represented by both Mr. Pena and by Benjamin K. Phipps, Esquire. During the pendency of Iberia's motion seeking to reopen the record, Mr. Negron withdrew from further representation of the Department and Elizabeth T. Bradshaw, Esquire, appeared as successor counsel for the Department.

4/ During the preparation of this Recommended Order, careful consideration has been given to the proposed recommended orders and the supplemental proposed recommended orders filed by the parties. In view of the amendments to Chapter 120, Florida Statutes, effected by Chapter 96-159, Laws of Florida, this Recommended Order does not contain a specific ruling on each proposed finding of fact submitted by each party.

5/ The expiration dates have been extended by operation of law as a result of applications to renew the certificates, which applications have not yet been the subjects of final agency action. See Section 120.60, Florida Statutes, as amended by Chapter 96-159, Laws of Florida.

6/ The record in this case does not contain any reliable information about the circumstances under which any of the subject certificates were issued to Iberia. One of the Department functionaries testified that the certificates were issued

as a result of misleading information furnished by Iberia. Careful review of all of the evidence in this case does not reveal any reliable evidence that Iberia submitted any misleading information. To the contrary, information in the Department's file indicates that Iberia provided the Department with accurate information about its status and its activities. The reason for the Department's mistaken issuance of the subject certificates is unexplained in the record in this case.

COPIES FURNISHED:

Celestino Pena, Esquire Iberia Airlines of Spain

1441 Brickell Avenue, Suite D Miami, Florida 33131

Benjamin K. Phipps, Esquire The Phipps Firm

Post Office Box 1351 Tallahassee, Florida 32302

Elizabeth T. Bradshaw, Esquire Office of the Attorney General The Capitol, Tax Section Tallahassee, Florida 32399-1050

Linda Lettera, General Counsel Department of Revenue

204 Carlton Building Tallahassee, Florida 32399-0100

Larry Fuchs, Executive Director Department of Revenue

104 Carlton Building Tallahassee, Florida 32399-0100

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within 15 days from the date of 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: 94-002792

Orders for Case No: 94-002792