vs. ) Case No. 97-3458
Respondent. )
Robert E. Meale, Administrative Law Judge of the Division of Administrative Hearings, conducted the final hearing in Naples, Florida, on January 13, 1998.
For Petitioner: Dr. Theron Trimble
For Respondent: Kevin J. O’Donnell
The issue is whether Petitioner is entitled to a consumer’s certificate of exemption from sales and use tax.
By Notice of Intent to Deny dated June 27, 1997, Respondent denied Petitioner’s application for a consumer’s
certificate of exemption, pursuant to Section 212.08(7), Florida Statutes. Petitioner timely requested a hearing.
At the hearing, Petitioner called the only witness. The parties jointly offered into evidence two exhibits, which were admitted.
The court reporter filed the transcript on March 12, 1998.
Petitioner is a Florida not-for-profit corporation. At all material times, Petitioner has qualified as a Section 501(c)(3) organization under the Internal Revenue Code.
Since March 1992, Petitioner has also held the sales and use tax exemption that it seeks in this case. Pursuant to a change in law requiring all exempt organizations to reapply, Petitioner submitted an Application for Consumer’s Certificate of Exemption dated February 1, 1997. By stipulation, the parties agree that, for the purpose of this case, the sole legal basis for the application is Section 212.08(7)(o), Florida Statutes, and, if Petitioner fails to prevail in this case, it may immediately file an application seeking the same exemption under another statute, such as Section 212.08(7)(n).
Petitioner was incorporated in 1989. It was first incorporated in 1975, but its corporate status lapsed. Petitioner has been in operation for 40 years.
In broadest terms, Petitioner’s purpose is to assist social-studies education in Florida. Petitioner’s major activities involve training teachers of social studies.
The most important annual activity of Petitioner is to sponsor a statewide conference that gives social-studies teachers a chance to receive inservice training. This inservice training satisfies, in whole or in part, each teacher’s requirement to obtain inservice training credits in order to maintain her teaching certificate. Petitioner conducts the conference in October during inservice days on which public-school teachers statewide are generally relieved from classroom duties. Between 600 and 1200 teachers participate in this annual conference.
The conference runs two days, but Petitioner offers preconference institutes for a day or two prior to the start of the conference. These institutes, which are held at the same location as the conference, provide social-studies teachers with more specialized training in social studies.
Petitioner also assists four regional affiliates in conducting inservice training to social-studies teachers. These affiliates are the Southwest Florida Coalition for the Social Studies, Big Bend Council for the Social Studies, Central Florida Coalition for the Social Studies, and Northeast Florida Council for the Social Studies.
Petitioner works with various organizations, including the Florida Department of Education, ensuring that these organizations are aware of the interests of social- studies teachers and that the teachers are aware of the activities of these organizations.
Petitioner quarterly publishes Trends in Social Studies, which provides useful, current information to social- studies teachers. Petitioner sells advertising space in the journal, mostly to educational publishers. Petitioner provides free space to the Florida Department of Education, state universities, state community colleges, the Holocaust Center, and African-American educational centers.
Partly through the use of an endowment fund, Petitioner also provides additional funding for the development of social-studies teachers and the promotion of social-studies education. Petitioner provides awards, including small monetary sums, for exceptional social-studies teachers in Florida, and recognizes, at the annual conference, the outstanding social-studies teacher from each of Florida’s
67 districts.
Petitioner’s major sources of income are membership fees and conference registration fees. Individual teachers pay membership fees. Conference registration fees are paid by checks from individual attendees, school districts, archdioceses, and the State of Florida. Educational vendors
pay Petitioner fees for the privilege of showing their products and services at the conference. Vendors’ fees typically make up the margin by which Petitioner’s revenues exceed expenses for the conference.
Petitioner does not have any paid employees.
Dr. Theron Trimble, who started teaching social studies in Florida in 1966, is the executive director of Petitioner and has been associated with Petitioner for 30 years.
Dr. Trimble’s full-time employment is in the Collier County School District, where he is director of Fulltime Equivalents and Resource Allocations. All persons working for Petitioner are, like Dr. Trimble, volunteers with full-time educational employment throughout Florida. Petitioner pays small sums to instructors or presenters at the annual conference and pre- conference institutes, but these payments are strictly for their services in conducting their seminars.
Petitioner intends to continue helping social- studies teachers meet students’ changing needs in social- studies education. For example, Petitioner recently sponsored an inservice program designed to help teachers incorporate computers in social-studies education. At a time of reduced state involvement, Petitioner has tried to fill the gaps in funding and curriculum control. Petitioner’s funding efforts are directed toward schools and teachers, rather than school districts. Three years ago, Petitioner started an endowment fund to establish a long-term mini-grant program for social- studies teachers.
According to the Webster’s New Collegiate Dictionary, the first definition of “office” is “a special
duty, charge, or position conferred by an exercise of governmental authority and for a public purpose: a position of authority to exercise a public function and to receive whatever emoluments may belong to it <hold public ~> [and] a position of responsibility or some degree of executive authority.” The fourth definition is “something that one ought to do or must do: an assigned or assumed duty, task, or role [and] the proper or customary action of something: FUNCTION.” The fifth definition includes: “a place in which the functions (as consulting, record keeping, clerical work) of a public officer are performed [and] the directing headquarters of an enterprise or organization.” The last definition is “a major administrative unit in some governments
<British Foreign Office [and] a subdivision of some government departments <Patent Offices>.”
According to the American Heritage Dictionary of the English Language, the second and third definitions of “office” are “[a] duty or function assigned to or assumed by someone: “the maternal office was supplied by my aunt (Gibbon) [and] “[a] position of authority, duty, or trust given to a person, as in a government, corporation, or other organization: the office of vice president.” However, the fourth definition is: “[a]ny of the branches of the Federal government of the United States ranking just below the departments [and a] major executive division of the British national government, often
headed by a cabinet minister.” And the fifth and seventh definitions are “[a] public position: seek office" [and] [o]ften plural[; a]n Act performed for another, usually beneficial: a favor: 'The projected duel . . . was halted by the offices of friends on both sides.' (Katherine Anne Porter).”
Webster’s second and third definitions of “administration” are “performance of executive duties: MANAGEMENT [and] the execution of public affairs as distinguished from policymaking.” The fourth definition includes “a governmental agency or board.”
American Heritage’s first definition of “administration” is “[t]he management of affairs.” However, the second definition is “[t]he activity of a sovereign state in the exercise of its powers or duties.” The fourth definition is “[t]he management of any institution, public or private.”
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the subject matter. Section 120.57(1), Florida Statutes. (All references to Sections are to Florida Statutes. All references to Rules are to the Florida Administrative Code.)
Section 212.08(7)(o)1.b exempts from sales and use tax all transactions involving sales or leases to nonprofit
“educational institutions” when used in carrying out their customary nonprofit educational activities.
Section 212.08(7)(o)2 provides that the exemption provisions “shall be strictly defined, limited, and applied in each category . . ..” Section 212.08(7)(o)2.d defines an “educational institution,” in part, as follows:
The term “educational institutions” includes private nonprofit organizations the purpose of which is to raise funds for schools teaching grades kindergarten through high school, colleges, and universities. . . . The term “educational institutions” also includes state, district, or other governing or administrative offices the function of which is to assist or regulate the customary activities of educational organizations or members. . . .
The Legislature intends that the exemption provisions be “strictly defined, limited, and applied.” Florida courts interpret exemptions against the taxpayer. State Department of Revenue v. Anderson, 403 So. 2d 397 (Fla. 1981). Moreover, the "administrative construction of a statute by the agency or body charged with its administration is entitled to great weight and will not be overturned unless clearly erroneous." Fort Pierce Utility Authority v. Florida Public Service Commission, 388 So. 2d 1031, 1035 (Fla. 1980). See Consumer Credit Counseling Service of the Florida Gulf Coast, Inc. v. Department of Revenue, So. 2d (Fla. 2d DCA 1997) (22 Fla. L. Weekly D1613, July 2, 1997)
(Respondent's interpretation entitled to deference when "social welfare services" lacks a "common meaning").
As an applicant, Petitioner has the burden of proof or, stated in alternative, the risk of nonpersuasion. Department of Transportation v. J. W. C. Company, Inc., 396 So. 2d 778 (Fla. 1st DCA 1981).
Petitioner fails to satisfy the first sentence of the statutory definition of “educational institution.” (This recommended order refers to the first sentence in the excerpt from the statute quoted above. Section 212.08(7)(o)2.d contains six sentences, and the two quoted sentences are actually the third and fifth sentences, respectively.)
Rule 12A-1.001(f)2.c enlarges the reach of the first sentence of the statutory definition by qualifying "purpose" with "primary." However, Petitioner's primary purpose is not raising funds for schools. Petitioner's exclusive purpose is raising funds for teachers and students, perhaps indirectly raising funds for schools by relieving them of certain expenditures that they might otherwise make. Construing the exemption statute and rule against Petitioner, though, it is impossible to credit Petitioner for an indirect contribution to schools, and Petitioner therefore does not qualify for the exemption under the first sentence of the statutory definition.
Petitioner is better described in the second sentence of the statutory definition of “educational institution” because Petitioner assists the customary activities of educational organizations or their members.
The word, "offices," in the second sentence qualifies the two words and one phrase preceding it. Thus, the second sentence of the exemption statute applies to state offices, district offices, other governing offices, and other administrative offices.
The meaning of the second sentence of the statutory definition of "educational institutions" is not entirely clear. Rule 12A-1.001(f)2.d merely restates the statutory language. Difficulties in interpretation arise because "offices" are not educational institutions or even legal entities, and, strictly speaking, offices do not assist or regulate the activities of organizations or members of organizations.
"State offices" and "district offices" do not mean state agencies and school districts. Although "persons" under Section 212.02(12), and thus potentially subject to the sales tax under Section 212.05, the state, counties, municipalities, and political subdivisions of the state are exempted from the sales tax under Section 212.08(6). Thus, the "state offices" and "district offices" described in the exemption under Section 212.08(7)(o)2.d do not describe, for example, the
Florida Department of Education or school districts in Florida.
Several of the definitions of "office" contemplate a public entity, such as a state government or political subdivision of a state government. These definitions are inapplicable, though, because, as noted above, the statutory definition of "educational institution" at Section 212.08(7) should not be construed as partly duplicative of the broad definition afforded such public entities at Section 212.08(6).
The use of the plural, "offices," in the statute suggests that the seventh definition of "office" in the American Heritage dictionary might be especially suitable. In this definition, which is the only one referring to the plural use of "office," the term is merely "an act performed for another, usually beneficial: a favor . . .." The other definitions address the regulatory aspect of "office," but the statutory definition does not limit the exemption to services of regulation; the statutory definition extends the exemption to services of assistance. The definition of "administration" that best observes the statutory distinctions between "regulate" and "assist" and "governing" and "administrative" is thus the first definition in the American Heritage dictionary: "administration" is merely "the management of affairs."
Petitioner thus qualifies for the exemption under the second sentence of the statutory definition because Petitioner's administrative offices assist the customary activities of social-studies teachers.
Although the exemption statute and rule must be construed against Petitioner and Respondent's interpretation of these authorities is entitled to great weight, it is also necessary to try to give meaning to all the words in statutes and rules. Failing to do so by treating some words in a statute as redundant may effectively frustrate Legislative purpose, as expressed in the portion of the statute that is deemed excess verbiage.
This case is not similar to Consumer Credit Counseling Service because Respondent's interpretation of the statutory phrase, "social welfare services," gave effect to all of the words in the exemption statute, even though Respondent's interpretation might not have been the only reasonable interpretation of the phrase. In this case, Respondent has not offered a comprehensive interpretation of the second sentence of the statutory definition. Although it is not Respondent's burden to explain the meaning of the statutory definition of educational institutions, Respondent's implicit construction in this case appears to deny meaning to much of the language contained in the statutory exemption.
Petitioner has claimed that, in the alternative, it is entitled to the exemption because it has had such an exemption for many years and should retain this exemption because its situation has not changed. The Legislature directed Respondent to reconsider all exemptions. Perhaps one purpose of this Legislative directive was to determine whether the activities of tax-exempt entities had changed, but it would risk frustrating Legislative intent to restrict the review process in this fashion. This process must also allow Respondent to correct any past mistakes or implement new, lawful interpretations of the exemption statutes.
RECOMMENDED that the Department of Revenue enter a final order granting Petitioner’s application for a consumer’s
certificate of exemption from sales and use tax.
DONE AND ENTERED this 10th day of April, 1998, in Tallahassee, Leon County, Florida.
ROBERT E. MEALE
Division of Administrative Hearings this 10th day of April, 1998.
Dr. Theron Trimble 3710 Estey Avenue
Kevin J. O’Donnell Assistant General Counsel Department of Revenue Post Office Box 6668
15 days from the date of this recommended order. Any exceptions to this recommended order must be filed with the agency that will issue the final order in this case.
