STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND )

PROFESSIONAL REGULATION, )

DIVISION OF ALCOHOLIC )

BEVERAGES AND TOBACCO, )

)

Petitioner, )

vs. ) Case No. 98-2858

)

BETTY J. SCHMIDT, d/b/a )

SMILEY’S TAP, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a formal administrative hearing was held in the above-styled cause by Don W. Davis, Administrative Law Judge with the Division of Administrative Hearings on November 5, 1998, in Daytona Beach, Florida.

APPEARANCES

For Petitioner: Elsa Lopez Whitehurst, Esquire

Department of Business and Professional Regulation

1940 North Monroe Street Tallahassee, Florida 32399-1007

For Respondent: Betty Schmidt, pro se

Smiley’s Tap

1161 North U.S. 1

Ormond Beach, Florida 32174 STATEMENT OF THE ISSUE

The issue for determination is whether Respondent's alcoholic beverage license should be disciplined for violation of Chapter 561, Florida Statutes. Resolution of

this issue requires a determination of whether Respondent correctly reported and remitted alcoholic beverage surcharges.

PRELIMINARY STATEMENT

By Notice to Show Cause dated April 29, 1998, Petitioner alleged Respondent failed to remit the correct surcharge tax amount to Petitioner as required by Section 561.501, Florida Statutes.

Respondent requested a formal administrative hearing and the matter was transferred to the Division of Administrative Hearings for conduct of formal proceedings pursuant to Section 120.57(1), Florida Statutes.

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

No transcript of the final hearing was provided. Both parties submitted proposed findings of fact which have been utilized where appropriate in the preparation of this Recommended Order.

FINDINGS OF FACT

1. Respondent is Betty Schmidt. At all times pertinent to these proceedings, she held alcoholic beverage license no. 74-00275, Series 2-COP, for a licensed premises located at 1161 North U.S. 1, Ormond Beach, Florida.

2. Petitioner's auditor, Muriel Johnson, performs audits on vendors monthly surcharge reports in order to confirm the accuracy of those reports and ensure compliance with statutory and administrative rule requirements. The audit in the instant case covered the reporting period of Respondent from September 1, 1994 through August 31, 1997.

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. Respondent elected to report via the sales method.

4. 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.

5. Because Respondent did not keep inventory figures, and based upon her assertion that her inventory was generally the same, Respondent and the auditor agreed upon zero as the starting inventory. Second, purchases of alcoholic beverages by Respondent during the audit period were computed based upon purchase figures provided by Respondent and verified independently through records obtained from distributors. Third, the ending inventory was agreed to be zero. Fourth, The gross gallonage available for sale was determined by adding the beginning inventory (zero) to the purchases made during the audit period and subtracting the ending inventory (also zero). Fifth, adjustments to net gallonage for sale included allowances for spillage and package sales. Notably, the audit revealed that Respondent was treating liquor mixers as wine coolers and paying a lower tax on that basis when in fact wine coolers are taxed at the rate of one ounce of liquor per container at a higher rate. Adjustments for this practice were also made. Finally, the total surcharge due for the audit period was calculated and compared to the amount already reported in order to determine the amount of under- reported or over-reported tax.

6. Respondent sets up various disbursement stations for beer on her property during “bike week” in Daytona Beach. With only one cash register, the sales at the various stations are maintained by hand on clipboards. Additional staff is employed at this time and Respondent is not personally present at each station to monitor sales reporting.

7. Frequent sources of alcoholic beverage sales that are not captured by a license’s cash register include theft, breakage, leakage, spillage, overpouring of drinks, and free drinks. The amounts of alcoholic beverage that are lost to a cash register in these ways are captured by Petitioner’s sales audit method.

8. While Respondent keeps good records, no cash register method can ever capture all of the alcoholic beverages available for consumption on premises and consequently there will always be some discrepancy as the result of a sales method audit.

9. As established by results of Petitioner's audit, Respondent underpaid surcharges for the audit period in the amount of $890. Additionally, it is established that Respondent owes $557.66 in penalties and $193.33 in interest on the payment deficiency.

   CONCLUSIONS OF LAW

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

11. 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 beverages 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, a surcharge of 6 cents is imposed on each 12 ounces of cider, 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 payments 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 in the amount of 10 percent of the amount due per month for each 30 days, or fraction

    thereof, after the 20th of the month, not to exceed a total penalty of 50 percent, in the aggregate, of any unpaid surcharges. 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.

12. 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.

    
    

13. Respondent contends that Petitioner's failure to use the cash register receipts provided by Respondent is erroneous. Yet, pursuant to Rule 61A-4.063(4)(c), Florida Administrative Code, it is Respondent who bears the burden of proof to show that the method used by her in the calculation of actual sales reported is accurate. Respondent merely argued that her cash register was correct and failed to show any error in the deficiency calculations of Petitioner. Respondent's argument is unpersuasive.

14. 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 was deficient in reporting, surcharge payments for the period September 1, 1994, through October 31, 1997, in the amount of $890.11, plus $557.66 in penalties, and an additional $193.33 in interest for a total liability of $1641.10, contrary to Section 561.501, Florida Statutes.

RECOMMENDATION

Based on the foregoing, it is hereby

RECOMMENDED that a Final Order be entered requiring payment by Respondent in the amount of $1641.10, the amount

of total tax and liabilities claimed by Petitioner to be due.

DONE AND ENTERED this 23rd day of November, 1998, in Tallahassee, Leon County, Florida.

DON W. DAVIS

Administrative Law Judge

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(850) 488-9675 SUNCOM 278-9675

Fax Filing (850) 921-6847

Filed with the Clerk of the Division of Administrative Hearings this 23rd day of November, 1998.

COPIES FURNISHED:

Elsa Lopez Whitehurst, Esquire Department of Business and

Professional Regulation 1940 North Monroe Street

Tallahassee, Florida 32399-1007

Betty Schmidt Smiley's Tap

1161 North U.S. 1

Ormond Beach, Florida 32174

Richard Boyd, Director Division of Alcoholic

Beverages and Tobacco Department of Business and

Professional Regulation 1940 North Monroe Street

Tallahassee, Florida 32399-0792

Lynda L. Goodgame, General Counsel Department of Business and

Professional Regulation 1940 North Monroe Street

Tallahassee, Florida 32399-0792

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: 98-002858

Orders for Case No: 98-002858