STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

ORMOND MAIN STREET, INC., )

)

Petitioner, )

)

vs. ) Case No. 99-2211

)

DEPARTMENT OF REVENUE, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, this matter was heard before the Division of Administrative Hearings by its assigned Administrative Law Judge, Donald R. Alexander, on July 15, 1999, in Daytona Beach, Florida.

APPEARANCES

For Petitioner: John P. Ferguson, Esquire

Post Office Box 2917

Ormond Beach, Florida 32175-2917

For Respondent: George C. Hamm, Esquire

Department of Revenue Post Office Box 6668

Tallahassee, Florida 32314-6668 STATEMENT OF THE ISSUE

The issue is whether Petitioner's application for a Consumer Certificate of Exemption as an agent of a municipality should be approved.

PRELIMINARY STATEMENT

This matter began on April 9, 1999, when Respondent, Department of Revenue, issued a Notice of Intent to Deny an

application for a Consumer Certificate of Exemption filed by Petitioner, Ormond Main Street, Inc. Thereafter, Petitioner requested a hearing under Section 120.569, Florida Statutes, to contest the preliminary decision. The matter was referred by Respondent to the Division of Administrative Hearings on May 14, 1999, with a request that an Administrative Law Judge be assigned to conduct a formal hearing.

By Notice of Hearing dated June 8, 1999, a final hearing was scheduled on July 15, 1999, in Daytona Beach, Florida. At the final hearing, Petitioner presented the testimony of its executive director, Lori M. Gillooly. Also, it offered Petitioner's Exhibits 1-7. All exhibits were received in evidence. Respondent presented the testimony of W. David Young, a Tax Specialist II, and offered Respondent's Exhibits 1-4. All exhibits were received in evidence.

The Transcript of the hearing was filed on July 28, 1999. Proposed Findings of Fact and Conclusions of Law were filed by Respondent on August 9, 1999, and they have been considered by the undersigned in the preparation of this Recommended Order.

FINDINGS OF FACT

Based upon all of the evidence, the following findings of fact are determined:

1. In this dispute, Petitioner, Ormond Main Street, Inc., a private, non-profit corporation formed in 1995, seeks a Consumer Certificate of Exemption as an agent of a municipality which

   would exempt it from paying sales and use taxes on purchases otherwise taxable under Chapter 212, Florida Statutes. In a preliminary decision issued on April 9, 1999, Respondent, Department of Revenue (DOR), issued a Notice of Intent to Deny the application on the ground Petitioner "is not the United States Government . . . nor a state, nor is it a county, municipality, or political subdivision of the state."

2. After receiving the Notice of Intent to Deny, on or around April 29, 1999, Petitioner filed a new application seeking an exemption under the theory that it was a charitable organization. By agreement of the parties, however, Petitioner has elected to proceed on the basis that it is an agent of a municipality, as reflected in its first application.

3. By law, certain transactions are exempt from the state sales and use tax. Among these are sales or lease transactions by qualified governmental organizations. In order for an organization to be entitled to an exemption, it must make application with DOR for a Consumer Certificate of Exemption and demonstrate that it is a qualified "political subdivision" within the meaning of the law. To do that, it must show that it is the United States Government; a state; or any county, municipality, or political subdivision of a state. In this case, Petitioner claims to be an "agent" of a municipality.

4. Petitioner has executed a contract with the City of Ormond Beach (City) under which it provides services to the City

   in exchange for payments from the City totaling $20,000.00 per year. In addition, Petitioner solicits funds through fund- raising drives and fees from its members, who are local businessmen. Its principal purpose is to "promote the downtown of Ormond Beach."

5. In support of its case, Petitioner pointed out that its executive director reports to both her board of directors and the city manager; a city commissioner sits on its board of directors; its office is located in the City Hall, which is provided free of any rent or utility payment from the City; it provides a variety of civic services related to promoting the downtown area; and it is involved with other various City matters, such as giving input to the planning department, assisting in the preparation of a city sign ordinance, and working with other City departments.

6. Notwithstanding the above considerations, the contract specifically provides that neither party to the contract is an "employee, agent, or other representative of the other party." It also provides that either party can end the agreement with sixty days' notice.

   CONCLUSIONS OF LAW

   
   

7. The Division of Administrative Hearings has jurisdiction over the subject matter and the parties hereto pursuant to Sections 120.569 and 120.57(1), Florida Statutes.

8. As the party seeking an exemption, Petitioner bears the burden of proving its entitlement to a Consumer's Certificate of

   Exemption by a preponderance of the evidence. At the same time, it is well established that an exemption clause in a tax statute must be strictly construed against the person claiming the exemption. See, e.g., Asphalt Pavers, Inc. v. Dep't of Revenue,

   584 So. 2d 55, 57 (Fla. 1st DCA 1991). This holding is consistent with the terms of Section 212.08(7)(o)2., Florida Statutes, which provides that "the provisions of this section authorizing exemptions from tax shall be strictly defined, limited, and applied in each category."

9. Section 212.08(6), Florida Statutes, provides the following exemption for "political subdivisions":

   (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.

   
   

   The term "political subdivision" is not defined by statute or rule, and research by the undersigned has failed to disclose any administrative cases construing that term. However, Petitioner contends that it is an agent of a municipality, and thus the case can be resolved without resorting to a lengthy academic exercise in statutory construction of that term.

10. The evidence establishes that Petitioner is not an agent of the City. The lease agreement itself confirms this. Even if it were, the terms of Section 212.08(6), Florida Statutes, do not extend to "agents" of a municipality. This

    conclusion is based on the reasonable assumption that if the Legislature had intended for agents to qualify for the exemption, it could have easily added the words "or any agent thereof" to the statute to create this exception. This being so, Petitioner's application for a Consumer's Certificate of Exemption should be denied. Cf. Iberia Airlines of Spain v.

    Dep't of Revenue, Case No. 94-2792 (Dept. of Revenue, Dec. 20, 1996)(government-owned foreign airline not eligible for certificate of exemption as agent of political subdivision).

11. In reaching this conclusion, the undersigned has given consideration to Petitioner's contention that under the rationale of Memorial Hospital-West Volusia, Inc., v. News-Journal Corp., 733 So. 2d 445 (Fla. 1999), a certificate should be issued. This case, however, deals with the application of the Public Records Act and Sunshine Law to a private, non-profit corporation's operation of hospital facilities transferred to it by a hospital taxing authority, and not to the requirements for an exemption from payment of sales and use tax. Therefore, the case is not found to be persuasive.

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of law, it is

RECOMMENDED that the Department of Revenue enter a final order denying Petitioner's application for a Consumer's Certificate of Exemption.

DONE AND ENTERED this 19th day of August, 1999, in Tallahassee, Leon County, Florida.

DONALD R. ALEXANDER

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 www.doah.state.fl.us

Filed with the Clerk of the Division of Administrative Hearings this 19th day of August, 1999.

COPIES FURNISHED:

Linda Lettera, General Counsel Department of Revenue

204 Carlton Building Tallahassee, Florida 32399-0100

George C. Hamm, Esquire Department of Revenue Post Office Box 6668

Tallahassee, Florida 32314-6668

John P. Ferguson, Esquire Post Office Box 2917

Ormond Beach, Florida 32175-2917

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 to this Recommended Order within fifteen days of this order. Any exceptions to this Recommended Order should be filed with the Department of Revenue.

Docket for Case No: 99-002211

Orders for Case No: 99-002211