vs.
Respondent.
) Case No. 04-0681
In accordance with notice, a formal hearing was conducted in this proceeding before P. Michael Ruff, duly-designated Administrative Law Judge of the Division of Administrative Hearings, in Ocala, Florida, on April 7, 2004.
For Petitioner: Charles B. Morrow, pro se
For Respondent: Carrol Y. Cherry, Esquire
Office of the Attorney General The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050
The issues to be resolved in this proceeding concern whether the Petitioner owes sales and use tax or specifically use tax, on certain purchases of tangible personal property in
accordance with the relevant provisions of Chapter 212, Florida Statutes.
This cause arose upon the assessment of sales and use tax against the Petitioner by the Respondent agency. The amount of the assessment proposed is $1,812.86, plus penalties and interest. The Petitioner has denied liability and requested a formal proceeding to contest the assessment.
The cause came on for formal hearing as noticed. The Petitioner called two witnesses at the hearing and submitted nine exhibits, which were admitted into evidence. The Respondent called one witness and admitted eight exhibits into evidence. Upon conclusion of the proceeding the parties obtained a transcript thereof, requesting an extended briefing schedule by stipulation, which was granted. Thereafter, a Proposed Recommended Order was filed by the Respondent. The Proposed Recommended Order has been considered in the rendition of this Recommended Order.
The Petitioner, Florida Property Care, Inc. (Petitioner, taxpayer), was a Florida "Subchapter-S Corporation" having its home office in Dade City, Florida, at times pertinent hereto. The Petitioner's federal employer identification number was 59-3288869 and its Florida sales tax number was 06-1041158.
The Petitioner was engaged in the business of cutting and removing trees, driveway construction, lawn maintenance, and landscaping.
The Department of Revenue (Department) is an agency of the State of Florida charged with administering the tax laws of the state in accordance with Section 212 and 213, Florida Statutes.
After issuing proper notification to the Petitioner on January 2, 2003, the Department conducted a sales and use tax audit of the Petitioner's business records. The audit covered the period of December 1, 1999 through December 16, 2001. The Petitioner corporation ceased doing business on December 16, 2001.
The Department examined purchase invoices, general ledgers, and federal income tax returns of the Petitioner in the course of its audit. The Department elected to examine the records in detail rather than doing a statutorily permissible sample audit, since the assessment period was relatively short.
The Petitioner was engaged in the business of making improvements to real property (construction driveways, landscaping, etc.) through the purchase and use of items of tangible personal property, as raw materials, it bought for use in its business. This included the purchase of limerock, plants, sod, mulch and the like for use in maintaining or
landscaping real property. Because the Petitioner was engaged in the business of making improvements to real property, and not merely re-selling limerock, mulch, etc., it was generally only liable to pay sales tax on its purchases of items of tangible personal property used in its business, but not to charge and collect sales tax on its landscaping and real property improvement business activities or services for its ultimate customers. See Chapter 212, Fla. Stat.
During the audit period, it was determined by the Department that sales tax had not been paid by the Petitioner on some of its purchases of items of tangible personal property used in the conduct of its business, such items as sod, limerock, asphalt, hay, and other products. The Department also found that the Petitioner had not paid sales tax on certain auto repairs that included both parts and labor charges.
Accordingly, the Department noticed an assessment to the Petitioner for use tax on the purchases of items of tangible personal property, for which sales invoices produced in the audit, and by the Petitioner, did not indicate that sales tax had been paid when the items had been purchased from the suppliers. The Department calculated the additional tax due by multiplying the taxable amounts taken from the purchase invoices by the applicable tax rate. The Department also gave the Petitioner credit for sales taxes already paid. Specifically,
on a purchase invoice for auto repairs, the Department gave the Petitioner credit for sales tax paid on the parts used in the repairs.
The Petitioner's witnesses testified that the four purchase invoices identified as Petitioner's Composite Exhibit 2 in evidence, represented freight charges and were not tangible personal property purchase amounts for the limerock involved. Those purchase invoices, however, indicate on their face that they were for limerock. They indicate the total tonnage and the price per ton and do not indicate any portion of the charges representing freight or delivery charges. The price indicated per ton appears reasonable as a price for limerock and not just for freight charges. Moreover, the Petitioner's own witnesses concede that the purchase invoices in composite Exhibit 2 do not indicate any itemization or amount for freight charges. It is determined that these invoices are actually invoices for the purchase of limerock and not merely freight charges.
The Petitioner contends that it assumed that the purchase invoices, identified as Petitioner's Exhibits 1, 4, and 7-9, in evidence, included sales tax in the unit price represented on those invoices, even though any sales tax increment of those invoices is not separately stated and itemized. The Petitioner's witness in this regard conceded, however, that he had no way of knowing whether the vendors from
whom he purchased the goods actually charged sales tax on the subject invoices, since it was not itemized. He was only assuming that the tax was included in the unit price he paid, as a part of the total number.
The Petitioner contends that it is not liable for the sales tax because sales tax was included in the unit price of the tangible personal property that the Petitioner purchased. The Petitioner argues, in the alternative, that it is not liable for sales tax because the vendors were responsible for charging and collecting the sales tax and that they should be held liable for the tax.
In consideration of the evidence which shows that the Petitioner bought the limerock, sod, and other items for use in its business of providing landscaping, maintenance, and other improvements to real property, the Petitioner did not provide documentary or other evidence to corroborate its testimonial assumption or belief that the invoices were either not subject to tax or that the invoiced amounts included payment of the tax. Most of the invoices (the only documentary evidence of billing and the amount and category of payment), do not depict an itemization or category for tax on the face of the invoices.
The evidence adduced by the Petitioner does show, as to Invoice Number 29, that tax indeed was paid on that purchase in the amount of $679.25. Additionally, with regard to APAC
Invoice Number PORT 16175, $73.39 in tax was paid. Any assessment and collection of tax, penalty and interest by the Department upon conclusion of this proceeding should reflect credit to the Petitioner for these amounts.
On June 3, 2003, a Notice of Proposed Assessment was issued by the Department to the Petitioner, setting forth deficient sales and use tax in the sum of $1,812.86, with interest through June 3, 2003, in the sum of $354.34, accruing at the rate of $.25 per day as well as a penalty in the sum of
$906.44.
The Notice of Proposed Assessment became a Final Assessment on August 2, 2003, for purposes of filing a request for formal proceeding before the Division of Administrative Hearings or for contesting the assessment in the circuit court. On September 30, 2003, the Petitioner elected to file a Petition with the Division of Administrative Hearings seeking a formal proceeding and hearing to contest the final assessment in this case.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the subject matter of and the parties to this proceeding. §§ 120.569 and 120.57(1), Fla. Stat. (2003).
The burden of proof herein lies with the Petitioner.
Florida Department of Transportation v. J.W.C. Company, Inc.,
396 So. 2d 778 (Fla. 1st DCA 1981); Balino v. Department of Health and Rehabilitative Services, 348 So. 2d 349 (Fla. 1st DCA 1977); and § 120.57(1)(j), Fla. Stat.
The Petitioner is charged with showing by a preponderance of evidence that the Department departed from the essential requirements of law or that the assessment was not supported by any reasonable hypothesis of legality. Cf. Straughn v. Tuck, 354 So. 2d 368, 371 (Fla. 1978)(involving property tax assessments under Chapter 193); Harris v. State, Department of Revenue, 563 So. 2d 97, 99 (Fla. 1st DCA 1990)(citing Straughn supra, for assessments under Chapter 212)(overruled on other grounds in Florida Department of Revenue v. Herre, 634 So. 2d 618 (Fla. 1994)).
The Department is an agency of the state of Florida charged with administering the tax laws of this state in accordance with Section 213.05, Florida Statutes (2003). The Department is authorized to conduct audits of taxpayers and to request information to ascertain tax liability, if any, in accordance with Sections 213.34 and 212.13, Florida Statutes.
For taxes due after July 1, 1999, the Department is authorized to assess the amount of any tax, penalty, or interest due under Chapter 212, Florida Statutes, within three years after the date the tax is due, any return with respect to the
tax is due, or such return is filed, whichever occurs later.
§ 95.091(3)(a)1., Fla. Stat.
The Florida sales and use tax is an excise tax on the privilege of engaging in business in Florida. §§ 212.05 and 212.06, Fla. Stat.
The tax imposed by the sales and use tax law generally include sales and use, admissions, transient rentals, and commercial rentals taxes. §§ 212.05 and 212.06, Fla. Stat.
The Florida sales and use tax are separate, but complementary taxes, although they are generally referred to as one tax. U.S. Gypsum v. Green, 110 So. 2d 409 (Fla. 1958).
The Florida use tax complements the sales tax and together they provide a uniform tax on retail sales and the use of all "tangible personal property" in Florida, without regard to where it may have been purchased. Fla. Admin. Code
R. 12A-1.091(4). The use tax is imposed on retail sales of tangible personal property and the exercise of ownership rights over tangible personal property, for purposes of storage, use or other consumption of tangible personal property by the purchaser. §§ 212.05 and 212.06, Fla. Stat.
The storage, use or "other consumption" constitutes any use other than retail sale of the item of tangible personal property purchased. See § 212.02(21), Fla. Stat. The Petitioner was using the items purchased as raw materials for
use in his landscaping and driveway construction business, etc., not for retail sale of such materials themselves.
The Florida use tax is implicated under the following facts and circumstances which apply in the instant situation:
* * *
when a consumer has purchased tangible personal property in a taxable transaction and cannot prove that tax was paid to the dealer at the time of the transaction. Under these circumstances, the use tax complements the sales tax, in that, liability for unpaid sales tax is placed on the consumer for the use, consumption or storage of such tangible personal property. Davis v. Ponte Vedra Club, 78 So. 2d 858 (Fla. 1955)(overruled on other grounds, Green v. Panama City Housing Authority, 115 So. 2d 560 (Fla. 1959)).
The Petitioner contends that it is not liable for the sales tax at issue because the unit price for the limerock or other materials, included sales tax in the total price charged, even though it was not separately stated.
A dealer, however, such as the seller of the limerock, etc., as to the transactions in evidence, must, as far as practicable, add the amount of the tax imposed under Chapter 212 to the "sales price," and the amount of the tax must be separately stated as Florida sales tax on any charge ticket, sales slip, invoice, or other tangible evidence of the sales transaction. See § 212.07(2), Fla. Stat.
"Sales price" means the total amount paid for tangible personal property, including any services that are a part of the sale, valued in money, whether paid in money or otherwise.
§ 212.02(16), Fla. Stat.
The Petitioner's testimony that it assumed the sales tax was included in the unit price quoted on the purchase invoices and its contention that it paid that sales tax, as to the invoices in Petitioner's Exhibits 1, 2, 4, and 7-9 in evidence, was not corroborated by other evidence, documentary or otherwise, and, being self-serving, is not, standing alone, persuasive or preponderant evidence.
The Petitioner's contention that it is not liable for the sales tax, because the vendors in those transactions neglected to charge sales tax, is without merit. Florida law imposes a use tax when a consumer has purchased tangible personal property such as limerock or sod, in a taxable transaction and is unable to prove that the tax was paid to the dealer at the time of the transaction, which is the situation in this case. See § 212.08(13), Fla. Stat.
Any person who purchases at retail, who uses, consumes, distributes, or stores for use or consumption in the state tangible personal property, who cannot prove that the tax levied by Chapter 212, Florida Statutes, has been paid to the vendor of the property is directly liable for any tax, interest,
or penalty due on that taxable transaction, according to Sections 212.07(9) and 212.08(8), Florida Statutes, and Florida Administrative Code Rule 12A-1.091(13).
Although the Petitioner has asserted that it paid the sales tax on the purchases of the limerock, sod, hay, and other materials, no separate sales tax itemization on the invoices involved, in evidence, is shown. There is no corroborating evidence with the exception of the two invoices noted in the above Findings of Fact on which separate sales tax itemization is shown, which would support the Petitioner's position. While the Petitioner may have a good faith belief that it paid the sales tax, and that the sales tax was simply imbedded in the invoiced lump-sum sales price for the limerock and other materials purchased by the Petitioner, that belief, stated in testimony, is not sufficient or preponderant evidence to overcome the Department's showing that the only records available do not show payment of the sales tax, i.e., the invoices.
The Petitioner also argues that the invoices for sale and delivery of limerock are for freight charges and are not subject to sales tax since they represent freight or delivery charges. In this regard, Florida Administrative Code Rule 12A- 1.045, addresses transportation or freight charges and provides in pertinent part as follows:
"Transportation charges" include carrying, delivery, freight, handling, pickup, shipping, and other similar charges or fees.
Transportation charges which are not separately stated on an invoice or bill of sale, but are included in the sales price of taxable tangible personal property, are subject to tax.
(3)(a) Where the seller agrees to delivery tangible personal property to some designated place and the purchaser cannot elect to avoid the charge for transportation services, the charge for the transportation service is subject to tax, even if separately stated on an invoice or bill of sale.
* * *
Here, the transportation charges, if they existed, were not separately stated on the invoices but were included in the sales price. There is no showing that the purchaser, the Petitioner herein, could elect to avoid any charge for transportation services, thus, the transportation services or charges, if they were assessed by the seller of the limerock, are still subject to the tax. The charges for the limerock were in a lump sum without any separate itemization of not only sales tax but freight charges as well.
Moreover, the purchase invoices expressly state that they are for "limerock" and contain no statements that they represent any freight charges. The charges in the amount of
$3.50 per ton times the number of tons shown on the invoices are
typical and reasonable as a purchase or sales price for limerock and do not support a reasonable interpretation that they only represent freight charges. Thus, it cannot be deemed that there were any separately stated freight charges on those invoices.
The Petitioner failed to offer any additional documentary or other evidence to controvert the evidentiary showing of the purchase invoices themselves which simply state that they are for "limerock." The Petitioner's self-serving testimony that the purchase invoices were for freight and not for limerock is not reasonable or persuasive.
"Sales price" includes consideration for a transaction which requires both labor and parts and materials needed to alter, remodel, maintain, adjust, or repair tangible personal property, such as motor vehicles. See § 212.02(16), Fla. Stat.; Fla. Admin. Code R. 12A-1.016(2). Here, the Department assessed the Petitioner for additional sales tax on the sales price of the purchase invoices involving repairs to its motor vehicles as to those which depict both labor and parts or materials being furnished in the transaction. There has been no persuasive evidential showing that that assessment is incorrect because, as to those invoices, both labor and materials were furnished. Consequently, the Department has established that its assessment as to those "auto repair invoices" is correct.
Accordingly, and in summary, it is been established that the Department proved a prima facie case of the validity of its sales and use tax assessment. The Petitioner did not adduce credible persuasive evidence, to overcome prima facie showing by the Department. Accordingly, the Department's assessment has been shown to be correct and valid.
Having considered the foregoing Findings of Fact and Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses and the pleadings and the arguments of the parties, it is, therefore,
RECOMMENDED that a final order be entered by the Department of Revenue assessing the tax as depicted in the notice of assessment, in evidence herein, including credit for the tax shown to have been collected on the two invoices referenced in the above Findings of Fact, and assessing interest and penalties in the amounts legally prescribed or as agreed to by the parties.
DONE AND ENTERED this 9th day of June, 2004, in Tallahassee, Leon County, Florida.
P. MICHAEL RUFF Administrative Law Judge
Filed with the Clerk of the Division of Administrative Hearings this 9th day of June, 2004.
Carrol Y. Cherry, Esquire Office of the Attorney General The Capitol, Plaza Level 01
Charles B. Morrow Jeanne Morrow
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.
