STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND )

PROFESSIONAL REGULATION, ) DIVISION OF ALCOHOLIC BEVERAGES ) AND TOBACCO, )

)

Petitioner, )

)

vs. ) Case No. 06-1927

) LAUDERDALE COPA, INC., d/b/a ) THE COPA, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice a formal hearing was held on August 4, 2006, by video teleconference with the parties appearing from Lauderdale Lakes, Florida, before J. D. Parrish, a designated Administrative Law Judge of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Michael Wheeler, Esquire

Department of Business and Professional Regulation

Northwood Centre, Suite 6 1940 North Monroe Street

Tallahassee, Florida 32399-2202

For Respondent: Gregg Bernard, pro se

Lauderdale Copa, Inc., d/b/a The Copa Post Office Box 22961

Fort Lauderdale, Florida 33335

STATEMENT OF THE ISSUE

The issue in this case is whether the Respondent, Lauderdale Copa, Inc., d/b/a The Copa (Respondent or The Copa) should pay an alcoholic beverage surcharge in the amount of $18,960.48 as alleged by the Administrative Complaint dated March 27, 2006.

The Petitioner, Department of Business and Professional Regulation, Division of Alcoholic Beverages and Tobacco (Petitioner or Department) claims that the surcharge is owed and due pursuant to Sections 561.502(2) and 561.29, Florida Statutes (2005).

PRELIMINARY STATEMENT

This case began on March 27, 2006, when the Petitioner issued an Administrative Complaint that alleged that the Respondent had failed to remit appropriate surcharges on alcoholic beverages for The Copa for the period of November 1, 2002, through October 31, 2005 (the period). The Administrative Complaint was based upon the results of an audit for the period that had been conducted on or about January 25, 2006. The audit concluded that The Copa owed $11,257.52 in surcharge payments,

$5,425.04 in penalties, and $2,277.92 in interest. The results of the audit were forwarded to The Copa by certified mail which was returned unsigned.

The Administrative Complaint was forwarded to the Respondent by certified mail. The Respondent claimed that he did not receive a copy of the audit report and findings until April 10,

2006. Thereafter, on May 30, 2006, the Respondent requested a formal hearing in connection with the Administrative Complaint and the matter was immediately forwarded to the Division of Administrative Hearings for formal proceedings. On June 2, 2006, the Petitioner filed a Response to Initial Order and the case was scheduled for hearing on the first available date requested by the party.

At the hearing, the Petitioner presented testimony from Alma Cortez, an auditor employed by the Department; and J. Cesar Torres, a senior tax audit administrator for the Department. The Petitioner’s Exhibits 1 and 2 were admitted into evidence. Gregg Bernard, owner and president of Lauderdale Copa, Inc., testified on behalf of the Respondent. Respondent’s Exhibits 1-5 were admitted into evidence.

Following the hearing the parties were afforded ten days from the filing of the transcript to file Proposed Recommended Orders. According to the docket maintained in this matter, the transcript was not filed until September 20, 2006.

Notwithstanding that date, the parties had filed their Proposed Recommended Orders on September 1, 2006 (the Petitioner) and September 13, 2006 (the Respondent). The undersigned was unaware of the transcript until September 20, 2006. On or about

October 12, 2006, the undersigned requested the original transcript from the court reporter as it was to contain the exhibits as an addendum. By letter entered the same date the

parties were apprised that the exhibits had not been filed. The parties were directed to provide copies of the exhibits no later than October 31, 2006.

The original transcript of the proceeding (together with the exhibits) has not been filed. Petitioner’s counsel filed copies of the exhibits on October 20, 2006. Curiously, the transcript previously filed by the Petitioner bears the stamped ORIGINAL on its face but is not an original transcript and did not contain the exhibits. The Proposed Recommended Orders filed by the parties have been considered in the preparation of this Recommended Order.

FINDINGS OF FACT

1. The Petitioner is the state agency charged with the responsibility of regulating the alcoholic beverage industry within Florida. § 561.501 Fla. Stat. (2005).

2. At all times material to the allegations of this case, the Respondent was a licensed entity authorized to sell alcoholic beverages pursuant to its license number 16-00516, Series 4-COP. The Copa was authorized to sell liquor, wine, and beer at its licensed premises for on-site consumption.

3. Alcoholic beverage sales are subject to a surcharge.

   
   

   § 561.501 Fla. Stat. (2005). In addition to other sales taxes that may be imposed on the sale of the product, an alcoholic beverages licensee (such as the Respondent) must also collect and remit to the Department a surcharge on the sale of the alcoholic beverage. The amount of the surcharge remittance is computed

   pursuant to the guidelines set forth in the laws and regulations. To confirm accurate reporting and remittance of the surcharge, the Department conducts after-the-fact audits of licensees.

4. In this case, the Department audited The Copa’s alcoholic beverage sales for period from November 1, 2002, through October 31, 2005 (the audit period).

5. There are two methods to review or audit the sales of

   
   

   alcoholic beverages. The inventory method directs the Department to take the beginning inventory plus purchases for the period and subtract the ending inventory (and a spillage allowance) to calculate the sales for the period. The calculated sales volume is then used to derive the surcharge obligation.

6. The second method is based on the actual sales incurred during the audit period. The sales method requires that the licensee keep records to verify the volume of actual sales. The surcharge is due based on the on-premise consumer’s purchase of the alcoholic beverage at the licensed site.

7. Both of the methods described require that the licensee keep and maintain records.

8. The inventory method is verifiable since licensees

   
   

   purchase their stock from vendors also regulated by the Department.

9. On or about October 24, 2005, Hurricane Wilma struck Florida and crossed to the Atlantic Ocean from the west coast. The storm caused extensive damage to the Respondent's property. The Respondent claims that its beverage records were lost in the

   storm.

10. The audit in this case used the inventory method to compute the surcharge. By using the distributors’ sales reports the Department calculated a surcharge owed in the amount of

    $11,257.52. To that amount the Petitioner seeks interest and penalties.

11. The Respondent does not acknowledge that any surcharge is owed. The Respondent maintains that its inventory, records, and package sales information (alcoholic beverages not consumed on the premises) were lost in the storm.

12. The Department gave the Petitioner over five months to obtain records from other sources to refute the audit findings. As of the date of the formal hearing in this case, the Respondent did not have any records to refute the audit findings.

    CONCLUSIONS OF LAW

    
    

13. The Division of Administrative Hearings has jurisdiction over the parties to, and the subject matter of, these proceedings. § 120.57(1), Fla. Stat. (2006).

14. The Petitioner bears the burden of proof in this matter to establish that a surcharge for the sale of alcoholic beverages is owed by the Respondent. See Department of Banking and Finance, Division of Securities and Investor Protection v. Osborne Stern and Company, 670 So. 2d 932 (Fla. 1996); and Florida Department of Transportation v. J.W.C. Company, Inc., 396 So. 2d 778 (Fla. 1st DCA 1981). It has met that burden.

15. Section 561.501(1), Florida Statutes (2005) imposes a

    surcharge on alcoholic beverages sold at retail for consumption on the licensed premises. That provision states:

    1. Notwithstanding s. 561.50 or any other provision of the Beverage Law, a surcharge of

       3.34 cents is imposed upon each ounce of liquor and each 4 ounces of wine, a surcharge of 2 cents is imposed on each 12 ounces of cider, and a surcharge of 1.34 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. However, the surcharges imposed under this subsection need not be paid upon such beverages when they are sold by an organization that is licensed by the division under s. 561.422 or s. 565.02(4) as an alcoholic beverage vendor and that is determined by the Internal Revenue Service to be currently exempt from federal income tax under s. 501(c)(3), (4), (5), (6), (7), (8), or (19) of the Internal Revenue Code of 1986, as amended.

       
       

16. Section 561.501(2), Florida Statutes (2005), requires that a licensee report and pay the alcoholic beverages surcharge in the month following the sale of the beverage. If it is determined the licensee remitted an incorrect surcharge amount, the Department is authorized to assess a late penalty on the unpaid surcharge amount. Section 561.501(2), Florida Statutes (2005), provides:

    (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.

    
    

17. Florida Administrative Code Rule 61A-4.063(8) also requires that licensees keep complete and accurate records of the quantities of alcoholic beverages purchased, sold, and inventoried on the licensed premises. The rule also mandates that licensee records be kept and maintained for a period of three years.

18. Section 561.501(3), Florida Statutes (2005), authorizes the Petitioner to compromise a licensee’s liability for the surcharge if there is doubt as to the liability for, or collectibility of, the tax. The Petitioner may also compromise a taxpayer’s liability for penalties if the noncompliance is due to reasonable cause and not to willful negligence, willful neglect, or fraud. Section 561.501(3), Florida Statutes (2005), states:

    (3)(a) The division may compromise a taxpayer's liability for the surcharge

    imposed by this section upon the grounds of doubt as to liability for or collectibility of such tax. A taxpayer's liability for penalties as prescribed by this section may be settled or compromised if the division finds that the noncompliance is due to reasonable cause and not to willful negligence, willful neglect, or fraud. The division shall maintain records of all compromises, and the records must state the basis for the compromise.

    1. The division may enter into agreements for scheduling payments of taxes, interest, and penalties prescribed in this section.

    2. The division shall establish by rule guidelines and procedures for administering this section.

    
    

19. The Respondent did not have any records to refute the accuracy of the audit findings. The comments of the Respondent in connection with The Copa’s inability to obtain copies of records or to secure records (in anticipation of the storm) have not been deemed credible or persuasive.

20. Section 561.501(4) and (5), Florida Statutes (2005), provide:

    1. If any vendor fails to remit the surcharge, or any portion thereof, by the 20th of the month following the month in which the surcharges are imposed, there shall be added to the amount due interest at the rate of 1 percent per month of the amount due from the date due until paid. Interest on the delinquent tax shall be calculated beginning on the 21st day of the month following the month for which the surcharge is due.

    2. All penalties and interest imposed by this section are payable to and collectible by the division in the same manner as if they were a part of the tax imposed. The division

    may settle or compromise any such interest or penalty under paragraph (3)(a).

    
    

21. According to the audited records of third-party vendors, from whom the Respondent purchased alcoholic beverages, The Copa owed a surcharge for the audit period. The Respondent has not demonstrated that it paid any of the claimed surcharge for the audit period or that the surcharge now claimed is incorrect.

22. In this case, the Department has demonstrated by clear and convincing evidence that the audit calculated an unpaid surcharge in the amount of $11,257.52. The statutory penalty on that amount is $5,425.04. The interest on the unpaid surcharge is $2,277.92. The total surcharge liability owed by the Respondent is $18,960.48.

23. The Respondent has, however, established that its

ability to remit the surcharge liability has been compromised since it has not re-opened following the hurricane. Should the Respondent accept responsibility for the surcharge liability, some accommodation or compromise for the repayment may be appropriate, given the condition of the business entity.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Business and Professional Regulation, Division of Alcoholic Beverages and Tobacco, enter a Final Order sustaining the surcharge liability in the amount of $18,960.48.

DONE AND ENTERED this 6th day of December, 2006, in Tallahassee, Leon County, Florida.

S

J. D. Parrish 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 6th day of December, 2006.

COPIES FURNISHED:

Gregg Bernard

Lauderdale Copa, Inc., d/b/a The Copa Post Office Box 22961

Fort Lauderdale, Florida 33335

Michael J. Wheeler, Esquire Department of Business and

Professional Regulation Northwood Centre, Suite 6 1940 North Monroe Street

Tallahassee, Florida 32399-2202

Steven M. Hougland, Ph.D., Director Division of Alcoholic Beverages

And Tobacco

Department of Business and Professional Regulation

Northwood Centre

1940 North Monroe Street Tallahassee, Florida 32399-0792

Josefina Tamayo, General Counsel Department of Business and

Professional Regulation Northwood Centre

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: 06-001927

Orders for Case No: 06-001927