STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
WELLS FARGO BANK NORTHWEST N.A. | ) | |||
TRUSTEE, | ) | |||
) | ||||
Petitioner, | ) | |||
) | ||||
vs. | ) ) | Case | No. | 09-0403 |
DEPARTMENT OF REVENUE, | ) ) | |||
Respondent. | ) | |||
| ) |
RECOMMENDED ORDER
A duly-noticed final hearing was held in this case by Administrative Law Judge T. Kent Wetherell, II, on June 4, 2009, in Tallahassee, Florida.
APPEARANCES
For Petitioner: M. Stephen Turner, Esquire
David K. Miller, Esquire Broad & Cassel, P.A.
215 South Monroe Street, Suite 400 Post Office Box 11300
Tallahassee, Florida 32302
For Respondent: Nicholas Bykowsky, Esquire
Office of the Attorney General The Capitol, Plaza Level 01 Revenue Litigation Bureau Tallahassee, Florida 32399-1050
STATEMENT OF THE ISSUE
The issue is whether Petitioner owes tax, penalty, and interest under Section 212.05(1)(a)2., Florida Statutes,1/ for an aircraft that it allegedly purchased and used in Florida.
PRELIMINARY STATEMENT
On January 29, 2008, the Department of Revenue (Department) gave notice of its intent to assess tax, penalty, and interest against Petitioner based upon its alleged purchase and use of an aircraft in Florida. Petitioner protested the assessment, and the Department’s review of this matter culminated in a Notice of Reconsideration dated November 4, 2008, which determined that Petitioner owes tax, penalty, and interest of approximately
$476,000 pursuant to Section 212.05(1)(a)2., Florida Statutes.
On December 31, 2008, Petitioner timely filed a Petition for Formal Administrative Hearing with the Department contesting the assessment. The petition alleges that the assessment is not supported by the facts or the law, and that the assessment is unconstitutional under the circumstances.
On January 23, 2009, the Department referred this matter to the Division of Administrative Hearings (DOAH) to conduct the hearing requested by Petitioner. The referral was received by DOAH on January 26, 2009. Over the Department’s objection, the final hearing was scheduled for June 4-5, 2009, in order to give the parties ample time to conduct discovery.
At the final hearing, the Department presented the testimony of Rebecca Burdick and Matt Crockett, and Petitioner presented the testimony of Jon Croasmun. The Department’s Exhibits A, B, 1 through 5, 7 through 12, 15, and 16, were
received into evidence, as were Petitioner’s Exhibits 1, 2, 3, 7, and 8. The Department’s Exhibit 14 and Petitioner’s Exhibit
12 were offered, but not received. Petitioner’s Exhibit 13 was received after the hearing without objection. See Order on Post-hearing Motions, entered July 16, 2009.
Petitioner’s requests for official recognition of certain flight distances and Venezuelan tax laws were denied in an Order entered on June 3, 2009. Reconsideration of that Order was denied at the final hearing. See Transcript, at 24-37.
The two-volume Transcript of the final hearing was filed on June 18, 2009. The parties initially requested and were given
28 days from that date to file proposed recommended orders (PROs), but the deadline was subsequently extended to July 24, 2009, upon the Department’s unopposed motion. The PROs were timely filed and have been given due consideration.
FINDINGS OF FACT
Petitioner is a national banking and trust company headquartered in Utah. It does not have any operations or personnel in Florida.
Petitioner routinely serves as “owner trustee” for non-
U.S. citizens who want to register aircraft with the Federal Aviation Administration (FAA). Petitioner charges a fee (typically $4,000) to set up the trust, as well as an annual fee (typically $2,000) for its services as “owner trustee.”
Petitioner holds legal title to the aircraft in its capacity as “owner trustee” because the FAA regulations do not allow non-U.S. citizens to register aircraft.
Petitioner does not have any operational control over the aircraft even though it holds legal title.
The tax assessment at issue in this case relates to a Cessna Citation 650 jet, tail number N385EM (hereafter “the aircraft”), which Petitioner holds legal title to as “owner trustee” pursuant to a Trust Agreement dated April 28, 2007.
The trustor and beneficiary under the Trust Agreement is MAW.ZC, LLC, which is a Delaware limited liability company, controlled by a non-U.S. citizen, Nelson Ceballos.
The sole purpose of the trust was to “ensure the eligibility of the Aircraft for United States registration with the [FAA].”
The aircraft was purchased from Southern Jet Center (SJC) in Sanford, Florida, on May 3, 2007, for $3.74 million.
The “purchaser” identified on the Bill of Sale was “Wells Fargo Bank Northwest, NA as Owner Trustee under Trust Agreement dated 4/28/07.” MAW.ZC, LLC, was not mentioned on the Bill of Sale.
Petitioner’s witness, Jon Croasman, testified that MAW.ZC, LLC, negotiated the purchase of the aircraft with SJC, and then assigned the purchase right to Petitioner as “owner
trustee” so that the aircraft would not lose its tail number and it would be easier to register the aircraft with the FAA.
The record does not contain a written purchase agreement between MAW.ZC, LLC, and SJC or a written assignment of the purchase right from MAW.ZC, LLC, to Petitioner. According to Mr. Croasman, SJC was “kind of an unsophisticated seller” and it did not require these documents.
Mr. Croasman was the only witness with personal knowledge of the events surrounding the purchase of the aircraft who testified at the final hearing. His testimony was logical and persuasive and is accepted as credible despite the absence of corroborating documentation.
Petitioner did not pay anything to SJC for the purchase of the aircraft. The entire $3.74 million purchase price was paid by MAW.ZC, LLC.
Petitioner was the purchaser of the aircraft in name only. The real purchaser was MAW.ZC, LLC.
On May 4, 2007, Petitioner filed an application to register the aircraft with the FAA. The applicant listed on the application form was “Wells Fargo Bank Northwest, National Association, not in its individual capacity but solely as Owner Trustee under a Trust Agreement dated as of 4/28/07.”
On the same day, the FAA issued a certificate of registration for the aircraft. The certificate was issued to “Wells Fargo Bank Northwest NA Trustee.”
Registration of an aircraft with the FAA has no bearing on its ownership. Indeed, the official registration document for the aircraft issued by the FAA states: “This certificate is issued for registration purposes only and is not a certificate of title. The Federal Aviation Administration does not determine rights of ownership as between private parties.”
On May 7, 2007, Petitioner filed with the Department an Affidavit for Exemption of Aircraft Sold for Removal from the State of Florida by a Nonresident Purchaser (hereafter “the Removal Affidavit”). The affidavit identified the purchaser of the aircraft as “Wells Fargo bank Northwest, NA, not in its individual capacity but solely as Owner Trustee for MAW.ZC, LLC.”
The aircraft remained in Florida undergoing repairs at SJC from the date of purchase until July 2, 2007, when it was flown to Venezuela where it was based.
It is undisputed that the aircraft left Florida within
20 days after the initial repairs were completed and, therefore, the sale was exempt from the sales tax.
The Department informed Petitioner in a letter dated July 13, 2007, that the aircraft could not be brought back into Florida for a period of six months without its becoming subject to Florida’s use tax.
Petitioner forwarded this letter to Mr. Ceballos, since he and MAW.ZC, LLC, were responsible for the operation of the aircraft.
Petitioner did not exercise any control over the operation of the aircraft after its purchase.
In April 2007, prior to the purchase of the aircraft, Petitioner and MAW.ZC, LLC, entered into an Aircraft Operating Agreement. This agreement was executed in conjunction with the Trust Agreement in anticipation of the purchase of the aircraft.
The Aircraft Operating Agreement gave MAW.ZC, LLC, “an exclusive right to possess, use and operate the Aircraft.” The agreement required MAW.ZC, LLC, to pay all costs associated with the operation and maintenance of the aircraft. And, with respect to the operation of the aircraft, the agreement required only that MAW.ZC, LLC, cause the Aircraft to be operated by competent personnel in accordance with the manufacturer’s manuals and FAA and other government regulations.
On June 15, 2007, Petitioner authorized Captain Alexander Nunez to pilot the aircraft “wherever necessary and specifically including but not limited to Venezuelan air space.”
Petitioner interprets the Trust Agreement and the Aircraft Operating Agreement to preclude it from exercising any control over the operation of the aircraft even though Section 9.01(a) of the Trust Agreement gives Petitioner “absolute and complete discretion” in connection with matters involving the ownership and operation of the aircraft so as to protect the interests of the United States.
According to Mr. Croasman, the language in Section
9.01 is required verbatim by the FAA for the sole purpose of ensuring that Petitioner, as “owner trustee,” will be able to operate the aircraft without violating its obligations under the Trust Agreement in the unlikely event that the U.S. government needs to use the aircraft for some reason.2/ And, as
Mr. Croasman pointed out, Section 9.01(a) requires Petitioner to “exercise this discretion in all matters involving ownership and operation of the Aircraft by the Owner Trustee with due regard for the interests of the Trustor.”
The Trust Agreement and the Aircraft Operating Agreement provided that MAW.ZC, LLC, was responsible for keeping records concerning the use of the aircraft. MAW.ZC, LLC, was also responsible for paying any taxes or expenses related to purchase or use of the aircraft.
The aircraft crashed in Venezuela on February 18, 2008, killing Mr. Ceballos, Captain Nunez, and the copilot.
The original flight records for the aircraft were destroyed in the crash, and no copies of those records were presented at the final hearing.
No witness with personal knowledge regarding the operation of the aircraft was presented at the final hearing.
The only evidence presented concerning the operation of the aircraft was flight data obtained from two Internet sources, FlightAware and fboweb.com.
The FlightAware data was obtained by Department staff as part of their monitoring of the aircraft’s operation during the six-month period after its initial departure from Florida.
The fboweb.com data was provided to the Department by David McDonald, the attorney for MAW.ZC, LLC, and Mr. Ceballos, who was acting as Petitioner’s authorized representative during the investigation and protest phase of this case.
There is no evidence that Mr. McDonald had any personal knowledge of the information contained in the fboweb.com data, and he did not present it to the Department as his understanding of the aircraft’s operation. Indeed, the letter by which Mr. McDonald transmitted the fboweb.com data to the Department stated that he was “having trouble trying to decipher the information provided by fboweb.com” and that he was providing it to the Department because it appeared to be
inconsistent with the FlightAware data conveyed to him by the Department staff.
Mr. McDonald never expressly contested the assertion by the Department staff that the aircraft returned to Florida within the six months after it initial departure. His failure to do so was not, under the circumstances, an admission or acquiescence to the Department’s position that the aircraft did return to Florida within that period. Indeed, he informed the Department staff on several occasions that he had not been able to obtain information concerning the aircraft’s operation because the aircraft’s flight records were destroyed in the crash.
No credible evidence was presented as to what the FlightAware or fboweb.com services are, or how they obtain the flight data included in their records. For example, when asked to explain her “understanding of what Flight Aware is,” the Department witness used to introduce the data testified only that “[i]t’s a service that the Department subscribes to to track the flights for the aircraft.”
The FlightAware data indicates that the aircraft made eleven flights into Florida between September 2007 and
January 2008:
Flight | Date | Destination |
1 | 9/22/07 | from Arturo Michelena International Airport (Arturo) in Venezuela to Kendall-Tamiami Executive Airport, and then to Simon Bolívar International Airport in Venezuela by way of Ft. Lauderdale Executive Airport on the same day |
2 | 9/29/07 | from Arturo to Hollywood International Airport (FLL), and then to Simon Bolivar International Airport the following day |
3 | 10/1/07 | from Arturo to FLL, and then back to Arturo the same day |
4 | 10/4/07 | from Arturo to FLL, then to Orlando Sanford International Airport (SFB) the following day, with a return to Arturo by way of FLL and Nassau International Airport on October 14 |
5 | 10/15/07 | from Arturo to FLL, then to SFB on the same day |
6 | 12/16/07 | from Arturo to FLL, then to SFB the same day, with a return to Arturo on December 20 |
7 | 12/21/07 | from Arturo to FLL, and then back to Arturo on the same day |
8 | 12/23/07 | from Arturo to FLL, and then back to Arturo on the same day |
9 | 1/3/08 | from Punta Cara International Airport to FLL, then to SFB on the same day, with a return to Arturo by way of FLL on January 6 |
10 | 1/10/08 | from Arturo to FLL, and then back to Arturo on January 12 |
11 | 1/13/08 | from Arturo to FLL, and then back to Arturo on the same day |
The fboweb.com data is, as Mr. McDonald noted, difficult to decipher. However, it appears to include most, if not all, of the flights that were listed in the FlightAware data.
The fboweb.com data also lists flights on September 8- 9, 2007, between Arturo, FLL, and SFB. Those flights were not listed in the FlightAware data.
No findings can be made as to whether the aircraft was indeed in Florida on the dates reflected in the FlightAware or fboweb.com data because that data is uncorroborated hearsay.
Even if the FlightAware and fboweb.com data could be relied upon to establish that the aircraft was in Florida on the dates referenced above, only the September 8-9 flights listed in the fboweb.com data and the first eight flights listed in the FlightAware data would be relevant. The other three flights listed in the FlightAware data -– 1/3/08, 1/10/08, and 1/13/08 -
– occurred more than six months after the aircraft’s initial departure from Florida on July 2, 2007.
Mr. McDonald was able to locate and provide to the Department repair invoices related to only four of the nine relevant flights listed in the FlightAware and fboweb.com data –
- 9/8/07, 10/4/07, 10/15/07, and 12/16/07. On each of those occasions, there is documentation showing that the aircraft underwent repairs at SJC in Sanford.
There is no evidence that the aircraft underwent repairs in connection with the other five flights listed in the FlightAware data -– 9/22/07, 9/29/07, 10/1/07, 12/21/07, and 12/23/07.
Mr. McDonald provided an invoice for a part that was purchased for the aircraft at FLL on September 29, 2007, but
there is no evidence that the part was installed in Florida on that trip.
No sales or use tax was paid on the aircraft by Petitioner or any other entity or person to Florida or to any other state or country.
Petitioner does not dispute the amount of the tax, penalty, or interest calculated by the Department in the Notice of Reconsideration. The tax is $224,400, which is six percent of the sales price of the aircraft; the penalty is $224,400, which is 100 percent of the tax as required by Section 212.05(1)(a)2., Florida Statutes; and interest is accruing at a rate of $67.44 per day, with $27,273.10 of interest having accrued through the date of the Notice of Reconsideration.
These amounts were assessed against Petitioner in its capacity as “owner trustee,” not its individual capacity.
CONCLUSIONS OF LAW
DOAH has jurisdiction over the parties to and subject matter of this proceeding pursuant to Sections 72.011(1), 120.80(14)(b), 120.569, and 120.57(1), Florida Statutes (2008).
The Department is the state agency responsible for administering and enforcing the sales and use taxes imposed by Chapter 212, Florida Statutes. See § 213.05, Fla. Stat.
Section 212.05(1), Florida Statutes, imposes a six percent tax on the retail sale or use of tangible personal property in Florida.
The retail sale of an aircraft to an out-of-state resident or business is exempt from the sales tax under certain, limited circumstances. See § 212.05(1)(a)2., Fla. Stat.
The relevant terms of the exemption are as follows:
2. [The sales tax] does not apply to the sale of a[n] . . . aircraft by or through a registered dealer under this chapter to a purchaser who, at the time of taking delivery, is a nonresident of this state, does not make his or her permanent place of abode in this state, and is not engaged in carrying on in this state any employment, trade, business, or profession in which the
. . . aircraft will be used in this state, or is a corporation none of the officers or directors of which is a resident of, or makes his or her permanent place of abode in, this state, or is a noncorporate entity that has no individual vested with authority to participate in the management, direction, or control of the entity's affairs who is a resident of, or makes his or her permanent abode in, this state. This
exemption shall not be allowed unless:
The purchaser removes [the]
aircraft from this state within 10 days after the date of purchase or, when the . .
. aircraft is repaired or altered, within 20 days after completion of the repairs or alterations;
The purchaser, within 30 days from the date of departure, shall provide the department with written proof that the purchaser licensed, registered, titled, or documented the . . . aircraft outside the
state. If such written proof is unavailable, within 30 days the purchaser shall provide proof that the purchaser applied for such license, title, registration, or documentation. The purchaser shall forward to the department proof of title, license, registration, or documentation upon receipt.
The purchaser, within 10 days of removing the . . . aircraft from Florida, shall furnish the department with proof of removal in the form of receipts for fuel, dockage, slippage, tie-down, or hangaring from outside of Florida. The information so provided must clearly and specifically identify the . . . aircraft;
The selling dealer, within 5 days of the date of sale, shall provide to the department a copy of the sales invoice, closing statement, bills of sale, and the original affidavit signed by the purchaser attesting that he or she has read the provisions of this section;
The seller makes a copy of the affidavit a part of his or her record for as long as required by s. 212.35; and
* * *
If the purchaser fails to remove . . . aircraft from this state within 10 days after purchase or, when the . . . aircraft is repaired or altered, within 20 days after completion of such repairs or alterations, or permits the . . . aircraft to return to this state within 6 months from the date of departure, or if the purchaser fails to furnish the department with any of the documentation required by this subparagraph within the prescribed time period, the purchaser shall be liable for use tax on the cost price of the . . . aircraft and, in addition thereto, payment of a penalty to the Department of Revenue equal to the tax
payable. This penalty shall be in lieu of the penalty imposed by s. 212.12(2) and is mandatory and shall not be waived by the department. . . . . Notwithstanding other provisions of this paragraph to the contrary, an aircraft purchased in this state under the provisions of this paragraph may be returned to this state for repairs within 6 months after the date of its departure without being in violation of the law and without incurring liability for the payment of tax or penalty on the purchase price of the aircraft if the aircraft is removed from this state within 20 days after the completion of the repairs and if such removal can be demonstrated by invoices for fuel, tie-down, hangar charges issued by
out-of-state vendors or suppliers, or similar documentation.
§ 212.05(1)(a)2., Fla. Stat. (emphasis supplied).
It is undisputed that the initial sale of the aircraft was exempt from the sales tax under the terms of this statute. The dispute is whether the aircraft is subject to use tax based upon the language emphasized above, and if so, whether Petitioner is the entity responsible for paying the tax and the related penalty and interest.
The Department has the initial burden of “showing that an assessment has been made against the taxpayer and the factual and legal grounds upon which the . . . department made the assessment.” § 120.80(14)(b)2., Fla. Stat. (2008). If the Department meets this burden, Petitioner then has the burden to prove by a preponderance of the evidence that the assessment is
incorrect. See IPC Sports, Inc. v. Dept. of Revenue, 829 So. 2d 330, 332 (Fla. 3rd DCA 2002).
The Department’s initial burden is akin to the presentation of a prima facie case with competent substantial evidence.
It is undisputed that the Department made an assessment against Petitioner in its capacity as “owner trustee.” There is no basis to tax Petitioner in its individual capacity, and the Department has not argued that there is.
In order to show the factual and legal grounds for the assessment in this case, the Department must present competent substantial evidence to show (1) that Petitioner was the purchaser of the aircraft, and (2) that Petitioner permitted the aircraft to return to Florida within six months after the date of its initial departure for purposes other than repairs.
With respect to the first issue, Section 212.05(1)(a)2., Florida Statutes, does not define “purchaser,” and, therefore, the term must be given its plain and ordinary meaning by reference to the dictionary.
“Purchase” means “to obtain by paying money or its equivalent.” See Merriam-Webster’s Online Dictionary, at www.m- w.com. Therefore, a purchaser is one who obtains by paying money or its equivalent. Accord Black’s Law Dictionary (6th ed. 1990), at 1235 (defining “purchaser” to mean “[o]ne who acquires
either real or personal property by buying it for a price in money; a buyer; vendee” and noting that the term “may be employed in the broad sense to include anyone who obtains title otherwise than by decent and distribution but is more commonly
used to refer to a vendee or buyer who has purchased property for valuable consideration” (emphasis supplied)).
The Department met its initial burden to show the basis for its assessment against Petitioner as the “purchaser” of the aircraft. Specifically, the Department presented competent substantial evidence showing that in making the assessment, it reasonably relied on the Bill of Sale, the Removal Affidavit, and FAA registration executed by Petitioner, which, on their face, identify Petitioner as the “purchaser” and registrant of the aircraft.
Thus, the burden shifted to Petitioner to prove that the factual and legal basis for the assessment are incorrect.
Petitioner met its burden of proof because, as a matter of fact and law, MAW.ZC, LLC, was the “purchaser” of the aircraft, not Petitioner.
The documents relied on by the Department do not refer to Petitioner in its individual capacity. Rather, they refer to Petitioner in its capacity as “owner trustee under a Trust Agreement dated 4/28/07” (Bill of Sale and FAA registration) and “owner trustee for MAW.ZC, LLC” (Removal Affidavit). This
qualification, which was essentially ignored by the Department in making the assessment, is significant because the greater weight of the evidence establishes that, as “owner trustee,” Petitioner had essentially no control over the aircraft and, as a result, the true owner of the aircraft was MAW.ZC, LLC, not Petitioner.
Moreover, as detailed in the Findings of Fact, the more persuasive evidence establishes that notwithstanding the reference to Petitioner on the Bill of Sale and other documents, MAW.ZC, LLC, was the actual “purchaser” of the aircraft. First, the evidence establishes that the purchase/sale transaction was between SJC and MAW.ZC, LLC, not SJC and Petitioner. Second, the evidence establishes that MAW.ZC, LLC, and not Petitioner, paid the purchase price to SJC. Third, as Mr. Croasman credibly explained, the sole reason that Petitioner (rather than MAW.ZC, LLC) was listed as the “purchaser” on the Bill of Sale was to facilitate registration of the aircraft with the FAA.
In light of this conclusion, it is not necessary consider the second issue as to whether Petitioner permitted the aircraft to return to Florida for purposes other than repairs within six months after the aircraft’s initial departure from the state. Nevertheless, that issue will be addressed in the event that the Department or an appellate court concludes that Petitioner was indeed the “purchaser” of the aircraft.
Section 212.05(1)(a)2., Florida Statutes, does not define “permits,” and, therefore, that term must be given its plain and ordinary meaning by reference to the dictionary.
“Permit” means “to consent to expressly or formally,” “to give leave: AUTHORIZE,” “to make possible,” and “to give an opportunity: ALLOW.” See Merriam-Webster’s Online Dictionary, at www.m-w.com. Accord Allstate Ins. Co. v. TIG Ins. Co., 711 So. 2d 84, 85 (Fla. 1st DCA 1998) (noting that that term “permit” is susceptible of two meanings: (1) to expressly or formally consent, or (2) not to prohibit).
Petitioner argues that it could not have, and did not, “permit” the aircraft to return to Florida because it had no control over the operation of the aircraft. This argument is rejected.
The evidence establishes that Petitioner expressly allowed MAW.ZC, LLC, to operate the aircraft anywhere without any oversight or supervision by Petitioner through the terms of the Aircraft Operating Agreement and the separate authorization issued to Captain Nunez. And, because Petitioner did not in any way limit that authority to exclude operating the aircraft in Florida during the six-month period after the aircraft was initially removed from the state (even after receiving the letter from the Department regarding the tax consequences if the aircraft returned to Florida during that period), the evidence
supports the Department’s position that Petitioner “permitted” the aircraft to return to Florida.
That said, it is not enough for Petitioner to have permitted the aircraft to return to Florida within six months after its initial departure. It must also be shown that the aircraft did, in fact, return to the state during that period for purposes other than repairs.
The Department failed to meet its initial burden on this issue.
The Department did not present any competent substantial evidence showing that the aircraft returned to Florida for purposes other than repairs during the six-month period after its initial departure on July 2, 2007. The only evidence presented on this issue was the FlightAware and fboweb.com data, which are hearsay to the extent they are being offered for the truth of the matter asserted in the data, i.e., that the aircraft was in the locations reflected in the data.
Hearsay is admissible in this proceeding, but it is not competent substantial evidence that can support a finding of fact unless it is corroborated by other, non-hearsay evidence. See §§ 120.569(2)(g), 120.57(1)(c), Fla. Stat.
The Department argues in its PRO that the FlightAware data was admitted without objection as part of its enforcement file under the business record exception to the hearsay rule.
This argument was rejected in the Order on Post-hearing Motions, entered July 16, 2009.
The fact that the enforcement file was received as a business record did not cure the hearsay nature of the FlightAware data. As explained by Professor Ehrhardt,
[w]hen a business record contains a hearsay statement, the admissibility of the record depends on whether the hearsay statement in the record would itself be admissible under some exception to the hearsay rule. In other words, if the person who prepared the record could not testify in court concerning the recorded information, the information does not become admissible as evidence merely because it has been recorded in the regular course of business.
Ehrhardt, Florida Evidence, at § 805.1, n.3 (2002) (discussing “hearsay within hearsay”). Accord Harris v. Fla. Game & Fresh Water Fish Comm’n, 495 So. 2d 806, 808-09 (Fla. 1st DCA 1986).
Next, the Department argues that the FlightAware data is corroborated by the fboweb.com data, which was provided to the Department by Petitioner’s authorized representative.
The fboweb.com data, like the FlightAware data, is hearsay to the extent it is being offered to show that the aircraft returned to Florida on the dates reflected in the data. Thus, even though the fboweb.com data appears to be materially consistent with the information in the FlightAware data,3/ it is not corroborating evidence upon which findings of fact can be made. Simply put, hearsay corroborated by other hearsay is not
competent substantial evidence upon which findings of fact can be made.
The fact that the fboweb.com data was provided to the Department by Petitioner’s authorized representative does not, as the Department argues, make the data an “admission” or “statement against interest” that can be relied upon to make findings of fact, either by itself or in conjunction with the FlightAware data. See §§ 90.803(18) (providing an exception to the hearsay rule for admissions and 90.804(2)(c), Florida Statutes (providing an exception to the hearsay rule for statements against interest made by an unavailable declarant).
First, the fboweb.com data itself is not a statement of Petitioner or Mr. McDonald. Second, even though the data was provided to the Department by Mr. McDonald in his capacity as Petitioner’s representative, he did not “manifest[] his adoption or belief in its truth” (see § 90.803 (18)(b), Fla. Stat.), but rather he informed the Department that he could not decipher the data. Third, there is no evidence that Mr. McDonald was unavailable at the time of the final hearing, so even if his presentation of the fboweb.com data to the Department were considered a statement against Petitioner’s interest, it would not be admissible under Section 90.804(2)(c), Florida Statutes.
Arguably, the FlightAware and fboweb.com data are corroborated by the repair invoices from SJC (which Petitioner
does not argue are hearsay), but only as to the flight dates that correspond to the dates in the invoices. The fact that certain aspects in FlightAware and fboweb.com data are corroborated by non-hearsay evidence does not mean that findings can be made based upon other uncorroborated aspects of the flight data. Each entry in the flight data is a separate statement for purposes of the hearsay rule because each entry asserts a different fact (e.g., that the aircraft traveled from Arturo to FLL on December 21, 2007, and that it traveled back to Arturo from FLL later that day).
In light of the conclusion that the Department failed to present competent substantial evidence showing that the aircraft returned to Florida within six months after its initial departure, it is not necessary to consider whether Petitioner met its burden to prove that the Department’s assessment on that basis was incorrect. Nevertheless, that issue will be addressed below in the event that an appellate court reverses these evidentiary rulings.
To the extent that the FlightAware data and/or the fboweb.com data were determined to be sufficient to support findings of fact, the preponderance of the evidence would establish that the aircraft returned to Florida for purposes other than repairs five times -- 9/22/07, 9/29/07, 10/1/07,
12/21/07, and 12/23/07 -- in the six-month period after its initial departure.
Petitioner’s argument that the FlightAware data would not support a tax assessment even if it were not hearsay since it showed only de minimus use of the aircraft in Florida is rejected. See Petitioner’s PRO, at 21-22. The case relied upon by Petitioner in support of this argument -- Department of Revenue v. Yacht Futura Corporation, 510 So. 2d 1047 (Fla. 1st DCA 1987) -- is distinguishable because that case involved a single five-day use of a yacht in the state, whereas the FlightAware data shows a more routine and frequent use of the aircraft in the state over a period of several months.
Also rejected is Petitioner’s argument that the five trips would not trigger tax under Section 212.05(1)(a)2., Florida Statutes, because each occurred within 20 days of a documented repair. See Petitioner’s PRO, at ¶¶ 69-70. On this issue, the undersigned agrees with the Department that the 20- day period in the statute is not a “safe harbor” during which the aircraft can return to Florida for non-repair reasons. Rather, that is the period within which the aircraft must be removed from the state after the completion of repairs, and once removed, any return trips to the state (even those within the
20-day period) must be for repairs.
Finally, Petitioner’s constitutional arguments (see, e.g., Petitioner’s PRO, at 23-24) need not be addressed in light of the determinations above, and in any event, DOAH and the Department do not have the authority to adjudicate
constitutional issues.
Based upon the foregoing Findings of Fact and Conclusions of Law, it is
RECOMMENDED that the Department issue a final order rescinding the assessment at issue in this case.
DONE AND ENTERED this 19th day of August, 2009, in Tallahassee, Leon County, Florida.
S
T. KENT WETHERELL, II Administrative Law Judge
Division of Administrative Hearings The DeSoto Building
1230 Apalachee Parkway
Tallahassee, Florida 32399-3060
(850) 488-9675
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, 2009.
ENDNOTES
1/ Unless otherwise indicated, all statutory references are to the 2006 version of the Florida Statutes in effect at the time of the events giving rise to this case.
2/ It is not necessary to determine whether Mr. Croasman’s hearsay-based understanding is correct, but paragraph (c) of Section 9.01 suggests that it is not. That paragraph provides:
(c) Purpose. The purpose of Section 9.01 is to give the Owner Trustee the power to manage and control the Aircraft with respect to matters involving the ownership and operation of the Aircraft by the Owner Trustee so as to assure that (i) the Aircraft shall be controlled with respect to such matters by a Citizen of the United States and (ii) the Trustor shall have no power to influence or control the exercise of the Owner Trustee’s authority with respect to such matters and (iii) the Owner Trustee shall be able to give the affidavit required by [FAA regulations]. Section 9.01 shall be construed in furtherance of the foregoing purpose.
3/ Petitioner correctly points out in its PRO (at paragraph 47) that there are gaps and other inconsistencies in FlightAware and fboweb.com data. Those issues affect the weight that would be given to the data if it were not hearsay, but it does not completely undermine the reliability of the data.
COPIES FURNISHED:
M. Stephen Turner, Esquire Broad & Cassel, P.A.
215 South Monroe Street, Suite 400 Post Office Box 11300
Tallahassee, Florida 32302
Nicholas Bykowsky, Esquire Office of the Attorney General The Capitol, Plaza Level 01 Revenue Litigation Bureau Tallahassee, Florida 32399-1050
Marshall Stranburg, General Counsel Department of Revenue
The Carlton Building, Room 204
501 South Calhoun Street Tallahassee, Florida 32399-0100
Lisa Echeverri, Executive Director Department of Revenue
The Carlton Building, Room 104
501 South Calhoun Street Tallahassee, Florida 32399-0100
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.
| Issue Date | Document | Summary |
|---|---|---|
| Mar. 09, 2017 | Agency Final Order | |
| Aug. 19, 2009 | Recommended Order | Respondent should rescind use tax assessment against Petitioner because Petitioner was not the purchaser of the aircraft at issue, and the evidence fails to establish that the aircraft returned to Florida within six months after initial departure. |
