STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was held in this case on November 2, 2009, by video-teleconference between Tampa and Tallahassee, Florida, before Carolyn S. Holifield, a duly- designated Administrative Law Judge of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Michael Maynard, pro se

19046 Bruce B. Downs Boulevard, No. 142 Tampa, Florida 33647

For Respondent: John Mika, Esquire

Office of the Attorney General The Capitol - Tax Section Tallahassee, Florida 32399-1050

STATEMENT OF THE ISSUE

The issue is whether Respondent properly assessed a civil penalty against Petitioner, pursuant to Section 213.29, Florida Statutes (2007),1 after Respondent was adjudicated and sentenced

in a criminal proceeding for the offense of theft of state funds.

PRELIMINARY STATEMENT

On March 19, 2008, Respondent, Department of Revenue ("Department" or "Respondent"), issued its Notice of Final Assessment which notified Petitioner, Michael Maynard, the corporate officer for Integrated Copy Systems, Inc. ("Integrated Copy Systems"), that it was being assessed a penalty in the amount of $14,150.96, pursuant to Section 213.29, Florida Statutes. After exhausting its informal protest rights, Petitioner timely challenged Respondent's assessment.

On May 7, 2009, the matter was forwarded to the Division of Administrative Hearings for assignment of an Administrative Law Judge to conduct the hearing. The final hearing was initially scheduled for August 7, 2009, but was continued by an Order granting Petitioner's unopposed motion for continuance and rescheduling for hearing on November 2, 2009. A second motion for continuance, filed by Petitioner on October 29, 2009, was denied, and the hearing was held on November 2, 2009, as noticed.

Prior to the final hearing, Respondent filed a Request to Take Judicial Notice of the following three court documents attached thereto: (1) the Information filed by the state attorney for the Thirteenth Judicial Circuit, Hillsborough

County, Florida, for theft of state funds (Subsection 212.15(2)(b), Florida Statutes), dated December 12, 2005; (2) the Judgment and Sentencing of the Thirteenth Judicial Circuit, in and for Hillsborough County, Florida, dated December 13, 2007; and (3) the Supervision Order dated December 13, 2007.2 The Request for Judicial Notice, which is deemed to be a Request for Official Recognition, is granted.

At the hearing, Petitioner presented the testimony of one witness and its Exhibits 1 through 6 were admitted into evidence. Respondent presented the testimony of two witnesses, both Department employees: Philip Wilk, a revenue investigator; and Janet Cumbie, a tax law specialist. Respondent's Composite Exhibits A, B, C, D, and F were admitted into evidence.

The hearing Transcript was filed on November 17, 2009.

Respondent timely filed its Proposed Recommended Order. Petitioner did not file a proposed recommended order or any other post-hearing submittal.

FINDINGS OF FACT

1. Integrated Copy Systems failed to file sales tax returns or failed to remit sales tax, or both, to the Department during the periods July 2003 through April 2005.

2. In an attempt to secure compliance, on May 12, 2005, the Department recorded a tax warrant with the clerk of court for Hillsborough County in the amount of $24,060.95.

3. The amount of tax due listed on the warrant was

   
   

   $18,400.29, an amount which included, in part, an estimate of tax liability. This estimate was appropriate since Integrated Copy Systems had not filed sales tax returns for certain periods, and Respondent had no information as to the amount of taxable sales made for those periods.

4. Petitioner was subsequently arrested and charged with the offense of theft of state funds, a third-degree felony, in State of Florida v. Michael Maynard, Case No. 05-22960, in the Thirteenth Judicial Circuit in and for Hillsborough County, Florida.

5. On December 13, 2007, Petitioner entered a plea to the criminal charge and was sentenced to probation, with conditions which included the payment of restitution,3 and adjudication was withheld. Petitioner testified that as part of an agreement in his criminal case, he paid the outstanding taxes and that "zero" taxes were due. Petitioner also testified that pursuant to an agreement with the prosecuting attorney, he was assessed and paid a civil fine $1,000.00.

6. Petitioner made some payments to the Department for the sales taxes which he failed to remit for the periods of

   July 2003 through April 2005. However, Petitioner has not paid all the outstanding sales taxes owed for the subject time period, despite his belief to the contrary. The records

   generated and/or produced by Petitioner, which purport to reflect the payments made to the Department, do not take into account the accrual of interest and other penalties.

7. The Department properly applied Petitioner's payments to the outstanding sales taxes owed by Integrated Copy Systems. To calculate the amount of sales and use tax owed by Integrated Copy Systems, the Department applied all payments made towards the tax liability of the company. The Department also removed the estimated amount of tax from the total amount of taxes due upon receipt of the company's sale tax returns for the missing periods.

8. The Department accurately determined that as of December 21, 2007, Integrated Copy Systems still owed $7,075.48 in sales tax.

9. On March 19, 2008, the Department issued a Notice of Final Assessment Sales or Use Tax, Penalty and Interest.

10. The amount of the penalty assessed against Petitioner, in his capacity as corporate officer or responsible party, is

    $14,150.96, which is 200 percent of Integrated Copy Systems' tax liability.

    CONCLUSIONS OF LAW

    
    

11. The Division of Administrative Hearings has jurisdiction over the subject matter and parties in this

    proceeding pursuant to Sections 120.569 and 72.011 and Subsection 120.57(1), Florida Statutes (2009).

12. The Department is the agency of state government authorized to administer the tax laws of the State of Florida pursuant to Section 213.05, Florida Statutes (2009).

13. In administrative proceedings where the taxpayer contests the assessment of the tax, penalty or interest, the Department's "burden of proof . . . shall be limited to a showing that an assessment has been made against the taxpayer and the factual and legal grounds upon which the applicable department made the assessment." § 120.80(14)(b), Fla. Stat. (2009). If the Department makes a prima facie showing of the factual and legal sufficiency of its assessment of a tax, penalty or interest, the burden of proof then shifts to Petitioner. To meet its burden, Petitioner must establish by a preponderance of evidence that the assessment is incorrect. IPC Sports v. Department of Revenue, 829 So. 2d 330, 332 (Fla. 3d DCA 2002).

14. The Department met its burden of proof in this case.

    
    

15. The Department established that the proposed agency action is based on Section 213.29, Florida Statutes (2007), which provides in pertinent part:

    Failure to collect and pay over tax or attempt to evade or defeat tax.--Any person who is required to collect, truthfully

    account for, and pay over any tax enumerated in chapter 201, chapter 206, or chapter 212 and who willfully fails to collect such tax or truthfully account for and pay over such tax or willfully attempts in any manner to evade or defeat such tax or the payment thereof; or any officer or director of a corporation who has administrative control over the collection and payment of such tax and who willfully directs any employee of the corporation to fail to collect or pay over, evade, defeat, or truthfully account for such tax shall, in addition to other penalties provided by law, be liable to a penalty equal to twice the total amount of the tax evaded or not accounted for or paid over. The filing of a protest based upon doubt as to liability or collection of a tax shall not be determined to be an attempt to evade tax under this section. The penalty imposed hereunder shall be in addition to any other penalty imposed or that should have been imposed under the revenue laws of this state, but shall be abated to the extent that the tax is paid. Any penalty may be compromised by the executive director of the Department of Revenue as set forth in

    s. 213.21. An assessment of penalty made pursuant to this section shall be deemed prima facie correct in any judicial or

    quasi-judicial proceeding brought to collect this penalty.

    
    

16. The Department established by a preponderance of evidence that Petitioner willfully failed to remit sales taxes to the Department that he collected from his customers for the period of July 2003 through April 2005. In fact, that Petitioner committed such an offense is undisputed in that Petitioner pled guilty to grand theft as defined in Subsection 212.15(2)(b), Florida Statutes, which provides that it is a

    third-degree felony for a person who, with intent to unlawfully deprive or defraud the state of its moneys or . . . fails to remit taxes collected under this chapter is guilty of grand theft."

17. The competent and substantial evidence also established that the Department correctly calculated the assessment for sales tax for the period of July 2003 through April 2005 to be $7,075.48.

18. Pursuant to Section 213.29, Florida Statutes, as a result of his willful failure to pay the sales tax for the applicable time period, Petitioner is "liable to a penalty equal to twice the total amount of the tax evaded or not accounted for or paid over." Thus, the penalty amount in this case is

    $14,150.96, which is twice the amount of the assessment for sales tax.4

19. Petitioner failed to prove that the penalty assessed him is incorrect.

20. Petitioner makes several arguments, none of which are persuasive. First, Petitioner contends that if his payments were applied in the manner and fashion he specified in documents accompanying the payments, that there would be no remaining liability. Section 213.75, Florida Statutes, allows a taxpayer to specify the manner in which payments are to be applied. However, once a warrant or lien has been filed and recorded by

    the Department, the taxpayer loses this right and payments are applied according to statute. In those instances, the costs, interest, and penalty are to be paid first and, then, any remaining amount applied towards the tax liability, starting with the earliest in time and moving to the present. Where, as in this case, the Department filed and recorded a warrant, Petitioner (the taxpayer) no longer had the right to specify how the payments should be applied.

21. Next, Petitioner asserts that he entered into an agreement in his criminal case, which resulted in his making all outstanding payments owed to the Department. As a result of making all payments in accordance with the terms of that agreement, Petitioner asserts that he has met his obligation and should not be required to pay the assessed penalty. Subsection 775.089(8), Florida Statutes, provides that the conviction of a defendant for an offense which gives rise to an order of restitution will not bar any subsequent civil remedy or recovery.5 Thus, notwithstanding the agreement made as part of his criminal case, Petitioner is still subject to the penalty prescribed by Section 213.29, Florida Statutes.

22. Petitioner failed to meet his burden of proof and is liable for the penalty amount of $14,150.96, assessed by the Department in accordance with Section 213.29, Florida Statutes.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is

RECOMMENDED that Respondent, Department of Revenue, enter a final order sustaining the sales tax assessment of $7,075.48; and the penalty assessment of $14,150.96 45.

DONE AND ENTERED this 31st day of March, 2010, in Tallahassee, Leon County, Florida.

S

CAROLYN S. HOLIFIELD

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 31st day of March, 2010.

ENDNOTES

1/ Unless otherwise noted, all statutory references are to 2007 version of Florida Statutes. The 2007 version of the Florida Statutes provisions cited have not been amended and are the same as the 2009 version.

2/ The three-court documents all relate to the case, State of Florida v. Michael D. Maynard, Case No. 05-22960, in the Thirteenth Judicial Circuit in and for Hillsborough County, Florida.

3/ The amount of the restitution is not specified in the court documents.

4/ Section 213.29, Florida Statutes (2007), does provide that the penalty imposed shall be abated to the extent the tax is paid. Therefore, to the extent Petitioner pays the outstanding tax liability of Integrated Copy Systems, the penalty assessed against him individually should be abated.

5/ Subsection 960.291(3), Florida Statutes, provides that a conviction includes a guilty plea and a plea of nolo contendere by a defendant, even if adjudication of guilt is withheld as is the situation present in this case.

COPIES FURNISHED:

Lisa Echeverri, Executive Director Department of Revenue

The Carlton Building, Room 104

501 South Calhoun Street Tallahassee, Florida 32399-0100

Marshall Stranburg, General Counsel Department of Revenue

The Carlton Building, Room 204

501 South Calhoun Street Post Office Box 6668

Tallahassee, Florida 32314-6668

Michael Maynard

19046 Bruce B. Downs Boulevard, No. 142 Tampa, Florida 33647

John Mika, Esquire

Office of the Attorney General The Capitol - Tax Section Tallahassee, Florida 32399-1050

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: 09-002410

Orders for Case No: 09-002410