STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
RED LOBSTER INNS OF AMERICA, INC., )
)
Petitioner, )
)
vs. ) CASE NO. 76-1245
)
FLORIDA STATE DEPARTMENT )
OF REVENUE, )
)
Respondent. )
)
RECOMMENDED ORDER
Upon stipulations of the parties hereto that there are only issues of law to be determined by this order and upon an order pursuant to stipulation, this cause is determined upon receipt of Memorandum of Law by both parties.
APPEARANCES
For Petitioner: Terrell Griffin, Esquire
515 Pan American Building
250 North Orange Avenue Orlando, Florida 32801
Charles E. DeMarco, Esquire Staff Attorney
Red Lobster Inns of America, Inc. Post Office Box 13330
Orlando, Florida 32809
For Respondent: Caroline C. Mueller, Esquire
Department of Legal Affairs, The Capitol Tallahassee, Florida 32304
ISSUE
The Petitioner and Respondent have agreed by stipulation that the following four issues of law are to be determined by the Hearing Officer:
Whether Red Lobster must pay four percent sales tax on ad valorem taxes paid directly to a governmental taxing unit on leases in which it is set forth that Red Lobster, the Lessee, will, in addition to the rental payments, be obligated to pay the ad valorem taxes.
Whether certain waitress uniforms and denominators purchased from vendors outside the State of Florida by Red Lobster and shipped to Red Lobster Headquarters within the State of Florida for storage purposes and subsequently transshipped for use in Red Lobster locations outside the State of Florida are subject to Florida sales or use tax.
Whether those automobiles purchased by Red Lobster's parent company, General Mills, Inc., outside the State of Florida and on which a sales tax was paid in the state in which purchased and then leased to Red Lobster for use in the State of Florida for periods in excess of twelve months are subject to a Florida sales or use tax on the rental payments.
Whether Red Lobster is obligated to pay an amount of sales tax determined by the Bracket System as set forth in Florida Statutes or is obligated to pay all sales tax actually collected so long as the sales tax collected equals or exceeds 4 percent of gross sales.
FINDINGS OF FACT
The Respondent Department of Revenue assessed certain sales and use tax against Petitioner Red Lobster Inns of America, Inc., for a three-year period commencing February 1, 1971 through January 31, 1974. The Petitioner filed a petition for hearing to the Division of Administrative Hearings pursuant to Chapter 120, Florida Statutes, contesting the imposition of said sales and use taxes by Respondent.
Each of the issues will be treated separately.
ISSUE I Whether Petitioner must pay 4 percent sales tax on ad valorem taxes paid directly to a governmental unit on leases in which it is set forth that Red Lobster, the Lessee, will, in addition to the rental payments, be obligated to pay the ad valorem taxes.
Two kinds of leases are involved here. One type (Exhibit "A") provides the payment of "all real estate taxes" shall be "as additional rent" and a second type (Exhibit "B") provides that "The lessee shall be responsible for the payment of all real estate taxes" without labeling such payments as additional rental. In both types of leases, the ad valorem tax payments on the leased real estate are the obligation of Red Lobster, Lessee.
The Petitioner, Lessee, paid the sales tax on the amount it considered "rent" paid but did not pay the sales tax on the monies paid the Lessor for the payment of the ad valorem taxes on the leased property.
The Respondent Department of Revenue contends: that all the monies paid by Petitioner as Lessee, including the amount paid for the payment of ad valorem taxes, constitute consideration for the lease and thus constitute rent for purposes of Chapter 212.
Petitioners contend: that these payments for ad valorem taxes are not "total rent charges for such real property" under Section 212.031(c); that to require that sales and use tax be paid on ad valorem tax payments is double taxation; that the imposition of a sales and use tax on an existing ad valorem tax constitutes a pyramiding of taxation contrary to Section 212.031(2)(b). Petitioner further contends that the rule 12A-1.70(3) exceeds the statutory authority of Section 212.031, Florida Statutes, inasmuch as the statute states a tax is levied on the "rent charged" whereas the rule states that the tax shall be paid "on all considerations."
The lease between the parties marked for identification as Exhibit "A" provides in pertinent part on page 1, Section 2, Demise of Premises:
"In consideration of the rents and covenants herein stipulated to be paid and performed by Lessee, Lessor hereby demises and lets to Lessee . . . the parcel of land . . . together with all buildings, structures and
other improvements constructed thereon . . ."
On page 5, in Section 9, Taxes and Other Charges:
"(a) Lessee also agrees . . . to pay and discharge as auditional rent, punctually as and when the same shall become due and payable without penalty, all real estate taxes, personal property taxes, business and occupation taxes, occupational license taxes
. . . and all other governmental taxes which at any time during the term of the lease shall become due "
Clearly, the payment of taxes was understood by both parties as being part of the rent in Exhibit "A" contracts.
The lease between the parties marked for identification as Exhibit "B" does not specifically provide that the payment of taxes is part of the rent. However, it speaks to the issue on page 1 providing:
"That for and in consideration of the covenants and agreements herein contained and in consideration of the rents herein reserved to be paid by lessee to lessors, the parties hereto do hereby mutually covenant and agree
. . . ."
to do certain things and includes the specific requirement on page 3: "9. The lessee shall be responsible for the
payment of all real estate taxes, both city and county, assessed against the demised premises and shall pay the same before the taxes become delinquent."
It is apparent that the payment of real estate taxes is a part of the "total rent charges for such real property" in Exhibit "B" contracts.
Designation by the Lessor as to the method of distributing the gross sum of rent does not relieve the Lessee from his payments to the Lessor or change the fact that it is for rent due and for the "return . . . which the tenant makes to the landlord for the use of the demised premises." 52 CJS, Section 462, p. 344. Thus, there is no pyramiding or double taxation.
Inasmuch as the payment of ad valorem taxes is a part of the rental agreement between the parties, sales tax would be due on the amount paid by Lessee for ad valorem taxes regardless of whether the Lessee or the Lessor performed the transmittal duties of paying the taxes. The acceptance by the Lessee of the onerous duties of timely paying the numerous taxes, charges, assessments and other impositions is a valuable consideration and a part of the rent charge itself.
The statute supports the assessment of Respondent. The contention that the rule is invalid is not well taken inasmuch as the rule is presumed valid for the purpose of this hearing.
Thus, the Hearing Officer determines that the Petitioner Red Lobster Inns of America must pay the 4 percent sales tax on the ad valorem taxes paid directly to a governmental taxing unit.
ISSUE II Whether the waitresses' uniforms and denominators (a counting device) purchased from vendors outside the State of Florida by Petitioner and shipped to Petitioner's headquarters in Florida for storage purposes and thereafter shipped for use in Red Lobster Inn locations outside the State of Florida are subject to Florida sales or use tax.
The Respondent Department of Revenue sought to impose a use tax upon the uniforms and denominators which were purchased outside the state, sent in and then sent out again. The Petitioner Red Lobster Inns does not contest the assessment of sales or use tax on the uniforms and denominators that were used and consumed in this state. However, it contests the assessment on the items that were bought outside the state, sent in to Florida and then sent out of state in the same condition. Red Lobster uses uniforms both within and without the state and also denominators both inside and outside the state.
The Respondent Department of Revenue contends: that the sales and use tax is properly applied inasmuch as the uniforms and denominators came to rest in the State of Florida, were delivered and stored and therefore became part of the mass property in the state. It contends that they were used in that a right of ownership was exercised.
The Petitioner Red Lobster Inns contends: that the tax is not due on the items that were brought in and transshipped out again; that the goods never actually came to rest because the storage time was very short and was in fact part of the shipment process; that the uniforms and denominators were reshipped without having been used or consumed in this state.
Section 212.05, Sales, storage, use tax.-- provides: "It is hereby declared to be the legislative
intent that every person is exercising a
tangible privilege who engages in the business of selling tangible personal property at retail in this state, or who rents or furnishes any of the things or services taxable under this chapter, or who stores for use or consumption in this state any item or article of tangible personal property as defined herein and who leases or rents such property within the state . . . .
* * *
(2) At the rate of 4 percent of the cost price of each item or article of tangible personal property when the same is not sold but is used, consumed, distributed or stored for use or consumption in this state."
Section 212.06(6), Sales, storage, use tax; collectible from dealers; dealers defined; dealers to collect from purchasers; legislative intent as to scope of tax, provides:
"(6) It is however, the intention of this chapter to levy a tax on the sale at retail, the use, the consumption, the distribution, and the storage to be used or consumed in this state of tangible personal property after it has come to rest in this state and has become a part of the mass property of this state."
The Petitioner was correct in paying the tax on the waitresses' uniforms and the denominators that were used and consumed in this state.
Those uniforms and denominators that were temporarily stored in this state and sent outside the state in the same condition were not a part of the mass property of this state, had not come to rest in this state nor became a part of the mass property of this state. They were not used or consumed in this state.
The use and consumption of the uniforms and denominators were subsequent to their shipment outside of the state and therefore no use tax is due on those items reshipped to other states.
ISSUE III Whether those automobiles purchased by Red Lobster's parent company, General Mills, Inc., outside the State of Florida and on which a sales tax was paid in the state in which purchased and then leased to Red Lobster for use in the State of Florida for periods in excess of twelve months are subject to Florida sales or use tax on the rental payments.
The Petitioner contends: that it is entitled to the exemption in Rule 12A-1.07(13)(b) because the purchase of the automobiles was made out of state and sales tax was paid out of state.
The Respondent Department of Revenue contends: the exemption of the rule applies only when the sales tax was paid to the State of Florida.
Section 212.21(2), Declaration of legislative intent.-- provides in pertinent part:
"(2) It is hereby declared to be the specific legislative intent to tax each and every sale, admission, use, storage, consumption or rental levied and set forth in this chapter, except as to such sale, admission, use, storage, consumption or rental, as shall be specifically exempted therefrom by this chapter, subject to the conditions appertaining to such exemption."
Section 212.07(9), Sales, storage, use tax; tax added to purchase price; dealer not to absorb liability of purchasers who cannot prove payment of the tax; penalties; general exemptions:-- provides in part:
"(9) Any person who has . . . leased tangible personal property, . . . and cannot prove that the tax levied by this chapter has been paid to his vendor or lessor shall be directly liable to the state for any tax, interest, or penalty due on any such taxable transactions."
Rule 12A-1.07(13)(b) provides:
"When the term of a lease or rental to one lessee or rentee is for a period of 12 or more months, the lessor-owner may pay the tax on the acquisition of the vehicle. In such cases, the rental to the initial lessee and the renewals thereof to the same lessee are not subject to the rental tax. Rentals of the same vehicle to subsequent lessees
by the owner are taxable."
Clearly, it appears from the foregoing that the rule made pursuant to the authority of the legislature does in fact state that the tax may be paid "on the acquisition of the vehicle" and that the lessee is then not subject to the rental tax. The rule is presumed to be valid.
Thus, in answer to the question in Issue III, the answer is that the rental cars are not subject to the Florida sales or use tax on the rental payments having been specifically exempted.
ISSUE IV Whether Red Lobster is obligated to pay an amount of sales tax determined by the Bracket System set forth in Florida Statutes or is obligated to pay all sales tax actually collected so long as the sales tax collected equals or exceeds 4 percent of gross sales.
The Respondent Department of Revenue contends: that the Petitioner must collect and pay the tax according to the Bracket Method provided in the statutes.
The Petitioner contends: that it does not have to be governed by the Bracket Method as long as Petitioner pays 4 percent of its gross sales to the State of Florida and that the Bracket System is merely a convenience method.
Section 212.12(1), Dealer's credit for collecting tax; penalties for noncompliance; powers of Department of Revenue in dealing with delinquents; brackets applicable to taxable transactions; records required, providing for the Bracket System.-- clearly states in pertinent part:
"(10) . . . Notwithstanding the rate of taxes imposed upon the privilege of sales, admissions and rentals, and communication services, the following brackets shall be applicable to all 4 percent taxable transactions:
On single sales of less than 10 cents no tax shall be added.
On single sales in amounts from 10 cents to 25 cents, both inclusive, 1 cent
shall be added for taxes.
On sales in amounts from 26 cents to
50 cents, both inclusive, 2 cents shall be added for taxes.
On sales in amounts from 51 cents to
75 cents, both inclusive, 3 cents shall be added for taxes.
On sales in amounts from 76 cents to
$1, both inclusive, 4 cents shall be added for taxes.
On sales in amounts of more than $1,
4 percent shall be charged upon each dollar of price, plus the above bracket charges upon any fractional part of a dollar."
It is self-evident that the foregoing statute does in fact require the Bracket Method to be used inasmuch as it dictates that is shall be applicable to all 4 percent taxable transactions. The tax is increased when the Bracket Method is used.
In summary, the findings of the Hearing Officer are:
On Issue I, Petitioner Red Lobster Inns of America must pay ad valorem tax on the full amount of the consideration as set forth in its various leases.
On Issue II, the waitresses' uniforms and denominators which were reshipped in the same condition outside the state were not subject to Florida sales and use tax.
On Issue III, the automobiles on which a sales tax was paid to the state in which they were purchased and then leased to Red Lobster for use in this state for periods in excess of twelve months are not subject to the Florida sales and use tax on rental payments.
On Issue IV, Petitioner Red Lobster Inns of America is obligated to pay an amount of sales tax determined by the Bracket System as set forth in Florida Statutes.
Affirm the position of the Respondent Department of Revenue on Issue I.
Affirm the position of the Petitioner Red Lobster Inns of America on Issue II.
Affirm the position of the Petitioner Red Lobster Inns of America on Issue III.
Affirm the position of the Respondent Department of Revenue on Issue
IV.
DONE and ORDERED this 16th day of March, 1977, in Tallahassee, Florida.
DELPHENE C. STRICKLAND
Hearing Officer
Division of Administrative Hearings Room 530 Carlton Building Tallahassee, Florida 32304
(904) 488-9675
Filed with the Clerk of the Division of Administrative Hearings this 16th day of March, 1977.
COPIES FURNISHED:
Terrell Griffin, Esquire
515 Pan American Building
250 North Orange Avenue Orlando, Florida 32801
Charles E. DeMarco, Esquire Staff Attorney
Red Lobster Inns of America, Inc. Post Office Box 13330
Orlando, Florida 32801
Caroline C. Mueller, Esquire Department of Legal Affairs The Capitol
Tallahassee, Florida 32304
=================================================================
AGENCY FINAL ORDER
=================================================================
STATE OF FLORIDA DEPARTMENT OF REVENUE
RED LOBSTER INNS OF AMERICA, INC.,
Petitioner,
vs. CASE NO. 76-1245
FLORIDA STATE DEPARTMENT OF REVENUE,
Respondent.
/
FINAL ORDER
This cause comes before the Department of Revenue after hearing having been held pursuant to Section 120.57, Florida Statutes, before a Hearing Officer of the Division of Administrative Hearings. The parties stipulated to the facts and agreed to argue the case by way of memorandums of law submitted to the Hearing Officer. Said Hearing Officer has heretofore submitted to the Department of Revenue a Recommended Order dated March 16, 1977. Attorneys for the various parties were:
For Petitioner: Terrell Griffin, Esquire
515 Pan American Building
250 North Orange Avenue Orlando, Florida 32809
Charles E. DeMarco, Esquire Staff Attorney
Red Lobster Inns of America, Inc. Post Office Box 13330
Orlando, Florida 32809
For Respondent: Caroline C. Mueller, Esquire
Assistant Attorney General Department of Legal Affairs The Capitol
Tallahassee, Florida 32304
The Petitioner and Respondent agreed by stipulation that there were four issues of law to be determined by the Hearing Officer. Pursuant to Section 120.57(1)(b)9, Florida Statutes, the Department of Revenue, after careful analysis of the Recommended Order, elects to modify in part the conclusions of law contained in said Recommended Order. In particular, the Department of Revenue elects to modify the conclusions of law in regard to Issue 2 and Issue
In regard to Issue 1, only one slight correction has been made in the Hearing Officer's text. In the fifth paragraph contained in the Issue 1 discussion, reference is correctly made in this Final Order to Section 212.031(1)(c), Florida Statutes. The Hearing Officer had inadvertently and incorrectly cited that section as Section 212.031(c), Florida Statutes.
The Department of Revenue adopts the following as the Final Order of the Department of Revenue.
ISSUE
The Petitioner and Respondent have agreed by stipulation that the following four issues of law are to be determined by the Hearing Officer:
Whether Red Lobster must pay four percent sales tax on ad valorem taxes paid directly to a governmental taxing unit on leases in which it is set forth that Red
Lobster, the Lessee, will, in addition to the rental payments, be obligated to pay the ad valorem taxes.
Whether certain waitress uniforms and denominators purchased from vendors outside the State of Florida by Red Lobster and shipped to Red Lobster Headquarters within the State of Florida for storage purposes and subsequently transshipped for use in Red Lobster locations outside the State of Florida are subject to Florida sales or use tax.
Whether those automobiles purchased by Red Lobster's parent company, General Mills, Inc., outside the State of Florida and on which a sales tax was paid in the state in which purchased and then leased to Red Lobster for use in the State of Florida for
periods in excess of twelve months are subject to a Florida sales or use tax on the rental payments.
Whether Red Lobster is obligated to pay an amount of sales tax determined by the Bracket System as set forth in Florida Statutes or is obligated to pay all sales tax actually collected so long as the sales tax collected equals or exceeds 4 percent of gross sales.
FINDINGS OF FACT
The Respondent Department of Revenue assessed certain sales and use tax against Petitioner Red Lobster Inns of America, Inc., for a three-year period commencing February 1, 1971 through January 31, 1974. The Petitioner filed a petition for hearing to the Division of Administrative Hearings pursuant to Chapter 120, Florida Statutes, contesting the imposition of said sales and use taxes by Respondent.
Each of the issues will be treated separately.
ISSUE I Whether Petitioner must pay 4 percent sales tax on ad valorem taxes paid directly to a governmental unit on leases in which it is set forth that Red Lobster, the Lessee, will, in addition to the rental payments, be obligated to pay the ad valorem taxes.
Two kinds of leases are involved here. One type (Exhibit "A") provides the payment of "all real estate taxes" shall be "as additional rent" and a second type (Exhibit "B") provides that "The lessee shall be responsible for the payment of all real estate taxes" without labeling such payments as additional rental. In both types of leases, the ad valorem tax payments on the leased real estate are the obligation of Red Lobster, Lessee.
The Petitioner, Lessee, paid the sales tax on the amount it considered "rent" paid but did not pay the sales tax on the monies paid the Lessor for the payment of the ad valorem taxes on the leased property.
The Respondent Department of Revenue contends: that all the monies paid by Petitioner as Lessee, including the amount paid for the payment of ad valorem taxes, constitute consideration for the lease and thus constitute rent for purposes of Chapter 212.
Petitioners contend: that these payments for ad valorem taxes are not "total rent charges for such real property" under Section 212.031(1)(c); that to require that sales and use tax be paid on ad valorem tax payments is double taxation; that the imposition of a sales and use tax on an existing ad valorem tax constitutes a pyramiding of taxation contrary to Section 212.031(2)(b). Petitioner further contends that the rule 12A-1.70(3) exceeds the statutory authority of Section 212.031, Florida Statutes, inasmuch as the statute states a tax is levied on the "rent charged" whereas the rule states that the tax shall be paid "on all considerations."
The lease between the parties marked for identification as Exhibit "A" provides in pertinent part on page 1, Section 2, Demise of Premises:
"In consideration of the rents and covenants herein stipulated to be paid and performed by Lessee, Lessor hereby demises and lets to Lessee . . . the parcel of land . . . together with all buildings, structures and other improvements constructed thereon
. . . ."
On page 5, in Section 9, Taxes and Other Charges:
"(a) Lessee also agrees . . . to pay and discharge as additional rent, punctually as and when the same shall become due and payable without penalty, all real estate taxes, personal property taxes, business and occupation taxes, occupational license taxes
. . . and all other governmental taxes which at any time during the term of the lease shall become due "
Clearly, the payment of taxes was understood by both parties as being part of the rent in Exhibit "A" contracts.
The lease between the parties marked for identification as Exhibit "B" does not specifically provide that the payment of taxes is part of the rent. However, it speaks to the issue on page 1 providing:
"That for and in consideration of the covenants and agreements herein contained and in consideration of the rents herein reserved to be paid by lessee to lessors, the parties hereto do hereby mutually covenant and agree
. . . ."
to do certain things and includes the specific requirement on page 3: "9. The lessee shall be responsible for the
payment of all real estate taxes, both city and county, assessed against the demised premises and shall pay the same before the taxes become delinquent."
It is apparent that the payment of real estate taxes is a part of the "total rent charges for such real property" in Exhibit "B" contracts.
Designation by the Lessor as to the method of distributing the gross sum of rent does not relieve the Lessee from his payments to the Lessor or change the fact that it is for rent due and for the "return . . . which the tenant makes to the landlord for the use of the demised premises." 52 CJS, Section 462, p. 344. Thus, there is no pyramiding or double taxation.
Inasmuch as the payment of ad valorem taxes is a part of the rental agreement between the parties, sales tax would be due on the amount paid by Lessee for ad valorem taxes regardless of whether the Lessee or the Lessor performed the transmittal duties of paying the taxes. The acceptance by the Lessee of the onerous duties of timely paying the numerous taxes, charges,
assessments and other impositions is a valuable consideration and a part of the rent charge itself.
The statute supports the assessment of Respondent. The contention that the rule is invalid is not well taken inasmuch as the rule is presumed valid for the purpose of this hearing.
Thus, the Hearing Officer determines that the Petitioner Red Lobster Inns of America must pay the 4 percent sales tax on the ad valorem taxes paid directly to a governmental taxing unit.
ISSUE II Whether the waitresses' uniforms and denominators (a counting device) purchased from vendors outside the State of Florida by Petitioner and shipped to Petitioner's headquarters in Florida for storage purposes and thereafter shipped for use in Red Lobster Inn locations outside the State of Florida are subject to Florida sales or use tax.
The Respondent Department of Revenue sought to impose a use tax upon the uniforms and denominators which were purchased outside the state, sent in and then sent out again. The Petitioner Red Lobster Inns does not contest the assessment of sales or use tax on the uniforms and denominators that were used and consumed in this state. However, it contests the assessment on the items that were bought outside the state, sent in to Florida and then sent out of state in the same condition. Red Lobster uses uniforms both within and without the state and also denominators both inside and outside the state.
The Respondent Department of Revenue contends: that the sales and use tax is properly applied inasmuch as the uniforms and denominators came to rest in the State of Florida, were delivered and stored and therefore became part of the mass property in the state. It contends that they were used in that a right of ownership was exercised.
The Petitioner Red Lobster Inns contends: that the tax is not due on the items that were brought in and transshipped out again; that the goods never actually came to rest because the storage time was very short and was in fact part of the shipment process; that the uniforms and denominators were reshipped without having been used or consumed in this state.
Section 212.05, Florida Statutes, provides in pertinent part:
212.05 Sales, storage, use tax.--It is hereby declared to be the legislative intent that every person is exercising a taxable privilege who engages in the business of selling tangible personal property at retail in this state, or who rents or furnishes any of the things or services taxable under this chapter, or who stores for use or consumption in this stage any item or article of tangible personal property as defined herein and who leases or rents such property within the state. For the exercise of said privilege a tax is levied on each taxable transaction or incident and shall be due and payable, according to the brackets set forth in 212.12 (10), as follows:
* * *
(2) At the rate of four per cent of the cost price of each item or article of tangible personal property when the same is not sold but is used, consumed, distributed or stored for use or consumption in this state. (e.s.)
Section 212.06(6), Florida Statutes, provides in regard to legislative intent:
It is however, the intention of this chapter to levy a tax on the sale at retail, the use, the consumption, the distribution, and the storage to be used or consumed in this state of tangible personal property after it has come to rest in this state and has become a part of the mass property of this state. (e.s.)
The waitress uniforms and denominators were delivered and stored in Florida. They had thus come to rest in the state, and were part of the mass property of the state. The fact that they were later shipped out of the state does not affect the imposition of the use tax.
"Use" and "storage" occur pursuant to the definitions contained in Sections 212.02(7) and (8). Section 212.02(7), Florida Statutes, provides:
"Storage" means and includes any keeping or retention in this state of tangible personal property for use or consumption in this state, or for any purpose other than sale at retail in the regular course of business. (e.s.)
Section 212.02(8), Florida Statutes, provides:
"Use" means and includes the exercise of any right or power over tangible personal property incident to the ownership thereof, or interest therein, except that it shall not include the sale at retail of that property in the regular course of business. (e.s.)
The uniforms and denominators were stored and therefore were part of the mass of property in the State. The uniforms and denominators were used in that a right of ownership was exercised.
The use tax has been upheld in many cases. The recent First District case of Wanda Marine Corp. v. State Department of Revenue, 305 So.2d 65 (Fla. 1 DCA 1974), stated as follows:
Our Supreme Court in United States Gypsum Company v. Green, 110 So.2d 409, decided in 1959, stated that the primary function of the use tax imposed by this statute is to complement the sales tax so imposed so
as to make uniform the taxation of property
subject to the tax, whether produced, purchased and used in this State or produced and purchased in another state or country, but used in this state. And in Green v.
Pederson, Fla., 99 So.2d 292, decided in 1957, that Court held that the use tax imposed by this statute is to be levied upon the use of out-of-state purchases in the same manner and upon the same tangible personal property as is the sales tax on intrastate purchases.
In Wanda Marine, supra, the Court quotes from another case: "[t]he theory supporting the use tax is
that it is an impost on the privilege of using personal property which has been shipped into the state and come to rest in the taxing forum and has become a part of the property within the taxing situs
. . . ."
An exception to the use tax exists when a credit is given for sales tax paid in another state. An exception exists also when an item is an "export" or is involved in interstate commerce. None of these exceptions exists in this case.
There are very rigid requirements which have to be met in order to avoid the use tax. The statutes and the United States case law provide strict criteria for proving that an item is an export. See Section 212.06(5)(a), Florida Statutes, and Kosydar v. National Cash Register Co., 417 U.S. 62 (1974). The United States and Florida cases also provide strict criteria for showing that an item is involved in interstate commerce. See Southern Pacific Company v. Gallagher, 306 U.S. 167, 59 S.Ct. 389, 83 L.Ed. 586 (1938) and Pacific Tel. & Tel. Co. v. Gallagher, 306 U.S. 182, 59 S.Ct. 396, 83 L.Ed. 595 (1938). Pursuant to this line of authority, even items which eventually move in interstate commerce are subject to the use tax when they are used--temporarily at rest or stored--in a state.
Thus, the use tax is a valid tax and was properly applied by the Department of Revenue in the instant case. The waitress uniforms and denominators came to rest in the State of Florida and were taxable pursuant to Chapter 212, Florida Statutes.
ISSUE III Whether those automobiles purchased by Red Lobster's parent company, General Mills, Inc., outside the State of Florida and on which a sales tax was paid in the state in which purchased and then leased to Red Lobster for use in the State of Florida for periods in excess of twelve months are subject to Florida sales or use tax on the rental payments.
The Petitioner contends: that it is entitled to the exemption in Rule 12A-1.07(13)(b) because the purchase of the automobiles was made out of state and sales tax was paid out of state.
The Respondent Department of Revenue contends: the exemption of the rule applies only when the sales tax was paid to the State of Florida.
The Department of Revenue assessed sales and use tax on the rental payments made by Petitioner to lease automobiles. The Petitioner claims an exemption from the sales and use tax based on Rule 12A-1.07(13) which provides:
Effective July 1, 1971, the purchase of a motor vehicle to be used exclusively
for rental purposes is subject to one of the following tax applications:
When the term of the lease or rental to one lessee or rentee is for a period of less than 12 months, the purchaser shall issue a resale certificate in lieu of paying the tax. The lessor shall collect the tax from his customers on the total rental charged.
When the term of a lease or rental to one lessee or rentee is for a period of 12 or more months, the lessor-owner may pay the tax on the acquisition of the vehicle.
In such cases, the rental to the initial lessee and the renewals thereof to the same lessee are not subject to the rental tax.
Rentals of the same vehicle to subsequent lessees by the owner are taxable.
Subleases of leased motor vehicles are subject to the tax. (e.s.)
The Petitioner claims that the Petitioner is entitled to the above- quoted exemption in Rule 12A-1.07(13)(b) when the purchase of the automobile was made out of state and sales tax was paid out of state. The Department of Revenue maintains that the exemption applies only when the sales tax was paid to the State of Florida.
It should be pointed out that interpretations by the Department of Revenue are to be given great weight, State ex rel. Szabo Food Serv., Inc. of
N. C. v. Dickinson, 286 So.2d 529 (Fla. 1973), and that exemptions are to be strictly construed against the taxpayer. Green v. Surf Club, Inc., 136 So.2d 354 (Fla. 3 DCA 1961); Green v. Sgurovsky, 133 So.2d 663 (Fla. 3 DCA 1961); Wanda Marine Corporation v. State Department of Revenue, 305 So.2d 65 (Fla. 1 DCA 1974). In addition, Section 212.21(2), Florida Statutes, provides in pertinent part:
(2) It is hereby declared to be the specific legislative intent to tax each and every sale, admission, use, storage, consumption or rental levied and set forth in this chapter, except as to such sale, admission, use, storage, consumption, or rental, as shall be specifically exempted therefrom by this chapter, subject to the conditions appertaining to such exemption. (e.s.)
The interpretation by the Department is valid and consistent with Chapter 212, Florida Statutes, and expresses the intent of the Legislature. A sales tax may be imposed on the privilege of selling; a sales tax may be imposed on the privilege of renting. Gaulden v. Kirk, 47 So.2d 567 (Fla. 1950). The
Legislature could validly impose a tax on both privileges in regard to the same item.
Pursuant to the rules of the Department of Revenue, an option is offered in certain cases where the State of Florida is in a position to tax both the privilege of selling and the privilege of renting on the same item. In such a specified case, only one tax need be paid pursuant to Rule 12A-1.07(13),
F.A.C. According to the rule, a sales tax may be paid to the State of Florida and Florida will waive the rentals tax.
The sales and use tax statute is a revenue producing statute. There is no reason to interpret an exemption provision in such a way that the State of Florida misses out on collecting a tax on both the privilege of selling and the privilege of renting. This was clearly not the intent of the Legislature or the Department of Revenue. The interpretation of the Statute and of its own rule by the Department of Revenue expresses the intent of the Legislature and produces a logical result. Again, it should be pointed out that interpretations by the Department of Revenue are to be given great weight.
The Petitioner contends that the intent of the Legislature as seen throughout Chapter 212, Florida Statutes, is to exempt items from taxation when tax has been paid in another state. This is true in regard to sales tax and use tax. If sales tax is paid in another jurisdiction, credit is given on the use tax and no use tax is due in Florida. The sales tax and the use tax are complementary. Florida does not levy a tax on the privilege of sale and the privilege of use. See Wanda Marine, supra. The sales tax on the privilege of selling and the sales tax on the privilege of renting are not complementary.
The State of Florida may impose both. The State of Florida chose not to impose both under certain conditions, but certainly did not mean for the exemption to apply so that Florida gets no tax. If a sales tax is paid in Florida, the option applies. Otherwise, the option does not apply.
It should be noted that an option is usually provided to allow a taxpayer a choice of alternatives. Florida has no jurisdiction to require other states to abide by our option rules. If the rule is interpreted as Petitioner contends, then a choice cannot be offered to each taxpayer. The rule obviously meant to provide an option between two Florida taxes.
It is most important to note that the Department of Revenue's interpretation is supported by the statutory authority. Section 212.06(8) provides:
(8) Use tax will apply and be due on tangible personal property imported or caused to be imported into this state for use, consumption, distribution or storage to be used or consumed in this state; provided, however, that it shall be presumed that tangible personal property used in another state for six months or longer before being imported into this state was not purchased for use in this state. The rental or lease of tangible personal property which is used or stored in this state shall be taxable without regard to its prior use or tax paid on purchase outside this state. (e.s.)
Thus, the Department of Revenue was correct in assessing sales and use tax pursuant to Chapter 212, Florida Statutes, on the rental payments made by Petitioner as consideration for the leasing of automobiles in Florida.
ISSUE IV Whether Red Lobster is obligated to pay an amount of sales tax determined by the Bracket System set forth in Florida Statutes or is obligated to pay all sales tax actually collected so long as the sales tax collected equals or exceeds 4 percent of gross sales.
The Respondent Department of Revenue contends: that the Petitioner must collect and pay the tax according to the Bracket Method provided in the statutes.
The Petitioner contends: that it does not have to be governed by the Bracket Method as long as Petitioner pays 4 percent of its gross sales to the State of Florida and that the Bracket System is merely a convenience method.
Section 212.12(1), Dealer's credit for collecting tax; penalties for noncompliance; powers of Department of Revenue in dealing with delinquents; brackets applicable to taxable transactions; records required, providing for the Bracket System.--clearly states in pertinent part:
"(10) . . . Notwithstanding the rate of taxes imposed upon the privilege of sales, admissions and rentals, and communication services, the following brackets shall be applicable to all 4 percent taxable transactions:
On single sales of less than 10 cents no tax shall be added.
On single sales in amounts from 10 cents to 25 cents, both inclusive, 1 cent shall be added for taxes.
On sales in amounts from 26 cents to
50 cents, both inclusive, 2 cents shall be added for taxes.
On sales in amounts from 51 cents to
75 cents, both inclusive, 3 cents shall be added for taxes.
On sales in amounts from 76 cents to
$1, both inclusive, 4 cents shall be added for taxes.
On sales in amounts of more than $1,
4 percent shall be charged upon each dollar of price, plus the above bracket charges upon any fractional part of a dollar."
It is self-evident that the foregoing statute does in fact require the Bracket Method to be used inasmuch as it dictates that it shall be applicable to all 4 percent taxable transactions. The tax is increased when the Bracket Method is used.
CONCLUSION
On Issue I, Petitioner Red Lobster Inns of America must pay sales tax on the full amount of the consideration as set forth in its various leases.
On Issue II, the waitresses' uniforms and denominators which came to rest in Florida and which were then reshipped in the same condition outside the state were subject to Florida sales and use tax.
On Issue III, the automobiles on which a sales tax was paid to the state in which they were purchased and then leased to Red Lobster for use in this state for periods in excess of twelve months are subject to the Florida sales and use tax on rental payments.
On Issue IV, Petitioner Red Lobster Inns of America is obligated to pay an amount of sales tax determined by the Bracket System as set forth in Florida Statutes.
It is ordered that the sales and use tax assessment by the Department of Revenue against the Petitioner pursuant to Chapter 212, Florida Statutes, be upheld as a valid assessment.
CERTIFICATION
I CERTIFY that the foregoing is the Final Order of the Department of Revenue adopted by the Governor and Cabinet on the 17th day of May 1977.
HARRY L. COE, JR.
Executive Director Department of Revenue State of Florida
Room 102, Carlton Building Tallahassee, Florida 32304
Dated this 18th day of May , 1977.
| Issue Date | Proceedings |
|---|---|
| May 19, 1977 | Final Order filed. |
| Mar. 16, 1977 | Recommended Order sent out. CASE CLOSED. |
| Issue Date | Document | Summary |
|---|---|---|
| May 17, 1977 | Agency Final Order | |
| Mar. 16, 1977 | Recommended Order | Ad valorem tax due on consideration for leases. No tax due on goods shipped in same condition out-of-state. No tax on rental cars. Use Bracket method. |
