STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

THE COLSON COMPANY, )

)

Petitioner, )

)

vs. ) CASE NO. 76-1280

)

STATE OF FLORIDA, )

DEPARTMENT OF REVENUE, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice a hearing was held before Charles C. Adams, Hearing Officer with the Division of Administrative Hearings, at Room 205, Building "B", 6501 Arlington Expressway, Jacksonville, Florida, at 9:30 A.M., September 20, 1976.

APPEARANCES

For Petitioner: George Stelljes, Jr., Esquire

Post Office Box 447 Jacksonville, Florida 32201

For Respondent: Harold F. X. Purnell, Esquire

Assistant Attorney General The Capitol

Tallahassee, Florida 32304 ISSUE

Whether or not the Respondent was correct in its assessment of tax, penalties and interest against the Petitioner in its notice of assessment of April 12, 1976, which assessment pertained to matters arising in the contract between the Petitioner and Marion County School Board, Marion County, Florida dated January 23, 1974.

FINDINGS OF FACT

1. By its bid proposal of August 13, 1973, the Petitioner, the Colson Company, offered a bid on subsystem #3 - heating, ventilating and air conditioning (HVAC) to the School Board of Marion County, Florida. This bid proposal was by a lump sum bid, and was further broken down into labor, materials and supplies, and sales tax on material and supplies. A copy of the bid proposal is shown in Petitioner's composite Exhibit #3, admitted into evidence in the course of the hearing. Pages IV-3-20 and IV-3-21 of Petitioner's composite Exhibit #3 give the details of the base bid and lump sum bid, together with the further breakdown as mentioned before. By letter of September 6, 1973, from the project architects, the Marion County School Board

   indicated their intent to enter into a contract for materials and installation for the purchase of the HVAC system, based upon the Petitioner's lump sum bid and consideration of item #20, option #1 and the interface associated with the project. A copy of this letter of intent together with unit price figures is Petitioner's composite Exhibit #4, admitted into evidence.

   
   

2. On January 23, 1974, the Petitioner and the Marion County School Board signed two contract documents. The first contract document which is Petitioner's Exhibit #1, admitted into evidence, was a materials contract and the second contract document which is Petitioner's Exhibit #2, admitted into evidence, was a labor contract.

   
   

3. The Petitioner in accordance with contract agreements supplied the materials and the labor necessary to install the HVAC subsystem for the Marion County School Board.

   
   

4. By its notice of assessment of tax, penalties and interest, dated April 12, 1976, the Respondent called for payment of $6,172.41. This notice of assessment is attached as Exhibit A to the petition. The period being assessed was a period of January 1, 1973 through December 31, 1975. Prior to the notice of assessment, the Petitioner had paid sales tax on the labor contract with Marion County School Board of January 23, 1974. This sales tax payment was in the amount of $2,654.66. Still in dispute is the amount of Sales tax on the materials contract, which is reflected in the notice of assessment of April 12, 1976. Of the amount of alleged sales tax assessments for the materials, the Petitioner is protesting the amount of $4,642.54.

   
   

   CONCLUSIONS OF LAW

   
   

5. It is concluded as a matter of law based upon the facts of the case, that the Petitioner is responsible for payment of the assessment of tax, penalties and interest called for in the notice of assessment. This conclusion is premised upon the language set forth in Rule 12A-1.51, Florida Administrative Code, specifically:

   
   

   "Sales to or by contractors who repair, alter, improve and construct real property.

   1. The method by which contractors or subcontractors arrive at the total contract price charged for repair, alteration, improve- ment and construction of real property or for a combination of work on both real and personal property must be determined for the purpose of ascertaining whether the receipts from sales made to or by them are taxable.

   2. Such contractors may include, among others, building, electrical, plumbing, heating, painting decorating ventilating, paper hanging, sheet metal, bridge, road, landscape or roofing contractors and they may use one of the following methods in arriving at the total contract price:

      1. Contracts in which the contractor or subcontractor agrees to furnish materials and supplies and necessary services for a lump sum;

      2. Contracts in which the contractor or

         subcontractor agrees to furnish the materials and supplies and necessary services on a cost plus or fixed fee basis;

      3. Contracts in which the contractor or subcontractor agrees to furnish materials and supplies and necessary services with an upset or guaranteed price which may not be ex- ceeded; and

      4. Contracts in which the contractor or subcontractor repairs, alters, improves or constructs real property and wherein he agrees to sell specifically described and itemized materials and supplies at an agreed price or at the regular retail price and to complete the work either for an additional agreed price or on the basis of time con- sumed.

         When a contractor or subcontractor uses ma- terials and supplies in fulfilling either a lump sum, cost plus, fixed fee, guaranteed price or any kind of contract except one falling in class (d) above, he becomes the ultimate consumer thereof. The person or dealer who sells such materials and supplies to such contractor or subcontractor is making sales at retail and is required to collect the tax from him based upon the receipts from such sales.

         In cases falling in class (d) above, the contractor or subcontractor is deemed to be selling tangible personal property at an agreed retail price and shall collect tax from his purchases based upon the amount of the receipts from such sales, excluding instal- lation charges if separately stated. A dealer selling to such contractor or subcon- tractor must obtain a resale certificate in lieu of tax."

         
         

6. The contract between the Petitioner and the Marion County School Board was a contract for the furnishing of materials and supplies and necessary services for lump sum, in which the Petitioner was the ultimate consumer thereof and responsible for the payment of sales tax, as contemplated by Section (1), Subsection (2)(a) and the attendant paragraph of explanation within Section (2), Rule 12A-1.51, Florida Administrative Code. The execution of the contract was not a sale of tangible personal property as contemplated by Rule 12A-1.51(2)(d), Florida Administrative Code. See Kings Bay Yacht and Country Club, Inc. v. Green, 173 So.2d 509 (1DCA Fla. 1965).

RECOMMENDATION

It is recommended that the April 12, 1976 assessment placed against the Petitioner for the tax, penalties and interest in the year January 1, 1973 through December 31, 1975 be allowed.

DONE and ENTERED this 19th day of October, 1976, in Tallahassee, Florida.

COPIES FURNISHED:

George Stelljes, Jr., Esquire Post Office Box 447 Jacksonville, Florida 32201

Harold F. X. Purnell, Esquire Assistant Attorney General The Capitol

Tallahassee, Florida 32304 For the Department of Revenue

CHARLES C. ADAMS

Hearing Officer

Division of Administrative Hearings

530 Carlton Building Tallahassee, Florida 32304 (904) 488-9675

Docket for Case No: 76-001280

Orders for Case No: 76-001280