STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

PALM BEACH EL CID, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 77-598

)

DEPARTMENT OF REVENUE, )

)

Respondent. )

)

RECOMMENDED ORDER

This matter came on for hearing in Tallahassee, Florida, before the Division of Administrative Hearings by its duly designated Hearing Officer, Robert T. Benton, II, on July 14, 1977. The parties were represented by counsel:

APPEARANCES

For Petitioner: Mr. John E. Woodbery, Esquire

217 John Knox Road Tallahassee, Florida 32303

For Respondent: Mr. E. Wilson Crump, II, Esquire

Department of Legal Affairs The Capitol

Tallahassee, Florida 32304

By notices of assessment dated January 20, 1977, respondent advised petitioner of alleged delinquencies in sales taxes being on account of sales of drinks at the two bars petitioner owns, as well as interest and penalties on the claimed delinquencies. On March 17, 1977, petitioner filed its petition for administrative hearing, which respondent subsequently transmitted to the Division of Administrative Hearings.

FINDINGS OF FACT

1. Petitioner owns the Palm Beach El Cid Bar and the Fifty-One-O-One Bar in West Palm Beach. Mixed drinks are sold at these establishments. In both bars, the cash registers record each item rung up but do not state the prices of the drinks separately from the sales taxes incurred on account of their sale. When James A. Blalock acquired petitioner approximately five years ago, he computed the sales tax owing on a day's sales at the Palm Beach El Cid Bar by examining a cash register tape which reflected the sales. For the day Mr. Blalock made his item by item calculations, he computed sales tax at 4 percent on each item, which yielded a figure slightly in excess of 4.2 percent on aggregate sales. Mr. Blalock then "made a supposition" that multiplying gross receipts (the sum of aggregate sales and aggregate sales taxes) by one twenty- fifth (4 percent) would yield a figure which would approximate 4.2 percent of aggregate sales. This supposition is well founded, as reflected by the

   equation .042 = X(1 + .042), where X equals the number by which gross receipts are to be multiplied.

   
   

2. After Mr. Blalock had done his calculations, he made the assumption that the results for that day would hold true generally for both bars, and instructed petitioner's employees to multiply gross receipts by one twenty-fifth (4 percent) in order to compute petitioner's sales taxes. Petitioner's employees did in fact calculate and pay sales taxes monthly on this basis from August 1, 1974, through September 30, 1976, on sales at the Fifty-One-O-One Bar, and from October 1, 1979, through September 30, 1976, on sales at the Palm Beach El Cid Bar. Since Mr. Blalock's calculations, however, the "price structure" at the bars has changed three times. Nobody now remembers what day of the week was chosen as the basis for the original calculations.

   
   

3. Gross sales at the Fifty-One-O-One Bar from August 1, 1974, through September 30, 1976, amounted to two hundred twenty thousand four hundred ninety- one dollars and thirty cents ($220,491.30). On these sales, petitioner paid sales taxes of eight thousand seven hundred forty-three dollars and twenty-eight cents ($8,743.28). Gross sales at the Palm Beach El Cid Bar from October 1, 1973, through September 30, 1976, amounted to four hundred ninety-two thousand six hundred forty-one dollars. and sixty-four cents ($492,641.64). On these sales, petitioner paid sales taxes of nineteen thousand six hundred sixty-five dollars and ninety-one cents ($19,665.91).

   
   

4. At both of petitioner's bars, a price list which sated, for each item, its cost without tax, the amount of sales tax, and its cost with sales tax, was kept next to the cash register, for employees' use. Ordinarily, these price lists were not visible patrons.

   
   

5. At least since the fall of 1971, respondent has permitted dealers in mixed alcoholic beverages to pay a sales tax equal to their gross sales less the quotient. of gross sales divided by 1.045, whenever it is impractical to record the sales price of each drink separately from the tax collected on account of the sale of the drink, but only if the dealer displays a price list on which the dealer "indicate[s]. . . the cost of each item, the applicable amount of sales tax to each and the total price of the item." Petitioner's exhibit No. 2.

   
   

   CONCLUSIONS OF LAW

   
   

6. The alcoholic beverages sold by petitioner's bars are subject to a 4 percent sales tax. Section 212.05, Florida Statutes (1975); Rule 12A-1.57,

   F.A.C. The cash registers in these bars are such that it is "impractical for [petitioner) . . . to separately record the sales price of the beverage and the tax collected thereon." Rule 12A-1.57(3), F.A.C. Petitioner is, therefore, under no obligation to calculate the actual tax collected from persons who buy mixed drinks at the bars it owns.

   
   

7. Rule 12A-1.57(3), F.A.C., clearly requires those alcoholic beverage dealers for whom it is impractical to record sales prices separately from sales taxes to remit sales tax at the rate of 4.5 percent of gross sales, without regard to whether any price list is displayed. Even so, respondent has followed a policy of collecting sales taxes at a lesser rate from those bars which, although subject to Rule 12A-1.57(3), F.A.C., publicly displayed an itemized list stating the cost of drinks before sales tax is added, the amount of sales tax, and the cost with sales tax. This policy, which is set forth in an interoffice memorandum that came in evidence as petitioner's exhibit No. 2, flies in the teeth of a duly adopted rule; it has operated as an unlawful

   "secret rule," arbitrarily subsidizing certain bar owners at the expense of public treasury.

   
   

8. Petitioner contends that it should be entitled to pay sales tax at the lower rate available to dealers who complied with the policy set out in petitioner's exhibit No. 2, but to allow this would only aggravate the diminution of tax revenues which respondent's policy has already caused.

RECOMMENDATION

Upon consideration of the foregoing, and in keeping with the teachings of McDonald v. Department of Banking and Finance, 346 So.2d 569 (Fla. 1st D.C.A. 1977), it is

RECOMMENDED:

1. That respondent cease and desist from applying the policy set forth in petitioner's exhibit No. 2 until and unless the same shall be duly adopted as a rule, in the manner provided by law.

   
   

2. That petitioner pay respondent twenty-two thousand one hundred sixty- eight dollars and eighty-seven cents ($22,168.87) on account of sales at the Palm Beach El Cid Bar and nine thousand nine hundred twenty-two dollars and eleven cents ($9,922.11) on account of sales at the Fifty-One-O-One Bar, together with applicable penalties and interest, less sales taxes petitioner has already paid on account of the Palm Beach El Cid Bar for the period October 1, 1973, to September 30, 1976, and on account of the Fifty-One-O-One Bar for the period August 1, 1974, to September 30, 1976.

DONE and ENTERED this 19th day of August, 1977, in Tallahassee, Florida.

ROBERT T. BENTON, II

Hearing Officer

Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304

(904) 488-9675

COPIES FURNISHED:

Mr. John E. Woodbery, Esquire Woodbery and Sapp

217 John Knox Road Tallahassee, Florida 32303

E. Wilson Crump, II, Esquire Assistant Attorney General Department of Legal Affairs The Capitol

Tallahassee, Florida 32304

Docket for Case No: 77-000598

Orders for Case No: 77-000598