STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
GREAT LAKES DREDGE & DOCK )
COMPANY, )
)
Petitioner, )
)
vs. ) CASE NO. 77-1054
)
DEPARTMENT OF REVENUE, )
)
Respondent. )
)
RECOMMENDED ORDER
Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, K. N. Ayers, held a public hearing in the above styled case on June 8, 1978 at Tallahassee, Florida.
APPEARANCES
For Petitioner: James R. McCachran, Esquire
Post Office Box 1170 Tallahassee, Florida 32302
For Respondent: Joseph C. Mellichamp, III, Esquire
Assistant Attorney General Department of Legal Affairs The Capitol, Room LLO4 Tallahassee, Florida 32304
By Petition filed 1 June 1977 Great Lakes Dredge and Dock Company, Petitioner, contests the assessment levied against it for sales tax, penalty and interest which it paid under protest; and requests the assessment be revised, reduced or declared invalid. As grounds for the relief sought, Petitioner contends that the property on which the tax was levied was purchased for export, was exported to Saudi Arabia, and is exempt from Florida sales tax.
Two witnesses were called by Petitioner, one witness was called by Respondent and 7 exhibits were admitted into evidence.
FINDINGS OF FACT
The facts in this case are largely undisputed. Petitioner is a joint venturer with two foreign corporations who subcontracted to perform the dredging portion of the contract to develop the port of Dammam in Saudi Arabia. The joint venture is called GLABVO and the joint venture agreement was admitted as Exhibit 1. The parties contributed capital and leased equipment to the joint venture while the latter paid for all supplies used by the parties in carrying out the subcontract.
All of the equipment and materials purchased and which is the subject of the tax assessment here involved is personal property of a nature subject to sales and use tax, was ordered by Petitioner for GLABVO and shipped to Miami where it was loaded for shipment to Saudi Arabia. The property was purchased from both within and without the state.
The nature of the operation, the urgency of the contract with respect to time of completion, and the lack of existing port facilities necessitated special shipping arrangements which involved a contract carrier in lieu of a common carrier. Accordingly the various dredges, workboats, barges and related equipment here loaded on a large barge which was towed from Ft. Lauderdale to Saudi Arabia. Lack of port facilities at Dammam necessitated the capability to unload being carried with the equipment so the larger elements transported wore floated onto the barge, and off the barge upon arrival, by sinking the barge.
Most of the supplies were packaged for overseas shipment before being shipped to Miami where this material and equipment was marshalled at Petitioner's facility on Dodge Island at Miami, Florida. At this marshalling yard, which was the Florida shipping destination for materials purchased, the supplies were inventoried, repackaged, if necessary, for the barge shipment by placing in containers that could be floated off the barge and segregated into the three shipments that would be needed to move the equipment and supplies to Dammam.
Petitioner used its tax registration number in purchasing the supplies on behalf of GLABVO and the vendors were relieved from collecting the sales tax.
At the time the supplies were shipped to Petitioner there were no export declarations in connection with these items but much of the equipment was packaged for export and the shipping documents represented the material was shipped "for export".
The contract carrier that had been engaged to provide the transportation had no facility that could be used as a marshalling yard and Petitioner did have such a facility. Due to the nature of the operation it was essential to assemble the supplies and equipment at a marshalling point for inventory and checking against the list of needed supplies before continuing the transportation to Saudi Arabia. Bills of lading and export declarations were made up where the material was placed on board the contract carrier's barge.
On those items shipped from outside Florida Respondent assessed a use tax and on those items purchased in Florida Respondent assessed a sales tax.
It is undisputed that all property on which the tax was assessed was purchased for use in Saudi Arabia and was shipped to Saudi Arabia; that the property had an initial Florida destination at Dodge Island, Florida; that the property was shipped from Florida to Saudi Arabia on bills of lading; and that export declarations were executed.
For the purpose of this case no distinction exists with respect to the export nature of those shipments purchased from a supplier in Florida and those purchased from a source outside of Florida.
CONCLUSIONS OF LAW
The primary issue here involved is whether the tangible personal property that was the subject of the assessment was in the stream of interstate
commerce when it commenced its journey to Miami and if so, did the storage of the property at Dodge Island while inventorying, repackaging and preparing for loading on the barge interrupt this voyage so that the property came to rest and became part of the mass property of this state.
The statutory provisions relating to the taxes herein assessed are contained in Section 212.06 Florida Statutes which provides in pertinent part:
(1)(a) The aforesaid tax at the rate of 4 percent of the retail sales price as of the moment of sale, 4 percent of the cost price as of the moment of purchase, or 4 percent of the cost price as of the moment of commingling with the general mass of property in this state, as the case may be, shall be collectible from all dealers as herein defined on the sale at retail, the use, the consumption, the distribution and the storage for use or consumption in this state, of tangible personal property.
* * *
(2)(c) The term "dealer" is further defined to mean every person, as used in this chapter, who sells at retail, or who offers for sale at retail, or who has in his possession for sale at retail, or for use, or consumption, or distribution, or storage to be used or consumed in this state, tangible personal property as defined herein.
* * *
Every dealer making sales, whether within or outside the state, of tangible personal property, for distribution, storage, or use or other consumption, in this state, shall at the time of making sales, collect the tax imposed by this chapter from the purchaser.
On all tangible personal property imported or caused to be imported from other states, territories, the District of Columbia, or any foreign country, and used by him, the dealer
as herein defined, shall pay the tax imposed by this chapter on all articles of tangible personal property so imported and used, the same as if the said articles had been sold at retail for use or consumption in this state. For the purposes of this chapter, the use, or consumption, or distribution, or storage to be used or consumed in this state of tangible personal property, shall each be equivalent to a sale at retail, and the tax shall thereupon immediately levy and be collected in the manner provided herein, provided there shall be no duplication of the tax in any event
(5)(a) It is not the intention of this chapter to levy a tax upon tangible personal property imported, produced or manufactured in this
state for export, provided that tangible
personal property shall not be considered as being imported, produced or manufactured for export unless the importer, producer or manufacturer delivers the same to a licensed exporter for exporting, or to a common carrier for shipment outside the state or mails the same by United States mail to a destination outside the state . . .
(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.
These provisions of the statute were considered in Fred McGilvray, Inc. v. Askew, 340 So.2d 475 (Fla 1976) which involved a factual situation somewhat similar to that here involved. In McGilvray the plaintiff was a subcontractor for a construction project in the Bahamas wherein the plaintiff supplied materials to the contractor in connection with the plumbing and air conditioning portions of the contract. Property was ordered by plaintiff from vendors both within and outside Florida, shipped to a Miami destination where they were stored and/or later loaded onto barges chartered by the general contractor for shipment to the Bahamas. There were no bills of lading or export declarations in connection with these items.
In sustaining the trial court's award of summary judgment for Respondent the court stated:
Of essential importance to this determination was whether there existed valid ocean bills of lading and export declarations, which would, of course, be convincing indicia of a commitment to the stream of exports. The trial judge expressly found that no such documents existed as to the items whose taxable status is at issue in these proceedings. Various documents, including bills of lading and export declarations, are appended to appellant's brief in this Court, but we agree with appellees that these papers were never properly before the lower court for purpose of the hearing on the motions for summary judgment.
Central to our determination that appellant had no valid indicia of a commitment to export was an affidavit executed by the Department of revenue tax examiner who conducted the audit of appellant's books and records. The affidavit recites in detail the inability of McGilvray or its vendors to show valid export declarations or bills of lading concerning the goods whose taxability is here at issue.
Section 212.06(5), Florida Statutes, establishes a presumption that tangible personal property is not to be considered "as being imported, produced or manufactured for export unless the importer, producer or manufacturer delivers the same [i] to a licensed exporter for exporting, or [ii] to a common carrier for shipment outside the state or [iii] mails the same by United States mail to a destination outside the state." This presumption, of course, is rebuttable by the taxpayer.
Here the tangible personal property was delivered to a dealer who had been issued a tax registration number which relieved a Florida seller from collecting the tax. Thereafter the tax became the responsibility of the Petitioner to collect when the property was sold to another consumer or used in this state by the Petitioner-dealer.
State ex rel Sunair Electronics, Inc. v. Green, 177 So.2d 490 (Fla 1 DCA 1965) involved the sale of electronics parts to foreign purchasers with delivery in Florida. The court upheld the imposition of sales tax on equipment installed in the plane because when installed it lost its identity as a shipment of tangible personal property and became an integral part of the aircraft as a completed and finished manufactured product. However, with respect to the electronics equipment merely loaded aboard the aircraft for export the court held this was not subject to state sales tax despite the fact it was not delivered to a common carrier. The court stated at p. 405:
It is our view that the act of placing the equipment aboard the purchaser's aircraft at the manufacturer's plant in Ft. Lauderdale committed the property to the export stream, and effectively passed title thereof from the manufacturer to the purchaser to the same extent as if the equipment had been placed aboard a common carrier for transport to the purchaser at its foreign destination. The transaction did not constitute a sale by appellant on the open market thereby rendering it subject to the sales tax.
In support of its position the court in Sunair, supra, cited Richfield Oil Corp. v. State Board of Equalization, 329 U.S. 69 (1946) for the holding that placing the goods with a common carrier was not essential for the goods to be covered by the export-import clause of the United States Constitution. In Richfield, the Supreme Court stated:
The certainty that the goods are headed to sea and that the process of exportation has started may normally be best evidenced by the fact that they have been delivered to a common carrier for that purpose. But the same degree of certainty may exist though no common carrier is involved. The present case is an excellent illustration. The foreign purchaser furnished the ship to carry the oil abroad.
Delivery was made into the hold of the vessel from the vendor's tanks located at the dock. That delivery marked the commencement of the movement of oil abroad. It is true, as the Supreme Court of California observed, that at the time of the delivery the vessel was in California waters and was not bound for its destination until it started to move from the port. But when the oil was pumped into the hold of the vessel, it passed into the control of a foreign purchaser and there was nothing equivocal in the transaction which created even a probability that the oil would be diverted to domestic use. It would not be clearer that the oil had started upon its export journey had it been delivered to a common carrier at an inland point. The means of shipment are unimportant so long as the certainty of the foreign destination is plain.
The personal property here involved had been purchased by Petitioner as the agent for the foreign purchaser, GLABVO. Petitioner accepted delivery from the sellers and gave the sellers his tax registration number as a dealer. The property remained exempt from the sales or use tax until it was either used by the dealer in Florida, sold by him to an ultimate user, or became assimilated with the mass property of this state.
The situation here existing was also somewhat similar to that involved in Graybar Electric Company, Inc. v. State of Florida Department of Revenue, 347 So.2d 718 (Fla 3 DCA 1977) where Graybar sold tangible personal property to foreign corporations, delivered it to their domestic agents who in turn packaged the material for foreign shipment and delivered it to a common carrier for transportation. The court found these transactions tax exempt because the purchaser's subsidiary corporation possessed a state-issued export sales tax number. Accordingly the court held that the property was delivered to a licensed exporter who shipped outside the state and it was therefore not subject to the state sales tax. In so finding the court stated:
The Florida Department of Revenue issues export sales tax numbers to exporting companies in Florida which apparently has the effect of exempting such companies from the state sales tax when they hold goods for foreign export. The Department of Revenue has adopted no other procedures by which an exporter can be licensed by the state. Having issued appropriate export sales tax numbers to Caribbean Supply Co. and America Devco, Inc., we believe that the Department of Revenue is in no position to claim that these companies are not in fact licensed exporters since there is no other procedures by which they could become so licensed. They are recognized as exporters by the state and in the absence of any other formalized procedures, it is our view that these companies are licensed exporters within the meaning of Section 212.06
(5)(a) Florida Statutes. Accordingly the tangible personal property delivered to them by Graybar for foreign export is not subject to the state sales tax.
Here the certificate of registration issued to Petitioner was undoubtedly the same as was issued to the dealers in Graybar, supra, although in the instant ease the number issued to this certificate holder identified him as a contractor while one must presume that the certificate holders in Graybar were identified as exporters by the number assigned.
The effect of either tax registration number was to stay the collection of sales taxes by the Florida sellers and to place the burden of collecting or paying the tax upon the dealer.
Until such time as Petitioner used the property in this state or the property became part of the mass property of the state it was not subject to the use tax. In view of the stipulation of the parties that all of tie property here involved was in fact shipped to Saudi Arabia, it is clear that Petitioner did not use the property in this state so as to bring it within the provision of the use tax.
Packaging and preparing the property for export by Petitioner appears to be exactly what was done by the "exporters" in Graybar, supra. The coincidence that the Tax Registration Certificate was issued to an exporter in Graybar and to a contractor here, while undoubtedly significant, is not controlling.
McGilvray, supra, teaches that those indicia of export contained in Section 212.06(5) Florida Statutes are presumptions rebuttable by the taxpayer and that valid ocean bills of lading and export documents are convincing indicia of commitment to the stream of export. Richfield Oil, supra, holds that private carriage in lieu of common carriage cannot provide the basis for state taxation of property being exported. Similarly, Sunair, supra, would not permit the type of carriage to determine the nature of the transaction as export or not. Finally, the instant case is substantially different from McGilvray in that here "convincing indicia", viz. export documents, were produced which conclusively showed the property was exported and was not used in this state.
Numerous cases were cited by the Petitioner to show that the tax assessed by Respondent violates the export-import clause of the United States Constitution. However, the cardinal rule of statutory construction is to ascertain the intent of the legislature. That intent, clearly expressed in Section 212.06(5)(a) Florida Statutes above quoted is not to levy a tax upon a sale "which the state is prohibited from taxing under the Constitution or laws of the United States."
If the case can be decided without reaching the constitutional question, courts will avoid the constitutional issues. As stated in Asbwander
v. Tennessee Valley Authority, 297 U.S. 288 (1936):
The Court will not pass upon a constitutional question although properly presented by the record, if there is also present some other ground upon which the case may be disposed of. This rule has found most varied application.
Thus if a case can be decided on either of two
grounds, one involving a constitutional question, the other a question of statutory construction or general law, the Court will decide only on the latter. Id. p. 347.
The presumptions contained in Section 212.06(5) were rebutted by the Petitioner. It was clear that none of the property was used or consumed in this state; that, when the property was delivered to Petitioner, the Florida seller was not liable for the sales tax by reason of Petitioner's tax certificate; export documents were executed thereby providing convincing indicia of export; and, under the circumstances, delivery of the property to a contract carrier for export was equivalent to delivering the property to a common carrier for export. Shipping of the property to a Miami address did not, per se, interrupt or terminate the interstate nature of those shipments originating outside the state or result in the property coming to rest in this state. Carson Petroleum Co. v. Vial, 279 U.S. 626 (1929).
From the foregoing it is concluded that the property delivered to Great Lakes Dredge and Dock Company at Dodge Island, Florida an which the Department of Revenue levied an assessment for sales and use taxes was in the stream of interstate commerce and had not come to rest in this state so as to make it subject to Florida sales and use taxes. Being in the stream of exports it was not subject to Florida tax. It is therefore
RECOMMENDED that the assessment in the amount $186,083.91 be rescinded. DONE AND ENTERED this 28th day of July, 1978, in Tallahassee, Florida.
K. N. AYERS Hearing Officer
Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32304
(904) 488-9675
Filed with the Clerk of the Division of Administrative Hearings this 28th day of July, 1978.
COPIES FURNISHED:
James R. McCachren, Esquire Post Office Box 1170 Tallahassee, Florida 32302
Joseph C. Mellichamp, III, Esquire Assistant Attorney General Department of Legal Affairs
The Capitol - Room LL04 Tallahassee, Florida 32304
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AGENCY FINAL ORDER
=================================================================
STATE OF FLORIDA DEPARTMENT OF REVENUE
GREAT LAKES DREDGE & DOCK COMPANY,
Petitioner,
vs. CASE NO. 77-1054
DEPARTMENT OF REVENUE,
Respondent.
/
NOTICE
TO: James R. McCachran, Esquire Post Office box 1170 Tallahassee, Florida 32302 Attorney for Petitioner
Joseph c. Mellichamp, III, Esquire Assistant Attorney General Department of Legal Affairs Capitol, LL04
Tallahassee, Florida 32304 Attorney for Respondent
You will please take notice that the Governor and Cabinet of the State of Florida, acting as head of the Department of Revenue, at its meeting on the 26th day of September, 1978, approved the Recommended Order of the Department of Revenue in the above captioned case which modified the Division of Administrative Hearing's Recommended Order dated July 28, 1978. A copy of the Department of Revenue's Recommended Order is attached.
JOHN D. MORIARTY, ATTORNEY DEPARTMENT OF REVENUE DIVISION OF ADMINISTRATION ROOM 104, CARLTON BUILDING TALLAHASSEE, FLORIDA 32304
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that a true and correct copy of the foregoing Notice was furnished by mail to James R. McCachran, Esquire, Post Office Box 1170, Tallahassee, Florida 32302, Attorney for Petitioner, Joseph C. Mellichamp, III,
Esquire, Assistant Attorney General, Department of Legal Affairs, Capitol LL04, Tallahassee, Florida 32304, Attorney for Respondent and Kenneth Ayers, Esquire, Hearing Officer, Division of Administrative Hearings, Department of Administration, Room 530, Carlton Building, Tallahassee, Florida 32304 this 28th day of September, 1978.
JOHN D. MORIARTY, ATTORNEY
STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
GREAT LAKES DREDGE & DOCK COMPANY,
Petitioner,
vs. CASE NO. 77-1054
DEPARTMENT OF REVENUE,
Respondent.
/
DEPARTMENT OF REVENUE'S RECOMMENDED ORDER
Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, K. N. Ayers, held a public hearing in the above styled case on June 8, 1978 at Tallahassee, Florida.
APPEARANCES
For Petitioner: James R. McCachran, Esquire
Post Office Box 1170 Tallahassee, Florida 32302
For Respondent: Joseph C. Mellichamp, III, Esquire
Assistant Attorney General Department of Legal Affairs The Capitol, Room LL04 Tallahassee, Florida 32304
By Petition filed 1 June 1977 Great Lakes Dredge and Dock Company, Petitioner, contests the assessment levied against it for sales tax, penalty and interest which it paid under protest; and requests the assessment be revised, reduced or declared invalid. As grounds for the relief sought, Petitioner contends that the property on which the tax was levied was purchased for export, was exported to Saudi Arabia, and is exempt from Florida sales tax.
Two witnesses were called by Petitioner, one witness was called by Respondent and 7 exhibits were admitted into evidence.
FINDINGS OF FACT
The Petitioner, Great Lakes Dredge & Dock Company will be referred to herein as the "Petitioner" and exhibits introduced at the hearing held in the matter as "E- " and the Initial Interrogatories to Petitioner, which were introduced, without objection, into the record at the hearing held in this matter as "I- ". The Respondent, Department of Revenue will be referred to herein as the "Department."
The Petitioner contests a revised assessment totaling $186,083.91, as shown in E-5, for accrued sales and use taxes under Chapter 212, F.S. The Petitioner is a construction company, engaged in dredging work in Florida, other states and outside the United States. The Petitioner was a 47 percent partner of a joint venture. The Joint Venture was a subcontractor to a general contractor, who was to perform certain dredging operations and other related work in the Kingdom of Saudi Arabia. Under the Joint Venture agreement the Petitioner supplied its own materials in connection with its part of the work to be performed. Under the joint venture the "Sponsor", which was not the Petitioner, was responsible for the day to day expandable supplies of the joint ventures operation. Those supplies are not the subject of this case. Ex-1, clause 9.
The nature of the operation, the urgency of the contract with respect to time of completion, and the lack of existing port facilities necessitated special shipping arrangements which involved a contract carrier in lieu of a common carrier. Accordingly the various dredges, workboats, barges and related equipment were loaded on a large barge which was towed from Ft. Lauderdale to Saudi Arabia. Lack of port facilities at Dammam necessitated the capability to unload being carried with the equipment so the larger elements transported were floated onto the barge, and off the barge upon arrival, by sinking the barge.
The tax assessed is on tangible personal property ordered and paid for, by the Petitioner, from various vendors, both within and outside the state. The goods were shipped by the various vendors and delivered to the Petitioner (E-3) at 1680 Port Everglades Boulevard, Dodge Island, Miami, Dade County, Florida. This facility was a space maintained by the Petitioner in the ordinary course of business activities and not just for this particular contract. There, the goods were delivered and stored (some repacked for shipment) and later loaded onto barges, chartered by the joint venture, for shipment to the Kingdom of Saudi Arabia. At the time the vendors, whether from within or outside the state, shipped and delivered the tangible personal property to the Petitioner and the goods were stored, at 1680 Port Everglades Boulevard, Dodge Island, Miami, Dade County, Florida, there were no bills of lading or export declarations in existence in connection with these items but much of the equipment was packaged for export and the shipping documents represented the material was shipped "for export".
Most of the supplies were packaged for overseas shipment before being shipped to Miami where this material and equipment was marshalled at Petitioner's facility on Dodge Island at Miami, Florida. At this marshalling yard, which was the Florida shipping destination for materials purchased, the supplies were inventoried, repackaged, if necessary, for the barge shipment by placing in containers that could be floated off the barge and segregated into the three shipments that would be needed to move the equipment and supplies to Dammam.
The contract carrier that had been engaged to provide the transportation had no facility that could be used a a marshalling yard and Petitioner did have such a facility. Due to the nature of the operation it was essential to assemble the supplies and equipment at a marshalling point for inventory and checking against the list of needed supplies before continuing the transportation to Saudi Arabia.
The bills of lading and/or export declaration did not come into existence until after the goods had been removed from storage by the Petitioner and loaded onto the contract barges for shipment to their foreign destination.
On those items shipped from outside Florida Respondent assessed a use tax and on those items purchased in Florida Respondent assessed a sales tax.
It is undisputed that all property on which the tax was assessed was purchased for ultimate use in Saudi Arabia and was shipped to Saudi Arabia; that the property had an initial Florida destination at Dodge Island, Florida; that the property was shipped from Florida to Saudi Arabia on subsequent bills of lading; and the export declarations were subsequently executed.
For the purpose of this case no distinction exists with respect to the export nature of those shipments purchased from a supplier in Florida and those purchased from a source outside of Florida.
There were other challenges to the assessment, as set forth in paragraph 4(F), (G), and (H), but these were voluntarily dismissed by the Petitioner.
CONCLUSIONS OF LAW
The items in issue in the instant case were not exports and thus the Department was correct in assessing sales and use taxes on these items pursuant to Chapter 21.2, Florida Statutes.
The Sales and use tax statute is a valid statute taxing the privilege of selling and of using tangible personal property in the State of Florida. An exception exists if the items sought to be taxed are exports. In the instant case, the items are not exports.
Section 212.05, Florida Statutes (1969), provided:
"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 state 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 incident and shall be due and payable . . ."
Section 212.06(6), Florida Statutes (1969), provides in regard to these taxes:
"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."
There is no issue but that the property involved is tangible personal property which would be subject to sales and use taxes unless they are "exports" within the meaning of Clause 2, Section 10, Article I, U.S. Constitution, known as the Import-Export Clause.
Section 212.06(5), Florida Statutes, states that it is not the intention of the sales and use tax law (Chap. 212) to levy a tax on property imported, produced or manufactured in the state 'for export', but expressed tests for this as the delivery of the property `to a licensed exporter for exporting or to a common carrier for shipment outside of the state or mails the same by United States mail to a destination outside the state'. In the instant case there has been no contention that any of these conditions have been met.
However, subsection (5) provides further that it is not the intention to levy a tax 'on any sale which the state is prohibited from taxing under the Constitution'. This merely states what would be applicable regardless of the provisions of Ch. 212, F.S.
The Hearing Officer places great emphasis on the case of State ex rel. Sunair Electronics, Inc. v. Green, 177 So.2d 490 (1 D.C.A. 1965), cert den. 180 So.2d 464, to the instant case.
In the Sunair case, supra, it was held that the taxpayer's act of placing electronic equipment sold to a foreign purchaser aboard purchaser's aircraft, but not installing it thereon, committed the equipment to the export stream and effectively passed title thereof from the taxpayer to the purchaser so that this transaction did not constitute a sale by the taxpayer in the open market rendering it subject to the state sales tax.
The instant case differs from the Sunair case in that here the property is purchased and delivered and comes to rest at a storage place prior to being loaded onto the instrumentalities, i.e. the barges, which will move them outside the country to the foreign destination.
This case is more analogous to and is controlled by Fred McGilvray, Inc. v. Askew, 340 So.2d 475 (Fla. 1976). In that case goods were purchased by a corporation from various vendors, both within and outside the state and delivered to the corporation or a Miami company, where the property came to rest in this state and became a part of the mass property of this state, prior to being loaded onto a barge chartered by the corporation's prime contractor and shipped to the Bahamas in furtherance of the corporation's construction subcontract. The Court held that the goods were not exempt under 212.06(5), F.S., in that the goods, were not delivered to a licensed exporter for exporting, or to a common carrier for shipment outside the state or that they had been mailed by United States mail to a destination outside the state. The Court went on to state that, as in the instant case, there had been no facts to establish that the goods had been committed to the 'stream of export' prior to accrual of what would be taxable transactions under Ch. 212, F.S., such as delivery in Florida to the Transworld Marine with export declaration or bill of
lading for foreign export duly executed, and thus, in the instant case, the property came to rest in this state and became a part of the mass property of this state and when removed from storage and subsequently loaded on board ship, there was a "use" in fact by the Petitioner of its personal property within this state which was subject to sales and use tax under Ch. 212, FS.
This case is likewise analogous to and controlled by Kosydar v. National Cash Register, 417 U.S. 62, [94 S.Ct. 2108] 40 L.Ed.2d 660 (1974). In that case NCR manufactured certain electronic machines especially for export which were not suitable in the domestic trade. Prior to shipment abroad they were stored in a warehouse in Ohio, which state sought to impose an ad valorem tax on them. The Supreme Court of Ohio ruled the tax was prohibited as the goods were exports and came within the Import-Export Clause of the Constitution. The Supreme Court of the United States reversed and in so doing stated the question to be whether a sufficient commencement of the process of exportation has occurred so as to immunize the articles from taxation. It was said that 'at least some such entrance [into the export stream], is a prerequisite to the Clause's operation', and that its 'protections are not available until the article at issue begins its physical entry into the stream of exportation'.
This case cited the case of Empresa Siderurgica v. County of Merced, 337 U.S.154, [69 S.Ct. 995] 93 L.Ed. 1276, (1949) which in turn referred to the early case of Coe v. Errol, 116 U.S. 517, 29 L.Ed. 715 (1886). In the Coe case it was said:
'Do the owner's state of mind in relation to the goods, that is, his intent to export them, and his partial preparation to do so, exempt them from taxation? 116 U.S., at 525.
A negative answer was given with the comment that not 'until they have been shipped or entered with a common carrier for transportation to another state or have started upon such a transportation in a continuous route or journey' have they entered the status of being beyond the power of the state for taxation.
Referring to the test in Coe, the Supreme Court of the U.S. in Empresa stated:
'Under that test [Errol v. Coe] it is not enough that there is an intent to export, or a plan which contemplates exportation, or an integrated series of events which will end with it . . . It is the entrance of the articles into the export stream that marks the start of the process of exportation. Then there is certainty that the goods are headed for their foreign destination and will not be diverted to domestic use. Nothing less will suffice.' (es) 93 L.Ed. at 1279 and 1280.
The Petitioner will not find support in the U.S. Supreme Court decisions of Spaulding & Bros. v. Edwards, 262 U.S. 66, [43 S.Ct. 485] 67 L.Ed. 865 (1923) in which the goods were delivered to a common carrier for transport to the purchaser at its foreign destination or Richfield Oil Corp. v. State Bd. of Equalization. 329 U.S. 69, (67 S.Ct. 176] 91 L.Ed. 80, in which oil purchased by the New Zealand government to be delivered F.O.B. Los Angeles was pumped from the seller's storage tanks into the hold of the New Zealand tanker and thereafter transported to its foreign destination. In both of those cases attempts to collect state sales taxes were held to violate the Clause. The
Kosydar, Coe and Empresa cases involved ad valorem taxes. However, the principles are the same. Fred McGilvray, Inc. v. Askew, supra.
Likewise, the Petitioner will find no comfort in the cases of Graybar Electric Company, Inc. v. Revenue, 347 So.2d 718 (3 D.C.A. 1977) in which the goods were delivered to a 'licensed exporter', and Klosters Rederi A/S v. Revenue, 343 So.2d 656 (3 D.C.A. 1977), in which because of the specific nature of the goods and certain rules of the Department of Revenue, the goods were taxable only upon a pro rata basis. Neither case is applicable to the instant case as a basis for exempting the property herein from taxation.
Goods become immune from state taxation when when are sufficiently committed to the export stream at the time the tax would accrue as to make certain the foreign destination. When, as in the instant case, there is no delivery to a common carrier for delivery to the purchaser abroad, or no preparation of bills of lading or export declarations are made, or no physical placing of the goods on the instrumentality for removal from the country prior to accrual of what would be taxable transactions under Chapter 212, then the immunities of the Import-Export Clause do not attach. The removal from storage and subsequent placement on board ship of the subject items amounted to a taxable "use". Klosters Rederi A/S v. Department of Revenue, supra; See United Air Lines v. Mahin 410 U.S. 623, 93 S.Ct. 1186, 35 L.Ed.2d 545 (1973). There are two additional cases which support the tax assessment in the instant case. In the case of Sumitomo Forest Co. v. Thurston, U.S.C.C.A. 9, 1974, 504 F.2d 604, it was stated:
'Certainty of export evidenced by financial and contractual relationships does not by itself render goods "exports" before their commencement of their journey abroad.'
Likewise, the case of Farmer's Rice Cooperative v. County of Yola, [44 Cal. App. 3d 1] 118 Cal.Rep. 500 (1974), is very similar to the instant case and is in accord. This involved an ad valorem tax but the principles are the same.
Section 212.06(5), Florida Statutes (1977), establishes a presumption that tangible personal property is not to be considered "as being imported, produced or manufactured for export unless the importer, producer or manufacturer delivers the same [i] to a licensed exporter for exporting, or [ii] to a common carrier for shipment outside the state or [iii] mails the same by United States mail to a destination outside the state." This presumption, of course, is rebuttable by the Petitioner. The facts in the record negated the assertion that the goods qualified for exemption by delivery to a common carrier and likewise failed to establish through proper documents or otherwise that the property had been committed to the stream of exports, prior to accrual of what would be taxable transactions under Chapter 212, F.S. (See 212.02(2) defining "sale"; 212.02(7) defining "storage" and 212.02(8) defining "use"; Klosters Rederi v. Revenue, supra at 658 and the discussion on "use"); thus the immunities of the Import-Export Clause do not attach. The Petitioner in this case failed to carry its burden of overcoming the statutory presumption. It must follow, then, that the property here at issue "[came] to rest in this state and [became] a part of the mass property of this state", and when removed from storage and subsequent placement on board ship of the subject items the Petitioner did in fact "use" its personal property within the State of Florida and is subject to the instant tax.
Applying these principles enunciated in the above-cited cases to the facts in the instant case, there is no choice but to find that the items in question in the instant case were not exports and thus are subject to taxation.
In the instant case, the facts indicate, prior to accrual of what would be taxable transactions under Chapter 212, F.S., that there is very little certainty of export or committal to the export stream. The goods bought in Florida were subject to sales tax. At the time of sale, there was no certainty that the goods would reach foreign lands and there was no committal to the export stream. The goods bought out of state came to rest in Florida where they were stored in Florida and were subject to the use tax since there was no certainty or committal to export.
The lack of certainty or committal is shown by many factors. All of the invoices were marked for delivery to the Petitioner at 1680 Port Everglades Boulevard, Dodge Island, Miami, Dade County, Florida, which was a storage yard maintained by the Petitioner in the ordinary course of its business. The Petitioner took possession and had title to the goods. The Petitioner could do as it liked with the goods such as substitute other goods prior to removal of the goods from storage and loading them onto the contract barge. To show otherwise, signed shipper's export declarations and bills of lading to foreign ports would have to be in existence prior to the accrual of what would be taxable transactions under Chapter 212, F.S. These were not in existence in the instant case until after the goods had been loaded onto the contract barges (Ex- 4). The barge used for transporting the goods was not a common carrier but just a chartered vessel.
All of these factors lend support to the Department determination that at the time of the application of the sales and use tax in the instant case, the items in question were not committed to the export stream and there was no certainty that the goods would be exported. The goods were either sold in Florida or used (stored and loaded) in Florida and were part of the mass of property in the State of Florida subject to taxation.
The cases point out that the intent in the instant case is not important. The fact that the goods ended up in the Kingdom of Saudi Arabia is not a factor. Contractual agreements are not determinative. The fact that goods began their journey across state lines by common carrier is not to be considered.
Each case depends on the facts. In the instant case, when the sales and use tax was activated, the items in question were not exports. If there had been declarations of export or bills of lading to foreign ports at the time of delivery by the vendor and prior to the storage and subsequent removal for loading on boats by the Petitioner, then the results might have been different. The goods would have had certainty of export and committal to the stream commerce. In that case, short delays such as intermediate storage would not have affected the fact that an item was a export and immune from taxation. However, such is not the case before this department.
WHEREFORE, it is ordered, that the proposed assessments be sustained.
DONE AND ORDERED this 28th day of September, 1978.
Harry L. Coe, Jr. Executive Director
State of Florida, Department of Revenue
Room 102, Carlton Building Tallahassee, Florida 32304
Dated this 28th day of September, 1978
| Issue Date | Proceedings |
|---|---|
| Oct. 03, 1978 | Final Order filed. |
| Jul. 28, 1978 | Recommended Order sent out. CASE CLOSED. |
| Issue Date | Document | Summary |
|---|---|---|
| Sep. 28, 1978 | Agency Final Order | |
| Jul. 28, 1978 | Recommended Order | Respondent did not show tax due on goods packed and shipped in Florida for use elsewhere. Respondent has responsibility of collecting taxes. |
