Judges: THOMAS C. OLDHAM
Agency: Department of Revenue
Latest Update: Jan. 25, 1979
Summary: Petitioner's alleged liability for sales tax under Chapter 212, Florida Statutes. This case was consolidated for hearing purposes with Case No. 77-1503R which was a rule challenge under Section 120.56, Florida Statutes. However, at the commencement of the hearing, Petitioner withdrew its petition in Case No. 77-1503R and the cause was thereafter dismissed by order of the Hearing Officer on March 21, 1978.Proposed tax assessment enforced where tax payer could establish he was using property for r
Summary: Petitioner's alleged liability for sales tax under Chapter 212, Florida Statutes. This case was consolidated for hearing purposes with Case No. 77-1503R which was a rule challenge under Section 120.56, Florida Statutes. However, at the commencement of the hearing, Petitioner withdrew its petition in Case No. 77-1503R and the cause was thereafter dismissed by order of the Hearing Officer on March 21, 1978.Proposed tax assessment enforced where tax payer could establish he was using property for rental purposes but did not have requisite dealer registration.
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ROBERT H. ANDERSON and/or )
vs. ) CASE NO. 77-1257
Respondent. )
A hearing was held in the above captioned matter, after due notice, on March 20 and April 18, 1978, at Miami, Florida, before the undersigned Hearing Officer.
For the Respondent: Patricia S. Turner, Esquire
Petitioner's alleged liability for sales tax under Chapter 212, Florida Statutes.
This case was consolidated for hearing purposes with Case No. 77-1503R which was a rule challenge under Section 120.56, Florida Statutes. However, at the commencement of the hearing, Petitioner withdrew its petition in Case No.
77-1503R and the cause was thereafter dismissed by order of the Hearing Officer on March 21, 1978.
Petitioner Out Island Charters, Inc., Miami, Florida is a Florida corporation engaged in the business of selling, leasing, repairing and chartering yachts in South Florida. Robert H. Anderson is president of the firm. During the tax period in question, i.e., December 1, 1973 to November 30, 1976, Petitioner sold various sailing vessels and made repairs thereon. The purchasers individually entered into a "Yacht Charter Management Agreement" with Petitioner under which the latter agreed to act as the owners' agent to obtain
charters of the boats from third parties, and to maintain, repair, and dock the vessels at the owners expense. The agreement provided that Petitioner would receive a percentage of the gross bareboat charter fee. It also contained a provision that the owner could use his vessel at any time without cost provided that no charters had been booked for the particular time period. Although this was a standard provision in all of the contracts, some of the owners deleted it prior to execution of the agreement. In most cases, the owners used their vessels occasionally for the purpose of testing equipment and performing routine maintenance and repairs. At such times, some of them were accompanied by their wives, mechanics, or friends who assisted in handling the vessels or performing the routine maintenance functions. They did not use the vessels for purely personal pleasure trips.
When the vessels were purchased, sales tax under Chapter 212, Florida Statutes, was neither collected from the buyers by the Petitioner nor otherwise paid to the state. Sales tax was not paid on various equipment purchases, repair parts, dockage, or other expenses incident to the management and maintenance of the vessels. However, sales tax was collected by Petitioner from the third parties who rented the vessels except for a few inadvertent omissions. At the time Petitioner sold the vessels, none of the purchasers had applied for nor received from Respondent a certificate of registration to engage in or conduct business as a "dealer" in yacht chartering under Chapter 212, Florida Statutes, nor had they provided Petitioner with a certificate of resale. Anderson believed the transactions to be exempt from sales tax because the vessels were purchased for rental purposes, and he was unaware that registration as a dealer and submission of a resale certificate were required to establish such an exemption. (Exhibits 5-7, 9, Testimony of Wolin, Witmer, Gay, Harrill, Krapf, Purdy, Anderson, McLean (Exhibit 1), Bennett (Exhibit 2))
Pursuant to an audit of Petitioner's business by Respondent's tax examiner, a proposed assessment of sales tax, penalties, and interest was issued to Petitioner in the total amount of $28,790.76. The parties met at an informal conference on March 29, 1977, and, as a result of adjustments at that time, a revised Notice of Proposed Assessment was issued on May 19, 1977, showing a total sum due of $26,646.91. Petitioner thereafter requested an administrative hearing in the matter. (Exhibit 3)
In March, 1977, Petitioner's counsel advised the various purchasers of the pending tax audit and requested that they either pay the sales tax if they had used the boats for personal business, or, if the boats had been exclusively used for chartering purposes, that they execute affidavits to that effect, together with applications for certificate of registration as dealers and blanket certificates of resale. Most of the purchasers returned the executed documents and were later registered with the Respondent as dealers in the chartering business. (Testimony of Anderson, Gay, Wolin, Witmer, Harrill, Krapf, Purdy, McLean, Bennett, Exhibits 1 - 2, 4 - 14)
In one particular transaction wherein James Morgan purchased a vessel from Petitioner, Anderson testified that the vessel was removed from Florida to Tennessee where Morgan lived on the day after full payment had been made under the contract. Anderson, however, did not know if Morgan provided him with an affidavit for exemption of the boat by removal from the state, and no documentary evidence concerning the transaction was presented by Petitioner at the hearing. (Testimony of Anderson, Exhibit 15)
In another transaction, Anderson purchased a vessel in 1973 from Coastal Sailing Services, Inc., of Tallahassee, Florida, and paid sales tax in
the amount of $1,027.40. Later, Anderson believed that he was exempt from the payment of tax because he had purchased the vessel solely for rental purposes. He communicated with Respondent's sales tax bureau through his accountant for information concerning refund procedures. Remus O. Cook, Jr., an examiner in the state sales tax bureau, advised in a letter of August 14, 1974, that a refund from Coastal Sailing Service could be secured if the vessel had been purchased solely for rental purposes, and that such request to the seller should be accompanied by a certificate of sales tax exemption utilizing a form enclosed with the letter. Although the vessel had been purchased by Anderson, the letter made reference to Out Island Charters, Inc. as the buyer and cited its sales tax registration number. Cook testified that it was departmental policy to grant an exemption if tangible personal property was purchased exclusively for rental purposes, even if the purchaser was not registered as a dealer at the time of sale. However, Henry Coe, Jr., Respondent's Executive Director, testified that registration at or a few days after the time of sale was a prerequisite to exemption in such cases. Anderson proceeded to request the refund from the seller, but the exemption form was executed in the name of Out Island Charters, Inc. He received the refund in 1975. Respondent's tax examiner assessed this sale in the current proposed tax assessment because he found no documentary evidence that Anderson intended to use the boat for charter purposes when he purchased it, and there was no evidence that Anderson was registered as a dealer at that time or furnished a resale certificate to the seller when it was purchased. No evidence was presented that Anderson had used the boat for personal purposes and he testified that he purchased it solely for rental, but conceded that he had no dealer's registration number at the time of purchase. (Testimony of Anderson, Lloyd, Exhibit 18, Depositions of Cook, Coe (Exhibits 19, 20))
Petitioner conceded at the hearing that the tax computations were correct, but contested liability therefor except for the several instances where sales tax had not been collected on boat rentals. (Testimony of Anderson)
CONCLUSIONS OF LAW
Petitioner challenges the proposed tax assessment on the ground that all of the sales and other transactions in question (except for the several inadvertent failures to remit sales tax on yacht charters) are exempt from tax under Chapter 212, Florida Statutes, because the vessels were purchased and used solely for rental purposes and thus are exempt under Rule 12A-1.07(13)(a),
F.A.C. That rule states that the purchaser of a motor vehicle to be used exclusively for rental purposes may issue a resale certificate on rentals for periods of less than twelve months in lieu of paying sales tax on the purchase price, but shall collect a rental tax from his customers on the rental amounts. However, the rule is not deemed applicable here because subparagraph (3)(a) thereof provides that for sales tax purposes, a motor vehicle shall be any vehicle required to be licensed under Chapter 320, Florida Statutes. Boats are not embraced within the term "motor vehicle" as defined in Section 320.01 that are required to be registered under that chapter.
The basic statutory authority for imposition of the tax is Section
212.05 which provides that four percent of the sales price of each item or article of tangible personal property sold at retail in this state by a "dealer" shall be collected from the purchaser and remitted to the state. A "retail sale" is defined in Section 212.02(3)(a) as a sale for any purpose other than resale, and provides that a resale must be in strict compliance with rules and regulations or else a dealer will himself be liable for the tax. Section 212.02(4) provides that "sales price" includes the cost of labor and materials
to maintain or repair tangible personal property. Subparagraph (12) of that provision includes boats within the definition of "tangible personal property." The term "dealer" as defined in Section 212.06(2) includes persons who sell at retail or lease or rent tangible personal property for a consideration. Section 212.18(3) requires every person desiring to engage in business as a dealer to obtain a certificate of registration as a dealer for the type of business in question and prohibits any such business transactions without having first been so registered with the Department of Revenue.
Section 212.06(10) states that all transfers of titles to boats are presumed to be taxable actions unless otherwise shown. Rule 12A-1.56(3) provides that if any dealer or other person fails to report and pay a required tax, Respondent shall make an assessment from an estimate of the taxable period and proceed to collect the taxes on the basis of such assessment. The assessment is considered to be prima facie correct and the burden to show the contrary rests on the taxpayer.
The only specific provision in the departmental rules that would excuse the collection of tax on the sale of a boat is contained in Rule 12A- 1.07(1)(c) if the purchaser removes the boat from this state within ten days after purchase and provides written proof of such fact to the dealer. Although one of the transactions in question is alleged by Petitioner to be such a sale, there is no evidence that Petitioner obtained the necessary written proof of removal within the specified period.
Respondent appears to concede that the boat sales would be exempt from tax if they qualified under Rule 12A-1.71(2) which provides that "equipment" purchased solely for rental purposes is exempt at the time of its acquisition. Although it is indeed questionable if a boat could be construed as "equipment" within the meaning of that rule, it apparently has been the practice of Respondent to exempt such purchases in the past, as evidenced by the testimony of its officials. Respondent, however, contests any such exemption on two grounds: (1) that the vessels were not purchased exclusively for rental purposes because of the charter agreement provision that the owner could use the yacht at any time that it was not under charter, and that the owners on occasion did board and use the vessels. However, it is considered that this claim would not defeat the so-called exemption because the mere fact that a provision authorizing private use may have existed would be of no significance unless it became operative by such use. Further, the use made of the vessels by the various owners was not for personal pleasure, but solely incident to the maintenance and repair of vessels used in the charter business; (2) that the purchasers of the vessels were not registered as dealers at the time of purchase and thus Petitioner should have collected sales tax on the transactions. In this connection, Rule 12A-1.38 reads pertinently as follows:
Rule 12A-1.38 Resale and exemption certificates
It is the specific legislative intent that each and every sale . . . is taxable under Chapter 212, F.S., unless such sale . . . is specifically exempt. The exempt status of the transaction must be established by the dealer. Unless the dealer shall have taken from the purchaser a certificate to the effect that the property . . . was purchased for resale and bearing the name and address of the purchaser and the number of his dealer's certificate of
registration . . . the sale shall be deemed to be a taxable sale at retail.
* * *
(3) A dealer shall refuse to accept a resale certificate . . . and shall collect a tax unless the purchaser has obtained a dealer certificate from the Department of Revenue and the number of his dealer's certificate of registration is stated on the resale certificate. (Emphasis added)
Although the purchasers here did not intend to resell the boats, but rather rent them, Respondent's suggested form for a resale certificate as set forth in Rule 12A-1.39 indicates that a "resale or rental as tangible personal property" is one of the authorized purposes for use of the certificate.
The basic question for determination is whether registration as a dealer and submission of a resale certificate some months after the date of sale, as was done in the transactions under consideration, can relate back and provide exemption for such sales. At the outset, it must be kept in mind that exemptions to taxing statutes are to be strictly construed against the taxpayer. Wanda Marine Corporation v State Dept. of Revenue, 305 So.2d 65 (Fla. 1st DCA 1974). Although it is apparent that the exempt status of the various boat purchases could have been established if the purchasers had been registered as dealers at the time of sale, no evidence has been submitted by Petitioner that they were then so registered or had otherwise complied with the above provisions of Rule 12A-1.38. In view of such failure of proof, relief cannot be granted from the proposed tax assessment with respect to the sales price of the vessels and the interest and penalties thereon.
Although the cost of parts and materials used to maintain, repair and recondition vessels which are used exclusively for rental purposes are tax exempt under Rule 12A-1.71(7), it necessarily follows that such exemption is unavailing to boat owners who were not registered as dealers in such a business at the time of the purchases. In such instances, they cannot validly provide blanket certificates of resale as provided in Rule 12A-1.38(5).
As to the vessel allegedly removed from the State of Florida shortly after sale, it has previously been noted that proof of compliance with Rule 12A- 1.07(1)(c) has not been shown and accordingly, the sale does not qualify for exemption.
That the proposed tax assessment be enforced against Petitioner herein. DONE and ENTERED this 9th day of June, 1978, in Tallahassee, Florida.
THOMAS C. OLDHAM
Filed with the Clerk of the Division of Administrative Hearings this 9th day of June, 1978.
Patricia S. Turner, Esquire Assistant Attorney General Department of Legal Affairs The Capitol
John D. Moriarty, Esquire Department of Revenue
