STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

NORTHGATE FUEL OIL SERVICES, )

)

Petitioner, )

)

vs. ) CASE NO. 77-1652

)

DEPARTMENT OF REVENUE, )

)

Respondent. )

)

RECOMMENDED ORDER

This matter came on for hearing in Tampa, Florida, before the Division of Administrative Hearings by its duly designated Hearing Officer, Robert T. Benton, II, on December 7, 1977. The parties were represented by counsel:

APPEARANCES

For Petitioner: James P. LaRussa, Esquire

Flagship Bank Building, Suite 416

315 East Madison Street Tampa, Florida 33602

For Respondent: Cecil L. Davis, Jr., Esquire

Assistant Attorney General The Capitol

Tallahassee, Florida 32304

At the final hearing, counsel for respondent produced a revised notice of proposed assessment asserting a tax deficiency under Chapter 206, Florida Statutes (1975) , of twenty thousand eight hundred sixty five dollars and ninety-two cents ($20,865.92), together with a ten percent penalty, for the period February 1973, through February 2, 1977. The original notice of proposed assessment was not offered as evidence or otherwise made part of the file.

FINDINGS OF FACT

1. Petitioner deals in fuel oil. It buys fuel oil from several wholesalers and sells it at retail, mainly to people who use fuel oil for heating purposes. Petitioner operates a low pressure pump on its premises for pumping fuel oil from a ten thousand gallon tank into five gallon cans and similar containers brought to the pump by its customers. At peak demand, the ten thousand gallon tank supplying this pump had to be refilled twice a week. In general, however, during the cold season, the tank was refilled only every other week or less often still. No fuel oil was ever pumped from the low pressure pump into any motor vehicle. Petitioner also maintained two big dispersing pumps for filling its tank trucks with fuel oil and a gasoline pump

   for fueling the truck engines. The trucks were equipped with pumps for emptying their fuel oil tanks, which pumped at the rate of forty gallons per minute.

   Petitioner advertised home delivery of fuel oil in the newspaper, and dispatched its trucks in response to the resulting telephone calls.

   
   

2. In addition to delivering fuel oil for home heating purposes, petitioner occasionally sold larger quantities to fellow fuel oil dealers and to other commercial concerns. In February, March and April of 1974, petitioner sold particularly large quantities of fuel oil to Tampa Electric Company.

   During the period covered by the audit, petitioner sold from 50,000 to 70,000 gallons to other fuel oil dealers. Petitioner did not get resale certificates from its commercial customers, but Mr. Hayes, until recently petitioner's proprietor, required dealers to show him their dealer's licenses and he copied the dealers' license numbers onto the invoices.

   
   

3. In March of 1976, Mr. Donald E. Snyder, a tax examiner in respondent's employ, began auditing petitioner's books. At this time most of petitioner's records were in Orlando in the custody of the Federal Energy Administration. Subsequently, some, but not all, of these records were returned to petitioner. In an effort to reconstruct records which were unavailable, Mr. Snyder contacted petitioner's suppliers and examined their records of sales to petitioner. On January 2, 1977, Mr. Hayes and Mr. Snyder took an inventory of petitioner's fuel oil. Mr. Snyder used this information as well as what records petitioner was able to furnish him, and concluded that petitioner had sold, during the audit period, two thousand four hundred seventy-nine (2,479) gallons of fuel oil to persons or concerns who were users of fuel oil for non-exempt purposes. Written on the invoices evidencing these sales, however, was the phrase "non-road use" or words to that effect. The limited materials with which he worked gave Mr. Snyder no indication as to the disposition of an additional two hundred fifty- eight thousand three hundred forty (258,340) gallons of fuel oil. Although Mr. Snyder approximated petitioner's sales month by month, these figures were unreliable because of certain erroneous assumptions, notably the assumption that petitioner never used additional storage facilities.

   
   

   CONCLUSIONS OF LAW

   
   

4. The initial pleading furnished the Division of Administrative Hearings in this matter is styled petition for formal administrative hearing, and recites "that the issues [sic] in this case is whether the Petitioner, NORTHGATE FUEL OIL SERVICE, violated Sections 206.86 and 206.87, Part 2, Chapter 206 of the Florida Statutes." Respondent met the petition with an answer admitting this allegation. The answer mentioned no administrative rules and no additional statutes. The notice of hearing cited as legal authority the statutory provisions named in the petition. In closing argument, for the first time, respondent's counsel indicated that the Department intended to rely on Rule 12A- 2.03, F.A.C. Petitioner's counsel then objected to the form of the notice of hearing, see Section 120.57(1)(b)(2)(b), Florida Statutes (1975), and represented that he had never seen the text of Rule 12A-2.03, F.A.C., or even been aware of its existence.

   
   

5. In Poirier v. Division of Health, State Department of Health and Rehabilitative Services, 351 So.2d 50 (Fla. 1st DCA 1977), the court considered the question of how administrative rules should be established, for purposes of hearings conducted pursuant to Section 120.57(1), Florida Statutes (1975). In the present case, as in Poirier, the agency invoking an administrative rule "did not furnish copies of the applicable rules to [the citizen] with the amended complaint nor were they offered into (evidence at the time of the hearing." 351 So.2d at 53. The Poirier court held that the agency's failure to take either of these alternative steps constituted error. In the present case, especially in

   light of the omission in the notice of hearing of any reference to administrative rules, the applicable statutes must be deemed to govern, without benefit of any elaboration by administrative rule.

   
   

6. Section 206.87, Florida Statutes (1975) , imposes an "excise tax of 8 cents per gallon . . . upon every gallon of special fuel used or sold in this state for use." For purposes of the statute "use" is defined to mean "the placing of special fuel into any receptacle on a motor vehicle from which fuel is supplied for the propulsion thereof." Section 206.86(5), Florida Statutes (1975). "Special fuel" is defined to include, among other things, "kerosene .

   . . and all other forms of liquefied petroleum gases, except [gasoline and its compounds]." Exempted from taxation are "[s]ales by a dealer when the special fuel is delivered for home, industrial, commercial, agricultural or marine purposes, for consumption other than use, or for resale [by a non-dealer in quantities of five gallons or less]." Section 206.87(4)(a), Florida Statutes (1975). In addition, the statute provides that a "dealer may purchase special fuel without the tax . . . being paid upon the [transaction]." Section

   206.87 (2), Florida Statutes (1975)

   
   

7. The evidence established that petitioner was a dealer in special fuels who sold fuel oil principally "for home . purposes, for consumption other than use" although occasionally petitioner sold fuel oil for "industrial [or] commercial . . purposes, for consumption other than use," and petitioner sometimes sold fuel oil to other licensed fuel oil dealers. All these sales are exempted from the excise tax. There was no evidence that petitioner made any non-exempt sales of fuel oil.

RECOMMENDATION

Upon consideration of the foregoing, it is RECOMMENDED:

That respondent abandon its notice of proposed assessment, as revised. DONE and ENTERED this 10th day of January, 1978, 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. James P. LaRussa, Esquire Flagship Bank Building, Suite 416

315 East Madison Street Tampa, Florida 33602

Mr. Cecil L. Davis, Jr., Esquire Assistant Attorney General

The Capitol

Tallahassee, Florida 32304

Docket for Case No: 77-001652

Orders for Case No: 77-001652