STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

GABRIEL COMMUNICATIONS )

CORPORATION, )

)

Petitioner, )

)

vs. ) CASE NO. 78-0480

) STATE OF FLORIDA, DEPARTMENT ) OF REVENUE, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a hearing was held before Charles C. Adams, a Hearing Officer with the Division of Administrative Hearings, at the Broward County Courthouse, 201 Southeast Sixth Street (Room 821), Fort Lauderdale, Florida, at 10:15 A.M., on Tuesday, July 25, 1978.

APPEARANCES

For Petitioner: John W. Costigan, Esquire

Post Office Box 669 Tallahassee, Florida 32304

For Respondent: Maxie Broome, Jr., Esquire

Assistant Attorney General Department of Legal Affairs The Capitol

Tallahassee, Florida 32304

ISSUE

Whether or not the Petitioner is liable for tax, penalties and interest under the authority of Chapter 212, Florida Statutes, on certain purchases, rentals/leases and repairs to capital equipment made by the Petitioner on paging equipment, for the audit period October 1, 1974 through September 30, 1977. The audit also considers the purchase of office supplies in the aforementioned period, but for the purposes of this hearing the Petitioner is not contesting the imposition of tax, penalty and interest on those items. Furthermore, the Petitioner does not contest the mathematical calculations in arriving at the tax as set forth in the Notice of Proposed Assessment; instead, it is an attack on the right of the Respondent to affect such a tax against the Petitioner on the items in dispute.

FINDINGS OF FACT

1. This cause came on for consideration based upon the Petition filed by Gabriel Communications Corporation protesting a proposed deficiency of sales tax liability asserted by the Respondent, the Florida Department of Revenue, by its

   1st Revised Notice of Proposed Assessment of Tax, Penalties and Interest Under Chapter 212, Florida Statutes. The contents of that 1st Revised Notice of Proposed Assessment, to include the worksheets of the Respondent's Tax Examiner, may be found as the Respondent's Composite Exhibit No. 1 admitted into evidence. The proposed assessment contains claims for tax, penalties and interest on the Petitioner's purchase, rentals/lease and repair to capital equipment; to wit, pagers made by the Petitioner. The purchases and rentals/leases were involved in transactions between the Petitioner and certain suppliers to the Petitioner and the repairs pertain to materials necessary to keep the pagers in working order.

   
   

2. There are additional items in the audit which concern certain office supplies purchased by the Petitioner for which sales tax was not paid; however, for the purposes of this proceeding those items are not contested by the Petitioner. Moreover, Gabriel Communications Corporation does not contest the amount of the assessment, assuming that the Respondent is entitled in law to make the assessment on the matters in dispute.

   
   

3. Gabriel Communications Corporation is a Florida corporation and a holder of a Certificate of Public Convenience and Necessity issued by the Florida Public Service Commission, which certificate authorizes Gabriel to provide radio, telephone and paging services to the public in certain areas in Florida. The Petitioner's corporate office is in Fort Lauderdale, Florida. Gabriel Communications Corporation is one of forty-three organizations licensed by the Public Service Commission of the State of Florida as a radio common carrier. (The conclusion is borne out in the late-filed exhibit of the Petitioner, which is Exhibit No. 5, admitted into evidence, being a statement from the Commission Clerk for the Florida Public Service Commission.)

   
   

4. The tax that the Respondent is attempting to impose in this matter is a tax on the pagers which the Petitioner has purchased or rented/leased from suppliers to be provided to the Petitioner's customers to assist in establishing the paging services which the Petitioner offers to those customers. The proposed tax also involves a tax asserted against the Petitioner on those items of inventory which the Petitioner purchases from its suppliers for purposes of making repairs to the equipment its customers are utilizing.

   
   

5. The focus of the Petitioner's argument in support of this Petition is centered on the provision of Rule 12A-1.46(8) (i), Florida Administrative Code, which in discussing taxation involving telephone, telegraph and other communication services by radio common carrier states as follows:

   
   

   "(8) Radio Common Carriers.

   * * *

   1. The charge by the radio common carrier for one-way pocket pager service is exempt."

      
      

      In the view of the Petitioner this means that the entire transaction between the Petitioner and its customers involving paging services, to include the initial purchase or rental/lease of pagers from its suppliers and repairs thereto, would be exempt from any tax under Chapter 212, Florida Statutes. The Petitioner supports its argument in this vein by citing Attorney General's Opinion 68-62, dated 1968, dealing with an interpretation of Section 212.05(5), Florida Statutes, and the subsequent Florida Revenue Commission ruling No. 068-56 of June 27, 1978. That section, 212.05(5), Florida Statutes, states:

      (5) At the rate of 4 percent on charges for all telegraph messages and long distance telephone calls beginning and terminating in this state; on recurring charges to regular subscribers for local telephone service and for wired television service; on all charges for the installation of telephonic, wired television, and telegraphic equipment; and, at the same rate, on all charges for electrical power or energy. Telephone and telegraph services originating within this state and completed outside this state or originating outside this state and completed within this state are not taxable.

      The provisions of s. 212.17(3), regarding credit for tax paid on charges subsequently found to be worthless, shall be equally applicable to any tax paid under the provisions of this section on charges for telephone and telegraph services and electric power subsequently found to be uncollectible. The word 'charges' in this subsection shall not include any excise or similar tax levied by the federal government, any political subdivision of the state, or any municipality upon the purchase or sale of telephone, wired television or telegraph service, or electric power, which tax is collected by the seller from the purchaser."

      
      

      The Petitioner makes a further argument that the provision which the Respondent relies on in proposing its assessment does not have application. That provision is Rule 12A-1.46(8)(e), Florida

      Administrative Code, and it reads:

      
      

      "(8) Radio Common Carriers.

      * * *

      (e) Sales, rentals or repairs of machines, equipment, parts or accessories to a radio common carrier for its use in providing communication services are taxable. This includes parts and materials used by radio common carriers in the repair and installation of their own communication equipment. When purchasing equipment for resale or for exclusive rental, a radio common carrier should furnish its supplier a

      resale certificate in lieu of paying the tax."

      
      

      The Petitioner doesn't feel that this provision has application to it because of the perception that the sale-rental or repair of equipment is not for purposes of the radio common carrier's use in providing communication service, but is for the benefit of the ultimate consumer/customer of the Petitioner. Finally, the Petitioner argues that if a tax should be allowed, it should be on the arrangement between the Petitioner and the customer, on the theory that the arrangement involves the rental of a pager by the customer and the Respondent

      should not make that tax have retroactive application to the transactions in question.

      
      

6. From the point of view of the Respondent, Section 212.21(2), Florida Statutes, establishes the general proposition that tax shall be levied for sales and rentals considered under Chapter 212, Florida Statutes, except to the extent that those transactions were specifically exempted. To the Respondent, the only exemption in application is that exemption found in Rule 12A-1.46(8)(i), Florida Administrative Code, and that only pertains to the one-way pocket pager service, not as Rule 12A-1.46(8)(e), Florida Administrative Code, sets out, the, "sales, rentals or repairs of machines, equipment, parts or accessories to a radio common carrier for its use in providing communication services." In the position of the Respondent, the purchase or rental of equipment and the repair to that equipment made by the Petitioner are for its own use in providing the separate exempt service to the Petitioner's customers.

   
   

7. After analyzing the arguments in behalf of the parties, the Respondent's position is found to be persuasive. Although the service charges made by the Petitioner to its consumer are exempt from taxation, under authority of Rule 12A-1.46(8)(i), Florida Administrative Code, the purchase or rental/lease and repair to the capital equipment of the Petitioner which it uses in providing that service to its consumers are taxable pursuant to Rule 12A- 1.46(8)(e), Florida Administrative Code.

   
   

8. There flows from that tax liability certain interest charges not to exceed a total penalty of 25 percent in the aggregate (see Section 212.12(2), Florida statutes). However, the Respondent may for good cause shown compromise those penalties after investigation reveals that the penalty would be too severe or unjust (see Section 212.12(5), Florida statutes). In view of the testimony offered by a number of radio common carriers in the State of Florida licensed by the Florida Public Service Commission to the effect that they misunderstood the tax liability under Rule 12A-1.46(8)(e), Florida Administrative Code, and the acknowledgement of the undersigned of that difficulty, it would be recommended that no penalty be imposed in this instance.

   
   

9. (A review has been made of the proposed findings of fact and conclusions of law submitted, and they have been utilized in this Recommended Order in those instances in which the proposals were deemed to be appropriate.)

   
   

   CONCLUSIONS OF LAW

   
   

10. The Division of Administrative Hearings has jurisdiction in this cause.

    
    

11. The undersigned takes official recognition of Rules 12A-1.01 through 1.93, Florida Administrative Code.

    
    

12. Those provisions of the Respondent's Composite Exhibit No. 1 which were late-filed exhibits are hereby accepted into the record.

    
    

13. The Petitioner's Exhibit No. 5, a late-filed exhibit, is admitted into evidence.

    
    

14. Upon a consideration of the facts as reported in this cause, it is concluded as a matter of law that the Petitioner is responsible for the payment of the tax, penalties, and interest as set forth in the 1st Revised Notice of Proposed Assessment of Tax, Penalties and Interest, together with the interest

that has accrued since the rendition of the 1st Revised Notice of Proposed Assessment. This imposition of tax is in accordance with Chapter 212, Florida Statutes, and Rule 12A-1.46(8)(e), Florida Administrative Code.

RECOMMENDATION

Upon a full consideration of the facts in this cause, it is recommended that the Petitioner be required to pay the tax and applicable interest due and owed under the 1st Revised Notice of Proposed Assessment of Tax, Penalties and Interest, which is the subject of this case. It is further recommended that the penalties be waived.

DONE and ENTERED this 29th day of August, 1978, in Tallahassee, Florida.

CHARLES C. ADAMS

Hearing Officer

Division of Administrative Hearings 1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 29th day of August, 1978

COPIES FURNISHED:

John D. Moriarty, Esquire Department of Revenue

Room 104, Carlton Building Tallahassee, Florida 32304

John W. Costigan, Esquire Post Office Box 669 Tallahassee, Florida

Maxie Broome, Jr., Esquire Department of Legal Affairs The Capitol

Tallahassee, Florida 32304

Docket for Case No: 78-000480

Orders for Case No: 78-000480