STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

CENTRAL PHOSPHATES, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 78-1221

) GERALD A. LEWIS, COMPTROLLER, ) STATE OF FLORIDA, )

)

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 December 29, 1978. The parties were represented by counsel:

APPEARANCES

For Petitioner: Carlos Alvarez, Esquire

Gary P. Sams, Esquire Mahoney, Hadlow & Adams Post Office Box 5617 Tallahassee, Florida 32301

For Respondent: Linda C. Procta, Esquire

Harold F. X. Purnell, Esquire Assistant Attorneys General The Capitol, Room LL04 Tallahassee, Florida 32304

In a petition received by respondent on June 29, 1978, petitioner alleged that "[s]ince May 9, 1975, [it] ha[d] erroneously paid sales taxes into the state treasury in the amount of $861,322.52," because its lease of certain personal property was an occasional or isolated transaction and therefore exempt from the tax levied by Section 212.05, Florida Statutes (1977). Petitioner seeks a refund of all taxes paid on account of the lease payments.

FINDINGS OF FACT

1. Petitioner is Central Phosphates, Inc. ("CPI"), a Delaware corporation, engaged in the business of processing phosphate and manufacturing phosphate fertilizer. Petitioner rents and operates a phosphate fertilizer processing plant which is located in the vicinity of Plant City, Florida (the "Plant"). At issue in this proceeding is whether a sales tax under Section 212.05, Florida Statutes (1977), is due on the rental of the Plant.

   
   

2. The Plant was constructed in 1974. The construction was financed in an arrangement involving CF Realty, a sister company of CPI which is wholly owned

   along with CPI by CF Industries, Inc. CF Realty originally purchased the equipment and other personal property that constitute the Plant from certain contractors. CF Realty then sold the Plant to Plantlease Corporation ("Plantlease"), a New York for profit corporation. Plantlease is a wholly owned subsidiary of Morgan Guarantee Company, a New York lending institution.

   Plantlease was organized solely and specifically to acquire title to the Plant and to lease the Plant back to CPI, which would operate the Plant.

   
   

3. Plantlease paid for the Plant by assuming CF Realty's indebtedness on the construction loan and by paying some additional cash. Plantlease then leased the Plant to CPI for an initial term of 15 years. At the end of this initial term CPI has the right to elect to extend the lease for an additional two years or it may elect to purchase the Plant from Plantlease. At the end of the first extended term, CPI has the option of renewing the lease for a second renewal term of two years, or purchasing the Plant. If the lease is extended to the full 19 years, CPI is entitled to purchase the Plant at the end of that term.

   
   

4. CPI makes quarterly rental payments to Plantlease pursuant to the lease. Since the first payment of rent in May, 1975, CPI has also been paying to Plantlease a sales tax of four percent of the amount of each payment pursuant to Section 212.05, Florida Statutes (1977). Plantlease, in turn, has remitted these payments to the Florida Department of Revenue with which it has registered as a dealer.

   
   

5. Plantlease, as a potential claimant of a refund of the allegedly erroneously paid rental tax, has waived its right to a refund as reflected in its letter dated May 4, 1978, to the Florida Department of Revenue.

   
   

6. Since May, 1975, CPI has paid sales taxes into the State Treasury in the amount of $861,322.55 which rental tax along with all other rental tax payments paid on the Plant since May, 1978, would be refunded if CPI were not liable for the rental tax. On May 8, 1978, CPI filed an Application for Refund with the Comptroller's Office of the State of Florida seeking a refund of the amount allegedly erroneously paid by CPI to the State Treasury and giving reasons for the claim for a refund.

   
   

7. CPI bases its claim for a refund on the grounds that the Plantlease rental of the Plant to CPI constitutes an occasional or isolated sales transaction under Section 212.02 (9), Florida Statutes (1977).

   
   

8. By letter dated May 30, 1978, the Comptroller's Office denied CPI's Application for Refund and determined that CPI's transaction with Plantlease was not exempt from Section 212.05, Florida Statutes (1977), and the regulations pursuant thereto.

   
   

9. On or about July 7, 1978, CPI timely filed a Petition for a Section 120.57(1), Florida Statutes (1977), hearing on the issue of whether, for aforementioned reasons, a refund was due on the sales tax paid on the Plant.

   
   

10. By application dated May 9, 1975, and received by respondent on May 12, 1975, Plantlease applied to respondent for a certificate of registration to engage in or conduct business as a dealer. Item 10 on the form application calls for "Type of Business." In the blank provided, Plantlease's agent has supplied "Rental of personal property." Underneath the blank, in parentheses, are examples of types of businesses, "Grocery, hardware, jewelry " Exhibit A-I, attached to Joint Exhibit No. 2.

11. The foregoing findings of fact should be read in conjunction with the statement required by Stuckey's of Eastman, Georgia v. Department of Transportation, 340 So.2d 119 (Fla. 1st DCA 1976), which is attached as an appendix to the recommended order.

    
    

    CONCLUSIONS OF LAW

    
    

12. Section 212.05, Florida Statutes (1977), levies an excise tax on the privilege of "engag[ing] in the business of . . . [renting] tangible personal property at retail in this state . . . ." During the life of the lease by Plantlease to petitioner, this excise tax has been paid. Petitioner now says these payments were "made into the State Treasury in error," Section 215.26(1)(c), Florida Statutes (1977), and seeks their refund. Petitioner has the burden to establish its entitlement to a refund. Section 215.26, Florida Statutes (1977). Petitioner maintains that Plantlease is not "engage[d] in business" within the meaning of Section 212.05, Florida Statutes (1977), by virtue of the definition of "business" in Section 212.02(9), Florida Statutes (1977), which provides that

    
    

    The term "business" shall not be construed to include occasional or isolated sales or transactions involving tangible personal property by a person who does not hold himself out as engaged in business Section 212.02(9), Florida Statutes (1977).

    
    

    In Green v. Pederson, 99 So.2d 292 (Fla. 1957), the occasional or isolated sales or transactions category was characterized as "an exemption clause in a tax statute," 99 So.2d at 296; and the Court held that "the law is to be strictly construed as against the person claiming the exemption and in favor of the taxing power." Id.

    
    

13. Petitioner contends that Plantlease is not engaged in business because it has entered into only one lease of tangible personalty and, says petitioner, because it "does not hold [it] self out as engaged in business." See Georgia B. Crabb v. Claude Kirk, Jr., Governor, et al., 1 Florida Tax Cases Pgh.200-851, at 1032 (Fla. 2d Cir. 1968)(dicta). Of course, Plantlease holds itself out to petitioner, its lessee, as engaged in the business of renting tangible personalty. But, petitioner argues, the grocer making an isolated or occasional sale of store fixtures likewise holds himself out to the buyer of the fixtures as being in the business of selling fixtures; and the grocer making, such a sale has the benefit of the "occasional or isolated sales or transactions" provision. The fallacy in this argument, however, is that the grocer holds himself out as a grocer even to the one time or occasional buyer of his store fixtures; and does not hold himself out as being engaged in the business of selling store fixtures even when he makes an occasional or isolated offering of store fixtures. In contrast, the sole purpose for the existence of Plantlease has been stipulated to be to lease the Plant; and Plantlease has held itself out to representatives of public authority as being in the business of "[r]ental of personal property." See generally Rule 12A-1.60(1)(a), Florida Administrative Code. It has never held itself out as being in any other business and it is a corporation organized for profit. Plantlease "does . . . hold itself out as engaged in business" within the meaning of Section 212.02(9), Florida Statutes (1977). In these circumstances, it is immaterial that petitioner has been the only lessee to date. Just as an office supply house would be engaged in business even if its only customer were Mahoney Hadlow & Adams or the State of Florida, Plantlease is

    engaged in business even though petitioner is its only customer. If petitioner should default on the lease, Plantlease would presumably seek out another lessee, because that is the business that it holds itself out as being in.

    
    

14. Petitioner argues that denying it a refund "[c]an [o]nly [b]e [s]upported by [a]pplying a [r]ule [w]hich [h]as [n]ot [b]een [a]dopted in [a]ccordance with Chapter 120, Florida Statutes." This overlooks the clear language of Section 212.05, Florida Statutes (1977).

RECOMMENDATION

Upon consideration of the foregoing, it is RECOMMENDED:

That respondent deny petitioner's application for refund.

DONE and ENTERED this 12th day of January, 1979, in Tallahassee, Florida.

ROBERT T. BENTON, II

Hearing Officer

Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301

(904) 488-9675

APPENDIX

Except for the final paragraph, the findings of fact in the recommended order are based on the parties' stipulation, which was received as joint exhibit No. 2.

Paragraphs one, two, three, five, nine and ten of petitioner's proposed findings of fact have been adopted in toto.

The first sentence of paragraph four of petitioner's proposed findings of fact has been rejected as not being supported by the evidence. The second sentence has been adopted, in substance.

Paragraph six of petitioner's proposed findings of fact has been adopted except for the second sentence, which is actually a proposed conclusion of law.

Paragraph seven of petitioner's proposed findings of fact has been adopted, in substance.

Paragraph eight of petitioner's proposed findings of fact has been adopted except for the second sentence, which is actually a proposed conclusion of law.

Paragraphs eleven and twelve of petitioner's proposed findings of fact have been rejected as contrary to the evidence.

COPIES FURNISHED:

Charles Alvarez, Esquire Gary P. Sams, Esquire Mahoney, Hadlow & Adams Post Office Box 5617 Tallahassee, Florida 32301

Linda C. Procta, Esquire Harold F. X. Purnell, Esquire Assistant Attorneys General The Capitol, Room LL04 Tallahassee, Florida 32304

Docket for Case No: 78-001221

Orders for Case No: 78-001221