vs. ) CASE NO. 78-2049
Respondent. )
A hearing was held in the above captioned matter, after due notice, at Fort Lauderdale, Florida, on February 27, 1979, before the undersigned Hearing Officer.
For Petitioner: Gaylord A. Wood, Jr.
For Respondent: Maxie Broome, Jr.
Whether Respondent's proposed assessment under Chapter 212, Florida Statutes, for sales tax, penalty, and interest is valid (Notice of Proposed Assessment, dated August 15, 1978).
Petitioner is a Florida corporation doing business and having its principal place of business in Broward County, Florida. It holds an operating certificate as an air taxi/commercial operator issued by the Federal Aviation Administration on April 4, 1977. The certificate states that Petitioner has met the requirements of the Federal Aviation Act of 1958, as amended, and the rules prescribed thereunder for issuance of the certificate. The operating certificate was issued by the F.A.A. under 14 CFR 135. Petitioner is also registered as an air taxi operator with the Civil Aeronautics Board (C.A.B.) under 14 CFR 298. (Testimony of Jackson, Petitioner's Exhibit 2, Stipulation)
Respondent's auditor conducted an audit of Petitioner's records for the period June 1, 1975 through July 31, 1978, and, on August 15, 1978, issued a Notice of Proposed Assessment of tax, penalties and interest under Chapter 212, Florida Statutes, in the total amount of $1,629.35 for alleged delinquent sales and use tax incurred during the audit period. The proposed assessment was based upon audit findings that Petitioner had purchased fuel, aircraft parts and repairs from a firm called Hansa Jet located at the Fort Lauderdale Hollywood Airport on which sales tax was allegedly due, but not paid thereon. Petitioner was not chartered as a corporation until March, 1977, and purchases prior to that time were made by Andy Jackson Yacht and Aircraft, Inc., which was a registered dealer under Chapter 212, Florida Statutes. Although the audit was based upon invoices in the possession of Petitioner, no effort was apparently made to check the records of the supplier, Hansa Jet, to ascertain whether it took tax exemption certificates from either firm. Several of the invoices reflected the sales tax number of Andy Jackson Yacht and Aircraft, Inc. Petitioner was not a registered dealer under Chapter 212, during the audit period. It was originally a division of Andy Jackson Yacht and Aircraft, Inc. and since 1977 has been a wholly owned subsidiary of that firm. (Testimony of Bravade, Jackson, Petitioner's Exhibit 7)
By letter of September 12, 1978, Petitioner asked Respondent for an interpretation as to the applicability of the partial tax exemption of Section 212.08(9), Florida Statutes, to its operations. By letter of September 19, Respondent's audit bureau chief advised Petitioner that the exemption applied only to carriers holding certificates of convenience issued by the C.A.B. that establish routes, rates, and reports on operations on such routes. Petitioner thereafter requested a Chapter 120 hearing. (Petitioner's Exhibit 4)
Prior to obtaining federal authorization to operate as an air taxi carrier, Petitioner was obliged to meet such preliminary requirements as acquisition of aircraft, insurance coverage, and the preparation of a detailed operations manual for the F.A.A. specifying the structure of the firm, and detailed provisions relating to personnel and operations. Its pilots have the same training and meet the same basic qualifications as those employed by other airlines, and its aircraft are periodically inspected by the F.A.A. under federal standards.
Petitioner's place of business is located at the Fort Lauderdale- Hollywood International Airport and it maintains gate and counter space at the terminal. Its aircraft carry both passengers and cargo at published rates. Although it formerly flew scheduled routes to the Bahama Islands, it found these to be unprofitable and discontinued them. Approximately 95 percent of its business is in interstate and foreign commerce, and all of the purchases for which the taxes are presently asserted were for flights in such commerce. Petitioner is listed in the local telephone directory under the heading "Airline Companies." The listing shows destinations in the Bahama Islands and further states "Charter rates on request to all Caribbean and U.S. cities." It accepts passengers without discrimination who are willing to pay the specified rate for passage. It is a member of the Warsaw Pact on limitation of liability for international carriers. Petitioner will quote specific charter rates to a group to a particular place but gives the same rate to any other group desiring transportation to the same destination. Its operations are controlled by the
F.A.A. in accordance with Petitioner's plan of operations. It aircraft fly twenty-four hours a day throughout the week. It has no continuing contracts for cargo or passengers. Although it has printed passenger tickets, these are not customarily used. Fares are paid in cash or through national credit cards. Petitioner is free to decline to fly passengers and cargo to a particular
destination and exercises its discretion in this respect. It files regular annual reports to the C.A.B. on all of its revenue operations. (Testimony of Jackson, Petitioner's Exhibits 3, 6)
Although Petitioner, as an air taxi operator, does not hold a C.A.B. certificate of public convenience and necessity under Section 401 of the Act, it is nevertheless viewed as a "common carrier" by that agency. The C.A.B. does not issue "licenses" to any category of air carrier but construes registration with it to be the same as a license. (Testimony of Untiedt, Petitioner's Exhibit 1)
CONCLUSIONS OF LAW
The proposed assessment is based on Section 212.05, Florida Statutes, which levies a 4 percent tax on the sale of tangible personal property or the furnishing of services taxable under Chapter 212, Florida Statutes. petitioner does not contest the fact that the sale of gas, aircraft parts, and repair services are taxable transactions under the statutory provision.
Petitioner contends that the transactions are exempt from tax under Section 212.08(9) since they were all attributable to its operations in foreign commerce. Section 212.08(9) provides pertinently:
(9) PARTIAL EXEMPTIONS, VEHICLES ENGAGED IN INTERSTATE OR FOREIGN COMMERCE.--
Vehicles which are licensed as common
carriers by the Interstate Commerce Commission or by the Civil Aeronautics Board and parts thereof used to transport persons or property in interstate or foreign commerce are subject to tax imposed in this chapter only to the extent provided herein. The basis of the
tax shall be the ratio of intrastate mileage to interstate or foreign mileage traveled by the carrier during the previous fiscal year of the carrier, such ratio to be determined at the close of the carrier's fiscal year. This ratio
shall be applied each month to the total purchases of such vehicles and parts thereof
which are used in Florida to establish that portion of the total used and consumed in intrastate movement and subject to tax under this chapter. .
Respondent does not contest Petitioner's claim that all of the transactions which are the subject of the proposed assessment arose out of foreign commerce, but claims that the exemption is not available to Petitioner because it is not "licensed" as a "common carrier" by the Civil Aeronautics Board. as required by the wording of the statutory exemption provision.
Neither the applicable federal nor state statutes and regulation define the terms "licensed or common carriers. The common definition of the word "license" is "permission granted by competent authority to engage in a business or occupation or in an activity otherwise unlawful." Webster's New Collegiate Dictionary, 1977 Ed. Petitioner holds an operating certificate issued by the
F.A.A. and is registered as an air taxi operator with the C.A.B. under 14 CFR
298.21. Such registration is required for every air taxi operator prior to
commencement of operations and constitutes authority to conduct such operations in accordance with regulatory requirements. It is therefore considered that such registration process meets the licensing requirements of Section 212.08(9), Florida Statutes.
The term "common carrier" is not defined in the applicable federal and state statutes and regulations. Petitioner's registration with the C.A.B. entitles it to conduct operations in "air transportation." "Air transportation" is defined in the Federal Aviation Act of 1958 to include the interstate and foreign carriage by aircraft of persons or property as a common carrier for compensation or hire. (49 USC 1301) It thus can be seen that the federal law contemplates that an air taxi operator may function as a common carrier and this is borne out by policy of the C.A.B. as stated in a letter to Petitioner's counsel, dated February 9, 1979 (Petitioner's Exhibit 1) which said in part:
The term common carrier is not defined in
the Federal Aviation Act of 1958, as amended, but it has been defined variously by the Board and the courts as one who hold himself
out as ready and willing to undertake for hire the transportation of passengers and property from place to place and so invites the patronage of the public. Air taxi operators holding exemption authority under Part 298 of the Board's Economic Regulations do indeed comply with this definition inasmuch as they engage directly in
air transportation, holding their services out for hire to the general public. We would therefore consider an air taxi operator to be a common carrier.
The conduct of Petitioner's operations meets the above definition of "common carrier" in all respects. Its operations likewise fall within the parameters of the definition of "common carrier" set forth in an opinion of the First District Court of Appeal in Ruke Transport Lines, Inc. v. Green, 156 So.2d 176 (Fla. 1st DCA 1963) wherein the Court stated:
The Legislature of Florida has failed to adopt a statutory definition of
the term "common carrier" . . . a common carrier has been generally defined as
"one who holds himself out to the public as engaged in the business of transporting persons or property from place to place, for compensation, offering his services
to the public generally
The distinctive characteristic of a common carrier is that he undertakes to carry for all people indifferently and hence he is regarded, in
some respects, as a public servant. The dominant controlling factor in determining
the status of one as a common carrier is his public profession or holding out, by words or by a course of conduct, as to the service offered or performed. . .
Respondent's contention that Petitioner, as an air taxi operator, does not conduct its business in accordance with a "stringent plan of operation approved by any governmental operation" is not well taken. It is true that it is exempted from a number of the more complex regulations applicable to carriers holding certificates of public convenience and necessity, but expert testimony from a C.A.B. official at the hearing showed that the distinction in the degree of regulation is simply due to the smaller operations ordinarily conducted by an air taxi operator. All of the basic aspects of regulation such as insurance requirements, safety inspections, pilot qualification, and the like are imposed upon air taxi operators by the C.A.B. All of these requirements are designed to protect the public at large and certainly constitute sufficient regulatory authority to consider Petitioner as a common carrier in such respect.
It is concluded, therefore, that Petitioner meets the statutory eligibility for prorata exemption from tax as to that portion of its operations that are conducted in interstate or foreign commerce. Respondent's auditor made no attempt to determine the correct ratio of interstate and foreign to intrastate mileage travel by Petitioner's aircraft during fiscal years previous to the audit period as specified in the exemption provision. Petitioner's evidence that all of its mileage during the audit period was in interstate or foreign commerce was uncontroverted by Respondent. It further is evident that the purchases during the period 1975 and 1976 were made by Andy Jackson Yacht and Aircraft, Inc. rather than the Petitioner, which was not incorporated until 1977. Accordingly, any proposed assessment for purchases during those years should have been asserted against Petitioner's predecessor, if otherwise appropriate.
Notwithstanding the foregoing conclusion that Petitioner was entitled to exemption from its purchases as a licensed common carrier, Rule l2A- 1.64(5)(a), F.A.C., provides that in order for the statutory exemption to be available "Common carriers who make any purchases hereunder must qualify as dealers subject to audit and extend in writing a resale certificate in lieu of tax, stating the specific reasons for exemption." Petitioner was not registered under Chapter 212, Florida Statutes, during the audit period as a "dealer" and therefore was not entitled to avail itself of the exemption provision.
That Respondent revise its proposed assessment against Petitioner to encompass only those transactions occurring after Petitioner's date of incorporation, and enforce the same in accordance with law.
DONE and ENTERED this 21st day of March, 1979, in Tallahassee, Florida.
THOMAS C. OLDHAM
Gaylord A. Wood, Jr.
Maxie Broome, Jr. Assistant Attorney General
John D. Moriarty Department of Revenue
