STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

PELICAN BAY IMPROVEMENT DISTRICT, )

a special taxing district located ) in Collier County, Florida, )

)

Petitioner, )

)

vs. ) CASE NO. 79-678

) STATE OF FLORIDA, DEPARTMENT ) OF REVENUE, )

)

Respondent. )

)

RECOMMENDED ORDER

The Respondent, State of Florida, Department of Revenue, has filed a Motion to Dismiss the Petition to which the Petitioner, Pelican Bay Improvement District, has failed to respond. After considering the facts alleged in the petition with its attached exhibits, in vi of the Motion to Dismiss, it is concluded that the motion should be granted.

1. The facts reveal that the Petitioner Pelican Bay Improvement District, let for bid certain contracts identified as Contracts B and D for Pelican Bay Improvement District, Phase I, Water and Wastewater Systems. One of the bidders for that contract was Gator Utilities Service, Inc. A special condition of the contract bid process, which has relevance to the Motion to Dismiss, was found in Article SC-18 Sales Tax at page 1-5, which stated:

   
   

   * * *

   Since the Proposal covers a direct purchase by the Owner for certain materials, equipment

   and supplies, the bidder shall not include any Florida State Sales Tax in his bid price for these items, as the Pelican Bay Improvement District is exempt from payment of such

   taxes . . .

   
   

   Operating in compliance with that provision, Gator Utilities Service, Inc., did not figure in the price for sales tax on those items deemed to be covered by the aforementioned provision.

   
   

2. Gator Utilities Service, Inc., was the low bidder in the contracts and thus entitled to perform the Contracts 18 and D. However, Gator Utilities Service, Inc., did not immediately enter into the contract; instead, it applied to the Respondent, State of Florida, Department of Revenue, for a "resale" certificate pursuant to Chapter 12A-1.38, Florida Administrative Code. This resale certificate pertained to the attempt on the part of Gator Utilities Service, Inc., to operate in accordance with the terms of Article SC-18 Sales Tax, alluded to herein.

3. Notwithstanding the belief on the part of the Petitioner, Pelican Bay Improvement District, and the apparent faith in that opinion held by Gator Utilities Service, Inc., the State of Florida, Department of Revenue, was not of the opinion that the materials, equipment, and supplies spoken to in Article SC-

   18 Sales Tax, which is in dispute, would entitle the Gator Utilities Service, Inc., to a "resale" certificate under the terms of Chapter 12A-1.38, Florida Administrative Code. The Respondent said as much through a letter from its employee, Frank Waters, that letter being dated November 21, 1978. This opinion of Waters was reconfirmed on January 22, 1978, through the process of a meeting between certain officials of Gator Utilities Service, Inc., and employees of the State of Florida, Department of Revenue, which meeting was followed by an opinion letter of Sam Alexander, Director of the Division of Audit, State, of Florida, Department of Revenue. That letter is the attached Exhibit "A" to the petition. Through that correspondence, Gator Utilities Service, Inc., was told that the State of Florida, Department of Revenue, believes that Contracts B and D constitute performance contracts and the materials, equipment and supplies involved in those contracts did not entitle Gator Utilities Service, Inc., to register to buy materials tax free, there being in the mind of the Respondent no exemption through the Rule 12A-1.51(2)(d), Florida Administrative Code. Additionally, the correspondence of January 22, 1979, alluded to Subsection 212.08(6), Florida Statutes, which excepts from the exemption to pay sales tax those items of tangible personal property which are ultimately involved in public works owned by government or political subdivisions of the government, and it appears that the Respondent thought that the materials, equipment and supplies wore to be incorporated into such public works.

   
   

4. Gator Utilities Service, Inc., then entered into the contracts with the Petitioner, Pelican Bay Improvement District, to construct the matters found in Contracts B and D. The signing took place on February 5, 1979. subsequently, the Gator Utilities Service, Inc., attempted to assign to the Petitioner whatever rights might be available to the contractor to recoup any sales taxes paid by Gator Utilities Services, Inc., to the State of Florida or the State of Florida, Department of Revenue. The language of these assignments may be found in the Petitioner's Composite Exhibit B attached to the petition document.

   
   

5. After receiving the assignments, the Petitioner filed a request for formal proceeding with the State of Florida, Department of Revenue, which request was forwarded to the Division of Administrative Hearings for consideration. That petition reasserts the claim of Gator Utilities Service, Inc., that the materials, equipment and supplies sold to the Petitioner are exempt from the payment of tax due to the operation of Rule 12A-1.51(2)(d), Florida Administrative Code, which argument was denied when the request was made for a "resale" certificate under the authority of Rule 12A-1.38, Florida Administrative Code. In the alternative, the petition prays for the granting of a "resale" certificate on the basis that the Respondent should be estopped from denying such a "resale" certificate in view of alleged past conduct by the Respondent which exempted other substantially similar or identical contractual provisions from the Florida Sales Tax.

   
   

6. The Respondent, through its motion to Dismiss, argues that the January 22, 1979, correspondence from its employee on the question of The "resale" certificate being issued to Gator Utilities Service, Inc., is final agency action only reviewable through the provisions of Section 120.68, Florida Statutes. Furthermore, the Respondent is of the persuasion that the present Petitioner has insufficient standing to bring the administrative action because the Petitioner will not bear the financial burden of a wrongfully extracted tax and can suffer no loss or injury and, therefore, would be without standing to

   oppose the imposition of the tax or make a claim for refund. The Respondent also states through its Motion to Dismiss that the petition fails to state a cause of action by failing to plead the essential ultimate facts necessary to establish its claim for exemption. Finally, the Motion to Dismiss challenges the Petitioner's claim of estoppel, by stating in the Motion to Dismiss that the petition fails to allege ultimate facts which establish that the Petitioner, or Gator Utilities Service, Inc., relied on representations by employees of the department to the effect that the subject contracts would be exempt from taxation. In the mind of the Respondent, there are no statements upon which the Petitioner could rely in its argument of estoppel, quite to the contrary, the Respondent indicated that there would be a tax liability arising out of the contracts ,between the Petitioner and Gator Utilities

   
   

7. It is not necessary to address the issue of whether the January 22, 1979, letter of the Respondent denying the request for "resale" certificate constituted final agency action reviewable only through procedures under 120.68, Florida Statutes. The case should be dismissed because the Petitioner is without standing to bring this petition.

   
   

8. This conclusion is reached after examining the language of the assignments between the Petitioner and Gator Utilities Service, Inc., wherein the operative paragraphs state:

   
   

   WHEREAS, Pelican Bay Improvement District, if held liable for the payment of said sale's tax to the contractor, for any sales taxes claimed due by the State of Florida, Department of Revenue, then, in such event, the Assignor does hereby assign all his right, 'title' and interest, of any nature whatsoever, to the Assignee to proceed on the Assignee's own behalf against the State

   of Florida, for recoupment of the sales taxes paid by the Assignor, if any, against said State of Florida or the State of Florida, Department of Revenue.

   
   

9. It can be seen that the rights of Pelican Bay Improvement District to proceed under the assignment are contingent upon a determination of its liability to pay the contractor an amount of damages equal to the sales tax amount. This determination can only be made through a court proceeding. It would be necessary for the court to find that Pelican Bay Improvement District owes Gator Utilities Service, Inc., damages equal to the sales tax amount, based upon the theory that the contractor relied to its detriment upon the bid terms which excluded sales tax from the bid process, when in law the contractor was unentitled to the tax certificate and became responsible for the payment of the sales tax. The current forum is not one in which the determination of the liability on the part of the Pelican Bay Improvement District may be litigated. The jurisdiction of the Division of Administrative Hearings in this cause is limited to a consideration of the entitlement by the State of Florida, Department of Revenue, to collect from Gator Utilities Service, Inc., the tax that is alleged to be due and owing on the transaction between the Petitioner and Gator Utilities Service, Inc.

   
   

10. Consequently, since the Petitioner's right to proceed as an assignee is contingent upon a determination of liability by that assignee and that determination of liability is yet to be made, until that time Petitioner is

    without standing to assert a claim for a tax refund as Assignee of Gator Utilities Service, Inc.

    
    

11. Likewise, the Petitioner's estoppel agreement fails because Petitioner lacks standing to bring that argument as Assignee of Gator Utilities Service, Inc.'s rights.

RECOMMENDATION

It is, therefore, recommended that the petition be dismissed for lack of standing on the part of the Petitioner to bring such action.

DONE AND ENTERED this 7th day of May, 1979, in Tallahassee, Florida.

CHARLES C. ADAMS, Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301

(904) 488-9675

COPIES FURNISHED:

Trace H. Bolosky, Esquire

Carroll, McPeak, Bolesky & Schryver 1169 Eighth Street South

Naples, Florida 33940

George L. Varnadoe, Esquire Post Office Box 17907 Naples, Florida 33941

Joseph C. Mellichamp, III, Esquire Assistant Attorney General

The Capitol, LL04 Tallahassee, 32301

John D. Moriarty, Esquire Department of Revenue

Room 104, Carlton Building Tallahassee, Florida 32301

Docket for Case No: 79-000678

Orders for Case No: 79-000678