STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

HOLIDAY INN OCEANSIDE, )

)

Petitioner, )

)

vs. ) CASE NO. 79-1088RX

) STATE OF FLORIDA, DEPARTMENT OF ) REVENUE, )

)

Respondent. )

)

FINAL ORDER

THIS CASE is presented as a rules challenge filed by the Petitioner, Holiday Inn Oceanside/Cleveland Caribbean, Inc., and is filed pursuant to Section 120.56, Florida Statutes. It attacks the validity of Rule 12A-1.57(3), Florida Administrative Code, on the basis that that rule is an invalid exercise of delegated legislative authority. By prior stipulation and agreement, the case has been presented through the record created in the companion case before the Division of Administrative Hearings which is styled, State of Florida, Department of Revenue, Petitioner, vs. Holiday Inn Oceanside/Cleveland Caribbean, Inc., Respondent, D.O.A.H. Case No. 79-247. That case was heard on May 9, 1979. In addition to the consideration of the record in the companion case, the case sub judice is presented and considered on the basis of memoranda filed by the parties which take into account the evidence offered in D.O.A.H. Case No. 79-247 and set out the legal arguments of the parties in the rules challenge case.

Under this arrangement, the memoranda were to be filed on or before June 12, 1979, and that same date served as the official date for hearing per the arrangement entered into between the parties and accepted by the Hearing Officer. It should be mentioned that the parties were given the opportunity for oral argument in the present case, but did not avail themselves of that opportunity. There have been no attempts by a third party to intervene in the Section 120.56, Florida Statutes, case. (The details of the stipulation and agreement to consider the case on the basis as outlined above can be examined by review of the record in DOAH. Case No. 79-247, which was established on May 9, 1979, and by an examination of a letter of the undersigned dated May 25, 1979, which pertains to the current case between these parties.)

APPEARANCES

For Petitioner: Mark J. Wolff, Esquire, and

Howard E. Reskin, Esquire Sparber, Shevin, Resen, Shapo

& Heilbronner, P.A.

30th Floor, First Federal Building One Southeast Third Avenue

Miami, Florida 33131

For Respondent: Martha J. Cook, Esquire

Department of Revenue

Room 422, Fletcher Building

101 East Gaines Street Tallahassee, Florida 32301

ISSUE

Whether the Rule 12A-1.57 (3), Florida Administrative Code, should be invalidated as an invalid exercise of delegated legislative authority within the meaning of Section 120.56, Florida Statutes.

FINDINGS OF FACT

1. This case is here presented on the petition of Holiday Inn Oceanside/Cleveland Caribbean, Inc., which prays for the determination of the invalidity of an existing rule of the Florida Administrative Code. That rule is Rule 12A-1.57(3), Florida Administrative Code. The petition to challenge the rule was filed on May 17, 1979, and in keeping with the provisions of Section 120.56, Florida Statutes, the Director of the Division of Administrative Hearings entered an Order of Assignment on May 23, 1979, which designated Charles C. Adams as the Hearing Officer to consider this rules challenge. By prior agreement, which is set out in detail in the introductory portion of this Order, the case is presented on the record created in the companion case of State of Florida, Department of Revenue, Petitioner, vs. Holiday Inn Oceanside/Cleveland Caribbean, Inc., Respondent, DOAH. Case No. 79-247, and memoranda directed to the rules challenge claim.

   
   

2. The pertinent provisions of Section 120.56, Florida Statutes, by which this rules challenge is made is that provision found in Subsection 120.56(1), Florida Statutes, which states:

   
   

   1. Administrative determination of rule by hearing officer

      1. Any person substantially affected by a rule may seek an administrative determination of the invalidity of the rule on the ground that the rule is an invalid exercise of delegated legislative authority.

   
   

3. Under the language of that subsection of law, the threshold question to be determined in this matter concerns the standing of the Petitioner to bring this claim.

   
   

4. Petitioner's standing is assured in view of the fact that through the companion case, DOAH. 79-247, the Respondent in the present dispute has utilized Rule 12A-1.57(3), Florida Administrative Code, as its basis for claiming tax in the amount of $10,176.18, plus 5 percent penalty and interest accrued thereon. Therefore, the Petitioner in this cause is substantially affected by the subject rule and has the necessary standing to attack the validity of that rule on the grounds that the rule is allegedly an invalid exercise of delegated authority.

   
   

5. The language of Rule 12A-1.57 (3), Florida Administrative Code, is as follows:

12A-1.57 Alcoholic and malt beverages.

(3) Dealers in alcoholic and malt beverages

are required to remit the actual tax collected to the State. In some instances, however, it may be impractical for such dealers to separately record the sales price of the beverage and the tax collected thereon. In such cases, dealers may elect to report tax on the following basis. Package stores who sell no mixed drinks should remit the tax at 4.3 percent of total receipts and dealers who sell mixed drinks or a combination of mixed drinks and packaged goods should remit the tax at the rate of 4.5 percent of total receipts.

In those instances where the sales price and the tax have not been separately recorded but where it can be demonstrated that the public has been put on notice means of price lists posted prominently throughout the establishment that the total charge includes tax, the dealer may deduct the tax from the total receipts to arrive at the appropriate tax and gross sales figures using the method shown below:

Total receipts divided by the tax rate gross sales. For example, a package store which sells no mixed drinks and whose total receipts are $2,000 could compute sales as follows:

$2,000 divided by 1.043 percent gross sales

$1,917.54 tax collected 82.46

A dealer who sells drinks or a combination of drinks and package goods and whose total receipts are $2,000 would compute sales as follows:

$2,000 divided by 1.045 percent gross sales

$1,913.87 tax collected 86.12

When the public has not been put on notice through the posting of price lists that tax is included in the total charge, tax shall be computed by multiplying total receipts by the applicable rates referred to in this rule.

1. The Petitioner sets out its attack on the validity of the aforementioned rule by referring to the statutory provisions of Subsections 212.17(6) and 212.18(2), Florida Statutes. These subsections were also given as the specific authority when the subject rule was enacted. The referenced provisions of Chapter 212, Florida Statutes, indicate:

   
   

   212.17(6) The department shall have the power to make, prescribe and publish reasonable rules and regulations not inconsistent with this chapter, or other laws, or the constitution of this state, or the United States, for the enforcement of the provisions of this chapter and the collection of revenue hereunder, and such

   rules and regulations shall when enforced be deemed to be reasonable and just.

   212.18(2) The department shall administer and enforce the assessment and collection of the taxes, interest, and penalties imposed by this chapter. It is authorized to make and publish such rules and regulations not inconsistent with this chapter, as it may deem necessary in enforcing its provisions

   in order that there shall not be collected on the average more than the rate levied herein. The department is authorized to and it shall provide by rule and regulation a method for accomplishing this end. It shall prepare instructions to all persons required by this chapter to collect and remit the tax to

   guide such persons in the proper collection and remission of such tax and to instruct such persons in the practices that may be necessary for the purpose of enforcement of this chapter and the collection of the tax imposed hereby. The use of tokens in the collection of this tax is hereby expressly forbidden and prohibited.

   
   

2. In analyzing the language of the aforementioned provisions, the Petitioner urges that although the Respondent has the authority and obligation to make rules and regulations to implement the provisions of Chapter 212, Florida Statutes, these rules and regulations may not violate the provisions of the statute, other laws of Florida or the Constitution of the United States or the Constitution of the State of Florida. When the precautionary comment of the statute is read in conjunction with Subsection 212.18(2), Florida Statutes, wherein that subsection states that rules and regulations shall be established in a fashion "in order that there shall not be collected on the average more, than the rate levied herein", the Petitioner believes there is created a prohibition against the assessment of a 4.5 percent sales tax on the sale by the Petitioner of mixed drinks and package goods, as called for by the terms of Rule 12A-1.57(3), Florida Administrative Code.

   
   

3. Following the Petitioner's line of reasoning, it contends that the overall statutory meaning of Chapter 212, Florida Statutes, calls for the imposition of a 4 percent sales tax and to add an additional .5 percent sales tax by the utilization of Rule 12A-1.57(3), Florida Administrative Code, is an invalid exercise of delegated legislative authority. The subject rule according to the Petitioner is a derogation of the controlling provision of Subsection 212.18(2), Florida Statutes, which does not allow tax to be collected on the average more than the rate of 4 percent, thereby causing this Petitioner to pay an additional $10,176.18, together with a 5 percent penalty and interest.

   
   

4. In replying to the Petitioner's attack on the rule, the Respondent refers to the same Subsections 212.17(6) and 212.18(2), Florida Statutes, to support its claim of the validity of the questioned rule. The Respondent feels that the application of a 4.5 percent rate on those occasions where a dealer did not keep itemized sales receipts showing the sales price and tax separately recorded for each and every transaction, was in keeping with the proviso that, "There shall not be collected on the average more than the rate levied herein", Subsection 212.18(2), Florida Statutes, supra.

5. The Respondent then cites sane examples of the implementation of the

   4.5 percent theory by showing hypothetical known sales prices in one column, tax due on those sales prices in the second column, and the total amount of price and tax in a third column. By this formula the price total was $3.70, the tax due $.17 and the total amount of price and tax, $3.87. The Respondent then applies the 4.5 percent theory found in Rule 12A-1.57(3), Florida Administrative Code, to that amount by dividing the total receipts which includes sales price figures and the tax, by the 1.045 divisor. This gives a figure of $3.703 as the gross amount of sales, which is then subtracted from $ 3.87 total receipts, the known total of sales and tax due in the hypothetical; revealing a figure of

   $.167 as tax due, as contrasted with $.17 known amount of tax due in the hypothetical. To the Respondent this demonstrates that The actual tax collected exceeds the amount of speculated tax applying the 4.5 percent rule.

   
   

6. The comparison is then taken a step further by utilizing the Petitioner's claimed rate of tax which is 4.1666667 percent (which the Petitioner in its hypothetical has reduced to 4.16667 for its hypothetical computations), and by dividing the known total receipts in the hypothetical by the figure 1.041667, the gross sales amount is $3.715. When this is subtracted from $3.87 total receipts, the amount resulting is $.155, which is less than

   $.17 tax due under the hypothetical and less exact than the application of the

   4.5 percent formula of the rule, which gives $.167 as tax due.

   
   

7. The Petitioner has vigorously opposed the utilization of the hypothetical and stated that its formula of 4.1666667 percent his a formula arrived at in view of its claim that all drinks are in increments of $.25 to include tax, thereby making their sales tax percentage infallible when applied to the sales which were made during the time period which is the subject of the audit in the case DOAH. 79-247 and making Rule 12A-1.57(3), Florida Administrative Code, inapplicable.

   
   

8. It is not necessary in this case to resolve the question of the applicability of the subject rule to the Petitioner, nor to determine if the tax is due; having found that the Respondent is attempting to apply the rule to the Petitioner, the sole purpose of this Order is to comment on the validity of Rule 12A-1.57(3), Florida Administrative Code, when considered in keeping with the conditions of Section 120.56, Florida Statutes. Within those parameters and after considering the positions of the parties, thee Respondent is found to be correct.

   
   

9. Section 212.05, Florida Statutes, sets the rate of sales tax at 4 percent on sale of articles of tangible personal property when sold at retail in the State of Florida. A further refinement to this general statement calling for a 4 percent sales tax is found in the provision Subsection 212.12(10), Florida Statutes, which creates a bracketing system, the effect of which has been seen in, the hypothetical offered by the, Respondent in its argument. That effect includes the possibility that the actual amount of tax will exceed 4 percent. The breakout of the bracketing provisions in Subsection 212.12, Florida Statutes, is as follows:

   
   

   212.12(10) Taxes imposed by this chapter upon the privilege of the use, consumption, or storage for consumption, or sale of tangible personal property, admissions and rentals, and communication services as herein taxed shall be collected upon the basis of

   an addition of the tax imposed by this chapter to the total price of such admissions, rentals, communication services or sale price of such article or articles that are purchased, sold or leased at any one time by or to a customer or buyer, and the dealer, or person charged herein, is

   required to pay a privilege tax in the amount of the tax imposed by this chapter on the total of his gross sales of tangible personal property, admissions, and rentals, communication services and such person or dealer shall add the tax imposed by this chapter to the price, rental or admissions, and communication services and collect the total sum from the purchaser, admittee, lessee or consumer. Notwithstanding the rate of taxes imposed upon the privilege of sales, admissions and rentals, and communication services, the following brackets shall be applicable to all 4 percent taxable transactions:

   1. On single sales of less than 10 cents no tax shall be added.

   2. On single sales in amounts from 10 cents to 25 cents, both inclusive, 1 cent shall be added for taxes.

   3. On sales in amounts from 26 cents to

      50 cents, both inclusive, 2 cents shall be added for taxes.

   4. On sales in amounts from 51 cents to 75 cents, both inclusive, 3 cents shall be added for taxes.

   5. On sales in amounts from 76 cents to

      $1, both inclusive, 4 cents shall be added for taxes.

   6. On sales in amounts of more than $1,

      4 percent shall be charged upon each dollar of price, plus the above bracket charges upon any fractional part of a dollar.

      
      

      Consequently, Rule 12A-1.57(3), Florida Administrative Code, in its general call for a 4.5 percent tax as an option to other methods of tax computation, is consistent with the statutes, other laws of Florida and the Constitutions of the United States and the State of Florida and does not cause the collection on the average of more than the 4 percent tax levied by Chapter 212, Florida Statutes. As such, it is a valid exercise of delegated legislative authority.

      
      

10. The Respondent has submitted Proposed Findings of Fact, Conclusions of Law and Recommendation and to the extent that those matters are not inconsistent with this Order, they have been utilized. To the extent that those proposals by the Respondent are inconsistent with this Order, they are specifically rejected.

    
    

    CONCLUSIONS OF LAW

    
    

11. The Division of Administrative Hearings has jurisdiction over the subject matter in this cause and the parties.

Based upon a full consideration of facts herein and the argument of the parties, it is concluded as a matter of law that the Petitioner has failed to demonstrate that Rule 12A-1.57(3), Florida Administrative Code, is an invalid exercise of delegated legislative authority, within the meaning of Section 120.56, Florida Statutes; therefore, Rule 12A-1.57(3), Florida Administrative Code, is found to be a proper rule when considered in the context of this rules challenge.

DONE AND ORDERED this 29th day of June, 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:

Mark J. Wolff, Esquire Howard E. Ruskin, Esquire

Sparber, Shevin, Rosen, Shapo & Heilbronnner, P.A.

30th Floor, First Federal Building One Southeast Third Avenue

Miami, Florida 33131

Ms. Liz Cloud Department of State The Capitol

Tallahassee, Florida 32301

Martha J. Cook, Esquire Department of Revenue

Room 422, Fletcher Building Tallahassee, Florida 32301

Carroll Webb, Director Joint Legislative

Management Committee Holland Building, Room 120 Tallahassee, Florida 32301

Docket for Case No: 79-001088RX

Orders for Case No: 79-001088RX