Judges: MICHAEL P. DODSON
Agency: Department of Revenue
Latest Update: May 16, 1991
Summary: Uphold the assessment on sale of farm equipment except exclude the tax claim for the sprayer and two diesel engines.
79-2338.PDFSTATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
SIX L'S FARMS, INC., )
)
Petitioner, )
)
vs. ) CASE NO. 79-2338
)
DEPARTMENT OF REVENUE, )
)
Respondent. )
) SIX L'S PACKING COMPANY, INC., )
)
Petitioner, )
)
vs. ) CASE NO. 79-2339
)
DEPARTMENT OF REVENUE, )
)
Respondent. )
)
RECOMMENDED ORDER
Pursuant to notice the Division of Administrative Hearings by its Designated Hearing Officer, Michael Pearce Dodson, held the final hearing in this case on March 19, 1980, in Fort Lauderdale, Florida. The following appearances were entered:
APPEARANCES
For Petitioners: Karl W. Adler, Esquire
and Robert P. Dunckel, Esquire ADLER TOLAR & ADLER
Suite 301 Bayview Building 1040 Bayview Drive
Fort Lauderdale, Florida 33304
For Respondent: E. Wilson Crump II, Esquire
Assistant Attorney General Department of Legal Affairs The Capitol, Room LL04 Tallahassee, Florida 32301
BACKGROUND
These proceedings began on November 19, 1979 when Petitioner, Six L's Farms, Inc., filed a Petition for Formal Hearing with Respondent, Department of Revenue to contest a tax assessment made by Respondent. Simultaneously, Petitioner, Six L's Packing Company, Inc., filed a Petition for Formal Hearing to contest another tax assessment by Respondent. On November 27, 1979 the cases were forwarded to the Division of Administrative Hearings for the assignment of
a Hearing Officer and the scheduling of a final hearing. Subsequently on December 10, 1979 Respondent served Answers in both cases. By an Order issued on January 23, 1980, the two cases were consolidated for all further proceedings before the Division of Administrative Hearings.
At the final hearing the parties offered the testimony of witnesses.
Petitioners offered Exhibits 1-15 which were received into evidence subject to certain stipulations reflected in the hearing transcript. Respondent did not offer any exhibits. At the conclusion of the hearing Petitioners asked that the record remain open in order to allow the depositions of two expert witnesses on behalf of petitioners to be received. Respondent agreed to that request. The depositions were filed on October 19, 1981.
Respondent filed a memorandum of law including proposed Findings of Fact on November 17, 1981. On November 18, 1981 Petitioners filed a proposed Recommended Order which contains Findings of Fact. To the extent that the proposed findings of the parties are not reflected in this Order, they are rejected as being either not supported by the weight of admissible evidence or as being irrelevant to the issues determined here. Sonny's Italian Restaurant
Department of Business Regulation, 414 So.2d 1156, 1157 (Fla. 3d DCA 1982).
FINDINGS OF FACT
Petitioners, Six L's Farms, Inc. and Six L's Packing Company, Inc., are engaged in the business of growing and marketing tomatoes in South Florida.
Tomato Stakes
Between December 7, 1977 and January 10, 1978 Petitioner, Six L's Farms purchased 878,000 Honduras Pitch Pine pressure treated tomato stakes from Caribbean American Lumber Sales Company (CALS) of Savannah, Georgia for a purchase price of $71,100. At the time of purchase Petitioner paid sales tax in the amount of $2,844. There is no evidence on which to find that at the time of purchase, Six L's furnished a sales tax exemption certificate to the seller, GALS. Six L's did furnish an executed sales tax exemption certificate for this purchase on March 11, 1980 to Respondent.
Subsequent to the purchase and the payment of sales tax GALS filed a request for refund with the Comptroller of the State of Florida and received a refund of sales tax in the amount of $2,844 which was then credited back to Petitioner, Six L's Farms. On October 17, 1979, Petitioner made an assessment for the sales tax and for interest and penalties since December 1977.
The purchased tomato stakes were used in Petitioner's farming activities. As tomato plants in the field mature Petitioner's employees drive the stakes which measure 3/4 inch by 1 inch by 48 inches into the ground along a line of plants. Then string is run along the stakes at various heights to hold the growing plants in a vertical position.
A staked tomato plant is far more productive than one allowed to grow along the ground. The vertical plant is easier to spray with insecticides. The top of the plant, the canopy, provides shade to the lower part of the plant and thereby prevents sunburn or scalding of the fruit by intense summer sun. In cold weather the vertical plant resists frost damage because frost which settles on the upper portion of the canopy frequently does not reach the lower portion of the plant and cause damage to the fruit.
The tomato stakes themselves, without regard to the plants' vertical position, do not provide shade, frost protection or insect protection. Whatever effect the stakes have on these activites is only a secondary result of the stakes' holding the tomato plants in a vertical position.
Speedling Plant Houses
Between May 31, 1977 and June 20, 1977 Six L's Farms purchased from Speedling, Inc. the following materials at the indicated price:
16 Curtain Controllers $ 7,200.00
8 Loretex Panels with hem, 8' x 230' 1,280.00 464 51 3/8" x 232" #556 Panels 13,442.10
768 Redwood Strips 407.04
192 Cartridges Clear Sealant 316.80
60 Vertical Rubber Strips 51.00
8 Rolls #546 Fiberglass, 3' x 100' 1,160.00
No sales tax was paid on these purchases. The materials were used to construct a "Speedling" plant house. It is a wood frame structure measuring 224 feet long by 34 feet wide by 14 feet high at the apex of the roof trusses. To make the roof, fiberglass panels were laid across the trusses. This construction provides a water proof but translucent covering. The type of fiberglass was carefully selected to allow 65 percent light transmission. If the young tomato seedlings which are grown in the plant house receive too much light, they develop too close to the ground. If they do not receive enough light, they become scrawny from developing spindly foliage in an attempt to reach up to sunlight.
The Speedling house is a permanent structure placed out in Six L's tomato fields. While tomato seedlings are growing in the house its perimeter is wrapped with the Loretex plastic. The plastic which is partially buried extends up the frame members of the house to approximately chest height. Because of its position the Loretex prevents crawling insects from entering the house and attacking the plants.
While not primarily designed to provide temperature control, the Speedling house by its very nature provides some moderation of natural temperature extremes With the Loretex panels in place some frost damage can be prevented. There is no evidence on which to find that at the time of purchase, Six L's furnished a sales tax exemption certificate to the seller, Speedling. Six L's did furnish an executed sales tax exemption certificate for this purchase on March 11, 1980 to Respondent.
Detroit Diesel Engines
During Respondent's audit of Petitioner's books a "repair" invoice from Del's Diesel Service was found. It showed the sale of two 6 v 53 Detroit Diesel Engines with P.T.O. and radiators to Six L's Farms on March 17, 1977. The invoice indicates payment by check no. 6505 in the amount of $4,900. Check no. 6505 was drawn by Creigh Hall, a person employed by Six L's Farms to maintain some of its machinery. There is no indication that sales tax was paid on the transaction reflected by the invoice.
In addition to being employed by Six L's Farms, Mr. Hall also farmed for himself. When the two engines were delivered they came to a loading lot at
Six L's but were disassembled by Mr. Hall and then removed to his own field. Six L's never took possession of the engines.
I find from the foregoing circumstances that the two diesel engines, while invoiced to Six L's and paid for on a Six L's checking account, were actually sold to Mr. Hall for his own use.
Enviro" Services Invoice
On April 18, 1977, Six L's Farms purchased from "Enviro" Services one 3-71 GM Engine with electric starting and P.T.O. clutch and one HRG Lister engine with a 10" x 10" pump for a total of $6,750. Subsequently on May 9, 1977 Six L's Farms purchased one HBS 6 Lister engine with a 1061 El Marlow pump and one HB6 Lister engine with a 10" G&C pump for a total of $8,000. Neither invoice shows that sales tax was paid or collected on either transaction.
Petitioner offered hearsay testimony that the sales tax was paid by "Enviro" Services but there was no independent non-hearsay evidence to support it.
Conveyors and Palletizer
On August 4, 1976 Six L's Packing Company entered into a contract with Citrus Machinery Company (CMC) under which CMC agreed to supply an automatic conveying and palletizing system to Six L's for a total price of $189,564. The equipment supplied has never operated to the satisfaction of Six L's and at the time of the final hearing the matter was in litigation between Petitioner and CMC. The record here does not reflect the results of that litigation. No sales tax was paid on the transaction.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties and subject matter of this case. Section 120.57(1), Florida Statutes (1981).
At the time of the foregoing transactions Florida imposed a 4 percent sales tax on the sale of goods. Section 212.05, Florida Statutes (1981). Exemptions from that tax are provided in Section 212.08, Florida Statutes (1981) which provides in pertinent part:
The sale at retail, the rental, the use, the consumption, the distribution, and the storage to be used or consumed in this state of the, following tangible personal
property are hereby specifically exempt from the tax imposed by this chapter.
* * *
(5) EXEMPTIONS; ACCOUNT OF USE.--
(a) Items in agricultural use and certain nets.
--There shall be exempt from the tax imposed by this chapter...cloth, plastic, and other similar materials used for shade, mulch, or protection from frost or insects on a farm...
To implement the terms of Section 212.08(5)(a), Florida Statutes (1981) Section 12A-1.48(12), Florida Administrative Code provides:
Items entitled to exemption when purchased for use on a farm include cloth, plastic and other similar materials used for shade, mulch and protection from frost or insects.
The first issue presented here is whether tomato stakes are "cloth, plastic, and other materials used for shade, mulch, or protection from frost or insects on a farm." I conclude that they are not such materials. While the stakes, as a secondary function, assist in providing shade and protection from frost and insects, they are not themselves the direct source of shade or frost and insect protection.
The question of the taxability of the fiberglass panels placed on top of the Speedling plant house evokes a different conclusion. The fiberglass panels which are designed and used to provide shade to agricultural plants are within the exemption of Section 212.08(5)(a), Florida Statutes (1981). Respondent has cited Section 12A-1.48(13), Florida Administrative Code which states, "Nails and materials purchased to build or repair sheds, greenhouses and other structures are taxable." This rule cannot be construed to take away the exemption granted by the statute for shade producing plastic materials. I therefore conclude that no sales tax would be owed on the purchase price of the fiberglass roof panels if the purchase transaction were properly exempt.
The Hearing Officer is unable to determine from the evidence in the record which of the items invoiced by Speedling are the roof panels. For this reason I am unable to more fully describe the panels and ascertain their purchase price. All the other materials invoiced by Speedling, the Loretex plastic, etc., are not exempt from taxation even though they may incidentally contribute to shading or frost protection.
Section 212.08(5)(a) states that "...however, such exemption [the agricultural use exemption provided therein] shall not be allowed unless the purchaser or lessee signs a certificate stating that the item to be exempted is for the exclusive use designated herein." Section 12A-1.38(1), Florida Administrative Code requires:
It is the specific legislative intent that each and every sale, admission, use, storage, consumption or rental is taxable
under Chapter 212, F.S., unless such sale, admission, use, storage, consumption or rental is specifically exempt. The exempt status of the transaction must be estab- lished by the dealer. Unless the dealer shall have taken from the purchaser a certificate to the effect that the property or service was purchased for resale and bearing the name and address of the pur- chaser and the number of his dealer's certificate of registration or a certificate bearing the number of his consumer's exemption certificate, the sale shall be deemed to be a taxable sale at retail. (Emphasis added)
The burden of establishing the exempt nature of a sale is on the taxpayer. Department of Revenue v. Anderson, 403 So.2d 397 (Fla. 1981). The record here fails to show compliance with Section 12A-1.38(1), Florida Administrative Code in order to qualify for an exemption. There is no evidence that exemption certificates were provided to Speedling, Inc. by Six L's for the purchase of the fiberglass panels.
Prior to the final hearing the parties were at issue over the assessment of the sales tax on the purchase of four John Bean sprayer machines from Paragon Produce in Pennsylvania for a price of $18,485.09. At the conclusion of the hearing and after reviewing the evidence the Department of Revenue through counsel has agreed that this sale was a casual and isolated sale from a non-dealer and therefore is not subject to sales tax. Section 12A- 1.37(2), Florida Administrative Code.
The sale of two diesel engines by Del's Diesel Service to Creigh Hall does not make Six L's liable for sales tax on the transaction. While the transaction had the appearance on paper of being a sale to Six L's, the facts established at the final hearing adequately demonstrated that Mr. Hall purchased the engines for his own personal use.
The sales of pumping equipment by "Enviro" to Six L's for a total of
$14,750 are taxable. The invoices fail to show the payment of sales tax and Six L's Farms was unable to prove by admissible evidence that the tax had been paid. Section 212.07(9), Florida Statutes (1981) requires:
Any person who has purchased at retail, used, consumed, distributed, or stored for use or consumption in this state tangible personal property, admissions, communica- tion services, or leased tangible personal property, or who has leased any commercial offices or buildings, real property, space or spaces in parking lots or garages for motor vehicles or docking or storage space, or spaces for boats in boat docks or
marinas and cannot prove that the tax levied by this chapter has been paid to his vendor or lessor shall be directly liable to the state for any tax, interest, or penalty due on any such taxable transactions.
Petitioner, Six L's Packing Company does not argue that its purchase of the conveying and palletizing machinery is inherently an exempt transaction. Instead Petitioner attempts to defend against the instant assessment by showing a breach of contract by the seller, CMC. That defense is premature. At the time of the final hearing there had been no recission of the contract by either the parties or by the judgment of a court. Because sales taxes are due "at the moment of the transaction", 1/ tax on the full purchase price of the equipment is due from August 4, 1976, the date of the contract. Causeway Lumber Company, Inc. v. Lewis, 410 So.2d 511, 513 (Fla. 4th DCA 1982).
SUMMARY
The assessment for the audit period April 1, 1976 through March 31, 1979 of sales taxes owed by Petitioners should be upheld, less the tax claimed on the
sale of the four spraying machines for $18,485.09 and less the tax claimed on the sale of two diesel engines to Mr. Creigh Hall for $4,900.
RECOMMENDATION
Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED:
That the Department of Revenue enter a Final Order imposing an assessment for sales tax, interest and penalties against Petitioners, Six L's Farms and Six L's Packing Company for the purchase of the following items at the indicated price:
Tomato Stakes $ 71,100.00 Speedling House Materials 23,856.94 "Enviro" Services Pumps 14,750.00 CMC Conveyor and Palletizer 189,564.00
DONE and RECOMMENDED this 2ND day of December, 1982, in Tallahassee, Florida.
MICHAEL P. DODSON
Hearing Officer
Division of Administrative Hearings The Oakland Building
2009 Apalachee Parkway
Tallahassee, Florida 32301
(904) 488-9675
Filed with the Clerk of the Division of Administrative Hearings this 2nd day of December, 1982.
ENDNOTE
1/ Section 212.06(1)(a), Florida Statutes (1981).
COPIES FURNISHED:
Karl W. Adler, Esquire
and Robert P. Dunckel, Esquire ADLER TOLAR & ADLER
Suite 301 Bayview Building 1040 Bayview Drive
Fort Lauderdale, Florida 33304
E. Wilson Crump II, Esquire Assistant Attorney General Department of Legal Affairs The Capitol, Room LL04 Tallahassee, Florida 32301
Larry Levy, Esquire General Counsel Department of Revenue
104 Carlton Building Tallahassee, Florida 32301
Randy Miller, Executive Director Department of Revenue
102 Carlton Building Tallahassee, Florida 32301
Docket for Case No: 79-002338
Orders for Case No: 79-002338
| Issue Date |
Document |
Summary |
|
Mar. 26, 1983 |
Agency Final Order
|
|
|
Dec. 02, 1982 |
Recommended Order
|
Uphold the assessment on sale of farm equipment except exclude the tax claim for the sprayer and two diesel engines.
|
