STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF REVENUE, STATE ) OF FLORIDA, )

)

Petitioner, )

vs. ) CASE NO. 80-735

) VOLPE CONSTRUCTION COMPANY, ) INC., )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, R. L. Caleen, Jr., held a public hearing in this case on May 14, 1980, in Miami, Florida.

APPEARANCES

For Petitioner: Linda C. Procta, Esquire

Assistant Attorney General Department of Legal Affairs The Capitol

Tampa, Florida 32301

For Respondent: James Knight, Esquire

900 Alfred I. duPont Building Miami, Florida 33131

ISSUE

Whether Petitioner ("DEPARTMENT") is entitled to assess sales or use taxes, penalties, and interest against Respondent ("VOLPE") pursuant to Chapter 212, Florida Statutes, as set out in its Notice of Proposed Assessment dated March 20, 1980.

CONCLUSIONS AND RECOMMENDATIONS

Conclusions:

VOLPE established by a preponderance of evidence that it previously paid to its several vendors the sales and use tax which the DEPARTMENT now seeks. Accordingly, the proposed tax

assessment, with penalties and interest thereon, cannot be sustained.

Recommendation:

That the DEPARTMENT's Notice of Proposed Assessment of Tax, Penalties, and Interest, under Chapter 212, Florida Statutes, dated March 20, 1980, be DISMISSED.

Background

By written notice issued on March 20, 1980, Petitioner ("DEPARTMENT") proposed to assess Respondent ("VOLPE") taxes, penalties, and interest allegedly due pursuant to Chapter 212, Florida Statutes. In response, VOLPE claimed that it had previously paid the tax in question, and requested an opportunity to submit proof at a formal hearing. On April 17, 1980, the DEPARTMENT forwarded VOLPE's request to the Division of Administrative Hearings, and asked that the requested hearing be conducted by a hearing officer.

On May 15, 1980, final hearing was set for July 18, 1980. On June 17, 1980, the DEPARTMENT filed a motion to realign the parties. As grounds, it stated that VOLPE had the burden of proof, and the duty to present a prima facie case at hearing since VOLPE requested the hearing and was the party seeking relief. At the DEPARTMENT's request, ruling on its motion was withheld until presentation of arguments at final hearing.

At hearing, the DEPARTMENT's motion was denied for the reasons stated in the Conclusions of Law below. In support of its proposed assessment against VOLPE, the DEPARTMENT called Marvin P. Alford, a tax examiner, as its only witness, and offered Petitioner's Exhibits 1/ 1 through 6, inclusive, each of which was received into evidence. VOLPE called Salvatore Danca, its comptroller, and Harold G. Gregory, its branch manager, as its witnesses, and offered Respondent's Exhibits 1 through 11, inclusive, each of which was received.

At the conclusion of hearing, the parties were granted the opportunity to submit proposed findings of fact, conclusions of law, and memoranda within ten (10) days after filing of the transcript of hearing. The post-hearing submittals were filed by August 21, 1980.

Based on the evidence submitted at hearing, the following facts are determined:

FINDINGS OF FACT

1. During 1975-1977, VOLPE was a general contractor engaged in the construction of a United States Post Office and Vehicle Maintenance Facility at Miami, Florida. In connection with that construction project, VOLPE purchased materials from numerous subcontractors, including Hardware Lighting and Emporium, and Jemco, Inc. (Testimony of Alford, Danca; P.E. 2, 3)

   
   

2. On March 8, 1979, after audit of VOLPE's records, the DEPARTMENT proposed to assess VOLPE for delinquent sales and use tax, together with interest and penalties thereon, which it claimed were due from VOLPE's purchase of materials from various subcontractors. The DEPARTMENT's proposed assessment was based on its inability to verify, to its satisfaction, that sales and use tax due from those sales transactions was paid by VOLPE to the vendors, and subsequently remitted to the DEPARTMENT. (Testimony of Alford, P.E. 3.)

   
   

3. With the DEPARTMENT's encouragement, VOLPE then wrote its vendors in the various sales transactions requesting proof that the requisite Florida sales or use tax had been remitted to the DEPARTMENT. In response, two vendors, Ohio Medical Products and Power Wash, remitted tax vendors, (collected from VOLPE at time of sale) to the DEPARTMENT, in the amounts of $10,070 and

   $1,635.50, respectively. In addition, VOLPE discovered that it had not paid the requisite tax to a vendor in one transaction and remitted a payment to the DEPARTMENT in the amount of $1,442.53. (Testimony of Danca, Alford, P.E. 1.)

   
   

4. These late tax payments made by Ohio Medical Products, Power Wash, and VOLPE in partial satisfaction of the DEPARTMENT's March 8, 1979, proposed assessment consisted only of the tax due on the individual sales, including interest thereon. No penalty payments were made because Salvatore Danca, VOLPE's comptroller involved in collecting the sales tax from the various vendors, reasonably and in good faith believed that the DEPARTMENT would waive penalties if late tax payments were promptly submitted. Although Louis A. Crocco, the DEPARTMENT's representative, by affidavit denies making such a representation, he admits that the possibility of adjusting the penalties, otherwise due, was discussed with Danca. In the absence of more explicit evidence from the DEPARTMENT concerning those discussions, or attacking the credibility of Danca's testimony, it is determined that, based on discussions with DEPARTMENT representatives, Danca reasonably and in good faith believed penalties would be waived. (Testimony of Danca; P.E. 1, 6, R.E. 2, 3, 4, 5, 6.)

   
   

5. As a result of partial payments and adjustments made to the DEPARTMENT's proposed sales and use tax assessment, the

   DEPARTMENT issued a fourth revision of the proposed assessment on March 20, 1980. By that revision, the DEPARTMENT asserts VOLPE, as of March 20, 1980, is liable for payment of tax, interest, and penalties as follows:

   
   

   Sales Transaction	Sales And Use Tax Due	Interest	Penalties (25 Percent)
   Jemco, Inc., sale of mechanization equipment to VOLPE, per agreement dated December 5, 1975.	$16,229.53		$4,047.88
   Hardware, Lighting and Emporium, sale of finished hardware and accessories to VOLPE per VOLPE Purchase Order dated October 2, 1975.	1,556.10		389.02
   Ohio Medical Products' Power Wash's, and unidenti- fied vendor's sale to VOLPE for which late payments of tax due and interest have been made.	-0-		2,737.43
   TOTAL:	$17,856.10	$5,779.42	$7,174.33
   (Testimony of Alford, Danca, 3.)	Stipulation	of Counsel;	P.E. 1, 2,

   
   

   [AS TO JEMCO, INC./VOLPE TRANSACTION]

   
   

6. By its standard Agreement dated December 5, 1975, VOLPE agreed to purchase from Jemco, Inc., of Fort Worth, Texas, post office mechanization equipment for the contract price of

   $347,900. Subsequent change orders resulted in an adjustment to

   $405,689.70. In order to minimize on-site installation problems, Jemco, Inc., was required to maximize assembly of the mechanization equipment at its out-of-state plant prior to shipping to the Miami job site. (Testimony of Danca; P.E. 2,

   R.E. 1.)

   
   

7. The written sales Agreement, including attachments, between Jemco, Inc., and VOLPE expressly states, in three separate places, that the total contract sales price includes Florida sales tax. The DEPARTMENT admits that VOLPE has paid all monies due Jemco, Inc., under the contract. By virtue of its full payment of the contract price which expressly included sales

   tax, it must be concluded that VOLPE paid the requisite sales or use tax to Jemco, Inc. (Stipulation of Counsel; P.E. 2.)

   
   

8. VOLPE's standard form, entitled "Subcontractor's Application for Payment" was used as a basis to make incremental payments to Jemco, Inc., pursuant to the Agreement. That form required the subcontractor to certify that, among other things, it had complied with state tax laws applicable to performance of the Agreement. (Testimony of Danca; R.E. 11.)

   
   

9. VOLPE's actions in connection with the Jemco, Inc., sales transaction were consistent with its standard practice when entering contracts with vendors or subcontractors. That practice is to require that the sales price include the payment of necessary sales tax, the vendor or subcontractor is required to remit the required tax to the appropriate government entity. After performance of the contract, the subcontractor is required to certify that these requirements have been satisfied. The certification is in the form of a General Release which discharges VOLPE from all claims, debts and liabilities which the subcontractor may have against VOLPE because of the contract. In this case, Jemco, Inc., executed such a General Release in favor of VOLPE. (Testimony of Danca; R.E. 1.)

   
   

10. The DEPARTMENT has not audited Jemco, Inc.'s records, thus, it does not know whether the tax it seeks to assess against VOLPE has already been remitted by Jemco, Inc. (Testimony of Alford.)

    
    

11. The DEPARTMENT offered no affirmative evidence to contravene VOLPE's assertion that it had paid the requisite sales or use tax to Jemco, Inc. Its claim rests solely on the fact that VOLPE's evidence of payment does not contain a sales invoice or other documentation which itemizes, or separately states the amount of sales tax due from VOLPE.

    
    

    [AS TO HARDWARE AND LIGHTING EMPORIUM TRANSACTION]

    
    

12. By purchase agreement dated October 2, 1975, VOLPE agreed to purchase finished hardware from Hardware and Lighting Emporium of Miami, Florida, for the contract price of $23,877, which expressly included Florida state sales tax. Each billing invoice issued by Hardware and Lighting Emporium separately itemizes and states the Florida sales tax due. In applying for payment under the agreement, Hardware and Lighting Emporium completed the VOLPE "Subcontractor's Application for Payment" forms certifying compliance with state sales tax laws in performing the agreement. VOLPE has fully satisfied its payment obligations under the purchase agreement. (Testimony of Danca; P.E. 3, R.E. 9, 10.)

    
    

    
    

    CONCLUSIONS OF LAW

    
    

13. The Division of Administrative Hearings has jurisdiction over the subject matter of this proceeding. Section 120.57(1), Florida Statutes (1979).

    
    

14. Burden of Proof. In administrative proceedings, the burden of proof is normally on the party asserting the affirmative of an issue. 1 Fla. Jur., Administrative Law, Section 81, p. 658 (1977). Here, the DEPARTMENT proposes to assess tax, interest, and penalties; it, therefore, must sustain the burden of proof, and present a prima facie case in support of its allegations. VOLPE defends against the DEPARTMENT's allegations by asserting that it previously paid to its vendors the requisite sales or use tax on the transactions in question. By virtue of Section 212.06(2)(d), Florida Statutes (1979), the burden of proving such prior payment of tax falls on the party asserting it.

    
    

15. At hearing, the DEPARTMENT argued, among other things, that the burden of proof in an administrative tax assessment proceeding must fall on a taxpayer because proposed tax assessments carry a presumption of correctness. But the presumption of correctness attaching to the actions of administrative officials arises only after a fair hearing, with procedural safeguards, is held. O'Neill v. Pallot, 257 So.2d 59,

    61 (Fla. 1st DCA 1972). The DEPARTMENT provided no statutory or judicial authority which confers upon its proposed agency actions a presumption not enjoyed by other agencies subject to Chapter 120, Florida Statutes (1979). Unless and until the legislature provides otherwise, administrative proceedings involving proposed tax assessments by the DEPARTMENT are subject to the provisions of Section 120.57, Florida Statutes (1979). Such proceedings formulate final department action, and are not instituted to review action taken earlier or preliminary by the DEPARTMENT.

    See McDonald v. Department of Banking and Finance, 356 So.2d 569,

    583 (Fla. 1st DCA 1977). Absent waiver by the taxpayer, the DEPARTMENT's proposed tax assessment is ineffective until it ripens into a final department order through Section 120.57 proceedings. See United States Service Industries-Florida v. State Department of Health and Rehabilitative Services, 385 So.2d 569, 583 (Fla. 1st DCA 1977). Absent waiver by the taxpayer, the DEPARTMENT's proposed tax assessment is ineffective until it ripens into a final department order through Section 120.57 proceedings. See United States Service Industries-Florida v. State Department of Health and Rehabilitative Services, 385 So.2d 1147 (Fla. 1st DCA 1980). For these reasons, the DEPARTMENT's

    motion to realign the parties and place the burden of proof upon VOLPE was, and is, denied.

    
    

16. The DEPARTMENT bases its proposed assessment of VOLPE upon Section 212.07(9), Florida Statutes (1979), which provides:

    
    

    "(9) Any person who has purchased at retail, used consumed, distributed, or stored for use or consumption in

    this state tangible personal property, admissions, communication services,

    or leased tangible personal property, or who has leased any commercial offices or building, real property, space or spaces in parking lots or garages for motor vehicles or docking or storage space, or spaces for boat docks or marinas and cannot prove that the tax levied by this chapter has been paid to his vendor or

    lessor shall be liable to the state for any tax, interest, or penalty

    due on any such taxable transactions. (Emphasis supplied.)

17. The parties agree that the sales transactions between VOLPE and the two subcontractors, or suppliers, were taxable transactions under Chapter 212, Florida Statutes (1979), and that VOLPE was the purchase and ultimate consumer of the goods.

    
    

18. The DEPARTMENT has, by rule, defined the parties to such transactions, and allocated the respective taxpaying and collecting responsibilities:

    
    

    Section 12A-1.51(2)(d)

    "Dealers shall, as far as practicable, add the amounts of the tax imposed under this chapter to the sale price and the tax shall be separately

    stated as Florida tax on any charge tickets, sales slips, invoices, or other tangible evidence of sale and such tax shall constitute a part of such price, charge or proof of sale which shall be a debt from the purchaser or consumer to the dealer, until paid, and shall be recoverable at law in the same manner as other debts. Any dealer who shall neglect, fail or refuse to collect the tax

    herein provided upon any, every and all retail sales made by him or his agents or employees of tangible personal property which is subject to the tax imposed by this chapter shall be liable for and pay the tax himself." (Emphasis supplied.)

    
    

19. The central legal question in this case is whether VOLPE may prove that it paid the requisite tax to its vendors by any manner other than by sales slips, invoices, or other written evidence of sale separately stating the Florida tax. The DEPARTMENT claims any other proof of payment is legally insufficient; VOLPE asserts that the obligation to "separately state" the tax on invoices belongs to, and is within the primary control of vendors. It argues that no statutory provision precludes a purchaser from submitting other probative evidence of prior payment.

    
    

20. As to Jemco, Inc./VOLPE Sales-Use Transaction. It is concluded that VOLPE has established, by a preponderance of evidence, that it paid the requisite use tax to its vendor, Jemco, Inc. Although VOLPE failed to produce written evidence of the transaction separately stating the tax in dollar amount, when taken as a whole, the evidence supports the assertion that it has paid the requisite tax. The DEPARTMENT's restrictive interpretation of Section 212.07(2) is not supported by the statutory language. Neither Section 212.07(9), nor DEPARTMENT rules limit the manner by which a taxpayer can prove that it has paid the requisite tax. Under the facts of this case, it would be grossly unfair not to allow the taxpayer to show the true situation. Cf. Anderson v. State Department of Revenue, 380 So.2d 1083, 1087 (Fla. 3d DCA 1980); Accord, Fischer v. State Department of Revenue, 385 So.2d 702, 703 (Fla. 1st DCA 1980).

    
    

21. Notwithstanding its own rule, Section 12A-1.51(2)(d), the DEPARTMENT argues that VOLPE is a "dealer" by virtue of its importing Jemco, Inc., material from another state for use or consumption in Florida. See Section 212.06(2)(b), Florida Statutes (1979). Thus, the DEPARTMENT argues that VOLPE was statutorily obligated to "separately state: the requisite use tax, collect the tax from itself, and remit it to the DEPARTMENT. But in Whitehead & Kales Company v. Green, 113 So.2d 732 (Fla. 1st DCA 1959), the court determined the question of which party is charged with collecting and remitting the Florida use tax:

    
    

    "At this point we would like to emphasize that we are dealing with a use tax as distinguished from a sales tax. The theory supporting

    the use tax is that it is an impost on the privilege of using personal property which has been shipped into the state and come to rest in the taxing forum and has become a part of the property within the taxing situs. The levy is actually imposed upon and collected from the ultimate consumer who as a Florida resident enjoys the use of the property after it has come to rest. However, for purposes of enforcing collection of the use tax, the dealer is the one who is charged with remitting the tax." Citations omitted. (Emphasis supplied.) Id. at 734.

    
    

22. The court also commented on the manner by which the consumer customarily pays the tax:

    
    

    "For all practical purposes, the dealer customarily includes in his price to the consumer the tax for the remission of which the dealer is

    responsible. We deal in the trivialities unless we recognize that the

    consumer actually pays the use tax which the dealer remits. It might be mentioned at this juncture for the purpose of illustration, but not necessarily determinative of our

    decision, that the mentioned contract provided that the unit price would include 'state and/or use tax.'"

    Id. at 735.

    
    

23. VOLPE having shown that it paid to Jemco, Inc., the tax levied on their transaction by Chapter 212, Florida Statutes, the DEPARTMENT'S proposed assessment of further use tax, together with interest and penalties thus, cannot be sustained.

    
    

24. As to Hardware and Lighting Emporium Sales-Use Transaction. It is concluded that, even under the interpretation of Section 212.07(9) argued by the DEPARTMENT, VOLPE established that it previously paid to Hardware and Lighting Emporium the sales tax levied on the transaction by Chapter 212, Florida Statutes (1979). Thus, the DEPARTMENT's proposed assessment of further sales tax, with interest and penalties, cannot be sustained.

25. Lastly, the DEPARTMENT seeks penalties in the amount of

    $2,737.43 against VOLPE for late remission of sales tax by several vendors. However, VOLPE has established that it paid the vendors the requisite tax levied by Chapter 212, Florida Statutes (1979). Further, in light of VOLPE's efforts to "collect" the tax from the vendors and remit it to the DEPARTMENT, and VOLPE's reasonable good faith belief that penalties would be waived, imposition of penalties would be unwarranted and unjust. See Section 212.12(5), Florida Statutes (1979). Accordingly, the DEPARTMENT's proposed assessment of penalties cannot be sustained.

    
    

26. The proposed findings of fact and conclusions of law submitted by the parties have been considered and incorporated into this Recommended Order. To the extent such proposed findings are not so incorporated, they are rejected as irrelevant to the issues, or unsupported by the evidence.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is,

RECOMMENDED:

That the DEPARTMENT's Notice of Proposed Assessment of Tax, Penalties, and Interest, Under Chapter 212, Florida Statutes, dated March 20, 1980, be DISMISSED.

RECOMMENDED this 25th day of September, 1980, in Tallahassee, Florida.

R. L. CALEEN, JR. Hearing Officer

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

(904) 488-9675

Filed with Clerk of the Division of Administrative Hearings this 25th day of September, 1980.

ENDNOTE

1/ Petitioner's and Respondent's Exhibits will be abbreviated as "P.E. and "R.E. ", respectively.

COPIES FURNISHED:

Linda Procta, Esquire Assistant Attorney General Department of Legal Affairs The Capitol, LL04 Tallahassee, Florida 32301

James Knight, Esquire

900 Alfred I. duPont Building Miami, Florida 33131

Docket for Case No: 80-000735

Orders for Case No: 80-000735