STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
MIAMI TIRESOLES, INC., )
)
Petitioner, )
)
vs. ) CASE NO. 80-927RX
) STATE OF FLORIDA, DEPARTMENT OF ) REVENUE, )
)
Respondent. )
)
RECOMMENDED ORDER
Pursuant to notice, the Division of Administrative Hearings by its designated Hearing Officer, Michael Pearce Dodson, held a final hearing in this case on December 10, 1980, in Miami, Florida. The following appearances were entered:
APPEARANCES
For Petitioner: Warren S. Wepman, Esquire
WEPMAN AND WEPMAN, P.A.
El Dorado
3636 Bougainvillea Road
Miami, Florida 33133
For Respondent: Linda C. Procta, Esquire
Assistant Attorney General Department of Legal Affairs The Capitol, LL04 Tallahassee, Florida 32301
PROCEDURAL BACKGROUND
These proceedings began on January 14, 1980, when the Respondent, Department of Revenue (Department) gave notice to Petitioner, Miami Tiresoles, Inc. (MTS) of a proposed tax assessment for a special fuels tax in the amount of
$6,695.39 1/ plus interest. In response to the notice Petitioner filed a request for an administrative hearing. The case was forwarded on March 10, 1980 to the Division of Administrative Hearing for the assignment of a Hearing Officer and the scheduling of a final hearing. On April 7, 1980, the Department answered MTS' first Petition. Because the original Petition contained allegations which appeared to constitute a rule challenge cognizable under Section 120.56, Florida Statutes, the Hearing Officer, sua sponte, entered an Order to Show Cause why those portions of the original petition attacking Respondent's rule should not be stricken without prejudice to the later filing of a Section 120.56 proceeding.
As a result of the Order to Show Cause MTS filed a Petition in Case No. 80- 927RX to challenge the validity of Section 12B-5.01, Florida Administrative
Code, as amended. Petitioner also requested that the tax assessment case. No. 80-517 be consolidated with the rule challenge case, No. 80-927RX. That request was initially denied because of the different time lines for a decision in a rule case as compared to a Section 120.57(1) case. After a stipulation by the parties to waive the time limit in Section 120.56, Florida Statutes for a Final Order. the cases were consolidated for discovery and hearing. The final- hearing was initially scheduled for April 28 and 29, 1980. but after a Joint Motion For Continuance the hearing was reset for December 10, 1980.
At the final hearing, Petitioner presented Mr. Charles Rigl, Ms. Jeanne Ann Rigl, Ms. Eleanor Stonaker and Mr. Thomas J. Kilbury as its witnesses. The following stipulation was also offered in support of Petitioner s case "It is stipulated that the testimony of Abner Turk, Gary Marjama Jose Juelle, Robert Sims, and Leon Glazer who are respectively Abner Turk, owner of Chuck's Backhoe Service; Jose Juelle, owner of Juelle Bros. Construction Company; Robert Sims, owner of Sims Paving Company; Gary Marjama, owner of Atomic Sandblasting Company and Leon Glazer, owner of A & M Trucking Company; would be to the same effect as the testimony of Thomas Kilbury, that special fuels purchased by them on which no road tax of 8 per gallon was collected, was used by them for industrial purposes, placed by them in their receptacles, whether that be the tanks of their heavy equipment or their tank truck, on the premises of Miami Tiresoles, regardless of the number of gallons involved in each invoice." Petitioner offered Exhibits 1-4 which were received into evidence. The Respondent presented the testimony of Mr. David Pratt and offered Exhibits A and B which were received into evidence.
At the conclusion of the hearing the parties were offered the opportunity to file memoranda or proposed orders with findings of fact on or before January 15, 1981. The Department filed a Memorandum of Law and the petitioner filed a proposed Recommended Order which contains finding of fact. To the extent that the proposed findings of fact submitted by the Petitioner are not reflected in this order, they are rejected as being either not supported by competent substantial evidence or as irrelevant and immaterial to the issues for determination here.
ISSUES PRESENTED
Was the amendment to Section 12B-5.01, Florida Administrative Code adopted on November 8, 1978, adopted in violation of the procedural requirements of Section 120.54, Florida Statutes?
Is the amendment to Section 12B-5.01, Florida Administrative Code an invalid exercise of the Department's delegated legislative authority?
FINDINGS OF FACT
Miami Tiresoles, Inc. sells both new and retreaded tires for cars and trucks. The company also sells gasoline and diesel fuel. It is licensed by the Department as a dealer in special fuels. As far as this case is concerned special fuel is number 2 diesel oil.
Unless an exemption is met each gallon of special fuel sold by MTS is taxed by the Department at a rate of 8 cents per gallon.
The Department has given MTS a revised notice of proposed assessment of tax for the sale of special fuel in the amount of $4,551.88 plus a penalty of
$455.48 and interest in the amount of $735.11 (through April 21, 1980). The tax
figure on the assessment appears to reflect a typographical error. The Department's records (Exhibit A) indicate that for the period in question 2/ MTS sold 56,936 gallons of special fuel subject to tax according to the Department's interpretation of the law. If a tax at a rate of 8 cents per gallon is due, then the amount due should be $4,554.88 and not $4,551.88. The correct tax figure is reflected on the Department's work sheets but was probably misread when the figure was transferred to the revised Notice of Assessment issued on April 21, 1980.
The foregoing assessment is based on MTS' invoices which reflect sales of special fuel to customers in amounts of more than 110 gallons at one time. Those sales were made to MTS customers who have filed with MTS a document called "Purchaser's Exemption Certificate". A typical example of such a certificate states:
PURCHASER'S EXEMPTION CERTIFICATE
The undersigned hereby certifies that the motor duel (sic) and/or special fuel pur- chased on 1-19-79 is for the following purpose as checked in the space provided.
(X) Purchased for home, industrial, com- mercial, agricultural or marine purposes for consumption other than for the propul- sion of a motor vehicle.
( ) Purchased at bulk plant or terminal in volumes of not more than 110 gallons
for delivery into a receptacle not connected to the fuel supply system of a motor vehicle for consumption other than for the pro- pulsion of a motor vehicle.
Purchaser is aware that if this exemption if (sic) falsely claimed, or if this certi- ficate is not rescinded at the time he fails to quality (sic) for the exemption, he shall be liable for the taxes imposed under Chapter 206, F.S. Furthermore, by issuing this certificate the purchaser
also certifies that he does not have any motor vehicles which use special fuel for propulsion.
This certificate is to continue in force until revoked by written notice to MIAMI TIRESOLES, INC.
Purchaser: Trade Name: A ACME SANDBLASTING, INC.
Street Address:
9521 W. Oakmont Dr., Hialeah, Fla. 33015 BY: /s/
The industrial customers of MTS (that is those who have filed an exemption certificate) are engaged in the construction business. They use the diesel fuel to operate bulldozers, front-end loaders, back hoes, sandblasters and similar
equipment. None of the fuel is used for the operation of motor vehicles on the public highways of Florida.
All the fuel in question is sold on the premises of MTS. At the time of sale it is placed either in the fuel tank of a particular piece of equipment such as a back hoe, or it is placed in a fuel storage tank mounted on the back of a truck. The storage tanks are not connected so they can provide fuel for the propulsion of the truck. They are used to transport fuel to the purchaser's particular job site. The storage tanks have a capacity of between 100 to 300 gallons.
MTS does not have delivery trucks of its own and has no facilities for taking fuel to its customers job sites.
A single invoice of MTS which indicates a sale of 110 gallons of special fuel to an individual customer is frequently the result of a sale where multiple fuel tanks are filled at one time. For instance, the customer may have a back hoe sitting on the rear of a flat-bed truck. He will fill the fuel tank in his back hoe and then perhaps fill an additional 55 gallon drum or two which would be on the truck. This would occur all in one transaction.
The reason why the Department seeks to tax special fuel sold by MTS to its industrial customers in an amount exceeding 110 gallons is because the fuel was placed in the customers' own fuel tanks on the premises of MTS and not on the premises of the customer or at the customer's job site.
The amendment to Section 12B-5.01, Florida Administrative Code challenged by Petitioner here was adopted by the Governor and Cabinet, sitting as the head of the Department of Revenue, on November 8, 1978. No hearing was held on the amendment's adoption because no person requested one.
Notice of the Department's intent to adopt the rule was given in the October 13, 1978 issue of the Florida Administrative Weekly. At the time the notice was published a copy of the amendment was available for inspection and copying by the public.
The notice published in the Florida Administrative Weekly stated: DEPARTMENT OF REVENUE, DIVISION OF
MISCELLANEOUS TAX, MOTOR FUEL TAX
Rule 12B-5.01
TITLE: Specific Exemption
PURPOSE AND EFFECT: To amend the rule which implements Subsection 206.87(4)(a) & (b),
F.S. to clarify interpretation of the law. SUMMARY: Provides specifically the requirements necessary in order for the licensed dealer of special fuel to make an exempt sale for home, industrial, commercial, agricultural, or marine purposes and exempt sales of not more than 110 gallons at his place of business, and by cross reference, the records needed to be maintained by the licensed dealer to substantiate the sale. SPECIFIC LEGAL AUTHORITY UNDER WHICH THE ADOPTION IS AUTHORIZED AND THE LAW BEING
IMPLEMENTED, INTERPRETED OR MADE SPECIFIC:
SPECIFIC AUTHORITY: 206.14(1), 206.59, FS. LAW IMPLEMENTED: 206.87(4)(a)(b), FS. ESTIMATE OF ECONOMIC IMPACT ON ALL AFFECTED
PERSONS: There will be no significant economic impact.
IF REQUESTED, A HEARING WILL BE HELD AT:
TIME: 10:00 A.M.
PLACE: The New Capitol, Lower Level 3 DATE: November 9, 1978
A COPY OF THE PROPOSED RULE AND THE ECONOMIC IMPACT STATEMENT MAY BE OBTAINED
BY WRITING TO: L. N. Thomas, Chief, Motor Fuel Tax Bureau, Department of Revenue, Carlton Building, Tallahassee, Florida 32304
Individual notices of the proposed rule making were not sent to licensed special fuel dealers in Florida.
On October 10, 1978, the Department sent the following items to the Joint Administrative Procedures Committee:
A copy of the proposed amendment to Rule l2B-5.01.
The notice to appear in the Florida Administrative Weekly.
The Economic Impact Statement.
The "Summary and Justification Sheet" (apparently the Department's term for the facts and circumstances justifying the proposed rules).
The following shows how the Department's amendment adopted on November 8, 1978, changed Section 12B-5.01, Florida Administrative Code. Words stricken were deleted; words underlined were added.
12B-5.01 Specific Exemptions.
(1) - (2) - No change.
HOMES, INDUSTRIAL. COMMERCIAL, AGRICULTURAL OR MARINE. Any sale of special fuel by a licensed dealer, regardless of quantity, when such fuel is to be consumed exclusively for home, industrial, commercial, agricultural, or marine purposes, is exempt from tax, provided the sale is made by a licensed dealer who delivers the fuel into the customer's storage facility, which must be located on the customer's premises, place of business, or job site. (Cross Reference - Rule 12B-5.03(1). (7)(b)
- (6) - No change.
(7) SALES OF 110 GALLONS OR LESS.
A licensed dealer may deliver, at his place of business, tax free, not more than 110 gallons of special fuel to a person who is not a licensed dealer of special fuel, provided the fuel is placed into a receptacle which is
furnished by the purchaser and which is not connected to the fuel supply system of a motor vehicle. (Cross Reference - Rule 12B-5.03(1), (7)(b)
Any licensed dealer of special fuel who, at his place of business, delivers more than 110 gallons of special fuel to a person who is not a licensed dealer of special fuel, shall be liable for and shall pay to the state taxes, penalties and interest on the total quantity sold even though the fuel may not be ultimately used to propel a motor vehicle on the highway.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties and the subject matter of this case. Section 120.56, Florida Statutes (1979).
MTS is substantially affected by Section 12B-5.01, Florida Administrative Code. Section 120.56, Florida Statutes (1979). Petitioner is a special fuels dealer regulated by the rule and has also been issued a Notice of Proposed Assessment based upon the rule. Pinellas County v. Southwest Florida Water Management District, 2 FALR 547A, 549A (Fla. Division of Administrative Hearings, Final Order, April 9, 1980).
Invalid Exercise
In exercising their rule making power, agencies may promulgate rules which are reasonably related to the purpose of the agency's enabling legislation. Florida Beverage Corporation, Inc. v. Wynne, 306 So.2d 200, 202 (Fla. 1st D.C.A. 1975). This power is not without limitation however. Agencies are created by the Legislature and they may not exercise power not specifically delegated to them. Roth v. State, 378 So.2d 794, 796 (Fla. 2nd D.C.A. 1980).
It is within the foregoing parameters that the validity of the Department's November 8, 1978 amendment to Rule 12B-5.01 will be examined.
The Department's general rule making authority is given at Section 206.59(1) which states:
(1) The department shall make rules and regulations, which shall have the force and effect of law, to govern reports and accounts by all persons dealing in or handling motor fuel for the purpose of
enabling the department to ascertain whether or not any motor fuels are being dealt with, handled, or
stored in this state under such circumstances as to become liable to the tax imposed by any law relating to a tax on motor fuel.
The specific statute purported to be implemented by the amendment is Section
Florida Statutes (1977). It imposes a tax of 8 cents per gallon on the sale or use of special fuels in Florida. It provides in pertinent part that:
An excise tax of 8 cents per gallon is hereby imposed upon every gallon of special fuel used
or sold in this state for use. Unless expressly provided to the contrary in this part, every sale shall be deemed to be for use in this state. This levy of tax is upon the consumer but shall be
paid upon the first sale or transfer of title within this state by a dealer except as expressly provided in this part, who shall act as
agent for the state in the collection of said tax whether he be the ultimate seller or not.
In paragraph (1) the statute clearly provides that every gallon of special fuel sold or used in Florida is taxed unless an exemption from tax can be met by the nature of the sale or use. Pioneer Oil Company, Inc. v. Department of Revenue,
381 So.2d 263 (Fla. 1st D.C.A. 1980); Belcher Oil Company v. Department of Revenue, 382 So.2d 793 (Fla. 1st D.C.A. 1980). The two exemptions which are relevant here are: (4)(a) and (b). They provide:
The following sales shall not be subject to the tax herein imposed:
Sales by a dealer when the special fuel is delivered for home, industrial, commercial, agricultural, or marine purposes, for consumption other than use, or for resale pursuant to paragraph (c) hereof.
Sales at the dealer's place of business of not more than 110 gallons by a dealer into a receptacle not connected to the fuel supply system of a motor vehicle for consumption other than use.
These exemptions, when construed in pari materia provide that: (1) if fuel is delivered at some location other than the dealer's place of business and is used for an exempt purpose, it may be sold in any quantity and be exempt from the proposed tax, and (2) if fuel is delivered at the dealer's place of business (not into a motor vehicle fuel tank) and is used for an exempt purpose in any amount less than 110 gallons, it will be exempt from the tax imposed.
It is a reasonable implication that for sales at a dealer's place of business of more than 110 gallons, the tax is imposed even though the fuel is ultimately used for an exempt purpose. Cf. Pioneer Oil Company, Inc. v. Department of Revenue, supra and Belcher Oil Company v. Department of Revenue, supra. This last conclusion is embodied in that part of the amendment which created Section 12B-5.01(7)(a) and (b), Florida Administrative Code. The Department has acted within its rule making power with respect to those two sub- paragraphs.
The change to Section 12B-5.01(3), Florida Administrative Code, as amended on November 8, 1978, presents a more difficult problem. It states:
(3) HOMES, INDUSTRIAL, COMMERCIAL, AGRICULTURAL OR MARINE. Any sale of special fuel by a licensed dealer, regardless of quantity, when such fuel is to be consumed exclusively for home, industrial, commercial, agricultural, or marine purposes, is exempt from
tax, provided the sale is made by a licensed dealer who delivers the fuel into the customer's storage facility, which must be located on the customer's premises, place of business or job site. (Emphasis added)
If read in isolation from the rest of Section 12B-5.01, new paragraph 3 would make all sales at a dealer's place of business taxable even though in an amount less than 110 gallons and for exempt purposes. The amendment would effectively nullify the exemption which the legislature provided at Section 206.87(4)(b) Florida Statutes (1977), for sales of less than 110 gallons. An agency may not nullify a statute by the promulgation of a rule. Department of Health and Rehabilitative Services v. McTigue, 387 So.2d 454 (Fla. 1st D.C.A. 1980); Cf.
James v. Florida Parole and Probation Commission, So.2d, Case No. ZZ-169 (Fla. 1st D.C.A., February 13, 1981); Ormond Hotel Corporation v. Department of Revenue, 2 FALR, 851A (Florida Division of Administrative Hearings, Final Order, June 10, 1980).
While the amendment to paragraph 3 of Section 12B-5.01 could be an invalid exercise of delegated legislative authority if considered alone, it must be construed in pari materia with the remainder of Section 12B-5.01, Florida Administrative Code. Under such a construction it is reasonable to interpret the broad language of paragraph 3 (which would make all sales taxable unless they were made off the dealer's place of business) as being restricted by the specific language provided in paragraph 7 of Section 12B-5.01. That construction of the amendment still preserves the exemption provided by the Legislature for sales of special fuel in amounts of less than 110 gallons at the dealer's place of business. Any attempt by the Department of Revenue to apply a contrary interpretation would make the amendment to paragraph 3 an invalid exercise of delegated legislative authority. Section 120.56, Florida Statutes (1979).
Rule Making Procedures
MTS alleges that when the Department adopted the amendment it failed to follow certain procedures required for rule making under Section 120.54 Florida Statutes (Supp. 1978). They include: inadequate notice of rule making; filing an inadequate economic impact statement; adopting the amendment on November 8, 1978 rather than on November 9, 1979; failing to file a detailed written statement of facts and circumstances justifying the amendment with the Secretary of State and with the Administrative Procedures Committee.
Inadequate Notice
Petitioner contends that the Department failed to give adequate notice of proposed rule making as required by portions of Section 120.54(1)(a), Florida Statutes, which state:
(1) Prior to the adoption,
amendment, or repeal of any rule not described in subsection (9), an agency shall give notice of its intended action, setting forth a short, plain explanation of the purpose and effect of the
proposed rule, a summary of the proposed rule, the specific legal authority under which its adoption is authorized and a summary of the estimate of the economic impact of the proposed rule on all persons affected by it. The notice shall contain the location where the text of the proposed rule or economic impact statement can be obtained if such text is not included in the notice.
(a) Except as otherwise provided in this paragraph, the notice shall be mailed to the
committee, to all persons named in the proposed rule, and to all persons who have made requests of the agency for advance notice of its proceedings at least 14 days prior to such mailing....
(Emphasis added)
Because the Department admits not mailing an individual notice of proposed rule making to each special fuel dealer in Florida, petitioner argues that notice was not mailed to "all persons named in the proposed rule". An interpretation of Section 120.54(1)(a) to mean that every individual within a class of persons named in the rule must be individually noticed is unreasonable. Such an interpretation would mean, for instance, that the Department of Education could not adopt a rule regulating the conduct of teachers without first mailing an individual notice to each teacher in the whole of Florida. The provision requiring notice to all persons named in a proposed rule is reasonably interpreted to mean those persons designated by name in the rule itself. In this case adequate notice of rule making was given by the Department by the publication of the requisite notice in the Florida Administrative Weekly on October 13, 1978.
Inadequate Economic Impact Statement
Due to the passage of time, the failure of the Department to file an adequate economic impact statement is no longer subject to question. The challenged amendment was adopted on November 8, 1978. Section 120.54(2)(c), Florida Statutes (Supp. 1980) states:
Failure to provide an adequate state- ment of economic impact is grounds
for holding the rule invalid; however, beginning October 1, 1978, no rule shall be declared invalid for want of an adequate statement of economic
impact unless the issue is raised in an administrative or judicial proceeding within 1 year of the effective date of the rule to which the statement applies.
The rule challenge petition by MTS was filed here on May 14, 1980 -- later than
1 year after November 8, 1978.
Adoption Date
Petitioner has also attacked the amendment because the notice in the Florida Administrative Weekly said that, "If requested, a hearing would be held on November 9, 1978," yet the Governor and the Cabinet actually adopted the amendment on November 8, 1978. This point is without merit because no hearing on the rule was ever requested by any party. The Department was therefore free to adopt the rule at any time after 21 days beyond October 13, 1973, the date the notice was published in the Florida Administrative Weekly. Agrico Chemical Company v. Department of Environmental Regulation, 365 So.2d 759, 764 (Fla. 1st
D.C.A. 1979).
Failure To File Justification Statement
Section 120.54(11)(a), Florida Statutes (Supp. 1978) requires:
The adopting agency shall file with the committee at least 21 days prior to the proposed adoption date, a copy of each rule it proposes to adopt, a detailed written statement of the facts and circumstances justifying the proposed rule.
When the Department filed its proposed amendment with the Administrative Procedures Committee it also filed a "Summary Justification Sheet" which said under the heading of "Justification", "Previous rules covering these 2 subsections were not clear. These amendments clarify the interpretation of Section 206.87(4)(a)(b), F.S. which provides for these 2 types of exempt sales." While the justification statement filed by the Department cannot be considered to be "detailed" as required by the statute, there was no evidence presented that any harm came from the inadequate justification statement. For this reason, it is concluded that the failure to comply with Section 120.54(11)(a) was harmless error. Florida-Texas Freight v. Hawkins, 379 So.2d 944 (Fla. 1980); School Board of Broward County v. Gramith, 375 So.2d 340 (Fla. 1st D.C.A. 1979); but see Department of Health and Rehabilitative Services v.
Delray Hospital Corporation, 373 So.2d 75 (Fla. 1st D.C.A.1979).
Section 120.54(11)(b), Florida Statutes (Supp. 1978) provides:
If the adopting agency is required to publish its rules in the Florida Administrative Code, it shall
file with the Department of State,
3 certified copies of the rule it proposes to adopt, a summary of the rule, a summary of any hearings
held on the rule, and a detailed written statement of the facts and circumstances justifying the rule.
According to the evidence presented at the hearing, no such justification concerning the amendment was filed with the Secretary of State. This too was harmless error. Florida-Texas Freight v. Hawkins, supra; School Board of Broward County v. Gramith, supra.
CONCLUSION
Section 12B-5.01(3) and (7)(a) and (b), Florida Administrative Code, as amended, is determined not to be an invalid exercise of delegated legislative authority. This conclusion is subject to the caveat that Section 12B-5.01(3) must be interpretated by the Department of Revenue in a manner not to conflict with the exemption set out in Section 206.87(4)(b), Florida Statutes (1977), and the Department's own rule, Section 12B-5.01(7)(a) and (b), Florida Administrative Code.
DONE and ORDERED this 25th day of March 1981, 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 25th day of March, 1981.
ENDNOTES
1/ Later revised to $4554.88 because, as announced at the final hearing, the parties reached a settlement on that part of the assessment relating to sales of less than 110 gallons.
2/ December 1, 1976 through December 31, 1979.
COPIES FURNISHED:
Warren S. Wepman, Esquire Carroll Webb
WEPMAN AND WEPMAN, P.S. Administrative Procedures El Dorado Committee
3636 Bougainvillea Road 120 Holland Building
Miami, Florida 33133 Tallahassee, Florida 32301
Linda C. Procta, Esquire Liz Cloud, Chief
Assistant Attorney General Bureau of Administrative Code Department of Legal Affairs 1802 Capitol Building
The Capitol, LL04 Tallahassee, Florida 32301 Tallahassee, Florida 32301
| Issue Date | Proceedings |
|---|---|
| Mar. 25, 1981 | CASE CLOSED. Final Order sent out. |
| Issue Date | Document | Summary |
|---|---|---|
| Mar. 25, 1981 | DOAH Final Order | Petitioner's challenge to rule insufficient to show it was in conflict with statute or other rules. Dismiss. |
CO-OP OIL COMPANY, INC. vs DEPARTMENT OF REVENUE, 80-000927RX (1980)
DEPARTMENT OF REVENUE vs JACK A. ROBINSON, 80-000927RX (1980)
WALKER OIL COMPANY vs. DEPARTMENT OF REVENUE, 80-000927RX (1980)
LINCOLN OIL COMPANY vs. OFFICE OF COMPTROLLER, 80-000927RX (1980)
JOHN L. BURKHEAD vs. DEPARTMENT OF REVENUE, 80-000927RX (1980)
