on December 3, 1980, in Tallahassee, Florida. The parties agree that the sole issue for determination at this hearing was whether the Respondent's proposed amendment to Rule 7A-10.26, Florida Administrative Code, constitutes an invalid exercise of delegated legislative authority in that it exceeds or is
contrary to the statutory language or legislative intent of Chapter 210, Florida Statutes.
For Petitioner J. Riley Davis
Company and 320 Barnett Bank Building Joseph J. Barone Post Office Box 1796
(Case No. 80-1505RP): Tallahassee, Florida 32302
For Petitioner Walter S. McLin, III
Florida McLine and Burnsed, P.A. Seminole Indian Post Office Drawer 1357 Tobacco Association and
(Case No. 80-1523RP): John Q. Chin
For Petitioner Jack M. Skelding, Jr. Seminole Tribe of Madigan, Parker, Gatlin, Florida Swedmark and Skelding (Case No. 80-1541RP): Post Office Box 669
For Respondent: Daniel C. Brown
Department of Business Regulation 725 Fourth Bronough Street Tallahassee, Florida 32301
By three separate petitions timely filed pursuant to Section 120.54(4), Florida Statutes, Barone Sales Company and Joseph J. Barone, the Florida Seminole Indian Tobacco Association and Seminole Tribe of Florida each challenge the validity of the Respondent's proposed amendments to Rule 7A-10.26, Florida Administrative Code. The proposed amendments would prohibit the sale of stamped but untaxed cigarettes by the Seminole Indian Tribe or its members to any person other than an enrolled member of such tribe or related tribes. The respondent Division of Alcoholic Beverages and Tobacco, Department of Business Regulation, moved to consolidate the three petitions for hearing purposes. There being no objection to said motion, the motion to consolidate was granted.
The Petitioner's contend that the Respondent's proposed amendments to Rule 7A-10.26, Florida Administrative Code, constitute an invalid exercise of delegated legislative authority. As grounds for this contention, it is alleged, inter alia, that the proposed rule exceeded and is in conflict with the statutory provisions of Chapter 210, Florida Statutes, that the economic impactment statement accompanying the proposed rule is insufficient and inadequate and that the respondent is estopped to adopt the proposed amendment. Prior to the hearing in this cause, all parties entered into a "Stipulation as to Procedure, " agreeing to bifurcate these proceedings as to the issues and to initially present the cases to the Hearing Officer for the sole determination as to the statutory authority under Chapter 21, Florida Statutes, for the proposed rule. The undersigned agreed to this procedure and this Order is confined
solely to the issue of whether the contents of the proposed rule, specifically Section 7A-10.26(8), contravenes or is in excess of the Respondent's statutory authority under Chapter 210, Florida Statutes. It should be noted that subsequent to the filing of the petitioners in these cases, the respondent has changed the language of proposed subsections (9) and (10) of the proposed rule. Inasmuch as this change is not relevant to the issue for determination herein, it will not be discussed in this Order.
Upon consideration of the parties' joint stipulation of facts, the following relevant facts are found:
The Seminole Indian Tribe is a federally recognized tribe organized under the Indian Reorganization Act of June 18, 1934, (25 U.S.C. Section 475) with an adopted and approved constitution and bylaws.
Pursuant to ordinance all cigarette sales are conducted by retail outlets licensed and taxed by the Seminole Tribe of Florida. These retail outlets lease property from the Seminole Tribe on lands which are part of the Seminole Indian Reservation. This is Federal Indian Reservation land held in trust for the Seminole Tribe and managed by the Bureau of Indian Affairs.
The Florida Seminole Indian Tobacco Association is a nonprofit association of Seminole Indian merchants who operate cigarette shops on the Seminole Indian Reservation in the State of Florida. These merchants buy cigarettes from wholesalers and sell them at retail to the general public. The members of the association do not collect or pay any cigarette tax to or for the benefit of the State of Florida.
In early 1977 certain enrolled members of the Seminole Tribe of Florida contacted the respondent, through the agency hear, Charles A. Nuzum, with respect to the Indian Smoke Shops' sale of untaxed cigarettes to members of the public. At that time the respondent agreed that such sales were legal and were not taxable. The relevant portions of Chapter 210, Florida Statutes, relating to cigarette taxes were then identical to Chapter 210 as it exists today, with the exception of Section 210.05(5), effective June 29, 1979.
Prior to 1979, the cigarettes sold to the public by the Indians were shipped in by common carrier from the State of Alabama. The respondent knew that such cigarettes sold to the general public did not bear indicia of the payment of the Florida cigarette excise or privilege tax and knew that the tax was not collected or remitted by the retail dealers or by the Seminole Tribe of Florida. Nor was the tax collected or remitted by wholesalers outside of the State of Florida.
The respondent was sued in the Circuit Court of Leon County, Florida, in the case of Vending Limited, Inc., d/b/a Ace Saxon, a Florida corporation, and Edward J. Stack, Plaintiffs, v. State of Florida, Department of Business Regulation, Division of Alcoholic Beverages and Tobacco, and Charles A. Nuzum, Director, Defendants; Case No. 77-1933. The legal position of the Department in that case was that no cigarette tax was due.
Senate Bill 981 was introduced in the Florida Legislature on April 20, 1979. It subsequently passed the House and Senate, was approved by the Governor on June 29, 1979, and became Chapter No. 79-317, Laws of Florida. Relevant
portions of Chapter 79-317, Laws of Florida, are now codified as Section 210.05(5), Florida Statutes, 1979, which reads as follows:
210.05 Preparation and sale of stamps; discount.--
* * *
(5) Agents or wholesale dealers may sell stamped but untaxed cigarettes to the Seminole Indian Tribe or to members thereof, for retail sale. Agents or wholesale dealers
shall treat such cigarettes and the sale thereof in the same manner, with respect to reporting and stamping, as other sales under this chapter,
but agents or wholesale dealers shall not collect from the purchaser the tax imposed by s. 210.02. The purchaser hereunder shall be responsible to the agent or wholesale dealer for the services and expenses incurred in affixing the stamps and accounting therefor.
Prior to the enactment of this statute, Florida wholesalers were prohibited from offering for sale or use any cigarettes which did not bear a stamp indicating payment of the required state tax.
During the time that Senate Bill 981 was pending in the Legislature and after it became law, the respondent interpreted its language to provide that licensed Florida wholesalers could sell stamped but untaxed cigarettes to Seminole Indian retailers. The Respondent knew that such cigarettes would be resold to the general public.
Pursuant to its interpretation of Section 210.05(5), Florida Statutes, the Department initiated rulemaking proceedings and adopted Rules 7A-10.26(1) through (7), Florida Administrative Code. Those rules provide that licensed Florida wholesalers can sell stamped but untaxed cigarettes to Seminole Indian retailers. The Division knew at the time the rules were adopted and knows now that such cigarettes would be resold to the general public.
Since the enactment of Section 210.05(5), Florida Statutes, and Rules 7A-10.26(1) through (7), Florida Administrative Code, Seminole Indian retailers, with the full knowledge and agreement of the Department, have purchased cigarettes from Florida wholesalers bearing a stamp and the replica of an Indian heard indicating that no tax had been paid on these cigarettes. The cigarettes were stamped and records were kept in order to prevent bootlegging of untaxed cigarettes. Department personnel trained Seminole Indian retailers in the proper record-keeping procedures to be sued by said retailers to ensure that the cigarettes actually received by the Indian retailers were commensurate with the amount of cigarettes listed on the wholesalers reports forwarded to the Department.
The number of retail cigarette dealers on the Seminole Indian Reservation has increased from the one initial dealer in 1977 to 18 dealers now licensed by the Seminole Tribe of Florida. The number of cartons sold by said Indian dealers has increased from an average of approximately 120,000 cartons per month in 1977 to approximately 4000,000 cartons per month at the present time.
Petitioner Barone Sales Company has been licensed by the respondent as a wholesale dealer of cigarettes in the State of Florida and, since the enactment of Section 210.05, Florida Statutes, has sold stamped but untaxed cigarettes to the Seminole Indian Tribes located in Florida for resale. During this period of time, Barone Sales Company has not remitted any cigarette taxes to the respondent as a result of the sale of cigarettes to the Indians, even though many of the cigarettes were being sold to members of the general public by the Indians. Furthermore, the respondent has not requested Barone Sales Company to remit an cigarette taxes on these sales. Said sales were made with the full knowledge of the respondent.
During this same period of time, the Seminole Indian Tribes have sold these cigarettes at retail to Indians and to the general public without collecting any taxes on such sales. The respondent has not requested or demanded that they do so. Said sales were made with the full and complete knowledge of the respondent.
Since Section 210.05(5), Florida Statutes, became law and since the adoption of current Rule 7A-10.26(1) through (7), Florida Administrative Code, there has been no change in the Florida statutory law relevant to this matter; there has been no change in Florida case law relevant to this matter; and there have been no factual changes relevant to this matter.
On June 10, 1980, the Supreme Court of the United States rendered its decision in the case of Washington v. Confederated Tribes of the Colville Indian Reservation, 447 U.S. , 65 L. Ed. 2d 10, 100 S. Ct. 2069, 48 U.S.L.W. 4668. This decision by the United States Supreme Court is the sole motivating factor for the Respondent's decision to amend Rule 7A-10.26, Florida Administrative Code, as now proposed.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction of this matter pursuant to Section 120.54(4), Florida Statutes. The facts illustrate and the respondent has so stipulated that the three petitioners have standing to seek an administrative determination of the validity of Respondent's proposed Rule 7A-10.26(8)-(12), Florida Administrative Code.
The Respondent's present Rule 7A-10.26, Florida Administrative Code, is entitled "Sale of Stamped, untaxed cigarettes by stamping agents or wholesale dealers to Indians for retail sale, reporting." The rule contains seven paragraphs, the first two paragraphs reading as follows:
Stamping agents or wholesale dealers may sell stamped but untaxed cigarettes only to Indians on Indian reservation or lands for retail sale when such cigarettes are stamped with a meter imprint and ink
or water applied stamp indicia designated and approved by the Division.
Such cigarettes stamped and designated by the stamping agent or wholesaler for sale to Indians on Indian reservation or lands may
not be sold or transferred to any other person.
The remaining five paragraphs of the existing rule relate primarily to the reporting duties of the stamping agent or wholesaler.
The challenged proposed rule attempts to amend the existing rule by creating five more subsections numbered (8) though (12). While all the proposed amendatory paragraphs are being challenged in this proceeding, it is proposed paragraph (8) which constitutes the gravamen of the petitioners' challenge of lack of statutory authority. Proposed Rule 7A-10.26(8) reads:
"(8) Nothing in this rule shall be construed to permit the sale of stamped but untaxed cigarettes by the Seminole Indian Tribe or its members to any person other than an enrolled member of such tribe or related tribes. Persons in possession of stamped but untaxed cigarettes except as herein provided shall be subject to arrest and the penalties provided in Section 210.18, Florida Statutes.
Stated in summary form, it is the position of the petitioners that the respondent has no statutory authority to prohibit the sale by the Seminole Indian Tribe or its members of stamped but untaxed cigarettes to members of the general public. The respondent argues that Chapter 210, Florida Statutes, exempts only the wholesaler from payment of the cigarette tax when selling cigarettes to Indian retailers, and does not exempt from taxation Indian retailers' sales to the general public.
In its contentions of validity of the proposed challenged rule, the respondent has asked the undersigned to review the legislative history and scheme of taxation set forth in Chapter 210, Florida Statures, to declare the most recent Florida case law1 as to the incidence of taxation to be in error, to disregard the plain wording of Section 210.05(5), Florida Statutes, and to disregard the respondents's own existing rule and prior interpretation and implementation of the same statutes. The undersigned declines to take such a strained approach to a basically simple problem.
The law being implemented by the proposed amendments to Rule 7A-10.26 are stated by the respondent to be Sections 210.05(5), 210.09, and 210.18(4)(b), (5)(b), (6)(c), (7) and (8), Florida Statutes. Section 210.09, Fla. Stats., relates to required record-keeping and reports. While it is relevant to the remaining proposed amendatory paragraphs, it is not relevant to the contents of paragraph (8) which prohibits the sale of untaxed cigarettes by Indians to non- Indians. Section 210.18, Fla. Stats., sets forth the penalties for violations of the cigarette tax laws. Such penalties for violations of the cigarette tax laws. Such penalties only apply to those who are in possession of cigarettes upon which a tax is imposed by the cigarette law. Thus, the crucial issue which is determinative in this proceeding is whether the statutes authorize a tax to be imposed upon cigarettes sold by Indians to non-Indians. To make this determination, one need only look to the remaining law being implemented by proposed rule. Section 210.05(5), Florida Statutes. That statute has been set forth in full in Paragraph (7) of the Findings of Fact above. The pertinent, controlling portion is the first sentence, which reads as follows:
"Agents or wholesale dealers may sell stamped but untaxed cigarettes to the Seminole Indian Tribe, or to members thereof, for retail sale."
The term "retail sale" is defined in Section 210.01(4), Florida Statutes, as meaning "a sale to a consumer or to any person for any purpose other than
resale." Had the Legislature intended to allow the sale of stamped but untaxed cigarettes to the Seminole Indian Tribe only when the Tribe sold such cigarettes to other members of the Tribe, it would not have used the term "for retail sale." That term carries a specific definition is Chapter 210, Florida Statutes; to wit: "a sale to a consumer or to any person for any purpose other than resale." It must be assumed that the Legislature knew meaning of the language it used in the statute and that it expressed its intent by the use of the words found in Section 210.05(5). S.R.G. Corp. v. Dept. of Revenue, 365 So.2d 687 (Fla. 1978); Thayer V. State v. Dept. of Revenue, 365 So.2d 687 (Fla. 1978); Thayer v. State, 335 So.2d 815 (Fla. 1976). A statute must be given its plain and obvious meaning where the language of the statute is clear and unambiguous. Union Camp Corp. v. Seminole Forest Water Management District, 302 So.2d 419 9 (Fla. 1st DCA, 1974). If the Legislature had intended to tax cigarettes sold by the Indians to the general public as proposed Rule 7A- 10.26(8) purports to do, it would have been a simple matter for the following underlined words to be added to the first sentence of Section 210.05(5):
"Agents or wholesale dealers may sell stamped but untaxed cigarettes to the Seminole Indian Tribe, or to members thereof, for retail sale only to the Seminole Indian Tribe or to members thereof."
The regulatory scheme under the Florida cigarette tax laws places the burden on the Florida wholesaler to prepay the tax due on any cigarettes whenever the cigarettes are purchased from the wholesaler by a retailer located in Florida. Section 210.02(6), Fla. Stats. Once the retailer has purchased cigarettes from the Florida wholesaler, the retailer is free to sell them to whomever it pleases. Prior to 1979 and the enactment of Section 210.05(5), a Florida wholesaler was not authorized to sell untaxed cigarettes to any retailer, and the Seminole Indian Tribe therefore purchased their untaxed cigarettes from outside the State of Florida. Section 210.05(5) was enacted in 1979 to authorized Florida wholesale dealers to sell stamped but untaxed cigarettes to the Seminole Indian Tribe "for retail sale," and prohibited the wholesaler from collecting the tax from the Seminole Indian Tribe. The statute itself could be no more clear or unambiguous. An administrative rule which attempts to amend the authorizing statutory language is clearly invalid.
The parties have stipulated that the sole motivating factor for proposed Rule 7A-10.26(8)-(12) is the United States Supreme Court's decision in the case of Washington v. Conferated Tribes of the Colville Indian Reservation,
447 U.S. , 65 L. Ed 2d 10, 100 S. Ct. 2069 (1980). That case primarily dealt with the issue of whether, under principles of federal Indian Law, a state may legitimately impose a tax on cigarette sales by Indian tribes to non-Indians on Indian reservations. The Court concluded that, as long as the incidence of the tax does not fall on the Indians, a state may legitimately impose a tax on cigarettes sold by Indians to non-Indians. Thus, while it may be possible that the State of Florida, through the Legislature, could enact a law taxing cigarette sales by the Seminole Indian Tribe to members of the general public, that is not the issue in this proceeding. The issue is whether existing Florida law is authority for the proposed amendments to Rule 7A-10.26, Florida Administrative Code. The undersigned concludes from the plain language of the authorizing statute, Section 210.05(5), that existing Florida law does not authorize the imposition of the tax. The recent Colville case, decided in June of 1980, cannot supply the authority lacking in the statutes.
The respondent argues that the Legislature, the District Coiurt of Appeals, First District in the Vending, Unlimited case, supra, and the respondent itself previously misinterpreted the federal tax immunity law with regard to cigarette sales by Indians to the general public, and that the proposed amendment to Rule 7A-10.26 is simply an attempt to rectify this situation. If that be true, such a change in the law must come from the Legislature itself, and not from the agency charged with implementing the legislative directive. An administrative agency may not legislate. Its rules and regulations may not add to or vary the nature or the extent of the authority conferred upon it by statute. As stated in Dept. of Health and Rehabilitative Services v. Florida Psychiatric Society, Inc. etc. 382 So.2d 1280, at 1285 (Fla. 1st DCA, 1980):
"Administrative regulations must be consistent with the statutes under which they are promulgated, and they may not amend, add to, or repeal the statute."
Also, the Respondent's argument that the Legislature misinterpreted the federal law simply lends weight to the petitioners' contention and the undersigned's interpretation of the unambiguous language used in Section 210.05(5) that the Legislature had no intent to tax the sales of cigarettes by the Indians to the general public.
In order to uphold the validity of the challenged proposed rule, one would be required either to add words to the statutory language of Section 210.05(5) or to ascribe to the words used a definition different than and contrary to that contained in the definitional section of Chapter 210, Florida Statutes. One would also have to assume that the Legislature intended such a strained construction of the clear language used in the statute. The absurdity of such an approach is apparent.
In conclusion, it is found that proposed Rule 7A-10.26(8) exceeds the Respondent's delegated legislative authority under Chapter 210, Florida Statutes, and is therefore invalid. Paragraphs (11) and (12) of the proposed rule are attempts to implement the invalid paragraph (8) and they too are invalid. No ruling is made with regard to proposed paragraphs (9) and (1) inasmuch as the proposed wording of those paragraphs haven't been changed by the respondent since the filing of the petitions in these consolidated proceedings.
