Judges: D. R. ALEXANDER
Agency: Department of Financial Services
Latest Update: Jan. 09, 1991
Summary: Application for refund on sales tax approved.
83-0065.PDFSTATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
OMNI INTERNATIONAL OF )
OF MIAMI, LTD., )
)
Petitioner, )
)
vs. ) CASE NO. 83-065
)
DEPARTMENT OF BANKING AND )
FINANCE, )
)
Respondent. )
)
RECOMMENDED ORDER
Pursuant to notice, a formal hearing was held in the above case before the Division of Administrative Hearings by its duly designated Hearing Officer, Donald R. Alexander, on March 23, 1983, in Miami, Florida.
APPEARANCES
For Petitioner: William L. Richey, Esquire and
Steven I. Peretz, Esquire 1401 AmeriFirst Building One Southeast Third Avenue Miami, Florida 33131
For Respondent: William G. Capko, Esquire
The Capitol, Suite 1302 Tallahassee, Florida 32301
BACKGROUND
On November 22, 1982, Respondent, Department of Banking and Finance, advised Petitioner, Omni International of Miami, Limited, that its applications for a sales tax refund in the amounts of $57,866.20 and $4,466.48 had been denied. These amounts represented the sales tax paid by Petitioner on electricity and natural gas consumed by its commercial tenants from April, 1978 through March, 1981.
Petitioner thereafter requested a formal administrative hearing to contest the denial of its application pursuant to Subsection 120.57(1), Florida Statutes. The matter was forwarded by Respondent to the Division of Administrative Hearings on January 5, 1983, with a request that a hearing officer be assigned to conduct a formal hearing.
By notice of hearing dated February 10, 1983, the final hearing was scheduled for March 23, 1983, in Miami, Florida. At the final hearing Petitioner presented the testimony of Don Paul, general manager for Petitioner, and offered Petitioner's Exhibits 1-3; all were received in evidence.
There is no transcript of hearing in this case. Proposed findings of fact and conclusions of law were filed by Petitioner and Respondent on March 23 and April 8, 1983, respectively, and have been considered by the undersigned in the preparation of this order. Findings of fact not included in this order were considered irrelevant to the issues, immaterial to the results reached, or were not supported by competent and substantial evidence.
The issue herein is whether Petitioner's applications for a sales tax refund in the amount of $62,332.68, plus interest, should be granted.
Based upon all of the evidence, the following findings of fact are determined:
FINDINGS OF FACT
Petitioner, Omni International of Miami, Limited (Omni), is the owner of a large complex located at 1601 Biscayne Boulevard, Miami, Florida. The complex is commonly known as the Omni complex, and contains a shopping mall, hotel and parking garage.
On July 30, 1981, Petitioner filed two applications for refund with Respondent, Department of Banking and Finance, seeking a refund of $57,866.20 and $4,466.48 for sales tax previously paid to the Department of Revenue on sales of electricity and gas consumed by its commercial tenants from April, 1978 through March, 1981.
On November 22, 1982, Respondent denied the applications. The denial prompted the instant proceeding.
The shopping mall portion of the Omni complex houses more than one hundred fifty commercial tenants, each of whom has entered into a lease arrangement with Omni. The utility companies do not provide individual electric and gas meters to each commercial tenant but instead furnish the utilities through a single master meter. Because of this, it is necessary that electricity and gas charges be reallocated to each tenant on a monthly basis. Therefore, Omni receives a single monthly electric and gas bill reflecting total consumption for the entire complex, and charges each tenant its estimated monthly consumption plus a sales tax on that amount. The utility charge is separately itemized on the tenant's bill and includes a provision for sales tax. Petitioner has paid all required sales taxes on such consumption.
The estimated consumption is derived after reviewing the number of electric outlets, hours of operations, square footage, and number and type of appliances and lights that are used within the rented space. This consumption is then applied to billing schedules prepared by the utility companies which give the monthly charge. The estimates are revised every six months based upon further inspections of the tenant's premises, and any changes such as the adding or decreasing of appliances and lights, or different hours of operations.
The lease agreement executed by Omni and its tenants provides that if Omni opts to furnish utilities through a master meter arrangement, as it has done in the past, the tenant agrees to "pay additional rent therefor when bills are rendered." This term was included in the lease to give Omni the right to invoke the rent default provision of the lease in the event a tenant failed to make payment. It is not construed as additional rent or consideration for the privilege of occupying the premises.
Omni makes no profit on the sale of electricity and gas. Rather, it is simply being reimbursed by the tenants for their actual utility consumption.
If the applications are denied, Petitioner will have paid a sales tax on the utility consumption twice -- once when the monthly utility bills were paid, and a second time for "additional rent" for occupancy of the premises.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction of the subject matter and the parties thereto pursuant to Subsection 120.57(1), Florida Statutes.
Section 212.031, Florida Statutes, requires landlords to impose a sales tax on the collection of rental receipts. Rent is defined as "all consideration due for the privilege of occupancy." Rule 12A-1.70(3) , Florida Administrative Code. Respondent's denial of the applications rests upon the premise that the lease instruments are controlling, and clearly reflect that the utility payments are additional rent. Therefore, it contends the payments are taxable in accordance with the foregoing rule. Petitioner generally counters that reimbursement for utility charges does not represent rent, that the payment of the tax would constitute an illegal pyramiding of the same, and that the use of the term "additional rent" in the lease does not change the tax consequences of the transaction.
Respondent's reasoning must fail for several reasons. First, Omni merely serves as a conduit or pass-through between the utility companies who furnish the utilities and the tenants who consume them, and receives no benefit from the transaction. As such, no consideration flows to Omni when the tenant pays for its own use of electricity and gas, and the payment cannot be construed to be consideration for the privilege of occupancy. This result is identical to one reached in Modern Plating Corp. v. Dept. of Revenue, DOAH Case No. 80-1295, Final Order entered 12-1-80, where a similar landlord-tenant arrangement was present. There the land-lord and tenant received electricity through a single master meter. The landlord paid the total bill and collected reimbursement from the tenant for its pro rata share of usage. The Department concluded that this arrangement of sharing electricity costs could not be deemed to be rent, particularly where the cost of electricity to the tenant was directly proportional to its use. The Department also agreed that the landlord received no consideration from the payment of utility charges by the tenant. Although Respondent urges that Modern Plating is inapplicable, the undersigned concludes that the principle therein is controlling and requires a similar result in the case at bar. 1/
Second, Subsection 212.081(3)(b), Florida Statutes, provides in pertinent part that:
It is also the legislative intent that there shall be no pyramiding or duplication of excise taxes levied by the state
under this chapter.
Here the Petitioner has already paid the total electric and gas charges and sales tax to the electric and gas companies. If the applications are denied, it must pay the sales tax a second time. To require Omni to pay the tax again would violate the statutory provision against double taxation. See Subsection 212.031(2)(b) Florida Statutes. Accord: Modern Plating, supra.
Finally, Respondent refers to several provisions in the lease instrument which characterize the payments in question as rent. But the evidence discloses that the parties to the lease made reference to the term "additional rent" only to give Omni the right to invoke the rent default provision in the lease. It was not intended to govern the tax consequences of the transaction. As such, form should be disregarded for substance, and the emphasis should be on economic reality. American Video Corp. v. Lewis, 389 So.2d 1059 (Fla. 1st DCA 1980); United Housing Foundation, Inc. v. Forman, 421 U.S. 837 (1975).
RECOMMENDATION
Based upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that Petitioner's applications for refund, with interest, be
approved.
DONE and RECOMMENDED this 15th day of April, 1983, in Tallahassee, Florida.
DONALD R. ALEXANDER
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 15th day of April, 1983.
ENDNOTE
1/ Respondent also relies upon the case of Red Lobster Inns of America, Inc.
v. Dept. of Revenue, DOAH Case No. 76-1245, Final Order entered on 5-17-77. However, that case involved the payment of ad valorem taxes vis a vis utility charges by the tenant, and was distinguished by the Department in Modern Plating, supra. Therefore, Respondent's reliance upon this case is misplaced.
COPIES FURNISHED:
William L. Richey, Esquire and Steven I. Peretz, Esquire
1401 AmeriFirst Building One Southeast Third Avenue Miami, Florida 33131
William G. Capko, Esquire The Capitol, Suite 1302 Tallahassee, Florida 32301
Honorable Gerald Lewis Comptroller, State of Florida The Capitol
Tallahassee, Florida 32301
Docket for Case No: 83-000065
Orders for Case No: 83-000065
