STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
SOUTH FLORIDA BEVERAGE ) CORPORATION, d/b/a PEPSI-COLA ) BOTTLING COMPANY OF MIAMI, )
)
Petitioner, )
)
vs. ) CASE NO. 84-2710
)
DEPARTMENT OF REVENUE, )
)
Respondent. )
)
RECOMMENDED ORDER
Pursuant to Noticed this cause was heard by Linda M. Rigot the assigned Hearing Officer of the Division of Administrative Hearings, on August 20, 1985, in Tallahassee, Florida.
Petitioner South Florida Beverage Corporation, d/b/a Pepsi-Cola Bottling Company of Miami, was represented by Daniel L. Rubin, Esquire, Chestnut Hill, Massachusetts and Respondent Department of Revenue was represented by Linda Lettera, Assistant Attorney General, Tallahassee, Florida.
By Petition for Chapter 120 Hearings Petitioner contests the legality of Respondent's sales and use tax assessment covering an audit period of April 1, 1979, through June 30, 1983. Previous to filing its Petition Petitioner/Taxpayer agreed to all of the assessed taxes except those taxes assessed on rental payments paid by or charged to Petitioner under a lease dated June 2, 1969. Petitioner therefore made payment in partial satisfaction of the assessment, and the issue remaining for determination herein is whether additional tax in the amount of $32,873.18 plus penalties and interest is due to Respondent.
Prior to the final hearing, the parties filed a Stipulation of Facts and agreed that the final hearing in this cause would be limited therefore, to the introduction of exhibits and to argument of counsel. At the final hearings however, only Joint Exhibit numbered 6 was available and admitted in evidence. Although the parties were granted leave to file Joint Exhibits numbered 1-5 post hearing, the parties' proposed joint exhibit numbered 3 was not tendered for filing with the remainder of the late-filed exhibits and has not been tendered for filing as an exhibit to date. Accordingly, only Joint Exhibits numbered 1, 2, 4, 5, and 6 have been admitted as evidence in this cause.
Both parties have submitted proposed findings of fact which set forth only some of the facts which were stipulated to as the relevant facts necessary to fully understand and dispose of this matter. Accordingly each of Petitioner's
unnumbered proposed findings of fact and Respondent's proposed findings of fact numbered 1-11 have been rejected as being incomplete and unnecessary; rather, the complete and undisputed facts as contained in the stipulation of Facts filed herein are adopted and reproduced herein verbatim including the Definitions contained therein and therefore stipulated to by the parties.
STIPULATED FINDINGS OF FACT DEFINITIONS
Because of the complexity of the structuring of the transaction at issue, the following references will be used throughout in order to assist the reader in keeping track of the various items and corporate entities involved.
Taxpayer: South Florida Beverage Corp. a Florida Corporation incorporated on December 28, 1967 is the operating entity of the Pepsi Facility.
Pepsi Facility: The plant and equipment located at 7777 NW 41st Street, Miami Florida from which Pepsi-Cola and other soft drink products are manufactured and distributed.
Holiday: Holiday General Corporation, a Massachusetts Corporation, the sole stockholder of Taxpayer and a wholly owned subsidiary of General Cinema Corporation.
GC-H: GC-H Corporation, a Delaware Corporation is the owner of the Pepsi Facility.
GCC: GCC Beverages of Mass., Inc., a Massachusetts Corporation. A wholly owned subsidiary of General Cinema which functions as the Home Office for Taxpayer, Holiday and other bottling corporations throughout the country which, in the aggregate, constitute the "Beverage Division," so-called, of General Cinema.
ABC: American Beverage Corporation, a Delaware Corporation, which through controlled subsidiaries previously owned and operated the Pepsi Facility and other non-Florida soft drink bottling plants.
The tax assessment at issue covers the audit period between April 1, 1979 through June 30, 1983.
During the latter part of the 1960's General Cinema entered into negotiations with ABC with an eye to acquiring its bottling plants and franchises. At the time, ABC owned, or through its subsidiaries controlled, the Pepsi facility and plants in Dayton, Youngstown, and Akron, Ohio.
On or about March 11, 1968, after successfully reaching agreement with ABC stockholders, General Cinema caused Holiday to purchase the stock of ABC for a price of approximately twelve million dollars ($12,000,000.00). The purchase price was paid in cash.
Shortly thereafter, Holiday merged with ABC and its subsidiaries and became the owner of the Pepsi Facility along with the Dayton, Youngstown, and Akron plants. With the exception of a small existing mortgage on the Pepsi Facility Holiday ended up owning all of its newly acquired assets unencumbered.
In conjunction with this acquisition, Taxpayer which had recently been incorporated, was activated by an issuance of its stock to Holiday and commenced to operate the Pepsi Facility.
Inasmuch as Holiday now owned twelve million dollars ($12,000,000.00) worth of highly leveragable assets virtually unencumbered, it was highly desirous of refinancing the same. To this end, it sought the assistance of Haas Financial Corporation, a large mortgage broker who routinely acted as a middle man in structuring financial arrangements between would be borrowers and institutional lenders.
Haas was successful in securing financial commitments from a consortium of eight insurance companies who, in the aggregate, agreed to loan approximately eleven million seven hundred thousand dollars ($11,700,000.00). The transaction was a sale and lease-back arrangement entered into in July 1969.
The main aspects of this arrangement were as follows:
GC-H was created by Haas Financial Corporation and/or its principals;
GC-H borrowed eleven million seven hundred thousand dollars ($11,700,000.00) from the insurance companies,
GC-H used the proceeds received to "purchase" the Pepsi Facility and those in Ohio from Holiday,
The assets acquired were pledged as security for the institutional loans,
GC-H then leased back to Holiday under a long-term lease . . . the properties and assets involved,
General Cinema guaranteed Holiday's payments under the Lease . . .
GCC on behalf of Holiday and the other lessees pays to GC-H all amounts due under the Lease. GCC charges back to Taxpayer
and the other corporations their pro rate share of the payments.
The Pepsi Facility and the other plants are owned by GC-H.
The lease assets for book purposes have
been capitalized. This is the same treatment the Taxpayer uses for its other leased assets under lease-purchase agreements and is a common practice under lease-purchase arrangements.
The Lease . . . covers the real estate and personal property of the Pepsi Facility and the Ohio locations. It was entered into in June, 1969 and runs for a basic term of eighteen (18) years through June, 1987. According to paragraph 2 of the Lease, the Lease may be extended, at the Lessee's option, for not more than six (6) consecutive extended terms; the first extended term to be for ten (10) years and the five subsequent extended terms to be for five (5) years each.
Basic rental payments under the Lease for all of the properties are set forth in paragraph 3 of the Lease and amount to approximately $300,000.00 quarterly or $1,200,000.00 a year. The Pepsi Facility represents forty percent (40 percent) of the leased assets. Accordingly the Taxpayer is charged through inter-company billings for forty percent of the basic rent (which is forty thousand dollars [$40,000.00] a month or four hundred eighty thousand dollars [$480,000.00] a year).
Pursuant to paragraph 22 of the Lease, at the end of the initial basic term the Lessee, Holiday has an option to purchase all of the properties subject to the Lease by paying to Lessor (GC-H) a purchase price in cash equal to the amount specified in said paragraph of the Lease.
Pursuant to the terms of paragraph 23.3 of the Lease, if the Lessee, Holiday elects to purchase the property, the Lessor, GH-C [sic], promises to convey such property to Lessee by quitclaim deed, bill of sale and other necessary instruments and, if requested by Lessee, promises to obtain and deliver to Lessee an instrument releasing such property from the lien of the mortgage on the property.
Pursuant to paragraph 36 of the Lease, there is no merger of the Lease nor of the leasehold estate created by the Lease with the fee estate in the properties or any part thereof. unless there is a written instrument effecting such merger executed as specifically provided in said paragraph 36.
At all times material hereto fee simple record title to the property herein known as the Pepsi Facility was in the name of GC-H Corporation.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties hereto and the subject matter hereof. Section 120.57, Florida Statutes.
The sole issue for resolution in this case is whether the rental payments made by Petitioner for use and occupancy of the Pepsi Facility are subject to the rental tax imposed pursuant to Sections 212.031 and 212.05, Florida Statutes.
With reference to the lease or rental of real property, Section 212.031, Florida Statutes; provides as follows:
(1)(a) It is declared to be the legislative intent that every person is exercising a taxable privilege who
engages in the business of renting, leasing, or letting any real property unless such property is:
Assessed as agricultural property under s. 193.461.
Used exclusively as dwelling units.
Property subject to tax on parking, docking, or storage spaces under s.212.03(6).
* * *
For the exercise of such privilege, a tax is levied in an amount equal to 5 percent of and on the total rent charged for such real property by the person charging or collecting the rental.
* * *
(2)(a) The tenant actually occupying, using, or entitled to the use of any property the rental from which is subject to taxation under this section shall pay the tax to his immediate landlord or other person granting the right to such
tenant to occupy or use such real property.
With reference to the lease or rental of tangible personal property, Section 212.05; Florida Statutes, provides as follows:
It is hereby declared to be the legislative intent that every person is exercising a taxable privilege who engages in the business of selling tangible personal property at retail in this state, or who rents or furnishes any of the things or services taxable under this chapter, or who stores for use or consumption in this state any item or article of tangible personal property as defined herein and who leases or rents such property within the state.
(1) For the exercise of such privilege a tax is levied on each taxable transaction or incident, which tax is due and payable as follows:
* * *
At the rate of 5 percent of the lease or rental price paid by a lessee or rentee, or contracted or agreed to be paid by a lessee or rentee, to the owner of the tangible personal property.
Tangible personal property is defined for purposes of Chapter 212, Florida Statutes, in Section 212.02(12) to mean and include personal property which can be seen, weighed, measured, touched or which is in any manner perceptible to the senses. There can be no dispute that the plant machinery and equipment leased herein constitute "tangible personal property" within the purview of Section 212.02(12), Florida Statutes.
The taxes at issue are taxes imposed on the privilege of leasing property in the state of Florida. Petitioner contends that no one involved in Petitioner's sale and lease-back transaction is engaged in the business of renting or leasing real or personal property in the state of Florida, and, therefore, no taxes should be due. However, Section 212.02, Florida Statutes, which defines various terms for the purpose of Chapter 212 specifically provides in subsection (9) as follows:
"Business" means any activity engaged in by any person, or caused to be engaged in by him, with the object of private or public gain, benefit, or advantage, either direct or indirect. [T]he
term 'business' shall not be construed in this chapter to include occasional or isolated sales or transactions involving tangible personal property by a person who does not hold himself out as engaged in business, but includes other charges for the sale or rental of tangible personal property, *** and all rentals
of real property. . . .
The statutory definition for "business" is very broad. Moreover, the term business specifically is defined to include charges for the rental of tangible personal property and all rentals of real property. Thus, it would appear from the above statutory language that both GC-H and Holiday engage in the business of leasing real and personal property in the State of Florida and the rental payments made pursuant to the Lease agreement at issue are subject to the taxes imposed by Sections 212.031 and 212.05, Florida statutes, unless there exists an applicable statutory exemption from the tax.
Petitioner has taken the position that at least part of the leasing arrangement at issue qualifies as an occasional or isolated transaction involving tangible personal property entitled to an exemption pursuant to Section 212.02(9), Florida Statutes. However, exemptions from taxing statutes are express favors granted by the legislature and are to be strictly construed against the taxpayer.
The Lease agreement at issue herein was entered into in 1969 to continue for a basic term of 18 years with provision for extension of the Lease arrangement for an additional 35 years. The whole of the transaction structured as a sale and lease-back indicates a very sophisticated, comprehensive, and continuing business arrangement between corporate entities and not the random or infrequent transaction contemplated by the occasional and isolated exemption provisions contained in Section 212.02(9), Florida Statutes. GC-H, the lessors was created for the single purpose of effectuating the sale and lease-back, its leasing arrangement is not casual and isolated. See Central Phosphates, Inc. v. Lewis, etc., DOAH Case No. 78-1221, per curiam aff'd 379 So.2d 211 (Fla. 1st DCA 1979). Holiday, the sub-lessor, although primarily engaged in another business, is as to this Petitioner, engaged in the business of leasing or subleasing the Pepsi Facility. In addition, the subject long-term lease, by reason of continuity and systematic recurrence prevents this transaction from being occasional and isolated within the meaning of the exemption provisions of the sales and use tax statutes. Green v. Pederson, 99 So.2d 292 (Fla. 1957). Both GC-H and Holiday engage in the business of leasing real and tangible personal
property in the state of Florida and that leasing does not qualify as an occasional or isolated transaction entitled to exemption under Section 212.02(9), Florida Statutes.
Section 212.031(2)(a) Florida Statutes, imposes the tax at issue on the tenant. Section 212.031(2)(b), Florida Statutes, prohibits the state from collecting more than one tax on the rental or use of property and prohibits the pyramiding of taxes. This is consistent with Respondent's position. Only Petitioners as the tenant of the Pepsi Facility, is liable for the rental taxes at issue.
Petitioner's argument that a different structuring of the transaction herein via, for example, a conventional mortgage would have prevented Respondent from assessing its tax deficiency, even if true, is irrelevant since Petitioner did not utilize a conventional mortgage. Likewise irrelevant is Petitioner's argument that it has changed its method of paying the charges required under the lease-- it is the reason for payment and not the method of payment that is dispositive here.
Petitioner's request for relief includes a refund or credit for taxes erroneously paid with respect to the subject dispute. Nowhere in the record in this cause does Petitioner specify what it is referring to; moreover, even if Petitioner had proven entitlement to a refund or credits Petitioner has failed to either plead or prove compliance with section 215.26, Florida Statutes.
Based upon the foregoing Stipulated Findings of Fact and the foregoing Conclusions of Law, it is recommended that a Final Order be entered assessing delinquent taxes against Petitioner in the amount of $32,873.18, plus penalties and interest.
DONE and ORDERED this 27th day of February, 1986, at Tallahassee Florida.
LINDA M. RIGOT, 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 27th day of February 1986.
COPIES FURNISHED:
Daniel L. Rubin, Esquire GCC Beverages, Inc.
Box 500, 1300 Boyston Street Chestnut Hill, Massachusetts 02167
Linda Lettera, Esquire Department of Legal Affairs The Capitol, Suite LL04 Tallahassee, Florida 32301
William D. Townsend, General Counsel Department of Revenue
104 Carlton Building Tallahassee, Florida 32301
Randy Miller, Executive Director Department of Revenue
104 Carlton Building Tallahassee, Florida 32301
=================================================================
AGENCY FINAL ORDER
=================================================================
DEPARTMENT OF REVENUE, STATE OF FLORIDA TALLAHASSEE, FLORIDA
SOUTH FLORIDA BEVERAGE ) CORPORATION, d/b/a PEPSI-COLA ) BOTTLING COMPANY OF MIAMI, )
)
Petitioner, )
)
v. ) CASE NO. 84-2710
)
DEPARTMENT OF REVENUE, )
)
Respondent. )
)
FINAL ORDER OF THE DEPARTMENT OF REVENUE
This Cause came on to be heard before Randy Miller, Executive Director of the Department of Revenue, at a hearing on May 21, 1986 at 10.00 A.M., in Room
103 Carlton Building, Tallahassee, Florida.
Pursuant to Notice, this cause was heard by Linda M. Rigot, the assigned Hearing Officer of the Division of Administrative Hearings, on August 20, 1985, in Tallahassee, Florida.
Petitioner South Florida Beverage Corporation, d/b/a Pepsi Cola Bottling Company of Miami, was represented by Daniel L. Rubin, Esquire, Chestnut Hill, Massachusetts, and Respondent Department of Revenue, was represented by Linda Lettera, Assistant Attorney General, Tallahassee, Florida.
By Petition for Chapter 120 Hearing, Petitioner contests the legality of Respondent's sales and use tax assessment covering an audit period of April 1, 1979, through June 30, 1983. Previous to filing its Petition, Petitioner/Taxpayer agreed to all of the assessed taxes except those taxes assessed on rental payments paid by or charged to Petitioner under a lease dated June 2, 1969. Petitioner therefore made payment in partial satisfaction of the assessment, and the issue remaining for determination herein is whether additional tax in the amount of S32,873.18 plus penalties and interest is due to Respondent.
Prior to the final hearing, the parties filed a Stipulation of Facts and agreed that the final hearing in this cause would be limited, therefore, to the introduction of exhibits and to argument of counsel. At the final hearing, however, only Joint Exhibit numbered 6 was available and admitted in evidence. Although the parties were granted leave to file Joint Exhibits numbered 1-5 post hearing, the parties' proposed joint exhibit numbered 3 was not tendered for filing with the remainder of the late-filed exhibits and has not been tendered for filing as an exhibit to date. Accordingly, only Joint Exhibits number 1, 2, 4, 5, and 6 have been admitted as evidence in this cause.
Both parties have submitted proposed findings of fact which set forth only some of the facts which were stipulated to as the relevant facts necessary to fully understand and dispose of this matter. Accordingly, each of Petitioner's unnumbered proposed findings of fact and Respondent's proposed findings of fact numbered 1-11 have been rejected as being incomplete and unnecessary; rather the complete and undisputed facts as contained in the Stipulation of Facts filed herein are adopted and reproduced herein, verbatim, including the Definitions contained therein and, therefore, stipulated to by the parties.
STIPULATED FINDINGS OF FACT DEFINITIONS
Because of the complexity of the structuring of the transaction at issue, the following references will be used throughout in order to assist the reader in keeping track of the various items and corporate entities involved.
Taxpayer: South Florida Beverage Corp., a Florida Corporation incorporated on December 28, 1967 is the operating entity of the Pepsi Facility.
Pepsi Facility: The plant and equipment located at 7777 NW 41st Street, Miami, Florida from which Pepsi-Cola and other soft drink products are manufactured and distributed.
Holiday: Holiday General Corporation, a Massachusetts Corporation, the sole stock bolder of Taxpayer and a wholly owned subsidiary of General Cinema Corporation.
GC-H: GC-H Corporation, a Delaware Corporation is the owner of the Pepsi Facility.
GCC: GCC Beverages of Mass., Inc., a Massachusetts Corporation. A wholly owned subsidiary of General Cinema which functions as the Home Office for Taxpayer, Holiday and other bottling corporations throughout the country which, in the aggregate, constitute the "Beverage Division," so-called, of General Cinema.
ABC: American Beverage Corporation, a Delaware Corporation, which through controlled subsidiaries previously owned and operated the Pepsi Facility and other non-Florida soft drink bottling plants.
The tax assessment at issue covers the audit period between April 1, 1979 through June 30, 1983.
During the latter part of the 1960's, General Cinema entered into negotiations with ABC with an eye to acquiring its bottling plants and franchises. At the time, ABC owned, or through its subsidiaries controlled, the Pepsi facility and plants in Dayton, Youngstown, and Akron, Ohio.
On or about March 11, 1968, after successfully reaching agreement with ABC stockholders, General Cinema caused Holiday to purchase the stock of ABC for a price of approximately twelve million dollars ($12,000,000.00). The purchase price was paid in cash.
Shortly thereafter, Holiday merged with ABC and its subsidiaries and became the owner of the Pepsi Facility along with the Dayton, Youngstown, and Akron plants. With the exception of a small existing mortgage on the Pepsi Facility, Holiday ended up owning all of its newly acquired assets unencumbered.
In conjunction with this acquisition, Taxpayer which had recently been incorporated, was activated by an issuance of its stock to Holiday and commenced to operate the Pepsi Facility.
Inasmuch as Holiday now owned twelve million dollars ($12,000,000.00) worth of highly leveragable assets virtually unencumbered, it was highly desirous of refinancing the same. To this end, it sought the assistance of Haas Financial Corporation, a large mortgage broker who routinely acted as a middle man in structuring financial arrangements between would be borrowers and institutional lenders.
Haas was successful in securing financial commitments from a consortium of eight insurance companies who, in the aggregate, agreed to loan approximately eleven million seven hundred thousand dollars ($11,700,000.00). The transaction was a sale and lease-back arrangement entered into in July 1969.
The main aspects of this arrangement were as follows:
GC-H was created by Haas Financial Corporation and/or its principals;
GC-H borrowed eleven million seven hundred thousand dollars (S11,700,000.00) from the insurance companies;
GC-H used the proceeds received to "purchase" the Pepsi Facility and those in Ohio from Holiday;
The assets acquired were pledged as security for the institutional loans;
GC-H then leased back to Holiday under a long-term lease . . . the properties and assets involved;
General Cinema guaranteed Holiday's payments under the lease . . . .
GCC on behalf of Holiday and the other lessees pays to GC-H all amounts due under the Lease. GCC charges back to Taxpayer and the other corporations their prorata share of the payments.
The Pepsi Facility and the other plants are owned by GC-H.
The lease assets for book purposes have been capitalized. This is the same treatment the Taxpayer uses for its other leased assets under lease-purchase agreements and is a common practice under lease purchase arrangements.
The Lease . . . covers the real estate and personal property of the Pepsi Facility and the Ohio locations. It was entered into in June, 1969 and runs for a basic test of eighteen (18) years through June, 1987. According to paragraph 2 of the Lease, the Lease may be extended, at the Lessee's option, for not more than six (6) consecutive extended terms, the first extended term to be for ten (10) years and the five subsequent extended terms to be for five (5) years each.
Basic rental payments under the Lease for all of the properties are set forth in paragraph 3 of the Lease and amount to approximately $300,000.00 quarterly or $1,200,000.00 a year. The Pepsi Facility represents forty percent (40 percent) of the leased assets. Accordingly the Taxpayer is charged through inter-company billings for forty percent of the basic rent (which is forty thousand dollars [$40,000.00] a month or four hundred eighty thousand dollars [$480,000.00] a year).
Pursuant to paragraph 22 of the Lease, at the end of the initial basic term the Lessee, Holiday has an option to purchase all of the properties subject to the Lease by paying to Lessor (GC-H) a purchase price in cash equal to the amount specified in said paragraph of the Lease.
Pursuant to the terms of paragraph 23.3 of the Lease, if the Lessee, Holiday elects to purchase the property, the Lessor, GC-H [sic], promises to convey such property to Lessee by quitclaim deed, bill of sale and other necessary instruments and, if requested by Lessee, promises to obtain and deliver to Lessee an instrument releasing such property from the lien of the mortgage on the property.
Pursuant to paragraph 36 of the Lease, there is no merger of the Lease nor of the leasehold estate created by the Lease with the fee estate in the properties or any part thereof unless there is a written instrument effecting such merger executed as specifically provided in said paragraph 36.
At all times material hereto fee simple record title to the property herein known as the Pepsi Facility was in the name of GC-H Corporation.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the parties hereto and the subject matter hereof. Section 120.57, Florida Statutes.
The sole issue for resolution in this case is whether the rental payments made by Petitioner for use and occupancy of the Pepsi Facility are subject to the rental tax imposed pursuant to Sections 212.031 and 212.05, Florida Statutes.
With reference to the lease or rental of real property, Section 212.031, Florida Statutes, provides as follows:
(1)(a) It is declared to be the legislative intent that every person is exercising a taxable privilege who engages in the business of renting, leasing, or letting any real property unless such property is:
Assessed as agricultural property under s. 193.461.
Used exclusively as dwelling units.
Property subject to tax on parking, docking, or storage spaces under s. 212.03(6).
* * *
For the exercise of such privilege, a tax is levied in an amount equal to 5 percent of and on the total rent charged for such real property by the person charging or collecting the rental.
* * *
(2)(a) The tenant actually occupying, using, or entitled to the use of any property the
rental from which is subject to taxation under this section shall pay the tax to his immediate landlord or other person granting the right to such tenant to occupy or use such real property.
With reference to the lease or rental of tangible personal property, Section 212.05, Florida Statutes, provides as follows:
It is hereby declared to be the legislative intent that every person is exercising a taxable privilege who engages in the business of selling tangible personal property at retail in this state, or who rents or furnishes any of the things or services taxable under this chapter, or who stores
for use or consumption in this state any item or article of tangible personal property as defined herein and who leases or rents such property within the state.
For the exercise of such privilege, a tax is levied on each taxable transaction or incident, which tax is due and payable as follows:
* * *
At the rate of 5 percent of the lease or rental price paid by a lessee or rentee, or contracted or agreed to be paid by a lessee or rentee, to the owner of the tangible personal property.
Tangible personal property is defined for purposes of Chapter 212, Florida Statutes, in Section 212.02(12) to mean and include personal property which can be seen, weighed, measured, touched or which is in any way perceptible to the senses. There can be no dispute that the plant machinery and equipment leased herein constitute "tangible personal property" within the purview of Section 212.02(12), Florida Statutes.
The taxes at issue are taxes imposed on the privilege of leasing property in the state of Florida. Petitioner contends that no one involved in Petitioner's sale and lease-back transaction is engaged in the business of renting or leasing real or personal property in the state of Florida, and, therefore, no taxes should be due. However, section 212.02, Florida Statutes, which defines various terms for the purpose of Chapter 212 specifically provides in subsection (9) as follows:
'Business' means any activity engaged in by any person, or caused to be engaged in by him, with the object of private or public gain, benefit, or advantage, either direct or indirect. . . . [T]he term 'business' shall not be construed in this chapter to include occasional or isolated sales or
transactions involving tangible personal property by a person who does not hold himself out as engaged in business, but includes other charges for the sale or rental of tangible personal property,
***and all rentals of real property. . . .
The statutory definition for "business" is very broad. Moreover, the term business specifically is defined to include charges for the rental of tangible personal property and all rentals of real property. Thus, it would appear from the above statutory language that both GC-H and Holiday engage in the business of leasing real and personal property in the State of Florida and the rental payments made pursuant to the Lease agreement at issue are subject to the taxes imposed by Sections 112.031 and 112.05, Florida Statutes, unless there exists an applicable statutory exemption from the tax.
Petitioner has taken the position that at least part of the leasing arrangement at issue qualifies as an occasional or isolated transaction involving tangible personal property entitled to an exemption pursuant to Section 212.02(9), Florida Statutes. However, exemptions from taxing statutes are express favors granted by the legislature and are to be strictly construed against the taxpayer.
The Lease agreement at issue herein was entered into in 1969 to continue for a basic term of 18 years with provision for extension of the Lease arrangement for an additional 35 years. The whole of the transaction structured as a sale and lease-back indicates a very sophisticated, comprehensive, and continuing business arrangement between corporate entities and not the random or infrequent transaction contemplated by the occasional and isolated exemption provisions contained in Section 212.02(9), Florida Statutes. GC-H, the lessor, was created for the single purpose of effectuating the sale and lease-back; its leasing arrangement is not casual and isolated. See Central Phosphates, Inc. v. Lewis, etc., DOAH Case No. 78-1221, per curiam aff'd 379 So.2d 211 (Fla. 1st DCA 1979). Holiday, the sub-lessor, although primarily engaged in another business, is as to this Petitioner, engaged in the business of leasing or subleasing the Pepsi Facility. In addition, the subject long-term lease, by reason of continuity and systematic recurrence prevents this transaction from being occasional and isolated within the meaning of the exemption provisions of the sales and use tax statutes. Green v. Pederson, 99 So.2d 292 (Fla. 1957). Both GC-H and Holiday engage in the business of leasing real and tangible personal property in the state of Florida, and that leasing does not qualify as an occasional or isolated transaction entitled to exemption under Section 212.02(9), Florida Statutes.
Section 212.031(2)(a), Florida Statutes, imposes the tax at issue on the tenant. Section 212.031(2)(b), Florida Statutes, prohibits the state from collecting more than one tax on the rental or use of property and prohibits the pyramiding of taxes. This is consistent with Respondent's position. Only Petitioner, as the tenant of the Pepsi Facility, is liable for the rental taxes at issue.
Petitioner's argument that a different structuring of the transaction herein via, for example, a conventional mortgage would have prevented Respondent from assessing its tax deficiency, even if true, is irrelevant since Petitioner did not utilize a conventional mortgage. Likewise irrelevant is Petitioner's
argument that it has changed its method of paying the charges required under the lease--it is the reason for payment and not the method of payment that is dispositive here.
Petitioner's request for relief includes a refund or credit for taxes erroneously paid with respect to the subject dispute. Nowhere in the record in this cause does Petitioner specify what it is referring to; moreover, even if Petitioner had proven entitlement to a refund or credit, petitioner has failed to either plead or prove compliance with section 215.26, Florida Statutes.
Based upon the foregoing Stipulated Findings of Fact and the foregoing Conclusions of Law, it is
ORDERED that this Final Order be entered upholding the Department's assessment of $32,873.18, plus penalties and interest.
DONE AND ENTERED this 28th day of May, 1986, at Tallahassee, Leon County, Florida.
RANDY MILLER EXECUTIVE DIRECTOR DEPARTMENT OF REVENUE STATE OF FLORIDA
I HEREBY CERTIFY that a true and correct copy of the above Final Order was entered in the Official Records of the Department of revenue this 28th day of May, 1986.
Agency Clerk
| Issue Date | Proceedings |
|---|---|
| Feb. 27, 1986 | Recommended Order (hearing held , 2013). CASE CLOSED. |
| Issue Date | Document | Summary |
|---|---|---|
| May 28, 1986 | Agency Final Order | |
| Feb. 27, 1986 | Recommended Order | Sales and use tax assessment on rental payments pursuant to a long-term, sophisticated sale and lease-back arrangement upheld. |
