STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

THE BEACHES LEADER, INC., )

)

Petitioner, )

)

vs. ) DOAH CASE No. 86-1326

) Comptroller Administrative STATE OF FLORIDA, OFFICE OF ) Proceeding No. 86-35-DOA&A THE COMPTROLLER, )

)

Respondent. )

)

RECOMMENDED ORDER

Notice was provided, and a formal administrative hearing was held in this case as envisioned by Section 120.57(1), Florida Statutes. Charles C. Adams served as the hearing officer. The hearing was held in Jacksonville, Florida, on Monday, August 18, 1986. This recommended order is being entered following the filing of a transcript of the record. That transcript was received in the offices of the Division of Administrative Hearings on October 14, 1986. In aid of the preparation of this recommended order, the parties have submitted proposed recommended orders. Those proposals have been examined and to some extent utilized in the preparation of the recommended order. Otherwise, the fact proposals are rejected for reasons as explained in an appendix to this recommended order.

APPEARANCES

FOR PETITIONER: A. August Quesada, Jr., Esquire

WILDT, QUESADA AND WALKER, P.A.

Suite 2320, Independent Square One Independent Drive Jacksonville, Florida 32202

FOR RESPONDENT: Edwin A. Bayo, Esquire

Assistant Attorney General Department of Legal Affairs Tax Section, The Capitol Tallahassee, Florida 32301

ISSUES

The issues under consideration result from the attempt by The Beaches Leader, Inc., (Petitioner) to gain refund of sales tax paid to the State of Florida. That refund is sought from the State of Florida, Office of the Comptroller (Respondent). The theory of the pursuit of the tax claim is set forth in Section 212.08(6), Florida Statutes, in which there is provided an exemption from sales tax associated with the sale of newspapers. In this connection, the question is raised, whether Petitioner is a newspaper within the meaning of Rule 12A-1.08, Florida Administrative Code, in effect at the time that the refund was requested.

FINDINGS OF FACT

1. Petitioner, by this action, seeks a refund from Respondent for the payment of sales tax related to the cost of printing of the publication known as The Mirror. As publisher, Petitioner sought the refund in keeping with Section 215.26, Florida Statutes. The request dates from August 16, 1985. This application for refund is premised upon the Petitioner's belief that it is entitled to refund in that The Mirror is a newspaper within the meaning of Rule 12A-1.08(3), Florida Administrative Code, and as such is exempt from taxation associated with the cost of printing the publication. The statement of law dealing with exemptions from sales tax pertaining to newspapers is set forth in Section 212.08(6), Florida Statutes. Petitioner finds solace in the decision of Campus Communications vs. Dept. of Revenue, 473 So.2d 1290 (Fla. 1985). Petitioner believes the finding in that case in which the Florida Supreme Court upheld the claims of the publication, The Independent Florida Alligator, because it was a newspaper by definition found in the aforementioned rule and entitled to be exempt from sales tax requirements, applies to Petitioner's circumstance.

   
   

2. The amount of refund claimed is $6,577.10. Having considered the request for refund, and being mindful of the case of Campus Communications, supra, Respondent denied the refund request upon the expressed belief that The Mirror is not a newspaper within the meaning of Rule 12A-1.08(3), Florida Administrative Code. This statement of denial dates from March 20, 1986.

   
   

3. Petitioner made timely application for the tax refund ire question and has sought timely review of the Respondent's intent to deny that refund request.

   
   

4. The Mirror is a civilian enterprise publication for the special interests of personnel of the United States Naval Station at Mayport, Florida. However, it does solicit and contain some news items of general interest to the community.

   
   

5. The testimony of the witnesses and the documentary evidence, including the issues of The Mirror which were admitted into evidence, establish that The Mirror is published under a contract between Petitioner and the United States Navy. It is distributed free of charge to naval personnel at the Mayport Naval Station, Jacksonville, Florida. In addition to distribution throughout the Mayport Naval Station, it is available and is distributed to civilian employees of the United States Navy both on and off the naval base, and also to military dependents and visitors both on and off the Mayport Naval Station base. The Mirror is delivered to 1,200 off-base residences and distributed at the offices of the Beaches Leader, a newspaper sold to the general public. There, residents of the Duval County, Florida, beaches communities obtain copies of The Mirror. Finally, copies are mailed weekly to paid subscribers in Florida and five other states.

   
   

6. The affected community served by and which is the principal audience for The Mirror is the United States Naval Station at Mayport and the surrounding beaches area. This community is composed of naval personnel, their dependents and civilian naval employees. There are other persons who have no direct connection to the Navy but who, as beaches communities residents, are affected by the naval presence in the beaches area and in the Jacksonville metropolitan area as a whole and who use The Mirror as a means of information and dissemination of information.

7. Mr. Paul Henkemeyer, a civilian employee of the United States Navy who is responsible for maintaining and disseminating information concerning the economic and other impacts of the naval installations in the Jacksonville area, testified in the course of the hearing. He pointed out that the Navy has a very substantial economic and social impact upon the residents of metropolitan Jacksonville, Florida. The Navy employs over 37,000 military personnel in the Jacksonville area in addition to over 10,000 civilian employees. Its payroll in the Jacksonville area approaches $1.7 billion. The Navy and its related economic activity account for in excess of 10 per cent of the Jacksonville area economy.

   
   

8. The witnesses Mr. Henkemeyer; Mr. Townsend Hawkes, a beaches area real estate broker; Mr. Simon A. Smith, Jr., former Chief Executive of the North Florida Council of the Boy Scouts of America; and Ms. Marion Perry, supervisor of services of the United Way, testified that The Mirror is considered by them to be a "newspaper" of general circulation and interest to the public in the Jacksonville beaches communities. They demonstrated that The Mirror disseminates information about local events, including the Boy Scouts, United Way, and other charitable interests, and religious news. This pertains to the beaches communities and is a routine activity within The Mirror.

   
   

9. More specifically, Mr. Hawkes said that he regularly reads The Mirror to follow his interests and involvement with the Sea Cadets, a group of boys and girls from the community interested in sailing and nautical activities. He also promotes the activities of the Kiwanis Club related to a swim marathon sponsored by that club in the publication. He reads the publication in furtherance of his business as a real estate broker to determine current happenings in the beaches communities associated with the Navy as it affects his business interests. He is involved with paid advertisements in The Mirror. He noted several issues which are peculiarly beaches topics about the Navy. He referred to certain road development and transportation matters found in The Mirror.

   
   

10. Mr. Smith indicated that he considers The Mirror to be a "newspaper" of general circulation to the beaches communities, because it provides extensive coverage of Boy Scout activities and is viewed by the Boy Scouts of America and other charitable and community institutions as a source of dissemination of news and press releases concerning their present and future activities.

    
    

11. Ms. Perry, in her role with the United Way in which her unit serves several north Florida counties including Duval County, testified that The Mirror is considered by her and the United Way to be a "newspaper" of general circulation and public interest for the beaches communities. She indicated that it is included in the mailing lists for press releases by the Florida Press Association and the United Way. She testified that The Mirror is listed as a "newspaper" in the Media Guide prepared by her. She notes that The Mirror includes features and opinions to the editor pages. She explained that The Mirror regularly disseminates information about the activities and fund raising efforts of the United Way throughout Jacksonville and the beaches communities.

    
    

12. Generally speaking, Mr. Hawkes, Mr. Smith and Ms. Perry testified that The Mirror is included among the list of newspapers to which information, including press releases is regularly and routinely distributed by the organizations with which they are now or have been affiliated. In summary, those individuals and their community organizations consider The Mirror to be a "newspaper" of general circulation which contains matters of current public interest to the general public, and of current events and news of interest to the general public.

13. The testimony of Mr. Tom Wood, the chief executive officer of The Beaches Leader, Inc., which owns and publishes The Mirror, provided further insight into the operations and function of The Mirror. The publication has a designated employee who serves as editor and news reporter of The Mirror. This employee works on the base at the United States Naval Station Mayport where he collects news items from all sources, including not only those provided by the United States Navy, but also sources from the community at large and throughout Florida in the form of press releases. Mr. Wood's testimony was that The Mirror is a publication whose purpose and function is to disseminate the news. His testimony also established that it is not a "shopper" type of publication, and it is not given over principally to advertisements or personal classified advertisements. The Mirror contains a percentage of advertising which is less than the national average and regularly carries news items of general interest to the public and the beaches communities in particular. Mr. Wood conceded that the publication is decidedly directed to the special interests of the United States Naval Station Mayport, but he pointed out current events and news of current interest to the general public are found in the publication.

    
    

14. Wood identified the fact that the Navy informs the publisher where it wishes to have its news items placed and indicates to the publisher which of those items must be placed in a given issue. Beyond this arrangement, the publisher may choose what it wishes to include in an issue based upon remaining available space. In this realm, the number of pages in each issue of the publication, as well as the advertising ratio, is controlled by contract between Petitioner and the Navy. In picking examples of issues of The Mirror presented at hearing, issues were selected which are particularly demonstrative of a broader base of news stories than would relate to the Navy. Wood describes Petitioner's contract with the Navy as allowing the Navy to take back articles that were initially provided for placement in The Mirror. Per the contract, no editorial cartoons can be used. The Navy may request to see the galley or

    paste-up of an issue of the publication but has yet to do so.

    
    

15. As stated, The Mirror is published for the special interest of personnel of the U.S. Naval Air Station, Mayport, Florida. To this end, Mr. Wood explained that, "we do not expect to have readers, substantial number of readers who don't have some connection, interest in the Naval Air Station at Mayport."

    
    

16. The Mirror does not contain any news stories gathered from either Associated Press (AP) or United Press International (UPI) wire service material. Mr. Wood indicated that The Mirror does not routinely cover news of the day; however, given that this is not a daily publication, this arrangement is not unexpected.

    
    

17. A review of the issues of The Mirror admitted into evidence offered by both the Petitioner and the Respondent, reveals the nature of news of general interest to the public, including weekly religious and recreational columns and feature stories. The issues submitted include news reports about hurricane preparation, athletic events, Halloween safety programs, youth recreational league registration information, matters concerning important historical dates, information concerning the need for volunteers and other assistance in charitable works in the beaches communities, news concerning the public schools, news of Fire Prevention Week, news concerning Native American Week, as well as information pertaining to drug abuse and automobile safety, a recipe column, television information, as well as matters of national interest, including news concerning the disaster of the space shuttle Challenger, together with the

    efforts of the Navy associated with its recovery. The basic structure of the publication may be seen in Petitioner's Exhibits 1-12 and 17-19 and Respondent's Exhibits 1 and 2 admitted in evidence. Here are some subjects covered in those editions:

    
    

    1. The Mirror for the week of January 25, 1985, included religious columns, information on preventive dentistry and actions to be taken as precautions to colder weather, a story on African famine relief, reminders concerning taxes and matters pertaining to personal income tax, as well as an extensive classified section concerning both real property and personal property, in addition to the activities of the Boy Scouts in the beaches area.

       
       

    2. The Mirror issue of February 15, 1985, included feature story on the observation of Black History Month, as well as columns on recreation and religion.

       
       

    3. The issue of June 14, 1985, included articles on the restoration of the Statue of Liberty and a feature on Father's Day, in addition to the information on recreational activities and religious events.

       
       

    4. The Mirror issue of June 21, 1985, included coverage of religious activities.

       
       

    5. The Mirror issue dated June 28, 1985, included special features on the Fourth of July, a recreational feature on cave diving and safety measures, in addition to information on recreational and family activities and a feature on safety precautions concerning fireworks and their use.

       
       

    6. The September 6, 1985, issues of The Mirror contained features on square dancing, marriage counseling, carnival con-men and the surrender of the Japanese at the conclusion of World War II.

       
       

    7. The September 27, 1985, issue of The Mirror included a special feature on Native American Week, the dangers of cocaine, automobile safety and recreational and religious activities sections.

       
       

    8. The November 29, 1985, issue of The Mirror had a feature on toys for tots collections and year-end tax information, as well as the regular features on recreational, charitable and religious activities.

       
       

    9. The issues of The Mirror admitted in evidence for the dates January 31, 1986, and February 7, 1986, focused upon the disaster of the space shuttle Challenger and the extensive search efforts by the United States Navy and other vessels to locate the wreckage and to assist in determining the cause of the explosion. Extensive coverage of the shuttle disaster and NASA news was contained in those issues of The Mirror as well as in civilian newspapers which were introduced in evidence.

       
       

    10. The Mirror issue of February 21, 1986, contained a feature on Black Americans.

        
        

    11. The issue of August 8, 1986, focused upon the change in command of the United States Navy aircraft carrier Saratoga, which news was also the feature story of the local Jacksonville newspapers, The Florida Times Union and Jacksonville Journal, on that day.

18. The issues of The Mirror regularly contain feature stories concerning the United States Navy and matters related to the Naval Station Mayport. The testimony of the witnesses makes it evident that naval happenings, especially as they relate to the activities and events at the Naval Station Mayport and other naval bases in Jacksonville, are news in metropolitan Jacksonville, Florida.

    
    

19. Two issues of The Independent Florida Alligator, Petitioner's Joint exhibits 2 and 3, were admitted. A comparison of The Mirror and The Independent Florida Alligator shows in what ways they are similar and dissimilar. Both publications are publications of special interest to a particular community--the University of Florida in the case of The Independent Florida Alligator, and the United States Naval Station Mayport in the case of The Mirror. However, The Independent Florida Alligator has a much broader base in its reporting of news beyond its principal community and offers more extensive editorial comment. In addition, it serves the function of training student journalists in the newspaper business as the court in Campus Communications, supra, referenced in its favorable response to the claim for tax exempt status. No such role is played by The Mirror. The Independent Florida Alligator has a format that is more akin to a general circulation newspaper, whereas The Mirror is in many respects more of a news bulletin. The articles related to the Navy may preempt other news information and the reporting of other news events beyond the Navy's activities is secondary. The Navy exerts influence on the basic design and focus of The Mirror through the contract with its publisher. By contrast, the The Independent Florida Alligator has a wide-ranging set of topics in which there does not appear to be any outside entity predetermining space requirements or which has a say in what news is pursued by the student newspaper.

    
    

    CONCLUSIONS OF LAW

    
    

20. The Division of Administrative Hearings has jurisdiction over the subject matter and the parties to this action in accordance with Section 120.57(1), Florida Statutes.

    
    

21. Section 212.08(6), Florida Statutes, exempts the sale of newspapers from Florida sales tax. This would include the sales tax associated with the cost of printing. It is the sales tax associated with the printing that Petitioner seeks to gain as a tax refund.

    
    

22. Rule 12A-1.08(3), Florida Administrative Code, defines what constitutes a newspaper for the purposes of the tax exemption. It states:

    
    

    1. In order to constitute a newspaper, the publication must contain at least the following elements:

       1. It must be published at stated short intervals (usually daily or weekly).

       2. It must not, when successive issues are put together, constitute a book.

       3. It must be intended for circulation among the general public.

       4. It must have been entered or qualified to be admitted and entered as second class mail matter at a post office in the county where published.

       5. It must contain matters of general interest and reports of current events. If the publication is devoted primarily to

    matters of specialized interests such as legal, mercantile, political, religious or sporting matters, and it contains in addition thereto general news of the day, information of current events and news of importance and of current interest to the general public, it is entitled to be classed as a newspaper.

    
    

    Petitioner has been denied its request for refund premised upon the Respondent's belief that Petitioner does not meet the standards set forth in subsections (c) and (e) to the rule. The other subsections set forth in that definition are not at issue.

    
    

23. In order to reach a decision in this controversy, reliance is placed on the decision of Campus Communications, supra. The Florida Supreme Court in that opinion struck down the proposition set forth in Rule 12A-1.08(4), Florida Administrative Code, which required that a newspaper, to claim a tax exemption, must be sold as opposed to being given away to its readers free of charge. Having held that section of the rule invalid, it went on to deal with the claim on the part of The Independent Florida Alligator that the publication was a newspaper. In arriving at its decision, the court also laid to rest the requirement that a newspaper be entered or qualified to be admitted and entered as second class mail at a post office in the county where the publication took place. This result was reached because only those newspapers with a paid circulation are entitled to treatment of the material as second class mail. In deciding that the publication of information in the sense contemplated by the present taxpayer's claim for exemption need not be sold in order to be considered a newspaper, the Florida Supreme Court felt that Section 212.08(6) Florida Statutes, which exempted newspapers from sales taxation included a broad class of publications, those sold and some which were given away. The court, in referring to a prior court opinion, said that the idea of what constitutes a newspaper would be examined by considering the word "newspaper" in its common usage. Quoting from the court's opinion at page 1295, the court stated:

    
    

    * * *

    [6,7] In distinguishing between a news- paper and a shopper for purposes of the exemption, the question is whether the primary purpose of the publication is the dissemination of news or the advertising of business concerns. Green v. Home News Publishing Co., Inc., 90 So.2d 295 (Fla.

    1956). We agree with the trial and district courts that The Alligator is a "newspaper" within the common sense of the word.

    Relevant factors supporting this conclusion include the not-for-profit status of Campus Communications, Inc.; the tradition of training student journalists as evidenced by The Alligator's origins as a school newspaper and its present status (a majority of the board of directors of Campus Communications must be students and the editorial staff,,

    i.e. those who prepare the news content, is composed entirely of students); the inclusion of a broad range of news stories including

    staff-written and wire service material; and the relatively low percentage of space devoted to advertisements (under 55 percent during the period for which a tax was assessed, well below the national newspaper

    average of 63 percent cited by The Alligator).

    
    

    Unlike the circumstance with the student newspaper, the present situation of the Petitioner is one in which there exists no tradition for training journalists, there is no broad range of news stories to include those written by a newspaper staff, nor materials gathered from the wire services. The articles related to the Navy may preempt other news information and the reporting of other news events beyond the Navy's activities is secondary. The Navy exerts influence on the basic design and focus of The Mirror through the contract with its publisher. By contrast, the The Independent Florida Alligator has a wide- ranging set of topics in which there does not appear to be any outside entity predetermining space requirements or outside influence by another entity which has a say in what news is pursued by the student newspaper.

    
    

24. In summary, the language set forth in Campus Communications, supra, does not lead to the conclusion that the court, by its action, contemplated the grant of tax exemption for a publication such as that of the Petitioner. Moreover, an analysis of Rule 12A-1.08(3)(c), Florida Administrative Code, does not lead to the conclusion that the publication under consideration is one of circulation among the general public. While it has some information which is more universal in its appeal, that is not the principal purpose of the publication, nor can it be seen as an essential element of the endeavor. This publication has in mind a limited audience comprised of Navy personnel, civilian employees, Navy dependents and persons routinely affected by the Navy in its presence in the community. The fact that other persons rely on the publication to disseminate information or gain information does not equate with circulation among the general public. It is the nature of the audience sought, not the size of the audience, that is determinative. Here there is a specialized audience which is less than the general public.

    
    

25. Turning for a moment to the language of the subpart to Rule 12A-1.08, Florida Administrative Code, found at (3)(e), a literal reading of that language taken out of context might favor the recognition of the tax exemption claim by the Petitioner; however, when read as a part of the overall definition of a newspaper set forth in the rule and with the benefit of the remarks set out in Campus Communications, supra, Petitioner did not demonstrate that it is a newspaper and entitled to tax exemption.

    
    

26. Tax exemptions, being a matter of legislative grace, and not benefits which inure to the taxpayer as a matter of right, will not be found unless available through a strict construction of the statute declaring the exemption, as further defined in the rule's definition. See State ex rel. Szabo Food Services v. Dickinson, 286 So.2d 529 (Fla. 1974). With that authority in mind, no exemption is available to this taxpayer and a refund is not urged.

    
    

27. Based on a consideration of the facts found and conclusions of law reached, it is,

RECOMMENDED:

That a final order be entered which denies the refund claim in the amount

$6,577.10.

DONE AND ENTERED this 20th day of November, 1986, at Tallahassee, Florida.

CHARLES C. ADAMS, Hearing Officer Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 20th day of November, 1986.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 86-1326

All facts proposed by the parties to this action have been utilized, with the exception of the following:

Petitioner's Facts

1. Facts found in paragraph 1 are subordinate to facts found in the recommended order.

2. The fact suggesting that the payroll for the Navy in Jacksonville is in excess of $1.7 billion is contrary to the evidence which was to the effect that the payroll approaches $1.7 billion.

3. The last sentence of paragraph 9 is subordinate to facts found in the recommended order.

4. The suggestion that was found in paragraph 11 related to the claim that wire service stories are included in The Mirror is contrary to the facts found.

5. The reference set forth in paragraph 12(c) related to carnivals in fact related to carnival con-men.

6. The indication in paragraph 12(g) concerning an article related to fire prevention is contrary to the evidence.

7. The last sentence of paragraph 14 is subordinate to facts found in the recommended order.

8. Paragraph 15 is rejected as being contrary to the recommended order.

Respondent's Facts

With the exception of facts found in paragraph 3 which were utilized as proposed, all other facts proposed by the Respondent are subordinate to facts found in the recommended order.

COPIES FURNISHED:

A. August Quesada, Jr., Esquire WILDT, QUESADA AND WALKER, P.A. Suite 2320, Independent Square One Independent Drive Jacksonville, Florida 32202

Edwin A. Bayo, Esquire Assistant Attorney General Department of Legal Affairs Tax Section, The Capitol Tallahassee, Florida 32301

Honorable Gerald Lewis Comptroller, State of Florida The Capitol

Tallahassee, Florida 32301

Walter W. Wood, Esquire Deputy General Counsel Office of the Comptroller The Capitol, Suite 1302 Tallahassee, Florida 32301

Mitchell D. Franks, Esquire Tax Section

Suite 1501, The Capitol Tallahassee, Florida 32301

Docket for Case No: 86-001326

Orders for Case No: 86-001326