STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

HOLT PUBLISHING COMPANY, INC., )

)

Petitioner, )

)

vs. ) DOAH CASE NO. 86-1895

) Comptroller Administrative STATE OF FLORIDA, OFFICE ) Proceeding No. 86-47-DOA&A OF 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 Holt Publishing Company (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 for the publications known as the Jax Air News and Air Winger. As publisher, Petitioner sought the refund in keeping with Section 215.26, Florida Statutes. The request dates from September 25, 1985. This application for refund is premised upon the Petitioner's belief that it is entitled to refund in that the Jax Air News and Air Winger are newspapers within the meaning of Rule 12A-1.08(3), Florida Administrative Code, and as such are exempt from taxation associated with the cost of printing the publications. 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 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 $25,675.01. 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 Jax Air News and Air Winger are not newspapers within the meaning of Rule 12A- 1.08(3), Florida Administrative Code. This statement of denial dates from May 2, 1986.

   
   

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

   
   

4. The Jax Air News and Air Winger are civilian enterprise newspapers for the special interests of personnel of the United States Naval Air Station and Cecil Field, Jacksonville, Florida. However, they do solicit and contain news items of general interest to the community.

   
   

5. The testimony of the witnesses and the documentary evidence, including the issues of Jax Air News and Air Winger which were admitted into evidence, establish that Jax Air News and Air Winger are published under a contract between Petitioner and the United States Navy. The publications are distributed free of charge to naval personnel at the Naval Air Station and Cecil Field, Jacksonville, Florida. In addition to distribution throughout the Naval Air Station and Cecil Field, they are available and are distributed to civilian employees of the United States Navy both on and off the bases, and also to military dependents and visitors both on and off the bases. Jax Air News and Air Winger are also delivered to off-base residences and are available at the offices of Holt Publishing Company where members of the Jacksonville westside community may obtain them.

   
   

6. The directly affected communities served by and which constitute the audiences of the Jax Air News and Air Winger are the United States Naval Air Station and Cecil Field, Jacksonville, Florida. The surrounding area geographically known as the westside of Jacksonville, Florida, is also served. The communities served by Jax Air News and Air Winger are composed not only of naval personnel and their dependents and civilian naval employees, but also include persons who have no direct connection to the Navy. These are westside residents who are affected by the naval presence in the westside area and in the Jacksonville metropolitan area as a whole.

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 impact 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. 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 Jax Air News and Air Winger are considered by them to be "newspapers" of general circulation and interest to the public in the Jacksonville westside community. They testified that the publications disseminate information of local events, including the Boy Scouts, United Way, and other charitable interests and religious news. This pertains to news about the Jacksonville westside community and is routinely set forth in the publication.

   
   

9. Mr. Smith indicated that he considers Jax Air News and Air Winger to be "newspapers" of general circulation and interest to the Jacksonville westside community because they provide extensive coverage of Boy Scout activities and are viewed by the Boy Scouts of America and other charitable and community institutions as sources of dissemination of news and press releases concerning their present and future activities.

   
   

10. Ms. Perry, in her role with the United Way, in which her unit serves several north Florida counties including Duval County, testified that Jax Air News and Air Winger are considered by her and the United Way to be "newspapers" of general circulation and public interest for the Jacksonville and the westside community. She indicated that they are included in the mailing lists for press releases by the Florida Press Association and the United Way. She testified that Jax Air News and Air Winger are listed as "newspapers" in the Media Guide prepared by her. She notes that Jax Air News and Air Winger include features and opinions to the editor pages. She explained that Jax Air News and Air Winger regularly disseminate information about the activities and fund raising efforts of the United Way throughout Jacksonville and the westside community.

    
    

11. Generally speaking, Mr. Smith and Ms. Perry testified that Jax Air News and Air Winger are 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 Jax Air News and Air Winger to be "newspapers" of general circulation which contain matters of current public interest to the general public, and of current events and news of interest to the general public.

    
    

12. The testimony of Mr. Dick Holt, the chief executive officer of Holt Publishing Company, which owns and publishes Jax Air News and Air Winger, provided further insight into the operations and function of Jax Air News and Air Winger. The publications, according to Mr. Holt, collect news items from all sources, in addition to those provided by the United States Navy and the Navy personnel who help edit the newspapers. Other sources including the community at large and the state of Florida are in the form of press releases.

    Mr. Holt's testimony was that Jax Air News and Air Winger are publications whose purposes and functions are to disseminate the news. His testimony also established that the publications are not "shopper" types of publications, and are not given over principally to advertisements or personal classified advertisements. Jax Air News and Air Winger contain a percentage of advertising which is significantly less than the national average and regularly and continually carry news items of general interest to the public and the Jacksonville westside community in particular. Mr. Holt conceded that the publications are decidedly directed to the special interests of the United States Naval Air Station and Cecil Field, Jacksonville, Florida, but he alluded to the other general news found in the publications.

    
    

13. Holt describes the publications as having the mission to inform the troops (Navy personnel) and secondarily to provide information and entertainment to maintain readership. On occasion, Jax Air News carries editorials dealing with national defense. The Air Winger could present those editorials but chooses not to. Theoretically, the publications may offer other editorials. Petitioner uses a civilian Navy employee as its editor for Jax Air News, and a military person acts as editor for the Air Winger. In the final preparation of issues of the publications, the Navy is involved through its Public Affairs Office. The Navy does proofing for typographical errors and displaced graphics. Petitioner has a staff photographer. It has no staff reporter. News editorial material must be channeled through Navy Public Affairs Officers. Petitioner must look first to Public Affairs Officers for its copy, photographs, etc. Priority of placement of those items is a function Of the Navy and must be accommodated as closely as possible. Other things unrelated to the Navy can be placed in the publications if the ratio of news to advertising demanded by the contracts for publication is maintained. The Navy controls the number of pages in the publications. The Navy may ensure that material which it considers to be in bad taste, detrimental to discipline, subversive or in some way contrary to the best interest of the Navy is not included in the publications.

    
    

14. The issues of Jax Air News and Air Winger admitted into evidence, Petitioner's Exhibits 1-16 and Respondent's Exhibits 2-6, show that Jax Air News and Air Winger contain news of current interest to the general public, current events and news of the day of interest to the general public in the community geographically defined as the westside of Jacksonville, Florida.

    
    

15. A review of the issues of Jax Air News and Air Winger demonstrates that they contain varied articles and features, including features on scouting, fishing, Flag Day, rodeos, cooking, religious activities, recreational activities and the following special features which are matters of general interest to the public:

    
    

    1. The Air Winger of August 15, 1985, contained several features, including a feature on Children's Dental Health Week together with news of recreational and religious activities and other general news and current events.

       
       

    2. The Jax Air News of March 27, 1986, contained a feature article on poison prevention together with the other regular features concerning recreational and religious activities about Holy Week and the Passover.

       
       

    3. The Air Winger of July 24, 1986, contained a special feature on the change of command at Cecil Field, a feature which was also the predominant story that week in the local newspapers in Jacksonville, Florida, The Florida Times Union and Jacksonville Journal.

    4. The Jax Air News of May 15, 1986, contained a special feature on the Boy Scouts of America and Scout World and forthcoming scouting activities together with other recreational including live theatre and religious activities and various features and coverage concerning current events.

       
       

    5. The Air Winger issue of May 8, 1986, featured special coverage of the Boy Scouts of America and a feature concerning Mother's Day together with regular coverage of religious and recreational activities, local fitness run/walk and other current events.

       
       

    6. The Jax Air News of April 10, 1986, contained news about scouting and scouting events and news of naval operations having national and international focus.

       
       

    7. The Jax Air News of May 22, 1986, contained community news coverage featuring extensive coverage of Scout World 86 and Scouting, a major event in the Jacksonville, Florida, Community. That coverage paralleled coverage of the same event in The Florida Times Union, the largest newspaper of general circulation in Jacksonville, Florida, in its special edition of May 19, 1986.

       
       

    8. The Jax Air News of June 12, 1986, contained features on Flag Day and Japanese technology together with coverage of religious and recreational activities and other matters.

       
       

    9. The Air Winger issue of March 27, 1986, contained information and features concerning VA loan programs and U.S. Savings Bonds together with coverage of religious and recreational activities and current news.

       
       

    10. The Air Winger issue of April 3, 1986, contained news coverage of the United States Sixth Fleet's activity.

        
        

    11. The Jax Air News of May 29, 1986, contained features on hurricane safety and retirement planning together with coverage of religious and recreational activities and other news of the day.

        
        

        1. The Jax Air News of April 24, 1986, contained a feature on Red Cross classes.

           
           

           1. The Jax Air News of April 17, 1986, contained features concerning Pacific security and local coverage of the mayor of Orange Park, Florida.

              
              

           2. The Jax Air News of May 1, 1986, contained features concerning

              fishing.

              
              

           3. The Air Winger of May 22, 1986, contained information about

           military pensions and the commemoration of Memorial Day.

           
           

16. The issues of Jax Air News and Air Winger regularly contain feature stories concerning the United States Navy and matters related to the Naval Air Station and Cecil Field, Jacksonville, Florida. The testimony of the witnesses makes it evident that naval happenings, especially as they relate to the activities and events at the Naval Air Station and Cecil Field and other naval bases in Jacksonville, are news in metropolitan Jacksonville and in the Jacksonville westside community.

17. Jax Air News and Air Winger won a 1978 Florida Press Association Award for best special edition, small newspapers.

    
    

18. Two issues of The Independent Florida Alligator, Petitioner's Joint Exhibits 2 and 3, were admitted. A comparison of Jax Air News and Air Winger and The Independent Florida Alligator shows in what ways they are similar and dissimilar. The three 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 and Cecil Field in the case of Jax Air News and Air Winger. 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 roles are played by Jax Air News and Air Winger. The Independent Florida Alligator has a format that is more akin to a general circulation newspaper, whereas Jax Air News and Air Winger are in many respects more of a news bulletin. The articles related to the Navy 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 two publications through the contracts with the 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.

    
    

19. As described, Jax Air News and Air Winger are printed and distributed at the respective Navy bases pursuant to contracts between the Navy and the publishing company. A copy of the contract between Holt Publishing Company and the two Commanding Officers of the Naval Air Station, Jacksonville, and Naval Air Station, Cecil Field, was introduced as Respondent's Exhibit 1 to the Holt Publishing case.

    
    

20. A review of the editions of Jax Air News and Air Winger admitted into evidence showed that neither contained any news stories gathered from either Associated Press (AP) or United Press International (UPI) wire service materials.

    
    

    CONCLUSIONS OF LAW

    
    

21. 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.

    
    

22. 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.

    
    

23. 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.

          
          

24. 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.

    
    

25. 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 in considering the word "newspaper" in the 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).

    
    

26. 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 and materials gathered from the wire service. The articles related to the Navy 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 two publications through the contracts with the publisher. By contrast, the The Independent Florida Alligator has a wide- ranging set of topics in which there does not appear to be any predetermined space requirements or outside influence by another entity which has a say in what news is pursued by the student newspaper.

    
    

27. 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 focus 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.

    
    

28. 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 does not demonstrate that it is a newspaper and entitled to tax exemption.

29. 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.

    
    

30. 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

$25,675.01.

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. 86-1895

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 the facts found in the recommended order.

2. Facts found in the last sentence of paragraph 5 indicating that the payroll of the Navy in the Jacksonville area is excess of $1.7 billion are contrary to the evidence. The evidence indicates that the payroll approaches

   $1.7 billion.

3. The suggestion in the third sentence of paragraph 10 that wire service stories are carried in the publications is contrary to the facts found.

4. The suggestion in paragraph 11(a) that a fishing column was included is contrary to the facts in evidence, as is the suggestion in paragraph 14(c) that there was a change of command related to the Saratoga. The change of command described related to Cecil Field and was only found in the Air Winger. It was not found in the Jax Air News. The suggestion in paragraph 14(e) that there was a fishing column in that issue is contrary to the evidence. Further, the suggestions in paragraph (j) concerning the activities of the Sixth Fleet were not as specific as indicated and as such are contrary to the evidence. The suggestion found in paragraph 14(1) pertaining to the Red Cross is incorrect in that the feature pertained to Red Cross classes and not to the needs of the

   local Red Cross. That subparagraph did not have an indication of the change in daylight savings time.

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

6. The facts found in paragraph 15 are contrary to the facts found in the recommended order.

Respondent's Facts

All facts are subordinate to the 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: 86-001895

Orders for Case No: 86-001895