STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

SUSAN R. BAYER and LLOYD )

WILLIAM BAYER, )

)

Petitioners, )

)

vs. ) CASE NO. 86-2540

)

DEPARTMENT OF REVENUE, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings by its duly designated Hearing Officer, K. N. Ayers, held a public hearing in the above styled case on May 26, 1987 at Tampa, Florida.

APPEARANCES

For Petitioner: Edwin J. Bradley, Esquire,

Suite 310, 711 North Florida Avenue

Tampa, Florida 33602

For Respondent: J. C. O'Steen, Esquire and

Kevin O'Donnell, Esquire Department of Legal Affairs, The Capitol

Tallahassee, Florida 32399-1050

By petition dated July 10, 1986, the Petitioners, Susan A. Bayer and Lloyd

1. Bayer, contest the warrant for collection of sales tax, penalty and interest, in the amount of $8,269.95, alleged to be owed for sales and use taxes in connection with the lease of property located at 3001 East Hillsborough Avenue, Tampa, Florida, during the audit period April 1, 1983, through March 31, 1986.

   
   

   At the hearing, the parties presented a prehearing stipulation, petitioner called one witness, Respondent called one witness and twelve exhibits were admitted into evidence. Findings one through four are taken from the prehearing stipulation. There is no dispute regarding the facts here involved. The dispute is to the interpretation of the various documents presented.

   
   

   Proposed findings have been submitted by the parties. Treatment accorded those proposed findings are contained in the Appendix attached hereto and made a part hereof.

   
   

   FINDINGS OF FACT

   
   

   1. The State of Florida, Department of Revenue issued to the Petitioners a tax warrant dated May 12, 1986, for sales and use tax alleged to be due and delinquent, interest, penalties, and filing fees in the total sum of $8,269.95.

   2. Susan R. Bayer is the owner of a parcel of property located in Hillsborough County, Florida, commonly known as 3001 East Hillsborough Avenue, having become the owner of that property on February 29, 1984.

      
      

   3. Lloyd W. Bayer owned the property in finding 2 above prior to February 29, 1984.

      
      

   4. When Susan Bayer became the owner of the property, she became the successor in interest to a lease between Brown Bayer, Inc., and Creech Produce, Inc., wherein a portion of the property was leased to Creech Produce, Inc., for use by Creech Produce, Inc., to let sellers of produce use a space to park a vehicle to sell produce out of the vehicle. This business of Creech was licensed by the City of Tampa as a parking lot.

      
      

   5. The spaces in the lot were rented on a nightly basis and rent was collected on a nightly basis. There were no terms of rentals for periods longer than a nightly basis. The persons parking vehicles in the spaces generally sold wholesale produce out of the vehicles but not all of them did so, and there was no requirement the vehicles occupying these spaces be used for any specific purpose.

      
      

   6. In 1985, Susan Bayer filed proceedings against Creech Produce, Inc., seeking to revoke the lease to Creech. One ground alleged in this complaint (Exhibit 8) was that Creech was using the property in violation of state laws and regulations in failing to collect sales taxes on the parking fees and remit same to the Department of Revenue. The court not only ruled against Bayer on the eviction proceedings but extended the lease for an additional year.

      
      

   7. The lease to Creech (Exhibit 5) provided, inter alia, that the lessee would pay 1/2 of the sanitation expense paid by the lessor and that portion of electricity used for the portion of the building used and the lights for the outside of the property." The electricity was billed to the lessor and, pursuant to this lease provision, Creech remitted its share of the bill to the lessor. This payment for electricity by Creech was included by Respondent as rent on which the sales tax was levied.

      
      

   8. Exhibit 3 clearly conveys the intent of the parties to lease the property to be used by the lessee as a parking lot for the vehicles from which produce was to be sold and that the lessee could collect the fees for the use of these parking spaces.

      
      

   9. On February 1, 1984, Bayer entered into an Agreement for Purchase and Sale (Exhibit 2) with Bobby Lee McGilvery and Adella Fisher to sell the business known as Farmer Jahn's Ice to the latter. This business consisted of two icemaking machines on the premises of 3001 East Hillsborough Avenue, storage- disposing facilities at about 60 locations in Tampa, a pickup truck, step-van, ice baggers, bags, etc. McGilvery had worked for Bayer in this business of making and selling ice cubes for 15 years and purchased the business with no money down for a total price of $125,000 to be paid at the rate of $1,275 per month at 10 percent interest until the total of $125,000 is paid. Exhibit 2 provided that a separate lease agreement for the property occupied by the business would be executed providing for payment of $500 per month. A promissory note in the amount of $125,000 payable to Bayer was executed by McGilvery and Fisher (Exhibit 3) which provided for payment of $1,725 per month with interest at 10 percent until the total of $125,000 was paid. There appears to have been a scrivener's error in the preparation of the note so far as the

      monthly payment is concerned. Since the sale agreement provided for the business to be paid for at $1,275 per month and a rental price of $500 per month the monthly payments should have been $1,775. The Business Lease executed February 1, 1984, (Exhibit 4) provided "consideration for this lease is the note on the sale of the business." The auditor for Respondent based his sales tax calculation solely on the Business Lease (Exhibit 4) and the promissory note and calculated the tax on a rental of $1,725 per month.

      
      

   10. McGilvery and Fisher defaulted on the payments on the note and the business was recaptured by Petitioner. Having no lien on the personal property sold to the buyers Petitioner was able to recover only a small portion of those items enumerated in Finding 9 above.

       
       

       CONCLUSIONS OF LAW

       
       

   11. The Division of Administrative Hearings has jurisdiction over the parties to and the subject matter of these proceedings.

       
       

   12. There are two primary issues here involved and one minor and collateral issue. The collateral issue involves including the reimbursement by the lessee for electricity used as part of the rent paid. Section 212.081(3)(b), Florida Statutes provides in pertinent part:

       
       

       It is also the legislative intent that there shall be no pyramiding or duplication of excise taxes levied by the state under this chapter

       
       

   13. The electric company includes the sales tax in its billing. To include the reimbursement received from the lessee for electricity used by lessee as part of the rent upon which sales tax is computed constitutes pyramiding and is violation of the legislative intent above quoted.

       
       

   14. The first main issue involves sales tax on the lease to Creech. As noted in the findings above, this lease is primarily the lease of a parking lot for vehicles.

       
       

   15. Section 212.03(6), Florida Statutes, provides:

       
       

       It is the legislative intent that every person is engaging in a taxable privilege who leases or rents parking or storage spaces for motor vehicles in parking lots or garages, who leases or rents docking or storage spaces for boats in boat docks or marinas, or who leases or rents tie-down or storage space for aircraft at airports. For the exercise of this privilege, a tax is hereby levied at the rate of 5 percent on the total rental charge.

       
       

   16. This statutory provision is implemented by Department of Revenue Rule 12A-1.070, Florida Administrative Code, which provides in pertinent part:

       
       

       1. Effective July 1, 1969, the rental or lease of any real property is taxable, except property which is:

          (c) Property subject to tax on parking,

          docking or storage space under Section 212.03(6), F.S.

       2. The tenant actually occupying, using or entitled to use any such property shall pay the tax to his immediate landlord or such other person granting the right to such tenant to occupy or use such property.

          * * *

          1. Only one tax on rental payments shall be collected and the tax should not be pyramided by a succession of transactions.

          2. Each place of business is required to be registered separately by the owner, landlord, or agent, who is obligated to collect and remit the tax.

          3. Where a tenant who is subject to tax on rental charges, sublets and collects rentals on a taxable portion of the leased premises, such tenant shall be required to register as a dealer and collect and remit the tax on all such sub-rentals, except that when space is subleased to a convention or industry trade show in a convention hall, exhibition hall, or auditorium whether public or privately owned, the sponsor who holds the prime lease is subject to tax on the prime lease and sublease shall be exempt.

          (15) Any person who has leased any real property and cannot prove that the tax levied by this chapter has been paid to his lessor, shall be directly liable to the State for any tax, interest, or penalty due on any such taxable transaction.

          
          

   17. This rule clearly exempts Bayer from payment of sales tax on the lease of property used by the lessee as a parking lot for vehicles for which privileges the lessee collects a fee. Agencies must honor their own substantive rules until they are amended or abrogated. Gadsden State Bank v. Lewis, 348 So.2d 343 (Fla. 1st DCA 1977).

       
       

   18. The second issue involves the transaction between Bayer and McGilvery. Here the parties clearly contemplated the sale and purchase of a business and personal property associated therewith. While no evidence was presented regarding the value of the personal property listed on Exhibit A to Exhibit 2 it was certainly worth several thousand dollars. To look solely to the lease and promissory note given for the purchase of the business and ignore the sale agreement is like looking at half of a picture when the entire picture is visible. When all relevant documents are considered it is concluded that the contemplation of the parties was that $500 per month be paid as rent for the use of the premises and $1,275 per month was to be paid for the business which included all equipment and good will. This conclusion is strengthened by the inclusion in Exhibit 2 of the phrase "It is understood between the parties that no real estate is being sold under this agreement." Had the principal amount of

       $125,000 been paid the purchasers would have owned the business and associated equipment but would still have a need for real property from which to operate the business. For that the buyers were paying rent which was subject to tax.

   19. From the foregoing it is concluded that Petitioners are exempt from sales tax on the lease of the parking lot to Creech Produce, Inc., and that Petitioner is liable on the tax on the real property leased to McGilvery and Fisher at the rate of $500 per month for the duration of that occupancy. It is

RECOMMENDED that a Final Order be entered amending the warrant for the collection of Sales and Use Tax to delete all taxes, penalties and interest except those related to the lease to McGilvery and Fisher at the rate of $500 per month during the term of occupancy.

ENTERED this 2nd day of July 1987, in Tallahassee, Florida.

K. N. AYERS Hearing Officer

Division of Administrative Hearings 2009 Apalachee Parkway

The Oakland Building Tallahassee, Florida 32301

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 2nd day of July 1987.

APPENDIX TO RECOMMENDED ORDER IN CASE NO. 86-2540

Treatment Accorded Petitioner's Proposed Findings: 1-4. Included in HO #1, #2, #3, #4, and #5.

5. Included in HO #9.

Treatment Accorded Respondent's Proposed Findings: 1-3. Included in HO #1, #2, and #3.

1. Accepted. All exhibits were admitted into evidence.

2. Included in HO #4.

3. Included in HO #5.

4. Included in HO #5.

5. Accepted. However, not relevant to the issues.

6. Included in HO #6.

7. Included in HO #9.

8. Included in HO #10.

COPIES FURNISHED:

Randy Miller Executive Director Department of Revenue

102 Carlton Building Tallahassee, Florida 32399-0100

William D. Townsend General Counsel Department of Revenue

104 Carlton Building Tallahassee, Florida 32399-0100

J. C. O'Steen, Esquire Kevin J. O'Donnell, Esquire Department of Legal Affairs The Capitol

Tallahassee, Florida 32399-1050

Edwin J. Bradley, Esquire 711 North Florida Avenue Suite 310

Tampa, Florida 33602

Docket for Case No: 86-002540

Orders for Case No: 86-002540