STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

TIRELESS, INC., )

)

Petitioner, )

)

vs. ) CASE No. 86-4763

) DEPARTMENT OF REVENUE, )

)

Respondent. )

)

RECOMMENDED ORDER

Consistent with the Notice of Hearing furnished to the parties by the undersigned on February 18, 1987, a hearing was held in this case before Arnold H. Pollock, a Hearing Officer with the Division of Administrative Hearings in Fort Lauderdale, Florida, on April 6, 1987. The issue for consideration was whether the Petitioner, Tireless, Inc., is responsible to pay use tax plus interest and penalty on the purchase by it of the motor vessel, Tireless, in 1984 and if so, was the valuation placed upon the vessel by the Respondent, Department of Revenue, correct.

APPEARANCES

For Petitioner: Debra A. Altizer, Esquire

Post Office Box 14124

Fort Lauderdale, Florida 33302

For Respondent: Kevin J. O'Donnell, Esquire

Department of Legal Affairs Tax Section

Capitol Building

Tallahassee, Florida 32399-1050 BACKGROUND

On May 23, 1986, the Respondent, Department of Revenue, issued a Notice of Delinquent Tax, Penalty, and Interest Due and Assessed against Tireless, Inc., a Delaware corporation for failure to pay the Florida use tax on the motor vessel, Tireless, with an estimated purchase price of $850,000.00. A sum certain in the amount of $61,200.00, including the use tax, penalty, and interest, was incorporated in the notice furnished to the

Petitioner. Thereafter, on November 25, 1986, Petitioner, through counsel, filed a Petition for Administrative Hearing which was received on December 1, 1986 at the Department of Revenue in which it requested that the use tax assessment be declared invalid or, in the alternative, that if the assessment was determined to be authorized, that a renewed assessment be issued based on the actual lower purchase price of the vessel. On December 2, this Petition and the documentation supporting it were forwarded to the Director of the Division of administrative Hearings for the appointment of a Hearing Officer and on January 12, 1987, the undersigned issued a Notice of Hearing directing that the hearing would be held in Fort Lauderdale on April 9, 1987. Thereafter, the parties requested a change in hearing date to April 6, 1987, and on February 18, 1987, an Amended Notice of Hearing, changing the date to that requested, was issued.

Shortly before hearing, Respondent filed a Motion to Require the Petitioner to Post a Cash or Surety Bond in this matter which was denied by the undersigned on the basis that no authority existed under the statutes involved for the under signed to enter such an order.

At the hearing, Counsel for Respondent, in cross examination, attempted to question Mr. Thomas B. Geiger, Sr., President of Tireless, Inc., as to matters relating to the corporate structure of Petitioner, certain financial aspects of the corporate operation, and other matters objected to by Petitioner in a purported attempt to pierce the corporate veil. Petitioner contended that the issue before this forum was whether the use tax imposed and assessed by the State of Florida was legitimate and owing and if so, in what amount and that the undersigned had no jurisdiction to go into whether or not Mr. Geiger or other corporate officers could be held personally liable for any assessment deemed valid on behalf of their alleged ultra vires acts in regard to the purchase and sale of the motor vessel.

The undersigned directed counsel for Petitioner to continue with her objections to each question pertaining to this subject; permitted counsel for Respondent to ask the questions involved; and directed the witness, Mr. Geiger, to answer indicating that these questions, the objections thereto, and the answers thereto, would be stricken from the record and that portion of the record containing them sealed if, upon research, the undersigned determined that this subject was without his jurisdiction.

After careful study of the pertinent statutes and regulations involved, it has been concluded that while the inquiry objected to may well be appropriate, this is not the appropriate forum for

conducting it. It is therefore ordered that the objections be sustained, that the relevant questions and the answers thereto be stricken from the record, and that that portion of the transcript wherein they are reflected be sealed.

At the hearing, Petitioner presented the testimony of Thomas

1. Geiger, Sr., President of Tireless, Inc. and it's parent corporation, Capitol Tire, Inc., and introduced Petitioner's Composite Exhibit 1. Respondent presented no testimony but introduced Respondent's Composite Exhibits A and B. The parties requested that the undersigned take official recognition of Sections 212.02, 212.05, and 212.06, Florida Statutes, without objection and such was taken. Counsel for Petitioner also requested that the undersigned take official recognition of Section 213.29, Florida Statutes, dealing with the failure to collect and pay over tax or attempt to evade or defeat tax. This section was objected to and the under signed reserved ruling on taking official recognition of this section until such time as an examination of the entire chapter could be made to determine its relevance. Having done so, official recognition is hereby taken as requested.

   
   

   Subsequent to the hearing, both parties submitted proposed findings of fact which have been ruled upon in the Appendix to this Recommended Order.

   
   

   FINDINGS OF FACT

   
   

   1. Tireless, Inc., was incorporated in the State of Delaware in October, 1981. On October 15, 1984, Tireless, Inc. purchased a

      61 foot 1985 Hatteras motor yacht from Toledo Beach Marina in LaSalle, Michigan, for a purchase price of $771,339.00. Delivery was to be taken at New Bern, North Carolina. The above stated price was the factory invoice price of $746,330.00 plus a

      $25,000.00 profit to the dealer. The invoice for the sale, dated October 4, 1984, reflecting that the yacht was sold to Toledo Beach Marina, nonetheless reflects that the customer, who was to pay 100 per cent of the purchase price prior to delivery by customer pick up was Mr. Geiger.

      
      

   2. After purchase, the yacht was documented in Wilmington, Delaware and home-ported there. The name and home port appearing on the transom of the vessel reflected, "Tireless, Wilmington, Delaware." The vessel constituted the sole asset of its owning corporation.

      
      

   3. The vessel was purchased as an investment. It was anticipated that it would be used by company personnel for pleasure as well as business meetings and it could and would be chartered out on occasion. Though the vessel reportedly was to be

      used on the Great Lakes, because of the reported possibility of severe weather in that area at the time of pick up and of ice forming in one or more of the 38 locks of the canal across New York State to Lake Erie, a decision was made to take the boat to Florida for winter storage. Recognizing that dockage facilities are quite often difficult to come by, arrangements were made for the boat to be docked at the Bahia Mar Yacht Basin in Fort Lauderdale, arguably the premier, most active and most prestigious anchorage in South Florida. These arrangements were made well in advance of the arrival of the vessel. This was to be a winter dockage only. From the time of its arrival at the yacht basin in November, 1984 until it left to go north in April, 1985, it did not leave the basin although it was moved from one slip to another in the same marina. While at the Bahia Mar Yacht Basin, certain modifications were made to the vessel such as the installation of additional electronics and a custom interior was installed. From November 1, 1984 through April 5, 1985, Mr. Geiger visited the boat on six occasions staying overnight on it for one or more nights each time. The boat was not used for parties nor did any other person live aboard the boat during its stay at Bahia Mar.

   4. Though the Tireless was brought from North Carolina to Fort Lauderdale, there were other ports to the north where the boat could have been wintered including New Bern, itself, and various ports in South Carolina and Georgia, not even considering those Florida ports to the north. Mr. Geiger contends that corporate officials picked the Fort Lauderdale berth because of the availability of berthing facilities and the capability of electronics installation found in the immediate area. This argument is not persuasive, however. There was nothing shown to be particularly unique about the electronics installed or the interior customizing done which could not have been done in other marinas between New Bern and Fort Lauderdale such as Wilmington, North Carolina; Charleston, South Carolina; Savannah, Georgia; or Jacksonville, Florida. What is obvious, though no direct evidence of this was presented, is that in the wintertime, the climate of Fort Lauderdale is far superior and friendly than those other ports as are the social aspects.

      
      

   5. The boat was sailed from the factory to Fort Lauderdale by a crew made up of Mr. Geiger as captain and several other non- profession sailors who were friends or acquaintances of his. Upon arrival in Fort Lauderdale, Mr. Geiger put the boat into the marina immediately and stayed but one day prior to leaving to return up north. In addition to the six or so visits paid to the boat by Mr. Geiger referenced above, other unidentified individuals from up north did come down and onto the yacht at its berth for short periods. During the trip down from North Carolina, the boat utilized the Intracoastal Waterway and stopped at one or two Florida marinas over night on the way.

   6. On or about September 26, 1984, Mr. Geiger entered into a license agreement for dockage space with the Bahia Mar Hotel and Yachting Center for slip # E-251 for the Tireless at a rate of 90 per day to start on November 15, 1984. Thereafter, on November 2, he entered another agreement with the marina for a different slip, # H-359. The rate and estimated length of stay reflected on this second agreement is listed as "cond." No explanation of this notation was given. The bills for the dockage reflect numerous phone calls and other charges on an almost daily basis, the explanation for which is that they were calls made by workmen or others in reference to the work being done on the boat. When these bills came due they were paid and payment was authorized either by Mr. Geiger as President of Tireless, Inc., or by a yacht broker resident at the marina who was supervising the work being done on the vessel.

      
      

   7. In April, 1985, the boat was sailed from South Florida up to South Carolina where it stayed for a few weeks then on to North Carolina for a week and on to New York where it stayed for several weeks prior to going to the Great Lakes and its dockage in Ohio for the summer. While up north, it was, as intended, used for pleasure, business, and charter on several occasions.

      
      

   8. One of the individuals who showed a strong interest in chartering the vessel while it was in Ohio indicated also that he might be interested in chartering it in South Florida for the winter. As a result, Mr. Geiger had the boat brought back in the fall of 1985. However, the proposed charter fell through. While in Florida, however, the boat was sold to another individual who paid approximately $805,000.00 for it.

      
      

   9. The boat was sold in January, 1986. It was not until some four months later that the Department of Revenue filed its notice of delinquent tax. An informal hearing was held as a result of the assessment and on October 2, 1986, the Department, in a letter to Petitioner's counsel, stated as a notice of reconsideration and the final position of the Department that it affirmed the assessment and expected it to be paid in full. In essence, the Department concluded that the vessel was imported into the State of Florida and stored here initially for a period in excess of five months. While here, it was modified and improved and was available for use by the owner even though it may not have been taken out and that all of this was done prior to its being used elsewhere, in another state, for more than six months. The Department considered this to be co-mingling with the mass of property in the State of Florida rendering the yacht subject to use tax, and its position appears to be legally correct.

      CONCLUSIONS OF LAW

      
      

   10. The Division of Administrative Hearings has jurisdiction over the parties and subject matter in this case. Section 120.57(1), Florida Statutes.

       
       

   11. The authority for the State of Florida to impose sales and use tax is found in Chapter 212, Florida Statutes, wherein at Section 212.05, it is stated:

       
       

       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, ....

          * * *

          (b) At the rate of 5 per cent of the cost price of each item or article ... when the same is not sold but is used, consumed, distributed, or stored for use or consumption in this state.

          
          

   12. The evidence presented at the hearing clearly shows that the vessel in question, classified as tangible property and therefore subject to tax, was stored in the State of Florida for use here. It does not matter that it was not used for the normal purpose intended for yachts, that is, cruising on the water. It is sufficient that the vessel, while in storage for at least five months at a commercial yacht basin, not a repair yard, was used as living quarters on several occasions by the president of the owner corporation. In light of this, and in light of the fact that the vessel was brought to almost the farthest part of the state from the point of entry, a resort area frequented by yachtsmen and individuals likely to charter or purchase such a vessel, it is clear that the vessel was stored for use in this state during that period. Constitutional questions possibly involved are not resolvable in this forum.

   13. Having, therefore, determined that tax is due on the storage of the vessel in this state, the question remains as to the correct amount of said tax. Both Petitioner and Respondent agree the original assessment of the vessel by the Department was excessive and the correct assessment should be $771,330.00 upon which the tax due may be based along with appropriate penalty and interest.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore:

RECOMMENDED that the Petitioner, Tireless, Inc., pay a use tax plus penalty and interest on the storage for use in Florida of the motor vessel, Tireless, and that such tax be based on a value assessment of $771,330.00.

RECOMMENDED this 15th day of June, 1978 in Tallahassee, Florida.

Arnold H. Pollock, Hearing Officer Division of Administrative Hearings The Oakland Building

2900 Apalachee Parkway

Tallahassee, FL 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 15th day of June.

APPENDIX

The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties hereto:

By the Petitioner

1-8. Accepted and incorporated herein.

1. Accepted as to the fact that prior arrangements were made due to concern over availability of winter dockage space. There was no evidence regarding any representations made by the Bahia Mar Club.

2. Accepted.

11-12. Rejected. There was no evidence of actual weather conditions. In fact, the decision was made to go south reportedly due to possible weather conditions but no effort was made to make the trip to the Great Lakes at that time.

13. See 11-12.

1. Accepted.

2. Rejected while the vessel was not used for sailing, Mr. Geiger did live aboard on several visits down from Ohio.

16-17. No evidence was introduced by either party on the issue of intent. Evidence as to actual use or non-use is controlling in any event.

18-21. Rejected as irrelevant.

22. Accepted and incorporated herein. By the Respondent

1-5. Accepted and incorporated herein. 6-11. Accepted and incorporated herein.

1. Rejected as contrary to the evidence.

2. Accepted.

14-16. Accepted.

17-18. Accepted.

19-20. Accepted.

COPIES FURNISHED:

William D. Townsend, Esquire Department of Revenue

104 Carlton Building Tallahassee, FL 32399-0100

Debra A. Altizer, Esquire Post Office Box 14124 Fort Lauderdale, FL 33302

Kevin J. O'Donnell, Esquire Department of Legal Affairs Tax Section

Capitol Building Tallahassee, FL 32399-1050

Randy Miller, Executive Director Department of Revenue

104 Carlton Building Tallahassee, FL 32399-0100

Docket for Case No: 86-004763

Orders for Case No: 86-004763