STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

BARKETT OIL COMPANY, )

)

Petitioner, )

)

vs. ) CASE NO. 89-1513

) DEPARTMENT OF REVENUE, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was conducted in this case on November 14, 1990, in Miami, Florida, before J. Stephen Menton, a duly designated Hearing Officer of the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Todd A. Fodiman, Esquire

Wallace, Engels, Pertnoy, Solowsky & Allen, P.A. Centrust Financial Center

100 S.E. 2nd St. 21st Floor Miami, Florida 33131

For Respondent: Ralph R. Jaeger, Esquire

Assistant Attorney General Tax Section Capitol Building

Tallahassee, Florida 32399-1050 STATEMENT OF THE ISSUE

The issue in this case is whether the Respondent's assessment of taxes, penalties and interest against Petitioner for the alleged failure to remit motor fuel taxes, motor fuel retail sales tax, and local option fuel tax for the period September 1, 1984 through April 30, 1985, should be sustained.

PRELIMINARY STATEMENT

Pursuant to Audit Number 86-17412866, the Respondent, Department of Revenue (the "Department" or "DOR"), assessed taxes, late penalties and interest against Petitioner Barkett Oil Company ("Barkett") as a result of Barkett's alleged failure to remit motor fuel taxes, motor fuel retail sales tax, and local option fuel tax for the period of September 1, 1984 through April 30, 1985. Barkett timely disputed all taxes assessed. Barkett contends that the taxes, late penalties and interest have been improperly, incorrectly and unconstitutionally assessed. The case was transmitted to the Division of Administrative Hearings for formal hearing pursuant to Section 120.575, Florida Statutes (1987).

The case was initially assigned to Hearing Officer Claude B. Arrington. Following several continuances, the case was scheduled for formal hearing on November 14 and 15, 1990. On November 13, 1990, Hearing Officer Arrington entered an Order Granting Petitioner's Motion to Take Judicial Notice. That Order provided that official recognition would be taken of

[A]ll pleadings filed in the case of State of Florida v. Alfred Vittorino, Dade County Circuit Court Criminal Case Number: 86-17104, [the "Vittorino" case] including the trial transcript and all documents which were admitted into evidence during the trial of that matter. Accordingly, the record of the case of the State of Florida v. Alfred Vittorino, is hereby adopted and included in the record of the instant case, and will be considered as evidence in the instant case.

(3) Documentary evidence may be received in the form of a copy or exert if the original is not readily available, as long as the opposing party shall be given an opportunity to compare the copy with the original if such a request is made.

Prior to the commencement of the scheduled formal hearing, this case was transferred to the undersigned Hearing Officer. At the outset of the hearing, Petitioner offered fourteen exhibits into evidence, including a portion of the transcript and numerous exhibits from the Vittorino criminal case. Although the Order Granting Petitioner's Motion to Take Judicial Notice indicates that official recognition would be taken of the entire transcript and all of the exhibits from the Vittorino case, neither of the parties could verify that all such exhibits were marked and offered at the hearing in this cause. In fact, the transcript of the Vittorino case which was marked as Petitioner's Exhibit 1 is apparently incomplete. The transcript includes all of the proceedings of record in the Vittorino case from Monday, August 10, 1987 through Wednesday, August 12, 1987. At the end of the transcript, there is an indication that the trial was to resume on Thursday, August 13, 1987. However, no record of the proceedings on that day have been provided. Likewise, the transcript refers to several exhibits which were not offered in this case. At the conclusion of the hearing in the instant case, the parties were granted fourteen days to provide copies of any additional portions of the transcript or any other exhibits from the Vittorino case which they wanted to include as part of the record in this proceeding. No such additional exhibits have been submitted.

At the hearing, Petitioner presented the testimony of Harry J. Barkett, the president of Barkett Oil Company, Francesco Tejedor, a tax auditor with the Department of Revenue, and Mark Zych, a tax audit specialist supervisor with the Department of Revenue. Respondent also called Mr. Tejedor and Mr. Zych as witnesses in its case in chief. Respondent offered two composite exhibits into evidence, both of which were accepted without objection. Following the presentation of Respondent's case, Mr. Barkett testified in rebuttal.

A transcript of the proceedings has been filed. At the conclusion of the hearing, the parties agreed upon a schedule for filing proposed recommended orders. However, before the proposed recommended orders were filed, counsel for Respondent was called to active military duty because of the events in the Persian Gulf. As a result, numerous extensions were granted with respect to

filing proposed recommended orders. Ultimately, both parties submitted

proposed recommended orders. A ruling on each of the parties' proposed findings of fact is included in the Appendix attached to this Recommended Order.

FINDINGS OF FACT

Based upon the oral and documentary evidence adduced at the final hearing and the entire record in this proceeding, the following findings of fact are made.

1. On September 15, 1960, Earman Oil Company, Inc., was granted License Number 1748 (the "Special Fuels Dealer's License") authorizing it to operate as a User-Dealer of special fuels in the State of Florida. On the face of that License was the following notation:

   
   

   This license is NOT TRANSFERRABLE but will continue in full force and effect until cancelled or revoked as provided by law.

   
   

2. The Special Fuels Dealer's License also contained a notation that provided as follows:

   
   

   This license must be returned to RAY F. GREEN, Comptroller, when a licensee terminates his operation as a User-Dealer.

   
   

3. On April 1, 1967, Earman Oil Company, Inc., was issued State License Number 375 (the "Motor Fuels Distributor's License") by the Florida Revenue Commission, authorizing Earman to engage in the business of distributing motor fuels in the State of Florida. On the face of that License was the following notation:

   
   

   This license is not transferrable or assignable, and must be displayed conspicuously at all times at the Distributor's office or principle place of business.

   
   

4. A Special Fuels Dealer's License and a Motor Fuels Distributor's License entitle a holder to purchase diesel fuel and gasoline for distribution without paying local option taxes pursuant to Chapter 336, Florida Statutes, motor fuel retail sales tax pursuant to Chapter 212, Part II, Florida Statutes and motor fuels tax pursuant to Chapter 206, Part I, Florida Statutes. A holder of such licenses is obligated to collect the taxes upon resale to customers and to remit those taxes to the state. If the resale is to another distributor who holds a valid license, the sale can be made tax free provided the seller follows the procedures set forth in the statutes and applicable DOR rules. In order to obtain either of the licenses during all times pertinent to this case, a company was required to have been in operation for at least one year and had to meet certain other requirements, including the posting of a bond.

   
   

5. Sometime in 1983, Barkett, a licensed dealer of special and motor fuels in the state of Florida, purchased Florida Coast Oil Company, Inc. ("Florida Coast"), another licensed dealer of special and motor fuels in the State of Florida. The evidence did not establish the specific terms and details of that acquisition. The licenses held by Florida Coast which enabled it to purchase motor fuels on a tax exempt basis were not cancelled or revoked following

   Barkett's acquisition of the company. Barkett apparently acquired all of the stock of Florida Coast and Florida Coast continued in operation under that same name. Many, if not all, of the officers and directors of Barkett at this time also became officers and directors in Florida Coast.

   
   

6. The evidence was conflicting and confusing as to the status of Earman Oil during 1980-1984. After review of all the evidence, it is concluded that Florida Coast acquired Earman Oil Company in 1980. The evidence did not establish the specific terms and details of that transaction. Apparently, this acquisition was also a stock purchase arrangement and Earman Oil Company initially remained in existence following its acquistion by Florida Coast. However, on August 31, 1981, Earman Oil Company was officially merged into Florida Coast. Harry Barkett, the president of Barkett and Florida Coast (after its acquisition by Barkett in 1983,) testified that the Department was advised of Florida Coast's acquisition of Earman Oil Company and Florida Coast was told by DOR that it could continue to use the licenses issued to Earman Oil Company in order to purchase motor fuels on a tax exempt basis. However, it does not appear that Mr. Barkett had any interest in Florida Coast at the time of the acquisition of Earman and no explanation was provided as to how he learned of DOR's alleged approval of the continued use of Earman's licenses. This contention is discussed in more detail in Findings of Fact 24 below.

   
   

7. On September 10, 1984, Florida Coast sold certain assets to Alfred Vittorino. Vittorino had previously worked as a manager for Barkett. The sales agreement provided that the assets being sold included

   
   

   1. ll rights to operate as Earman Oil Company including but not limited to all rights to the stock, licenses, permits or trademarks

      that are titled to Earman Oil Company that are required to operate the business.

      
      

8. The parties have stipulated that on September 12, 1984, a Certificate of Incorporation for a new Earman Oil Company, Inc., was filed with the Office of the Secretary of State for Florida and that Alfred Vittorino was the president and sole stock holder for that company. The licenses issued to the original Earman Oil Company could not legally be transferred or assigned to the new company. Moreover, the new company could not qualify for new licenses on its own since it had not been in operation for at least one year.

   
   

9. There is no dispute that at the time Vittorino acquired the assets from Florida Coast and began operating under the name Earman Oil Company, the Special Fuel Dealer's License and the Motor Fuel Distributor's License previously issued in the name of Earman Oil Company were delivered to Vittorino by Florida Coast. Harry Barkett, who was the president of both Barkett and Florida Coast at the time of the sale to Vittorino, testified that Vittorino told him that he would take whatever steps were necessary to get the licenses reissued and/or obtain new licenses so that Earman could continue to purchase fuel on a tax exempt basis.

   
   

10. Earman Oil Company never applied for new licenses after its acquisition by Vittorino. Instead, the company merely obtained and used the old licenses. Since the Special Fuel Dealer's License and the Motor Fuel Distributor's Licenses issued to the original Earman Oil Company has never been cancelled, "Earman Oil Company" was still registered with DOR as a distributor of motor fuel and a dealer of special fuels and it remained registered during the entire period in question, September 1984 to April 1985.

11. Although Harry Barkett testified that he believes DOR was notified of Florida Coast's sale of Earman's assets to Vittorino, DOR has no record of the sale and/or the transfer of the licenses of Earman Oil Company to Vittorino. No persuasive evidence was presented to establish that DOR was fully advised as to the terms of the sale and the status of the companies at the time of the sale. The contention that DOR approved the transfer of the licenses to the new company established by Vittorino is rejected.

    
    

12. After Vittorino purchased the above described assets from Florida Coast, Earman Oil Company began engaging in the business of selling motor fuel and special fuels to its customers.

    
    

13. During the period from September 1984 through April 1985, Earman Oil Company purchased gasoline and diesel fuel from Barkett and other companies and sold that fuel to, among others, Miami Petroleum Oil Company, Inc., an unlicensed distributor of gasoline and diesel fuel. During that period, the invoices for the sales by Barkett to Earman Oil Company indicated that the sales were tax exempt and there is no indication that taxes were being collected from Earman. Barkett did not obtain an affidavit or "resale" certificate from Earman Oil Co. prior to selling tax exempt. However, Barkett filed tax returns with DOR indicating that the sales were tax exempt.

    
    

14. Barkett contends that its typical procedure for selling tax exempt to a customer is to obtain the customer's license number and verbally confirm the validity of that number with the Department. Petitioner contends that it followed this procedure prior to selling tax exempt to Earman Oil Company and that the Department confirmed that the license numbers provided by Earman Oil Company were valid. While Petitioner contends that it contacted the Respondent in order to verify that Earman Oil Company was in possession of a valid license, there is no written evidence of any such communication. The applicable statutes and regulations require a distributor to obtain an affidavit or a "resale certificate" in order to sell fuel tax exempt. There is no provision in the rules or the statutes for verbal confirmation of licensure status.

    
    

15. From September 1984 through April 1985, Earman Oil collected motor fuel taxes under Chapters 206 and 212, Florida Statutes, from its customers, but never remitted those taxes to the state. There is no evidence that any of the taxes collected by Earman Oil were transferred to Barkett. Earman Oil Company filed tax returns with DOR indicating that it had not collected any taxes.

    
    

16. Criminal charges were subsequently brought against Vittorino for failure to remit collected motor fuel taxes for the period September 1984 through April 1985.

    
    

17. Vittorino was found guilty by a jury of failure to remit collected motor fuel taxes and was initially sentenced to nine years in prison, which was subsequently reduced to six years on appeal. As of the date of the hearing in this administrative proceeding, the state has not collected any of the outstanding taxes from Vittorino or Earman Oil.

    
    

18. Petitioner contends that during the trial of Vittorino, the State of Florida maintained that Earman Oil Company held valid licenses as a distributor of motor fuel and as a dealer of special fuels during the period September 1984 through May 1985. The transcript of that criminal proceeding confirms that this was one theory advanced by the prosecution during that case. However, there was considerable confusion during that trial as to the licensure status of Earman.

    Ultimately, Vittorino was convicted of failure to remit collected motor fuel taxes. It was not an essential element of this offense for Earman to be a valid license holder.

    
    

19. DOR conducted an audit of Barkett (Audit Number 86-17412886) for the period September 1984 through April 1985. The Department's audit indicated that Barkett sold 9,548,414 gallons of motor fuel on a tax free basis to Earman Oil Company during the period from September 1, 1984 through April 30, 1985. During the audit, the auditor requested Barkett to provide resale certificates or affidavits from Earman Oil Company to substantiate the basis for the tax exempt sales. Barkett was unable to produce any such resale certificates or affidavits. As a result, DOR concluded that Barkett was responsible for collecting and remitting to the state taxes on all the sales made during this period by Barkett to Earman.

    
    

20. Barkett contested the results of the audit and the Department's Notice of Decision issued on August 4, 1988. Barkett timely petitioned for reconsideration of that decision on September 2, 1988. The Department issued its Notice of Reconsideration on January 19, 1989.

    
    

21. In its Notice of Reconsideration, the Department determined that the balance due for the Local Option Tax pursuant to Chapter 336, Florida Statutes, was $540,173.68, which consisted of $381,936.56 tax, $95,484.14 penalty and

    $62,752.98 interest (with interest accruing at the rate of $125.50 per day from June 6, 1986, until date of payment.) The Department also determined that the balance due for motor fuel retail sales tax pursuant to Chapter 212, Part II, Florida Statutes, was $769,747.50, which consisted of $544,259.60 tax,

    $136,064.90 penalty and $89,423.00 interest (with interest accruing at the rate of $178.93 per day from June 6, 1988 until date of payment.) Finally, the Department determined that the balance due for motor fuels tax pursuant to Chapter 206, Part I, Florida Statutes, was $540,173.68, which consisted of

    $381,936.56 tax, $95,484.14 penalty, and $62,752.98 interest (with interest accruing at the rate of $125.57 per day from June 6, 1986 until date of payment.) 1/

    
    

22. As part of its reconsideration, the Department deleted the fraud penalties that had previously been assessed against Barkett.

    
    

23. Barkett timely filed a challenge to the Department's conclusions in the Notice of Reconsideration. 2/

    
    

24. During the late 70's and early 1980's, Barkett Oil acquired a number of different oil companies (including Florida Coast, which had previously acquired Earman). Several of the companies that were acquired by Barkett held licenses from the Department that enabled them to purchase motor fuels on a tax exempt basis for resale. Barkett contends that it notified the Department of each of those acquisitions and was never instructed that it had to reapply for a license to purchase tax exempt. Barkett suggests that these prior experiences justified its conclusion that Earman Oil Company could continue to purchase tax exempt following the sale and transfer of licenses to Vittorino. However, the circumstances and terms of the prior acquisitions by Barkett were not established in this case. It is not clear whether those transactions were stock purchase agreements or simply the acquisition of assets. Furthermore, the evidence regarding the notification supposedly given to the Department was vague and unconvincing. Although Petitioner contends that it notified the Department that Earman Oil Company had been sold to Vittorino, there is no written evidence of any such communication. It is not clear who at the Department was notified

    of the sale nor is it clear what information was provided regarding the sale.

    In sum, Petitioner's contention that Respondent should be estopped from claiming that Earman Oil Company did not hold a valid Distributor's License and/or Special Fuel License is rejected. There was insufficient persuasive evidence to establish that an authorized representative of the Department who was provided with full disclosure of the facts surrounding the transfer to Vittorino advised Petitioner that it could sell tax exempt to Earman Oil Company.

    
    

    CONCLUSIONS OF LAW

    
    

25. The Division of Administrative Hearings has jurisdiction over this matter. Section 120.575, Florida Statutes.

    
    

26. The DOR is seeking to impose a tax on Barkett pursuant to the Motor Fuel Tax provisions of Chapter 206, Part I, Florida Statutes (1983), the Motor Fuel Retail Sales Tax provisions of Chapter 212, Part II, Florida Statutes (1983) and the Local Option Fuel Tax provisions of Chapter 336, Florida Statutes (1983).

    
    

27. Pursuant to Section 206.14(5), Florida Statutes (1983), the assessment by the Department is prima facie evidence of the claim of the state and the burden of proof is upon the person charged to show the assessment was incorrect and contrary to the law. See also, Section 212.66 which adopts Section 206.14 for purposes of motor fuel retail sales tax assessments under Chapter 212, Part II, Florida Statutes and Sections 336.021(2) and 336.025(2)(a), which provide that the administration and collection of the local option fuel tax shall be in accordance with the provisions of Chapter 206, Florida Statutes.

    
    

28. While tax statutes are generally strictly construed against the taxing authority, this case involves an exemption from taxation and exemptions are strictly construed against the taxpayer. See, State, Department of Revenue v. Anderson, 403 So.2d 397 (Fla. 1981).

    
    

29. During the time period in question, the motor fuel tax assessed pursuant to Chapter 206, Part I was .04 dollars per gallon; the motor fuel retail sales tax pursuant to Chapter 212, Part II was .057 dollars per gallon; and the local option gas tax was .04 dollars per gallon.

    
    

30. The assessments in this case are based on an audit covering the period September 1, 1984 through April 30, 1985. As indicated in the Findings of Fact above, Petitioner does not dispute the factual allegations that, during the time period in question, it sold 9,548,414 gallons of fuel tax free to Earman Oil Company. Petitioner also does not dispute the mathematical calculations of the assessments which are set forth in paragraph 21 of the Findings of Fact above.

    
    

31. Section 206.44, Florida Statutes (1983) provides for a penalty of up to 25% on the unpaid tax and for interest to accrue at the rate of 1% per month on the tax from the date due until paid. The penalty provisions are also applicable to motor fuel retail sales taxes assessed pursuant to Chapter 212. See, Section 212.66, Florida Statutes (1983). The local option gas tax statute provides that the tax should be collected in the same manner as all other gas taxes pursuant to Chapter 206 and indicates that the penalty provisions of Chapter 206 are applicable. See Section 336.025(2)(a), Florida Statutes (1983). Accordingly, it is concluded that the 25% penalty provision applies to local option gas taxes which are not paid as required.

32. Section 206.41, Florida Statutes (1983), governed the collection of motor fuel taxes during the relevant period, and stated in pertinent part:

    
    

    206.41 Constitutional gas tax imposed.--

    1. An excise or license tax of 2 cents per gallon is imposed upon every gallon of motor fuel sold in this state, or brought into this state for use, upon which such tax has not been paid or the payment thereof has not been lawfully assumed by some person handling the same in this state. . . . This levy of tax shall be paid upon the first sale or transfer of title, or use, within this state whether

       by a distributor or dealer, except as expressly provided in subsection (2), who shall act as agent for the state in the collection of such tax whether he is the ultimate seller or not. (2)(a) Persons who hold valid distributors' licenses may purchase motor fuel without the tax imposed by this section being paid upon

       the first sale or transfer of title in this state as aforesaid for sale in wholesale quantities to dealers in the state and be liable for and pay the tax on all motor fuel so purchased and sold, and they shall act as agents for the state in the collection and payment thereof. As a condition precedent to a distributor purchasing and selling the motor fuel under this subsection without the

       tax being paid upon the first sale or transfer of title in this state, he must have made average monthly sales for the 12 months next preceding of not less than 40,000 gallons....

       
       

33. Section 206.425, Florida Statutes (1983), required a distributor to "request signed affidavits or resale certificates of all persons who purchase or obtain motor fuel from such distributor and who are not required to pay the tax imposed by this part at the time of purchase." The statute provides that "such affidavits or resale certificates should be obtained by the distributor before or at the time of the first sale; however, the department may accept them from the distributor after the assessment is presented but before disposition." Curiously, this section was not specifically adopted in Chapter 212, the sales tax statute. See Section 212.66, 3/ Florida Statutes (1983.) However, the rules adopted by the Department at the time included such a requirement for purposes of taxes under both Chapter 206 and 212. Rule 12B-5.03(2), Florida Administrative Code provided as follows:

    
    

    1. A resale certificate is required from every dealer or distributor who purchases motor fuel or special fuel for resale. Otherwise, the dealer or distributor making the sale is required to collect and remit the tax to the Florida Department of Revenue.

    
    

    See, Pioneer Oil Co., Inc. v. State, 381 So.2d 263 (Fla. 1st DCA 1980).

34. Section 206.425, Florida Statutes (1983), and Rule 12B-5.03, Florida Administrative Code, set forth the information that was to be included on a resale certificate. Further, Rule 12B-5.03(7), Florida Administrative Code suggests forms to be used as resale certificates. In sum, the regulatory scheme in place at the time provided that in order to sell tax exempt, a distributor had to obtain resale certificates or affidavits from the purchaser. Without the resale certificate (or affidavit), the tax had to be collected. See, State Department of Revenue v. Anderson, supra. The evidence is clear that Barkett could not produce any such affidavits or resale certificates regarding its sales to Earman Oil Company. Therefore, even if the new Earman Oil Company had valid licenses, Barkett would still be liable under Chapters 206, 212 and 336, Florida Statutes (1983), for its tax-free sales to Earman Oil Company.

    
    

35. The evidence in this case indicates that the new Earman Oil Company was not properly the holder of valid distributor's licenses. The parties stipulated that Vittorino incorporated a new company under that name on September 12, 1984. That entity could not have qualified for licenses to purchase tax exempt because it did not have a 12-month history during the audit period in question. In order to obtain a valid distributor's license, the company was required to have made average monthly sale for the previous last 12 months of not less than 40,000 gallons. In addition, Section 206.02(3)(a), Florida Statutes (1984 Supp.), states:

    
    

    Upon the filing of an application for a license and concurrently therewith, a bond

    of the character stipulated and in the amount provided for shall be filed with the department. No license shall issue upon any application unless accompanied by such a bond, except as provided in Section 206.05(1).

    
    

36. The Earman Oil Company never posted a bond as required by this section. The only licenses the new Earman Oil Company had were those delivered to it by Florida Coast Oil Company. Those Licenses specifically stated that they were not "transferable or assignable". This prohibition is consistent with Section 206.03(2), Florida Statutes (1983), which provides:

    
    

    (2) The license so issued by the department shall not be assignable, shall be valid only for the distributor in whose name issued, and shall be displayed conspicuously in the principal place of business of the distributor in the state.

    
    

37. Section 206.18(1), Florida Statutes (1983), and Florida Administrative Code Rule 12B-5.09 require that the licenses be surrendered to the Department upon discontinuance, sale or transfer of the business. In view of all of these provisions, it is clear that Florida Coast's transfer of the licenses to Earman was improper and the new Earman Oil Company, Inc. (under Alfred Vittorino), did not hold a valid license to purchase fuel tax exempt.

    
    

38. Barkett suggests that there was an understood practice in the industry whereby oil companies transferred licenses among themselves. The evidence was insufficient to support this contention. More importantly, there was no persuasive evidence that the Department ever approved such a practice.

39. Barkett could have escaped liability if it had accepted resale certificates or affidavits in good faith from Earman Oil Company. There were no resale certificates or affidavits from Earman Oil Company. Moreover, because of the close relationship between Barkett and Florida Coast and Florida Coast's improper transfer of its licenses to Vittorino, it is doubtful whether Barkett could have accepted a resale certificate in good faith. In any event, having failed to obtain resale certificates, Barkett, acting as agent for the state, had the duty to collect taxes on its sales to Earman and, having failed this duty, it is liable for those taxes.

    
    

40. Barkett argues that the state should be estopped from collecting the taxes from Barkett because (1) the Department allegedly told Barkett that it could sell tax free to Earman and (2) the state maintained during the prosecution of Vittorino that Earman was validly licensed. Both of these arguments are rejected. "As a general rule, equitable estoppol will be applied against the state only in rare instances and under exceptional circumstances [citation ommitted]. Another general rule is that the state cannot be estopped through a mistaken statement of the law. State, Department of Revenue v. Hobbs,

368 So.2d 367 (Fla. 1st DCA0, appeal dismissed 378 So.2d 345 (Fla. 1979) [remaining citation ommitted]". Anderson, supra, 403 So.2d at 400. Barkett has failed to show the existence of the elements necessary to estop the state from collecting the taxes. As to the first argument, the evidence was insufficient to establish that DOR was fully apprised of the facts and advised Barkett that it could sell tax free to Earman. As to Petitioner's second contention, the arguments made during the criminal trial of Vittorino are irrelevant to this case. While there was some confusion as to the licensure status of Earman during the Vittorino trial, Barkett in no way relied on the arguments made in that case. The state has not collected the taxes from Earman or Vittorino. While the state would not be entitled to double payment of the taxes, it is free to seek payment from a seller who did not follow the proper procedures to sell tax exempt.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions of Law, it is recommended that a Final Order be entered upholding the assessments set forth in the Notice of Reconsideration.

RECOMMENDED this 10th day of February, 1992, at Tallahassee, Florida.

J. STEPHEN MENTON Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 10th day of February, 1992.

ENDNOTES

1/ Petitioner does not challenge the mathematical calculations contained in the Notice of Reconsideration. Instead, its challenge is based upon the contention that it is not liable for the assessments.

2/ The Department has conducted a separate audit of Barkett Oil and a number of its related companies. This second audit did not include the sales by Barkett to Earman Oil Company and is not relevant to this proceeding.

3/ Although, Section 212.66, Florida Statutes (1983), does not make Section 206.425, Florida Statutes (1983), applicable to the collection of the motor fuel retail sales tax under Chapter 212, Part II, it does make Section 206.12, Florida Statutes (1983), applicable. Section 206.12(1), Florida Statutes (1983), states: (1) Each distributor shall maintain and keep, for a period of 3 years, such record of motor fuel received, used, transferred, sold, and delivered within this state by such distributor, together with invoices, bills of lading, and other pertinent records and papers, as may be required by the department for the reasonable administration of the motor fuel tax laws of this state. (emphasis added).

As indicated above, Rule 12B-5.03(2), Florida Administrative Code, required the seller to obtain a resale certificate or affidavit from a purchaser of motor fuel, or the seller was required to collect and remit the tax. Thus, a seller must collect and remit the motor fuel retail sales tax under Chapter 212, Part II, and the local option tax under Chapter 336, Florida Statutes, unless he obtains an affidavit or resale certificate from the purchaser.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 89-1513

Both parties have submitted Proposed Recommended Orders. The following constitutes my rulings on the proposed findings of fact submitted by the parties.

The Petitioner's Proposed Findings of Fact

Proposed Finding Paragraph Number in the Findings of Fact of Fact Number in the Recommended Order Where Accepted or

Reason for Rejection.

1. Addressed in the Preliminary Statement.

2. Subordinate to Findings of Fact 7.

3. Adopted in substance in Findings of Fact 8.

4. The first sentence is adopted in substance in Findings of Fact 9. The second sentence is rejected as vague, ambiguous and argumentative. The remainder of this proposal is subordinate to Findings of Fact 9.

5. Subordinate to Findings of Fact 10.

6. Subordinate to Findings of Fact 13.

7. Adopted in substance in Findings of Fact

   19 and 20.

8. Adopted in substance in Findings of Fact

   21 and 23.

9. Addressed in the Preliminary Statement.

10. Adopted in substance in Findings of Fact

    16 and 17.

11. Subordinate to Findings of Fact 18.

12. Adopted in substance in Findings of Fact 17.

13. Adopted in substance in Findings of Fact 15.

14. Adopted in substance in Findings of Fact 9.

15. Subordinate to Findings of Fact 7 and 11.

16. The first sentence is subordinate to Findings of Fact 9. The second sentence is rejected as vague, ambiguous and irrelevant.

17. Subordinate to Findings of Fact 14.

18. Subordinate to Findings of Fact 9.

19. Subordinate to Findings of Fact 14 and 24.

20. Subordinate to Findings of Fact 14.

21. Rejected as vague, ambiguous and unsupported by the weight of the evidence.

22. Rejected as vague, ambiguous and irrelevant.

23. Rejected as irrelevant and unnecessary. In addition, the evidence did not fully explain the basis for and operation of this notification program.

24. The first sentence is rejected as unnecessary. The remainder of this proposal is subordinate to Findings of Fact 10.

25. Subordinate to Findings of Fact 9.

26. Rejected as unnecessary.

27. Subordinate to Findings of Fact 10 and 14.

28. Subordinate to Findings of Fact 15.

29. Subordinate to Findings of Fact 24.

30. Rejected as unnecessary. This subject matter is addressed in Findings of Fact 5 and 24.

31. Subordinate to Findings of Fact 5.

32. Subordinate to Findings of Fact 24.

33. Subordinate to Findings of Fact 11 and 24.

34. Subordinate to Findings of Fact 14 and 24.

35. Adopted in substance in Findings of Fact 19.

36. Rejected as unnecessary.

37. Adopted in substance in Findings of Fact 13.

38. Rejected as a mischaracterization of the testimony.

39. Rejected as unnecessary and irrelevant.

40. Rejected as irrelevant.

41. Rejected as vague, ambiguous and unnecessary.

42. Subordinate to Findings of Fact 10.

43. Rejected as ambiguous and subordinate to Findings of Fact 18.

44. Rejected as vague, ambiguous and

    unnecessary.

45. Rejected as a mischaraterization of the testimony.

46. Subordinate to Findings of Fact 15.

47. Rejected as vague, ambiguous and argumentative.

48. Rejected as vague, ambiguous and unnecessary.

49. Rejected as unnecessary and argumentative.

50. Rejected as unnecessary. The transcript from the Vittorino trial reflected that there was considerable confusion regarding the status of the Earman license.

51. Subordinate to Findings of Fact 22.

52. Rejected as unnecessary.

53. Rejected as unnecessary.

54. Rejected as unnecessary.

55. Rejected as unnecessary. This subject matter is addressed in Findings of Fact

10. 56. Rejected as unnecessary. This subject matter is addressed in Findings of Fact 18.

1. Rejected as unnecessary.

2. Rejected as unnecessary. This subject matter is addressed in Findings of Fact 18.

3. Rejected as unnecessary.

4. Rejected as unnecessary.

5. Rejected as unnecessary.

6. Subordinate to Findings of Fact 15.

7. Rejected as unnecessary. A review of the transcript of the criminal proceeding indicates that the embezzelment charges were not allowed to go to the jury.

8. Rejected as unnecessary. This subject matter is addressed in Findings of Fact 10.

9. Rejected as unnecessary. As reflected in Findings of Fact 8, a new Earman Oil Co. was incorporated on September 12, 1984.

10. Rejected as unnecessary.

11. Rejected as unnecessary. This subject matter is addressed in Findings of Fact 15.

12. Rejected as unnecessary and argumentative.

13. Rejected as unnecessary. As indicated in Findings of Fact 11 and 24, no persuasive evidence was presented to establish that DOR was fully informed as to the various transactions involving Earman Oil Company.

14. Rejected as ambiguous, unnecessary and subordinate to Findings of Fact 8.

15. Rejected as unnecessary.

16. Subordinate to Findings of Fact 14.

17. Subordinate to Findings of Fact 24.

18. Subordinate to Findings of Fact 5, 6 and 24.

The Respondents's Proposed Findings of Fact

Proposed Finding Paragraph Number in the Fidnings of Fact of Fact Number in the Recommended Order Where Accepted or

Reason for Rejection.

1. Adopted in substance in Findings of Fact 1.

2. Adopted in substance in Findings of Fact 1 and 2.

3. Adopted in substance in Findings of Fact 3.

4. Adopted in substance in Findings of Fact 3.

5. Subordinate to Findings of Fact 7.

6. Adopted in substance in Findings of Fact 5.

7. Adopted in substance in Findings of Fact 8.

8. Adopted in substance in Findings of Fact 9.

9. Adopted in substance in Findings of Fact 10.

10. Subordinate to Findings of Fact 10.

11. Adopted in substance in Findings of Fact 13.

12. Subordinate to Findings of Fact 14.

13. Adopted in substance in Findings of Fact 19.

14. Adopted in substance in Findings of Fact 24.

15. Adopted in substance in Findings of Fact 19.

16. Adopted in substance in Findings of Fact 19.

17. Adopted in substance in Findings of Fact 20.

18. Adopted in substance in Findings of Fact 20.

19. Adopted in substance in Findings of Fact 20.

20. Adopted in substance in Findings of Fact 21.

21. Adopted in substance in Findings of Fact 21.

22. Adopted in substance in Findings of Fact

    21.

23. Adopted in substance in Findings of Fact 16.

24. Subordinate to Findings of Fact 1, 2, 3,

    10 and 18.

25. Subordinate to Findings of Fact 10.

26. Rejected as unnecessary and subordinate to Findings of Fact 18.

27. Adopted in substance in Findings of Fact 17.

28. Subordinate to Findings of Fact 15.

29. Adopted in substance in Findings of Fact 17.

30. Addressed in the Preliminary Statement.

31. Addressed in the Preliminary Statement.

COPIES FURNISHED:

Todd A. Fodiman, Esquire Wallace, Engels, Pertnoy,

Solowsky & Allen, P.A. Centrust Financial Center

100 S.E. 2nd Stret 21st Floor Miami, Florida 33131

Ralph R. Jaeger

Assistant Attorney General Tax Section, Capitol Building

Tallahassee, Florida 32399-1050

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS:

All parties have the right to submit written exceptions to this Recommended Order. All agencies allow each party at least 10 days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should contact the agency that will issue the final order in this case concerning agency rules on the deadline for filing exceptions to this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the final order in this case.

Docket for Case No: 89-001513

Orders for Case No: 89-001513