STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

GAINESVILLE AMATEUR RADIO ) SOCIETY, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 94-1200

) DEPARTMENT OF REVENUE, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the above matter was heard before the Division of Administrative Hearings by its assigned Hearing Officer, Donald R. Alexander, on March 13, 1995, in Gainesville, Florida, and by telephone on March 17, 1995.

APPEARANCES

For Petitioner: Sidney Schmukler, Esquire

3922 Northwest 20th Lane Gainesville, Florida 32605-3565

For Respondent: Olivia P. Klein, Esquire

Department of Legal Affairs The Capitol-Tax Section

Tallahassee, Florida 32399-1050 STATEMENT OF THE ISSUE

The issue is whether petitioner qualifies for a consumer's certificate of exemption as a scientific organization within the meaning of Section 212.08(7)(o)2.c., Florida Statutes.

PRELIMINARY STATEMENT

This matter began on December 21, 1993, when petitioner, Gainesville Amateur Radio Society, Inc., filed an application as a charitable organization for a consumer's certificate of exemption with respondent, Department of Revenue. If approved, petitioner would be able to make tax exempt purchases that would otherwise be taxable under Chapter 212, Florida Statutes. On February 3, 1994, the application was denied on the ground petitioner did not qualify as a "charitable organization" within the meaning of the law.

Thereafter, petitioner filed a petition seeking to contest the denial of its application.

The matter was referred by respondent to the Division of Administrative Hearings on March 3, 1994, with a request that a hearing officer be assigned to conduct a formal hearing. By notice of hearing dated March 17, 1994, a final hearing was scheduled on July 14, 1994, in Gainesville, Florida. At the

parties' request, the matter was rescheduled to February 7, 1995, and then again to March 13, 1995, at the same location. A continued hearing was conducted by telephone on March 17, 1995.

On April 18, 1994, petitioner filed an amended petition along with a second application for a consumer's certificate of exemption, this time on the theory that it was a scientific organization. Leave to file the amended petition was granted on May 3, 1994.

At final hearing, petitioner presented the testimony of Dr. Leon W. Couch, II, George S. C. Barnes, Edward A. Slimak, Dr. Gary T. Gossinger, and Harold R. Blalack, all members of the organization. Also, it offered petitioner's exhibits 1-4. All exhibits were received in evidence. Respondent presented the testimony of Dr. Gary T. Gossinger, Daniel M. Wagner, Jr., a Department sales tax exemption examiner, and Sharon W. Bradley, an Internal Revenue Service tax technician. Also, it offered respondent's exhibits 1 and 2. Both exhibits were received in evidence. Finally, the parties stipulated into evidence joint exhibits 1-3.

The transcript of hearing (two volumes) was filed on May 3, 1995, and respondent's exhibit 2 was late-filed on June 20, 1995. Proposed findings of fact and conclusions of law were filed by petitioner and respondent on May 23 and June 1, 1995, respectively. A ruling on each proposed finding has been made in the Appendix attached to this Recommended Order.

FINDINGS OF FACT

Based upon all of the evidence, the following findings of fact are determined:

1. Background

   
   

   1. Petitioner, Gainesville Amateur Radio Society, Inc. (GARS or petitioner), a Florida non-profit corporation, was incorporated on December 31, 1975. Its stated purpose is to promote an interest in amateur radio operation. Among other things, GARS provides preparation for Federal Communication Commission licensing examinations, supports community activities with free communication services, and encourages public awareness of ham radio activities through the publication of a monthly newsletter called the GARS-MOUTH.

      
      

   2. Respondent, Department of Revenue (DOR), is charged with the responsibility of administering and implementing the Florida Revenue Act of 1949, as amended. It has the specific task of collecting sales taxes and enforcing the state tax code and rules.

      
      

   3. By law, certain transactions are exempt from the state sales and use tax. Among these are sales or lease transactions involving "scientific organizations." In order for an organization to be entitled to an exemption, it must make application with DOR for a consumer's certificate of exemption and demonstrate that it is a qualified scientific organization within the meaning of the law. Once the application is approved, the certificate entitles the holder to make tax exempt purchases that are otherwise taxable under Chapter 212, Florida Statutes. In the case of petitioner, a certificate would enable it to save a hundred or so dollars per year.

      
      

   4. Claiming that it was entitled to a certificate of exemption as a charitable organization, GARS filed an application with DOR on December 21,

      1993. After having the application preliminarily disapproved by DOR on the ground it did not expend "in excess of 50.0 percent of the . . . organization's expenditures toward referenced charitable concerns, within (its) most recent fiscal year," a requirement imposed by DOR rule, GARS then amended its application to claim entitlement on the theory that it was a scientific organization. Although DOR never formally reviewed the amended application, it takes the position that GARS still does not qualify for a certificate under this new theory.

      
      

2. Is GARS a Scientific Organization?

1. Under Section 212.08(7)(o)2.c., Florida Statutes, a scientific organization is defined in relevant part as an organization which holds a current exemption from the federal income tax under section 501(c)(3) of the Internal Revenue Code. A DOR rule tracks this statute almost verbatim. Accordingly, as a matter of practice, in interpreting this statutory exemption, DOR simply defers to the final determination of the Internal Revenue Service (IRS). If the IRS grants an organization a 501(c)(3) status based on the determination that it is a scientific organization, then DOR accepts this determination at face value. DOR does not make an independent determination whether the organization is "scientific" or question the decision of the IRS. This statutory interpretation is a reasonable one and was not shown to be erroneous or impermissible.

   
   

2. GARS received a federal income tax exemption from the IRS regional office in Atlanta, Georgia by letter dated August 12, 1993. The record shows that GARS was granted an "exempt organization" status as a "charitable organization" and as an "educational organization" under Treasury Regulation Section 1.501(c)(3). However, GARS did not receive an exempt status as a "scientific organization" nor did the IRS make that determination. Therefore, GARS does not qualify as a scientific organization within the meaning of the law.

   
   

3. While petitioner submitted evidence to show that it engages in what it considers to be a number of scientific endeavors, these activities, while laudable, are irrelevant under Florida law in making a determination as to whether GARS qualifies for a sales tax exemption as a scientific organization. Therefore, the application must be denied.

   
   

   CONCLUSIONS OF LAW

   
   

4. The Division of Administrative Hearings has jurisdiction over the subject matter and the parties hereto pursuant to Section 120.57(1), Florida Statutes.

   
   

5. In determining the merits of petitioner's application, it is first noted that as the party seeking an exemption, GARS bears the burden of proving its entitlement to a certificate of exemption by a preponderance of the evidence. At the same time, it is well established that an exemption clause in a tax statute must be strictly construed against the person claiming the exemption. See, e. g., Asphalt Pavers, Inc. v. Dept. of Revenue, 584 So.2d 55,

   57 (Fla. 1st DCA 1991). Finally, Section 212.08(7)(o)2., Florida Statutes, provides that "the provisions of this section authorizing exemptions from tax shall be strictly defined, limited, and applied in each category. . . "

6. Subsection 212.08(7)(o)2.c., Florida Statutes, provides in relevant part as follows:

   
   

   c. "Scientific organizations" means scientific organizations which hold current exemptions from federal income tax under s. 501(c)(3) of the Internal Revenue Code . . .

   
   

   Rule 12A-1.001(3)(g)3.d., Florida Administrative Code, tracks the statutory definition almost verbatim.

   
   

7. Because the evidence shows clearly that petitioner does not hold a "current exemption from federal income tax under s. 501(c)(3) of the Internal Revenue Code," as required by the statute and rule, it does not qualify as a scientific organization within the meaning of the law. This conclusion is consistent with the principles that the statutory exemption be "strictly" applied, and that the taxing statute be strictly construed against the person claiming the exemption. Accordingly, GARS' application should be denied.

   
   

8. Finally, at the conclusion of the telephonic hearing on March 17, 1995, petitioner's counsel indicated that he intended to promptly file an application for exemption as a scientific organization with the IRS. If that application is ultimately approved, and a new application is then filed with DOR, petitioner would appear to qualify as a scientific organization and be eligible for a certificate of exemption.

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that respondent enter a final order denying petitioner's

application for a consumer certificate of exemption.

DONE AND ENTERED this 23rd day of June, 1995, in Tallahassee, Florida.

DONALD R. ALEXANDER

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 23rd day of June, 1995.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 94-1200

Petitioner:

Respondent:

Note - Where a proposed finding has been partially accepted, the remainder has been rejected as being irrelevant, unnecessary for a resolution of the issues, not supported by the evidence, cumulative, subordinate, or a conclusion of law.

COPIES FURNISHED:

Mr. Larry Fuchs Executive Director Department of Revenue

104 Carlton Building Tallahassee, FL 32399-0100

Linda Lettera, Esquire General Counsel Department of Revenue

204 Carlton Building Tallahassee, FL 32399-0100

Sidney Schmukler, Esquire 3922 N. W. 20th Lane

Gainesville, Florida 32605-3565

Olivia P. Klein, Esquire Department of Legal Affairs The Capitol-Tax Section

Tallahassee, Florida 32399-1050

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit to the agency written exceptions to this Recommended Order. All agencies allow each party at least ten 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: 94-001200

Orders for Case No: 94-001200