STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

ALLOR, INC., )

)

Petitioner, )

vs. ) CASE NO. 94-1892

)

DEPARTMENT OF REVENUE, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its designated Hearing Officer, Joyous D. Parrish, held a formal hearing in the above-styled case on July 12, 1995, in Fort Lauderdale, Florida.

APPEARANCES

For Petitioner: Allan D. Steinberg

Allor, Inc.

4953 North University Drive, Suite 14-B Lauderhill, Florida 33351

For Respondent: Mark T. Aliff

Senor Attorney

Office of the Attorney General The Capitol-Tax Section Tallahassee, Florida 32399-1050

STATEMENT OF THE ISSUES

The central issue in this case is whether the Petitioner owes sales, use, intangible taxes, penalties and interest; and, if so, the amount.

PRELIMINARY STATEMENT

This case began on February 7, 1994, when the Department of Revenue (Department) issued a notice of reconsideration to the Petitioner that advised the following amounts had been sustained as due and owing by the taxpayer (Petitioner): sales and use tax for the audit period (12/01/85-11/30/90) totalled $6,945.63; the intangible tax audit for the period (1984-1991) was

$48.09. The notice further advised that interest would continue to accrue on any unpaid balance and outlined the taxpayer's right to contest the matters addressed in the notice.

More specifically, the notice of reconsideration alleged that the documentation provided by the taxpayer was insufficient to withdraw the audit assessment. According to the notice the assessment of the tax due on sales was based upon the sales revenue reported on the federal tax return which was the only information available to the auditor. According to the audit report, the taxpayer had presented no documentation to refute the federal tax reports.

Further, since the taxpayer could provide no purchase journals and very few invoices, the assessment for purchases was based upon a one year sample period, July 1987 through June 1988. Again, purchases for this period were obtained from the federal tax returns.

Finally, as to the assessment for the corporate intangible tax, the auditor relied upon standard valuation references to determine the amount owed. This assessment was necessitated by the taxpayer's failure to file the proper notifications to the Department.

In response to the notice of reconsideration the taxpayer timely filed a challenge stating the points of disagreement with the audit results. On April 11, 1994, the matter was forwarded to the Division of Administrative Hearings for formal proceedings.

This case was set for hearing for May 16, 1995. The transcript of the proceeding for that date was filed on July 12, 1995. On May 16, 1995, the hearing was to be conducted by Hearing Officer Claude Arrington. After admitting four exhibits into evidence by stipulation (Department's 1, 2, 3, and Joint Exhibit 1), and before taking any testimony on the issues, the case was continued to allow the parties additional time so that the Department could consider documentation by the taxpayer presented that day which had not been previously submitted. The hearing officer directed the parties to confer regarding the newly presented documentation and entered the following statement on the record:

Hearing Officer: Okay. I think that that would be the--all factors considered, I think it would be better to terminate the hearing

before we have any evidence presented other than we'll keep the three exhibits that are--the three exhibits plus the one Joint Exhibit which have already been admitted into evidence in the file. And we will--I will be in touch with your office. I expect to get back to Tallahassee Friday, if not, it will be Monday and we can discuss reconvening this hearing.

* * *

And I hope the parties do understand that even

if additional receipts are found at this juncture, I'm sorry, but I'm gonna have no choice but to rule 'em inadmissible.

At the hearing on July 12, 1995, the Department presented the testimony of Curt Horton, the tax auditor responsible for this assessment. Allan Steinberg and Laurie Steinberg testified on behalf of the taxpayer. Petitioner's exhibit 1, a composite exhibit consisting of a number of receipts and account statements, together with an accompanying schedule was admitted into evidence. Petitioner's composite exhibit 2 was not admitted as it contained documents not previously disclosed or provided to the auditor. Documents offered in Petitioner's composite exhibit 2 were specifically excluded pursuant to Hearing Officer Arrington's ruling on May 16, 1995. It has been marked as proffered for the record.

The transcript of this proceeding was filed on July 24, 1995. The Department's proposed recommended order has been considered and specific rulings

on the proposed findings of fact are included in the appendix at the conclusion of this Order. Petitioner did not file a proposed recommended order.

FINDINGS OF FACT

1. Petitioner, Allor, Inc., performs accounting services through the individual, Allan Steinberg.

   
   

2. Subsequent to an audit of one of Mr. Steinberg's clients, the Department directed Curt Horton, a tax auditor, to perform an audit of Allor, Inc.

   
   

3. In furtherance of the audit, Mr. Horton requested records necessary to complete the review. He discussed the audit with Mr. Steinberg and advised him of all records needed. When Mr. Steinberg produced no records the audit was estimated based on the federal tax return.

   
   

4. Later, Mr. Horton adjusted the estimate based on actual deposits for sales.

   
   

5. For purchases, a one year period was selected and, again, the federal tax return was reviewed.

   
   

6. The audit was performed in this manner as the records offered by the taxpayer were insufficient to perform the audit in the more conventional format.

   
   

7. Mr. Horton made numerous requests to the taxpayer for documentation.

   
   

8. Mr. Horton extended the time to provide records so that the taxpayer had additional opportunity to document the audit.

   
   

9. Credit was given for invoices that the taxpayer was able to produce and, for the remainder of the period, the amounts were averaged to determine the tax amount owed.

   
   

10. The sales and use tax audit covered the period December 1, 1985, through November 30, 1990. The amount of the tax owed was calculated at

    $4,933.35. The amount of the penalty was $1,099.92. The interest owed through October 11, 1991, was $2,026.61. Based upon the foregoing, the total assessment for this audit was $8,059.88 with interest continuing to accrue at the rate of

    $1.62 per day.

    
    

11. With regard to the intangible tax assessment for the period 1984 through 1991, Mr. Horton computed the accounts receivable and estimated that

    $2,000.00 per year would be the amount for this category. Since this taxpayer filed no intangible tax returns at all, the penalty owed was high relative to the tax amount owed. Based upon the foregoing computation, the intangible tax owed calculated to be $33.33 whereas the penalty for not filing was $2,763.55. The interest through September 20, 1991, was $14.76. Based upon the foregoing, the total assessment for the intangible tax owed was $2,811.64 with interest continuing to accrue at the rate of $.01 per day.

    
    

12. Following the audit, the results of which were made available to the taxpayer on or about March 20, 1992, the Department issued a notice of decision on April 23, 1993, which responded to a protest letter filed by Petitioner on May 15, 1992. In substance, that notice sustained the results of the audit and

    noted that the taxpayer had not presented any additional documentation to support a conclusion to the contrary.

    
    

13. Thereafter, the Petitioner filed another letter of protest and the Department issued a notice of reconsideration on February 7, 1994. That notice provided that upon further review, the proposed sustained amount for the sales and use tax was $6,945.63 and the amount owed for the intangible audit assessment was $48.09. This latter amount was reduced because the Department proposed to compromise the penalty in full.

    
    

14. All of the acts of the auditor in this case were in keeping with the standard audit practices of the Department.

    
    

15. None of the documents marked for identification as Petitioner's composite 2, which have not been received into evidence, were made available to the Department at any time during the audit.

    
    

16. The Department afforded the Petitioner approximately three years after the audit to produce relevant documentation.

    
    

    CONCLUSIONS OF LAW

    
    

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

18. Section 212.12, Florida Statutes, provides, in pertinent part: (5)(a) The department is authorized to audit

    or inspect the records and accounts of dealers

    defined herein, including audits or inspections of dealers who make mail order sales to the extent permitted by another state, and to correct by credit any overpayment of tax, and, in the event of a deficiency, an assessment shall be made and collected. No administrative finding

    of fact is necessary prior to the assessment of any tax deficiency.

    
    

    (b) In the event any dealer or other person charged herein fails or refuses to make his records available for inspection so that no audit or examination has been made of the books and records of such dealer or person, fails or refuses to register as a dealer, fails to make a

    report and pay the tax as provided by this chapter, makes a grossly incorrect report or makes a report that is false or fraudulent, then, is such event, it shall be the duty of the department to make an assessment from an estimate based upon the best information then available to it for the taxable period of retail sales of such dealer, the gross

    proceeds from rentals, the total admissions received, amounts received from leases of tangible personal property by such dealer or of the cost price of all articles of tangible personal property imported by the dealer for use or consumption or distribution

    or storage to be used or consumed in this state, or

    of the sales or cost price of all services the sale or use of which is taxable under this part, together with interest, plus penalty, is such have accrued, as the case may be. Then the department shall proceed to collect such taxes, interest, and penalty on the basis of such assessment which shall be considered prima facie correct, and the burden to show the contrary shall rest upon the dealer, seller, owner, or lessor, as the case may be.

    * * *

    (6)(b) For the purpose of this subsection, if a dealer does not have adequate records of his retail sales or purchases, the department may, upon the basis of a test or sampling of the dealer's available records or other information relating to the sales or purchases made by such dealer for a representative period, determine the proportion that taxable retail sales bear to total retail sales or the proportion that taxable purchases bear to total purchases. This subsection does not affect the duty of the dealer to collect, or the liability of any consumer to pay, any tax imposed by or pursuant to this part. (emphasis added)

    
    

19. In this case, the tax assessments must be considered prima facie correct. The burden of showing the contrary, therefore, is on the Petitioner as the party against whom the assessment is made. See Department of Revenue v. Nu- Life Health and Fitness Center, 623 So.2d 747, 751 (Fla. 1st DCA 1992).

    
    

20. The Petitioner has failed to establish that the amounts owed differ from those set forth in the original assessment notices. To its credit the taxpayer has offered explanations as to why documentation was not timely provided, however, no substantive evidence has been presented to establish the amounts claimed are erroneous.

RECOMMENDATION

Based on the foregoing, it is, hereby, RECOMMENDED:

That the Department of Revenue enter a final order sustaining the proposed sustained amounts set forth in the notice of reconsideration dated February 7, 1994.

DONE AND RECOMMENDED this 28th day of September, 1995, in Tallahassee, Leon County, Florida.

JOYOUS D. PARRISH

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 28th day of September, 1995.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 94-1892

Rulings on the proposed findings of fact submitted by the Petitioner:

1. None submitted.

Rulings on the proposed findings of fact submitted by the Respondent:

1. Paragraphs 1 through 11 are accepted.

COPIES FURNISHED:

Allan D. Steinberg Tax Accountant Allor, Inc.

Suite 14-B

4953 North University Drive Lauderhill, Florida 33351

Mark T. Aliff

Assistant Attorney General Office of the Attorney General The Capitol-Tax Section

Tallahassee, Florida 32399-1050

Linda Lettera General Counsel

Department of Revenue

204 Carlton Building Tallahassee, Florida 32399-0100

Larry Fuchs Executive Director

104 Carlton Building Tallahassee, Florida 32399-0100

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: 94-001892

Orders for Case No: 94-001892