STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND ) PROFESSIONAL REGULATION, )

)

Petitioner, )

)

vs. ) CASE NO. 94-2061

) JOSEPH LASICK, d/b/a BIG ) STILL LIQUORS, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, final hearing in the above-styled case was held in Ft. Myers, Florida, on October 21, 1994, before Robert E. Meale, Hearing Officer of the Division of Administrative Hearings.

APPEARANCES

The parties were represented at the hearing as follows: For Petitioner: Richard D. Courtemanche, Jr.

Senior Attorney

Department of Business and Professional Regulation

Division of Alcoholic Beverages and Tobacco 1940 North Monroe Street

Tallahassee, Florida 32399-1007

For Respondent: Harold M. Stevens

Harold M. Stevens, P.A. Post Office Drawer 1440 Ft. Myers, Florida 33902

STATEMENT OF THE ISSUE

The issues in this case are whether Respondent owes an additional surcharge tax liability on the sale of alcoholic beverages and, if so, how much and what penalties should be imposed.

PRELIMINARY STATEMENT

By Administrative Action dated October 6, 1993, Petitioner alleged that Respondent failed to pay a surcharge tax liability of $25,098.92 for the sale of alcoholic beverages from July 1990 through November 1992.

By Request for Hearing dated October 8, 1993, Respondent requested a formal hearing.

At the final hearing, Petitioner called ten witnesses and offered into evidence exhibits. Respondent called three witnesses and offered into evidence exhibits. All exhibits were admitted into evidence.

The transcript was filed November 14, 1994. Each party filed a proposed recommended order, and rulings on the proposed findings are in the appendix.

FINDINGS OF FACT

1. Respondent is licensed by Petitioner as an alcoholic beverage vendor. Since January 1982, Respondent has held a 4COP license, which permits him to operate a package store, in which beer, wine, and liquor are sold for consumption off premises, and a bar, in which these alcoholic beverages are sold for consumption on the premises. Respondent sells beer, wine, and liquor for consumption on and off premises at a place of business known as Big Still Liquors, which is located at 1042 N. Tamiami Trail, North Ft. Myers.

   
   

2. The Legislature introduced the surcharge in 1990. By Form DBR 44-005E, which is called "Election of Surcharge Payment Method and Certified Inventory Report," Respondent elected an accounting method by which to track and report sales of alcoholic beverages subject to the surcharge. On July 9, 1990, Respondent checked the box on the form that states: "I hereby permanently elect to pay future surcharges based upon purchases."

   
   

3. The other alternative on the form is the sales method, in which the surcharge is calculated directly from retail sales. The sales method requires that the vendor record at retail the gallonage, as well as sales price. Also, the vendor must distinguish among beer, wine, and liquor sold at retail. Like most vendors, however, Respondent records sales by sales price, not volume.

   
   

4. The issues in this case arise out of two factors. First, the surcharge applies to volume of alcoholic beverages, not the sales price or purchase cost. As noted above, Respondent's sales records are expressed in dollars. Second, the surcharge applies to alcoholic beverages sold for consumption on premises, not to package sales. Although purchases from wholesalers can easily be determined in terms of volumes, Respondent purchases all alcoholic beverages through the package store and does not purchase alcoholic beverages separately for the bar. Thus, factual issues arise in determining the volume of beer, wine, and liquor sold through the bar.

   
   

5. Even though a vendor elects the purchase method, rather than the sales method, Petitioner must calculate the volume of alcoholic beverages sold at retail. Petitioner has devised a formula for this purpose.

   
   

6. The audit in the present case took place at the start of 1993 and covered July 1990 through December 1992.

   
   

7. The auditor obtained the invoices of the wholesale distributors that sold beer, wine, and liquor to Respondent during December 1992, January 1993, and February 1993. From these invoices, the auditor determined Respondent's cost of goods sold for these three months.

   
   

8. The auditor then estimated the markup on the alcoholic beverages. For liquor, the auditor asked Respondent's counterperson the amount of markup for larger bottles and smaller bottles. The percentage markups were 25 percent and

   35 percent, respectively. Recording the sales prices of two smaller items and

   two larger items, the auditor then calculated the actual markup and found that these estimates were quite accurate.

   
   

9. The auditor next averaged the markup to 30 percent. It is unclear whether he attempted to estimate the relative proportion of larger items to smaller items. It is clear that this markup applies to liquor and possibly to wine, but not to beer, where the markup is much less.

   
   

10. The auditor then found the breakdown between package store sales and bar sales for December 1992 through February 1993. Expressed as a percentage of total sales, package sales accounted for 51.1 percent, 61.3 percent, and 49.3 percent for the three months, respectively. The auditor averaged these figures and determined that 53.9 percent of all Big Still sales were through the package store.

    
    

11. Next, the auditor applied the 53.9 percent factor to the total purchases from wholesale distributors during the 30-month audit period. After a reduction to reflect the 30 percent markup, the auditor calculated the package- store factor, which is deducted from total volume to yield the residual volume of beer, wine, and liquor, which is presumed to have been sold through the bar. The lower the markup, the higher the package-sale factor, which is to the vendor's advantage as the package-sale factor is a deduction because it is not subject to the surcharge.

    
    

12. Numerous questions arise in the application of Petitioner's formula in this case. Questions include the reasonableness of the methods of estimating markup and differentiating between package and bar sales. In the absence of records from Respondent, however, Petitioner's approach would prevail.

    
    

13. However, Respondent has separately accounted for bar and package store sales for years. Motivated by a desire to reduce employee pilferage, Respondent has required employees to record all transfers of beer, wine, and liquor from the package store to the bar. To ensure compliance, Respondent has also required that all empties be returned to the package store in order to monitor bar sales.

    
    

14. Respondent reported and paid the surcharge in accordance with the volumes of alcoholic beverages reflected on its internal records. There is no surcharge deficiency.

    
    

    CONCLUSIONS OF LAW

    
    

15. The Division of Administrative Hearings has jurisdiction over the subject matter and the parties. Section 120.57(1), Florida Statutes. (All references to Sections are to Florida Statutes.)

    
    

16. Section 561.501(1) provides:

    
    

    . . . a surcharge of 10 cents is imposed upon each ounce of liquor and each 4 ounces

    of wine, and a surcharge of 4 cents is imposed on each 12 ounces of beer sold at retail for consumption on premises licensed by the division as an alcoholic beverage vendor.

17. Section 561.501(2) provides:

    
    

    . . . If by the 20th of the month following the month in which the surcharges are imposed, reports and remittances are not made, the division shall assess a late penalty in the amount of 10 percent of the amount due per month for each 30 days, or fraction thereof, after the 20th of the month, not to exceed a total penalty of 40 percent, in the aggregate, of any unpaid surcharges. The division shall establish, by rule, the required reporting, collection, and accounting procedures. Records must be maintained for 3 years. Failure to accurately and timely remit surcharges imposed under this section is a violation of the Beverage Law.

    
    

18. Section 561.501(3)(a) states:

    
    

    The division may compromise a taxpayer's liability for the surcharge imposed by this section upon the grounds of doubt as to liability for or collecti- bility of such tax. A taxpayer's liability for penalties as prescribed by this section may be settled or compromised if the division finds that the noncompliance is due to reasonable cause and not to willful negligence, willful neglect, or fraud. . . .

    
    

19. Section 561.501(4) and (5) provide for interest and the settlement or compromise of interest as provided in Section 561.501(3)(a).

    
    

20. Petitioner seeks additional surcharges, and interest and penalties. The burden of proof is therefore on Petitioner, although the findings set forth above would be the same if the burden of proof were on Respondent.

    
    

21. Petitioner has failed to prove that Respondent is liable for additional surcharges.

RECOMMENDATION

Based on the foregoing, it is hereby

RECOMMENDED that the Department of Business Regulation, Division of Alcoholic Beverages and Tobacco, enter a final order dismissing the Administrative Action against Respondent.

ENTERED on November 29, 1994, in Tallahassee, Florida.

ROBERT E. MEALE

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 on November 29, 1994.

APPENDIX

Rulings on Petitioner's Proposed Findings

1-3: adopted or adopted in substance. 4-12: rejected as subordinate.

13-14 (first sentence): rejected as recitation of evidence.

14 (remainder)-15: adopted or adopted in substance. 16-18: rejected as recitation of evidence.

19-25: adopted or adopted in substance; provided, however, Petitioner failed to prove that the result was more accurate than the result produced by Respondent.

26: rejected as recitation of evidence. 27-30: adopted or adopted in substance.

31-34: rejected as recitation of evidence and subordinate.

Rulings on Respondent's Proposed Findings

1-2: adopted or adopted in substance. 3: rejected as irrelevant.

4: rejected as repetitious.

5-6: adopted or adopted in substance. 7-8: rejected as irrelevant.

9: adopted or adopted in substance.

10-end: rejected as subordinate, repetitious, recitation of evidence, irrelevant, not findings of fact, and not in compliance with order of hearing officer requiring numbered paragraphs with no more than four sentences per paragraph.

COPIES FURNISHED:

Jack McRay, General Counsel Department of Professional Regulation 1940 North Monroe Street

Tallahassee, FL 32399-0792

Richard D. Courtemanche, Jr. Senior Attorney

Department of Business and Professional Regulation

Division of Alcoholic Beverages and Tobacco

1940 N. Monroe St. Tallahassee, FL 32399-1007

Harold M. Stevens Harold M. Stevens, P.A.

P.O. Drawer 1440 Ft. Myers, FL 33902

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: 94-002061

Orders for Case No: 94-002061