STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

BEVERLY HILLS BOWL, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 94-3603

)

DEPARTMENT OF REVENUE, )

)

Respondent. )

)

RECOMMENDED ORDER

The final hearing in this case was held before Larry J. Sartin, Hearing Officer, on July 26, 1995, in Crystal River, Florida.

APPEARANCES

For Petitioner: Peter C. Johnston

Peter C. Johnston, CPA, P.A.

6 Beverly Hills Boulevard Beverly Hills, Florida 34465

For Respondent: Mark T. Aliff

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

STATEMENT OF THE ISSUE

The issue in this case is whether Petitioner owes additional sales and use tax, plus penalties and interest, on the purchase of bowling equipment during the audit period August 1, 1987 to July 31, 1992.

PRELIMINARY STATEMENT

On or about April 27, 1994, Respondent, the Department of Revenue, entered a Notice of Decision informing Petitioner, Beverly Hills Bowl, Inc., that additional sales and use tax, plus penalties and interest, was payable for the audit period August 1, 1987 through July 31, 1992.

Petitioner requested a formal administrative hearing to contest Respondent's determination. That request for hearing was filed with the Division of Administrative Hearings on July 1, 1994. The matter was designated case number 94-3603 and was assigned to the undersigned.

After giving the parties an opportunity to settle their dispute, the final hearing was scheduled for July 26, 1995, by Notice of Hearing entered March 13, 1995.

At the final hearing, Petitioner presented the testimony of Charles Gill and Evelyn Gill. Petitioner offered one exhibit. The exhibit was accepted into evidence.

Respondent presented the testimony of Kenneth Riordan and offered two exhibits. Respondent's exhibits were accepted into evidence.

A transcript of the final hearing was filed August 22, 1995. Proposed recommended orders were required to be filed on or before August 31, 1995. Both parties timely filed proposed orders. A ruling on each proposed finding of fact contained in the proposed orders has been made either directly or indirectly in this Recommended Order or the proposed finding of fact has been accepted or rejected in the Appendix which is attached hereto.

FINDINGS OF FACT

1. The Parties.

   
   

   1. Petitioner, Beverly Hills Bowl, Inc., is a Florida corporation. Petitioner was formed by Charles and Evelyn Gill, the shareholders of Petitioner. Petitioner was formed to own and operate a bowling alley.

      
      

   2. Respondent is an agency of the State of Florida charged with, among other things, responsibility for assessing and collecting sales and use taxes in Florida pursuant to Chapter 212, Florida Statutes.

      
      

2. The Respondent's Audit.

   
   

   1. Between July 23, 1992 and October 8, 1992, Respondent performed a sale and use tax audit of Petitioner for the period August 1, 1987 through July 31, 1992.

      
      

   2. Respondent concluded that Petitioner's books and records were reasonable except for documentation to support the payment of sales and use tax on a purchase by Petitioner of bowling equipment.

      
      

   3. Respondent issued a Notice of Proposed Assessment on October 29, 1992. Respondent proposed the assessment of $31,609.05 in sales and use tax. Petitioner paid $8,137.05 of the additional tax. The parties stipulated that the additional tax liability at issue in this proceeding amounts to $23,472.00.

      
      

   4. Respondent also assessed a penalty of $7,888.96 and interest of

      $5,264.15.

      
      

3. Disputed Purchase.

   
   

   1. Petitioner purchased bowling lane equipment from United Bowling Products, Inc. (hereinafter referred to as "United"), a Florida corporation, during the audit period.

      
      

   2. Petitioner paid $391,200.00 to United for bowling lanes and equipment described on Petitioner's exhibit 1.

      
      

   3. Before consummating an agreement to sale bowling lanes to Petitioner, United gave Petitioner a "Proposal" offering to sell bowling lanes to Petitioner for $391,200.00. See Petitioner's exhibit 1. The Proposal states, among other things, the following:

      * WE OFFER THE ABOVE EQUIPMENT FOR $16,300.00 PER LANE INCLUDING INSTALLATION, FREIGHT, AND

      FLORIDA SALES TAX. . . . [Emphasis added].

      
      

   4. Petitioner accepted the Proposal and purchased the bowling lanes for

      $391,200.00. Oral communications between Petitioner and United were also consistent with the Proposal concerning the inclusion of sales tax in the purchase price. No written documentation of the agreement between United and Petitioner was entered into.

      
      

   5. Petitioner received the bowling lanes and paid United $391,200.00. No written documentation or invoices were provided Petitioner by United upon consummation of the sale. The additional assessment at issue in this case is attributable to this sale of bowling equipment by United to Petitioner.

      
      

4. Respondent's Treatment of the Purchase.

1. Respondent concluded that, since the amount of sales tax was not separately stated on the Proposal, additional documentation of the payment of the sales tax by Petitioner to United was required. Respondent requested additional documentation but Petitioner was unable to provide it to Respondent's satisfaction.

   
   

2. Respondent concluded that Petitioner was responsible for the payment of use tax on the equipment because it could not be proved to Respondent's satisfaction that sales tax had been paid to United.

   
   

3. Respondent is also attempting to collect sales tax on the purchase from the primary dealer responsible for the collection and remittance of sales tax.

   
   

   CONCLUSIONS OF LAW

   
   

4. The Division of Administrative Hearings has jurisdiction of the parties to and the subject matter of this proceeding. Section 120.05, Florida Statutes (1993).

   
   

5. Sales and use tax on the sale of tangible personal property in Florida is imposed pursuant to Section 212.05, Florida Statutes:

   
   

   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 . . . .

   
   

6. The manner in which sales tax is to be collected is provided for in Section 212.07, Florida Statutes:

   
   

   (1)(a) The privilege tax herein leviedmeasured by retail sales shall be collected by the dealers from the purchaser or consumer. . . .

   1. A dealer shall, as far as practicable, add the amount of the tax imposed under this chapter to the sale price, and the amount of the tax shall be separately stated as Florida tax on any charge

      ticket, sales, slip, invoice, or other tangible evidence of sale. Such tax shall constitute a part of such price, charge, or proof of sale which shall be a debt from the purchaser or consumer to the dealer, until paid, and shall be recoverable at

      law in the same manner as other debts. . . .

   2. Any dealer who fails, neglects, or refuses to collect the tax herein provided, either by himself or through his agents or employees, is

      . . . guilty of a misdemeanor of the first degree . . . .

      
      

7. Pursuant to Section 212.07, Florida Statutes, the primary responsibility for assessing and collecting sales tax on the sale at retail of tangible personal property is placed on the dealer or seller of the property. See also, Section 212.06, Florida Statutes. In this case the dealer was United. Therefore, United has the primary responsibility for collecting and paying the sales tax due the State of Florida on Petitioner's purchase of the bowling equipment.

   
   

8. Although the primary responsibility for the collection and payment of sales tax is placed on United, Section 212.07(9), Florida Statutes, goes on to provide the following with regard to sales and use tax:

   
   

   (9) Any person who has purchased at retail, used, consumed, distributed, or stored for use or consumption in this state tangible personal property . . . and cannot prove that the tax levied by this chapter has been paid to his vendor . . . is directly liable to the state for any tax, interest, or penalty due on any such taxable transactions.

   
   

9. Although Respondent has taken the position that Petitioner owes use tax on the purchase of the equipment, the additional tax at issue in this case is payable, if at all, pursuant to Section 212.07(9), Florida Statutes. Whether the tax is characterized as "sales" or "use" tax is of little consequence.

   
   

10. There is no dispute that Petitioner purchased tangible personal property at retail for use in this state. There is also no dispute that the "dealer", as that term is used under Chapter 212, Florida Statutes, was United and that United had the primary responsibility to collect sales tax on the transaction. Finally, there is no dispute that Section 212.07(9), Florida Statutes, also imposes liability for the tax on Petitioner if Petitioner "cannot prove that the tax levied by this chapter has been paid to his vendor "

    
    

11. The only issue which must be resolved in this case is whether Petitioner has proved that tax was paid by it to United. Respondent has taken the position that Petitioner has failed to provide such proof because Petitioner has not produced any receipt or other written document which separately states the amount of sales tax paid. Respondent has not cited any statute or rule which requires such separate itemization under the circumstances of this case. The only specific requirement that proof be provided is, therefore, the language of Section 212.07(9), Florida Statutes.

    
    

12. In support of its position that sales tax was in fact paid, Petitioner presented unrefuted evidence that an "offer" was made by United to sell the

    subject property for a sales price of $16,300.00 per lane "including . . . Florida state sales tax." The unrefuted evidence also proved that Petitioner "accepted" United's offer and paid the agreed price "including . . . Florida state sales tax."

    
    

13. Having established by unrefuted evidence that Petitioner paid an amount for the bowling equipment that included Florida sales tax, simply mathematics can be applied to determine the amount of sales tax that was included in the total purchase price. The total amount paid need only be divided by the sales tax rate plus 100 percent. The resulting amount may then be subtracted from the total sales price to determine the amount of sales tax.

    
    

14. Petitioner has, therefore, met its burden of proving that "the tax levied by this chapter has been paid to [its] vendor . . ." as required by Section 212.07(9), Florida Statutes. Respondent did not offer sufficient proof to refute Petitioner's evidence and has not cited any authority requiring proof greater than that provided by Petitioner.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered dismissing the assessment dated

October 29, 1992 against Beverly Hills Bowl, Inc.

DONE AND ENTERED this 26th day of September, 1995, in Tallahassee Florida.

LARRY J. SARTIN, 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 26th day of September, 1995.

APPENDIX

The parties have submitted proposed findings of fact. It has been noted below which proposed findings of fact have been generally accepted and the paragraph number(s) in the Recommended Order where they have been accepted, if any. Those proposed findings of fact which have been rejected and the reason for their rejection have also been noted.

Petitioner's Proposed Findings of Fact

1. Accepted in 2-3, 5-6 and 11.

2. Accepted in 9-11.

3. Accepted in 1, 10 and 12.

4. See 14. What Mr. Aliff may have said during the hearing may not form the basis of a finding of fact. Mr. Aliff was not sworn and did not testify.

5. See 13.

Respondent's Proposed Findings of Fact

1 Accepted in 1.

2-3 Accepted in 3.

1. Accepted in 4. The last sentence is a conclusion of law.

2. Hereby accepted.

3. Accepted in 9-10 and 12.

4. Hereby accepted.

5. See 12-13. What the Citrus County Property Appraiser may have reported is hearsay.

6. Accepted in 5.

7. Not relevant.

COPIES FURNISHED:

Peter C. Johnston, CPA, P.A.

6 Beverly Hills Boulevard Beverly Hills, Florida 34465

Mark T. Aliff

Assistant Attorney General Tax Section, Capitol Building Department of Legal Affairs

Tallahassee, Florida 32399-1050

Larry Fuchs, Executive Director Department of Revenue

104 Carlton Building Tallahassee, Florida 32399-0100

Linda Lettera, Esquire Department of Revenue Legal Office

204 Carlton Building Tallahassee, FL 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: 94-003603

Orders for Case No: 94-003603