vs. ) Case No. 96-5098
Respondent. )
vs. ) Case No. 96-5099
Respondent. )
vs. ) Case No. 97-1115
Respondent. )
These cases had been forwarded to the Division of Administrative Hearings for the assignment of an administrative law judge to conduct a hearing in accordance with Section 120.57(1), Florida Statutes, to resolve disputed issues of material fact. Subsequently, the parties entered into a factual
stipulation to resolve those disputed issues of material fact. Nonetheless, the parties agreed that the case should remain before the administrative law judge for resolution. That arrangement was approved by the administrative law judge leading to the entry of this recommended order. See Section 120.569(1), Florida Statutes. This recommended order is entered based upon the Joint Stipulation of Facts, Statement of the Issues, and in consideration of joint exhibits filed.
For Petitioners: Paul R. Vidas, C.P.A.
Zelenkofske, Axelrod and Company, Inc.
For Respondent: Elizabeth T. Bradshaw, Esquire
Jerrell L. Murchison, Esquire Office of the Attorney General The Capitol, Tax Section Tallahassee, Florida 32399-1050
Are Petitioners entitled to repayment of funds paid to the State Treasury as intangible taxes in relation to accounts receivable generated by sales made in the state of Florida?
See Section 215.26, Florida Statutes.
On October 30, 1996, DOAH Case Nos. 96-5098, and 96-5099, were received by the Division of Administrative Hearings.
DOAH Case No. 96-5098 was set for a hearing to be conducted on
February 20, 1997. DOAH Case No. 96-5099 was consolidated with DOAH Case No. 96-5098 to be heard on February 20, 1997. The February 20, 1997, hearing date was cancelled to allow the parties to engage in settlement discussions and to prepare for hearing if that became necessary. The DOAH Case Nos. 96-5098, and 96-5099, were re-noticed for a hearing to be conducted on February 2, 1998.
DOAH Case No. 97-1115 was received by the Division of Administrative Hearings on March 10, 1997. It was noticed to be heard on August 28, 1997. That hearing date was cancelled and the case was reset to be heard on January 29, 1998.
On January 23, 1998, an order was entered which consolidated DOAH Case No. 97-1115, with DOAH Case Nos. 96-5098 and 96-5099, for a hearing to be conducted on February 2, 1998.
On February 5, 1998, an order was entered which cancelled the February 2, 1998, hearing date based upon the parties' Stipulation of Facts. The parties had also agreed to submit proposed recommended orders in support of their respective positions no later than February 13, 1998. The February 5, 1998, order established that a recommended order(s) would be entered subsequent to the time for filing proposed recommended orders.
Proposed recommended orders were provided by the parties on February 13, 1998. This recommended order is being entered in consideration of the stipulated facts, stipulated exhibits, and the argument found in the proposed recommended orders.
Paul R. Vidas, C.P.A., is accepted as the personal representative of Petitioners in accordance with Rule 62Q-2.008, Florida Administrative Code.
Specialty Products & Insulation Co. (Specialty Products or Petitioner), A C & S, Inc. (A C & S or Petitioner), and Centin Corporation (Centin or Petitioner) are sibling companies owned by a common corporate parent company.
Each of the three Petitioner companies is domiciled in a state other than Florida, and each has its headquarters in Pennsylvania.
The Department is an agency of the state of Florida charged with the duty of administering Chapter 199, Florida Statutes, involving intangible taxes.
Specialty Products, A C & S, and Centin remitted intangible taxes to the state of Florida for tax years 1993, 1994, and 1995.
By letter dated June 17, 1996, Special Products and
A C & S sought refunds from the Department of intangible taxes in the amounts of $19,848.01 and $4,796.41, respectively. By letter dated July 23, 1996, Centin also sought a refund from the Department of intangible taxes in the amount of $4,924.34.
The Petitioners' refund applications argued that a refund of intangible taxes was due because the account receivable
on which the taxes had been paid did not have a taxable situs in the state of Florida.
On August 28, 1996, the Department issued Notices of Decision of Refund Denial to Specialty Products and A C & S, denying their refund applications in their entirety.
On January 21, 1997, the Department issued its Notice of Decision of Refund Denial to Centin, also denying in its entirety Centin's application for refund.
All three of the Petitioners timely challenged the Department's notices of decision by filing petitions for administrative hearings.
Each of the petitions was originally assigned a separate case number by the Division of Administrative Hearings. By order dated January 16, 1997, Specialty Products and Insulation Co., v. Department of Revenue, (Case No. 96-5098) and A C & S, Inc., v. Department of Revenue, (Case No. 96-5099) were consolidated. By order dated January 23, 1998, Centin Corporation v. Department of Revenue, (Case No. 97-1115) was consolidated with the other two cases, as well.
Specialty Products and Insulation, Co.
Specialty Products is a building construction company operating in the state of Florida both as a contractor and by making sales of building materials to other contractors at retail.
At all times relevant to this matter, Specialty Products was registered to do business as a non-domiciliary with the Florida Department of State, Division of Corporations.
At all times relevant to this matter, Specialty Products was registered as a dealer with the Department of Revenue for purposes of collecting and remitting sales taxes.
Although it is headquartered in Pennsylvania, at all times relevant to this matter, Specialty Products maintained a number of branch offices in the state of Florida through which it conducted business, including in Pompano Beach, Medley, Orlando, Tampa, and Fort Myers.
At its various Florida branch offices, Specialty Products employed branch managers, operation managers, sales representatives, inside sales people, sales service clerks, office coordinators, warehousers and truck drivers.
During the period from 1993 through 1995, Specialty Products made retail sales of its products from its Florida branch offices to Florida customers.
During the period from 1993 through 1995, Specialty Products remitted intangible taxes to the state of Florida on the accounts receivable that were generated by its retail sales to its Florida customers.
Specialty Products does not employ any credit managers at any of its Florida branch offices.
Specialty Products' credit service, credit, cash application, and accounting departments are all located in Pennsylvania.
When a customer seeks credit from Petitioner in order to purchase materials or services, the customer executes a credit application and contract for purchase at Petitioner's Florida branch office. With the exception of those described in paragraph 20, below, all applications for credit submitted by its Florida customers are forwarded by Petitioner's Florida branch offices to Petitioner's credit department in Pennsylvania for review and approval.
Limited authority for granting credit (in an amount up to $5,000) to a Florida customer in an emergency is delegated to the branch manager located at each Florida branch office.
All corporate bank accounts are located in Pennsylvania.
All payments relating to sales made in the state of Florida are received and recorded in Pennsylvania, and all deposits are made into Petitioner's bank account in Pennsylvania.
If a Florida customer sends a payment to a Florida branch office, this payment is forwarded to the Pennsylvania offices of the Petitioner to be recorded, processed, and deposited.
All control procedures related to Specialty Products' accounts receivable are performed by employees located in Pennsylvania.
No cash payments or bank accounts are maintained by Specialty Products in the state of Florida.
A C & S, Inc.
A C & S, Inc., is an insulation contracting company specializing in the thermal insulation of mechanical systems, and it operates in the state of Florida.
At all times relevant to this matter, A C & S, Inc., was registered to do business as a non-domiciliary with the Florida Department of State, Division of Corporations.
At all times relevant to this matter, A C & S, Inc., was registered as a dealer with the Department of Revenue for purposes of collecting and remitting sales taxes.
Although it is headquartered in Pennsylvania, at all times relevant to this matter, A C & S, Inc., maintained at least one branch office in the state of Florida through which it conducted business. This branch office is located in Jacksonville, Florida. A C & S, Inc., also had a branch office in Merritt Island, Florida, until August 1995.
At its Florida branch office, A C & S, Inc., employed a district manager, contract manager, construction superintendent, secretary, more than one sales representative, and an estimator.
During the period from 1993 through 1995, A C & S, Inc., remitted intangible taxes to the state of Florida on the accounts receivable that were generated by its contracting sales to its Florida customers.
A C & S, Inc., does not employ any credit managers at any of its Florida branch offices.
A C & S, Inc.'s credit service, credit, cash application, and accounting departments are all located in Pennsylvania.
When a customer seeks credit from Petitioner in order to purchase materials or services, the customer executes a credit application and contract for purchase at Petitioner's Florida branch office. With the exception of those described in paragraph 35, below, all applications for credit submitted by its Florida customers are forwarded by Petitioner's Florida branch offices to Petitioner's credit department in Pennsylvania for review and approval.
Limited authority for granting credit (in an amount up to $5,000) to a Florida customer in an emergency is delegated to the branch manager located at each Florida branch office.
All corporate bank accounts are located in Pennsylvania.
All payments relating to sales made in the state of Florida are received and recorded in Pennsylvania, and all deposits are made into Petitioner's bank account in Pennsylvania.
If a Florida customer sends a payment to a Florida branch office, this payment is forwarded to the Pennsylvania offices of the Petitioner to be recorded, processed, and deposited.
All control procedures related to A C & S, Inc.'s accounts receivable are performed by employees located in Pennsylvania.
No cash payments or bank accounts are maintained by A C & S, Inc., in the state of Florida.
Centin Corporation
Centin Corporation is an insulation contracting company operating in the state of Florida.
At all times relevant to this matter, Centin Corporation was registered to do business as a non-domiciliary with the Florida Department of State, Division of Corporations.
At all times relevant to this matter, Centin was registered as a dealer with the Department of Revenue for purposes of collecting and remitting sales taxes.
Although it is headquartered in Pennsylvania, at all times relevant to this matter, Centin Corporation maintained at least one branch office in the state of Florida through which it conducted business. This branch office is located in Pompano Beach, Florida.
At its Florida branch office, Centin employed a branch manager, construction superintendent, secretary, and more than one sales representative.
During the period from 1993 through 1995, Centin remitted intangible taxes to the state of Florida on the accounts receivable that were generated by its contracting sales to its Florida customers.
Centin does not employ any credit managers at any of its Florida branch offices.
Centin's credit service, credit, cash application, and accounting departments are all located in Pennsylvania.
When a customer seeks credit from Petitioner in order to purchase materials or services, the customer executes a credit application and contract for purchase at Petitioner's Florida branch office. With the exception of those described in paragraph 50, below, all applications for credit submitted by its Florida customers are forwarded by Petitioner's Florida branch offices to Petitioner's credit department in Pennsylvania for review and approval.
Limited authority for granting credit (in an amount up to $5,000) to a Florida customer in an emergency is delegated to the branch manager located in each Florida branch office.
All corporate bank accounts are located in Pennsylvania.
All payments relating to sales made in the state of Florida are received and recorded in Pennsylvania, and all deposits are made into Petitioner's bank account in Pennsylvania.
If a Florida customer sends a payment to a Florida branch office, this payment is forwarded to the Pennsylvania offices of the Petitioner to be recorded, processed, and deposited.
All control procedures related to Centin's accounts receivable are performed by employees located in Pennsylvania.
No cash payments or bank accounts are maintained by Centin in the state of Florida.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the subject matter and the parties to this action pursuant to Sections 120.569(1), and 120.57(1), Florida Statutes.
Respondent has shown the basis of its assessment made against the Petitioners for intangible taxes concerning facts and law. In turn, Petitioners must show their entitlement to repayment of funds paid to the State Treasury. See Section 120.80(14)(b), Florida Statutes (1997).
The basis for Petitioners' claims to repayment is premised upon an alleged payment of intangible taxes where no taxes were due. See Section 215.26(1)(b), Florida Statutes,
(1997). To succeed, the Petitioners must prove the entitlement to repayment of funds based upon a preponderance of the evidence.
Section 199.023(1)(b), Florida Statutes, defines "intangible personal property" as including obligations for the payment of money. The accounts receivable which are at issue here constitute "intangible personal property" because the accounts receivable represent obligations for the payment of money. Chapter 199, Florida Statutes, creates the opportunity for Respondent to tax "intangible personal property" under certain conditions.
An annual intangible tax return is required with the remittance of the intangible tax in accordance with Section 199.052(1), Florida Statutes, where it states:
An annual intangible tax return must be filed with the department by every corporation authorized to do business in this state or going business in this state and by every person, regardless of domicile, who on January 1 owns, controls, or manages intangible personal property which has a taxable situs in this state. For purposes of this chapter, "control" or "manage" does not include any ministerial function or any processing activity. The return shall be due on June 30 of each year. It shall list separately the character, description, and just valuation of all such property.
Although Petitioners are not domiciled in Florida, they are authorized to do business, and do business in Florida. Whether Petitioners own, control, or manage the intangible
personal property, accounts receivable, which have a taxable situs in Florida, must also be considered.
Among other bases for establishing taxable situs in Florida, requiring payment of the intangible personal property tax for the accounts receivable at issue, are the bases identified in Section 199.175(2), Florida Statutes, (1997), which states:
Intangible personal property shall have a taxable situs in this state when it is deemed to have a business situs in this state and is owned, managed, or controlled by a person transacting business in this state, even though the owner may claim a domicile elsewhere. This provision shall apply regardless of where the evidence of the intangible is kept or where the intangible is created, approved, or paid.
Intangibles shall be deemed to have a Florida business situs when they receive the benefit and protection of Florida laws and courts and they are derived from, arise out of, or are issued in connection with the business transacted in this state with a customer in this state. For purposes of this paragraph:
Business is transacted in this state when any occupation, profession, or commercial activity, including financing, leasing, selling, or servicing activities, is regularly conducted with customers in this state from an office, plant, home, or any other business location in the state.
Business is transacted in this state when any occupation, profession, or commercial activity, including financing, leasing, selling or servicing activities, is regularly conducted with customers in this state by or through agents, employees, or representatives
of any kind in this state, whether or not such persons are vested with discretionary authority.
The intangible personal property, accounts receivable at issue, have a taxable situs in Florida because the accounts receivable are deemed to have a business situs in Florida.
The business situs of the intangibles is established by the benefit and protection of Florida laws and courts. Additionally, the accounts receivable are derived from, arise out of, or are issued in connection with the business transacted in Florida with Florida customers. The nature of Petitioners' business in Florida meets the definition of "business transacted in this state" for reasons described in the facts, as those facts relate to Section 199.175(2)(a)1. and 2., Florida Statutes (1997).
The accounts receivable are owned, managed, and controlled by Petitioners, who transact business in Florida, not- withstanding Petitioners' foreign domicile and evidence of the intangibles being kept in the foreign domicile, created in the foreign domicile, and approved and paid in the foreign domicile. The nature of the control or management of the accounts receivable is not merely a ministerial function or a processing activity given the nature of the contacts between Petitioners and their Florida customers.
Under the circumstances, Petitioners are not entitled
to the repayment of funds paid to the State Treasury on intangible personal property.
That the requests for repayment of funds paid to the State Treasury as intangible personal property taxes for all years in question be denied.
DONE AND ENTERED this 23rd day of March, 1998, in Tallahassee, Leon County, Florida.
CHARLES C. ADAMS
Filed with the Clerk of the Division of Administrative Hearings this 23rd day of March, 1998.
Elizabeth Bradshaw, Esquire Jarrell L. Murchison, Esquire Office of Attorney General The Capitol, Tax Section
Paul R. Vidas, CPA Director
Zelenkofske, Axelrod and Company, Inc.
A C & S, Inc.
15 days from the date of this recommended order. Any exceptions to this recommended order should be filed with the agency that will issue the final order in this case.
