vs.
Respondent.
) Case No. 02-2780
Administrative Law Judge (ALJ) Daniel Manry conducted the administrative hearing of this proceeding on October 11, 2002, in Sarasota, Florida, on behalf of the Division of Administrative Hearings (DOAH).
For Petitioner: R. John Cole, II, Esquire
Law Offices of R. John Cole, II
For Respondent: Carrol Y. Cherry, Esquire
Martha F. Barrera, Esquire Office of the Attorney General Department of Legal Affairs The Capitol, Plaza Level 01
The issue for determination is whether Petitioner is liable for the tax, penalty, and interest assessed.
Respondent assessed Petitioner for sales and use tax in the amount of $119,496.60, including penalty and interest.
Petitioner denied liability and requested an administrative hearing.
At the hearing, Petitioner presented the testimony of four witnesses and submitted 43 exhibits for admission into evidence. Respondent called one witness and submitted six exhibits. The parties submitted one joint exhibit. The identity of the witnesses and exhibits and any attendant rulings are reported in the two-volume Transcript of the hearing filed with DOAH on October 30, 2002.
At the conclusion of the hearing, the ALJ granted the parties' joint request to file proposed recommended orders (PROs) 60 days after the date the Transcript was filed with DOAH. The ALJ granted two uncontested Motions for Extension of time. Petitioner and Respondent timely filed their PROs, respectively, on January 29 and 30, 2003.
Petitioner is a Florida corporation with its principal place of business located at 2836 North Tamiami Trial, Sarasota, Florida. Petitioner primarily engages in the business of selling classic, vintage automobiles. Petitioner sells automobiles for delivery in-state, interstate, and
internationally. Petitioner also engages in the business of selling other collectible items, including jukeboxes.
Respondent is the state agency responsible for the administration of the Florida sales and use tax pursuant to Sections 20.21 and 213.05, Florida Statutes (1991). (All references to Florida Statutes are to Florida Statutes 1991 unless otherwise stated.)
In accordance with Section 212.34, Respondent audited Petitioner's business records for the period from May 1, 1991, through July 31, 1996 (audit period). Respondent determined a deficiency and assessed Petitioner for $114,878.68, including tax, penalty, and interest through January 26, 1999. Respondent assessed tax in the amount of $55,771.16, penalty in the amount of $26,528.02, and interest through January 26, 1999, in the amount of $32,579.50. Additional interest accrues at the daily rate of $20.97.
The assessed tax is based on several alleged deficiencies. Some deficiencies involve alleged failures of Petitioner to comply with taxing provisions. Other deficiencies involve alleged failures of Petitioner to comply with the requirements of claimed exemptions. Taxing provisions are construed narrowly against the taxing authority while the provisions authorizing exemptions are construed narrowly against the person claiming the exemption.
The assessment against Petitioner includes tax on
$51,353.10 in under-reported retail sales for 1994. Respondent compared the gross income reported by Petitioner for the 1994 tax year with the state sales tax revenues reported by Petitioner for the same year and determined that Petitioner under-reported sales tax revenues in the amount of
$51,353.10.
Mr. Martin Godbey is a corporate officer for Petitioner and a controlling shareholder. Mr. Godbey testified at the hearing.
Mr. Godbey testified that $45,000 of the $51,353.10 was not under-reported gross sales in 1994. According to
Mr. Godbey, Petitioner's accountant over-reported gross income for purposes of the federal income tax.
Petitioner derives some income from providing brokerage services as an liaison between a buyer and seller. Mr. Godbey testified that Petitioner earned $1,400 in 1994 as a broker for the sale of a 1956 Jaguar XJ140 roadster on behalf of an automobile dealership in Virginia. The testimony is that Petitioner introduced the seller and buyer but never possessed the vehicle or delivered the vehicle. The price of the vehicle was approximately $45,000. Mr. Godbey testified that Petitioner's accountant incorrectly reported $45,000 as gross income under the federal income tax law and reported the
difference between $45,000 and $1,400 as the cost of goods sold.
The testimony of Mr. Godbey was credible and persuasive. However, the testimony was not supported by documentary evidence of Petitioner's federal income tax return or by testimony of Petitioner's accountant. The unsupported testimony of Mr. Godbey does not rise to the level of a preponderance of the evidence.
Petitioner failed to show by a preponderance of the evidence that Petitioner over-reported gross income for the purpose of the federal income tax rather than under-reported gross sales for the purpose of the state sales tax. The testimony of Mr. Godbey did not explain the difference between the $51,353.10 amount determined by Respondent and $45,000 amount testified to by Mr. Godbey.
For the period from 1991 through 1993, Petitioner collected sales tax on retail sales but did not remit the tax to Respondent. Rather, Petitioner paid the tax to two automobile dealers identified in the record as International Antique Motors, Inc. (IAM) and Autohaus Kolar, Inc. (AK).
Petitioner registered with Respondent as a dealer sometime in 1991. However, Petitioner did not obtain a retail dealer's license from the Department of Motor Vehicles (Department) until late in 1993.
From 1991 through most of 1993, Petitioner was licensed by the Department as a wholesale dealer and was not authorized by the Department to engage in retail sales of motor vehicles. Section 320.27(2) prohibited Petitioner from selling motor vehicles at retail and made such sales unlawful. Petitioner asserts that it could not have engaged in retail sales, within the meaning of Section 212.06(2)(c) and (d), because Petitioner had no legal authority to do so.
From 1991 through 1993, Petitioner engaged in retail sales within the meaning of Section 212.06(2)(c) and (d). Petitioner engaged in retail sales by selling automobiles at retail in violation of Section 320.27(2). Respondent does not dispute that Petitioner collected sales tax on each sale.
Petitioner did not engage in retail sales and collect sales tax on each sale in the capacity of an agent for IAM or AK. Petitioner acted in his own behalf as a principal. IAM and AK had no actual or legal control over the sales conducted by Petitioner. IAM and AK merely processed the title work for each retail sale conducted by Petitioner.
Even if Petitioner were an agent for IAM and AK, Petitioner engaged in retail sales as a dealer defined in Florida Administrative Code Rule 12A-1.0066. (All references to rules are to rules promulgated in the Florida Administrative Code during the audit period.)
Petitioner registered the vehicles sold at retail from 1991 through 1993 by way of a business arrangement with IAM and AK. After Petitioner collected sales tax on each retail sale, Petitioner remitted the tax to IAM and AK. IAM and AK then registered the vehicles with the Department.
Respondent does not dispute that Petitioner paid to IAM and AK the sales tax that Petitioner collected from each customer. Nor does Respondent dispute that the amount of tax Petitioner paid to IAM and AK was sufficient to pay the tax due.
Section 212.06(10) requires IAM and AK to issue a receipt for sales tax with each application for title or registration. IAM obtained title or registration for 21 vehicles sold by Petitioner and at issue in this case. AK obtained title or registration for three vehicles at issue in this case.
Section 212.06(10) does not operate to create a factual presumption that IAM and AK paid the sales tax due on the 24 vehicles at the time that IAM and AK applied for title or registration of each vehicle. In practice, the receipt issued by dealers with each application for title or registration contains a code indicating that the dealer has collected the tax and will pay the tax in the dealer's ensuing sales tax return.
After IAM applied for title or registration for the vehicles evidenced in Petitioner's Exhibits 2, 4, 6, and 21, IAM remitted taxes to Respondent in an amount sufficient to pay the tax due on those sales by Petitioner. Respondent has no record of any tax deficiencies against IAM. Respondent's admitted policy is to avoid the collection of tax if the tax has already been paid.
After IAM applied for title or registration for the vehicles evidenced in Petitioner's Exhibits 1, 3, 5, and 7 through 20, IAM remitted taxes to Respondent in an amount that was insufficient to pay the tax due on those sales.
Petitioner failed to show by a preponderance of the evidence that IAM remitted to Respondent the taxes that Petitioner collected and paid to IAM in connection with the sales evidenced in Petitioner's Exhibits 1, 3, 5, and 7 through 20.
Petitioner is not entitled to a set-off of the taxes remitted to Respondent by IAM after the sales evidenced in Petitioner's Exhibits 1, 3, 5, and 7 through 20. There is insufficient evidence to show that the taxes remitted by IAM were collected on the sales at issue in this case rather than other sales made by IAM.
AK processed three vehicles for Petitioner that are at issue in this case. AK paid to Respondent the sales tax due on the three retail sales at issue. The relevant sales
are evidenced in Petitioner's Exhibits 24 through 26. AK remitted taxes in an amount that was more than sufficient to pay the tax due on those sales by Petitioner. Respondent has no record of a tax deficiency against AK. Respondent's policy is to avoid the collection of tax if tax has already been paid.
Several deficiencies are attributable to disallowed exemptions for 16 sales that include 14 vehicles and two jukeboxes. Statutory requirements for exemptions are strictly construed against the person claiming the exemption.
Petitioner did not satisfy essential requirements for any of the disallowed exemptions. The exemptions asserted by Petitioner in its PRO are discussed in greater detail in the following paragraphs.
During the audit period, Petitioner sold a 1972 Italia Spyder automobile, VIN: 50413414, to a Texas automobile dealership identified in the record as North American Classic Cars/Gene Ponder, of Marshall, Texas (North American). Petitioner claims that the sale to North American is exempt because it is a sale for resale to a non-resident dealer.
The sale to North American is not exempt.
Petitioner failed to obtain a non-resident dealer affidavit at the time of sale in violation of Section 212.08(10). During the audit, Petitioner obtained a Sales Tax Exemption Affidavit
(DR-40) from North American. A DR-40 is not appropriate for a sale for resale to a non-resident dealer. The appropriate affidavit would have required the non-resident dealer to attest that "the motor vehicle will be transported outside of the State of Florida for resale and for no other purpose."
Hand written notations on the bill of sale for the Italia Spyder indicate the North American representative took possession of the automobile in Florida. In addition, a hand- written letter to Petitioner indicates that the Italia Spyder was purchased for the private collection of the owner of North American rather than for resale.
During the audit period, Petitioner sold a 1959 Mercedes Benz 190SL automobile, VIN: 12104-10-95012, to Mike Hiller, of Coral Springs, Florida (Hiller). Petitioner claimed, on the bill of sale, that the sale was exempt because it was a sale to a non-resident dealer for resale.
The sale to Hiller is not exempt. At the time of the sale, Petitioner failed to obtain a non-resident dealer affidavit or a resale certificate. The bill of lading lists Hiller as an exporter and indicated that Hiller, as the exporter, took possession of the automobile in Florida. The bill of lading does not show unbroken, continuous transportation from the selling dealer to a common carrier or directly out of Florida as required in Section 212.06(5)(b)1.
During the audit period, Petitioner sold a 1959 MGA Roadster, VIN: 54941, to Fabiana Valsecchi, of Rome, Italy. Petitioner claims the sale is exempt as a sale for export.
The sale to Valsecchi is not exempt. At the time of the sale, Petitioner failed to obtain a bill of lading, or other shipping documentation that shows unbroken, continuous transportation from Petitioner to a common carrier or directly out of Florida. The bill of sale signed by the purchaser's agent shows that the agent took possession of the automobile in Florida.
Petitioner failed to show that the sale was exempt because it was a sale for resale. Petitioner did not provide a resale certificate from the purchaser.
During the audit period, Petitioner sold a 1961 Triumph TR3 automobile, VIN: TS753 38L, to Classic Automobile Investors, Inc., of Germany (Classic). Petitioner claims that the sale is exempt because it was a sale for export.
The sale to Classic is not exempt. At the time of sale, Petitioner failed to obtain a bill of lading, or other shipping documentation which shows unbroken, continuous transportation from Petitioner to a common carrier or directly out of Florida.
During the audit period, Petitioner sold a 1947 Bentley MKVI automobile, VIN: B137B, to Mr. Bob Erickson, of
Palmetto, Florida. Petitioner failed to collect and remit Local Government Surtax on the sale and owes the uncollected tax.
During the audit period, Petitioner sold two jukeboxes and other items of tangible personal property to Mr. C.P. Loontjens. Petitioner claims that the sales are exempt from sales tax because they were sales for export. At the time of the sale, Petitioner failed to obtain documentation from the buyer to show that items sold were delivered to a common carrier or directly delivered outside of Florida.
During the audit period, Petitioner was engaged in the business of selling items of tangible personal property other than vehicles and jukeboxes. Petitioner failed to collect and remit sales tax on the sale of these items of tangible personal property. Respondent properly assessed Petitioner for sales tax due on tangible personal property other than vehicles and jukeboxes in the amount of $3,352.50.
Vintage rented commercial real property for its business. Rental payments for such real property are subject to sales tax pursuant to Section 212.031.
During the audit period, Petitioner failed to pay sales tax on two payments for the commercial rental of real property. Petitioner is liable for use tax on the use of real
property during the audit period. Respondent properly assessed Petitioner for additional use tax in the amount of
$108.00.
Although Petitioner maintained some books and records of sales and purchases, Petitioner failed to maintain adequate records. Respondent properly conducted an audit by sampling Petitioner's available books and records in accordance with Section 212.12(6)(b) but limited the claimed penalty to a delinquent penalty.
The trier of fact cannot determine the taxes, interest, and penalty that are due after eliminating the deficiencies found in paragraphs 21 and 24 not to exist in connection with the sales evidenced in Petitioner's Exhibits 2, 4, 6, 21, and 24 through 26. Only Respondent can make that calculation using the same sampling formula that Respondent used to calculate the tax, interest, and penalty in the assessment.
CONCLUSIONS OF LAW
DOAH has jurisdiction over the subject matter and parties to this proceeding. Sections 120.569 and 120.57(1). The parties received adequate notice of the administrative hearing.
The ultimate burden of proof is on Petitioner.
Florida Department of Transportation v. J.W.C. Company, Inc.,
396 So. 2d 778 (Fla. 1st DCA 1981); Balino v. Department of Health and Rehabilitative Services, 348 So. 2d 349 (Fla. 1st DCA 1977). Petitioner must satisfy its burden of proof by a preponderance of the evidence.
Petitioner showed by a preponderance of evidence that Petitioner paid the tax due for those sales evidenced in Petitioner's Exhibits 2, 4, 6, 21, and 24 through 26. However, Petitioner failed to support the remainder of its claims by a preponderance of the evidence.
Statutory provisions authorizing exemptions must be strictly construed against the person claiming the exemption. State Department of Revenue v. Anderson, 403 So. 2d 397 (Fla. 1981). A person who has failed to comply with the procedural or documentary requirements for an exemption cannot overcome that defect with testimony or other evidence at the administrative hearing. Id. The exempt nature of the transaction must be established by the selling dealer, and unless the selling dealer obtained from the purchaser the valid resale certificate or exemption certificate, the sale is deemed to be taxable. Section 212.07(1)(b); Rule 12A-1.038(1).
RECOMMENDED that Respondent enter a Final Order ordering Petitioner to pay the tax, interest, and penalty that is due after Respondent recalculates the assessment against Petitioner in accordance with the findings pertaining to Petitioner's Exhibits 2, 4, 6, 21, and 24 through 26.
DONE AND ENTERED this 6th day of March, 2003, in Tallahassee, Leon County, Florida.
Filed with the Clerk of the Division of Administrative Hearings this 6th day of March, 2003.
Carrol Y. Cherry, Esquire Office of the Attorney General Department of Legal Affairs The Capitol, Plaza Level 01
Martha F. Barrera, Esquire Office of the Attorney General Department of Legal Affairs The Capitol, Plaza Level 01
R. John Cole, II, Esquire
Law Offices of R. John Cole, II
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.
