STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
PEACE RIVER CITRUS PRODUCTS, INC.,
Petitioner,
and
SUN ORCHARD OF FLORIDA, INC., AND FRESH JUICE COMPANY OF FLORIDA, INC.,
Intervenors,
vs.
DEPARTMENT OF CITRUS,
Respondent.
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) Case No. 02-3648RE
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PEACE RIVER CITRUS PRODUCTS, INC.; FRESH JUICE OF FLORIDA, INC.; AND SUN ORCHARD OF FLORIDA, INC.,
Petitioners,
vs.
DEPARTMENT OF CITRUS,
Respondent.
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) Case No. 02-4607RP
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FINAL ORDER
Pursuant to notice, a formal hearing was conducted in these consolidated cases on November 25, 2002, in Tallahassee, Florida, before Lawrence P. Stevenson, a duly-designated
Administrative Law Judge of the Division of Administrative Hearings.
APPEARANCES
For Petitioners
and Intervenors: Kristen Gunter, Esquire
Macfarlane Ferguson & McMullen 1501 South Florida Avenue Lakeland, Florida 33803
For Respondent: Eric J. Taylor, Esquire
Attorney General's Office The Capitol, Plaza Level 01 Tax Section
Tallahassee, Florida 32399-1050 STATEMENT OF THE ISSUE
The issue in DOAH Case No. 02-3648RE is whether Emergency Rules 20ER02-01, 20ER02-02, and 20ER02-03 constitute an invalid exercise of delegated legislative authority. The issue in DOAH Case No. 02-4607RP is whether Proposed Rules 20-15.001, 20- 15.002, and 20-15.003, Florida Administrative Code, constitute an invalid exercise of delegated legislative authority.
PRELIMINARY STATEMENT
On September 18, 2002, the Department of Citrus ("Department") adopted Emergency Rules 20ER02-01, 20ER02-02, and 20ER02-03 (the "Emergency Rules"), providing a mechanism for the collection of the equalization tax on non-Florida, United States juice for the years 1997-2002. On September 23, 2002, Petitioner, Peace River Citrus Products, Inc. ("Peace River"), filed a petition for determination of invalidity of the
Emergency Rules. The case was assigned DOAH Case No. 02-3648RE and was set for hearing on October 16-17, 2002. The hearing was continued to October 30-31, 2002, by order granting the Department's motion to continue.
On October 2, 2002, the Department filed a motion to dismiss the petition and transfer the case to the Tenth Judicial Circuit Court, which had jurisdiction of the case involving the validity of the statutory scheme underlying the Emergency Rules. As authority for its motion, the Department cited Department of Business Regulation v. Ruff, 592 So. 2d 668 (Fla. 1991), in which the Supreme Court directed that an emergency rule challenge before the Division of Administrative Hearings ("DOAH") be resolved by the circuit court before which the constitutional issues in the case were heard. By order dated October 15, 2002, the undersigned denied the motion to dismiss on the ground that Ruff provides authority for a court to order the transfer of a rule challenge from DOAH to a court based on certain prudential considerations, but does not provide authority for an Administrative Law Judge to dismiss an otherwise cognizable rule challenge based on such considerations.
On October 18, 2002, the Department filed a petition for writ of mandamus with the Second District Court of Appeal seeking transfer of the Emergency Rule challenge from DOAH to
the Tenth Judicial Circuit. On October 22, 2002, the Second District Court of Appeal issued an order granting the Department's emergency motion for immediate stay of the DOAH proceeding pending its decision on the petition for writ of prohibition. By order dated October 28, 2002, the undersigned placed the DOAH proceeding in abeyance pending the appellate court's ruling.
On November 6, 2002, the Second District Court of Appeal issued an order denying the petition for writ of prohibition, without prejudice. By order dated November 14, 2002, the DOAH rule challenge proceeding was scheduled for November 25, 2002. By orders dated November 15, 2002, the petitions for intervention of Fresh Juice Company of Florida, Inc. ("Fresh Juice") and Sun Orchard of Florida, Inc. ("Sun Orchard") were granted.
The hearing was held as scheduled on November 25, 2002. The parties had entered into a stipulation of relevant facts, and the hearing consisted of legal argument concerning the validity of the Emergency Rules. At the hearing, it was noted that the Department had published Proposed Rules 20-15.001, 20- 15.002, and 20-15.003, Florida Administrative Code (the "Proposed Rules"), in the November 15, 2002, edition of the Florida Administrative Weekly (vol. 28, no. 46, pp. 4996-4998). The text of the Proposed Rules was identical to that of the
Emergency Rules. The Petitioner and Intervenors stated their intent to challenge the Proposed Rules and to request consolidation of that case with the challenge to the Emergency Rules. The parties stipulated that the two cases would present identical issues of law and that, barring changes to the text of the Proposed Rules at public hearing to be held by the Department on December 18, 2002, the consolidated cases could be disposed of by a single final order entered pursuant to the hearing held on November 25, 2002.
On December 2, 2002, Petitioners Peace River, Fresh Juice, and Sun Orchard filed their challenge to Proposed Rules 20- 15.001, 20-15.002, and 20-15.003, Florida Administrative Code. The case was assigned DOAH Case No. 02-4607RP. By separate order entered on January 22, 2003, DOAH Case No. 02-4607RP has been consolidated with DOAH Case No. 02-3648RE.
No sworn testimony was taken at the hearing, and no exhibits were offered. The hearing consisted entirely of legal argument. No transcript of the hearing was ordered. The parties filed Proposed Final Orders on December 5, 2002.
FINDINGS OF FACT
Based on the stipulated facts, and the entire record in this proceeding, the following findings of fact are made:
The Florida Citrus Commission was established in 1935 to organize and promote the growing and sale of various citrus
products, fresh and processed, in the State of Florida. The purpose of the Citrus Commission is today reflected in Section 601.02, Florida Statutes.
The powers of the Florida Citrus Commission ("the Commission") and the Department, are set forth in full in Section 601.10, Florida Statutes. The powers of the Department include the power to tax and raise other revenue to achieve the purposes of the Department. In particular, Section 601.10(1) and (2), Florida Statutes, state:
The Department of Citrus shall have and shall exercise such general and specific powers as are delegated to it by this chapter and other statutes of the state, which powers shall include, but shall not be confined to, the following:
To adopt and, from time to time, alter, rescind, modify, or amend all proper and necessary rules, regulations, and orders for the exercise of its powers and the performance of its duties under this chapter and other statutes of the state, which rules and regulations shall have the force and effect of law when not inconsistent therewith.
To act as the general supervisory authority over the administration and enforcement of this chapter and to exercise such other powers and perform such other duties as may be imposed upon it by other laws of the state.
The Department is authorized to set standards by Section 601.11, Florida Statutes, as follows:
The Department of Citrus shall have full and plenary power to, and may, establish state
grades and minimum maturity and quality standards not inconsistent with existing laws for citrus fruits and food products thereof containing 20 percent or more citrus or citrus juice, whether canned or concentrated, or otherwise processed, including standards for frozen concentrate for manufacturing purposes, and for containers therefor, and shall prescribe rules or regulations governing the marking, branding, labeling, tagging, or stamping of citrus fruit, or products thereof whether canned or concentrated, or otherwise processed, and upon containers therefor for the purpose of showing the name and address of the person marketing such citrus fruit or products thereof whether canned or concentrated or otherwise processed; the grade, quality, variety, type, or size of citrus fruit, the grade, quality, variety, type, and amount of the products thereof whether canned or concentrated or otherwise processed, and the quality, type, size, dimensions, and shape of containers therefor, and to regulate or prohibit the use of containers which have been previously used for the sale, transportation, or shipment of citrus fruit or the products thereof whether canned or concentrated or otherwise processed, or any other commodity; provided, however, that the use of secondhand containers for sale and delivery of citrus fruit for retail consumption within the state shall not be prohibited; provided, however, that no standard, regulation, rule, or order under this section which is repugnant to any requirement made mandatory under federal law or regulations shall apply to citrus fruit, or the products thereof, whether canned or concentrated or otherwise processed, or to containers therefor, which are being shipped from this state in interstate commerce. All citrus fruit and the products thereof whether canned or concentrated or otherwise processed sold, or offered for sale, or offered for shipment within or without the
state shall be graded and marked as required by this section and the regulations, rules, and orders adopted and made under authority of this section, which regulations, rules, and orders shall, when not inconsistent with state or federal law, have the force and effect of law.
The Department is authorized to conduct citrus research by Section 601.13, Florida Statutes.
To help pay for these duties of the Department, the Legislature first enacted the "box tax" in 1949. The box tax is now codified as Section 601.15(3), Florida Statutes.
Section 601.15(3)(a), Florida Statutes, provides in relevant part:
There is hereby levied and imposed upon each standard-packed box of citrus fruit grown and placed into the primary channel of trade in this state an excise tax at annual rates for each citrus season as determined from the tables in this paragraph and based upon the previous season's actual statewide production as reported in the United States Department of Agriculture Citrus Crop Production Forecast as of June 1.
Section 601.15(3)(a), Florida Statutes, goes on to set forth specific rates for fresh grapefruit, processed grapefruit, fresh oranges, processed oranges, and fresh or processed tangerines and citrus hybrids.
Section 601.15(1), Florida Statutes, sets forth the Department's authority to administer the box tax, as follows:
The administration of this section shall be vested in the Department of Citrus, which
shall prescribe suitable and reasonable rules and regulations for the enforcement hereof, and the Department of Citrus shall administer the taxes levied and imposed hereby. All funds collected under this section and the interest accrued on such funds are consideration for a social contract between the state and the citrus growers of the state whereby the state must hold such funds in trust and inviolate and use them only for the purposes prescribed in this chapter. The Department of Citrus shall have power to cause its duly authorized agent or representative to enter upon the premises of any handler of citrus fruits and to examine or cause to be examined any books, papers, records, or memoranda bearing on the amount of taxes payable and to secure other information directly or indirectly concerned in the enforcement hereof. Any person who is required to pay the taxes levied and imposed and who by any practice or evasion makes it difficult to enforce the provisions hereof by inspection, or any person who, after demand by the Department of Citrus or any agent or representative designated by it for that purpose, refuses to allow full inspection of the premises or any part thereof or any books, records, documents, or other instruments in any manner relating to the liability of the taxpayer for the tax imposed or hinders or in anywise delays or prevents such inspection, is guilty of a misdemeanor of the second degree, punishable as provided in s. 775.082 or s. 775.083.
The box tax was challenged in 1936 and the Florida Supreme Court issued an opinion in 1937 upholding the validity of the box tax. C.V. Floyd Fruit Company v. Florida Citrus Commission, 128 Fla. 565, 175 So. 248 (1937).
In 1970, the Legislature enacted the "equalization tax," codified as Section 601.155, Florida Statutes. The statute mirrored Section 601.15, Florida Statutes, but added certain processors who were mixing foreign citrus products with Florida products. The purpose of the equalization tax was to have all Florida processors of citrus products help pay for the costs of the Department, rather than have the burden fall entirely on the Florida growers subject to the box tax.
Section 601.155, Florida Statutes, provides, in relevant part:
The first person who exercises in this state the privilege of processing, reprocessing, blending, or mixing processed orange products or processed grapefruit products or the privilege of packaging or repackaging processed orange products or processed grapefruit products into retail or institutional size containers or, except as provided in subsection (9) or except if a tax is levied and collected on the exercise of one of the foregoing privileges, the first person having title to or possession of any processed orange product or any processed grapefruit product who exercises the privilege in this state of storing such product or removing any portion of such product from the original container in which it arrived in this state for purposes other than official inspection or direct consumption by the consumer and not for resale shall be assessed and shall pay an excise tax upon the exercise of such privilege at the rate described in subsection (2).
Upon the exercise of any privilege described in subsection (1), the excise tax
levied by this section shall be at the same rate per box of oranges or grapefruit utilized in the initial production of the processed citrus products so handled as that imposed, at the time of exercise of the taxable privilege, by s. 601.15 per box of oranges.
In order to administer the tax, the Legislature provided the following relevant provisions in Section 601.155, Florida Statutes:
Every person liable for the excise tax imposed by this section shall keep a complete and accurate record of the receipt, storage, handling, exercise of any taxable privilege under this section, and shipment of all products subject to the tax imposed by this section. Such record shall be preserved for a period of 1 year and shall be offered for inspection upon oral or written request by the Department of Citrus or its duly authorized agent.
Every person liable for the excise tax imposed by this section shall, at such times and in such manner as the Department of Citrus may by rule require, file with the Department of Citrus a return, certified as true and correct, on forms to be prescribed and furnished by the Department of Citrus, stating, in addition to other information reasonably required by the Department of Citrus, the number of units of processed orange or grapefruit products subject to this section upon which any taxable privilege under this section was exercised during the period of time covered by the return. Full payment of excise taxes due for the period reported shall accompany each return.
All taxes levied and imposed by this section shall be due and payable within 61 days after the first of the taxable privileges is exercised in this state.
Periodic payment of the excise taxes imposed by this section by the person first exercising the taxable privileges and liable for such payment shall be permitted only in accordance with Department of Citrus rules, and the payment thereof shall be guaranteed by the posting of an appropriate certificate of deposit, approved surety bond, or cash deposit in an amount and manner as prescribed by the Department of Citrus.
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(11) This section shall be liberally construed to effectuate the purposes set forth and as additional and supplemental powers vested in the Department of Citrus under the police power of this state.
In March 2000, certain citrus businesses challenged Section 601.155(5), Florida Statutes, as being unconstitutional. At the time of the suit, Section 601.155(5), Florida Statutes, read as follows:
All products subject to the taxable privileges under this section, which products are produced in whole or in part from citrus fruit grown within the United States, are exempt from the tax imposed by this section to the extent that the products are derived from oranges or grapefruit grown within the United States. In the case of products made in part from citrus fruit grown within the United States, it shall be the burden of the persons liable for the excise tax to show the Department of Citrus, through competent evidence, proof of that part which is not subject to a taxable privilege.
The citrus businesses claimed the exemption in Section 601.155(5) rendered the tax unconstitutionally discriminatory, in that processors who imported juice from foreign countries to be blended with Florida juice were subject to the equalization tax, whereas processors who imported juice from places such as California, Arizona and Texas enjoyed an exemption from the tax. The case, Tampa Juice Service, Inc., et al. v. Department of Citrus, Case No. GCG-00-3718 (Consolidated), was brought in the Tenth Judicial Circuit Court, in and for Polk County. Judge Dennis P. Maloney of that court continues to preside over that case.
In a partial final declaratory judgment effective March 15, 2002, Judge Maloney found Section 601.155, Florida Statutes, unconstitutional because it violated the Commerce Clause of the United States Constitution due to its discriminatory effect in favor of non-Florida United States juice. In an order dated April 15, 2002, Judge Maloney severed the exemption in Section 601.155(5), Florida Statutes, from the remainder of the statute.
The court's decision necessitated the formulation of a remedy for the injured plaintiffs. While the parties were briefing the issue before the court, the Florida Legislature met and passed Chapter 2002-26, Laws of Florida, which amended Section 601.155, Florida Statutes, to read as follows:
Products made in whole or in part from citrus fruit on which an equivalent tax is levied pursuant to s. 601.15 are exempt from the tax imposed by this section. In the case of products made in part from citrus fruit exempt from the tax imposed by this section, it shall be the burden of the persons liable for the excise tax to show the Department of Citrus, through competent evidence, proof of that part which is not subject to a taxable privilege.
Chapter 2002-26, Laws of Florida, was given an effective date of July 1, 2002.
By order dated August 8, 2002, Judge Maloney set forth his decision as to the remedy for the plaintiffs injured by the discriminatory effect of Section 601.155(5), Florida Statutes. Judge Maloney expressly relied on the rationale set forth in Division of Alcoholic Beverages and Tobacco v. McKesson Corporation, 574 So. 2d 114 (Fla. 1991)("McKesson II").
In its initial McKesson decision, Division of Alcoholic Beverages and Tobacco v. McKesson Corporation, 524 So. 2d 1000 (Fla. 1988), the Florida Supreme Court affirmed a summary judgment ruling that Florida's alcoholic beverage tax scheme, which gave tax preferences and exemptions to certain alcoholic beverages made from Florida crops, unconstitutionally discriminated against interstate commerce. The Florida Supreme Court also affirmed that portion of the summary judgment giving the ruling prospective effect, thus denying the plaintiff a refund of taxes paid pursuant to the unconstitutional scheme.
The decision was appealed to the United States Supreme Court. In McKesson Corporation v. Division of Alcoholic
Beverages and Tobacco, 496 U.S. 18 (1990), the United States Supreme Court reversed the Florida Supreme Court's decision as to the prospective effect of its decision. The United States Supreme Court held that:
The question before us is whether prospective relief, by itself, exhausts the requirements of federal law. The answer is no: If a State places a taxpayer under duress promptly to pay a tax when due and relegates him to a postpayment refund action in which he can challenge the tax's legality, the Due Process Clause of the Fourteenth Amendment obligates the State to provide meaningful backward-looking relief to rectify any unconstitutional deprivation.
496 U.S. at 31 (footnotes omitted).
The United States Supreme Court set forth the following options by which the state could meet its obligation to provide "meaningful backward-looking relief:"
[T]he State may cure the invalidity of the Liquor Tax by refunding to petitioner the difference between the tax it paid and the tax it would have been assessed were it extended the same rate reductions that its competitors actually received. . . .
Alternatively, to the extent consistent with other constitutional restrictions, the State may assess and collect back taxes from petitioner's competitors who benefited from the rate reductions during the contested tax period, calibrating the retroactive assessment to create in hindsight a nondiscriminatory scheme. . . . Finally, a combination of a partial refund to
petitioner and a partial retroactive assessment of tax increases on favored competitors, so long as the resultant tax actually assessed during the contested tax period reflects a scheme that does not discriminate against interstate commerce, would render petitioner's resultant deprivation lawful and therefore satisfy the Due Process Clause's requirement of a fully adequate postdeprivation procedure.
496 U.S. at 40-41 (citations and footnotes omitted). The United States Supreme Court expressly provided that the state has the option of choosing the form of relief it will grant.
In keeping with the United States Supreme Court opinion, the Florida Supreme Court granted the Division of Alcoholic Beverages and Tobacco (the "Division") leave to advise the Court as to the form of relief the state wished to provide. The Division proposed to retroactively assess and collect taxes from those of McKesson's competitors who had benefited from the discriminatory tax scheme. McKesson contended that a refund of the taxes it had paid was the only clear and certain remedy, because retroactive taxation of its competitors would violate their due process rights. McKesson II, 574 So. 2d at 115.
The Florida Supreme Court remanded the case to the trial court for further proceedings on McKesson's refund claim, with the following instructions:
While McKesson may not necessarily be entitled to a refund, it is entitled to a "clear and certain remedy," as outlined in the Supreme Court's opinion. Because
nonparties, such as amici, will be directly affected by the retroactive tax scheme proposed by the state, all affected by the proposed emergency rule must be given notice and an opportunity to intervene in this action. Therefore, on remand, the trial court not only must determine whether the state's proposal meets "the minimum federal requirements" outlined in the Supreme Court's opinion, it also must determine whether the proposal comports with federal and state protections afforded those against whom the proposed tax will be assessed.
We emphasize that the state has the option of choosing the manner in which it will reformulate the alcoholic beverage tax during the contested period so that the resultant tax actually assessed during that period reflects a scheme which does not discriminate against interstate commerce.
Therefore, if the trial court should rule that the state's proposal to retroactively assess and collect taxes from McKesson's competitors does not meet constitutional muster and such ruling is upheld on appeal, the state may offer an alternative remedy for the trial court's review. However, any such proposal likewise must satisfy the standards set forth by the Supreme Court as well as be consistent with other constitutional restrictions.
574 So. 2d at 116.
In the instant case, Judge Maloney assessed the options prescribed by the series of McKesson cases and concluded that the only fair remedy was to assess and collect back assessments from those who benefited from the unconstitutional equalization tax exemption. His August 8, 2002 order directed the Department to "take appropriate steps, consistent with
existing law, to assess and collect the Equalization tax from those entities which [benefited] from the unconstitutional exemption."
On September 18, 2002, the Department promulgated the Emergency Rules at issue in DOAH Case No. 02-3648RE. The Emergency Rules were filed with the Department of State on September 24, 2002, and took effect on that date. They were published in the October 4, 2002 issue of the Florida Administrative Weekly (vol. 28, no. 40, pp. 4271-4272). The full text of the Emergency Rules is:
EQUALIZATION TAX ON NON-FLORIDA UNITED STATES JUICE
20ER02-1 Intent.
The Court in Tampa Juice Service, et al v. Florida Department of Citrus in Consolidated Case Number GCG-003718 (Circuit Court in and for Polk County, Florida) severed the exemption contained in Section 601.155(5), Florida Statutes, that provided an exemption for persons who exercised one of the enumerated Equalization Tax privileges on non-Florida, United States juice. The Court had previously determined that the stricken provisions operated in a manner that violated the Commerce Clause of the United States Constitution. On
August 8, 2002, the Court ordered that the Florida Department of Citrus "take appropriate steps, consistent with existing law, to assess and collect the Equalization tax from those entities which [benefited] from the unconstitutional exemption."
It is the Florida Department of Citrus' intent by promulgating the following
remedial Rule 20ER02-01 and Chapter 20-15, F.A.C., to implement a non-discriminatory tax scheme, which does not impose a significant tax burden that is so harsh and oppressive as to transgress constitutional limitations. These rules shall be applicable to those previously favored persons who received favorable tax treatment under the statutory sections cited above.
Specific Authority 601.02, 601.10, 601.15,
601.155 FS. Law Implemented 601.02, 601.10,
601.15, 601.155 FS. History-- New 9-24-02.
20ER02-2 Definitions.
"Previously favored persons" shall be defined as any person who exercised an enumerated Equalization Tax privilege as defined by Section 601.155, Florida Statutes, but who was exempt from payment of the Equalization Tax due to the exemption for non-Florida, United States juice set forth in the statutory provision, which was ultimately determined to be unconstitutional and severed from Section 601.155(5), Florida Statutes.
The "tax period" during which the severed provisions of Section 601.155(5), Florida Statutes, were in effect shall be defined as commencing on October 6, 1997, and ending on March 14, 2002.
"Tax liability" shall be defined as the total amount of taxes due to the Florida Department of Citrus during the "tax period," at the following rates per box for each respective fiscal year:
Fiscal Year Processed Rate Orange
Grapefruit
1997-1998 | .175 | .30 |
1998-1999 | .17 | .30 |
1999-2000 | .18 | .325 |
2000-2001 | .175 | .30 |
2001-2002 .165 .18
Specific Authority 601.02, 601.10, 601.15,
601.155 FS. Law Implemented 601.02, 601.10,
601.15, 601.155 FS. History-- New 9-24-02.
20ER02-3 Collection.
The Florida Department of Citrus shall calculate the tax liability for each person or entity that exercised an enumerated Equalization Tax privilege outlined in section 601.155, Florida Statutes, upon non-Florida, United States juice based upon inspection records maintained by Florida Department of Agriculture and Consumer Services and the United States Department of Agriculture.
Additionally, the Florida Department of Citrus will provide notice of the calculation to the previously favored persons by certified mail. The notice of the calculation shall contain a statement including the following categories:
(a) Tax liability; (b) Gallons;
Brix;
Type of product; (e) Total solids; (f) Conversion rate; (g) Total boxes;
(h) Delineation of non-Florida, United States juice.
(2)(a) Contained within the notice will be the various legal options available to those who previously enjoyed the exemption, set forth in proposed Rule 20- 15.003(2), F.A.C.
(b) Persons who previously enjoyed the exemption may petition to intervene in the case of Tampa Juice Service, Inc., et al, Consolidated Case No. GCG-003718, presently pending before the Circuit Court of the Tenth Judicial Circuit in and for Polk County.
A hearing to consider arguments made by any intervenor, the Plaintiffs and the Florida Department of Citrus is currently scheduled to be heard by the Honorable Dennis Maloney on November 12, 2002, in Bartow, Florida.
(3) The Florida Department of Citrus will not oppose the timely intervention of persons who previously enjoyed the subject exemption that wish to present a claim to the Court in the Tampa Juice Service, Inc., et al v. Florida Department of Citrus.
However, the Florida Department of Citrus does not waive any argument regarding the validity of the calculation of the tax liability or that imposition of this tax is constitutional.
Specific Authority 601.02, 601.10, 601.15,
601.155 FS. Law Implemented 601.02, 601.10,
601.15, 601.155 FS. History-- New 9-24-02.
The Department's "Specific Reasons for Finding an Immediate Danger to the Public Health, Safety or Welfare" were set forth as follows:
On March 18, 2002, the Court in the Tenth Judicial Circuit, State of Florida, in and for Polk County, entered a Partial Final Declaratory Judgment in the case of Tampa Juice Service, Inc., et al v. Florida Department of Citrus, Consolidated Case Number GCG-003718. In this order the Court ruled that the exemption in Section 601.155, F.S., for non-Florida, United States juice was unconstitutional. On or about April 15, 2002, the Court severed the exemption for non-Florida, United States juice from section 601.155(5), F.S. On August 8, 2002, the Court held that the Florida Department of Citrus was required to cure the invalidity of the equalization taxing scheme.
To cure this invalidity, the Florida Department of Citrus promulgates Rule 20ER02-1, F.A.C., which will serve to implement the Court's order for a nondiscriminatory tax scheme and provide due process protections for the previously favored taxpayers. These rules are being promulgated on an emergency basis to meet time constraints associated with litigation and to establish guidelines which protect the public's and state's interest for the orderly and efficient collection and payment of the tax liability. Without these guidelines, the welfare of the citizens and the state would be adversely affected because of the immediate and widespread impact of the failure of previously favored persons to properly remit the tax.
The Department's "Reason for Concluding that the Procedure is Fair Under the Circumstances" was set forth as follows:
Promulgation of these guidelines using the emergency rule procedures is the only available mechanism which adequately protects the public interests under the circumstances which require collection and payment of the tax liability. This procedure is fair to the public and to the previously favored persons. It permits promulgation of the necessary guidelines within a time frame which allows the industry to be adequately informed of their duties, responsibilities and rights with respect to the tax liability.
In the November 15, 2002 issue of the Florida Administrative Weekly (vol. 28, no. 46, pp. 4996-4998), the Department published the Proposed Rules at issue in DOAH Case No. 02-4607RP. The text of Proposed Rule 20-15.001, Florida
Administrative Code, is identical to that of Emergency Rule 20ER02-1, set forth above. The text of Proposed Rule 20-15.002, Florida Administrative Code, is identical to that of Emergency Rule 20ER02-2, set forth above. The text of Proposed Rule 20- 15.003(1)&(3), Florida Administrative Code, is identical to that of Emergency Rule 20ER02-3(1)&(3), set forth above. The text of Proposed Rule 15.003(2), Florida Administrative Code, varies from the text of Emergency Rule 20ER02-3(2), and reads as follows:
20-15.003 Collection.
Subsequent to adoption of this rule, the Florida Department of Citrus will provide to the previously favored persons by certified mail a Notice of Tax Liability which shall contain a demand for payment consistent with the above-referenced itemized statement. The Department will deem late payment of Equalization Taxes owed by previously favored persons to constitute good cause, and shall waive the 5 percent penalty authorized by Section 601.155(10), F.S., as compliance with either of the following is established by Department [sic]:
Lump sum payment of the tax liability remitted with the filing of Department of Citrus Form 4R (incorporated by reference in Rule 20-100.004, F.A.C.) for the relevant years and then-applicable tax rate(s) per subsection 20-15.002(3), F.A.C., within 61 days of receiving Notice of Tax Liability; or
Equal installment payments remitted with the filing of Department of Citrus Form 4R (incorporated by reference in
Rule 20-100.004, F.A.C.) for the relevant years and then-applicable tax rate(s) per subsection subsection [sic] 20-15.002(3), F.A.C., over a 60-month period, the first payment being due within 61 days of receiving Notice of Tax Liability pursuant to subsection 20-15.003(2), F.A.C.; or
The Good Cause provisions of 601.155(10), F.S., shall not apply to persons who do not comply with paragraph 20- 15.003(2)(a), F.A.C., or paragraph 20-
15.003(2)(b), F.A.C.
Failure to pay the taxes or penalties due under 601.155, F.S. and Chapter 20-15, F.A.C., shall constitute grounds for revocation or suspension of a previously favored person's citrus fruit dealer's license pursuant to 601.56(4), F.S., 601.64(6), F.S., 601.64(7), F.S., and/or 601.67(1), F.S.
Peace River is a Florida corporation and licensed citrus fruit dealer regulated by Chapter 601, Florida Statutes. As such, Peace River is subject to the rules of the Department.
Peace River buys, sells, and manufactures bulk citrus juices.
By correspondence dated October 2, 2002, Peace River was notified by the Department that Peace River would be liable for payment of $86,242.41 in Equalization taxes for the tax period of October 6, 1997 through March 14, 2002 (the "tax period"), pursuant to the terms of the Emergency Rules.
Fresh Juice is a Florida corporation and licensed citrus fruit dealer regulated by Chapter 601, Florida Statutes. As such, Fresh Juice is subject to the rules of the Department.
Fresh Juice buys, sells, and manufactures citrus juices.
By correspondence dated October 2, 2002, Fresh Juice was notified by the Department that Fresh Juice would be liable for payment of $45,052.19 in Equalization taxes for the tax period, pursuant to the terms of the Emergency Rules.
Sun Orchard is a Florida corporation and licensed citrus fruit dealer regulated by Chapter 601, Florida Statutes. As such, Sun Orchard is subject to the rules of the Department.
Sun Orchard buys, sells, and manufactures citrus juices.
By correspondence dated October 2, 2002, Sun Orchard was notified by the Department that Sun Orchard would be liable for payment of $45,052.19 in Equalization taxes for the tax period, pursuant to the terms of the Emergency Rules.
During the tax period, Peace River, Fresh Juice, and Sun Orchard imported, stored and blended non-Florida, United States citrus juices.
Neither Peace River, Fresh Juice, nor Sun Orchard is a party to the lawsuit styled Tampa Juice Service, Inc., et al. v. Department of Citrus, Case No. GCG-00-3718 (Consolidated).
Peace River, Fresh Juice, and Sun Orchard contend that they relied on the tax exemption in making business decisions and had no notice that their activities regarding non-Florida, United States juice would be taxable upon the court's striking of the exemption in Section 601.155(5), Florida Statutes. Accordingly, Peace River, Fresh Juice, and Sun Orchard contend that, during the tax period, they had no opportunity to conform their conduct to avoid the tax or position themselves to claim a refund allowed by Section 601.155, Florida Statutes.
Peace River, Fresh Juice, and Sun Orchard contend that they have not been obligated by Chapter 601, Florida Statutes, to keep specific records on their use of non-Florida United States citrus juices for the tax period, but admit they keep business records required by law, which may include some business records related to non-Florida United States juice during the tax period.
Peace River, Fresh Juice, and Sun Orchard shipped products made with non-Florida, United States juice during the tax period without payment of the Equalization Tax.
CONCLUSIONS OF LAW
DOAH has jurisdiction over the subject matter and the parties to these proceedings pursuant to Section 120.56, Florida Statutes.
Section 120.54(4)(a), Florida Statutes, sets forth the statutory criteria by which agencies may adopt emergency rules:
If an agency finds that an immediate danger to the public health, safety, or welfare requires emergency action, the agency may adopt any rule necessitated by the immediate danger. The agency may adopt a rule by any procedure which is fair under the circumstances if:
The procedure provides at least the procedural protection given by other statutes, the State Constitution, or the United States Constitution.
The agency takes only that action necessary to protect the public interest under the emergency procedure.
The agency publishes in writing at the time of, or prior to, its action the specific facts and reasons for finding an immediate danger to the public health, safety, or welfare and its reasons for concluding that the procedure used is fair under the circumstances. In any event, notice of emergency rules, other than those of educational units or units of government with jurisdiction in only one or a part of one county, including the full text of the rules, shall be published in the first available issue of the Florida Administrative Weekly and provided to the committee. The agency's findings of immediate danger, necessity, and procedural fairness shall be judicially reviewable.
In summary, Section 120.54(4), Florida Statutes, authorizes agencies to promulgate emergency rules if the agency finds there is "an immediate danger to the public health, safety, or welfare" requiring emergency action. The agency must
justify its emergency rules by findings of immediate danger to the public health, safety or welfare, and these findings must be factually explicit and persuasive. Florida Health Care Association v. Agency for Health Care Administration, 734 So. 2d 1052, 1053 (Fla. 1st DCA 1998); Golden Rule Insurance Company v. Department of Insurance, 586 So. 2d 429, 430 (Fla. 1st DCA 1991).
The scope of review of emergency rules is limited to a determination of whether the emergency rules comply with the statutory requirements relating to immediate danger, necessity and procedural fairness. Witmer v. Department of Business and Professional Regulation, Division of Pari-Mutuel Wagering, 631 So. 2d 338, 340 (Fla. 4th DCA 1994).
The Department's statement of reasons for finding an immediate danger to the public health, safety or welfare, set out in full above, is neither factually explicit nor persuasive. The Department first states that the Emergency Rules are being promulgated "to meet time constraints associated with litigation." This statement is vague and, absent further factual explication, cannot support a finding of "immediate danger to the public health, safety or welfare."
The Department places greater reliance on its second stated reason: ". . . to establish guidelines which protect the public's and state's interest for the orderly and efficient
collection and payment of the tax liability. Without these guidelines, the welfare of the citizens and the state would be adversely affected because of the immediate and widespread impact of the failure of previously favored persons to properly remit the tax."
The quoted statement does not explain the "immediate danger" to the public welfare that would be caused by the Department's collecting the taxes after promulgation of a permanent rule, rather than collecting the taxes immediately via emergency rule. At the hearing and in its written submissions, the Department contended that "the public welfare is in immediate danger when the State faces the prospect of losing tax revenues." To support its contention, the Department cited Calder Race Course, Inc. v. Board of Business Regulation, 319 So. 2d 67 (Fla. 1st DCA 1975), and Little v. Coler, 557 So. 2d
157 (Fla. 1st DCA 1990).
In Calder, the holder of a thoroughbred racing permit challenged an emergency order of the Board of Business Regulation granting the holder of a greyhound racing permit permission to conduct additional matinee races to partially recoup revenues lost as a result of race dates canceled due to a dispute with greyhound owners. The court found no error in the Board's "carefully circumscribed emergency action" because the
state had no other opportunity to mitigate the tax loss caused by the cancellation of race dates. 319 So. 2d at 68.
In Coler, the Department of Health and Rehabilitative Services ("HRS") had promulgated emergency rules changing the dates of entitlement and first benefit authorization for Aid to Families with Dependent Children ("AFDC"). The emergency rules responded to the Legislature's appropriations bill, which reduced the AFDC appropriation in anticipation of HRS' implementing new dates of entitlement. HRS stated that unless the total amount of the budget cuts were implemented immediately, it would not have sufficient funds to operate the AFDC program through the end of the year, and that there was insufficient time to promulgate a permanent rule before the date set by the Legislature for implementation of the budget cuts. Under these circumstances, the court held that "the potential compromise to state revenue constitutes adequate cause for emergency rule." 557 So. 2d at 160.
Neither of the cited cases supports the Department's Emergency Rules in the instant case. Calder involved the potential for a permanent loss in state revenues caused by the cancellation of authorized racing dates. In the instant case, if it is assumed that Judge Maloney's decision will withstand appellate review and the Department's permanent rules are upheld, then the back taxes on previously exempt juice will
eventually be collected. Here, the state faces a delay in collection, not the permanent loss of revenue. The Department offered no evidence that such a delay would have any impact on its budget or programs, or otherwise endanger the public welfare.1
Coler involved a genuine, explicitly stated public health emergency. If its emergency rules were invalidated, HRS faced the real danger of running out of AFDC funds before year's end, "which would result in an inability to provide benefits to eligible families whose daily needs are dependent upon those funds." Coler, 557 So. 2d at 158. In the instant case, the Department has described no similar crisis that would result if it were prevented from collecting the tax now rather than later. In conclusion, the Department has failed to elucidate factually explicit and persuasive findings of immediate danger to the public health, safety or welfare, and therefore its Emergency Rules must be held an invalid exercise of delegated legislative authority.
The analysis must now turn to the proposed permanent rules, Chapter 20-15, Florida Administrative Code. Section 120.56(1)(a), Florida Statutes, provides: "Any person substantially affected by a rule or a proposed rule may seek an administrative determination of the invalidity of the rule on the ground that the rule is an invalid exercise of delegated
legislative authority." Section 120.56(2)(a), Florida Statutes, provides that in challenges to proposed rules, "The petitioner has the burden of going forward. The agency then has the burden to prove by a preponderance of the evidence that the proposed rule is not an invalid exercise of delegated legislative authority as to the objections raised."
The Petitioners in DOAH Case No. 02-4607RP are licensed citrus fruit dealers regulated by Chapter 601, Florida Statutes. During the tax period, they imported, stored and blended non-Florida United States citrus juices. Petitioners demonstrated at hearing that they would be substantially affected by the Proposed Rules and accordingly have standing to bring this rule challenge. Petitioners have alleged a real and sufficiently immediate injury in fact, in that the Proposed Rules would subject them to payment of taxes for the period in question and to penalties for non-payment. Petitioners' alleged injury is within the zone of interest that is regulated by the statutes purportedly implemented by the Proposed Rules. See
Lanoue v. Florida Department of Law Enforcement, 751 So. 2d 94 (Fla. 1st DCA 1999), and cases cited therein regarding the "substantially affected" test to establish standing in a rule challenge proceeding.
Section 120.52(8), Florida Statutes (2002), provides: "Invalid exercise of delegated legislative
authority" means action which goes beyond the powers, functions, and duties delegated by the Legislature. A proposed or existing rule is an invalid exercise of delegated legislative authority if any one of the following applies:
The agency has materially failed to follow the applicable rulemaking procedures or requirements set forth in this chapter;
The agency has exceeded its grant of rulemaking authority, citation to which is required by s. 120.54(3)(a)1.;
The rule enlarges, modifies, or contravenes the specific provisions of law implemented, citation to which is required by s. 120.54(3)(a)1.;
The rule is vague, fails to establish adequate standards for agency decisions, or vests unbridled discretion in the agency;
The rule is arbitrary or capricious;
The rule is not supported by competent substantial evidence; or
The rule imposes regulatory costs on the regulated person, county, or city which could be reduced by the adoption of less costly alternatives that substantially accomplish the statutory objectives.
A grant of rulemaking authority is necessary but not sufficient to allow an agency to adopt a rule; a specific law to be implemented is also required. An agency may adopt only rules that implement or interpret the specific powers and duties granted by the enabling statute. No agency shall have authority to adopt a rule only because it is reasonably related to the purpose of the enabling legislation and is not arbitrary and capricious or is within the agency's class of powers and duties, nor shall an
agency have the authority to implement statutory provisions setting forth general legislative intent or policy. Statutory language granting rulemaking authority or generally describing the powers and functions of an agency shall be construed to extend no further than implementing or interpreting the specific powers and duties conferred by the same statute.
The statutory provisions cited by the Department as specific authority for the proposed rules are Sections 601.02, 601.10, 601.15 and 601.155, Florida Statutes. Section 601.02, Florida Statutes, sets forth the purposes of Chapter 601, Florida Statutes, and provides:
In the exercise of the police power to protect health and welfare and to stabilize and protect the citrus industry of the state.
Because the planting, growing, cultivating, spraying, pruning, and fertilizing of citrus groves and the harvesting, hauling, processing, packing, canning, and concentrating of the citrus crop produced thereon is the major agricultural enterprise of Florida and, together with the sale and distribution of said crop, affects the health, morals, and general economy of a vast number of citizens of the state who are either directly or indirectly dependent thereon for a livelihood, and said business is therefore of vast public interest.
Because it is wise, necessary, and expedient to protect and enhance the quality and reputation of Florida citrus fruit and the canned and concentrated products thereof in domestic and foreign markets.
To provide means whereby producers, packers, canners, and concentrators of citrus fruit and the canned and concentrated products thereof may secure prompt and efficient inspection and classification of grades of citrus fruit and the canned and concentrated products thereof at reasonable costs, it being hereby recognized that the standardization of the citrus fruit industry of Florida by the proper grading and classification of citrus fruit and the canned and concentrated products thereof by prompt and efficient inspection under competent authority is beneficial alike to producer, packer, shipper, canner, concentrator, carrier, receiver, and consumer in that it furnishes them prima facie evidence of the quality and condition of such products and informs the carrier and receiver of the quality of the products carried and received by them and assures the ultimate consumer of the quality of the products purchased.
To enable citrus producers collectively to pay assessments to fund marketing and research programs for the direct benefit of the citrus industry of this state. It is the intent of the Legislature that all funds collected under this chapter and the interest accrued on such funds are consideration for a social contract between the state and the citrus growers of the state whereby the state must hold such funds in trust and inviolate and use them only for the purposes prescribed in this chapter.
To stabilize the Florida citrus industry and to protect the public against fraud, deception, and financial loss through unscrupulous practices and haphazard methods in connection with the processing and marketing of citrus fruit and the canned or concentrated products thereof.
Because said act is designed to promote the general welfare of the Florida citrus
industry, which in turn will promote the general welfare and social and political economy of the state.
In the event any word, phrase, clause, sentence, paragraph, or section of this chapter is declared unconstitutional by any court of competent jurisdiction, then such declaration of such unconstitutionality shall not affect the remainder of this chapter, and the unconstitutional portion shall be considered severable, it being the intent of the Legislature that the remainder of this chapter shall continue in full force and effect.
Section 601.10, Florida Statutes, is quoted, supra, in paragraph 2.
Section 601.15, Florida Statutes, provides as follows, in relevant part:
The administration of this section shall be vested in the Department of Citrus, which shall prescribe suitable and reasonable rules and regulations for the enforcement hereof, and the Department of Citrus shall administer the taxes levied and imposed hereby. All funds collected under this section and the interest accrued on such funds are consideration for a social contract between the state and the citrus growers of the state whereby the state must hold such funds in trust and inviolate and use them only for the purposes prescribed in this chapter. The Department of Citrus shall have power to cause its duly authorized agent or representative to enter upon the premises of any handler of citrus fruits and to examine or cause to be examined any books, papers, records, or memoranda bearing on the amount of taxes payable and to secure other information directly or indirectly concerned in the enforcement hereof. Any person who is
required to pay the taxes levied and imposed and who by any practice or evasion makes it difficult to enforce the provisions hereof by inspection, or any person who, after demand by the Department of Citrus or any agent or representative designated by it for that purpose, refuses to allow full inspection of the premises or any part thereof or any books, records, documents, or other instruments in any manner relating to the liability of the taxpayer for the tax imposed or hinders or in anywise delays or prevents such inspection, is guilty of a misdemeanor of the second degree, punishable as provided in s. 775.082 or s. 775.083.
The Department of Citrus shall plan and conduct campaigns for commodity advertising, publicity, and sales promotion, and may conduct campaigns to encourage noncommodity advertising, to increase the consumption of citrus fruits and may contract for any such advertising, publicity, and sales promotion service. . . .
* * *
Every handler shall keep a complete and accurate record of all citrus fruit handled by her or him. Such record shall be in such form and contain such other information as the Department of Citrus shall by rule or regulation prescribe. Such records shall be preserved by such handlers for a period of 1 year and shall be offered for inspection at any time upon oral or written demand by the Department of Citrus or its duly authorized agents or representatives.
Every handler shall, at such times and in such manner as the Department of Citrus may by rule require, file with the Department of Citrus a return certified as true and correct, on forms furnished by the Department of Citrus, stating, in addition to other information, the number of standard-packed boxes of each kind of citrus
fruit handled by such handler in the primary channel of trade during the period of time covered by the return. Full payment of all excise taxes due for the period reported shall accompany each handler's return.
* * *
(9)(a) Any handler who fails to file a return or to pay any tax within the time required shall thereby forfeit to the Department of Citrus a penalty of 5 percent of the amount of tax determined to be due; but the Department of Citrus, if satisfied that the delay was excusable, may remit all or any part of such penalty. Such penalty shall be paid to the Department of Citrus and disposed of as provided with respect to moneys derived from the taxes levied and imposed by subsection (3).
(b) The Department of Citrus may collect any taxes levied and assessed by this chapter in any or all of the following methods:
By the voluntary payment by the person liable therefor.
By a suit at law.
By a suit in equity to enjoin and restrain any handler, citrus fruit dealer, or other person owing such taxes from operating her or his business or engaging in business as a citrus fruit dealer until the delinquent taxes are paid. Such action may include an accounting to determine the amount of taxes plus delinquencies due. In any such proceeding, it is not necessary to allege or prove that an adequate remedy at law does not exist.
(10) The powers and duties of the Department of Citrus include the following:
(a) To adopt and from time to time alter, rescind, modify, and amend all proper and necessary rules, regulations, and orders for the exercise of its powers and the performance of its duties under this chapter. . . .
Section 601.155, Florida Statutes, as amended by Chapter 2002-26, Laws of Florida, provides as follows, in relevant part:
The first person who exercises in this state the privilege of processing, reprocessing, blending, or mixing processed orange products or processed grapefruit products or the privilege of packaging or repackaging processed orange products or processed grapefruit products into retail or institutional size containers or, except as provided in subsection (9) or except if a tax is levied and collected on the exercise of one of the foregoing privileges, the first person having title to or possession of any processed orange product or any processed grapefruit product who exercises the privilege in this state of storing such product or removing any portion of such product from the original container in which it arrived in this state for purposes other than official inspection or direct consumption by the consumer and not for resale shall be assessed and shall pay an excise tax upon the exercise of such privilege at the rate described in subsection (2).
Upon the exercise of any privilege described in subsection (1), the excise tax levied by this section shall be at the same rate per box of oranges or grapefruit utilized in the initial production of the processed citrus products so handled as that imposed, at the time of exercise of the taxable privilege, by s. 601.15 per box of oranges.
For the purposes of this section, the number of boxes of oranges or grapefruit utilized in the initial production of processed citrus products subject to the taxable privilege shall be:
The actual number of boxes so utilized, if known and verified in accordance with Department of Citrus rules; or
An equivalent number established by Department of Citrus rule which, on the basis of existing data, reasonably equates to the quantity of citrus contained in the product, when the actual number of boxes so utilized is not known or properly verified.
For purposes of this section:
"Processed orange products" means products for human consumption consisting of
20 percent or more single strength equivalent orange juice; orange sections, segments, or edible components; or whole peeled fruit.
"Processed grapefruit products" means products for human consumption consisting of
20 percent or more single strength equivalent grapefruit juice; grapefruit sections, segments, or edible components; or whole peeled fruit.
"Original container" includes any vessel, tanker or tank car or other transport vehicle.
"Retail or institutional container" means a container having a capacity of 10 gallons or less.
Products made in whole or in part from citrus fruit on which an equivalent tax is levied pursuant to s. 601.15 are exempt from the tax imposed by this section. In the case of products made in part from citrus
fruit exempt from the tax imposed by this section, it shall be the burden of the persons liable for the excise tax to show the Department of Citrus, through competent evidence, proof of that part which is not subject to a taxable privilege.
Every person liable for the excise tax imposed by this section shall keep a complete and accurate record of the receipt, storage, handling, exercise of any taxable privilege under this section, and shipment of all products subject to the tax imposed by this section. Such record shall be preserved for a period of 1 year and shall be offered for inspection upon oral or written request by the Department of Citrus or its duly authorized agent.
Every person liable for the excise tax imposed by this section shall, at such times and in such manner as the Department of Citrus may by rule require, file with the Department of Citrus a return, certified as true and correct, on forms to be prescribed and furnished by the Department of Citrus, stating, in addition to other information reasonably required by the Department of Citrus, the number of units of processed orange or grapefruit products subject to this section upon which any taxable privilege under this section was exercised during the period of time covered by the return. Full payment of excise taxes due for the period reported shall accompany each return.
All taxes levied and imposed by this section shall be due and payable within 61 days after the first of the taxable privileges is exercised in this state. Periodic payment of the excise taxes imposed by this section by the person first exercising the taxable privileges and liable for such payment shall be permitted only in accordance with Department of Citrus rules, and the payment thereof shall be guaranteed
by the posting of an appropriate certificate of deposit, approved surety bond, or cash deposit in an amount and manner as prescribed by the Department of Citrus.
When any processed orange or grapefruit product is stored or removed from its original container as provided in subsection (1), the equalizing excise tax is levied on such storage or removal, and such product is subsequently shipped out of the state in a vessel, tanker or tank car, or container having a capacity greater than 10 gallons, the person who is liable for the tax shall be entitled to a tax refund, if such tax has been paid, or to a tax credit, provided she or he can provide satisfactory proof that such product has been shipped out of the state and that no privilege taxable under subsection (1) other than storage or removal from the original container was exercised prior to such shipment out of the state.
All excise taxes levied and collected under the provisions of this section, including penalties, shall be paid into the State Treasury to be made a part of the Florida Citrus Advertising Trust Fund in the same manner, for the same purposes, and in the same proportions as set forth in s. 601.15(7). Any person failing to file a return or pay any assessment within the time required shall thereby forfeit to the Department of Citrus a penalty of 5 percent of the amount of assessment then due; but the Department of Citrus, on good cause shown, may waive all or any part of such penalty.
This section shall be liberally construed to effectuate the purposes set forth and as additional and supplemental powers vested in the Department of Citrus under the police power of this state.
Petitioners' chief contention is that the Proposed Rules impose a retroactive tax liability on the use of non- Florida United States juice. They contend that this use was exempt until July 1, 2002, when the Legislature gave effect to Chapter 2002-26, Laws of Florida, imposing for the first time a tax on non-Florida United States juice. Petitioners contend that only the Legislature has the power to impose a tax, and that Chapter 2002-26, Laws of Florida, evinces no legislative intent to impose the tax retroactively.
Petitioners contend that the court's order cannot endow the Department with authority beyond that granted by the Legislature, and that Judge Maloney's order acknowledged the correctness of this contention: ". . . the Florida Department of Citrus is ordered to take appropriate steps, consistent with
existing law, to assess and collect the Equalization tax from those entities which [benefited] from the unconstitutional exemption." (Emphasis added.) "Existing law" at the time of Judge Maloney's August 8, 2002, order and at the time the Proposed Rules were published included Section 601.155, Florida Statutes, as amended by Chapter 2002-26, Laws of Florida.
In amending Section 601.155, Florida Statutes, to eliminate the exemption for non-Florida United States juice and to limit the exemption to products made from citrus fruit on which the box tax has been levied, the Legislature gave no
indication of an intent that its amendment should operate retroactively. Thus, Petitioners would have it that the terms of Judge Maloney's order should be limited to prospective assessment and collection of the taxes, the only remedy "consistent with existing law."
The Citrus Code's severance clause, in Section 601.02, Florida Statutes, simply states that a declaration of unconstitutionality of any portion of Chapter 601 "shall not affect the remainder of this chapter," which "shall continue in full force and effect." Petitioners point out that this provision stands in contrast to the declaration of legislative intent set forth in Section 212.21(4), Florida Statutes, regarding the sales and use tax:
It being further declared to be the specific legislative intent that in the event any exemption or attempted exemption of any sale, admissions, use, storage, consumption, or rental from the tax or taxes imposed by this chapter is for any reason declared to be unconstitutional, ineffective, inapplicable, or void, that then and in such event each and every such sale, admission, use, storage, consumption, or rental shall be subject to the tax or taxes imposed by this chapter as fully and to the same extent as if such exemption or attempted exemption had never been included herein, it being declared to be the specific legislative intent that no unconstitutional, invalid, ineffective, inapplicable, or void exemption or attempted exemption or exemptions or attempted exemptions induced the passage of this chapter, it being further declared to be the specific legislative intent that
without the inclusion herein of any such unconstitutional, invalid, ineffective, inapplicable, or void exemption or attempted exemption, exemptions or attempted exemptions, the valid portions of this chapter would have been enacted.[2]
(Emphasis added.)
This underscored language, treating unconstitutional exemptions as if they had never existed, appears to authorize the assessment and collection of back taxes from persons who previously enjoyed an unconstitutional exemption. No such authorization is apparent in the Citrus Code.
However, the absence of such direct authorization does not operate to limit the power of an Article V court to declare a tax exemption unconstitutional and void ab initio. The underscored language from Section 212.21(4), Florida Statutes, provides direction to the executive branch, but is not necessary to the exercise of the courts' constitutional powers any more than legislative silence would limit the extent of the courts' powers in matters of constitutional interpretation, or any more than legislation prohibiting the courts from declaring statutes unconstitutional would be given effect by those courts.
This analysis extends to Chapter 2002-26, Laws of Florida. This legislation by its terms effects a prospective removal of the exemption for non-Florida United States juice. Its silence as to retroactive application does not define the court's constitutional jurisdiction in the matter. It does not,
and could not, limit the court's authority to declare the former Section 601.155(5), Florida Statutes, unconstitutional and to direct the implementation of "meaningful backward-looking relief." Judge Maloney's order plainly anticipated such relief, and his direction that the Department implement his order in a fashion "consistent with existing law" cannot rationally be read as negating the intent of the order. Rather, Judge Maloney was directing the Department that its method of assessing and collecting the back taxes must be authorized by statute.
Thus, the issue in this case is not the correctness of Judge Maloney's constitutional ruling. DOAH does not sit as an appellate court. For purposes of this order, Judge Maloney's ruling on the constitutionality of former Section 601.155(5), Florida Statutes, and his order for retroactive relief are accepted as correct.
For this reason, Petitioners' separation of powers argument is unavailing. Petitioners are correct that only the Legislature may impose a tax. However, neither Judge Maloney's order nor the Proposed Rules "impose" a tax. Petitioners were always subject to the equalization tax but for the specific exemption for non-Florida United States juice. When the court ruled the exemption unconstitutional, the exemption was void ab
initio. Assuming the correctness of Judge Maloney's rulings,
Petitioners are liable for payment of the equalization tax as if the exemption had never existed.
The issue in this case is whether the Proposed Rules by which the Department intends to carry out Judge Maloney's order are "consistent with existing law," or, in the phrase relevant to this proceeding, are an invalid exercise of delegated legislative authority. This analysis proceeds on the assumption that former Section 601.155(5), Florida Statutes, was void ab initio, that the Department must provide a "meaningful backward-looking remedy" for the discrimination caused by the statute, and that the remedy it seeks to implement is the collection of taxes that would have been paid but for the unconstitutional exemption.
As regards its statutory authority, the Department first cites the provisions of Section 601.10(1) and (2), Florida Statutes, set forth above. These are statements of general rulemaking authority, not the "specific powers and duties granted by the enabling statute" contemplated by Section 120.52(8), Florida Statutes.
For more specific authority, the Department contends that the assessments contemplated by the Proposed Rules are authorized by Section 601.15(9)(b), Florida Statutes, which states:
The Department of Citrus may collect any taxes levied and assessed by this chapter in any or all of the following methods:
By the voluntary payment by the person liable therefor.
By a suit at law.
By a suit in equity to enjoin and restrain any handler, citrus fruit dealer, or other person owing such taxes from operating her or his business or engaging in business as a citrus fruit dealer until the delinquent taxes are paid. Such action may include an accounting to determine the amount of taxes plus delinquencies due. In any such proceeding, it is not necessary to allege or prove that an adequate remedy at law does not exist.
The Department asserts that the quoted provision provides ample authority for its issuance of written tax assessments and provides it with the power to seek enforcement of those assessments.
In conjunction with its assessment power, the Department points to Section 601.15(10)(a), Florida Statutes, which states:
(10) The powers and duties of the Department of Citrus include the following:
(a) To adopt and from time to time alter, rescind, modify, and amend all proper and necessary rules, regulations, and orders for the exercise of its powers and the performance of its duties under this chapter.
The Department asserts that, because Section 601.15(9)(b), Florida Statutes, gives it specific authority to
assess and collect taxes on a case-by-case basis, it follows as a logical matter that the Department also has the authority to promulgate rules setting forth the general procedures by which it will perform such assessment and collection, pursuant to Section 601.15(10)(a), Florida Statutes. In other words, the Department's authority to collect the taxes levied and assessed by Chapter 601, Florida Statutes, is a specific power granted by the enabling statute, and the Proposed Rules implement that specific authority.
The Department also contends that the Proposed Rules merely provide an administrative scheme for the collection of the back taxes. As noted above, the Department claims that Section 601.15(9)(b), Florida Statutes, gives it the authority to assess and collect the back taxes on a case-by-case basis. Thus, the Proposed Rules are not necessary for the Department to move ahead with the assessment and collection of the back taxes, but are being promulgated in order that previously favored persons may have notice as to the assessment and collection procedures that the Department intends to follow.
In short, the Department contends that its collection of the back taxes may proceed with or without the Proposed Rules. It contends that individual Petitioners will have a full opportunity to challenge the validity of the assessments via the judicial proceedings contemplated by Section 601.15(9)(b),
Florida Statutes. The Department also contends that this challenge to the Proposed Rules is in reality an improper effort to contest the validity of the assessments in the administrative rather than the judicial forum.
It is unnecessary to address the question of Petitioners' motives in challenging the Proposed Rules. Section 601.15(9)(b), Florida Statutes, specifically authorizes the Department to collect the taxes levied and assessed pursuant to Chapter 601, Florida Statutes. The Proposed Rules set forth a general framework for the collection of the equalization tax from those entities that benefited from the unconstitutional exemption. Again, accepting the correctness of Judge Maloney's ruling on the constitutionality of Section 601.155(5), Florida Statutes, and his order for retroactive relief, it is concluded that the Proposed Rules implement the Department's specific statutory authority to collect the taxes under Chapter 601, Florida Statutes.
This conclusion does not end the inquiry. It resolves the question of the Department's statutory authority to promulgate rules, but it does not resolve questions raised by Petitioners as to whether these particular Proposed Rules meet the requirements of Section 120.52(8), Florida Statutes.
Petitioners claim that Proposed Rule 20-15.003(1) is vague and fails to establish adequate standards for agency
decisions as regards the calculation of tax liability. The Proposed Rule states that the Department will calculate liability "based upon inspection records maintained by the Florida Department of Agriculture and Consumer Services and the United States Department of Agriculture." Petitioners argue that "inspection records" is a vague term. They point out that numerous provisions of Chapter 601 pertain to inspection, but that none of these provisions require inspection upon the occurrence of the taxable events covered by Section 601.155(1), Florida Statutes, i.e., the processing, reprocessing, blending, mixing, packaging, repackaging, or storage of processed orange or grapefruit products. See Section 601.29, Florida Statutes (general inspection powers of the Department of Agriculture and Consumer Services); Section 601.47, Florida Statutes (inspection of fruit for maturity prior to processing); Section 601.49, Florida Statutes (requiring inspection prior to sale, transport or marketing of citrus products); Section 601.51, Florida Statutes (requiring a grade certificate before shipping of juice). The Proposed Rule does not specify which of the multifarious "inspection records" maintained by the Department of Agriculture and Consumer Services will form the basis of the tax calculation and is therefore vague.
Petitioners contend that because none of the statutory inspection powers of the Department of Agriculture and Consumer
Services is related to the taxable events, there is no way that inspection records can be employed accurately to calculate tax liability. Petitioners also contend that multiple inspections occur during the manufacturing process, and that the Proposed Rule's lack of specificity could therefore lead to multiple taxation under the Proposed Rule. Because their activities were not considered taxable until Judge Maloney's ruling, Petitioners did not keep records of their use of non-Florida United States juice and would therefore be in no position to prove that the Department's calculation of tax liability was inaccurate.
In response, the Department argued that inspection records provide the only rational means for calculating tax liability under these circumstances, precisely because Petitioners were not required to keep the records specified in Section 601.155(6), Florida Statutes, i.e., "a complete and accurate record of the receipt, storage, handling, exercise of any taxable privilege under this section, and shipment of all products subject to the tax imposed by this section."
As to Petitioners' objection that the Proposed Rules could lead to an imprecise calculation of their tax liability, it must be noted that Section 601.155(3), Florida Statutes, sets forth a statutory method for calculating the equalization tax that does not require mathematical precision, but makes provision for the assessment to be based on an estimate:
For the purposes of this section, the number of boxes of oranges or grapefruit utilized in the initial production of processed citrus products subject to the taxable privilege shall be:
The actual number of boxes so utilized, if known and verified in accordance with Department of Citrus rules; or
An equivalent number established by Department of Citrus rule which, on the basis of existing data, reasonably equates to the quantity of citrus contained in the product, when the actual number of boxes so utilized is not known or properly verified. (Emphasis added.)
The current Department rule establishing the "equivalent number" that "reasonably equates to the quantity of citrus contained in the product" is Rule 20-9.002, Florida Administrative Code, which provides, in relevant part:
Filing excise tax returns: All excise tax returns required by law to be filed by handlers of citrus fruit sold or delivered for processing in the State shall be filed on forms furnished by the Department of Citrus (incorporated by reference in Rule 20-102.005, F.A.C.), and shall be filed with the Department of Citrus each week stating the number of standard packed boxes of 1 3/5 bushels, or equivalent thereof in other containers or in bulk, received during the preceding week. Excise taxes shall be due and payable at the time of delivery of such fruit to the handler.
All persons or entities required to file excise tax returns pursuant to Section 601.155, Florida Statutes, shall file, each week, an excise tax return on forms furnished by the Department of Citrus
(incorporated by reference in Rule 20- 100.004, F.A.C.).
All persons liable for the excise tax imposed by this section shall file with the Department of Citrus equalizing excise tax returns, certified as true and correct. The return, as furnished by the Department of Citrus, shall report information as to the number of units of processed orange or grapefruit products subject to this section upon which any taxable privilege was exercised during the period of time covered by the return, in addition to the status of inventoried product. Each handler shall maintain records and documentation supporting declarations made on the excise tax return filed with the Department of Citrus. Unless the actual number of boxes is known to the processor and can be substantiated by appropriate records in his possession, the following table shall be used in determining the equivalent number of boxes:
Conversion Unit Number of Equivalent Product Oranges Grapefruit 1 3/5 Bushel Boxes
__________
Concentrate 6.26 solids 4.56 solids 1
Single Strength 6.15 gallons 5.18 gallons 1
Sections, canned 4.93 gallons 4.27 gallons 1
* * *
(Emphasis added.)
It is apparent that Proposed Rule 20-15.003 would place Petitioners in no worse position than persons who have been remitting the equalization tax since its inception, insofar as the precision of the assessment. The Department's existing rule not only provides that the assessment may be based on an estimate; the underscored language indicates a presumption that
most persons liable for the tax will pay it according to the estimated value, unless they can substantiate the actual number of boxes received during the week. Thus, the fact that the Proposed Rule provides for a calculation of tax liability by way of estimating the amount of juice used during the tax period is not a ground for objection. The fact that the Proposed Rule provides a different method of estimating the tax liability is a reasonable concession to the exigency of compliance with Judge Maloney's order.
Finally, Section 601.155(3)(b), Florida Statutes, does not merely provide authority for the Department to base its assessment on a reasonable estimate of the quantity of citrus product used in the exercise of the taxable privilege; it also limits the Department's power to engage in the kind of arbitrary behavior implied by Petitioners' objections regarding the use of inspection records. If a calculation of tax liability performed pursuant to the Proposed Rule does not result in an "equivalent number . . . which, on the basis of existing data, reasonably equates to the quantity of citrus contained in the product," then the Department's application of the rule would exceed its delegated statutory authority and be subject to amendment or reversal. However, the Proposed Rule on its face does not exceed the Department's authority to promulgate rules for the
calculation of the equalization tax, where the statute itself makes provision for calculations to be based on estimates.
In conclusion, Petitioners established that the Emergency Rules constituted an invalid exercise of delegated legislative authority. As to the Proposed Rules, Petitioners came forward with evidence, but the Department satisfied the burden of proving by a preponderance of the evidence that the Proposed Rules are not an invalid exercise of delegated legislative authority.
ORDER
Based upon the foregoing Findings of Fact and Conclusions of Law, it is ORDERED that Emergency Rules 20ER02-01, 20ER02-02, and 20ER02-03 constitute an invalid exercise of delegated legislative authority, and that Proposed Rules 20-15.001, 20- 15.002, and 20-15.003, Florida Administrative Code, do not constitute an invalid exercise of delegated legislative authority.
DONE AND ORDERED this 24th day of January, 2003, in Tallahassee, Leon County, Florida.
LAWRENCE P. STEVENSON
Administrative Law Judge
Division of Administrative Hearings The DeSoto Building
1230 Apalachee Parkway
Tallahassee, Florida 32399-3060
(850) 488-9675 SUNCOM 278-9675
Fax Filing (850) 921-6847 www.doah.state.fl.us
Filed with the Clerk of the Division of Administrative Hearings this 24th day of January, 2003.
ENDNOTES
1/ It is noted that the Department defended the exemption for non-Florida, United States juice in the proceeding before Judge Maloney, making it unlikely that the Department's budget accounted for collection of the moneys sought by the Emergency Rules. Unlike the emergency order in Calder, which sought to recoup tax revenues that the state had long anticipated collecting, the Emergency Rules here seek immediate collection of revenues that appear to be, for budgetary purposes, an unanticipated windfall.
2/ A similar statement of legislative intent is contained in Section 212.13(1), Florida Statutes, dealing with the communications services tax:
If the operation or imposition of the taxes imposed or administered under this chapter is declared invalid, ineffective, inapplicable, unconstitutional, or void for any reason, Chapters 166, 203, 212, and 337, as such chapters existed before January 1, 2000, shall fully apply to the sale, use, or consumption of communications services. If any exemption from the tax is declared invalid, ineffective, inapplicable,
unconstitutional, or void for any reason, such declaration shall not affect the taxes imposed or administered under this chapter, but such sale, use, or consumption shall be subject to the taxes imposed under this chapter to the same extent as if such exemption never existed. (Emphasis added.)
COPIES FURNISHED:
Kristen C. Gunter, Esquire Macfarlane, Ferguson & McMullen 1501 South Florida Avenue Lakeland, Florida 33803
Kenneth O. Keck, Esquire Florida Department of Citrus Post Office Box 148 Lakeland, Florida 33802-0148
Eric J. Taylor, Esquire Attorney General's Office The Capitol, Plaza Level 01 Tax Section
Tallahassee, Florida 32399-1050
Mia McKown, General Counsel Department of Citrus
Post Office Box 148 Lakeland, Florida 32399-2100
Carroll Webb, Executive Director
Joint Administrative Procedures Committee
120 Holland Building Tallahassee, Florida 32399-1300
Liz Cloud, Chief
Bureau of Administrative Code The Elliott Building, Room 201 Tallahassee, Florida 32399-0250
NOTICE OF RIGHT TO JUDICIAL REVIEW
A party who is adversely affected by this Final Order is entitled to judicial review pursuant to Section 120.68, Florida Statutes. Review proceedings are governed by the Florida Rules of Appellate Procedure. Such proceedings are commenced by filing the original notice of appeal with the Clerk of the Division of Administrative Hearings and a copy, accompanied by filing fees prescribed by law, with the District Court of Appeal, First District, or with the District Court of Appeal in the Appellate District where the party resides. The notice of appeal must be filed within 30 days of rendition of the order to be reviewed.
| Issue Date | Document | Summary |
|---|---|---|
| Jan. 24, 2003 | DOAH Final Order | Agency failed to demonstrate emergency requisite to adoption of emergency rules, but did establish that proposed permanent rules regarding collection of equalization tax were within delegated statutory authority. |
PEACE RIVER CITRUS PRODUCTS, INC. vs DEPARTMENT OF CITRUS, 02-004607RP (2002)
PUTNAL GROVES vs THE CITRUS STORE AND FIDELITY & DEPOSIT COMPANY OF MARYLAND, 02-004607RP (2002)
POWERS CITRUS vs EAGLES` NEST GROVE, INC., AND CITRUS BANK, 02-004607RP (2002)
GBS GROVES, INC., AND CITRUS GROWERS ASSOCIATES, INC. vs DEPARTMENT OF CITRUS, 02-004607RP (2002)
