vs.
2 MUCH SQUID, INC., Respondent.
) Case No. 11-2228
This matter came before Administrative Law Judge W. David Watkins for final hearing by duly noticed video teleconference on October 25, 2011, at sites in Tallahassee and Gainesville, Florida. The undersigned and the Petitioner’s attorney appeared at the Tallahassee site, while the sole witness appeared in Gainesville, Florida, to testify on behalf of the Petitioner.
For Petitioner: Jeffrey M. Dikman, Esquire
Office of the Attorney General The Capitol, Plaza Level 01 Tallahassee, Florida 32399
The issues in this case are whether Respondent failed to remit taxes, interest, penalties and fees pursuant to a Compliance Agreement between Respondent and Petitioner; and if
so, whether Petitioner should revoke Respondent’s sales tax registration certificate in consequence thereof.
On November 24, 2010, Petitioner, Department of Revenue, issued an Administrative Complaint against Respondent, 2 Much Squid, Inc. (“Squid”), thereby notifying Squid that its registration certificate, which authorizes Squid to engage in the business of selling tangible personal property at retail as a “dealer” responsible for collecting and remitting sales taxes to the state, would soon be revoked unless Squid requested a hearing. As grounds for revocation, the Department alleged that Squid had failed to perform satisfactorily under a Compliance Agreement, pursuant to which the Department earlier had agreed not to revoke Squid’s certificate for nonpayment of taxes if Squid paid the overdue taxes, which it admittedly owed, and satisfied other specified conditions.
Squid timely exercised its right to be heard in a formal administrative proceeding. On May 2, 2011, the Department referred the matter to the Division of Administrative Hearings, where the case was assigned to the undersigned.
The final hearing took place as scheduled on October 25, 2011. The hearing commenced at 9:30 a.m. as scheduled, and concluded shortly after 10:00 a.m. Squid failed to appear.
Petitioner’s counsel represented at the beginning of the hearing that he had received a call from Squid’s representative the day before the hearing informing him that Squid’s representative would not be appearing, but would be delivering a partial payment to the Department. Petitioner’s counsel further represented that this conversation included Squid’s representation that she was surrendering her certificate of registration, as she would, in the future, be exclusively engaged in design and maintenance of aquariums, rather than in selling aquariums and other items of tangible personal property at retail.
The Department presented the testimony of Diane Seyez, whom the Department employed at the time of the hearing as a Revenue Specialist III. In addition, Petitioner’s Exhibits A-E, I-K and M-P were received into evidence, and Petitioner’s Exhibits F, G, H and Q were officially recognized.
The final hearing transcript was filed with the Division on November 14, 2011. Thereafter, the Department timely submitted a Proposed Recommended Order, in accordance with the schedule established at the conclusion of the hearing. Squid did not file a proposed recommended order.
Unless otherwise indicated, citations are to the 2010 version of the Florida Statutes.
Petitioner, Department of Revenue (Department) is the agency of state government authorized to administer the sales and use tax laws of the State of Florida.
Squid is a Florida corporation whose principal place of business is located in Alachua County, Florida. At all pertinent times, Squid sold tangible personal property at retail and consequently was required to collect from its customers, and remit to the Department, sales tax on every transaction which is taxable under chapter 212, Florida Statutes. In connection with this responsibility, Squid is an authorized “dealer,” holding sales tax Certificate of Registration No. 11-801-3974145-0 (Certificate), which the Department issued in February 2008. Squid has no other outstanding certificate of registration with the Department.
By November 2009, Squid had a history of repeatedly writing checks to the Department that were dishonored due to insufficient funds. Squid also had a history of failing to consistently remit sales and use tax to the Department. As a result of Squid’s delinquencies, the Department began to issue warrants on the official records.
On May 6, 2010, the Department issued a notice to Squid, which initiated a proceeding to revoke Squid’s Certificate for failure to remit taxes. Squid was invited to
appear at an informal conference with the Department on June 22, 2010. At the informal conference, Squid would have the opportunity to avoid revocation either by presenting evidence refuting the charges regarding unpaid taxes, or by entering into a compliance agreement pursuant to which the outstanding liability would be satisfied.
The informal conference took place as scheduled. Janet Hobson, Squid’s president, appeared on behalf of the corporation. At the conference, the Department and Squid entered into a written compliance agreement (Agreement). Under the Agreement, Squid admitted that it owed the State of Florida a grand total of $8,625.51, which is comprised of $6,842.64 tax,
$265.23 interest, $625.22 penalty and $892.42 fees.
Squid agreed to pay its debt in installments, in exchange for the Department’s promise to forbear from revoking Squid’s Certificate. The Agreement called for Squid to make a down payment of $800 on or before June 22, 2010, followed by eleven installment payments ranging in amount from $400 to $600, and culminating in a twelfth payment for the balance, in a balloon. The Agreement further provided that interest would continue to accrue on the outstanding tax balance at the rate of 7% per year, and that pursuant to section 213.75, payments would be applied to the outstanding balance in the following order: fees; interest; penalty; and tax.
Squid successfully made the $800 down payment as required by the Agreement. At the same time, Squid notified the Department that it would soon be relocating to a new address, but within the same county, to wit: 3709 SW 42nd Avenue,
Suite 10, Gainesville, Florida 32608. The Department made note of this address change, and consistent with its normal practices and procedures, did not require Squid to obtain a separate registration number for the new location. Although the Department does require dealers who open a second retail location or who move across county lines to apply for a new registration number, this has not been required for relocations within a single county. Those types of relocations are handled by updating the address of record pertaining to the existing certificate of registration.
The Agreement did not specifically provide that time was of the essence concerning Squid’s duty to make the installment payments, nor state any grace period applicable to the payment deadlines. However, the Agreement did state:
E. If the certificate holder fails to comply with any obligation under this agreement, the Department has the right to pursue revocation of the certificate holder’s certificate of registration by filing an Administrative Complaint pursuant to section 120.60(5), Florida Statutes. If a revocation proceeding is pursued, the certificate holder stipulates to the admission of this agreement in any
jurisdiction as proof of all matters recited herein.
G. If the certificate holder fails to perform any of the obligations under this agreement, including the timely filing of returns and payment of all taxes, penalties and interest as they become due, all amounts of the tax, interest and penalty settled under this agreement and any unpaid balance shall be immediately due, payable and collectible by all legal means.
In addition to and including the promise to pay the outstanding indebtedness, the Agreement also required Squid:
To accurately complete all past due sales tax returns and file them no later than 08/01/2010.
To remit all past due payments to the Department as stated in the attached payment agreement.
To accurately complete and timely file all required sales tax returns for the next 12 months, beginning with the return due on 6/1/2010 and ending on 05/31/2011.
To timely remit all sales tax collections due for the next 12 months, associated with the periods stated in paragraph “C” above.
To comply with all provisions of Chapter 212, Florida Statutes.
On June 17, 2011, the Department served its "First Interlocking Discovery Request" on Respondent. The discovery request included a series of requests for admissions (RFA), interrogatories, and document requests. On July 14, 2011, Janet Hobson, as authorized representative of Squid, served responses to the Department' discovery request. At final hearing, those
responses were received in evidence at the request of the Department.
In response to requests for admissions, Squid admitted the following:
-Squid failed to make the complete schedule of payments outlined in the payment schedule that appears in the Payment Agreement Schedule of the Compliance Agreement. (RFA No. 14).
-Squid failed to timely remit payment for the sales tax due for the months July through November of 2009. (RFA No. 4).
-Squid filed less than all past due sales tax returns by August 1, 2010. (RFA No. 6).
-Squid remitted less than all past due payments. (RFA No. 7).
-Squid timely filed less than all required sales tax returns for the time period of June 1, 2010, through May 31, 2011. (RFA No. 8).
-Squid remitted less than all required sales tax collections for the time period of June 1, 2010, through May 31, 2011. (RFA No. 9).
-Squid failed to timely remit payment for the sales tax due for the months of February through April and August through September of 2010. (RFA No. 11).
-Squid has been delinquent with past tax remittances and interest payable to the Department. (RFA No. 12).
-Squid failed to abide by the terms of the Agreement, within the meaning of the acceleration clause contained in the Agreement, at paragraph “G.” (RFA No. 13).
On August 2, 2011, the Department served a Notice of Taking Corporate Deposition Duces Tecum of Squid, pursuant to Florida Rule of Civil Procedure 1.310(b)(6). That deposition
took place on September 13, 2011, in Gainesville, Florida. Ms. Hobson appeared at the deposition as the authorized corporate representative of Squid. During the course of the deposition, Squid admitted that it used some of the sales tax moneys that it had collected in order to pay its own business operating expenses. Squid also acknowledged that it owed approximately $9,500 in overdue sales tax as of that date.
The day before the final hearing, at 4:45 p.m., Petitioner delivered additional moneys to the Department, together with additional tax returns, which are used to report additional tax due. The Department’s witness testified that Squid still owed a balance but she had not yet had an opportunity to update the revolving balance. Ms. Sevez estimated that several thousand dollars remained due, but she was uncertain as to the amount.
The determination of the precise amount due would be a material fact in a tax assessment challenge under sections 72.011, and 120.80, Florida Statutes, but this is a license revocation proceeding, not a tax assessment challenge. The totality of the evidence clearly and convincingly shows that Squid defaulted under the Agreement (and that Squid remains in arrears in an undetermined amount, even to this date). It is not necessary for the undersigned to quantify the precise amount due on any given date1/, or even to determine whether an amount
remains due, but only to determine whether Squid, at any pertinent time, fell into default under the compliance agreement.
The Department has met its burden to clearly and convincingly prove that Squid materially failed to comply with the terms of the Agreement.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has personal and subject matter jurisdiction in this proceeding pursuant to section 120.569 and subsection 120.57(1), Florida Statutes.
Section 212.05 provides in pertinent part:
It is hereby declared to be the legislative intent that every person is exercising a taxable privilege who engages in the business of selling tangible personal property at retail in this state, including the business of making mail order sales, or who rents or furnishes any of the things or services taxable under this chapter, or who stores for use or consumption in this state any item or article of tangible personal property as defined herein and who leases or rents such property within the state.
For the exercise of such privilege, a tax is levied on each taxable transaction or incident, which tax is due and payable as follows:
1. a. At the rate of 6 percent of the sales price of each item or article of tangible personal property when sold at retail in this state, computed on each taxable sale for the purpose of remitting the amount of tax due the state, and including each and every retail sale.
Section 212.06 states in pertinent part:
(2)(c) The term "dealer" is further defined to mean every person, as used in this chapter, who sells at retail or who offers for sale at retail, or who has in his or her possession for sale at retail; or for use, consumption, or distribution; or for storage to be used or consumed in this state, tangible personal property as defined herein, including a retailer who transacts a mail order sale.
* * *
(3)(a) Except as provided in paragraph (b), every dealer making sales, whether within or outside the state, of tangible personal property for distribution, storage, or use or other consumption, in this state, shall, at the time of making sales, collect the tax imposed by this chapter from the purchaser.
Section 212.15(1), provides as follows:
The taxes imposed by this chapter shall, except as provided in § 212.06(5)(a)2.e., become state funds at the moment of collection and shall for each month be due to the department on the first day of the succeeding month and be delinquent on the 21st day of such month. All returns postmarked after the 20th day of such month are delinquent.
(emphasis added.)
In accordance with section 212.18(3)(a), every "person desiring to engage in or conduct business in this state as a dealer . . . must file with the department an application for a certificate of registration for each place of business, showing the names of the persons who have interests in such business and their residences, the address of the business, and such other
data as the department may reasonably require." Upon receiving such an application, the Department "will grant to the applicant a separate certificate of registration for each place of business, which certificate may be canceled by the department or its designated assistants for any failure by the certificate holder to comply with any of the provisions of . . . chapter [212]." § 212.18(3)(b), Fla. Stat. No "person shall engage in business as a dealer . . . without first having obtained such a certificate or after such certificate has been canceled." Id.
Section 212.18(3)(d) provides as follows:
The department may revoke any dealer's certificate of registration when the dealer fails to comply with this chapter. Prior to revocation of a dealer's certificate of registration, the department must schedule an informal conference at which the dealer may present evidence regarding the department's intended revocation or enter into a compliance agreement with the department. The department must notify the dealer of its intended action and the time, place, and date of the scheduled informal conference by written notification sent by United States mail to the dealer's last known address of record furnished by the dealer on a form prescribed by the department. The dealer is required to attend the informal conference and present evidence refuting the department's intended revocation or enter into a compliance agreement with the department which resolves the dealer's failure to comply with this chapter. The department shall issue an administrative complaint under s. 120.60 if the dealer fails to attend the department's informal conference, fails to enter into a compliance agreement with the department
resolving the dealer's noncompliance with this chapter, or fails to comply with the executed compliance agreement.
(emphasis added.)
A proceeding to revoke a license is penal in nature.
State ex rel. Vining v. Florida Real Estate Commission, 281 So. 2d 487, 491 (Fla. 1973). Accordingly, the Department must prove the charges against Squid by clear and convincing evidence.
Dep’t of Banking & Fin., Div. of Sec. & Investor Protection v.
Osborne Stern & Co., 670 So. 2d 932, 933-34 (Fla. 1996) (citing
Ferris v. Turlington, 510 So. 2d 292, 294-95 (Fla. 1987)); Nair v. Dep’t of Bus. & Prof’l Reg., Bd. of Medicine, 654 So. 2d 205,
207 (Fla. 1st DCA 1995).
Regarding the standard of proof, in Slomowitz v.
Walker, 429 So. 2d 797, 800 (Fla. 4th DCA 1983), the court developed a "workable definition of clear and convincing evidence" and found that of necessity such a definition would need to contain "both qualitative and quantitative standards." The court held that:
clear and convincing evidence requires that the evidence must be found to be credible; the facts to which the witnesses testify must be distinctly remembered; the testimony must be precise and explicit and the witnesses must be lacking confusion as to the facts in issue. The evidence must be of such weight that it produces in the mind of the trier of fact a firm belief or conviction, without hesitancy, as to the truth of the allegations sought to be established.
Id. The Florida Supreme Court later adopted the Slomowitz court's description of clear and convincing evidence. See In re Davey, 645 So. 2d 398, 404 (Fla. 1994). The First District Court of Appeal also has followed the Slomowitz test, adding the interpretive comment that "[a]lthough this standard of proof may be met where the evidence is in conflict, . . . it seems to preclude evidence that is ambiguous." Westinghouse Elec. Corp.
v. Shuler Bros., Inc., 590 So. 2d 986, 988 (Fla. 1st DCA 1991), rev. denied, 599 So. 2d 1279 (Fla. 1992) (citation omitted).
Petitioner's case against Squid relies largely upon Squid's responses to the Department's request for admissions. As such, a brief discussion of the utility of those admissions in this proceeding is in order.
Section 120.569(2)(f), Florida Statutes, provides in pertinent part:
(f) The presiding officer has the power to swear witnesses and take their testimony under oath, to issue subpoenas, and to effect discovery on the written request of any party by any means available to the courts and in the manner provided in the Florida Rules of Civil Procedure, including the imposition of sanctions, except contempt.
Consistent with the above statutory provision, Florida Administrative Code Rule 28-106.206 provides:
28-106.206 Discovery
After commencement of a proceeding, parties may obtain discovery through the means and in the manner provided in Rules 1.280 through 1.390, Florida Rules of Civil Procedure. The presiding officer may issue appropriate orders to effectuate the purposes of discovery and to prevent delay, including the imposition of sanctions in accordance with the Florida Rules of Civil Procedure, except contempt.
The Department's requests for admissions were propounded to the Respondent, 2 Much Squid, Inc., pursuant to rule 1.370, Florida Rules of Civil Procedure. That rule provides in relevant part:
(b) Effect of Admission. Any matter admitted under this rule is conclusively established unless the court on motion permits withdrawal or amendment of the admission. Subject to rule 1.200 governing amendment of a pretrial order, the court may permit withdrawal or amendment when the presentation of the merits of the action will be subserved by it and the party who obtained the admission fails to satisfy the court that withdrawal or amendment will prejudice that party in maintaining an action or defense on the merits.
As of the date of hearing, Squid had not filed any motion seeking to withdraw or amend the admissions set forth in the propounded RFA’s. Accordingly, pursuant to rule 1.370(b), those matters admitted in its written responses are conclusively established.2/
As recited in Finding of Fact 11 above, Squid’s responses to the Department’s requests for admissions show
clearly and convincingly that Squid failed materially to comply with the Agreement when Squid:
Failed to make the complete schedule of payments outlined in the payment schedule that appears in the Payment Agreement Schedule of the Compliance Agreement;
Failed to timely remit payment for the sales tax due for the months July through November of 2009;
Filed less than all past due sales tax returns by August 1, 2010, as required per the Agreement’s paragraph “A”;
Remitted less than all past due payments, as required per the Agreement’s paragraph “B”;
Timely filed less than all required sales tax returns for the time period of June 1, 2010, through May 31, 2011, in violation of the Compliance Agreement’s paragraph “C,”;
Remitted less than all required sales tax collections for the time period of June 1, 2010, through May 31, 2011, in
violation of the Agreement’s paragraph “D”;
Failed to timely remit payment for the sales tax due for the months of February through April, and August through September 2010;
Failed to abide by the terms of the Agreement, within the meaning of the acceleration clause contained in the Agreement, at paragraph “G”.
In Department of Revenue v. Servers, Inc., Case No.
09-1274, 2009 WL 2387418 (Fla. DOAH, July 31, 2009;), it was
determined that late payment, in and of itself, constituted a
material breach under a similar compliance agreement, even where no balance remained due. In the matter sub judice, there is no disagreement that an overdue balance remains, although the precise amount has not been established.
Upon determining that Squid had committed at least one (and indeed more than one) material breach of the Agreement, the Department had the right under the Agreement, and the duty under section 212.18(3)(d), to initiate a proceeding to revoke Squid’s Certificate (which it did). At the final hearing, clear and convincing evidence, as described above, was presented regarding Squid’s material noncompliance with the Agreement, to justify revocation of the Certificate.
Based on the foregoing Findings of Facts and Conclusions of Law, it is RECOMMENDED that the Department enter a final order revoking sales tax certificate of registration numbered 11-801- 3974145-0, which the Department issued in February 2008.
DONE AND ENTERED this 5th day of January, 2012, in Tallahassee, Leon County, Florida.
W. DAVID WATKINS Administrative Law Judge
Filed with the Clerk of the Division of Administrative Hearings this 5th day of January, 2012.
1/ The Department’s witness testified that the Department performed an updated estimate and that $8,968.18 was estimated to be due as of July 26, 2011. However, the balance owing was subsequently decreased, due to a late delivered cash payment the day before the final hearing. The testimony of the Department's witness was credible.
1/ The undersigned is not unmindful of section 120.57(1)(c), Florida Statutes, which provides:
(c) Hearsay evidence may be used for the purpose of supplementing or explaining other evidence, but it shall not be sufficient in itself to support a finding unless it would be admissible over objection in civil actions.
Although out of court statements offered to prove the truth of the matter asserted are ordinarily inadmissible, admissions of a party litigant made through an authorized representative are an exception to the hearsay exclusionary rule, and as such, could form the basis of a finding of fact notwithstanding Rule 1.370, Florida Rules of Civil Procedure. § 90.803(18), Fla.
Stat.
Janet S. Hobson
2 Much Squid, Inc.
Jeffrey M. Dikman, Esquire Office of the Attorney General The Capitol, Plaza Level 01 Tallahassee, Florida 32399
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.
