The Issue Whether the Department of Revenue's final assessment of sales and use tax plus interest against Petitioner Karsten Enterprises FL, Inc., is correct.
Findings Of Fact Petitioner is a corporation headquartered in Dothan, Alabama, doing business in Florida. The Department is an agency of the State of Florida that has been delegated the responsibility to collect sales and use tax imposed by Chapter 212, Florida Statutes. During the audit period in controversy, from October 1, 2004 through September 30, 2007, Petitioner was a dealer in manufactured or modular homes and did business at one or more Florida locations. During the pertinent period, Petitioner entered into various contracts to provide manufactured or modular homes to its customers for delivery at locations in Florida. At a Karsten Sales Center, models of residential factory-built buildings are displayed. These residential factory-built buildings are produced by manufacturers that Karsten uses for that purpose. In most of the transactions during the audit period, Petitioner's customers would contract with Petitioner for the sale and installation of a factory built building on property owned by the customer. In the remainder of the contracts during the audit period, Petitioner would either purchase the property or enter into a contract for the sale of the property to the customer, and Petitioner would install a home that Petitioner had purchased from a manufacturer and then sell the home and land package to the customer. The contract prices were a lump sum, which included not only the manufactured or modular home, but also installation of the home at a Florida location. Petitioner’s contracts with its customers did not itemize individual components of the modular or manufactured homes, such as individual nuts, bolts, and shingles, but instead agreed to deliver the entire modular or manufactured home on an installed basis. The contracts between Petitioner and its customers specify the type of home that the customer wanted to have erected or installed on the property. Upon selection of a floor plan, options, and other customization, the customer would agree to order a specific home from a manufacturer. Petitioner purchased the pre-fabricated manufactured or modular homes from various manufacturers. The manufacturer would produce the home upon receiving an order from Petitioner. The manufacturer shipped the completed home to Petitioner, delivering the home to the property where the home would ultimately be erected and installed. Once shipped to the site, the factory-built buildings were placed on a foundation constructed for that purpose. Petitioner would either directly, through the manufacturer, or through subcontractors, construct the foundations, place the homes on the foundations, and connect the homes to required utilities. All of these activities were done as part of Petitioner's contracts with its customers for real property improvement. In many instances, the manufacturer both delivered the homes to the sites and provided post-delivery services to the homes. Additional services provided by the manufacturer after it installed the homes on the foundations included trim work, repair work, and fit and finish work. Petitioner paid the manufactures directly for these post-delivery services. During the audit period at issue, Petitioner sold, erected and installed approximately 30 residential modular or factory-built buildings in the state of Florida. If the home was built by a Florida factory, the factory would include sales tax in its invoice to Petitioner, based upon the cost of materials, but not including labor, that the manufacturer used in the construction of the home prior to its delivery to the site. If an out-of-state manufacturer built the home, the manufacturer would not include a sales tax amount in its invoices to Petitioner. Rather, the out-of-state manufacturers indicated that the cost of materials for construction of the homes at the factory was approximately 60% of the purchase price Petitioner paid for the homes. When Petitioner closed its contracts with its customers, if the manufacturer was an out-of-state manufacturer that had not previously included a sales or use tax in its invoice to Petitioner, Petitioner would remit a use tax directly to the Department, based upon 60% of Petitioner’s purchase price of the manufactured or modular homes. In either case, whether paying sales tax directly to a Florida manufacturer based only on the Florida manufacturer's cost of materials, or remitting use tax on 60% of its purchase price of manufactured or modular homes from out-of-state manufacturers, rather than paying tax on 100% of the price it paid for the homes, Petitioner did not pay sales or use tax on the manufacturer’s labor or fabrication costs. In remitting use tax, or paying sales tax to the Florida manufacturers, Petitioner was seeking to pay tax only on the manufacturer’s cost of materials used in the manufacturing process. There is no dispute concerning the Department’s math calculations. Rather, Petitioner disputes that the labor costs were taxable. Petitioner has no proof that the Department has ever received payment of tax from any person on the manufacturer’s labor costs at issue in this proceeding. Drenea York, who testified for the Department, is an accountant and auditor with twenty years of experience, all in sales and use taxation. Tammy Miller, who testified for the Department, is an attorney who has worked with the Department for eight years within the Department's Technical Assistance and Dispute Resolution section (Department's Dispute Resolution Section). The Department's Dispute Resolution Section employs “Tax Conferees,” such as Ms. Miller, who hear informal taxpayer protests, issue the Department's notices of decisions regarding final assessments, and provide guidance to the public upon request. Her practice has focused principally upon sales and use taxation, and she has handled several cases involving taxation of modular home contractors. Tammy Miller signed the notice of decision regarding the Final Assessment at issue. She also wrote the article for the Florida Institute of Certified Public Accountants, which Petitioner introduced into evidence as P1. She testified as the Department’s corporate representative. Douglas Uhler testified as a former employee of Petitioner and also as an expert witness for the Petitioner. He is a CPA with some tax experience, who was not shown to be a specialist in taxation or in Florida sales and use taxation. He practices in Birmingham, Alabama, where he is licensed. He has knowledge and expertise in valuation and other areas, but was not qualified as an expert to testify as to the tax determinations at issue in this controversy. Neither Petitioner nor Mr. Uhler applied for a TAA. Mr. Uhler was permitted to testify, over the Department’s hearsay and relevancy objections, that he relied on an oral statement from an alleged Department employee, concerning how Florida sales and use tax law is applied in the manufactured and modular home industry. During his testimony, however, Mr. Uhler did not know the name of the person to whom he allegedly spoke and he was not sure that the person he spoke to was an employee of the Department of Revenue. Therefore, no weight was given to his testimony regarding his recollection of a conversation with an alleged Department employee on the issue of how Florida sales and use tax law is applied in the manufactured and modular home industry. During the audit period at issue, the Department made four revisions to its original audit report in response to additional information provided by the Petitioner. During this period, the Petitioner paid the uncontested portion of the Department's assessment, leaving only one issue in dispute: whether additional tax and interest is due on Petitioner’s purchase of the modular homes. The Department’s audit and resulting tax assessment considered Petitioner, and not the manufacturer, to be the “real property contractor” responsible for the payment of the tax, within the meaning of the aforementioned rule provisions. The Department’s determination that Petitioner was the responsible “real property contractor” is consistent with the fact that the real property improvement contracts at issue were entered directly between Petitioner and its customers, and not between the manufacturer and Petitioner’s customers. In its contracts with its customers, Petitioner directly arranged installation work, either providing the installation itself or through the manufacturer or a subcontractor on behalf of Petitioner's customers. The issue of whether Petitioner or the manufacturer performed the installation work, however, was not considered by the Department to be a determinative factor, in and of itself, in making the Final Assessment. According to the Department, it would not consider a manufacturer to be the responsible “real property contractor” unless the contracts for real property improvement were directly between the manufacturer and Petitioner’s customers. The evidence does not support a finding that Petitioner's customers had direct contracts for real property improvements with the manufacturers of the homes. The Department also considered Petitioner to be the “end user” under Chapter 212, Florida Statutes, and Florida Administrative Code Rule 12A-1.051(3) and (4), which, according to the Department, imposes tax on the “end user.” The Department considered Petitioner, as opposed to Petitioner's customers, to be the end user based upon the reasoning that Petitioner was the last party to purchase the modular units as “tangible personal property,” before the modular homes became affixed to real property. Ms. York and Ms. Miller explained that the Department did not consider Petitioner’s customers to be the “end users” because Petitioner's customers did not purchase resold items of “tangible personal property,” itemized in detail under Florida Administrative Code Rule 12A-1.051(3)(d). Rather, they explained that Petitioner’s customers, who purchased under lump- sum contracts, were considered to have purchased an improvement to real property, and improvements to real property fall outside the scope of the Florida sales and use tax chapter. In its audit, the Department examined Petitioner’s contracts with its customers solely to determine that the Petitioner was the end user or the “real property contractor.” The Department’s assessment did not seek to impose tax or interest liability on Petitioner’s transactions with its customers. Instead, the Department taxed Petitioner on Petitioner’s “cost price” of purchasing modular homes, giving Petitioner full credit for any partial tax that Petitioner had paid. As noted above, during the audit period, when it was dealing with a Florida manufacturer, Petitioner generally remitted sales or use tax directly to the manufacturer, at the time of purchase. More often, however, Petitioner paid sales or use tax on a monthly basis, by direct accrual or remittance to the Department on approximately 60% of the amount Petitioner paid for homes manufactured by out-of-state manufacturers. The invoices to Petitioner frequently included other itemized charges, which the Department did not consider part of Petitioner’s “cost price” of the purchased modular units. For example, if an invoice included sales or use tax, the Department excluded charges for tax when calculating Petitioner’s “cost price,” so as to avoid imposing tax on the itemized tax. Likewise, no charges for installation of the modular units onto real property were included in the Department’s calculation of “cost price.” The Department instead determined “cost price” by adding up the “Base Price” for purchasing the modular homes, together with itemized home “Options,” as they appeared on the manufacturer's invoices to Petitioner for the modular homes. Examples of several “Options” would be such things as better carpeting, a sliding glass door, or a plywood floor. The combined total of “Base Price” and “Options” were used by the Department in determining Petitioner’s “cost price” of purchasing the units as items of tangible personal property from the manufacturer’s factory. Petitioner's "cost price" as determined by the Department reflected the seller’s (in this case the manufacturer’s) material and labor costs. The Department's Final Assessment, however, did not include costs related to the installation of the modular homes onto real property, as those were considered by the Department as costs arising subsequent to the sale of the product as tangible personal property. The Final Assessment only sought tax on Petitioner’s purchase cost of the modular homes as tangible personal property leaving the factory. Because Petitioner had already paid tax on approximately 60% of its cost price, the Department’s assessment sought to capture the 40% of sales and use tax that Petitioner never paid. The Department's assessment determined that Petitioner owed tax on its own “cost price” as invoiced by the manufacturer. The Department determined that the Petitioner’s “cost price” was a different “cost price” than the manufacturer’s “cost price.” According to the Department, the manufacturer’s cost price excluded labor on its factory floor but Petitioner’s “cost price” included all materials and labor costs that were necessarily a component of Petitioner's actual purchase price. The Department’s auditor gave Petitioner full credit for all taxes paid, whether Petitioner had paid the tax by direct remittance or at the time that it paid an invoice, with one exception: credit was generally not given for payments made by Petitioner to a company named Cavalier because during the audit period at issue, Petitioner remitted certain amounts of sales tax to a manufacturer named Cavalier, but Cavalier refunded these amounts to Petitioner.3/ The Department’s audit and assessment did not treat Petitioner as a “manufacturer” nor give Petitioner the benefit of the special exemption, under Section 212.06(1)(b), Florida Statutes, which is available to manufacturers of a “factory- built building.” This is because the Department did not consider Petitioner to be a manufacturer. Although Petitioner argued that it qualified for the special exemption under Section 212.06(1)(b), Florida Statutes, under the theory that it was a "manufacturer," Petitioner failed to show that it is a “manufacturer” entitled to such exemption. In accordance with Petitioner's Application for Registration with the Department, Petitioner was registered as a “Manufactured (Mobile) Home Dealer” rather than as a manufacturer. In response to audit interview questions, Petitioner advised the auditor that it was in the business of “Retail Sale” of “Mobile and Modular Homes.” Petitioner made this same representation again in its response to a Pre-Audit Questionnaire and Request for Information. The first time that Petitioner ever asserted that it was a "manufacturer" was after Petitioner received the Department’s Notice of Intent to make Audit Changes, and became aware that, as a “real property contractor,” it would be assessed tax on 100% of its “cost price.” Petitioner then changed its self-description of its business model, asserting that it was a “manufacturer.” When Petitioner protested the Department’s assessment, however, it abandoned, at least at the informal protest stage, the argument that it was a manufacturer. Petitioner instead argued that it should be treated like a real property contractor engaged in the business of stick built homes. According to Tammy Miller, Petitioner's president, Mr. Copeland, told Ms. Miller during the informal protest process, that Petitioner was not a manufacturer. The Final Assessment corroborates Tammy Miller’s recollection because it addressed Petitioner’s various legal arguments but did not address Petitioner’s argument that it is a manufacturer, because that argument apparently was not made during the informal protest. The Amended Petition does not allege that Petitioner was a manufacturer or that it should be treated like one. Petitioner instead asserts that it is a modular home dealer who purchases from “the factory” and that it should be treated like a stick-built contractor. Petitioner stipulated that it is a modular home “dealer” and that it purchased the pre-fabricated manufactured or modular homes from various manufacturers. No evidence was introduced that Petitioner owns or operates factories or an assembly line. Rather, the evidence showed that Petitioner operated out of an office building in Alabama. No evidence was presented that Petitioner has been licensed or certified as a “manufacturer” by the Department of Community Affairs, which is the agency that regulates manufacturers of factory-built buildings. See Fla. Admin. Code R. 9B-1.002(15) and 1.007(1). Petitioner’s representative repeatedly referred to Petitioner, throughout opening statement, argument and testimony, as a dealer purchasing from the factory. The Department’s witnesses testified that the sales and use tax applies to “real property contractors” in a way that taxes all real property contractors (stick-built or modular) on their full “cost price” of purchased materials, regardless of whether the purchased materials are lumber, shingles, nails, finished kitchen cabinetry, or assembled modular home modules. The Department's witnesses explained that the cost price of each item purchased will vary because the item purchased in each instance is different and some items will include greater material and labor costs than others. The Final Assessment reflects the unpaid balance assessed, after all revisions and payments made, and provides a per diem amount so that accrued interest may be readily calculated. The Final Assessment determined that the unpaid balance of tax and interest for the audit period (after crediting Petitioner with all payments made) was as follows: $41,446.31 combined tax and interest through 1/26/09, with $7.57 per day for each day thereafter until the postmark date of payment. The Final Assessment waived all penalties.
Recommendation Based on the foregoing Findings of Facts and Conclusions of Law, it is RECOMMENDED that, consistent with the Final Assessment and this Recommended Order, the Department of Revenue enter a final order finding that Petitioner owes tax and interest due as of January 26, 2009, in the amount of $41,446.39, with interest thereafter accruing at $7.57 per day, without penalties. DONE AND ENTERED this 1st day of October, 2010, in Tallahassee, Leon County, Florida. S JAMES H. PETERSON, III Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 1st day of October, 2010.
The Issue 1. Whether the Emergency Rules on Sales and Use Tax on Services and Other Transactions adopted by the Respondent effective July 1, 1987, were adopted pursuant to Section 33, Chapter 87-6, l987 Laws of Florida, and Section 120.54(9), Florida Statutes (1987)? 2. Whether Rules 12AER87-31(1)(c), (5), (7)(i)(7)(k), (10), (12) and (13), Florida Administrative Code, constitute an invalid exercise of delegated legislative authority?
Findings Of Fact The Respondent is an agency of the State of Florida. It is charged with the responsibility to implement, enforce and collect the taxes levied by the State of Florida, including Chapter 212, Florida Statutes (1987). During the 1987 Legislative Session the Legislature enacted Committee Substitute for Senate Bill 777, which is codified as Chapter 87-6, 1987 Laws of Florida (hereinafter referred to as "Chapter 87-6"). This act, which amended Chapter 212, Florida Statutes, was signed into law by the Governor on April 23, 1987. Section 5 of Chapter 87-6, created Section 212.0594, Florida Statutes. This new Section of Chapter 212 imposed a sales tax on construction services performed on or after July 1, 1987. Section 33 of Chapter 87-6, authorized the Respondent to adopt emergency rules pursuant to Section 120.54(9), Florida Statutes, to implement the new law. In authorizing the adoption of emergency rules, the Legislature determined that the failure to promptly implement the provisions of Chapter 87-6 would present an immediate threat to the welfare of the State because revenues needed for the operation of the State would not be collected. On June 6, 1987, the Legislature enacted Committee Substitute for House Bill 1506, which is codified as Chapter 87-101, 1987 Laws of Florida (hereinafter referred to as "Chapter 87-101"). Chapter 87-101 is commonly known as the Sales Tax Glitch Bill. Chapter 87-101 was passed by the Legislature on June 6, 1987, signed into law by the Governor on June 30, 1987, and was effective beginning July 1, 1987. Section 5 of Chapter 87-101 repealed Section 5 of Chapter 87-6. Section 6 of Chapter 87-101, created a new Section 212.0594, Florida Statutes, taxing construction services, in replace of the Section 212.0594, Florida - Statutes, previously created by Section 5 of Chapter 87-6. Thus the Legislature substantially changed the manner in which sales tax was to be imposed upon construction services. Section 20 of Chapter 87-101 amended Section 33 of Chapter 87-6 but continued the authorization to adopt emergency rules and the justification for doing so. On May 8, 1987, the Respondent published notice in the Florida Administrative Weekly of its intent to hold public meetings and workshops on May 19 and 26, 1987, and June 6, 1987. Proposed rules relating to Chapter 87-6 were to be considered at these meetings and workshops. On May 22, 1987, the Respondent published notice in the Florida Administrative Weekly of its intent to hold public meetings and workshops on May 26, 1987, and June 26, 1987. Proposed rules relating to Chapter 87-6 were to be considered at these meetings and workshops. On May 29, 1987, the Respondent published notice in the Florida Administrative Weekly of its intent to hold a public meeting and workshop on June 6, 1987, to consider proposed rules relating to Chapter 87-6. On June 5, 1987, the Respondent published notice in the Florida Administrative Weekly of its intent to hold a public meeting and workshop on June 12, 1987, to consider proposed rules relating to Chapter 87-6. Ultimately, the Respondent held four workshops concerning the emergency rules: May 19 and 26, 1987, and June 6 and 12, 1987. The workshop conducted on June 12, 1987, was conducted to consider Rules 12AER87-31, Florida Administrative Code. The rules considered at the June 12, 1987, workshop had been redrafted to implement Chapter 87-101. The rules considered at the workshop were available for a short period of time before the workshop and during the workshop. Comments were received by the Department at the June 12, 1987, workshop from the public, including representatives of the construction industry. As a result of these comments, changes in the Emergency Rules were made following the workshop. The Emergency Rules took into account the method of taxing construction services provided for in Chapter 87-101 rather than the method previously provided for in Chapter 87-6. The Respondent's emergency rules, including Rule 12AER87-31, Florida Administrative Code, were certified by the Executive Director of the Respondent and delivered to the Secretary of State for publication on June 18, 1987. The Respondent delivered the full text of the emergency rules, a statement of the specific reasons for finding an immediate danger, a statement of the reasons for concluding that the procedure followed to adopt the rules was fair under the circumstances and a summary of the purpose of the rules for publication in the first available issue of the Florida Administrative Weekly. The emergency rules had to be filed with the Secretary of State no later than June 18, 1987, in order to be published in the Florida Administrative Weekly by July 1, 1987, the effective date of Chapters 87-6 and 87-101 and the emergency rules. The full text of the emergency rules was published in the Florida Administrative Weekly on June 26, 1987. The text of this notice, which was accepted into evidence as Petitioner's exhibit 4, is hereby incorporated into this Final Order. The Emergency Rules had an effective date of July 1, 1987. Initially the Emergency Rules were to expire January 1, 1988, six months after their effective date, as specified in Chapter 87-101. Pursuant to Section 1, Chapter 87-539, 1987 Laws of Florida, the Emergency Rules are effective through June 30, 1988. Representatives of the Respondent and the Petitioner met between the passage of Chapter 87-101 by the Legislature and June 18, 1987, and discussed the act. The Respondent expended a great deal of time and effort in adopting the emergency rules implementing Chapters 87-6 and 87-101, and in providing information to the public. The method of taxation to be implemented was unique and, therefore, the Respondent was unable to look to other jurisdictions for guidance concerning implementation of the tax. The taxation of construction services was one of a multitude of services taxed. Chapter 87-101, required substantial redrafting of the emergency rules, including Rule 12AER87-31, Florida Administrative Code, within a relatively short period of time. The new tax necessitated the registration of 100,000 to 150,000 new sales tax "dealers" by July 1, 1987. Prior to July 1, 1987, the Respondent received thousands of telephone calls and thousands of written requests seeking information concerning the sales tax on services. The Respondent was extensively involved with the Legislature during the period of time when Chapters 87-6 and 87-101 were adopted. Representatives of the Respondent discussed the acts with Legislative members and staff. Dr. James Francis acted as a liaison between the Respondent and the Legislature. Dr. Francis also served on the Revenue Estimating Conference. In his capacity with the Revenue Estimating Conference, Dr. Francis prepared estimates of tax revenues from the services tax. A revenue impact analysis of the services tax was also provided by the Respondent to the Legislature based upon each amendment and proposed amendment to Chapters 87-6 and 87-101. Representatives of the petitioner expressed dissatisfaction with the method of taxation of construction services contained in Chapter 87-6 because of the required itemization of building material costs on each contract. The Respondent prepared a revenue neutral (no loss of tax revenue previously estimated to be generated by Chapter 87-6) method of imposing the services tax on construction services without requiring itemization of building material costs. Pursuant to this method, a set percentage, generally equal to the average percentage of building material costs, is backed out of "contract price" or "cost price." The remainder is treated as the amount of the "contract price" or "cost price" attributable to the construction services. The revenue estimated by the Respondent and provided to the Legislature, based upon the elimination of an average percentage of building material costs, was based upon the inclusion in "contract price" and "cost price" of all expenditures associated with the construction industry, including the total expenditures for building materials supplied by owners to contractors. The Legislature was aware of this fact before it adopted Chapter 87-101. Fiscal notes for Chapter 87-101, which the Respondent had available prior to the adoption of the Emergency Rules, numerically quantified the estimated revenue to be generated by Chapter 87-101. The Respondent also knew what amounts were included in the estimate of revenue contained in the fiscal notes. These amounts were consistent with the revenue estimates provided by the Respondent to the Legislature. The Emergency Rules represent a contemporaneous administrative construction of Chapters 87-6 and 87-101 by an agency charged with responsibility to administer the acts and which was intimately involved in the adoption of the acts. The Petitioner has challenged the validity of Rules 12AER87-31(1)(c), (5), (7)(i), (7)(k), (10), (12) and (13) Florida Administrative Code. The Petitioner withdrew its challenge of other portions of the Emergency Rules. Rule 12AER87-31(7)(i), Florida Administrative Code, defines the terms "contract price" which determines the amount of tax due on construction work performed pursuant to a contract and any speculative construction which is sold within six months of completion. The Petitioner has challenged Rule 12AER87-31(7)(i), Florida Administrative Code, to the extent that contract price is defined to include the fair market value of materials used by a contractor if the value of those materials is not otherwise included in the contract price. The Petitioner's contractor witnesses' understanding of Rule 12AER87- 31(7)(i), Florida Administrative Code, that the fair market value of materials supplied by the owner are to be included in the computation of contract price, is consistent with the Respondent's interpretation of the Rule. Prime contractors often estimate the cost of building materials in their daily business activities. The Respondent's interpretation of Rule 12AER87-31(1)(c), Florida Administrative Code, does not require a contractor or subcontractor who uses building materials which are purchased tax free to remit a tax. The rule simply makes it clear that there is not necessarily any link between the question of whether the purchase of building materials and the provision of construction services are tax exempt.
The Issue Does the taxpayer owe sales tax, penalty, and interest as assessed by the Department of Revenue.
Findings Of Fact Petitioner, Department of Revenue, is an agency of the State of Florida, lawfully created and organized pursuant to Section 20.21, Florida Statutes. By law, the Department is vested with the responsibility of regulating, controlling and administering the revenue laws of the State of Florida, including, specifically, the laws relating to the imposition and collection of the state's sales and use tax, pursuant to Chapter 212, Florida Statutes. Respondent, Worldwide Equipment Group, LLC, is a Florida limited liability company, whose principal address is Post Office Box 1050, Freeport, Florida 32439. Respondent sells and leases heavy equipment. In early 2006, Petitioner, Department of Revenue, conducted an audit of the books and records of Petitioner, pursuant to statutory notice. The period covered by the audit was March 1, 2002, through February 28, 2005. The audit was conducted by Department of Revenue auditor David Collins and addressed three issues. Issue A-01 addressed misclassified exempt sales, i.e. failure to collect appropriate sales and use tax or lack of documentation to prove tax exempt status of certain sales. Issue A-03 addressed discrepancies in sales for 2003 as reported for federal income tax returns and for state sales and use tax returns. Issue A-03 addressed interest owed due to a timing difference between actual transactions and the filing of state returns: basically a manipulation of the grace period for payment of sales and use taxes. Respondent was notified of the apparent discrepancies observed by the auditor. The original Notice of Intent To Make Audit Changes was issued February 17, 2006, and started at more than $75,000.00 in taxes, penalty, and interest due. Respondent then filed amended federal income tax returns, reflecting larger sales figures covering a portion of the audit period which reduced the discrepancy. The dispute was originally referred to the Division of Administrative Hearings (DOAH) on or about August 30, 2006. The original facts in dispute surrounded an addendum to the Notice of Proposed Assessment showing a balance due of $31,434.82. This was DOAH Case No. 06-3287. The request for a disputed-fact hearing was made by David R. Johnson CPA, who has a power of attorney on file with Petitioner Agency permitting him to represent Respondent. Throughout these proceedings, Worldwide has been served through Mr. Johnson by Petitioner and by DOAH. The parties filed a Joint Motion for Provisional Closing Order in DOAH Case No. 06-3287 on November 1, 2006. On November 2, 2006, DOAH Case No. 06-3287 was closed with leave to return if the parties' proposed settlement was not finalized. Mr. Johnson met once with counsel for Petitioner during the time the case was returned to the Agency. At some point, Respondent had produced certain accounting entries and supporting documents to the auditor. These were used to adjust the assessment levied by the Department. A Revised Notice Of Intent To Make Audit Changes dated March 13, 2007, was issued with a letter of the same date. The revised, and final Notice included an assessment of tax, penalty and interest totaling $15,065.24, as of the date of issue and information that the tax accrues interest at the rate of $3.10 per diem. On April 4, 2007, Petitioner filed before DOAH its Motion to Re-open Case and Notice for Trial. No timely response in opposition was filed by Respondent. By an Order to Re-open Case File, entered April 19, 2007, the case was re-opened as the instant DOAH Case No. 07-1710. Petitioner has established that the amount of $15,065.24 as tax, penalty, and interest was due as of March 13, 2007.
Recommendation Based on the foregoing Findings of Facts and Conclusions of Law, it is RECOMMENDED that the Department of Revenue sustain the March 13, 2007, assessment of the subject sales tax, penalties and interest to Petitioner. DONE AND ENTERED this 8th day of October, 2007, in Tallahassee, Leon County, Florida. S ELLA JANE P. DAVIS 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 8th day of October, 2007. COPIES FURNISHED: Warren J. Bird, Esquire Office of the Attorney General The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050 Bruce Hoffmann, General Counsel Department of Revenue The Carlton Building, Room 204 501 South Calhoun Street Tallahassee, Florida 32399-0100 Lisa Echeverri, Executive Director Department of Revenue The Carlton Building, Room 104 501 South Calhoun Street Tallahassee, Florida 32399-0100 David R. Johnson, CPA 1265 Highway 331 South Defuniak Springs, Florida 32435 Worldwide Equipment Group LLC Post Office Box 1050 Freeport, Florida 32439
Findings Of Fact 1. Petitioner is a Florida corporation wholly owned by Mr. Thomas C. Birkhead, president. Petitioner owns and operates the Satellite Motel in Cocoa Beach, Florida. The Audit Respondent conducted a sales and use tax audit of Petitioner's business records for the period September 1, 1985, through August 31, 1990. Respondent determined a deficiency and assessed Petitioner for $15,373.62, including tax, penalty, and interest through May 13, 1991. The assessment is for $1,922.42 in sales tax, $7,646.25 in use tax, $2,392.20 in delinquent penalty, and $3,412.75 in interest through May 13, 1991. Interest accrues daily in the amount of $3.15. Respondent made a prima facie showing of the factual and legal basis for the assessment. Petitioner failed to produce credible and persuasive evidence to overcome the prima facie showing. The audit and assessment are procedurally correct. Tax, interest, and penalty are correctly computed. Sampling Petitioner failed to maintain adequate records of its sales and purchases. Respondent properly conducted an audit by sampling Petitioner's available books and records in accordance with Section 212.12(6)(b), Florida Statutes. Although Petitioner's records of sales and purchases were inadequate, Petitioner produced some books and records for the entire audit period. Respondent properly limited the applicable penalty to a delinquent penalty. Audit Period Respondent is authorized to audit Petitioner for the period September 1, 1985, through August 31, 1990. Effective July 1, 1987, the period for which taxpayers are subject to audit was extended from three to five years. 1/ When Respondent conducted the audit, Respondent was authorized to conduct an audit within five years of the date tax was due. 2/ Tax owed by Petitioner for the period beginning September 1, 1985, was not due until the 20th day of the month following its collection. 3/ Therefore, Respondent was authorized to audit Petitioner's records anytime before October 20, 1990. 4/ On September 13, 1990, Respondent issued a Notice Of Intent To Audit Books And Records of the Petitioner (the "Notice Of Intent"). The Notice Of Intent tolled the running of the five year audit period for up to two years. 5/ Respondent completed its audit and issued its Notice Of Intent To Make Sales And Use Tax Audit Changes on May 13, 1991. 2. Sales Tax Petitioner sells snacks and beverages over the counter at the Satellite Motel. The sale of such tangible personal property is subject to sales tax. As a dealer, Petitioner must collect the applicable sales tax and remit it to Respondent. During the audit period, Petitioner failed to collect and remit applicable sales tax. As a dealer, Petitioner is liable for the uncollected sales tax. Respondent properly assessed Petitioner for $1,922.42 in uncollected sales tax. 3. Use Tax Petitioner rents televisions and linens and purchases business forms from Florida vendors. The rental and sale of such tangible personal property is subject to sales tax. During the audit period, Petitioner failed to pay sales tax to Florida vendors and used the televisions, linens, and business forms in its business at the Satellite Motel. Petitioner is liable for use tax on the use of those items during the audit period. Respondent properly assessed Petitioner for use tax in the amount of $7,646.25.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent enter a Final Order upholding the assessment of tax, penalty, and interest through the date of payment. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 25th day of October, 1994. DANIEL MANRY Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 25th day of October, 1994.
The Issue The issues are whether Respondent properly conducted a sales and use tax audit of Petitioner's books and records; and, if so, whether Petitioner is liable for tax and interest on its purchases of materials used for improvements to real property.
Findings Of Fact During the audit period, Petitioner was a Florida corporation with its principal place of business located at 7820 Professional Place, Suite 2, Tampa, Florida. Petitioner's Florida sales tax number was 39-00-154675-58, and Petitioner's federal employer identification number was 59-3089046. After the audit period, the Florida Department of State administratively dissolved Petitioner for failure to file statutorily required annual reports and filing fees. Petitioner engaged in the business of providing engineering services and fabricating control panels. Petitioner fabricated control panels in a shop Petitioner maintained on its business premises. Petitioner sold some of the control panels in over-the- counter sales. Petitioner properly collected and remitted sales tax on the control panels that Petitioner sold over-the-counter. Petitioner used other control panels in the performance of real property contracts by installing the panels as improvements to real property (contested panels). Petitioner was the ultimate consumer of the materials that Petitioner purchased and used to fabricate the contested panels. At the time that Petitioner installed the contested panels into real property, the contested panels became improvements to the real property. Petitioner failed to pay sales tax at the time Petitioner purchased materials used to fabricate the contested panels. Petitioner provided vendors with Petitioner's resale certificate, in lieu of paying sales tax, when Petitioner purchased the materials used to fabricate the contested panels. None of the purchase transactions for materials used to fabricate the contested panels were tax exempt. The audit is procedurally correct. The amount of the assessment is accurate. On October 23, 2000, Respondent issued a Notification of Intent to Audit Books and Records (form DR-840), for audit number A0027213470, for the period of October 1, 1995, through September 30, 2000. During an opening interview, the parties discussed the audit procedures and sampling method to be employed and the records to be examined. Based upon the opening interview, Respondent prepared an Audit Agreement and presented it to an officer and owner of the taxpayer. Respondent began the audit of Petitioner's books and records on January 22, 2001. On March 9, 2001, Respondent issued a Notice of Intent to Make Audit Changes (original Notice of Intent). At Petitioner's request, Respondent conducted an audit conference with Petitioner. At the audit conference, Petitioner provided documentation that the assessed transactions involved improvements to real property. At Petitioner's request, Respondent conducted a second audit conference with Petitioner's former legal counsel. Petitioner authorized its former legal counsel to act on its behalf during the audit. At the second audit conference, the parties discussed audit procedures and sampling methods, Florida use tax, fabricated items, and fabrication costs. Respondent revised the audit findings based upon additional information from Petitioner that the assessed transactions involved fabricated items of tangible personal property that became improvements to real property. Respondent assessed use tax on the materials used to fabricate control panels in those instances where Petitioner failed to document that Petitioner paid sales tax at the time of the purchase. Respondent also assessed use tax on fabrication costs including the direct labor and the overhead costs associated with the fabrication process, for the period of October 1, 1995, through June 30, 1999. Respondent eliminated use tax assessed on cleaning services in the original Notice of Intent because the amount of tax was de minimis. On August 29, 2001, Respondent issued a Revised Notice of Intent to Make Audit Changes (Revised Notice of Intent). On September 18, 2001, Petitioner executed a Consent to Extend the Time to Issue an Assessment to File a Claim for Refund until January 25, 2002. On October 18, 2001, Petitioner executed a second Consent to Extend the Time to Issue an Assessment to File a Claim for Refund until April 25, 2002. On February 6, 2002, Respondent issued a Notice of Proposed Assessment for additional sales and use tax, in the amount of $21,822.27; interest through February 6, 2002, in the amount of $10,774.64; penalty in the amount of $10,831.12; and additional interest that accrues at $6.97 per diem. Petitioner exhausted the informal remedies available from Respondent. On April 29, 2002, Petitioner filed a formal written protest that, in substantial part, objected to the audit procedures and sampling method employed in the audit. Respondent issued a Notice of Decision sustaining the assessment of tax, penalty, and interest. Respondent correctly determined that the audit procedures and sampling method employed in the audit were appropriate and consistent with Respondent's statutes and regulations. Respondent concluded that the assessment was correct based upon the best available information and that Petitioner failed to provide any documentation to refute the audit findings. Petitioner filed a Petition for Reconsideration that did not provide any additional facts, arguments, or records to support its position. On May 16, 2003, Respondent issued a Notice of Reconsideration sustaining the assessment of tax and interest in full, but compromising all penalties based upon reasonable cause.
Recommendation Based upon the findings of fact and the conclusions of law, it is RECOMMENDED that Respondent enter a Final Order denying Petitioner's request for relief and sustaining Respondent's assessment of taxes and interest in full. DONE AND ENTERED this 10th day of December, 2003, in Tallahassee, Leon County, Florida. S DANIEL MANRY 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 10th day of December, 2003. COPIES FURNISHED: Carrol Y. Cherry, Esquire Office of the Attorney General Revenue Litigation Section The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050 Michael E. Ferguson Control Design Engineering, Inc. 809 East Bloomingdale Avenue, PMB 433 Brandon, Florida 33511 Bruce Hoffmann, General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 James Zingale, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100
The Issue The Petitioner and Respondent have agreed by stipulation that the following four issues of law are to be determined by the Hearing Officer: Whether Red Lobster must pay four percent sales tax on ad valorem taxes paid directly to a governmental taxing unit on leases in which it is set forth that Red Lobster, the Lessee, will, in addition to the rental payments, be obligated to pay the ad valorem taxes. Whether certain waitress uniforms and denominators purchased from vendors outside the State of Florida by Red Lobster and shipped to Red Lobster Headquarters within the State of Florida for storage purposes and subsequently transshipped for use in Red Lobster locations outside the State of Florida are subject to Florida sales or use tax. Whether those automobiles purchased by Red Lobster's parent company, General Mills, Inc., outside the State of Florida and on which a sales tax was paid in the state in which purchased and then leased to Red Lobster for use in the State of Florida for periods in excess of twelve months are subject to a Florida sales or use tax on the rental payments. Whether Red Lobster is obligated to pay an amount of sales tax determined by the Bracket System as set forth in Florida Statutes or is obligated to pay all sales tax actually collected so long as the sales tax collected equals or exceeds 4 percent of gross sales.
Findings Of Fact The Respondent Department of Revenue assessed certain sales and use tax against Petitioner Red Lobster Inns of America, Inc., for a three-year period commencing February 1, 1971 through January 31, 1974. The Petitioner filed a petition for hearing to the Division of Administrative Hearings pursuant to Chapter 120, Florida Statutes, contesting the imposition of said sales and use taxes by Respondent. Each of the issues will be treated separately. ISSUE I Whether Petitioner must pay 4 percent sales tax on ad valorem taxes paid directly to a governmental unit on leases in which it is set forth that Red Lobster, the Lessee, will, in addition to the rental payments, be obligated to pay the ad valorem taxes. Two kinds of leases are involved here. One type (Exhibit "A") provides the payment of "all real estate taxes" shall be "as additional rent" and a second type (Exhibit "B") provides that "The lessee shall be responsible for the payment of all real estate taxes" without labeling such payments as additional rental. In both types of leases, the ad valorem tax payments on the leased real estate are the obligation of Red Lobster, Lessee. The Petitioner, Lessee, paid the sales tax on the amount it considered "rent" paid but did not pay the sales tax on the monies paid the Lessor for the payment of the ad valorem taxes on the leased property. The Respondent Department of Revenue contends: that all the monies paid by Petitioner as Lessee, including the amount paid for the payment of ad valorem taxes, constitute consideration for the lease and thus constitute rent for purposes of Chapter 212. Petitioners contend: that these payments for ad valorem taxes are not "total rent charges for such real property" under Section 212.031(c); that to require that sales and use tax be paid on ad valorem tax payments is double taxation; that the imposition of a sales and use tax on an existing ad valorem tax constitutes a pyramiding of taxation contrary to Section 212.031(2)(b). Petitioner further contends that the rule 12A-1.70(3) exceeds the statutory authority of Section 212.031, Florida Statutes, inasmuch as the statute states a tax is levied on the "rent charged" whereas the rule states that the tax shall be paid "on all considerations." The lease between the parties marked for identification as Exhibit "A" provides in pertinent part on page 1, Section 2, Demise of Premises: "In consideration of the rents and covenants herein stipulated to be paid and performed by Lessee, Lessor hereby demises and lets to Lessee . . . the parcel of land . . . together with all buildings, structures and other improvements constructed thereon . . ." On page 5, in Section 9, Taxes and Other Charges: "(a) Lessee also agrees . . . to pay and discharge as auditional rent, punctually as and when the same shall become due and payable without penalty, all real estate taxes, personal property taxes, business and occupation taxes, occupational license taxes . . . and all other governmental taxes which at any time during the term of the lease shall become due " Clearly, the payment of taxes was understood by both parties as being part of the rent in Exhibit "A" contracts. The lease between the parties marked for identification as Exhibit "B" does not specifically provide that the payment of taxes is part of the rent. However, it speaks to the issue on page 1 providing: "That for and in consideration of the covenants and agreements herein contained and in consideration of the rents herein reserved to be paid by lessee to lessors, the parties hereto do hereby mutually covenant and agree . . . ." to do certain things and includes the specific requirement on page 3: "9. The lessee shall be responsible for the payment of all real estate taxes, both city and county, assessed against the demised premises and shall pay the same before the taxes become delinquent." It is apparent that the payment of real estate taxes is a part of the "total rent charges for such real property" in Exhibit "B" contracts. Designation by the Lessor as to the method of distributing the gross sum of rent does not relieve the Lessee from his payments to the Lessor or change the fact that it is for rent due and for the "return . . . which the tenant makes to the landlord for the use of the demised premises." 52 CJS, Section 462, p. 344. Thus, there is no pyramiding or double taxation. Inasmuch as the payment of ad valorem taxes is a part of the rental agreement between the parties, sales tax would be due on the amount paid by Lessee for ad valorem taxes regardless of whether the Lessee or the Lessor performed the transmittal duties of paying the taxes. The acceptance by the Lessee of the onerous duties of timely paying the numerous taxes, charges, assessments and other impositions is a valuable consideration and a part of the rent charge itself. The statute supports the assessment of Respondent. The contention that the rule is invalid is not well taken inasmuch as the rule is presumed valid for the purpose of this hearing. Thus, the Hearing Officer determines that the Petitioner Red Lobster Inns of America must pay the 4 percent sales tax on the ad valorem taxes paid directly to a governmental taxing unit. ISSUE II Whether the waitresses' uniforms and denominators (a counting device) purchased from vendors outside the State of Florida by Petitioner and shipped to Petitioner's headquarters in Florida for storage purposes and thereafter shipped for use in Red Lobster Inn locations outside the State of Florida are subject to Florida sales or use tax. The Respondent Department of Revenue sought to impose a use tax upon the uniforms and denominators which were purchased outside the state, sent in and then sent out again. The Petitioner Red Lobster Inns does not contest the assessment of sales or use tax on the uniforms and denominators that were used and consumed in this state. However, it contests the assessment on the items that were bought outside the state, sent in to Florida and then sent out of state in the same condition. Red Lobster uses uniforms both within and without the state and also denominators both inside and outside the state. The Respondent Department of Revenue contends: that the sales and use tax is properly applied inasmuch as the uniforms and denominators came to rest in the State of Florida, were delivered and stored and therefore became part of the mass property in the state. It contends that they were used in that a right of ownership was exercised. The Petitioner Red Lobster Inns contends: that the tax is not due on the items that were brought in and transshipped out again; that the goods never actually came to rest because the storage time was very short and was in fact part of the shipment process; that the uniforms and denominators were reshipped without having been used or consumed in this state. Section 212.05, Sales, storage, use tax.-- provides: "It is hereby declared to be the legislative intent that every person is exercising a tangible privilege who engages in the business of selling tangible personal property at retail in this state, 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 . . . . * * * (2) At the rate of 4 percent of the cost price of each item or article of tangible personal property when the same is not sold but is used, consumed, distributed or stored for use or consumption in this state." Section 212.06(6), Sales, storage, use tax; collectible from dealers; dealers defined; dealers to collect from purchasers; legislative intent as to scope of tax, provides: "(6) It is however, the intention of this chapter to levy a tax on the sale at retail, the use, the consumption, the distribution, and the storage to be used or consumed in this state of tangible personal property after it has come to rest in this state and has become a part of the mass property of this state." The Petitioner was correct in paying the tax on the waitresses' uniforms and the denominators that were used and consumed in this state. Those uniforms and denominators that were temporarily stored in this state and sent outside the state in the same condition were not a part of the mass property of this state, had not come to rest in this state nor became a part of the mass property of this state. They were not used or consumed in this state. The use and consumption of the uniforms and denominators were subsequent to their shipment outside of the state and therefore no use tax is due on those items reshipped to other states. ISSUE III Whether those automobiles purchased by Red Lobster's parent company, General Mills, Inc., outside the State of Florida and on which a sales tax was paid in the state in which purchased and then leased to Red Lobster for use in the State of Florida for periods in excess of twelve months are subject to Florida sales or use tax on the rental payments. The Petitioner contends: that it is entitled to the exemption in Rule 12A-1.07(13)(b) because the purchase of the automobiles was made out of state and sales tax was paid out of state. The Respondent Department of Revenue contends: the exemption of the rule applies only when the sales tax was paid to the State of Florida. Section 212.21(2), Declaration of legislative intent.-- provides in pertinent part: "(2) It is hereby declared to be the specific legislative intent to tax each and every sale, admission, use, storage, consumption or rental levied and set forth in this chapter, except as to such sale, admission, use, storage, consumption or rental, as shall be specifically exempted therefrom by this chapter, subject to the conditions appertaining to such exemption." Section 212.07(9), Sales, storage, use tax; tax added to purchase price; dealer not to absorb liability of purchasers who cannot prove payment of the tax; penalties; general exemptions:-- provides in part: "(9) Any person who has . . . leased tangible personal property, . . . and cannot prove that the tax levied by this chapter has been paid to his vendor or lessor shall be directly liable to the state for any tax, interest, or penalty due on any such taxable transactions." Rule 12A-1.07(13)(b) provides: "When the term of a lease or rental to one lessee or rentee is for a period of 12 or more months, the lessor-owner may pay the tax on the acquisition of the vehicle. In such cases, the rental to the initial lessee and the renewals thereof to the same lessee are not subject to the rental tax. Rentals of the same vehicle to subsequent lessees by the owner are taxable." Clearly, it appears from the foregoing that the rule made pursuant to the authority of the legislature does in fact state that the tax may be paid "on the acquisition of the vehicle" and that the lessee is then not subject to the rental tax. The rule is presumed to be valid. Thus, in answer to the question in Issue III, the answer is that the rental cars are not subject to the Florida sales or use tax on the rental payments having been specifically exempted. ISSUE IV Whether Red Lobster is obligated to pay an amount of sales tax determined by the Bracket System set forth in Florida Statutes or is obligated to pay all sales tax actually collected so long as the sales tax collected equals or exceeds 4 percent of gross sales. The Respondent Department of Revenue contends: that the Petitioner must collect and pay the tax according to the Bracket Method provided in the statutes. The Petitioner contends: that it does not have to be governed by the Bracket Method as long as Petitioner pays 4 percent of its gross sales to the State of Florida and that the Bracket System is merely a convenience method. Section 212.12(1), Dealer's credit for collecting tax; penalties for noncompliance; powers of Department of Revenue in dealing with delinquents; brackets applicable to taxable transactions; records required, providing for the Bracket System.-- clearly states in pertinent part: "(10) . . . Notwithstanding the rate of taxes imposed upon the privilege of sales, admissions and rentals, and communication services, the following brackets shall be applicable to all 4 percent taxable transactions: On single sales of less than 10 cents no tax shall be added. On single sales in amounts from 10 cents to 25 cents, both inclusive, 1 cent shall be added for taxes. On sales in amounts from 26 cents to 50 cents, both inclusive, 2 cents shall be added for taxes. On sales in amounts from 51 cents to 75 cents, both inclusive, 3 cents shall be added for taxes. On sales in amounts from 76 cents to $1, both inclusive, 4 cents shall be added for taxes. On sales in amounts of more than $1, 4 percent shall be charged upon each dollar of price, plus the above bracket charges upon any fractional part of a dollar." It is self-evident that the foregoing statute does in fact require the Bracket Method to be used inasmuch as it dictates that is shall be applicable to all 4 percent taxable transactions. The tax is increased when the Bracket Method is used. In summary, the findings of the Hearing Officer are: On Issue I, Petitioner Red Lobster Inns of America must pay ad valorem tax on the full amount of the consideration as set forth in its various leases. On Issue II, the waitresses' uniforms and denominators which were reshipped in the same condition outside the state were not subject to Florida sales and use tax. On Issue III, the automobiles on which a sales tax was paid to the state in which they were purchased and then leased to Red Lobster for use in this state for periods in excess of twelve months are not subject to the Florida sales and use tax on rental payments. On Issue IV, Petitioner Red Lobster Inns of America is obligated to pay an amount of sales tax determined by the Bracket System as set forth in Florida Statutes.
Recommendation Affirm the position of the Respondent Department of Revenue on Issue I. Affirm the position of the Petitioner Red Lobster Inns of America on Issue II. Affirm the position of the Petitioner Red Lobster Inns of America on Issue III. Affirm the position of the Respondent Department of Revenue on Issue IV. DONE and ORDERED this 16th day of March, 1977, in Tallahassee, Florida. DELPHENE C. STRICKLAND Hearing Officer Division of Administrative Hearings Room 530 Carlton Building Tallahassee, Florida 32304 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 16th day of March, 1977. COPIES FURNISHED: Terrell Griffin, Esquire 515 Pan American Building 250 North Orange Avenue Orlando, Florida 32801 Charles E. DeMarco, Esquire Staff Attorney Red Lobster Inns of America, Inc. Post Office Box 13330 Orlando, Florida 32801 Caroline C. Mueller, Esquire Department of Legal Affairs The Capitol Tallahassee, Florida 32304 =================================================================
The Issue Whether Petitioner collected and remitted to the Florida Department of Revenue the correct amount of sales tax on Petitioner's retail sales; and Whether Petitioner remitted to the Florida Department of Revenue the proper amount of sales tax on Petitioner's general and fixed assets purchases and on its commercial lease.
Findings Of Fact Petitioning Taxpayer, Surface Preparation Group, Inc., is a "C" corporation, incorporated in the State of Texas. The Taxpayer's product or service is the sale, service, and rental of surface preparation equipment. The Taxpayer has been registered with the Department since October 7, 1999. By letter dated January 12, 2005, the Department notified the Taxpayer of its intent to audit the Taxpayer's books and records to verify the Taxpayer's compliance with Florida's sales and use tax statutes. The audit period in this case is from December 1, 2001, through November 30, 2004. When the audit started, the Taxpayer had a presence in LeGrange, Georgia. During the course of the audit and negotiations, the Taxpayer removed itself back to its Texas headquarters. Specific records were requested to be made available for the Department's auditor to review. Four subject areas were developed in the audit plan: (1) sales; (2) fixed expense; (3) general expense; and (4) commercial rent. Although the Taxpayer provided some sales data, the information contained therein did not correlate with other information the Department had concerning the Taxpayer's Florida sales. For instance, auditors had traced through general ledgers to Petitioner’s federal tax return and compared the return with the company’s Florida sales and use tax return, and the figures did not correlate. Despite repeated requests by the Department's auditor, the Taxpayer provided no information explaining the reasons for this discrepancy, nor was any information provided regarding the Taxpayer’s general purchases, fixed asset purchases, or its commercial lease expenses. Therefore, in order to complete the audit process, the Department had to use the best information available to estimate the additional tax due on fixed assets, general purchases, and commercial rent. That information in this case consisted of materials provided by the Taxpayer and industry averages and past audit assessments of businesses in similar industries. Because total sales reported by the Taxpayer on its DR-15 monthly sales returns were different than the amounts the Taxpayer reported in response to the audit request, there was no assurance that the reported taxable sales and exempt sales were correct. Accordingly, the Department's auditor disallowed all exempt sales as reported by the Taxpayer. Because the Taxpayer had a location in Polk County, Florida, during part of the audit period, it must have had fixed assets there. This meant that a use tax was due for all the Taxpayer’s purchases in Florida, without credit for sales tax paid to vendors who in many cases were located in Georgia. No information was provided by the Taxpayer for general expenses or rental expenses. Without any information from the Taxpayer for general expenses or rental location, the Department had to proceed differently than it would have normally proceeded. In anticipation of submitting more documents to be analyzed by the Department as part of the audit, Mr. Hillebrand, tax manager for Petitioner, signed, on October 24, 2005, a consent to extend the statute of limitations and time for completing the audit to July 31, 2006. (Exhibit R-2, page 000030). On March 15, 2006, Mr. Schnaible, one of the Taxpayer’s Controllers, signed a consent to extend until December 31, 2006. (Exhibit R-2, page 000029). On September 26, 2006, after analyzing all that had been received from the Taxpayer up to that date, the Department mailed a Notice of Intent to Make Audit Changes (NOI) to Petitioner, along with the work papers supporting the changes, and a letter from the auditor explaining the findings. The amount of tax assessed totaled $197,714.38, and comprised: Schedule A01: Disallowed Exempt Sales $169,994.38; Schedule B01: Estimated Fixed Asset Purchases $10,080.00; Estimated General Expenses: $5,040.00; and Estimated Commercial Rental $12,600.00. Interest accrued through September 26, 2006, totaled $57,353.50. The penalty at that date totaled $49,428.09, bringing the total assessment amount to $304,496.47. The Department’s September 26, 2006, letter offered the Taxpayer another opportunity to provide records if it disputed the auditor's findings, and another option to continue the audit process. (Exhibit R-2, pages 000044 through 000045). On October 25, 2006, Mr. Spomer, Taxpayer’s Controller who eventually signed the Petition and Amended Petition herein, wrote a letter (Exhibit R-2, page 000042) to the auditor stating that he requested to extend the audit and that he would mail back the signed, correct form. Normally, a DR-872e form to extend the statute and audit period must be signed within 30 days of the NOI. In this case, it was signed two months later. Apparently, one such form signed by Mr. Spomer was inadvertently filled-in by the Department with the extension date of "June 30, 2006," (copy attached to Amended Petition). Therefore, a second form was executed by Mr. Spomer on November 1, 2006. This form bears the correct extension date of June 30, 2007. (Exhibit R-2, page 000028). No additional information was provided by the Taxpayer which would change any of the tax amounts identified in the NOI. Therefore, on January 31, 2007, the Department issued it Notice of Proposed Assessment (NOPA). Therein, the amount of tax due remained unchanged. The amount of accrued interest through January 31, 2007, increased to $65,023.73, and the penalty was reduced to zero. The Department currently seeks $262,738.11, with interest accruing on the unpaid tax liability at the statutory rate.
Recommendation Based on the foregoing Findings of Facts and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order sustaining the Notice of Proposed Assessment dated January 31, 2007. DONE AND ENTERED this 6th day of December, 2007, in Tallahassee, Leon County, Florida. S ELLA JANE P. DAVIS 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 6th day of December, 2007. COPIES FURNISHED: Bruce Hoffmann, General Counsel Department of Revenue The Carlton Building, Room 204 501 South Calhoun Street Tallahassee, Florida 32399-0100 Lisa Echeverri, Executive Director Department of Revenue The Carlton Building, Room 104 501 South Calhoun Street Tallahassee, Florida 32399-0100 John Mika, Esquire Office of the Attorney General The Capital - Revenue Litigation Bureau Tallahassee, Florida 32399-1050 Dale Spomer International Surface Preparation Group (Texas), Inc. 6330 West Loop South, Suite 900 Houston, Texas 77401
The Issue The issue presented is whether Respondent is guilty of the allegations contained in the Administrative Complaint filed against her, and, if so, what disciplinary action should be taken, if any.
Findings Of Fact Respondent Anne E. Carr is and has been at all times material hereto a licensed real estate broker in the State of Florida, having been issued license number 0268356. In 1988 Helen B. Moser and her husband, John J. Moser, Jr., obtained their real estate salesman licenses. In 1989 they became real estate brokers. Upon becoming licensed brokers, they decided that they would like to open their own real estate office. They began contacting various real estate brokers seeking advice on how to open and operate a real estate business. Respondent was one of the brokers the Mosers contacted for advice. She and the Mosers already knew each other from previous professional activities. At the time, Respondent was the broker and sole stockholder of Carr Real Estate, Inc. She also was spending a substantial amount of time selling luxury condominiums for a particular developer, which required her to be on-site at the development. Respondent suggested to the Mosers that they join Carr Real Estate, Inc., and run the office for her rather than opening their own office, which would give them immediate access to her listings and many clients and allow her to devote her time to sales for the large real estate development. The Mosers agreed that was a good opportunity for all concerned and joined Carr Real Estate, Inc., as broker/salesmen in October of 1989. The Mosers began running the business for Respondent at her request, providing Respondent with monthly accountings. During 1990 the Mosers earned approximately $90,000 as a result of the listings they took over from Respondent and as a result of the listings Respondent referred to them. Throughout that year Carr Real Estate, Inc., remained a major presence in the Highland Beach area where Respondent was well known both for her flamboyant fashions and her ability to list and sell luxury ocean-front and water-front properties. During the first week of December 1990 Respondent advised the Mosers that due both to financial problems she was experiencing and pressure on her from the developer to devote full time to his sales she would be closing the business on December 31 unless the Mosers wanted to purchase the company from her. They advised Respondent they were interested in doing so and that they would draft the documents for Respondent's signature. Many discussions took place between Respondent and the Mosers over the next several weeks formulating the terms of the sale of the business, and the Mosers submitted to Respondent a number of drafts of documents. While the negotiations were on-going, Respondent filled out and executed on December 12, 1990, the documents necessary for her to file for personal bankruptcy. On December 15 she faxed written instructions to her attorney to not file the bankruptcy petition because she was selling her company. On December 20, 1990, Respondent and the Mosers executed a Purchase and Sale Agreement and a Bill of Sale. It is noted that those documents also involved the sale of Respondent's interest in two other corporations to the Mosers but that portion of the transaction raises no issues involved in this proceeding. The Purchase and Sale Agreement provided that its effective date would be January 1, 1991. The Agreement specifically represented that Carr Real Estate, Inc., was being sold free of any liabilities and encumbrances and that the corporation did not own any tangible assets. The Agreement further provided that Respondent would indemnify the Mosers from all obligations and liabilities incurred by Carr Real Estate, Inc., prior to January 1, 1991. The Agreement provided for no money to change hands as a result of the Mosers' purchase of Respondent's business; rather, the purchase price for the corporation was five percent of all sales commissions received by the corporation for a period of two years. On December 29, 1990, Respondent executed the Seller's Affidavit given to her by the Mosers. The portion of the Seller's Affidavit pertinent to this dispute is that Respondent attested that there were no actions or proceedings then pending in any state or federal court in which "the Affiant or Corporations" are parties, including bankruptcy. It was very clear in Respondent's mind that what she was selling under the Purchase and Sale Agreement and the Bill of Sale and what she was attesting to in the Seller's Affidavit was in regard to the corporation and not her personally. It never occurred to Respondent that she was representing to the Mosers that she personally had no bills and no assets. Respondent had no intention of defrauding the Mosers. Supporting this intent is the clear language contained in the Purchase and Sale Agreement, the Bill of Sale, and the Seller's Affidavit that she would personally indemnify and hold harmless the Mosers from any liabilities incurred by the corporation prior to the effective date of the sale. In mid-January 1991, approximately two weeks after the effective date of the sale, the Mosers discovered that a bankruptcy petition had been filed on behalf of Respondent as an individual. Although that petition did not involve the corporation, John Moser immediately contacted Respondent who did not know that her attorney had filed the petition contrary to Respondent's instructions. On January 23, 1991, Respondent wrote to Helen Moser apologizing for the erroneous filing of her bankruptcy petition and assuring her that it would be corrected. Respondent immediately contacted her attorney to ascertain how the petition could be dismissed. She was advised by her attorney that the only way she could dismiss the petition was to not attend the first meeting of creditors which would cause the petition to automatically be dismissed. Respondent did fail to attend the first meeting of creditors. Due to her failure to attend, her bankruptcy petition was dismissed. She immediately contacted Helen Moser to advise her of the dismissal. On February 1, 1991, John Moser called Respondent to inform her that a statement for a monthly automobile lease payment in the name of Carr Real Estate had been received. Respondent immediately sent the Mosers a note indicating that she had contacted G.M.A.C. but that company refused to allow her to transfer responsibility for her automobile lease payments from the corporation to herself. She acknowledged that she was responsible for any of the lease payments and requested that the Mosers acknowledge that the automobile was not an asset of the corporation. At the time Respondent knew that she was responsible for the lease payments because she signed the lease agreement as an individual. Respondent's contact with G.M.A.C. was unnecessary since her automobile had been leased to her as an individual in June of 1988, a date which preceded the existence of Carr Real Estate, Inc. The automobile was insured in Respondent's individual name and was registered in the name of G.M.A.C. at Respondent's address. The Bill of Sale executed by Respondent and the Mosers does not list the automobile as an asset of the corporation that was conveyed. The automobile leased by Respondent was not an asset of the corporation. The only relationship between Respondent's leased automobile and Carr Real Estate, Inc., concerns the deduction of automobile expenses as business expenses on the tax return for Carr Real Estate, Inc. On February 6, 1992, Helen Moser asked Respondent for a copy of the 1990 corporate tax return for Carr Real Estate, Inc., and Respondent provided a copy to her that same day. The return had been prepared in August or September of 1991 by Mary Dorak, a person enrolled with the Internal Revenue Service. It contained an entry entitled "loan from shareholder" in the sum of $107,060. Respondent had been the sole shareholder of the corporation. On February 26, 1992, the Mosers obtained an opinion letter from an attorney advising them that the corporation was not liable to Respondent for any debts. Neither the Mosers nor their accountant ever contacted Dorak or Respondent about the information contained in that tax return. Instead, the Mosers filed an amended corporate tax return for 1990 for Carr Real Estate, Inc. They removed the automobile as a corporate asset while leaving the shareholder's loan because it benefited them tax-wise. Instead of amending the return, the Mosers could have filed a 1991 return showing Respondent's stock exchange for the basis that was left of the stock in the corporation because the transaction took effect on January 1 of that year. Doing so would have caused no adverse tax consequences to the Mosers. Respondent typically provided Dorak with a listing of Respondent's income and expenses for the year and would then simply sign the return after Dorak had prepared it without reviewing the return first. Without any input from Respondent, Dorak had listed the automobile and some personal debts of Respondent on the 1990 corporate tax return because Respondent could take advantage of certain business deductions. That action had no adverse tax consequences for the Mosers. The Mosers never requested a tangible property tax return which would have reflected if there were any assets in the corporation. Had they made this request, they would have been told that there was none in existence because the corporation had no assets. At the time that Respondent and the Mosers executed the Purchase and Sale Agreement, the Bill of Sale, and the Seller's Affidavit in December, all three believed that the corporation had no assets or liabilities and that any assets and liabilities of Respondent were hers personally. As of January 1, 1991, the effective date of the sale, the corporation had no assets or liabilities. There were no tax consequences to the Mosers because of the listing of the shareholder loan in the 1990 corporate tax return because in that Subchapter S corporation the person ultimately adversely affected by the sale would be Respondent since she owned all of the shares in 1990. On the other hand, the filing of an amended 1990 corporate tax return by the Mosers without Respondent's knowledge and consent has resulted in adverse tax consequences to her, an unnecessary result. In November 1988 Respondent was involved in the sale of a condominium unit owned by Mr. and Mrs. Roy Heinz. Due to extended negotiations, the buyer's decision to not purchase the unit, and instructions from Heinz who was her client, Respondent delayed in placing the buyer's deposit check in her escrow account. Petitioner filed an Administrative Complaint against Respondent only and not also against Carr Real Estate, Inc., since that corporation was not yet in existence. After a formal evidentiary hearing, a Hearing Officer of the Division of Administrative Hearings specifically cleared Respondent of any intentional wrongdoing and of any culpable negligence. Respondent was found guilty, however, of what was specifically characterized to be a technical violation of failure to immediately place the deposit check into her escrow account. The minimum penalty permissible was assessed against Respondent. Respondent was also dismissed from the civil lawsuit filed by Roy Heinz which emanated out of the same circumstances for which the administrative action was brought. The Mosers knew about the disciplinary action and the civil lawsuit pending against Respondent individually prior to their execution of the December 1990 documents transferring Carr Real Estate, Inc., from Respondent's ownership to theirs effective January 1, 1991. The "Roy Heinz matter" was specifically raised by John Moser during the negotiations among the Mosers and Respondent. In April of 1991 Respondent sent Helen Moser a copy of the Recommended Order finding Respondent not guilty of any dishonest conduct or culpable negligence, and Helen Moser failed to even read the entire Order since she considered it unimportant and because she knew the transaction involved occurred prior to the formation of Carr Real Estate, Inc. The Mosers continue to operate Carr Real Estate, Inc. The business has been diminishing, however, since 1991 due to the reduction in the number of salespersons affiliated with the business, John Moser's inability to attract listings and retain clients, and the amount of time the Mosers have been devoting to John Moser's computer business. Respondent's actions and/or inactions have not been the cause of the decline in Carr Real Estate, Inc.'s, business. Moreover, the Mosers have not been harmed financially or in any other way due to any statements contained in the Purchase and Sale Agreement, Bill of Sale, or Seller's Affidavit executed by Respondent. The sale of Carr Real Estate, Inc., by Respondent to the Mosers benefited all three of them. In her negotiations surrounding that sale, Respondent agreed to the terms desired by the Mosers, acted honestly, and did not knowingly or intentionally misrepresent any material fact. Those misrepresentations alleged by the Mosers and Petitioner to be contained in the closing documents, such as any statement that Respondent personally had no assets or liabilities, were not material to the sale and purchase of the corporation.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is, RECOMMENDED that a Final Order be entered finding Respondent not guilty of the allegations contained in the Administrative Complaint filed against her and dismissing that Administrative Complaint. DONE and ENTERED this 16th day of December 1994, at Tallahassee, Florida. LINDA M. RIGOT Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 16th day of December 1994. APPENDIX TO RECOMMENDED ORDER Petitioner's proposed findings of fact numbered 1-4, 6-11, 13, 15, 18, and 19 have been adopted either verbatim or in substance in this Recommended Order. Petitioner's proposed findings of fact numbered 5, 16, and 17 have been rejected as not being supported by the weight of the credible evidence. Petitioner's proposed findings of fact numbered 12 and 14 have been rejected as being subordinate. Respondent's proposed findings of fact numbered 1-29, 31, and 33-36 have been adopted either verbatim or in substance in this Recommended Order. Respondent's proposed finding of fact numbered 30 has been rejected as not being supported by the weight of the credible evidence in this cause. Respondent's proposed findings of fact numbered 32 has been rejected as not constituting a finding of fact but rather as constituting argument of counsel. COPIES FURNISHED: Jack McRay, Esquire Acting General Counsel Department of Business and Professional Regulation Northwood Centre 1940 North Monroe Street Tallahassee, Florida 32399-0792 Theodore R. Gay, Senior Attorney Department of Business and Professional Regulation 401 Northwest 2nd Avenue, Suite N-607 Miami, Florida 33128 Harold M. Braxton, P.A. Suite 400, One Datran Center 9100 South Dadeland Boulevard Miami, Florida 33156-7815
The Issue Is the purchase or use of tangible personal property by a contractor who purchases material and supplies for use in performing non-public works contracts taxable under Chapter 212, Florida Statutes, and Rule 12A-1.051, Florida Administrative Code?
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant findings of fact are made. Petitioner is a Florida Corporation having its principal place of business located at 560 Highway 27 North, Sebring, Florida 33820, and is subject to the taxes imposed under Chapter 212, Florida Statutes. The Department is the agency authorized to administer the tax laws of the State of Florida, pursuant to Section 213.05, Florida Statutes. The Department is authorized to prescribe the records to be kept by all persons subject to taxes under Chapter 212, Florida Statutes. Such persons have a duty to keep and preserve their records, and the records shall be open to examination by the Department or its authorized agents at all reasonable hours pursuant to Section 212.12(6), Florida Statutes. The Department is authorized to conduct audits of taxpayers and to request information to ascertain their tax liability, if any, pursuant to Section 213.34, Florida Statutes. The Department conducted an audit of Petitioner to determine if Petitioner was properly collecting and remitting sales and use tax to the Department. The audit covers the period from November 1, 1992, through October 31, 1997. Petitioner is a retail carpet store, selling carpet and other flooring material, both installed and non-installed, in Sebring, Florida, and the surrounding areas. An invoice is prepared for each sales transaction. Petitioner rents the building in which its business is conducted and where Petitioner’s inventory and supplies are stored. Petitioner pays rent monthly. During the audit period, tax was neither paid nor collected on the rent payments. Petitioner purchases carpet samples from out-of-state vendors for use in its business. During the audit period, sales tax was not paid on all purchases. Petitioner collected tax on the price of the carpet or other flooring materials, as reflected on the invoice, where the customer was a taxpaying entity and collected tax on the total price on the invoice when the invoice specified installation. Petitioner did not collect tax on the price of the carpet or other flooring material, as reflected on the invoice, for tax-exempt entities, whether the invoice reflected the carpet or other flooring material as installed or non-installed. On May 18, 1998, a Notice of Intent to Make Audit Changes was presented to Petitioner. Additional sales and use tax and infrastructure surtax were determined to be due for the following taxable events: (a) rental expenses; (b) taxable purchases of samples; and, (c) sales to tax-exempt entities where the sale of carpet or other flooring materials included installation to real property. On May 18, 1998, Petitioner paid the additional tax assessed for taxable rental expenses and taxable purchases of samples and has been given credit for such payment. Petitioner protests the tax assessed on the cost price of carpeting used where the customer was a tax-exempt entity and the sales price included installation. On July 16, 1998, the Department sent to Petitioner its Notice of Proposed Assessment showing that Petitioner owed additional sales and use tax and infrastructure surtax in the amount of $13,569.15 and $2,188.01, respectively. Added to the tax owed by Petitioner were penalties in the amount of $6,730.78 and $1,085.02, respectively, and interest through July 16, 1998, in the amount of $4,627.66 and $736.95, respectively. The total assessment was $24,927.59 and $4,009.98, respectively. Credits in the amount of $8,233.87 and $1,372.30 respectively, have been applied against the taxes assessed and reflect the payments made by Petitioner on May 18, 1998. The amount of taxable rental expenses reported on the audit work paper Schedule B010 is consistent with Petitioner’s monthly reports. The amount of taxable sample expenses reported on the audit work paper Schedule B020 is consistent with Petitioner’s monthly reports. 18 The amount of exempt sales reported on the audit work paper Schedule B030 is consistent with Petitioner’s monthly reports. Petitioner timely filed a written protest of the Department’s proposed assessment. On October 25, 1998, the Department issued its Notice of Decision as to the protest of Petitioner. The proposed assessment was sustained by the Department. All invoices in the Department’s Composite Exhibit numbered 2, with the exception of invoices numbered 68, 197, 262, 432, 481, 482, 497, and 498, which are related to transactions that do not involve real property, are records of contracts between Petitioner and the tax-exempt entity to furnish and install wall-to-wall carpet or other flooring materials on real property. There is no retained title provision in any of these contracts. With the exception of invoices numbered 68, 197, 262, 432, 481, 482, 497, and 498, the invoices contained in the Department’s Composite Exhibit numbered 2 reflect an improvement being made to real property. Each of the invoices in the Department’s Composite Exhibit numbered 2 corresponds to a specific entry in Schedule B030 of the audit work papers and which is included under Tab 7a, pages 19 through 32, of the Department’s Composite Exhibit numbered 1. When Petitioner installed, or subcontracted the installation of carpet, the carpet was affixed to the floor by glue, nails, or other means and became the finished floor. Although tack strips, glue, nails, seaming tape, and other items were not listed on the invoice, these items are commonly used in the industry to complete performance of contracts such as those involved in this proceeding. In providing for the installation of carpet or other flooring materials involved in this proceeding, Petitioner engaged subcontractors and paid the subcontractor by the square yard. The square yard price included all materials and labor. With some exceptions, such as metal strips, materials used in the installation of the carpet or other flooring materials were not reflected on the invoices. Since there was no itemization of parts and labor, the invoices contained in the Department’s Composite Exhibit numbered 2, with the exception of invoices numbered 68, 197, 262, 432, 481, 482, 497, and 498, are lump-sum contracts. During his testimony at the hearing, John T. Griffin described Petitioner’s invoices as lump-sum contracts. Petitioner argued that the Department had failed to provide the proper information and training concerning the Department’s position on the imposition of the tax. However, based on the testimony of the Department’s witnesses concerning this matter it appears that sufficient information and sufficient training concerning the Department’s position on the imposition of the tax was readily available to Petitioner or its employees. The noncompliance by Petitioner with the applicable sales and use tax rules was not due to willful negligence, willful neglect, or fraud. It is the recommendation of the Department’s employees that the penalty assessed in this matter be waived. As of January 18, 2000, the total sales and use tax, penalty, and interest was $17,658.80. The local governmental infrastructure total surtax, penalty, and interest was $2,786.58. These totals do not reflect a downward adjustment for the taxes, penalty, and interest assessed against invoices numbered 68, 197, 262, 432, 481, 482, 497, and 498. For these invoices, the adjustment for taxes assessed, penalty, and interest shall be calculated from the date of each specific invoice and Petitioner given credit for any taxes, penalty, or interest charged against it for invoices numbered 68, 197, 262, 432, 481, 482, 497, and 498. The interest that has been assessed for the taxes that were not paid on the rent of the building or the carpet samples is appropriate. Petitioner does not disagree with this interest.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Department enter a final order upholding its assessments dated October 25, 1998, of sales and use tax, the local infrastructure surtax, plus applicable interest against Griffin Carpet Mart, Inc., with credit being provided for any payments made and for the assessments related to invoices numbered 68, 197, 262, 432, 481, 482, 497, and 498. It is further recommended after considering all the circumstances surrounding this case, that all penalties be waived. DONE AND ENTERED this 7th day of April, 2000, in Tallahassee, Leon County, Florida. WILLIAM R. CAVE 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) 921-6947 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 7th day of April, 2000. COPIES FURNISHED: James F. McCollum, Esquire Law Offices of James F. McCollum, P.A. 129 South Commerce Avenue Sebring, Florida 33870-3698 John Mika, Esquire Nicholas Bykosky, Esquire Office of the Attorney General Department of Legal Affairs The Capitol, Tax Section Tallahassee, Florida 32399-1050 Larry Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100 Linda Lettera, General Counsel Department of Revenue 204 Carlton Building Post Office Box 6668 Tallahassee, Florida 32314-6668
Findings Of Fact The stipulated facts are as follows: The petitioner is GJPR Two Corporation, formerly Employers Insurance Management Corporation, a Florida Corporation, and its address is c/o W. L. Adams, Esquire, Pyszka, Kessler, Adams and Solomon, 2699 South Bayshore Drive, Miami, Florida 33133. Said petitioner has a substantial interest in these proceedings and has proper standing herein. The agencies affected are the Department of Revenue, Tallahassee, Florida, and the Office of the Comptroller of Florida, Tallahassee, Florida; no other agencies are affected. These proceedings have been properly initiated and are now properly before the Division of Administrative Hearings of the Department of Administration of the State of Florida. The parties are not in dispute as to any issues of fact, and agree to the following findings of fact: On or about June 1, 1977, petitioner sold all of its assets of every kind and type in a single transaction to Arthur J. Gallagher and Company. The assets sold included two aircraft. When the registration documents of such aircraft were presented to the State of Florida for transfer, payment of sales tax was required in the sum of $4,056.00. Said sum was paid under protest on or about June 10, 1977. Until the sale of its assets, the business of petitioner had always been the sale of insurance and the administration of self-insurance programs for insureds and self-insureds throughout Florida and other states. The aircraft had been used in the business of petitioner, but petitioner had never engaged in the sale or leasing of aircraft as all or any part of its business. Since the sale of its assets, petitioner has not been engaged in business and petitioner has adopted and filed with the Internal Revenue Service of the United States a Resolution requiring that petitioner conduct no further business and that petitioner be liquidated. The sale of the two aircraft upon which the tax in question was paid under protest is an occasional or isolated sale. Petitioner filed a Claim for Refund upon the ground that the sale was an isolated sale. The Claim for Refund was denied by letter of August 11, 1977 from the Office of the Comptroller of the State of Florida, a copy of which is appended hereto and incorporated herein as Exhibit "A."
Recommendation That the denial of tax refund to the petitioner by the State Comptroller be affirmed. DONE and ENTERED this 24th day of January, 1978, in Tallahassee, Florida. THOMAS C. OLDHAM Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 24th day of January, 1978. COPIES FURNISHED: Richard J. Horwich, Esquire Suite 302 University Federal Building 2222 Ponce de Leon Boulevard Coral Gables, Florida 33134 Cecil Davis, Esquire Department of Legal Affairs The Capitol Tallahassee, Florida 32304 John D. Moriarty, Esquire Department of Revenue Room 104 Carlton Building Tallahassee, Florida 32304
