The Issue Whether Respondent real estate broker is guilty of a discriminatory housing practice against Petitioners related to the sale and marketing of their home.
Findings Of Fact Petitioner homeowners allege that Respondent real estate broker discriminated against them by the length of the exclusive listing contract Petitioners signed with Respondent (eight months); by inferior service because Respondent showed Petitioners' home only once in the eight months the contract was in effect1/; by incorrectly stating the agreed asking price on flyers Respondent circulated; by providing an "open house" to all of Respondent's other clients, but not to Petitioners; and by asking Petitioners to remove some of their bi-racial family photographs. Petitioner Donald Smith, Ph.D., is Caucasian. He is married to Miranda Smith, a dentist, who is African-American. They have at least one child, with whom they have been photographed. This case involves a house they owned on Cressida Circle in Spring Hill, Florida, where they displayed their bi- racial family photographs. On or about January 28, 2007, Petitioners signed, as sellers, an exclusive real estate listing contract with Kathlen Hobbs, a real estate salesperson, who at that time was an independent contractor associated with Exit Realty Shoppe. Respondent Montgomery, real estate broker, is the qualifying principal of Exit Realty Shoppe. Both Ms. Hobbs and Ms. Montgomery are Caucasian. The agreed asking price was $296,900.00. The term of the contract was for eight months: January 30, 2007, to October 1, 2007. Mr. Smith interviewed two other realtors, but he selected Ms. Hobbs and Respondent's proffered contract. It is a "fill-in the blanks contract," to which Mr. Smith had input. Although she signed the contract, Mrs. Smith did not speak to either Ms. Hobbs or Ms. Montgomery concerning the sale of the house at any material time. Mr. Smith testified that Ms. Hobbs initially told him that their home was "priced to sell" at $296,900.00, but he candidly admitted that Ms. Montgomery never made that representation and never "guaranteed" that the house would sell at that price. Upon the evidence as a whole and because Mr. Smith testified at one point that the other two realtors he interviewed told him the house would sell at "$295,000.00 or $296,000.00," and also testified contrariwise that Ms. Hobbs and the other two realtors told him the house would sell at "between $292,000.00 and $298,000.00," it is found to be more probable that no one guaranteed a sale at Petitioners' asking price of $296,900.00. Petitioners seek damages of $15,000.00, without stating any specific basis for that figure. They previously have sought $40,000.00, damages based upon the alleged lowered price of the house as sold by a subsequent realtor. However, the final date of sale and final sale price are not clear on this record. Paragraph Nine of the parties' contract provided for its early termination prior to its eight-month expiration date, upon the following terms: CONDITIONAL TERMINATION: At Seller's request, Broker may agree to conditionally terminate this Agreement. If Broker agrees to conditional termination, Seller must sign a withdrawal agreement, reimburse Broker for all direct expenses incurred in marketing the Property and pay a cancellation fee of $ plus applicable sales tax. Broker may void the conditional termination and Seller will pay the fee stated in paragraph 6(a) less the cancellation fee if Seller transfers or contracts to transfer the Property or any interest in the Property during the same time period from the date of conditional termination to Termination Date and Protection Period, if applicable. (Blank space in original; emphasis supplied.) Paragraph Six of that listing contract provides, in pertinent part: 6. COMPENSATION: Seller will compensate Broker as specified below for procuring a buyer who is ready, willing and able to purchase the Property or any interest in the Property on the terms of this Agreement or on any other terms acceptable to Seller. Seller will pay Broker as follows (plus applicable sales tax) 6% of the total purchase price OR $ , no later than the date of closing specified in the sales contract. However, closing is not a prerequisite for Broker's fee being earned. (Blank space in original.) Steve Van Slyke has been an active licensed real estate broker for over 20 years. For the last few years he has done more property appraisals than real estate sales. He has regularly taught and taken continuing education courses in the real estate profession since he was admitted to the profession in 1983. He has chaired the Professional Standards Committee of the Hernando County Association of Realtors (HCAR) since 1991. In that capacity, he has presided over hundreds of contract disputes between buyers and sellers, including the one that ultimately developed between the parties in this case. See infra. According to Mr. Van Slyke, the contract in this case is one commonly used in Hernando County, in the sense of not being unusual, but there are no "average," "usual," or "industry standards" for the duration of an exclusive real estate listing contract. He further testified that to have such a generally agreed-upon provision within the real estate industry would run afoul of the United States Fair Trade Commission's jurisdiction of, and prosecution for, "price-fixing." For the same reasons, there is no established average, usual, or industry standard for the conditional early release of a homeowner from a listing contract. Because no dollar amount for a cancellation fee had been written into Paragraph Nine of the parties’ contract herein, Mr. Van Slyke interpreted Paragraph Nine and Sub- paragraph Six (a) together, to permit Respondent broker the latitude to require payment by the sellers of six percent of Petitioners’/sellers’ asking price as a condition of early termination of the contract upon their unilateral request. Respondent submitted in evidence a similar contract dated March 5, 2007, between Respondent and a different homeowner for the duration of one year (12 months) from that date.2/ Petitioners presented no other contracts between any seller and Respondent or, for that matter, between any seller and any other realtor which specified a duration of less than eight months.3/ It is accepted that a different realtor with whom Petitioners contracted in November 2007, after their eight- month contract with Respondent had expired, filled-in “$500.00” in the equivalent Paragraph Nine, but there was no competent, credible evidence that this replacement realtor, or any other realtor for that matter, had a similar arrangement with any other sellers. Petitioners and Ms. Hobbs agreed that Ms. Hobbs would not submit Petitioners' sellers' contract on their existing home to Respondent until she got an acceptance on their offer as buyers for a new house on Rudolph Court. Accordingly, the listing contract for the Cressida Circle house in which Petitioners were living, and which contained their furniture and photographs, was not submitted to Respondent at least until January 31, 2007. Accordingly, Respondent could not begin attempts to sell Petitioners' existing home until the next day, February 1, 2007. There are 185 realty firms in Hernando County. There are four printed real property advertising booklets which are circulated in Hernando and surrounding counties. Each booklet is published every 30 days. The lead time to get a photographic advertisement of a newly listed property into each publication is three weeks. Before a photo can be published, it has to be made. On or about February 1, 2007, Ms. Hobbs photographed Petitioners’ Cressida Circle house for purposes of advertising it via websites, flyers, real estate advertising booklets, and newspapers, and placed Respondent’s "for sale" sign and lock-box on Petitioners' lawn. Respondent had admitted in evidence the first advertisements she paid for in three printed real estate booklets ("Nature Coast", March 22-April 18, 2007; "Real Estate News", April 2007; and "Sunshine Living", April 2007). Each advertisement contained a photograph and information extolling the Cressida Circle house. Each advertisement correctly quoted Petitioners' asking price of $296,900.00. Additionally, Respondent had admitted in evidence documentation showing that from March 22, 2007, until the end of her exclusive listing on September 30, 2007, she had advertised Petitioners' property repeatedly and/or consistently via newspaper, real estate advertising booklets, and/or Multiple Listing Services (MLS) websites and commercial websites. Both parties agree that Ms. Hobbs' first printed flyer stated an incomplete, and thus incorrect, selling price of "$296,90.", and that this flyer was circulated and/or placed in the lock-box tube on the "for sale" sign about February 1, 2007. (See Finding of Fact 17.) Despite Petitioners' claim that this was "inferior marketing," it is probable that most serious home seekers would have figured out how to correctly read the price as "$296,900.00", or would have asked what price was intended when phoning for an appointment to view the house. While Ms. Hobbs' flyer was never corrected, Respondent Montgomery had other, correct flyers printed, and she placed and circulated those correct flyers for the remainder of the contract period. It is customary for Exit Realty to conduct a "caravan" shortly after a contract is signed. A "caravan" involves Ms. Montgomery and all the salespeople she can round-up in her office. The entire team tours a seller's home, making notes, and then returns to Respondent's office, where a list of repairs and upgrades is compiled with each salesperson's in-put. Then the team brain-storms to develop selling techniques customized to each property listed. On February 7, 2007, the day before Caravan Day, an independent contractor with Exit Realty showed Petitioners' home to a potential buyer. Through Ms. Hobbs, the salesperson relayed to Mr. Smith that the potential buyer had remarked that the house's exterior paint was unacceptable. Mr. Smith told Ms. Hobbs that he would paint the house at his own expense if the potential buyer would make an offer, but no offer was forthcoming. Respondent's caravan viewed Petitioners' home on February 8, 2007. As a result, a list of selling suggestions was relayed by Ms. Hobbs to Mr. Smith. A day or so after Caravan Day, Mr. Smith was told by Ms. Hobbs that to best present and sell Petitioners’ home, Petitioners needed to deal with dirt and dust in an exhaust fan; replace a broken tile in a bathroom, and refinish their swimming pool. Mr. Smith also acknowledged that on the same date, or minimally later, he was told by Ms. Hobbs to remove Petitioners' large family photographs over the sliding doors opening from the house's vaulted-ceiling living room onto its screened patio and pool area. According to Ms. Montgomery, she had advised Ms. Hobbs to relay this information and additional advice, including the information that Petitioners’ house would sell better if Petitioners moved out or reduced the amount of furniture in the living room, so that potential buyers could visualize their own belongings in the room. It was not proven one way or the other whether Ms. Hobbs relayed the "move out" or "remove furniture" suggestions at that time. When Mr. Smith pressed Ms. Hobbs as to why the family photographs had to be removed, she referred him to Ms. Montgomery, who "could better explain." Mr. Smith acknowledged that Ms. Hobbs never said anything about race or discrimination. Mr. Smith testified to three versions of why he concluded that Ms. Montgomery was discriminating against Petitioners on the basis of race: first, because neither Ms. Hobbs nor Ms. Montgomery mentioned the bi-racial family photographs until after Ms. Montgomery had first seen them on Caravan Day, and Ms. Hobbs could not explain to his satisfaction the reason for removing the photographs; second, because Ms. Montgomery did not immediately return his phone calls; and third, because when Ms. Montgomery did return his phone calls, she mentioned the photographs over the sliding doors repeatedly among several other upgrades she encouraged him to accomplish, all of which upgrades Ms. Hobbs apparently had not passed along to him. Ms. Montgomery can suggest and encourage her independent contractors to pass on certain information to sellers and buyers and to pursue sales in certain ways, but she has no way to compel them. Mr. Smith conceded that at no time did Ms. Montgomery ever mention race or make any overt discriminatory statement to him and that she responded to all his letters, even though she did not agree with him in those letters. See, infra. Petitioners also agree that at no time did Ms. Montgomery or anyone associated with Exit Realty suggest that Petitioners remove tastefully framed bi-racial family photographs displayed on a bedroom dresser. Ms. Montgomery credibly testified that successfully "staging" a home for sale usually requires removing as much furniture as possible and all of the personalization, such as awards and photographs hung on the walls of all rooms. Mrs. Smith acknowledged that she was familiar with this concept from print literature and television. Ms. Montgomery demonstrated, using a photograph she had taken of the house without the wall photographs in place, that anything mounted above the living room's sliding glass doors had the potential to draw a shopper's eye away from the luxuriant sweep of the vaulted-ceiling and away from the scope and sweep of the view, through the sliding glass doors, of Petitioners' pool and patio. Petitioners accomplished the three repair suggestions (exhaust fan; tile; and swimming pool) that Ms. Hobbs passed on to them, but they remained in the Cressida Circle house and did not remove their furniture or the photographs above the sliding glass doors. In early March, Petitioners requested a reduction in the six percent commission specified in their Cressida Circle contract with Respondent. Respondent declined to consider reducing her commission until someone made an offer to buy. Petitioners closed on their new home on Rudolph Court on March 30, 2007. The Rudolph Court sale and closing in which Petitioners were buyers, was also handled by Hobbs, Montgomery, and Exit Realty. Petitioners do not claim that any racial discrimination by anybody occurred in the process of buying their new home. Closing on the Rudolph Court house left Petitioners with two houses to maintain and at least two (possibly four) mortgages to pay. Petitioners became concerned that no one had made an offer on their Cressida Circle house. Mr. Smith made several telephone calls to Ms. Montgomery. She did not immediately return those calls. When she did return Mr. Smith's phone calls, Ms. Montgomery explained to him that the Cressida Circle house needed to be "staged" better, including removing furniture and the photographs over the patio doors. Ms. Montgomery wrote Mr. Smith on April 5, 2007, to memorialize all of their April 4, 2007, conversation, giving him clear advice that a “lease/purchase procedure,” as opposed to a “lease/option to buy” arrangement which he had proposed, would be a better and safer solution for his needs. She also advised him that no home in his sub-development had been sold in the last seven months, and emphatically advised him to lower his asking price to $269,900.00, due to the competition of other similar homes for sale. It is undisputed that the parties' contract was signed during a "housing market slump" and that the housing market continued to decline during the entire term of the parties' contract. On April 9, 2007, Mr. Smith wrote Ms. Montgomery, making no reference to race or discrimination, but complaining about Exit Realty Shoppe showing his home only one time, requesting to void their contract, and closing with: If necessary we will follow thru [sic.] with a complaint to the Florida Real-estate [sic.] Commission in Tallahassee. Not unreasonably, Ms. Montgomery regarded Petitioners' foregoing letter as a threat. She responded by registered mail on April 10, 2007, setting out in detail all she had done and describing the costs she had incurred as of that date to sell the Cressida Circle house. She enclosed three printed real estate publications advertising Petitioner's house (see Finding of Fact 18); proof that the home was being advertised with the correct price April 7-13, 2007, in the St. Petersburg Times; proof that she had registered the house with the correct price on the MLS; and proof that the house was being shown in color on Exit Realty's three websites and on Ms. Hobbs' personal website with the correct price. She also reminded Mr. Smith that she had, earlier in the week, suggested that Petitioners reduce their asking price by $30,000.00, to $269,900.00. She also advised him, and included information showing, that as of that writing, there were 11 comparable listings in his sub- development, nine of which were listed at less than Petitioners' asking price. Evidence of all of Respondent's foregoing April 10, 2007, assertions was introduced in evidence by Respondent at the final hearing.4/ Respondent's April 10, 2007, letter also explained "staging," and offered to conditionally release Petitioners from their contract for six percent of their $296,900.00 asking price, as per the contract's Paragraph Six (a). Ms. Montgomery's April 10, 2007, unopened letter and supporting documentation were returned to her by the U.S. Mail as "unclaimed." Because Petitioners were still residing at the Cressida Circle address and because the post office did not mark the envelope "refused," it is probable that Petitioners simply did not go to the post office to sign-for, and pick up, Ms. Montgomery's material. However, Petitioners must have received these items because Ms. Montgomery also had the same materials delivered by messenger to Mrs. Smith’s office. Also, on April 11, 2007, Mr. Smith wrote, acknowledging receipt of Respondent's April 10, 2007, letter, refusing to reduce the asking price, and advising Ms. Montgomery that: I feel that it will be my responsibility to express this dissatisfaction in anyway [sic] I can, to as many people as I can. I will do what ever [sic.] I can do to be released from our agreement. He further threatened to contact "different government agencies" to report what he described as very poor service, but he did not mention race or discrimination. On or about April 19, 2007, Mr. Smith filed a complaint against Respondent dated April 16, 2007, with the local Better Business Bureau (BBB). His complaint alleged lack of service. Nowhere in his complaint is race or discrimination mentioned. The material in evidence shows that the BBB contacted Ms. Montgomery about the complaint, but marked it "information only," and did not pursue it at that time.5/ In early April 2007, Mr. Smith telephoned Ed Carr, Executive Director of the Hernando County Association of Realtors (HCAR). Mr. Smith said nothing to Mr. Carr about racial discrimination at that point, but said only that he wanted to get out of the listing contract with Respondent. On or about April 23, 2007, Petitioners filed a formal complaint with HCAR. HCAR's Grievance Committee met May 7, 2007, and, apparently in the mode of a probable cause panel, referred the case for a full evidentiary hearing. On June 29, 2007, the case was first noticed for hearing by HCAR. Petitioners’ HCAR complaint is not in evidence, and the evidence herein falls short of enabling the undersigned to determine whether the complaint before HCAR involved racial discrimination. However, it is certain that Ms. Montgomery perceived it that way. The HCAR hearing was first scheduled to occur August 28, 2007, but it was re-scheduled. The actual date the hearing took place and the date HCAR issued its decision are not clear in this record, but the hearing was on or after October 23, 2007. Mr. Van Slyke presided over the HCAR hearing. The HCAR decision resulted in a determination that Respondent had not violated professional real estate ethics. Despite Petitioners’ expressed dissatisfaction with HCAR's result and their claims that HCAR’s panel was prejudiced in Respondent's favor and that Respondent manipulated timing of the hearing, the HCAR process, and its deciding body, there is no competent, credible, or compelling evidence herein demonstrating the validity of such accusations or demonstrating that HCAR’s decision in Respondent’s favor was based on racial discrimination or constituted a cover-up for racial discrimination. That said, HCAR's decision is not binding here. Ms. Montgomery testified credibly that she had refused to acquiesce in any overt action, such as voluntarily letting Petitioners out of their contract without paying her commission, because to do so might make her appear to be prejudiced. Even more credible is her testimony that she did not want to let Petitioners out of their listing contract unless they paid her commission and costs, as provided in the contract, because she had already expended considerable time and money on Petitioners' behalf. Respondent continued to advertise the Cressida Circle house until the end of the eight-month contract (see Findings of Fact 19 and 40), despite Petitioners’ refusal to allow Respondent to reduce the asking price. Unfortunately, between June 14, and July 1, 2007, Respondent advertised an incorrect and lower asking price of $269,900.000, in "Nature Coast." Respondent did not know how the error occurred. The advertising for this two-week period was, as always, at Respondent's expense, and the asking price was corrected in the next issue. While signed-up with Respondent, Mrs. Smith took material prepared by Respondent for marketing the Cressida Circle property, made minor adjustments to it, and placed it on her own and others' websites. The material she posted sometimes carried Ms. Hobbs' contact information. Other times, Mrs. Smith's internet advertisements showed a reduced price for contacting Petitioners. This placed Petitioners in direct competition with Respondent's advertisements in which Petitioners required that Respondent maintain the original $296,900.00, asking price. In so-doing, Petitioners may have offended a clause of the listing contract. In placing this information on MLS websites outside of Respondent’s general geographic area, Petitioners may have exposed Respondent to liability in the professional real estate community. Respondent advised Petitioners of these problems, but there is no clear evidence that Respondent intervened to prevent Petitioners' behavior. Petitioners moved into their new, Rudolph Court house in early June 2007. When they moved, their furniture and photographs went with them. Photographic evidence shows that Petitioners allowed the Cressida Circle house to deteriorate after they moved to Rudolph Court, thereby rendering the sale property less desirable to potential buyers. Petitioners each testified credibly that between January 31, 2007, and the time they moved out, probably about June 6, 2007, Respondent gave them no advance notices that a potential buyer was coming to view the Cressida Circle house, as had been agreed upon when the house was listed. The sign-in sheet left in Petitioners’ sale house demonstrated that Exit Realty showed the house once, on August 21, 2007. Petitioners acknowledged that the home was also shown another time on the day before Caravan Day. (See Finding of Fact 22.) Respondent produced her lock-box's recorded printout showing that on February 1, 2007, Ms. Hobbs entered the house. (See Finding of Fact 17.) It shows also that Ms Hobbs entered again on June 7, 2007. On July 17, a ReMax salesman entered. On July 27, Respondent entered. On July 31, an ERA saleswoman entered. On August 10, and 11, Respondent entered. On August 21, another Exit Realty saleswoman entered. (See Finding of Fact 55.) On September 20, Clara Ward, an independent contractor with Exit Realty entered. (See Finding of Fact 58.) On October 4, 2007, Ms. Hobbs entered. Respondent acknowledged that on one or two of the foregoing occasions, she entered the sale house, not to show the property to prospective buyers, but to take photographs for the HCAR hearing (see Finding of Fact 47), but there is no credible evidence to support Petitioners' conjecture that the other visits by Ms. Montgomery and by all other real estate salespersons were not for the purposes of showing the house or for some other legitimate sales purpose. Clara Ward testified that she showed the house to a legitimate potential buyer about a month before Respondent's listing ended, and again in approximately December 2007, after Petitioners had listed it with another realtor at the reduced price of $256,900.00. Mr. Smith admitted that he never asked Ms. Hobbs for an "open house," until June 2007. The contract does not require an "open house." Ms. Montgomery testified credibly and without refutation that she did not schedule an "open house" for Petitioners because, in the past, "open houses" have not resulted in sales for her. She rarely, if ever, utilizes them for any property. Mr. Smith admitted that Petitioners had no evidence to support their allegation that every other home that Exit Realty signed in the same period was shown more than once. Petitioners also presented no evidence that every other home, besides the Cressida Circle home, which Exit Realty signed in the same period held even one open house.6/ In November 2007, Petitioners signed with another realtor who marketed the house at $269,900.00, which was $27,000.00 less than the only figure at which Petitioners would permit Respondent to market the house. If and when there was a sale is unclear.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Florida Commission on Human Relations enter a final order dismissing the Complaint and the Petition for Relief. DONE AND ENTERED this 19th day of September, 2008, 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 19th day of September, 2008.
The Issue Whether or not the Petitioners are responsible for the payment of tax, penalty and interest under the terms of the Respondent's Notice of Proposed Assessment of February 9, 1978, as revised June 12, 1978, which assessment was made pursuant to Chapter 212, Florida Statutes.
Findings Of Fact This cause comes on for consideration based upon the Petition for Administrative Hearing filed in behalf of the Petitioners, Housing by Vogue, Inc., and Mobile Home Industries, Inc., against the State of Florida, Department of Revenue, as Respondent. The case was subsequently referred to the State of Florida, Division of Administrative Hearings, for formal hearing in accordance with the terms of Subsection 120.57(1), Florida Statutes. Mobile Home Industries, Inc., is a Florida corporation and Housing by Vogue, Inc., is a wholly-owned subsidiary of the former-named corporation. The Respondent, State of Florida, Department of Revenue, is an agency of the State which has as its responsibility the investigation and enforcement of the tax laws of the State of Florida, to include Chapter 212, Florida Statutes. The facts reveal that on October 2, 1974, the Petitioners submitted a bid to the State of Florida, State Board of Education, for the purpose of contracting to execute and complete construction of the project identified as, "Relocatable InstructIonal Space for the Department of Education, Tallahassee, Florida." A copy of that bid proposal is found as Petitioners' Exhibit No. 2 admitted into evidence. The specifications and drawings of that project may be found as Petitioners' Exhibit Number 1 admitted into evidence. In accordance with the instructions of the owner, the bid proposal stated a lump-sum bid price in the amount of $119,250.00 and, in addition, contained certain itemized costs. The Petitioners' bid was accepted and a contract was entered into between the Petitioners and the State of Florida, State Board of Education. A copy of that contract and other contract items may be found as the Petitioners' Composite Exhibit No. 3 admitted into evidence. The contract was modified by proposal of the project engineer, upon suggestion of the contractor. A copy of this statement of suggested changes may be found in the Petitioners' Exhibit Number 4 admitted into evidence. The suggested changes were allowed and certain change orders were entered as shown through the Petitioners Exhibit Number 5 admitted into evidence. The project went forward as contemplated and under the terms and conditions of the contract, modules were fabricated by the Petitioners in their plant at Lake City, Florida. These modules were subsequently transported from the plant at Lake City to a location at Woodville, Florida, which is located in Leon County, Florida. The method of transportation was by the process of towing, with the modules being moved on the highway by virtue of a series of wheels and axles attached to the module proper. Once the modules were placed in the location in Woodville, Florida, the wheels and axles were removed and the modules were "set up," utilizing two methods to accomplish this task. Some of the modules were put on traditional footings and foundations similar to those involved in the "set up" of mobile homes, in the sense that footings were prepared and the modules were placed on concrete blocks and tie-down straps were attached to the bottom cross beams and secured by hellical anchors. The second method for placing the modules was to utilize a large hellical anchor device in lieu of the concrete blocks and tie downs. The modules themselves had fixed floors with interchangeable wall panels to allow assembly and re-assembly in various configurations for the purpose of instructional classroom space. After the modules had been arranged in an initial configuration, in accordance with the terms and conditions of the contract the modules were disassembled and placed in a different configuration at the site location in Woodville, Florida. The realty upon which these modules were located was a school ground and plant owned by the Leon County School Board, Leon County, Florida. The ownership of the modules was in the State of Florida, State Board of Education. The testimony in the course of the hearing did not indicate in any way that the Leon County School Board either was a party to the contract between the Petitioners and the State of Florida, State Board of Education, nor in any sense was granted ownership of the subject modules. Section 212.05, Florida Statutes, provides for the imposition of a four percent (4 percent) sales tax on the sale of articles of tangible personal property at retail within the State of Florida. The sale of the modules under the terms and conditions of the contract constituted a sale of tangible personal property by the Petitioners to the State of Florida, State Board of Education. Therefore, absent some specific exemption to the contrary, a sales tax was due. There does exist in law a partial exemption. This conclusion is reached after examination of the language of Subsection 212.08(6), Florida Statutes, which states: "212.08 Sales, rental, storage, use tax; specified exemptions.--The sale at retail, the rental, the use, the consumption, the distribution, and the storage to be used or consumed in this state of the following tangible personal property are hereby specifically exempt from the tax imposed by this chapter. (6) EXEMPTIONS; POLITICAL SUBDIVISIONS, COMMUNICATIONS.--There shall also be exempt from the tax imposed by this chapter sales made to the United States Government, the state, or any county, municipality or political sub- division of this state; provided this exemption shall not include sales of tangible personal property made to contractors employed either directly or as agents of any such government or political subdivision thereof when such tangible personal property goes into or becomes a part of public works owned by such government or political subdivision thereof, except public works in progress or for which bonds or revenue certificates have been validated on or before August 1, 1959; . . ." Under the language of the introductory portion of Section 212.08, Florida Statutes, and the specific provisions of Subsection 212.08(6), Florida Statutes, the sale which has been made to the State of Florida is exempt from tax implications, with the exception that the materials and supplies necessary for the fabrication of the modules, transportation of those modules and installation of the modules were tangible personal property which went into public works owned by the State of Florida, and as such were not exempt from taxation. (A public works is defined as "such works as are by statute authorized to be constructed for public purposes by the State or its agencies are generally regarded as public works." 26 Fla.Jur.section 2, citing to 43 Am. Jur., Public Works and Contracts section 2 as annotated at 92 ALR 835. From this definition, the modules which are used as instructional classroom space are considered to be public works within the meaning of Subsection 212.08(6), Florida Statutes.) It is unclear what the specific costs were on the question of the increments of expense for materials and supplies incurred by the Petitioners in carrying out their contract; however, it would be necessary for the Respondent to impose a tax together with a penalty and interest premised upon calculations made after determining Petitioners' cost items. This opinion is held notwithstanding the stipulation on the part of the parties (at the beginning of the hearing) to the effect that $4,048.57 in tax was in dispute, together with interest of $794.32 effective June 12, 1978, and additional interest at 47 cents per day from June 13, 1978, plus a penalty. In summary, there would be due tax, a penalty of 25 percent (such penalty being subject to further reduction) and interest on the amount which is the aggregate of the cost of materials and supplies used in the fabrication, transportation and installation of the subject modules. See Subsections 212.12(2) and (3), Florida Statutes. One final item should be considered. The parties in the course of their presentation and argument relied on various interpretations to be given Rule l2A-1.5l Florida Administrative Code, as a basis for their contention of tax liability or no liability. That provision would not have application to the facts sub judice, because the rule only applies to "sales to or by contractors who repair, alter, improve and construct real property". The installation of these modules which are the property of the State of Florida, State Board of Education, on realty which is owned by the Leon County School Board, of Leon County, Florida, does not constitute an action in which sales are made to or by contractors involved in the repair, alteration, improvement or construction of real property. While the modules as installed do constitute public works, they do not constitute repair, alteration, improvement or construction to real property. To consider this project to be one governed by Rule12A-1.5l, Florida Administrative Code, it would be necessary for the modules to be owned by the same entity which owns the property on which they are installed, as opposed to the facts in this case whereby ownership of the modules and real property are held by separate entities. In their present status, the modules are merely items of tangible personal property owned by the State of Florida, State Board of Education, which may be utilized at any location in accordance with the terms of their ownership.
Recommendation It is recommended that the Petitioners, Housing by Vogue, Inc., and Mobile Home Industries, Inc., be required to pay tax, a penalty of 25 percent and interest for those items of materials and supplies incidental to the fabrication, transportation and installation of the modules which are the subject matter of the contract in this dispute. DONE AND ENTERED this 2nd day of April, 1979, in Tallahassee, Florida. CHARLES C. ADAMS Hearing Officer Division of Administrative Hearings Room 101, Collins Building MAILING ADDRESS: 530 Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: John C. Cooper, Esquire Douglass, Powell & Davey Post Office Box 1674 Tallahassee, Florida 32302 Linda C. Procta, Esquire Assistant Attorney General Department of Legal Affairs The Capitol, LL04 Tallahassee, Florida 32304 John D. Moriarty, Esquire Department of Revenue Room 104, Carlton Building Tallahassee, Florida 32304 ================================================================= AGENCY FINAL ORDER ================================================================= STATE OF FLORIDA, DEPARTMENT OF REVENUE TALLAHASSEE, FLORIDA HOUSING BY VOGUE, INC., and MOBILE HOME INDUSTRIES, INC., Petitioner, vs. CASE NO. 78-1637 STATE OF FLORIDA, DEPARTMENT OF REVENUE, Respondent. /
The Issue Whether the Respondent, Page Lamar Ford, violated Section 112.3145, Florida Statutes, by failing to list real property owned by the Respondent on financial disclosure forms filed by the Respondent in 1986, 1987, 1988 and 1989? On or about May 18, 1990, a Complaint was filed with the Florida Commission on Ethics (hereinafter referred to as the "Commission"). The Complaint was filed by Laban Bontrager and contained allegations of misconduct by Page Lamar Ford, the Respondent in this case. An amended Complaint was filed by Mr. Bontrager on August 19, 1990. Based upon a review of the Complaint and the amended Complaint against the Respondent, the Commission issued a Determination of Investigative Jurisdiction and Order to Investigate on September 10, 1990, ordering the staff of the Commission to conduct a preliminary investigation into whether the Respondent violated Sections 112.313(6), 112.3143(3) and 112.3145(3), Florida Statutes. Following the Commission's investigation of the allegations against the Respondent, a Report of Investigation was released on January 31, 1991. Based upon the Complaint and the Report of Investigation the Advocate for the Commission issued an Advocate's Recommendation on March 15, 1991. The Advocate determined that there was probable cause to believe that the Respondent had violated Section 112.3145, Florida Statutes. The Advocate also determined that there was no probable cause to believe that the Respondent violated Sections 112.313(6) and 112.3143(3), Florida Statutes. Based upon the Report of Investigation and the Advocate's Recommendation, the Commission issued an Order Finding Probable Cause on April 24, 1991, accepting the recommendation of the Advocate. The Commission ordered that a public hearing be conducted. By letter dated August 16, 1991, the Commission referred this matter to the Division of Administrative Hearings and, in accordance with Rules 34-5.010 and 34-5.014, Florida Administrative Code, requested that the public hearing on the Complaint against the Respondent be conducted by the Division of Administrative Hearings. Prior to the formal hearing the parties filed a Prehearing Statement. The parties stipulated to certain facts in the Prehearing Statement. Those facts have been accepted in this Recommended Order. At the formal hearing the Advocate called no witnesses and offered no exhibits. The Respondent testified on his own behalf. The Respondent did not offer any exhibits into evidence. The parties stipulated that they would not order a transcript or file proposed recommended orders.
Findings Of Fact The Respondent, Page Lamar Ford, served as a City Commissioner in Bristol, Liberty County, Florida, during all times material to the allegations in the Complaint. (Stipulated Fact). At all times relevant to this proceeding, the Respondent served as a local officer. For the years 1986, 1987, 1988 and 1989, the Respondent owned several parcels of real property in Liberty County which he failed to list on his financial disclosure forms. The Respondent's failure to report the real property on his financial disclosure forms was caused by mistake. The weight of the evidence failed to prove that the Respondent failed to report the real property intentionally. The Respondent was paid $1.00 a year to serve on the Bristol City Commission. At a meeting of the Bristol City Commission, during which a purchase of real property close to the Respondent's real property was agreed upon, the Respondent disclosed the ownership of his real property. After the Complaint was filed alleging the failure of the Respondent to report the real property he owned, the Respondent filed financial disclosure forms for the years at issue.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Commission on Ethics enter a Final Order and Public Report finding that the Respondent, Page Lamar Ford, violated Section 3145, Florida Statutes, as alleged in Complaint No. 90-89, and imposing a civil penalty of $100.00 on the Respondent for such violation. DONE and ENTERED this 15th day of November, 1991, in Tallahassee, Florida. LARRY J. SARTIN 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 15th day of November, 1991. COPIES FURNISHED: Virlindia Doss Assistant Attorney General Department of Legal Affairs The Capitol, Suite 1601 Tallahassee, Florida 32399-1050 Page Lamar Ford Post Office Box 146 Bristol, Florida 32321 Bonnie J. Williams Executive Director Commission on Ethics The Capitol, Room 2105 Post Office Box 6 Tallahassee, Florida 32302-0006
The Issue Is Petitioner Haas Publishing Company liable for the taxes and interest assessed under Chapter 212, Florida Statutes, specifically the sales and use tax and related surtaxes, pursuant to Section 212.031, Florida Statutes, and Florida Administrative Code Rule 12A-1.070, for the audit period June 1, 1995 through May 31, 2000, and if so, to what extent?
Findings Of Fact Haas is a Delaware corporation, authorized to do business in the State of Florida. It is a subsidiary of Primedia, Inc. Haas publishes free consumer guides to apartments and homes and is paid by the apartment owners, realtors, and homeowners who advertise in the publications. One of Haas' divisions, Distributech, distributes the guides to retail stores. Haas negotiates with retailers for an appropriate site for its display of publications at each retail location. Nationwide, Haas distributes its publications from approximately 42,000 locations. Nationwide, Haas paid for the exclusive right to distribute, under contracts, in approximately 20,000 locations. Otherwise, it distributes in "free" locations. As required by Section 72.011(1)(b), Florida Statutes, Haas has complied with all applicable registration requirements with respect to the taxes at issue herein. DOR is the agency responsible for the administration and enforcement of Florida's tax laws, including sales and use tax and various local surtaxes. DOR conducted an audit of Haas for the period of June 1, 1995 through May 31, 2000. The audit resulted in an assessment of sales and use tax and associated surtaxes, interest, and penalties (Assessment). After protest and petition for reconsideration, DOR issued its Notice of Reconsideration (NOR) to Haas on May 16, 2003, wherein DOR sustained the Assessment in full, but offered to waive all penalties, without prejudicing Haas' right to challenge the remainder of the Assessment in full. Haas accepted the Department's offer to waive all penalties in their entirety, making a payment on the Assessment at the time the Petition herein was filed. In other words, Haas paid certain uncontested amounts in order to pursue the instant challenge to the remainder of the Assessment of all taxes and all interest, and in order to take advantage of an unrelated "extended amnesty" provided by DOR. This formal proceeding followed. The auditor who actually performed the work of the audit did not testify at the disputed-fact hearing. DOR's only witness, Ms. Gifford, did not participate in the original audit. However, Ms. Gifford reviewed the audit documents in detail and professionally consulted with the auditor and other reviewers to review the auditor's methods against the paperwork of the audit. She also reviewed the audit with input from Haas and its representative in the course of the Technical Assistance and Dispute Resolution (TADR) process, and throughout the informal challenges preceding this formal proceeding. She also reviewed all of the de novo material presented at the deposition of Haas' principal, Mr. Sullender, for purposes of her testimony. She is an expert capable of assisting the trier of fact, in that she is a Florida-licensed certified public accountant (CPA), and the undersigned is satisfied with the accuracy of her explanation of DOR's policies and procedures and of her predecessor's methodology and calculations. Also, her interpretations of rules and statutes are entitled to great weight where they purport to be the interpretation of the agency, but they do not constitute "factual" testimony and are not binding in this de novo proceeding. Ms. Gifford's analysis of case law is not entitled to that same deference. At the disputed-fact hearing, Haas challenged both the timeliness of the audit and the methodology of the audit. It is axiomatic that the amount assessed depends upon the methodology employed by the auditor, but DOR contended herein that because Haas protested only that an assessment had been made and because Haas had accepted all available offers of mitigation, Haas could not protest, at hearing, the amount calculated for the Assessment, whether the audit's calculations were correct, or whether the audit had been conducted in a timely manner. The following allegations of the Petition herein are relevant to these issues: No payment made by Haas to a retailer in Florida constituted payment for a lease of real property; No payment made by Haas to a retailer in Florida constituted payment for a license to use real property; The payments made by Haas to retailers were for distribution rights and/or intrinsically valuable personal property rights; The payments made by Haas to retailers were not subject to Florida sales and use taxes and other surtaxes; Alternatively, the payments made by Haas to retailers should have been apportioned by DOR, pursuant to Section 212.031, Florida Statutes; Some or all of the taxes that the Department claims that Haas owes have been paid by the retailers with whom Haas had agreements; The Department was without statutory authority to impose the Assessment for taxes and interest as set forth in Exhibit A; and The Assessment that is the subject of this proceeding is unlawful and violates the provisions of Chapter 212, Florida Statutes; Petitioner is entitled to relief under Sections 72.011 and Section 120.80, Florida Statutes. Section 212.031, Florida Statutes, dictates that the payments made by Haas to Florida retailers were not subject to Florida tax and therefore requires that the Assessment by DOR be stricken or modified. The auditor sent Form DR-840, the Notice of Intent to Audit (NOI), to Haas on May 30, 2000. This item informed the Taxpayer that the period of the audit would be June 1, 1995 through May 30, 2000, and that the audit would commence before July 29, 2000 (within 60 days) unless an attached waiver was signed and returned. The audit file does not reflect a signed waiver within 60 days. Ms. Gifford, on behalf of DOR, testified that the purpose of this NOI was to warn the Taxpayer that the audit would begin within 60 days unless the Taxpayer waived the timeline and that with a waiver, the audit would begin within 120 days. Ms. Gifford further testified that DOR considers itself limited to going back only five years from the date the auditor begins to review a taxpayer's records and that the Agency interprets Section 213.335, Florida Statutes, to require completion of the audit within one year of the initial letter. Ms. Gifford asserted that with a waiver, DOR would interpret the several applicable statutes and rules to provide the auditor with 120 days to begin an audit to encompass the whole of June 1, 1995 to May 30, 2000. However, if an audit is not begun within 120 days, DOR understands that the statutory audit period is not tolled and DOR usually removes the delay period from the front end (i.e., DOR starts the audit period the delayed number of days after June 1, 1995) and adds it to the back end (ends the audit period the delayed number of days after May 30, 2000) so that a five-year period of audit occurs, but the audit period starts some date later than June 1, 1995, and ends some date later than May 30, 2000. DOR considers the start of the audit to be when the auditor begins looking at records of the taxpayer. Haas provided pertinent, but incomplete, records on August 29, 2000, which was more than 60 days and less than 90 days after the May 30, 2000, NOI. Haas requested several extensions to review work papers received from the auditor. All were honored by DOR. A lot of correspondence ensued between the auditor and Haas and between DOR and Haas' designated representative(s)/accountants, but DOR's auditor did not record any time spent on the audit file until he met with Haas or its representative on October 23, 2000, more than 120 days after May 30, 2000. On the basis of the auditor's work record/timesheet, Haas contends that October 23, 2000, which was more than 120 days after the May 30, 2000 NOI, is when the audit actually began. Exchanges of records, work papers, and information continued, and on or about May 29, 2001, a vice-president of Haas signed and FAXED to DOR's auditor a consent to extend the statute of limitations for sales and use tax assessments through March 29, 2002. However, he did not affix the corporate seal in the designated part of the consent form. The consent form had been prepared by the auditor and mailed to Haas on or about March 25, 2001. It only listed "sales and use tax" as a reference. It did not identify any other tax, which ultimately made up the Assessment, including Charter Transit System Tax, Local Government Infrastructure Tax, Indigent Care Tax, or School Capital Outlay Tax, which, although related to sales and use tax, have separate designations. These surtax audits are based on the same facts, circumstances, and records as the sales and use tax audit herein but DOR lists and computes them separately from the sales and use tax on some of its forms. (See Finding of Fact 19.) The validity and timeliness, vel non, of the foregoing consent to extension was not raised by Petitioner until the disputed-fact hearing. A Notice of Intent to Make Audit Changes (also called an NOI) was dated September 21, 2001. The Notice of Proposed Assessment (NOPA) was issued December 5, 2001. DOR considers this document to be the completion of the audit. After the audit was completed, it was submitted to DOR's TADR, a dispute resolution process. A Notice of Decision (NOD) was entered July 30, 2002. Haas petitioned for reconsideration, alleging additional facts. By a May 16, 2003, Notice of Reconsideration (NOR), the audit was upheld. The NOR and NOIA lump all Chapter 212, Florida Statutes' taxes together. The NOPA lists each surtax separately. The compromise of amounts and this formal proceeding followed, as described above in Findings of Fact 5-6. Many contracts and other records were not provided by Haas to DOR until TADR, until the informal proceedings, or until after the Petition for this formal proceeding had been filed. Among other things, DOR had upheld the auditor's initial decision with regard to calculating Haas' 1997 tax. The auditor had not tested or sampled Haas' records for the full of the audit period in order to arrive at a tax figure for 1997. Because Haas had not provided certain records (RDAs) for 1997, Haas' figures for December 1996 were "extrapolated" by the auditor to the first six months of 1997, while the figures for January 1998 were "extrapolated" back to the last six months of 1997. Ms. Gifford felt this method constituted a legitimate estimate of the taxes due where a taxpayer had failed to provide adequate records. For the audit period, Haas published and distributed, free of charge to the public, apartment and home guides. The distribution was accomplished through contracts, on a regional and national level, with major retail store chains such as K-Mart, Blockbuster, Eckerd's, and Winn-Dixie Stores. The tax-assessment problems herein are compounded by Haas' choice not to use uniform contractual arrangements with all retailers; by its failure to designate within its contracts and/or accounting records what, if any, intangible uses it believed it was paying for; and its failure to allocate within its contracts and/or accounting records the amounts it believed it was paying for each alleged intangible use. Some of the contracts state that there is no corporate relation between Haas and the retailer. Haas has one major and several smaller competitors who distribute their own publications at retail store chains. Haas' contracts with the retail store chains guarantee to Haas the exclusive right to distribute apartment and home guides from the retail stores' locations and usually include the right to use the retail chains' respective logos and trademarks in Haas' promotional/sales materials and publications. One exception is Seven-Eleven, which limits to a greater degree use of its trademark and logo than do some of the other retailers. Not every contract contains a reference to a retailer's trademark or logo. Haas used its exclusive rights to distribute with certain retail store chains as an inducement to sell advertising to the apartment owners, realtors, and others who advertise in its publications. It was valuable to Haas to be able to tell potential print advertisers that its apartment/home guide was the only one allowed to be distributed from the particular retail chains. It was valuable to Haas to be able to show potential print advertisers the logo of retailers in Haas' promotional materials and publications. In most places, the exclusive right to distribute from the specified retail locations distinguished Haas from its competitors and allowed it to charge more for its advertising than they did. Mr. Sullender, Haas' principal, is credible that in each instance where Haas' contracts do not mention the use of trademarks and logos, each retail chain otherwise gave permission or provided Haas with its logo and trademark materials to use, as a result of the contracts. However, Haas provided nothing to DOR prior to instituting this formal case, by which DOR could have determined that such permission had been provided outside the contracts. Haas' right to place the retailers' logo or trademark on Haas' publication racks was a valuable right and every Haas rack displayed logos. Yet, the contracts do not obligate Haas to use the retailers' logos or trademarks, and Haas can still distribute from the racks without a logo. The contracts made no specific allocation of payments by Haas to the retailers for use of the retailers' logos and trademarks. The issue of whether payment for use of a logo or trademark should have been separately allocated from Haas' payment to the retailer in its contracts was not taken into consideration by DOR because this issue, in those terms, was not raised during the audit or subsequent informal protest/review procedures. However, the issue of allocation based on fair rental value of the space utilized in connection with prior audits of some of the respective retailers was raised. This is largely an issue of semantics. (See Findings of Fact 55-56.) All except one of the contracts at issue guarantee Haas the exclusive right to distribute its publications from the particular retail chains' locations. Exclusivity of the rights accruing to Haas is singularly important to Haas' business. However, Haas has been known to charge its competitors for space on its racks. Haas also is free to enter into partnerships with its competitors. In order to secure the exclusive right to distribute its publications from the retail locations and the right to use the retailers' trademarks and logos, Haas pays fees to the retail store chains under the contracts. Typically, Haas has to "outbid" at least one other competitor to obtain the foregoing exclusive rights. The payments under the contracts were typically made "per store," per month, and did not vary depending on the location of the store within the State. Part of Haas' negotiating strategy and ultimate success in securing exclusive use of most of its locations is the judicious use of "signing bonuses." Signing bonuses are specifically allocated in some, but not all, of Haas' contracts. In some contracts, they are directly linked to the right of exclusivity. They can be substantial amounts. However, according to Ms. Gifford, signing bonuses have never been part of DOR's Assessment in this case. (TR-62-63) Because the exclusive right to distribute its print materials was so valuable to Haas, it paid up to $375 per month per store under one contract. When Haas did not secure the exclusive right to distribute from a retail chain, it would not pay for the right to distribute, but distributed its publications from "free" locations. Nationwide, this compares at 20,000 paid to 22,000 unpaid locations. (See Finding of Fact 1.) The amount Haas paid a retail chain did not vary by particular store location within the chain nor by the size of the rack that Haas placed in a particular store. Haas' racks take up from two to four-feet worth of floor space. Haas supplied the racks, but, in general, the retail chains had control over the size, type, and color of the racks placed in its stores and limited Haas' access to the racks. Haas was solely responsible for set-up, replenishing, and maintenance of its racks on the retailer's property. Haas purchases liability insurance. Haas is always assigned covered space by the retailer. Haas considers space near an entrance/exit of the retailer's covered premises to be premium space. Retailers consider this same space to be "dead space," beyond its cash registers, which is essentially useless for display or sale of their retail goods. However, some retailers park carts or post notices in these areas. Haas does not sell or distribute any goods of, or for, the retailer. It merely stocks its own publications in its own racks in the retailer's space. Haas has no other contact with the retailers' business. Under the contracts, retailers have no obligation to market Haas' publications. They do not buy or sell them or pay to advertise in them. Retailers pay nothing to Haas. If Haas uses a retailer's logo and/or trademark in Haas' own advertising or in its publications per their negotiated arrangement, it is for the purpose of promoting Haas' publications. Use of the retailers' logos and trademarks has a benefit to the retailer, but a purely incidental one, since the retail customer who picks up a Haas publication from the Haas rack has already made the decision to enter the retail store in the first place. None of the retail chains ever attempted to charge sales or use taxes to Haas based on the payments made under the contracts. There is no evidence that Haas or any retailer, on Haas' behalf, tendered sales or use taxes to the State on the contracts at issue herein. Although some contracts acknowledge that a retailer is a franchisee of a third party, none of the contracts refer to the relationship between Haas and the retailer as a "franchise" or acknowledge Haas as a franchisee. Ms. Gifford did not equate Haas' use of a retailer's logo or trademark to market Haas' publications, not the retailer's goods, with all the accoutrements of a franchise, as she understood those accoutrements. DOR issued to a different taxpayer (not Haas) Technical Assistance Advisement No. 03A-002 (the TAA), concerning real property lease agreements. Although this advisory letter from a DOR attorney is not binding, except between DOR and the party to whom it is addressed, and although it is limited to the specific facts discussed within it, the legal conclusions therein are instructive, if not conclusive, of DOR's official interpretation of the statutes and rules it administers and of its agency policy with regard to when allocations are appropriate between intangible rights and real property rights. TAA 03A-002 cites, with approval, paragraphs 56 through 59 of the Final Order in Airport Limousine Service of Orlando, Inc. v. Department of Revenue, DOAH Case No. 94-1790, et seq., (March 23, 1995)1/ and State ex rel. N/S Associates v. Board of Review of the Village of Greendale, 473 N.W. 2d 554 (Wisc. App. 1991), and states, "The test for isolating intangible business value is as simple as asking whether the disputed value is appended to the property, and thus transferable with the property, or is it independent of the property so that it either stays with the seller or dissipates upon sale." This TAA also states that DOR will view the reasonableness of allocations of payments made pursuant to a lease agreement on a case-by-case basis in reference to whether the allocation is made in good faith or lacks any basis. It further cites with approval Bystrom v. Union Land Investment, Inc., 477 So. 2d 585, 586 (Fla. 3rd DCA 1985) ("Good faith for property tax valuation purposes will mean 'real, actual, and of a genuine nature as opposed to a sham or deception.'") The TAA anticipates that DOR would require that the taxpayer make reasonable allocations, within the taxpayer's own records, of lease payments to rent and other items not subject to tax, and that the taxpayer would also be required to otherwise maintain records adequate to establish how the taxpayer determined that each allocation was reasonable, and further, that if DOR auditors were satisfied with the taxpayer's records, an appraisal would not be required by DOR. The TAA does not foreclose the requirement of an appraisal to test the taxpayer's records. Synopsized, the TAA opines that separate payments by a tenant to a landlord for trademark, service mark, or logo rights of the landlord are subject to the tax on real property rentals unless the allocation of payments made by the taxpayer is reasonable, and further, that the allocation is not reasonable where no substantial, competent, and persuasive evidence is provided to establish the value of the trademark, service mark, or logo rights of the landlord received by the tenant and a legitimate business purpose for the tenant to acquire those rights is not demonstrated. Herein, Haas had not allocated rent and intangibles within its own contracts/records. It was Ms. Gifford's view that if the Taxpayer herein had not allocated the value of the trademarks, etc. and the real property value of its contracts, it was not up to DOR to do so in the course of an audit. Nonetheless, during the protest period, DOR had considered allocating the payments made by Haas under its contracts, into taxable and non-taxable payments, by reviewing the market rate rental for the space occupied and obtaining a valuation of the identifiable intangible property. Ultimately, DOR did not use this method on the basis that Haas had not submitted sufficient records. At hearing, Haas attempted to present evidence of the fair market value of the real estate involved and of the so- called intangible rights through an intangible property appraiser and a Florida-certified real estate appraiser. Lee Waronker is a Florida-certified real estate appraiser who was accepted as an expert in real estate appraisal. Mr. Waronker prepared a report which made a comparison of Haas' contracts with allegedly comparable rental properties, but he only used three "comparables," none of which included racks owned by similar advertising businesses. He did not consider what Petitioner's real competitors paid for similar space. Thus, when he arrives at an average fair rental value of Haas' space in all the retailers' locations as $25-50 per square foot, his base figures are suspect. Therefore, when he concluded that since Haas was paying an average of $355 per square foot and all the remainder of the contract payments should be allocated to intangible rights, such as trademarks and exclusivity, he was not credible or persuasive. His figures also apply only to the date of his appraisal in 2003, and admittedly would not be representative of the value of the rental property during the audit period. Therefore, his analysis that only 11.3 percent, plus or minus, of the contract prices constituted rent or a license to use is discounted and not accepted. Petitioner also presented the testimony and report of James N. Volkman, an intangible property appraiser who was accepted as an expert in that field. Mr. Volkman obtained all of his data from either the Securities and Exchange Commission filings of eighty-three percent of the retailers involved, from Haas, or from information compiled by DOR. These are legitimate appraisal sources. He performed his appraisal within the professional standards of the Financial Accounting Standards Board. He concluded that Haas' contracts could best be described as "distribution agreements," "because they are the means by which Haas distributes its publications" and because anyone familiar with the operations of a publisher would understand a line item on a balance sheet of a "distribution agreement" and not everyone would understand the term "license to use real property." It is noted that "distribution agreements" are not listed in the statute, but this, by itself, is not a fatal flaw. He maintained that the Haas contracts could not reasonably be characterized as a license to use real property, because the amount paid was well in excess of the fair rental value of the space. However, as part of his analysis, Mr. Volkman did not rely on Mr. Waronker's independent real estate appraisal, but conducted his own analysis as to the amount a retailer would likely charge a party seeking to utilize the floor space taken up by the approximate size of a single Haas rack. In doing so, Mr. Volkman was admittedly outside his realm of expertise. Mr. Volkman allocated the amounts Haas was paying as twelve percent to the "right to use real property"; twenty-four percent to "non-compete rights" (his term for exclusivity); fourteen percent to "trademark rights"; thirty-five percent to "distribution cost savings" (a term which seems to describe Haas not having to identify and mail its publications to interested persons or use a retailer's magazine rack);2/ and fifteen percent to "market penetration premium."3/ The last two calculations are not credible and undermine the entire allocations summary he presented. The distribution cost savings figure contains too many assumptions not fully documented. Mr. Volkman also arrived at his calculation of the "market penetration premium" merely by selecting the residual percentage sufficient to make up the difference, so that his other figures added up to 100 percent of the total fee paid by Haas to retailers. His reason for doing this is not plausible. He assumed that just because the growth rate of Haas' business far exceeded the growth rate in multi- family units, it must be that Haas substantially increased its market share during the audit period due to exclusivity. Ultimately, he could not explain the fifteen percent calculation for "market penetration" by the documents he relied on for calculating the other three categories. More damaging to the weight and credibility of his report is that Mr. Volkman did not consider Haas' signing bonuses as having anything to do with the exclusivity rights accruing to Haas. He considered the signing bonuses not to be an intangible right but only "compensation to retailers for negotiating these agreements." However, signing bonus rights seem to be the only intangible rights allocated in any of the contracts and were inherently recognized as such by DOR when it chose not to address them in the Assessment. There are also a number of other questionable portions of his report and opinion which cause it to be discounted and not accepted here.
Recommendation Based on the foregoing Findings of Facts and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order finding the Assessment factually and legally correct and sustaining the Assessment plus interest to date. DONE AND ENTERED this 18th day of June, 2004, 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 18th day of June, 2004.
Findings Of Fact Structural Homes, Inc., the Petitioner, is in the business of constructing prefabricated, custom-built homes at its plant in Florida City, Florida. These homes are primarily sold to customers in the Florida Keys. The homes consist of a prefabricated steel frame, which Structural Homes purchases, constituting the skeleton of the house. The frame is modular and is delivered, generally, a minimum of two modules, or sections, for the typical home because of building code requirements related to minimum square footage, which necessitates using two frame units to build a legally minimal size house. The frames are delivered from the supplier to the Structural Homes' plant in Florida City, where employees of Structural Homes' plant in Florida City, house around the skeleton consisting of adding frame walls, paneling, exterior siding walls, plumbing and flooring. The customer is given the opportunity during the assembly or construction of the home to select all tile, carpeting and other floor covering materials. The work at the job site, before construction of the home, consists primarily of only digging and installing the foundation, including anchor bolts for anchoring the house upon when it is delivered to the job site. The homes are assembled at the plant and then moved to the lot for bolting down to the foundation. One module or unit of such a house requires one trip by truck to deliver to the job site. Thus, there must be at least two trips to deliver the two units used to construct a house of the minimal 750 square foot size. Thus, the house is assembled almost solely at the Petitioner's plant and delivered in several trips to the job sited and bolted down. Although many more trips are necessary from the Petitioner's facility to the job site that involve various items of finish labor and construction, for all intents and purposes the house is, to a great degree, assembled at the plant and then delivered to the job site. At the job site, the house is bolted down to its foundation, carpet or other finish floor covering is put in and the plumbing, which was "roughed in" or "stubbed in" at the foundation at the job site, is connected with plumbing already installed in the house modules at the Petitioner's plant. In effect then, the only work done at the job site is foundation preparation, site erection of the completed modules, and connection of utility services, which are done at the lot. Pursuant to the Department's audit, it was determined that the bulk of the assessment, $8,389.49, including penalties and interest, related to tax on the fabrication of the completed homes at the factory. There was also a tax assessed on rental of the plant building from the Petitioner's landlord in the amount of $533.19, including penalties and interest, as well as a use tax on purchases by the Petitioner of materials generally from out-of-state vendors where no tax was paid, which assessment originally amounted to $2,697.18. After negotiations between the parties, the Department ultimately issued its revised notice of assessment, which culminated in the instant administrative proceeding. The parties stipulated at the hearing that there were no disputed issues of material fact, but pursuant to agreement, elected to proceed formally before the undersigned anyway.
Recommendation Having considered the foregoing Findings of Fact and Conclusion of Law, and the evidence in the record, it is therefore RECOMMENDED: That a Final Order be entered upholding the tax assessment involved herein and that the subject taxes, penalties and interest are due. DONE and ORDERED this 1st day of August, 1983, in Tallahassee, Florida. P. MICHAEL RUFF, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 2nd day of August, 1983.
Findings Of Fact Respondent Theodore Dorwin is a registered real estate broker, registration certificate number 0022474, 561 N.E. 79th Street, Miami, Florida. He also is now and was at all times alleged in the Administrative Complain the president and active firm member of Respondent Intermart, Inc., a registered corporate broker located at the same address. As broker with Intermart, Respondent holds registration certificate number . 0157090. Intermart is registered under certificate number 0157081. The registrations of both Dorwin and Intermart were suspended by Petitioner on July 21, 1976, for a period of ninety (90) days. By order, dated December 16, 1976, Petitioner denied Respondents' petition for reactivation and return of registration certificates. (Petitioner's Composite Exhibit 1) Intermart, Inc. was formed in the middle of 1975, but did not commence active operations until February, 1976. Prior to 1975, Dorwin had been a general real estate broker for various land companies in Florida. In 1975, he became associated for a brief period of time with a firm called Property Resales Service, Inc., of Miami, an organization that solicited listings for the resale of property. During the period February, 1975, until 1976, Dorwin was connected successively with International Land Brokers, Inc. (hereinafter "International") and Florida Landowners Service Bureau (hereinafter "Service Bureau"), both of which firms engaged in the solicitation of advance fees from out of state property owners for listing agreements whereby they undertook to advertise and sell the property for a ten percent commission. The listing agreements of these firms provided that the advance fee would be credited against the commission. In February, 1976, Intermart, Inc. was activated and began operations at the same office and with the same salesmen who had been used by Dorwin in his activities for the Service Bureau. It used virtually the identical "Listing and Brokerage Agreement" and promotional material as had the other firms. The change was brought about by the fact that commission checks received from the Service Bureau had "bounced." (Testimony of Dorwin, Petitioner's Exhibits 2,5,6,7,23,26,27,28) Respondents operated the advance fee business in the following manner: Lists of primarily out of state owners of land in large developments in Florida and other states were purchased by Respondents from individuals who sold such lists "on the street." In like manner, lists of prospective purchasers of such land were purchased. Information was placed on cards containing the name, address and phone number of the landowner, together with information as to the development where the land was located. A staff of some fifteen to twenty real estate salesmen were utilized to solicit listings from the prospective sellers over the telephone. Each salesman had a cubicle in a small office with a .telephone. These individuals worked in two shifts, six days a week, during the evening hours. Each salesman averaged about twenty to twenty-five telephone calls a night. When Intermart succeeded Dorwin's operation for the Service Bureau, there was little or no change in any of the above procedures. The average, listing fee was $350 , of which the soliciting salesmen received approximately one-third. The salesmen were provided a "script" or "opening statement" by Dorwin to use as a selling "pitch." The persons called were asked if they were interested in reselling their property. They were told that foreign investors around the world were interested in buying blocks of land in Florida and were quoted a sale price that usually was somewhat in excess of the current market value of the property. If the property owner expressed interest in listing his land for sale, literature was mailed to him which consisted of information about Intermart and the experience and qualifications of its officers, together with a form "Listing and Brokerage Agreement," and reprints of newspaper and other articles concerning the interest of foreign investors in land in the United States, and similar subjects. About two weeks later, the salesman would call the individual again to urge that he send in his advance fee, along with the signed listing agreement. The proposed selling price was fixed by the salesman from a large chart in the office that showed sample original purchase prices and amounts to be quoted as selling prices based on the number of years since purchase of the property. These amounts were used in all cases, regardless of where the property was located. The only deviation from the standard selling price was in cases where water or canal front property, golf course or business property was involved, in which case, $500 to $1,000 was added to the quoted figure. During the initial call, the salesman asked for the legal description of the lots in question and, if a listing was obtained, a copy of the agreement for deed or warranty deed was also requested. However, no efforts were made to check the legal descriptions of the property nor were any visits made to the property by Dorwin or other personnel of the firm. The sales man had nothing to do with actual sales of the property and did not contact prospective purchasers. Neither Dorwin nor one of his former salesmen who testified at the hearing was aware of any actual sales of listed property made by Intermart or the Service Bureau. No credible evidence was submitted that the property was ever checked for zoning restrictions or that prospective purchasers were contacted by anyone. Respondents did occasionally send a form letter to those listing property stating that Intermart "had the opportunity to present your property" to a named individual and that they would "endeavor to interest the prospect further." However nothing ever came of these supposed contacts. During the telephone conversations with sellers, the alesmen made statements to the effect that Intermart was making sales, and that the land would usually be sold within eight to nine months. In one case, a seller was told by one of Respondents' salesmen that Intermart had sold all of the property that had been listed with it. Further representations were that Argentine buyers loaded with money" wanted to invest in American real estate. One salesman represented that Respondents advertised all over the world in all foreign countries and in every state in the Union. A letter enclosed with promotional materials stated that Respondents advertised or had proposed advertising pending in a number of countries via major magazine and newspaper publications, and in Miami, Los Angeles, New York City, Boston and Chicago. Another landowner was told that the company had been in business for a period of ten years. It was also represented that Intermart had a computer printout on the latest market values of land and that this was used in determining their estimate of a selling price. In one instance, the salesman told the seller that they had identified a buyer for his land which would be part of a large block package to be sold to the individual and that a rapid decision had to be made whether or not to list. the property so that he could participate in the deal. He was further told that it would take about three months to close the sale with a Venezuelan investor. Attempts by the property owners to obtain copies of the listing agreement signed by Respondent proved to be futile, in spite of promises from its representatives to provide the same. In one instance, to induce a listing, the sales man told the landowner to cross out the amount shown on the listing contract that previously had stated a sale price and to pencil in an increased sales price. He also told him to make pencil corrections on the proposed agreement to indicate that the purchaser rather than the seller would pay the ten percent commission of the sales price. (Testimony of Judkins, Ladabauche, Nicholas, Burke, Petitioner's Composite Exhibit 2, Petitioner's Exhibits 5,6,7 [depositions]) Respondents' promotional literature and information that was sent to prospective sellers of property contained various promises and representations that were not kept, as follows: Respondents stated that it would "analyze" the property to arrive at a correct selling price by reviewing the status of development and zoning in the immediate area of the property. In fact, the selling price was based solely on an arbitrary figure selected from a chart on the wall that did not take into consideration the precise location of the property or zoning considerations. Respondents stated that "Your property legals are checked thoroughly." In fact, any legal description of the property was obtained solely from copies of agreements for deed or warranty deeds supplied by the owner , and were not further checked in any manner. Respondents stated "In order for us to successfully merchandise and receive the highest offer for your property (ies) considerable expense is involved because a great deal of time is put forth on your behalf and many of the property(ies) are being offered for sale sight unseen." In fact, only a small amount of money and little or no time was expended to sell the property. After the property owner had submitted his advance fee and listing agreement to Respondents, no further efforts were made on his be half nor was he ever contacted thereafter by the firm. (Testimony of Lewis, Judkins, Ladabauche, Nicholas, Petitioners' Composite Exhibit 2, Petitioners' Exhibits 57, 23) In the "Listing and Brokerage Agreement," Respondents a greed to use its "efforts to secure a purchaser for the property" and to include the property in its directory of "available properties, to be distributed to other real estate brokers." It also contained A the following pertinent undertakings: "4. In consideration of this listing, you agree: To cause said property to be included in your listing directory and in two successive issues of said directory within a period of one year. Contemporaneously with the appearance of said listing in the directory, you agree to direct the efforts of your organization to bringing about a sale of my property; To advertise said property as you deem advisable in magazines or other mediums of merit: I understand that this agreement does not guarantee the sale of my property, but that it does guarantee that you will make an earnest effort pursuant to the aforementioned provisions." (Petitioner's Composite Exhibit 23) Respondent Dorwin testified that he planned to issue a catalog of listed properties in June, 1976 to be distributed to various investors and brokers in the United States and foreign Mailings this depend 7 countries. of catalog were to on responses to .advertisements placed in newspapers around the world and in the United States in April. No action toward any of these goals was taken until March, 1976 when Intermart entered into an agreement with Currency Control Advertising, Miami, Florida, to act as an advertising agency for brochures, printing, copy, layout, typesetting, art, newspaper and magazine advertising, public relations, radio and television. Under this contract, small, one insertion newspaper ads were placed in approximately seven newspapers of various foreign countries and Canada, and in newspapers in Chicago, Los Angeles and New York, costing approximately $500. These ads read as follows: "U.S. Investments Catalogue . . . $9.95 U.S. Complimentary to Investors and to the Trade." Property listings for the catalog were not provided to the advertising agency until the last half of July, 1976. It was not published until August 20th but has not been mailed due to Respondents' current suspension by Petitioner. A few responses were received as a result of the newspaper advertisements but Dorwin testified that nothing was done to follow-up such inquiries because he was waiting for the catalog to be published. Five thousand copies of the catalog were printed at a cost of some $4,500. At the present time, Intermart owes the advertising firm about $2,500 for its work. Dorwin testified that he planned to distribute the catalog to several thousand investors and brokers listed in the International Real Estate Federation, of which he was a member, but that he was unable to do so because of his suspension by Petitioner in July. During the period January-June, 1976, Intermart's records reflected a gross income from the advance fee business of approximately $190,000. About forty-eight per cent of this amount was paid to salesmen for commissions on listing fees, twenty-eight per cent for officers salaries, and about one and one-half per cent was paid for advertising. (Testimony of Dorwin, Weinstein, Stowe, Leader, Petitioner's Exhibits 4, 825) During the last half of June, 1975, Intermart, upon advice of Counsel, in anticipation of a new state law regulating advance fee contracts, stamped on their listing agreements a statement that the parties agreed the advance fee did not constitute trust funds and that the monies therefrom could be expended for expenses. Listing fees received after July 1, 1976, were placed in an Intermart, Inc. trust account of the Capital Bank of North Bay Village, Florida, Account 10452, and as of December 31, 1976, this account showed a balance of $5,083.35 that is being retained by Respondents pending the outcome of present proceedings. (Testimony of Dorwin, Petitioner's Dorwin testified that, although he was aware the other advance fee firms with which he had been associated did not follow through on listings to attempt to make sales, he planned to do so by his newspaper advertisements and issuance of the catalog. However, he admitted that no information was ever sent to any prospective purchaser, that no advertisements were ever placed that described individual parcels of property, and that the only contact ever made with prospective purchasers was by telephone calls. He further admitted that no one from the firm ever checked public records involving the property listed for sale to assure the accuracy of information provided by the owners, and only token visits were ever made to view the listed properties by any member of the firm. He maintained that salesmen were not given a "script" to use but merely an "opening statement" and that they were free to deal with property owners as individuals. He was unaware of where the chart showing sample property values had been obtained and stated that such a chart was not used during Intermart's operations but had been used only during the previous operation at the same address. He denied ever telling salesmen to inform expected sellers that the firm was selling blocks of land but acknowledged that in monitoring telephone conversations of the salesmen, they did exaggerate at times. (Testimony of Dorwin) In view of the totality of the evidence, it is found that the operations of Intermart, Inc. were designed and carried out with the sole intention of extracting monies from landowners with no intent to carry out the stated promises of "earnest efforts" to sell the property.
Recommendation That the certificates of registration of Theodore Dorwin and Intermart, Inc. be revoked pursuant to subsection 475.25(3), F.S. DONE and ENTERED this 11th day of February, 1977, in Tallahassee, Florida. THOMAS C. OLDHAM Hearing Officer Division of Administrative Hearings Room 530 Carlton Building Tallahassee, Florida 32304 COPIES FURNISHED: Richard J. R. Parkinson, Esquire Florida Real Estate Commission 2699 Lee Road Winter Park, Florida 32789 Louis B. Guttmann, Esquire 2699 Lee Road Winter Park, Florida 32789 Harold Mendelow, Esquire Manners and Amoon, P.A. 4349 N.W. 36th Street, Suite 106 Miami, Florida 33166
