Findings Of Fact At the time and place scheduled for final hearing, nobody appeared on behalf of petitioner and no evidence was adduced.
Recommendation It is, accordingly recommended that respondent dismiss petitioner's request for a formal administrative proceeding. RECOMMENDED this 19th day of November, 1991, in Tallahassee, Florida. ROBERT T. BENTON, II Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 19th day of November, 1991. COPIES FURNISHED: J. Thomas Herndon, Executive Director Department of Revenue 104 Carlton Building Tallahassee, FL 32399-0100 Vicki Weber, General Counsel Department of Revenue 204 Carlton Building Tallahassee, FL 32399-0100 Kevin J. O'Donnell, Esquire Department of Legal Affairs Tax Section, The Capitol Tallahassee, FL 32399-1050 Louise J. Allen, Esquire Stearns, Weaver, Miller, Weissler, Alhadeff & Sitterson, P.A. 150 W. Flagler Street, Suite 2200 Miami, FL 33130
The Issue The issue is whether Petitioner collected and remitted to Respondent the correct amount of sales and use taxes during the audit period from October 1, 2004, through September 30, 2007, and, if not, what additional amount of tax plus penalty and interest is due.
Findings Of Fact Petitioner True Blue Pools (Petitioner, taxpayer, or TBP) is a domestic corporation headquartered in Miami-Dade County, Florida. TBP services, repairs, and renovates swimming pools and constructed some pools during the audit period. Respondent, Florida Department of Revenue (Respondent or DOR), is the agency of state government authorized to administer the tax laws of the State of Florida, pursuant to section 213.05, Florida Statutes.2 DOR 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 DOR or its authorized agents at all reasonable hours pursuant to section 212.12(6), Florida Statutes. DOR 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. On November 2, 2007, DOR initiated an audit of TBP to determine whether it was properly collecting and remitting sales and use taxes to DOR. The audit period was from October 1, 2004, through September 30, 2007. On December 15, 2008, DOR sent TBP its Notice of Intent to Make Audit Changes (NOI), with schedules, showing that TBP owed to DOR additional sales and use taxes in the amount of $113,632.17, penalty in the amount of $28,406.05, and interest through December 16, 2008, in the amount of $34,546.59, making a total assessment in the amount of $176,586.81. On October 26, 2009, DOR issued its Notice of Proposed Assessment. TBP timely challenged the Notice of Proposed Assessment, filing its petition with DOR and requesting an administrative hearing. Subsequent to the petition being filed, additional documentation was provided by TBP resulting in a revision to the tax, interest, and penalty amount due. DOR's revised work papers, dated May 27, 2010, claim Petitioner owes $64,430.83 in tax, $16,107.71 in penalty, and interest through May 27, 2010, in the amount of $27,071.99, with an assessment of $107,610.53. The assessed penalty, $16,107.71, was calculated after 25% of the penalty was waived, pursuant to subsection 213.21(3)(a), Florida Statutes, based on DOR's determination that there is no evidence of willful negligence, willful neglect, or fraud. The audit was conducted to determine liability in four categories: improper sales tax exemptions, unpaid sales taxes for taxable expenses, unpaid use taxes on fixed assets, and unpaid use taxes on taxable materials used to fulfill contracts to improve real property. Sales Tax Exemptions Due to the large volume of invoices and other records, the auditor conducted a random sampling of invoices for three months during the audit period, October 2004, January 2005, and September 2007.3 If no sales tax was collected and the Petitioner claimed that the transaction was exempt from the requirement to pay taxes, the auditor looked for proof that either the TBP customer was an exempt organization, for example, a school or a church, or that TBP had provided its suppliers with a DOR Form DR-13 to exempt from taxes products acquired for resale. In the absence proof of either type of exemption, DOR assumed taxes should have been paid. Using the difference between taxes collected and taxes due for the three months, the auditor determined that the percentage of error was .016521. When .016521 was applied to total sales of $1,485,890.79 for the 36-month audit period, the results showed that an additional $24,548.41 in sales taxes should have been collected from customers, and is due from TBP. Although a business is required to pay taxes for the materials it purchases to use in its business, it is not required to collect taxes from its customers when it enters into lump sum contracts to perform a service for customers. At least one invoice for $9,500.00 that the auditor treated as an improper exemption was, in fact, a partial payment on a lump-sum contract. The invoice referenced a "shotcrete draw," which represented the collection of funds after the concrete part of pool construction was completed. TBP is not required to collect taxes when it uses lump-sum contracts. Other invoices for pool repair and services were also mischaracterized as exempt by the TBP, but it is not clear that all were payments related to lump-sum contracts. DOR's auditor, nevertheless, testified as follows: With the knowledge that I have for True Blue Pools, being a lump-sum contractor, True Blue Pools should not charge their customer any sales tax. Transcript at pages 67-68. DOR concedes that some of TBP's transactions are also exempt from taxes as improvements to real property. In its Proposed Recommended Order, DOR asserted that TBP's use of the term "improvements to real property" is overbroad, but it did not specify how or why this is the case. During cross- examination of the owner of TBP, only one invoice for $500.00 for leak detection on the Delgado property was shown to have been for a service rather than for swimming pool construction. Taxable Expenses DOR audited TBP's purchases of tangible personal property used in the daily operation of its business. The products included chlorine and other chemicals, office supplies, and vehicle parts, expenses, and repairs. The ledger for a 12- month period, calendar year 2006, showed an average monthly additional tax due of $111.18, or a total of $4,002.48 in additional taxes for the 36-month audit period. As noted in Petitioner's Proposed Recommended Order, "[t]he representative of TBP did not dispute DOR's allegation that no tax may have been paid on the purchase of all of these items " Fixed Assets TBP's list of fixed assets was taken from the depreciation schedule on Internal Revenue Service Form 4562. The items listed are computer- and software-related. TBP provided no proof that it had paid a use tax. The additional tax due equals $419.94. Petitioner's Proposed Recommended Order includes the statement that "[a]gain, the representative of TBP did not dispute DOR's allegation that no tax may have been paid on the purchase of these items " Taxable Materials Taxable materials, those purchased to fulfill a contract to improve real property, included items used to build, renovate, and repair pools. The items included concrete, meters, drains, and valves. For the 12-month sample period, calendar year 2006, TBP failed to pay taxes on material purchases in the total amount of $168,310.05, or an average of $14,078.96 a month. For the 36-month audit period, the total of the purchases was $506,842.56. With a 6 percent tax due for the state and 1 percent for the county, the total additional tax due on materials is $35,460.00. TBP conceded that it improperly used a resale exemption to purchase taxable materials from suppliers without paying taxes. The materials were used to provide services and were not resold. Acknowledging again that TBP uses lump-sum contracts, this time to support the collection of additional taxes, the auditor testified as follows: And the law states that the taxpayer's [sic] an ultimate consumer of all materials purchased to fulfill a lump-sum contract, and that's what they told me they operate under, a lump-sum contract. Transcript at page 58. At the hearing, TBP used its actual profit and loss statement to show that the cost of goods it sold (general purchases and taxable materials) in the amounts of $18,360.77 in October 2004, $8,519.22 in January 2005, and $4,818.65 in September 2007. Corresponding taxes for each of those months should have been $1,285.25, $596.35, and $337.31, or an average of $739.63 a month, or a total of $26,626.68 for 36 months. The goods that it sold were not at issue in the audit of taxable materials, rather it was TBP's purchases from vendors that should have been taxed that resulted in DOR's audit results. Total Additional Sales and Use Taxes Due The three categories of additional taxes due, $4,002.48 for taxable expenses, $419.94 for fixed assets, and $35,460.00 for taxable materials, equal $39,882.42 in additional taxes due during the audit period. Taxes Paid TBP filed DOR Forms DR-15, monthly sales and use tax reporting forms, and paid sales and use taxes during the audit period. For the sample months used by DOR to examine sales tax exemptions, TBP paid $1,839.10 in taxes in October 2004, $1,672.73 in January 2005, and $1,418.13 in September 2007. Using the three months to calculate an average, extended to 36 months, it is likely that TBP paid $59,712 in taxes. TBP asserted that DOR was required to, but did not, offset the deficiency of $39,882.42, by what appears to be an overpayment of $59,712.00 in sales and use taxes. Other than pointing out that the amount reported on the DR-15s differed, being sometimes more and sometimes less than the amount shown on the profit and loss statements, DOR did not dispute TBP's claim that it had paid sales and use taxes. TBP's representative explained that end-of-the-year adjustments for additional collections or for bad debt could cause the amounts on the DR-15s and profit and loss statements to differ. With regard to the taxes paid, DOR took the following position in its Proposed Recommended Order: Petitioner's DR-15's [sic] for the collection periods October 2004, and January 2005, [and September 2007] (Petitioner's Composite Exhibit 1) do reflect sales tax being collected and remitted to DOR. DOR does not allege that Petitioner never paid tax on its purchases, or made bona fide exempt sales for which no tax was collected. DOR's audit findings identify just those which occurred within the sample period, scheduled in the auditor's workpapers, and applied over the entire audit period. The DR-15s are taken from the sample months selected by DOR within the audit period, and DOR does not address TBP's claim that a set off for taxes paid was mandatory, pursuant to subsection 213.34(4), Florida Statutes. Using the audit schedules, DOR showed credit for taxes paid in the amounts of $20.63 for taxable expenses, $0 for fixed assets, and $24.31 in state taxes and $1.03 for county taxes on taxable materials. The amounts are far less that the $59,712.00 in sales/use taxes TBP showed that it paid during the audit period.
Recommendation Based upon the forgoing findings of fact and conclusions of law, it is recommended that the Department of Revenue issue a final order dismissing the Notice of Intent to Make Audit Changes dated December 15, 2010. DONE AND ENTERED this 20th day of January, 2011, in Tallahassee, Leon County, Florida. S ELEANOR M. HUNTER 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 20th day of January, 2011.
The Issue Whether the contested and unpaid portions of the tax, penalty and interest assessment issued against Petitioners as a result of Audit No. 9317210175 should be withdrawn as Petitioners have requested?
Findings Of Fact Based upon the evidence adduced at hearing, and the record as a whole, the following Findings of Fact are made: Shuckers is an oceanfront restaurant and lounge located at 9800 South Ocean Drive in Jensen Beach, Florida. In November of 1992, Petitioner Mesa's brother, Robert Woods, Jr., telephoned Mesa and asked her if she wanted a job as Shuckers' bookkeeper. Woods had been the owner of Shuckers since 1986 through his ownership and control of the corporate entities (initially Shuckers Oyster Bar Too of Jensen Beach, Florida, Inc., and then NAT, Inc.) that owned the business. Mesa needed a job. She therefore accepted her brother's offer of employment, notwithstanding that she had no previous experience or training as a bookkeeper. When Mesa reported for her first day of work on November 19, 1992, she learned that Woods expected her to be not only the bookkeeper, but the general manager of the business as well. Mesa agreed to perform these additional responsibilities. She managed the day-to-day activities of the business under the general direction and supervision of Woods. After a couple of weeks, Woods told Mesa that it would be best if she discharged her managerial responsibilities through an incorporated management company. Woods had his accountant draft the documents necessary to form such a corporation. Among these documents were the corporation's Articles of Incorporation. Mesa executed the Articles of Incorporation and, on December 3, 1992, filed them with the Secretary of State of the State of Florida, thereby creating Petitioner TAN, Inc. TAN, Inc.'s Articles of Incorporation provided as follows: The undersigned subscribers to these Articles of Incorporation, natural persons competent to contract, hereby form a corporation under the laws of the State of Florida. ARTICLE I- CORPORATE NAME The name of the corporation is: TAN, INC. ARTICLE II- DURATION This corporation shall exist perpetually unless dissolved according to Florida law. ARTICLE III- PURPOSE The corporation is organized for the purpose of engaging in any activities or business permitted under the laws of the United States and the State of Florida. ARTICLE IV- CAPITAL STOCK The corporation is authorized to issue One Thousand (1000) shares of One Dollar ($1.00) par value Common Stock, which shall be designated "Common Shares." Article V- INITIAL REGISTERED OFFICE AND AGENT The principal office, if known, or the mailing address of this corporation is: TAN, INC. 9800 South Ocean Drive Jensen Beach, Florida 34957 The name and address of the Initial Registered Agent of the Corporation is: Linda A. W. Mesa 9800 South Ocean Drive Jensen Beach, Florida 34957 ARTICLE VI- INITIAL BOARD OF DIRECTORS This corporation shall have one (1) director initially. The number of directors may be either increased or diminished from time to time by the By-laws, but shall never be less than one (1). The names and addresses of the initial directors of the corporation are as follows: Linda A. W. Mesa 9800 South Ocean Drive Jensen Beach, Florida 34957 ARTICLE VII- INCORPORATORS The names and addresses of the incorporators signing these Articles of Incorporation are as follows: Linda A. W. Mesa 9800 South Ocean Drive Jensen Beach, Florida 34957 On the same day it was incorporated, December 3, 1992, TAN, Inc., entered into the following lease agreement with the trust (of which Woods was the sole beneficiary) that owned the premises where Shuckers was located: I, Michael Blake, Trustee, hereby lease to Tan, Inc. the premises known as C-1, C-2, C-3, C-4, 9800 South Ocean Drive, Jensen Beach, Florida for the sum of $3,000.00 per month. This is a month to month lease with Illinois Land Trust and Michael Blake, Trustee. Mesa signed the agreement in her capacity as TAN, Inc.'s President. She did so at Woods' direction and on his behalf. No lease payments were ever made under the agreement. 3/ The execution of the lease agreement had no impact upon Shuckers. Woods remained its owner and the person who maintained ultimate control over its operations. At no time did he relinquish any part of his ownership interest in the business to either Mesa or her management company, TAN, Inc. Mesa worked approximately 70 to 80 hours a week for her brother at Shuckers doing what he told her to do, in return for which she received a modest paycheck. Woods frequently subjected his sister to verbal abuse, but Mesa nonetheless continued working for him and following his directions because she needed the income the job provided. As part of her duties, Mesa maintained the business' financial records and paid its bills. She was also required to fill out, sign and submit to Respondent the business' monthly sales and use tax returns (hereinafter referred to as "DR- 15s"). She performed this task to the best of her ability without any intention to defraud or deceive Respondent regarding the business' tax liability. The DR-15s she prepared during the audit period bore NAT, Inc.'s Florida sales and use tax registration number. On the DR-15 for the month of December, 1992, Mesa signed her name on both the "dealer" and "preparer" signature lines. Other DR-15s were co-signed by Mesa and Woods. In April of 1993, Woods told Mesa that she needed to obtain a Florida sales and use tax registration number for TAN, Inc., to use instead of NAT, Inc.'s registration number on Shuckers' DR-15s. In accordance with her brother's desires, Mesa, on or about May 14, 1993, filed an application for a Florida sales and use tax registration number for TAN, Inc., which was subsequently granted. On the application form, Mesa indicated that TAN, Inc. was the "owner" of Shuckers and that the application was being filed because of a "change of ownership" of the business. In fact, TAN, Inc. was not the "owner" of the business and there had been no such "change of ownership." By letter dated June 22, 1993, addressed to "TAN INC d/b/a Shuckers," Respondent gave notice of its intention to audit the "books and records" of the business to determine if there had been any underpayment of sales and use taxes during the five year period commencing June 1, 1988, and ending May 31, 1993. The audit period was subsequently extended to cover the six year period from June 1, 1987 to May 31, 1993. Relying in part on estimates because of the business' inadequate records, auditors discovered that there had been a substantial underpayment of sales and use taxes during the audit period. The auditors were provided with complete cash register tapes for only the following months of the audit period: June, July, August and December of 1992, and January, February, March, April and May of 1993. A comparison of these tapes with the DR-15s submitted for June, July, August and December of 1992, and January, February, March, April and May of 1993 revealed that there had been an underreporting of sales for these months. Using the information that they had obtained regarding the three pre- December, 1992, months of the audit period for which they had complete cash register tapes (June, July and August of 1992), the auditors arrived at an estimate of the amount of sales that had been underreported for the pre- December, 1992, months of the audit period for which they did not have complete cash register tapes. The auditors also determined that Shuckers' tee-shirt and souvenir sales, 4/ Sunday brunch sales, cigarette vending sales, vending/amusement machine location rentals 5/ and tiki bar sales that should have been included in the sales reported on the DR-15s submitted during the audit period were not included in these figures nor were these sales reflected on the cash register tapes that were examined. According of the "Statement of Fact" prepared by the auditors, the amount of these unreported sales were determined as follows: TEE-SHIRT SALES: Sales were determined by estimate. This was determined to be $2,000/ month. No records were available and no tax remitted through May, 1993. SUNDAY BRUNCH SALES: Sales were determined by estimate. This was determined to be 100 customers per brunch per month (4.333 weeks). No audit trail to the sales journal was found and no records were available. CIGARETTE VENDING SALES: The estimate is based on a review of a sample of purchases for the 11 available weeks. The eleven weeks were averaged to determine monthly sales at $3/pack. VENDING MACHINE LOCATION RENTAL REVENUE: The revenue estimate is based on a review of a one month sample. TIKI BAR SALES: The sales estimate is based on a review of infrequent cash register tapes of February, 1993. The daily sales was determined by an average of the sample. The number of days of operation per month was determined by estimate. In addition, the auditors determined that TAN, Inc. had not paid any tax on the lease payments it was obligated to make under its lease agreement with Illinois Land Trust and Michael Blake, Trustee, nor had any tax been paid on any of the pre-December, 1992, lease payments that had been made in connection with the business during the audit period. According to the "Statement of Fact" prepared by the auditors, the amount of these lease payments were determined as follows: The estimate is based on 1990 1120 Corporate return deduction claimed. This return is on file in the Florida CIT computer database. The 1990 amount was extended through the 6/87 - 11/92 period. For the period 12/92 - 5/93 audit period, TAN's current lease agreement of $3,000/month was the basis. No documentation was produced during the audit supporting any the sales tax exemptions that the business had claimed during the audit period on its DR-15s. 6/ Accordingly, the auditors concluded that the sales reported as exempt on the business' DR-15s were in fact taxable. Using records of sales made on a date selected at random (February 1, 1993), the auditors calculated effective tax rates for the audit period. They then used these effective tax rates to determine the total amount of tax due. An initial determination was made that a total of $201,971.71 in taxes (not including penalties and interest) was due. The amount was subsequently lowered to $200,882.28. On or about December 22, 1993, TAN, Inc., entered into the following Termination of Lease Agreement with Ocean Enterprises, Inc.: TAN, Inc., a Florida corporation, hereby consents to termination of that certain lease of the premises known as C-1, C-2, C-3 and C-4 of ISLAND BEACH CLUB, located at 9800 South Ocean Drive, Jensen Beach, Florida, dated December 3, 1992, acknowledges a landlord's lien on all assets for unpaid rent; and transfers and sets over and assigns possession of the aforesaid units and all of its right, title and interest in and to all inventory, equipment, stock and supplies located on said premises 7/ in full satisfaction of said unpaid rent; all of the foregoing effective as of this 22nd day of December, 1993. FOR AND IN CONSIDERATION of the foregoing termin- ation of lease, OCEAN ENTERPRISES, Inc., a Florida corporation, hereby agrees to pay Linda Mesa, each month all of the net revenues of the operation of the bar and restaurant located on said premises, up to the sum of $15,000.00, for sales tax liability asserted against TAN, Inc. or Linda A. W. Mesa based upon possession or ownership of said premises or any of the assets located thereon, plus attorney's fees incurred in connection with defending or negotiating settlement of any such liability. Net revenue shall mean gross revenue, less operating expenses, includ- ing, but not limited to, rent, up to the amount of $5,000.00 per month, costs of goods sold, utilities, payroll and payroll expense and insurance. OCEAN ENTERPRISES, Inc. represents that it has entered into a lease of said premises for a term of five years commencing on or about December 22, 1993, pursuant to the terms and conditions of which OCEANFRONT [sic] ENTERPRISES, Inc. was granted the right to operate a restaurant and bar business on said premises. Ocean Enterprises, Inc., leases the property from Island Beach Enterprises, which obtained the property through foreclosure. TAN, Inc., has been administratively dissolved.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Department of Revenue enter a final order withdrawing the contested and unpaid portions of the assessment issued as a result of Audit No. 9317210175, as it relates to TAN, Inc., and Linda A. W. Mesa. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 27th day of June, 1995. STUART M. LERNER 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 27th day of June, 1995.
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 Whether the Petitioner owes sales and use tax (plus interest and penalties) for charges made to its catering customers for the labor of waiters serving complete meals before December 7, 1987.
Findings Of Fact During the period, May 1, 1984 through September 30, 1984, Gourmet To Go did not charge its customers sales tax for labor provided by waiters serving full meals that it catered. Gourmet To Go treated the waiters as subcontractors, and shows charges for waiters on its bill as "Sub Contract Services." During the period May 1, 1984 through December 7, 1987, Gourmet To Go collected sales tax on the services of waiters when the food served was canapes, sandwiches, hors d'oeuvres or party tidbits. Gourmet To Go commonly served both full meals and party tidbits as part of its catering business. The Department of Revenue audited the accounts of Gourmet To Go by reviewing gross receipts, and subtracting any exempt sales Gourmet To Go reported to the Department on form DR- 15. This is the audit method ordinarily used by the Department. The invoices of Gourmet To Go show that it did not charge its clients sales tax upon amounts shown on invoices for labor of waiters serving dinners. The agreed amount due for the period from May 1, 1984 through April 30, 1987, if Gourmet To Go is liable for the taxes is as follows: Tax $6,335.67 Penalty $1,583.92 Interest computed through the date of the hearing, June 23, 1989 - $2,733.50 TOTAL $10,650.09 For the period May 1, 1987 through April 30, 1987, the amount due if Gourmet To Go is liable for the sales tax is: Tax $1,214.70 Penalty $303.67 Interest the date computed through of the hearing, June 23, 1989 - $241.11 TOTAL $1,759.48 Interest would continue to accrue on any unpaid amounts due through the date payment is made.
Recommendation It is RECOMMENDED that a Final Order be entered by the Department of Revenue finding Gourmet To Go, Inc. liable for sales tax on charges to its customers for services of waiters at dinners it catered during the period May 1, 1984, through April 30, 1988, with penalties and interest through the date of payment. DONE and ENTERED this 5th day of September, 1989, at Tallahassee, Florida. WILLIAM R. DORSEY, JR. 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 5th day of August, 1989. APPENDIX TO THE FINAL ORDER IN DOAH CASE NO. 88-6367 Rulings on Proposals Made By The Petitioner, Gourmet To Go, Inc. The substance of all facts proposed by Gourmet To Go, Inc. have been included in the Recommended Order. COPIES FURNISHED: Larry V. Bishins, Esquire 4548 North Federal Highway Ft. Lauderdale, FL 33308 Lealand L. McCharen, Esquire Assistant Attorney General The Capitol Building Tallahassee, FL 32399-1050 William D. Moore, General Counsel Department of Revenue 203 Carlton Building Tallahassee, FL 32399-0100 Katie D. Tucker, Executive Director Department of Revenue 104 Carlton Building Tallahassee, FL 32399-0100
The Issue The issue for determination is whether Petitioner owes unpaid sales and use tax, interest, and penalties for the period of February 1, 1994 through June 30, 1998.
Findings Of Fact Based on the oral and documentary evidence presented at the final hearing and on the entire record of this proceeding, the following findings are made. Petitioner, Macfarlane, Ferguson, & McMullen, P.A., ("Macfarlane"), is a law firm located in Tampa, Florida. In May 1993, Macfarlane entered into a Copy Control Services Agreement ("1993 Contract") with Copy Control Center ("CCC"). The 1993 Contract, which was effective for three years, called for CCC to provide copying services within the physical confines of the MacFarlane law firm. CCC provided the personnel and MacFarlane provided the equipment and space for copying. The 1993 Contract called for a flat rate charge to Macfarlane. This stated flat rate charge covered a maximum number of copies each month. Pursuant to the terms of the 1993 Contract, so long as MacFarlane did not make more than 160,000 copies per month, it was charged a flat rate of $10,000 per month. Additional copy-related work over the flat rate charge for the maximum of 160,000 copies was at additional cost. An appendix to the 1993 Contract set forth the additional costs not covered by the flat monthly fee. If no copies were made under the contract, the base fee of the $10,000 would still have to be paid by Macfarlane. Paragraph 4 of the 1993 Contract required CCC to bill Macfarlane "monthly for the preceding month's copies." That paragraph of the 1993 Contract also provides that, "[i]ncluded with the invoice will be a detailed monthly usage report." The invoices issued under the 1993 Contract listed all costs for the month or preceding month. At the bottom of each invoice, CCC listed a total "sale amount" which consisted of the total of the copying facilities management charge and the additional charges. Between May 1993 and January 1994, Macfarlane paid sales tax on the total amount invoiced under the 1993 Contract (i.e. for all goods (copies) and services). In 1993 and 1994, the Department audited CCC. The audit was conducted by Elizabeth Sanchez, an auditor employed by the Department. Based on the 1993 and 1994 audit of CCC, the Department, through its auditor, Ms. Sanchez, alleged that CCC was not properly collecting sales tax from its clients, such as Macfarlane. Specifically, Ms. Sanchez determined that CCC should not have been taxing the entire cost of the 1993 Contract since a portion of the contract was related to services. Instead, the auditor represented that CCC should only tax the direct materials for the photocopy process (paper, toner, developer, and other supplies). Ultimately, CCC was assessed $16,000 in back taxes because it failed to pay sales tax on direct materials. During the aforementioned audit of CCC, Ms. Sanchez developed a formula which CCC could use in charging sales and use taxes to its clients. The formula was discussed with CCC personnel. CCC believed that the formula devised by Ms. Sanchez required or allowed the allocation of tax between nontaxable services and taxable photocopy consumables. Based on its understanding of the formula, CCC quit taxing Macfarlane for the entire amount of the monthly invoices issued under the 1993 Contract. Rather, consistent with its understanding of what was allowed under Ms. Sanchez's formula, CCC modified its billing to allocate tax between what CCC considered to be the facilities management services rendered under the 1993 Contract and the photocopy consumables used under that contract. The Department does not dispute that Ms. Sanchez developed a formula during the 1993 and 1994 audit of CCC. In fact, in the Department's Response to Petitioner's Request for Admissions, the Department admits that "Ms. Sanchez did audit Copy Control Center . . . and did develop a formula during that audit." However, the Department contends that the formula developed by Ms. Sanchez has no basis in law and fact and her actions are contrary to Rule 12A-1.0161(7)(a), Florida Administrative Code. According to the Department, that Rule requires both a statement of the actual cost of the taxable sales and the nontaxable services and the separation of taxable sales from non-taxable services in a contract or invoice for the service to be untaxed. In 1996, Macfarlane executed a new Copy Control Services Agreement with CCC (the "1996 Contract"). The 1996 Contract, dated May 22, 1996, was in effect from May 1996 through April 30, 2000. The 1996 Contract contained similar terms and conditions as the 1993 Contract, including a flat-rate charge and a maximum number of copies before additional charges were imposed. The flat-rate charge in the 1996 contract was $10,200 and the maximum number of copies before additional charges were imposed increased to 170,000. Additional copy- related work over the flat rate charge was at additional cost. The additional costs not covered by the flat monthly fee were set forth in an appendix to the 1996 Contract. Paragraph 6 of the 1996 Contract was entitled "Invoices." That section provides in pertinent part the following: A summary invoice for all Customer Locations shall be sent by Copy Control to the bill-to address and contact person of the Customer set forth hereinbelow, on a monthly basis. The monthly minimum base charge will be invoiced on the first day of each month. Additional charges for copies in excess of target volume or additional services from the previous month will be included with this invoice. In addition, Copy Control specifically agrees to provide to such Customer contact person, on a monthly in arrears basis, a summary report of the C.C.M. [Copy Control Management] Services transaction activity at, (A) all Customer Locations; and, (B) the Copy Control back-up facility, if any ("Summary Report"). Each Summary Report will contain, at a minimum, the following information: The total volume of Copies rendered; The number of Copies rendered per Customer location; The number of Copies above the Targeted Copy Volume, if any, and total Excess Copy Charge therefor by Customer Location and Copy Control back-up facility; The volume of Copies and associated dollar amount rendered at Copy Control's back-up facility, if any; The number of Copies "short" of Targeted Copy Volume; Additional Supplies procured, if any; Amount of overtime paid, if any, for Copy Control Personnel and dates therefor; A description of the Related Services, if any provided by Copy Control and the charge(s) therefore, if any; (emphasis supplied) Consistent with the terms of the 1996 Contract, CCC rendered an invoice to Macfarlane each month during the term of the contract and during the remainder of the audit period covered by that contract. Each invoice listed charges for making copies and off-site copies and other copy-related work and/or materials and products. Under the line for "Copying Facilities Mgt. Billing" were the additional charges made according to the appendix to the contract. The following invoice, dated June 30, 1995, is representative of the monthly invoices issued by CCC to Macfarlane during the period covered by the Department's audit of Macfarlane. That invoice provides in material part the following: COPY CONTROL CENTER INVOICE NO. 131611 3907 W. Osborne Avenue Tampa, Florida 33614 SOLD TO: MacFarlane Ausley & et al 23rd Floor LeeAnn Conley 111 E. Madison Street Tampa, Florida 33602 INVOICE DATE 6/30/95 QYT. ORDERED 1 QTY. SHIPPED 1 ITEM NO. COPIES DESCRIPTION COPIES UNIT PRICE 10000.00 Copying Facilities Mgt.Billing for June 23913 23913 Copies Copies Overage 0.04 1 1 TAX Tax on CCM Material 106.39 1 1 Copies Off Site Services 349.36 1 1 TONER 90 TONER 174.25 9 9 STOCK 8 1/2 x 11 White Paper 2.85 SALE AMOUNT 11612.17 MISC. CHARGES 6.500% SALES TAX 35.70 FREIGHT TOTAL 11647.87 For all the invoices generated under the 1996 Contract, CCC taxed Macfarlane in accordance with its understanding of the formula devised and recommended by Ms. Sanchez. Based on application of this formula, Macfarlane was charged and remitted only sales tax for the consumable goods portion of the contract. During the audit period which is the subject of this proceeding, February 1, 1994 through June 30, 1998, the sales tax was either 6.5 percent or 7 percent, whichever was in effect at the time of the invoice. The sales tax listed on the invoices do not reflect tax on the total amount of the invoice. A multiplication of the total amount by either 6.5 or 7 percent reveals that the amount of sales taxes paid by Macfarlane for the audit period in question, February 1, 1994 through June 30, 1998, was only on a small portion of the total invoice billing. The 1993 Contract and the 1996 Contract between Macfarlane and CCC do not address, contain language, or speak directly to any "facilities management services." Neither do the contracts define the terms "service," "related services," or "other related services." Although the terms listed in paragraph 22 above are not defined in the 1993 Contract and the 1996 Contract, Mr. Cayo, the regional operations manager of Lanier Professional Services (LPS), formerly CCC, testified that other services included facilities management services. According to Mr. Cayo, "facilities management" at Macfarlane included making deliveries and rounds, key-oping equipment, filing, supporting, and cleaning and setting up conference rooms. Diane Garner, an employee of CCC, was assigned to work at Macfarlane during the time of the audit period which is the subject of this proceeding. Ms. Garner testified that facilities management services or other services provided by CCC included providing coffee service, sorting mail, sending and delivering faxes, sending and delivering Federal Express packages, moving boxes, ordering and delivering office supplies, and making interoffice mail runs. If the above-described facilities management services were provided, none of the invoices sent by CCC to Macfarlane separately listed any charges to Macfarlane for those services. Moreover, CCC did not separately list on its invoices to Macfarlane a charge for "mail delivery," "filing," "charge-back accounting," or "clerical services," or any other such services. If these services were deemed "related services," the provisions of the 1996 Contract quoted in paragraph 16 required that a description of such services be provided on the invoice or summary report. No description of the foregoing services appears on any of the invoices prepared by CCC and issued to Macfarlane. No other contracts existed between CCC and Macfarlane during the audit periods which reflect that the services described in paragraphs 23 and 24 above would be offered or provided by CCC to Macfarlane. The Department audited Macfarlane in 1999. The audit was conducted by Darlene Bebbington, an auditor with the Department. During this audit, contrary to the position of Ms. Sanchez during the aforementioned audit of CCC, the Department stated that Macfarlane was required to pay tax on the full amount of the invoices. This conclusion was reached by Ms. Bebbington based on the information contained on each invoice. The invoices did not itemize or otherwise separately list or detail products, materials, and/or services that were exempt from tax. To address issues raised by Ms. Bebbington during the audit, Macfarlane sought information from CCC regarding the sales tax amounts that were listed on the invoices. In response, CCC provided two letters to Macfarlane, one dated April 29, 1999, and the second one dated September 22, 1999. In the April 29, 1999, letter to Macfarlane, Mr. Cayo explained how the company handled the sales tax issue for Facilities Management customers and the rationale for doing so. Mr. Cayo stated that during the Department's audit of CCC, Ms. Sanchez indicated that "Facilities Management" was a service and it "was not subject to be taxed." In the letter, Mr. Cayo also stated that all equipment and material used in the performance of these services needed to be taxed, but not the total "Facilities Management" charge. The September 22, 1999, letter was from Andrew Schutte, Finance Manager of LPS, formerly CCC, to Macfarlane and was in response to a specific inquiry from Macfarlane. In that letter, Mr. Schutte stated that the two full-time CCC employees working at the Macfarlane office assigned 87 percent of their collective time performing various facilities management services and spent approximately 13 percent of their collective time making photocopies. However, the letter did not indicate how Mr. Schutte arrived at the quoted percentages or the time period for which those percentages applied. Based on CCC's claim that the formula devised by Ms. Sanchez was used to calculate the amount of sales tax it should charge Macfarlane, Ms. Bebbington pulled CCC's audit file from the Department's records. The Department contends that any agreement to use a formula such as the one described in paragraph 10, should have, by Department policy, been in writing, signed by the auditor and the supervisors, and placed in the audit file. However, upon a review of the Department's records, no such written agreement or documentation was in the CCC audit file. In light of the Department's admission noted in paragraph 13 above, Ms. Sanchez devised a formula which was shared with CCC, but she apparently did not include this formula or her discussions with CCC in the audit file. After Ms. Bebbington completed the audit of Macfarlane and based on the results thereof, the Department notified Macfarlane that it intended to impose additional sales and use tax, interest, and penalties. After the audit report was issued Macfarlane objected to the findings and requested that the Department reconsider the assessment. On or about April 10, 2001, the Department issued a Notice of Reconsideration ("Notice") based on Macfarlane's protest of the Department's audit findings for the period of February 1, 1994 through June 30, 1998. The Notice showed that Macfarlane owed additional sales and use tax of $35,958.27, a penalty of $17,979.37, and interest through April 6, 2000, of $16,701.32, and additional interest through April 12, 2000, of $3,606.12. The notice also indicated that interest would continue to accrue at $9.72 per day from April 12, 2001. According to the Notice, Macfarlane made a payment of $6,407.65 to the Department on April 6, 2000, leaving an unpaid balance of $67,837.43. Macfarlane asserts that it should not have to pay sales and use tax on the full amount of the invoice because a portion of that amount is for services that are exempt from sales and use tax. Contrary to this assertion, the auditor found that the invoices and other documentary evidence provided to the Department did not provide substantial competent evidence that any portion of the invoice amounts were attributable to products, materials, or services that were exempt from tax. Accordingly, based on the information provided by Macfarlane, the Department properly concluded that the total amount of each invoice was subject to sales and use tax. Because there is no substantial competent written documentation evidencing what tax exempt services were performed by CCC for Macfarlane and what specified portion of the monthly costs invoiced to Macfarlane were for those "claimed" tax exempt services, Macfarlane is liable for the entire amount on the invoices for the audit period. There is nothing in the record to indicate that Macfarlane did not timely pay the total amount of the invoices, including the amount attributable by CCC to sales and use tax. But for CCC's changing the manner in which it calculated the sales and use tax for its customers in early 1994, Macfarlane would have continued paying the tax on all goods and services as it did prior to January 1994.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that a final order be entered sustaining the assessment for sales and use tax against Petitioner, but compromising the entire interest and penalty amount. DONE AND ENTERED this 6th day of March, 2002, in Tallahassee, Leon County, Florida. CAROLYN S. HOLIFIELD 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 February, 2002. COPIES FURNISHED: James W. Goodwin, Esquire MacFarlane, Ferguson & McMullen, P.A. 400 North Tampa Street, Suite 2300 Tampa, Florida 33602 Bruce Hoffman, 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 Jarrell L. Murchison, Esquire Office of the Attorney General The Capitol, Tax Section Tallahassee, Florida 32399-1050 Eric J. Taylor, Esquire Office of the Attorney General Department of Legal Affairs The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050 David Adams, Esquire Charles Moore, Esquire Macfarlane, Ferguson & McMullen, P.A. 400 North Tampa Street, Suite 2300 Tampa, Florida 33602
The Issue The issue presented is whether Petitioner is liable for payment of sales and use taxes.
Findings Of Fact The Department conducted an audit of the business records of Petitioner, a Florida corporation operating a food catering business, covering the audit period of June 1, 1985 through May 31, 1990. As a result of that audit, the Department determined that Petitioner had failed to collect and remit sales taxes due to the Department and was liable for the payment of those unpaid sales taxes. The Department issued an assessment determining that Petitioner owed the amount of $213,683.87 in unpaid taxes, interest, and penalty for the audit period. On October 9, 1992, the Department issued its second revised audit assessment based upon its redetermination of Petitioner's tax liability. On that date, the Department reduced Petitioner's liability to the amount of $147,924.45, which sum includes the unpaid tax, the penalty therefor, and interest through that date. Based on its revised calculations, the Department also determined that interest would accrue at the rate of $27.06 per day until the date of payment. Through the date of the final hearing in this cause, Petitioner has made no payments to satisfy or reduce the amount of assessment.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered finding Petitioner liable for the payment of sales tax, penalty, and interest through October 9, 1992, in the amount of $147,924.45 together with the amount of $27.06 interest per day until the date of payment. DONE and ENTERED this 18th day of August, 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 18th day of August, 1994. APPENDIX TO RECOMMENDED ORDER The Department's proposed findings of fact numbered 1 and 6-8 have been adopted in substance in this Recommended Order. The Department's proposed findings of fact numbered 2-5 and 9-16 have been rejected as not constituting findings of fact but rather as constituting conclusions of law or recitation of the procedural context of this case. COPIES FURNISHED: Eric J. Taylor, Esquire Assistant Attorney General Office of the Attorney General The Capitol, Tax Section Tallahassee, Florida 32399-1050 Richard J. Hays, Esquire 7100 West Commercial Boulevard Suite 109 Lauderhill, Florida 33319 Mark D. Cohen, Esquire 121 Southeast First Street Suite 600 Miami, Florida 33131 Linda Lettera, General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 Larry Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100
The Issue Whether Petitioner ("DEPARTMENT") is entitled to assess sales or use taxes, penalties, and interest against Respondent ("VOLPE") pursuant to Chapter 212, Florida Statutes, as set out in its Notice of Proposed Assessment dated March 20, 1980.
Findings Of Fact During 1975-1977, VOLPE was a general contractor engaged in the construction of a United States Post Office and Vehicle Maintenance Facility at Miami, Florida. In connection with that construction project, VOLPE purchased materials from numerous subcontractors, including Hardware Lighting and Emporium, and Jemco, Inc. (Testimony of Alford, Danca; P.E. 2, 3) On March 8, 1979, after audit of VOLPE's records, the DEPARTMENT proposed to assess VOLPE for delinquent sales and use tax, together with interest and penalties thereon, which it claimed were due from VOLPE's purchase of materials from various subcontractors. The DEPARTMENT's proposed assessment was based on its inability to verify, to its satisfaction, that sales and use tax due from those sales transactions was paid by VOLPE to the vendors, and subsequently remitted to the DEPARTMENT. (Testimony of Alford, P.E. 3.) With the DEPARTMENT's encouragement, VOLPE then wrote its vendors in the various sales transactions requesting proof that the requisite Florida sales or use tax had been remitted to the DEPARTMENT. In response, two vendors, Ohio Medical Products and Power Wash, remitted tax vendors, (collected from VOLPE at time of sale) to the DEPARTMENT, in the amounts of $10,070 and $1,635.50, respectively. In addition, VOLPE discovered that it had not paid the requisite tax to a vendor in one transaction and remitted a payment to the DEPARTMENT in the amount of $1,442.53. (Testimony of Danca, Alford, P.E. 1.) These late tax payments made by Ohio Medical Products, Power Wash, and VOLPE in partial satisfaction of the DEPARTMENT's March 8, 1979, proposed assessment consisted only of the tax due on the individual sales, including interest thereon. No penalty payments were made because Salvatore Danca, VOLPE's comptroller involved in collecting the sales tax from the various vendors, reasonably and in good faith believed that the DEPARTMENT would waive penalties if late tax payments were promptly submitted. Although Louis A. Crocco, the DEPARTMENT's representative, by affidavit denies making such a representation, he admits that the possibility of adjusting the penalties, otherwise due, was discussed with Danca. In the absence of more explicit evidence from the DEPARTMENT concerning those discussions, or attacking the credibility of Danca's testimony, it is determined that, based on discussions with DEPARTMENT representatives, Danca reasonably and in good faith believed penalties would be waived. (Testimony of Danca; P.E. 1, 6, R.E. 2, 3, 4, 5, 6.) As a result of partial payments and adjustments made to the DEPARTMENT's proposed sales and use tax assessment, the DEPARTMENT issued a fourth revision of the proposed assessment on March 20, 1980. By that revision, the DEPARTMENT asserts VOLPE, as of March 20, 1980, is liable for payment of tax, interest, and penalties as follows: Sales Transaction Sales And Use Tax Due Interest Penalties (25 Percent) Jemco, Inc., sale of mechanization equipment to VOLPE, per agreement dated December 5, 1975. $16,229.53 $4,047.88 Hardware, Lighting and Emporium, sale of finished hardware and accessories to VOLPE per VOLPE Purchase Order dated October 2, 1975. 1,556.10 389.02 Ohio Medical Products' Power Wash's, and unidenti- fied vendor's sale to VOLPE for which late payments of tax due and interest have been made. -0- 2,737.43 TOTAL: $17,856.10 $5,779.42 $7,174.33 (Testimony of Alford, Danca, 3.) Stipulation of Counsel; P.E. 1, 2, [AS TO JEMCO, INC./VOLPE TRANSACTION] By its standard Agreement dated December 5, 1975, VOLPE agreed to purchase from Jemco, Inc., of Fort Worth, Texas, post office mechanization equipment for the contract price of $347,900. Subsequent change orders resulted in an adjustment to $405,689.70. In order to minimize on-site installation problems, Jemco, Inc., was required to maximize assembly of the mechanization equipment at its out-of-state plant prior to shipping to the Miami job site. (Testimony of Danca; P.E. 2, R.E. 1.) The written sales Agreement, including attachments, between Jemco, Inc., and VOLPE expressly states, in three separate places, that the total contract sales price includes Florida sales tax. The DEPARTMENT admits that VOLPE has paid all monies due Jemco, Inc., under the contract. By virtue of its full payment of the contract price which expressly included sales tax, it must be concluded that VOLPE paid the requisite sales or use tax to Jemco, Inc. (Stipulation of Counsel; P.E. 2.) VOLPE's standard form, entitled "Subcontractor's Application for Payment" was used as a basis to make incremental payments to Jemco, Inc., pursuant to the Agreement. That form required the subcontractor to certify that, among other things, it had complied with state tax laws applicable to performance of the Agreement. (Testimony of Danca; R.E. 11.) VOLPE's actions in connection with the Jemco, Inc., sales transaction were consistent with its standard practice when entering contracts with vendors or subcontractors. That practice is to require that the sales price include the payment of necessary sales tax, the vendor or subcontractor is required to remit the required tax to the appropriate government entity. After performance of the contract, the subcontractor is required to certify that these requirements have been satisfied. The certification is in the form of a General Release which discharges VOLPE from all claims, debts and liabilities which the subcontractor may have against VOLPE because of the contract. In this case, Jemco, Inc., executed such a General Release in favor of VOLPE. (Testimony of Danca; R.E. 1.) The DEPARTMENT has not audited Jemco, Inc.'s records, thus, it does not know whether the tax it seeks to assess against VOLPE has already been remitted by Jemco, Inc. (Testimony of Alford.) The DEPARTMENT offered no affirmative evidence to contravene VOLPE's assertion that it had paid the requisite sales or use tax to Jemco, Inc. Its claim rests solely on the fact that VOLPE's evidence of payment does not contain a sales invoice or other documentation which itemizes, or separately states the amount of sales tax due from VOLPE. [AS TO HARDWARE AND LIGHTING EMPORIUM TRANSACTION] By purchase agreement dated October 2, 1975, VOLPE agreed to purchase finished hardware from Hardware and Lighting Emporium of Miami, Florida, for the contract price of $23,877, which expressly included Florida state sales tax. Each billing invoice issued by Hardware and Lighting Emporium separately itemizes and states the Florida sales tax due. In applying for payment under the agreement, Hardware and Lighting Emporium completed the VOLPE "Subcontractor's Application for Payment" forms certifying compliance with state sales tax laws in performing the agreement. VOLPE has fully satisfied its payment obligations under the purchase agreement. (Testimony of Danca; P.E. 3, R.E. 9, 10.)
Conclusions Conclusions: VOLPE established by a preponderance of evidence that it previously paid to its several vendors the sales and use tax which the DEPARTMENT now seeks. Accordingly, the proposed tax assessment, with penalties and interest thereon, cannot be sustained. Recommendation: That the DEPARTMENT's Notice of Proposed Assessment of Tax, Penalties, and Interest, under Chapter 212, Florida Statutes, dated March 20, 1980, be DISMISSED. Background By written notice issued on March 20, 1980, Petitioner ("DEPARTMENT") proposed to assess Respondent ("VOLPE") taxes, penalties, and interest allegedly due pursuant to Chapter 212, Florida Statutes. In response, VOLPE claimed that it had previously paid the tax in question, and requested an opportunity to submit proof at a formal hearing. On April 17, 1980, the DEPARTMENT forwarded VOLPE's request to the Division of Administrative Hearings, and asked that the requested hearing be conducted by a hearing officer. On May 15, 1980, final hearing was set for July 18, 1980. On June 17, 1980, the DEPARTMENT filed a motion to realign the parties. As grounds, it stated that VOLPE had the burden of proof, and the duty to present a prima facie case at hearing since VOLPE requested the hearing and was the party seeking relief. At the DEPARTMENT's request, ruling on its motion was withheld until presentation of arguments at final hearing. At hearing, the DEPARTMENT's motion was denied for the reasons stated in the Conclusions of Law below. In support of its proposed assessment against VOLPE, the DEPARTMENT called Marvin P. Alford, a tax examiner, as its only witness, and offered Petitioner's Exhibits 1/ 1 through 6, inclusive, each of which was received into evidence. VOLPE called Salvatore Danca, its comptroller, and Harold G. Gregory, its branch manager, as its witnesses, and offered Respondent's Exhibits 1 through 11, inclusive, each of which was received. At the conclusion of hearing, the parties were granted the opportunity to submit proposed findings of fact, conclusions of law, and memoranda within ten (10) days after filing of the transcript of hearing. The post-hearing submittals were filed by August 21, 1980. Based on the evidence submitted at hearing, the following facts are determined:
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, RECOMMENDED: That the DEPARTMENT's Notice of Proposed Assessment of Tax, Penalties, and Interest, Under Chapter 212, Florida Statutes, dated March 20, 1980, be DISMISSED. RECOMMENDED this 25th day of September, 1980, in Tallahassee, Florida. R. L. CALEEN, JR. Hearing Officer Division of Administrative Hearings Room 101 Collins Building Tallahassee, Florida 32301 (904) 488-9675 Filed with Clerk of the Division of Administrative Hearings this 25th day of September, 1980.
The Issue There is little controversy as to the facts in this cause. The issue is essentially a legal issue and is stated as follows: When parties act in reliance and in conformity to a prior construction by an agency of a statute or rule, should the rights gained and positions taken by said parties be impaired by a different construction of said statute by the agency? Both parties submitted post hearing proposed findings of fact in the form of proposed recommended orders filed March 17 and 18, 1983. To the extent the proposed findings of fact have not been included in the factual findings in this order, they are specifically rejected as being irrelevant, not being based on the most credible evidence, or not being a finding of fact.
Findings Of Fact The Petitioner, Vanguard Investment Company, is a Florida corporation with its principal offices at 440 Northeast 92nd Street, Miami Shores, Florida 33138. On or about March 3, 1981, Vanguard purchased an aircraft described as a Turbo Commander, serial number N9RN, from Thunderbird Aviation, Inc., for a purchase price of $120,000 plus $4,800 in sales tax. The sale price plus the sales tax was paid by Vanguard to Thunderbird, which remitted the $4,800 in sales tax to the Department of Revenue (DOR) less a three percent discount as authorized by law. On February 27, 1981, Vanguard had executed a lease of said aircraft to General Development Corporation for a term of two years commencing on March 1, 1981, contingent upon Vanguard's purchase of said aircraft from Thunderbird. Prior to March 1, 1981, General Development had leased said aircraft from Thunderbird, and the least terminated on February 28, 1981. Vanguard purchased said aircraft for the sole purpose and in anticipation of continuing its lease to General Development. Vanguard never took possession or control of said aircraft, which remained in General Development's possession at Opa-locka Airport in Dade County, Florida. No controversy exists that all sales tax payable under General Development's lease of the aircraft, both with Thunderbird and subsequently with Vanguard, had been remitted to DOR with no break in continuity of the lease as a result of the change in ownership of the aircraft on or about March 1, 1981. At the time Vanguard purchased the aircraft from Thunderbird, Vanguard had not applied for or received a sales and use tax registration number pursuant to Rule 12A-1.38, Florida Administrative Code. Vanguard applied for said sales and use tax registration number on or about April 2, 1981, approximately 30 days after the purchase of said aircraft. The sales and use tax registration number was granted by DOR on or about April 23, 1981. Shortly thereafter, Vanguard inquired of DOR concerning a refund of the $4,800 in sales tax paid on the aircraft plus the three percent discount taken by Thunderbird. In lieu of Vanguard's providing Thunderbird a resale certificate and having Thunderbird apply for the sales tax refund, it was suggested that Vanguard obtain an assignment of rights from Thunderbird and apply directly for the refund because Thunderbird had been dissolved immediately after the sale of the aircraft to Vanguard. Acquisition of the assignment of rights from Thunderbird by Vanguard was delayed by the dissolution of Thunderbird and the death of Thunderbird's principal officer. Vanguard received the assignment of rights from Thunderbird on or about July 1, 1982, and immediately applied for a refund of the sales tax. Said application for refund was well within the three years permitted by Florida law to apply for a sales tax refund. On November 22, 1982, the Office of Comptroller (OOC) notified Vanguard of its intent to deny Vanguard's application for the sales tax refund because Vanguard had failed to obtain a sales and use tax registration number prior to purchasing the aircraft from Thunderbird. At the time of the purchase, it was the policy of DOR to permit individuals to apply late for a sales and use tax registration number and not to deny refunds on the basis that the applicant did not have the sales and use tax registration number at the time of the taxable purchase. On or about July 1, 1982, this policy of DOR was altered to conform with the decision of the Florida Supreme Court in State Department of Revenue v. Robert N. Anderson, 403 So.2d 297 (Fla. 1981). Vanguard was aware of the DOR policy at the time of the sale, relied on that policy, and conformed to that policy. It was clearly stated that had Vanguard applied for its refund even a month earlier, in June of 1982, the refund would have been approved under the then-existing policy.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the application of Vanguard Investment Company for refund of sales tax be approved, and that said refund be paid by the Office of Comptroller. DONE and RECOMMENDED this 25th day of April, 1983, in Tallahassee, Leon County, Florida. STEPHEN F. DEAN, 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 25th day of April, 1983. COPIES FURNISHED: Edward S. Kaplan, Esquire 907 DuPont Plaza Center Miami, Florida 33131 William G. Capko, Esquire Assistant Attorney General Office of Comptroller The Capitol, Suite 203 Tallahassee, Florida 32301 Thomas L. Barnhart, Esquire Assistant Attorney General Department of Legal Affairs The Capitol, LL04 Tallahassee, Florida 32301 The Honorable Gerald A. Lewis Office of Comptroller The Capitol Tallahassee, Florida 32301
