The Issue Petitioner's liability for proposed assessment of fuel tax and penalty pursuant to Chapter 206, Florida Statutes.
Findings Of Fact Petitioner Barkett Oil Company, Miami, Florida, is a distributor of motor fuel and a dealer in special fuel licensed by Respondent. During the period 1971 through 1974, it held three licenses for motor fuel and three for special fuel. It owned over 100 fuel service stations during that period. At the time petitioner obtained its licenses, it provided Respondent with a list of its stations' fuel storage tank capacities. However, over the years and prior to 1971, the fuel capacity of 12 stations was increased by the addition of tanks in the total amount of some 57,000 gallons, but Petitioner did not advise Respondent of such changed capacity. (Testimony of Barkett, Respondent's Exhibit 3). In May 1974, D. L. Hunt, Respondent's auditor, conducted an audit of Petitioner's business for the period April 1971 through March 1974. Petitioner made most of its existing records available to the auditor, including purchase and sale invoices, and monthly tax reports which had been timely filed with Respondent during the audit period. Petitioner used Respondent's standard forms for the monthly tax returns which reflected an inventory of fuel at the beginning of the month plus gallons acquired during the month, less nontaxable sales. These computations resulted in net gallonage subject to fuel tax on which the tax was remitted, less a collection fee. Petitioner's standard business practice had been to conduct its monthly inventory in the morning of the last day of the monthly period. However, by this method, sales and deliveries which were made during the remaining portion of the day, and fuel contained in its trucks were reflected in the next month's report. Once the inventory was made, Petitioner recorded the "stick" measurements of fuel on hand at the various stations in its computer and discarded the individual station inventory records. State tax returns were then prepared using the figures derived from the computer "print-out." (Testimony of Hunt, Barkett, Petitioner's Exhibit 1,3). During the course of his audit, Mr. Hunt ascertained that the recorded purchases and sales as reflected on the monthly tax returns were correct. However, he noted that fuel on hand at the end of each month apparently exceeded Petitioner's storage capacity. He therefore asked for inventory records in the form of tank readings, but was informed that they had been destroyed and he was not informed that the readings from the "stick" measurements had been processed by computer and that this stored information was available. Hunt therefore made audit findings that the amount of gallonage on hand at the end of each month over and above Petitioner's storage capacity was taxable, even though there was no showing that the fuel had actually been sold. He also predicated penalties against Petitioner for late payment of tax because sales made during the latter half of the last day of the reporting month were carried over to next month's report. Additionally, he found that certain untaxed sales should have been taxed. In February 1975, a proposed assessment of tax and penalties was issued in the total amount of $375,543.27. A number of informal conferences were held by the parties which resulted in certain adjustments to the proposed assessment, primarily consisting of tax exempt sales. As a result of these conferences, the asserted tax was reduced to $245,652.96, with penalties of $39,405.04, for a total amount of $285,058.00. Thereafter, further reductions were made in the assessment, as reflected in a letter from Respondent's counsel to Petitioner's counsel, dated July 22, 1977. This letter stated that the remaining assessment consisted of tax due in the amount of $27,216.05, with penalties of $63,269.22, for total amount due of $90,485.27. The letter explained that the differences in the penalties consisted of instances where the tax had not been timely paid on fuel which had been sold. For instance, as to license No. 391, the letter showed that although only $2,378.46 in additional tax was due, penalties over the audit period amount to $38,769.19. (Testimony of Hunt, Barkett, Petitioner's Exhibit 2, Respondent's Exhibits 1-2, 5, Hearing Officer's Exhibit 1). During the course of informal negotiations, Petitioner's counsel, by letter of April 17, 1978, to Respondent's counsel, provided a corrected list of the capacity of twelve of its stations. Respondent's auditor Hunt had checked four of these stations, but was unable to determine the existence of additional tanks at those locations. He also declined to accept the computer printout sheets as a basis for determining inventory because the actual tank reading reports were not available. At the hearing, Petitioner's president, Harry Barkett, established that additional tanks had existed at the four locations during the audit period. (Testimony of Hunt, Barkett, Petitioner's Exhibit 4-8, Respondent's Exhibit 3, 4). A certified public accountant retained by Petitioner testified that he had audited Petitioner's books and had personally reconciled inventory amounts for the fiscal year 1972-73. He further testified that Petitioner's accounting procedures were proper and that even if inventory had been overstated, it had no effect on sales, and that any unreported sales during one monthly period would be overstated in the following month, which would balance out any prior underpayments. He had never found any discrepancy in Petitioner's fuel reports and found no accounting reason for retaining "stick" readings after the information had been placed in the computer. (Testimony of Pfeiffer).
Recommendation That Respondent proceed to collect the amount of $5,707.50 from Petitioner for unpaid fuel tax under Chapter 206, Florida Statutes, but that the remainder of the proposed assessment be withdrawn. DONE AND ENTERED this 4th day of October 1979 in Tallahassee, Florida. THOMAS C. OLDHAM Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 4th day of October 1979. COPIES FURNISHED: Maxie Broome, Jr., Esquire Assistant Attorney General Department of Legal Affairs The Capitol Tallahassee, Florida 32301 Milton J. Wallace, Esquire 2138 Biscayne Boulevard Miami, Florida 33137
Findings Of Fact During the discovery phase of this proceeding, the Department ascertained from Echo Artz that $4,070 (the "Uncontested Amount") of the assessed tax was not contested. That is, Echo Artz agreed that it owed at least that amount of the total tax assessment of $67,757.46 set forth in the Notice. Of the total amount set forth in the Notice, $54,626.25 was the tax portion and the remainder was interest. No penalties were imposed as of the date of the Notice of Proposed Assessment. The Uncontested Amount was approximately 7.5 percent of the tax portion and approximately 5.9 percent of the total assessment. At the final hearing, during discussion of the Department's Motion to Dismiss, Echo Artz stated that the Uncontested Amount was erroneous. Instead, it stated that $23,135 of the total tax assessment was actually uncontested. The total tax portion of the assessment should be, according to Echo Artz, $57,730. The revised uncontested amount was approximately 40 percent of the total tax portion. Echo Artz did not pay any of the Uncontested Amount or any of the revised uncontested amount pursuant to its own calculations. The Department asserts that inasmuch as Echo Artz failed to pay the Uncontested Amount prior to filing its request for formal hearing, the case must be dismissed as required by law.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent, Department of Revenue, enter a final order of dismissal. DONE AND ENTERED this 18th day of May, 2012, in Tallahassee, Leon County, Florida. S R. BRUCE MCKIBBEN 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 18th day of May, 2012.
The Issue The issues in these cases are (1) whether four tax warrants issued by Petitioner against Respondent, Frances Bowers, a/k/a Francis Bowers, d/b/a Shannon Oil Company and Shannon Service Stations, were properly issued; (2) whether two Notices of Freeze and two Notices of Intent to Levy on Respondent were properly issued; (3) whether the allegations of an Administrative Complaint entered March 1, 1995 by Petitioner against Respondent are correct; and (4) whether an Emergency Order of Suspension issued by Petitioner on or about March 3, 1995 was warranted.
Findings Of Fact At all times relevant to this proceeding, Respondent, Frances Bowers, a/k/a Francis Bowers, held a Special Fuel Dealers License #10-011382, a Motor Fuel Jobbers License #09-001450 and Retail Dealer License #’s 77- 000320 and 40-001175. The motor fuel and special fuel licenses were held at Highway 90 East, Caryville, Florida 32427. The retail dealer licenses were held at 1007 North Waukesh Street, Bonifay, Florida 32425 and Highway 279 South, Caryville, Florida 32427. Ms. Bowers operated under the business names of Shannon Oil Company or Shannon Service Station. Ms. Bowers has been engaged in the sale of fuel at various retail locations since 1986. She has engaged in the sale of special fuels (diesel) since May 10, 1985. She has operated as a motor fuel jobber (gasoline) since January 18, 1989. From April 1994 through December 1994, Ms. Bowers purchased special fuel from Murphy Oil Co. From May 1994 through July 1994, Ms. Bowers purchased special fuel from Beards Oil Co. For the period July 1993 through December 1994 Ms. Bowers delivered unsigned, no-remit tax returns to Petitioner, the Department of Revenue (hereinafter referred to as the “Department”). Those returns were delivered by Ms. Bowers to Kathy Jones, a Department Revenue Specialist, at the Department’s Marianna offices. Returns for some months were not remitted. Ms. Bowers subsequently returned to the Department’s Marianna offices and signed the no-remit returns she had filed in the presence of Ms. Jones. The no-remit returns filed by Ms. Bowers indicate that she owed taxes pursuant to Chapters 206, 212, Part II and 336, Florida Statutes. No part of the tax Ms. Bowers indicated was owed was remitted by Ms. Bowers to the Department. For months for which no return was filed, the Department estimated the amount of tax owed. The Department issued Notices of Assessment and Jeopardy Finding to Ms. Bowers in January 1995. These Notices informed Ms. Bowers of the Department’s intent to cause tax warrants for the outstanding taxes owed by Ms. Bowers to be filed with the Clerk of Court. Based upon the no-remit returns, the Department filed four tax warrants. The warrants were for total taxes of $218,801,56. Additionally, penalties, filing fees and interest was included in the tax warrants. The total amount for the four warrants, without the filing fees, was $187,167.18 attributable to Shannon Service Stations and $183,548.97 attributable to Shannon Oil Company. Included in the no-remit returns filed by Ms. Bowers were Special and Alternative Fuel Tax Returns. These returns indicated that Ms. Bowers had purchased “tax-paid” special fuel, meaning that she had paid the tax at the time she purchased the fuel. The tax was allegedly paid to Murphy Oil Co. or Beard’s Oil Co. Based upon the Special Fuel Tax Returns of Murphy Oil Co. and Beard’s Oil Co. no tax was paid by Ms. Bowers on purchases of special fuel purchased by Ms. Bowers. Copies of these returns were accepted into evidence without objection from Ms. Bowers. Ms. Bowers has admitted during her deposition testimony that she owes the outstanding taxes at issue in this proceeding. See Department’s exhibit 14. On or about February 28, 1995, the Department issued two Notices of Freeze and two Notices of Intent to Levy on Frances Bowers, a/k/a Francis Bowers, d/b/a Shannon Oil Company and Shannon Service Stations. Pursuant to the Notices, the Department notified Ms. Bowers that it intended to levy against her assets, consisting of deposits at the Bank of Bonifay, for outstanding taxes. The Department indicated that it was taking this action for nonpayment of taxes, penalty and interest in the sum of $183,548.97 attributable to Shannon Oil Company and in the sum of $187,267.18 attributable to Shannon Service Stations. On or about March 20, 1995, Ms. Bowers filed a Request for Administrative Hearing with the Department. Ms. Bowers contested the proposed levy and alleged that she had not failed to pay any taxes owed. On or about March 1, 1995, the Department issued an Administrative Complaint against Ms. Bowers. Pursuant to the Administrative Complaint, the Department informed Ms. Bowers that Special Fuel Dealers License #10-011382, Motor Fuel Jobbers License #09-001450 and Retail Dealer License #’s 77-000320 and 40-001175 were being revoked. This action was premised upon allegations that Ms. Bowers “failed to file or pay fuel taxes collected for the period of July, 1993 through December, 1994”. The Department also issued an Emergency Order of Suspension on or about March 3, 1995. Pursuant to this Order, the Department suspended the licenses held by Ms. Bowers which the Department sought to revoke in the Administrative Complaint. On or about March 22, 1995, Ms. Bowers sent a Petition for Administrative hearing to the Department in response tot he Administrative Complaint. Ms. Bowers disputed in the Petition whether she had failed to remit outstanding taxes or that she owed such taxes as alleged in the Administrative Complaint. All of the exhibits and the facts of this matter were stipulated to by Ms. Bowers. Ms. Bowers also stipulated to the revocation of her licenses, the emergency suspension order issued by the Department, the issuance of the tax warrants and the Notices of Freeze and Notices of Intent to Levy.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered upholding the Emergency Order of Suspension, the Department’s Administrative Complaint, the four tax warrants issued by the Department against Respondent and the Notices of Intent to Freeze and Notices of Intent to Levy. DONE and ORDERED this 25th day of February 1997, in Tallahassee, Florida. LARRY J. SARTIN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 25th day of February 1997. COPIES FURNISHED: Larry Fuchs Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100 Linda Lettera General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399 Albert J. Wollermann John N. Upchurch Assistant Attorneys General Office of the Attorney General The Capitol - Tax Section Tallahassee, Florida 32399-1050 Owen N. Powell, Esquire Post Office Box 789 Bonifay, Florida 32425
The Issue Whether the Petitioner owes unpaid sales and use tax for the period extending from May 1, 1986, through April 30, 1991, and, if so, the amount owed.
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 of fact are made: Jay P. Weiss is a Florida-licensed motor vehicle dealer, and he has been licensed in Florida for 27 years. Mr. Weiss does business as Jay P. Weiss, Inc. ("Weiss"), and Weiss is, and was during the times material to this proceeding, in the business of selling cars for resale. Weiss purchases motor vehicles at auction, from banks, from leasing companies, or from other dealers; reconditions the vehicles; and sells the majority of the vehicles to other dealers for resale. During the times material to this proceeding, Weiss purchased an average of 400 to 500 vehicles each year. During the times material to this proceeding, the locations from which Weiss conducted business consisted of an office and an adjacent shop in which vehicles were reconditioned. The locations did not include a showroom or a retail car lot, and Weiss did not advertise that vehicles were offered for retail sale on the premises. Nonetheless, people often walked into the office and inquired if Weiss sold cars at retail. Occasionally, Weiss sold cars to customers at retail. Motor vehicle purchases and sales were recorded on "title jackets," which contained information regarding each vehicle purchased and sold by Weiss, including the identification of the vehicle; the date of purchase, the purchase price and the identity of the person from whom the vehicle was purchased; the date of sale, the sales price, and the identity of the person to whom the vehicle was sold; and relevant title information. Duplicate information for each vehicle was included in "police books" maintained at Weiss's offices. Mr. Weiss was in Weiss's office about nine hours per week, including weekends. Throughout the week, he traveled to various auctions throughout the state, although he routinely called his office several times each day. In addition to Mr. Weiss and the employees who worked in the shop, Weiss employed a bookkeeper that was responsible for managing the office and handling all of the accounts and records for the business, including preparation of the Florida Sales and Use Tax Return Form DR-15. The bookkeeper also provided information to Weiss's accountants from which Weiss's U.S. Income Tax Return for an S Corporation, Form 1120S, was prepared. During the times material to this proceeding, three successive bookkeepers were employed by Weiss, two of whom were employed approximately three years each. Section 212.12(5)(a), Florida Statutes (1993), grants to the Department of Revenue the authority to audit the books and records of any dealer subject to Chapter 212, Florida Statutes, Tax on Sales, Use, and Other Transactions, to determine if the dealer overpaid or underpaid Florida sales and use taxes. Pursuant to this authority, the Department conducted an audit of the books and records of Weiss, for the period extending from May 1, 1986, through April 30, 1991. The Department initially concluded that Weiss owed $115.442.57 additional tax due on sales for the audit period and $10,706.94 additional tax due on purchases for the audit period, plus delinquent penalties and interest through December 6, 1991. Weiss provided additional documentation, and these amounts were revised downward in a Notice of Intent to Make Sales & Use Tax Changes dated January 13, 1993, to reflect $79,065.07 additional tax due on sales for the audit period and $10,706.94 additional tax due on purchases for the audit period, plus delinquent penalties and interest through January 13, 1993. The schedules and work papers from which the revised assessments were derived were attached to the January 13, 1993, notice. In conducting the audit of Weiss's books and records, the Department's auditor examined books and records made available to her at Weiss's business location and at the office of Weiss's accountant on August 1, 7, and 28, 1991; September 6, 1991; January 29 and 30, 1992; and February 5, 1992. Mr. Weiss never met the Department's auditor, although he did talk with her on the telephone. He has no personal knowledge of the records requested by the auditor or whether all of the requested records were provided. According to the affidavit of the accountant who prepared Weiss's federal tax returns for 1988, 1989, and 1990, which was introduced into evidence by Weiss, the accountant became aware of inaccuracies in the bookkeeping by Weiss "because of the audit by the Florida DOR and due to the fact that all details of bookkeeping records were either lost or misplaced it was recommended to Jay P. Weiss that an outside bookkeeper be hired to recreate the books and records." Weiss followed its accountant's advice, and the Department's auditor examined, and accepted as accurate, documents entitled "Sales Reconciliation" for 1988, 1989, and 1990, which were prepared by the outside accountant hired by Weiss. These documents itemized for each month of these years the corrected income received by Weiss from taxable sales, rents, and exempt sales; corrected taxable amounts; corrected sales tax; the original amount of tax paid; and the sales tax owed or overpaid. The Department's auditor concluded that additional sales tax was due in the amount of $4,281,57, attributable to unreported rental income collected by Weiss on commercial property it owned, as reflected in Schedule A-1 of the audit papers. The auditor calculated the additional taxable amount of rental income for the years 1988 and 1989 for which no tax had been paid based on the information provided by Weiss in the sales reconciliations and identified the actual rental income for 1990 based on Weiss's records. The auditor totaled the amount of additional rental income for these three years, divided the total by 36, the number of months in the sample period, and projected this average monthly amount of additional taxable rental income for each month of the 5-year audit period. The appropriate tax rate was applied to calculate the additional sales tax owed for each month, and these amounts were totaled for the 5-year audit period. 1/ The Department's auditor concluded that additional sales tax was due on retail sales of automobiles in the amount of $20,538.31, as reflected in Schedule A-3 of the audit papers. This amount was based on a comparison of the information provided by Weiss in the Florida Sales and Use Tax Returns, Form DR-15's, that it filed with the Department for 1988 and 1989 with the corrected taxable sales included by Weiss's accountant in the sales reconciliations prepared for 1988 and 1989. The auditor first totaled the taxable sales reported on the Form DR-15's for 1988 and 1989, which was $81,736.00, and the revised taxable sales included in the sales reconciliations for 1988 and 1989, which was $131,063.00, and then calculated a weighted error ratio of approximately 1.603492, meaning that Weiss's actual taxable sales were approximately 60 percent higher than reported in the Form DR-15's submitted by Weiss to the Department. The auditor then projected the total additional taxable sales by multiplying the taxable sales reported on the Form DR-15s by .603492 to arrive at the additional taxable sales for each month of the audit period. The appropriate tax rate was applied to calculate the additional sales tax attributable to additional taxable motor vehicle sales for each month, and these amounts were totaled for the 5-year audit period. The Department's auditor concluded that additional sales tax was due on undocumented sales in the amount of $54,245.19, as reflected in Schedule A-2 of the audit papers. In reaching this conclusion, the auditor reviewed the U.S. Income Tax Returns for an S Corporation, Form 1120S's, filed by Weiss with the Internal Revenue Service for 1988, 1989, and 1990, and the Florida Sales and Use Tax Returns, Form DR-15's, filed with the Department for the same period of time. The Department routinely compares the gross sales reported on the federal income tax returns with the total sales reported to the Department on Form DR-15's to determine if there is a difference between the amounts reported. The Department considers the gross sales reported on federal income tax returns to be more reliable than the total sales reported to the Department because it is assumed that taxpayers will not over-report sales to the federal government. If the gross sales reported on the federal income tax returns are greater than the total sales reported to the Department on the Form DR-15's for the applicable period, the Department asks for documentation from the taxpayer to account for the difference. If the taxpayer is unable to provide such documentation, the Department presumes that the difference is attributable to taxable sales. In concluding that Weiss owed additional tax on undocumented sales, the auditor compared the gross sales reported by Weiss in the U.S. Income Tax Returns for an S Corporation, Form 1120S's, filed with the Internal Revenue Service for 1988, 1989, and 1990 with the revised total sales reportable on the Florida Sales and Use Tax Returns, Form DR- 15's, filed with the Department for the same years. The auditor broke down Weiss's revised total sales into revised taxable sales based on Schedule A-3 of the audit papers, revised rental income based on Schedule A-1 of the audit papers, and revised exempt sales identified in the sales reconciliations for 1988, 1989, and 1990. 2/ The total gross sales Weiss reported on the Form 1120S's for 1988, 1989, and 1990 were higher than the revised total sales reported by Weiss on the Form DR-15's for the same years. The auditor calculated the monthly difference between the gross sales and the revised total sales for 1988, 1989, and 1990, 3 and, because no documentation was provided to establish that the difference was attributable to exempt sales, the difference was attributed to taxable sales. The average monthly difference was calculated, and this amount was projected for each month of the audit period. The appropriate tax rate was applied to calculate additional sales tax owed for each month, and these amounts were totaled to determine the additional sales tax due for the 5-year audit period. Because inaccuracies in the gross sales included in the Form 1120S's filed with the Internal Revenue Service for 1988, 1989, and 1990 were discovered by Weiss's accountant as a result of the recreation of Weiss's books by the outside accountant, Weiss's accountants prepared amended Form 1120S's for those years. The amended forms were sent to Weiss for execution and filing. Mr. Weiss cannot recall whether the amended returns were filed, and the Internal Revenue Service has no record that these amended returns were filed. For this reason and because Weiss did not provide any documentation to support the revised gross sales included in the amended returns, the Department refused to consider the gross sales reported in the amended Form 1120S's. The Department's auditor concluded that additional tax in the amount of $1,334.07 was due from Weiss with respect to purchases of consumable supplies, that is, supplies that did not become a component part of a motor vehicle. This conclusion was based on the auditor's review of invoices provided by Weiss for 1990 and the auditor's determinations that, of the $6,903.86 total derived from the invoices, $4,722.07 was taxable and that Weiss had paid no tax on the purchases. The average monthly taxable amount was calculated, the appropriate tax rate was applied to determine the additional tax owed for each month, and these amounts were totaled for the 5-year audit period. The Department's auditor concluded that, based on records provided by Weiss, additional tax was owed on fixed assets in the amount of $86.34. The Department's auditor concluded that additional tax was due in the amount of $9,286.53 on amounts paid by Weiss for commercial rentals and on amounts paid by Weiss in the form of mortgage payments on property it occupied that was owned by Jay P. Weiss, individually, who was also individually obligated under the note and mortgage on the property. This determination that additional tax was due was based on documentation Weiss provided to the auditor. After the January 13, 1993, Notice of Intent to Make Sales & Use Tax Audit Changes was issued, Weiss provided additional documentation to the Department. As a result of the new information, the amount of additional tax due was revised downward in a Notice of Intent to Make Sales & Use Tax Audit Changes dated March 22, 1995, which identified $75,998.46 additional tax due on sales for the audit period and $8,382.94 additional tax due on purchases for the audit period, for a total amount due of $166,800.43, including delinquent penalties and interest accrued as of March 22, 1995. This total amount was the final sustained amount identified in the Notice of Reconsideration dated May 10, 1995, which is the subject matter of this proceeding, and the notice includes a discussion of the basis for the revisions made to the January 13, 1993, assessment. After this case was referred to the Division of Administrative Hearings, a representative of the Department met with Weiss's accountant. The Department's representative requested that Weiss provide any additional documentation that would explain the difference between the gross sales reported on the Form 1120S's and the revised total sales reportable on the Form DR-15's or that would support any further change in the sales and use tax assessment. No further documentation was provided. The evidence presented by the Department establishes that a sales and use tax audit assessment was made against Weiss, for the audit period extending from May 1, 1986, through April 30, 1991, and establishes the factual basis for that assessment. The methodology used by the Department's auditor to calculate the assessment was proper under the circumstances, and the Department's assessment for sales and use tax for the audit period, as revised in the May 10, 1995, Notice of Reconsideration, is reasonable. Weiss did not present any persuasive evidence to the contrary.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order upholding its assessment against Jay P. Weiss, Inc., in full, including all taxes, penalties, and interest statutorily due until the date of payment of the sales and use tax. DONE AND ENTERED this 2nd day of June, 2000, in Tallahassee, Leon County, Florida. PATRICIA HART MALONO 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 2nd day of June, 2000.
The Issue The issues for determination are whether the emergency suspension of Respondents' licenses was proper and whether revocation of those licenses is required.
Findings Of Fact Respondent Robinson, an authorized Chevron representative, is the sole proprietor of Jack A. Robinson, Distributor. Respondent R&R Partnership (R&R) is a partnership between Jack A. Robinson and Dee Ann Rich (Rich). Respondent I-10 Corporation (Stacks) is a subchapter S corporation in which Respondent Robinson is a 50 percent shareholder. Rich is the general manager of Jack A. Robinson, Distributor and exercises administrative responsibilities with regard to Respondents Stacks and R & R Corporation. Robinson holds Special Fuel Dealer's License No. 10 Wholesaler's License No. 09000950/9356 issued by Petitioner. Robinson sells diesel fuel and gasoline at wholesale to I unrelated parties. I products at retail. Robinson admits in response to Counts III, IV, VI, VII, VIII, IX, X, XI, XII, XVI, XIX, XXII, XXIII, XXIV, XXVII, and XXX, of the Notice To Show Cause in DOAH Case No. 93-1563 that $210,876.19 of tax remains due and owing. Rich is Jack A. Robinson's step supervising and preparing tax returns for Robinson. With regard to the $210,876.19 admitted as due and owing, these state funds were collected by Respondent Jack A. Robinson as an agent for the State of Florida but, instead of being remitted to the state, these funds were spent by Respondent in the course of business operation. DOAH Case No. 93-1563 In response to Counts I, II, V, XV, XVII, XXI, XVI, XXVIII, and XXIX of the Notice To Show Cause in DOAH Case No. 93 that $103,452.71 tax is due. As to Count I, the balance for the tax return period of February 1990, for motor fuel tax due is $2,524.14. In regard to Count II, Respondent also owes motor fuel tax in the amount of $26,839.71 for the tax return period of March, 1990. Although Rich requested Respondent's bank to make the appropriate electronic funds transfer to Petitioner, the amount was not received by Petitioner and no explanation was provided by Respondent for the failure of Petitioner to receive this amount. As to Count V, Respondent owes a total motor fuel tax of $12,900.27. The previous total of $36,232.69 was reduced by a late partial payment of $11,562.53, and an additional payment of $11,769.87 on September 25, 1991. No payment of tax was made for the period of March 1992. As to Count XIV, Respondent Robinson filed a tax return for January 1993, motor fuel local option tax in the month of February 1993. The return showed a total tax due of $21,044.62. A collection allowance of $148.56 is shown deducted. No proof of payment of the tax was presented. In regard to Count XVII, a return for the tax period of March 1990, was filed on behalf of Respondent Robinson, declaring a total special fuel tax due of $23,572.82. No evidence was presented that payment was actually made, although Rich testified that a wire transfer payment of that amount was requested by Respondent. With regard to Respondent Robinson, the amounts of tax admitted in responsive pleading together with all counts of the Notice To Show Cause where no evidence or allegation of payment was presented total: Admitted in pleading $210,876.19 Admitted owing for March of 1990 in Motor Fuel and Special Fuel Tax $ 50,412.53 Copies of Returns introduced and alleged to have been filed, but unsupported by Petitioner's records and otherwise unsubstan- tiated by proof (for August of 1992 and January of 1993). $ 35,655.06 No proof of payment presented for balance of November of 1990 tax. $ 12,900.27 Admitted, paid less than due for January 1990; August 1990; and November, 1990. $ 8,058.52 This amount does not include applicable penalties and interest. DOAH Case No. 93-1565 Counts I through IV are admitted by Respondent R & R Partnership as to the amounts owned for a total tax due of $9,189.12. This amount does not include applicable penalties and accrued interest. While R & R reported taxes due on Respondent Robinson's returns, no proof was submitted that these taxes were paid to Petitioner. For the tax period of January, 1993, Rich maintained that a return was filed on behalf of R & R partnership and payment made. However, the copy of the payment check presented at hearing had "2/93" written in pencil as the date of the check and no evidence was presented that the check was presented for payment to Respondent's bank. DOAH CASE NO. 93-1564 With regard to I allegations of Counts I, II, III, IV, V, VII, VIII, X, XI, and XII. As to Counts VI and IX, Respondent denies only that there was improper reporting, not that the amount of tax is not due. Respondent maintains that all taxes collected by Stacks were paid to Respondent Robinson and reported on those returns. The periods of January 1990; February 1990; March 1990; April 1990; August 1990; November 1990; February 1992; correspond to the counts of the Notice To Show Cause to which Stacks denies all allegations. These periods and denied counts match precisely with periods in Counts IX, X, XI, XII, XV, XVI, XVII, XVIII, XIX, XX, XXI, XXII, of the Notice To Show Cause filed against Respondent Robinson. Robinson admits Counts IX, X, XI, XII, XVI, XVII, XIX, XX, and XXII and presented no proof of payment at hearing with regard to Count XV and XVII. This fact, coupled with testimony that Stacks and R & R taxes were paid to Robinson and reported as line items on his returns, show that Stacks does owe the taxes claimed by Petitioner in the amount of $36,029.45 exclusive of interest and penalties. Debra Swift, a Certified Public Accountant, employed by Petitioner, personally reviewed records of Petitioner in determining the amounts of tax, penalty and interest due from each Respondent. All payments received by Petitioner were credited by Swift in performing her calculations.
Recommendation Based on the foregoing, it is hereby RECOMMENDED that a Final Order be entered revoking the fuel licenses of all three Respondents. DONE AND ENTERED this 13th day of May, 1993, in Tallahassee, Leon County, Florida. DON W. DAVIS 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 13th day of May, 1993. APPENDIX The following constitutes my rulings pursuant to Section 120.59, Florida Statutes, on proposed findings of fact submitted by the parties. Petitioner's Proposed Findings: 1.-12. Adopted, though not verbatim. 13.-15. Accepted. 16.-22. Accepted. Respondent's Proposed Findings: 1. Rejected, no record citation. 2.-3. Adopted. 4. Accepted, except for last sentence which is rejected as legal conclusion. 5.-7. Adopted. 8.-9. Rejected, subordinate to HO findings on this point. 10.-12. Rejected, weight of the evidence. 13. Rejected, relevancy. 14.-16. Rejected, subordinate to HO findings. 17. Adopted by reference. 18.-21. Rejected, subordinate to HO findings. 22.-24. Rejected, weight of the evidence, no citation. 25._38. Rejected, subordinate to HO findings. 39.-40. Rejected, weight of the evidence. 41.-42. Adopted by reference. 43.-44. Rejected, subordinate, misconstruction of testimony. 45. Rejected, conclusion of law, weight of the evidence. 46.-48. Rejected, subordinate, argumentative, relevancy. COPIES FURNISHED: Lealand L. McCharen Assistant Attorney General Department of Legal Affairs The Capitol-Tax Section Tallahassee, FL 32399-1050 Timothy J. Warfel Messer, Vickers Suite 701 First Florida Bank Building 215 South Monroe Street Post Office Box 1878 Tallahassee, FL 32302 Linda Lettera General Counsel 204 Carlton Building Tallahassee, FL 32399-0100 Larry Fuchs Executive Director 104 Carlton Building Tallahassee, FL 32399-0100
Findings Of Fact Modern Tool and Die, (MTD), is a privately held corporation engaged in manufacturing equipment. In 1965 they started the manufacture of bumper guards which required electroplating. They entered into agreements with MPC pursuant to which MTD erected two buildings adjacent to their plant which they leased to MPC in which to do the electroplating of the bumper guards. MPC is also a privately held corporation and there is no common ownership of these two companies. The two buildings built for MPC's occupancy were partitioned, compartmented and wired as desired by MPC and at its expense. Florida Power Corporation supplied electricity to the complex through the main transformer of MTD. In 1965 and to a lesser extent now, electricity rates per kilowatt-hour (kwh) were lowered with increased usage of electricity. Since both MTD and MPC are large users of electricity they obtain a cheaper rate if all electricity used is billed from the master meter serving MTD. Accordingly, and at the recommendation of the power company, additional transformers and meters were placed at the two buildings occupied by MPC and read monthly at or about the same time the master meter is read by the power company. The kw used at the two buildings is forwarded by MPC to MTD each month. The latter, upon receipt of the power company bill, computes the cost of the power per kwh and in turn bills MPC for its portion of the bill based upon the usage forwarded by MPC to MTD. Upon the commencement of this working agreement between these two companies in 1965 MPC, pursuant to an oral lease, has paid rent to MTD monthly at the rate of approximately $2,400 per month. It has also paid to MTD its pro rata cost for the electricity used each month. The rent is invoiced each month on the first of the month as in Exhibit 3 and paid by the 10th by MPC. Sales tax is added to the rent and remitted to DOR. Electricity usage is also invoiced by MTD to MPC on or about the 20th of the month and paid by MPC on or about the first of the following month. (Exhibit 4). Sales tax on the electricity used is paid by MTD to Florida Power Company who presumably remits this to DOR. During the 15 years these two companies have shared the cost of electric power they have been audited numerous times; the arrangement was made known to the auditors; and no auditor, prior to the present, suggested that the cost of electricity was part of the rent paid by MPC upon which sales tax was due. Notice of Proposed Assessment (Exhibit 1) in the amount of $9,747.34 is based upon the cost of electricity billed to MPC during the period of the audit December 1, 1976 through November 30, 1979 multiplied by 4 percent sales tax plus penalties and interest. The parties stipulated to the accuracy of this amount. They differ only as to whether the tax is owed.
Findings Of Fact For the period of time from January 1, 1986, through December 31, 1989, Co-Op Oil Company, Inc., was a wholesaler and retailer of motor fuel (gasoline) and special fuel (diesel) in the Florida west coast area and held Motor Fuel License Number 09_000447 and Special Fuel License No. 10-003477. During this time, each month Co-Op reported and paid motor fuel and special fuel tax based on the number of "net" gallons purchased during the preceding month. "Net" gallons are an industry standard. They are measured at a temperature of 60 degrees Fahrenheit. Meanwhile, during the same month, Co-Op sold motor fuel and special fuel through metered pumps and charged customers motor fuel and special fuel tax on the metered gallons sold through the pumps. Both motor fuel and special fuel are volatile. They expand and contract significantly as temperatures rise and fall. Since the temperature in an underground storage tank generally is around 71-72 degrees Fahrenheit, the "gross" gallons of motor fuel and special fuel stored in Co-Op's underground tanks and for resale to customers generally exceeds the "net" gallons it purchased by approximately one percent. Additional expansion, or some contraction, of the fuels can occur in transit from the tank to the metered pump, depending on outside temperature. As a result, the "gross" gallons pumped through the meter and sold to customers can differ from the "net" gallons purchased by Co-Op Oil. "Losses" due to contraction in cold tempertures also can occur, but a reasonable "shrinkage" allowance was factored into the Department's calculations. (Additional losses can occur due to spillage and evaporation. However, tax is still due on fuel lost to spillage and evaporation.) Except for Chapters 206 and 212, Part II, motor fuel taxes after January 1, 1988, the Department has interpreted the applicable statutes to: (1) require Co-Op to report and pay motor fuel and special fuel taxes monthly on the "gross" gallons it sells to its customers, plus any fuel it loses to spillage or evaporation; (2) hold Co-Op, as a licensee who collects more tax on motor fuel and special sold than was paid on the same gallons purchased, to be liable for the difference; and (3) hold Co-Op, as a licensee who purchased gasoline tax free, recorded such purchases at "net," and adjusted sales on its tax returns to "net," and sold such fuel at "gross," to be liable for the difference in tax. The Sampling Method The parties agreed that, due to the voluminous records that would be the subject of a detailed audit of all pertinent transactions, an audit using a sampling method is not only appropriate but also a practical necessity. The parties agreed that it would be appropriate to average the months of July, a hot month, and December, cold month, to obtain a valid and accurate average for the amount of gains (or losses) in volume of motor and special fuel due to expansion (or contraction) from the "net" gallonage purchased for resale through the metered pumps. An audit of the sample months reveals the following pertinent information (expressed in gallons): Month Motor Fuel Special Fuel JULY, 1986 Beginning Inventory 139,777 37,263 Amount of Fuel Purchased 622,543 124,809 Amount of Fuel Sold 639,640 125,591 Ending Inventory 126,740 37,167 DECEMBER, 1986 Beginning Inventory 103,046 33,648 Amount of Fuel Purchased 644,966 112,297 Amount of Fuel Sold 627,361 106,795 Ending Inventory 119,169 39,608 JULY, 1987 Beginning Inventory 88,937 30,769 Amount of Fuel Purchased 485,783 66,382 Amount of Fuel Sold 471,823 73,261 Ending Inventory 109,542 24,378 DECEMBER, 1987 Beginning Inventory 85,210 30,678 Amount of Fuel Purchased 552,977 76,584 Amount of Fuel Sold 535,767 78,667 Ending Inventory 102,497 28,311 JULY, 1988 Beginning Inventory 17,863 Amount of Fuel Purchased 61,499 Amount of Fuel Sold 52,380 Ending Inventory 27,197 DECEMBER, 1988 Beginning Inventory 24,195 Amount of Fuel Purchased 52,492 Amount of Fuel Sold 47,242 Ending Inventory 29,293 JULY, 1989 Beginning Inventory 19,829 Amount of Fuel Purchased 45,817 Amount of Fuel Sold 42,834 Ending Inventory 25,386 DECEMBER, 1989 Beginning Inventory 20,114 Amount of Fuel Purchased 54,323 Amount of Fuel Sold 55,520 Ending Inventory 18,824 (Under Chapters 206 and 212, Part II, motor fuel was taxed on purchases, as reported and paid by Co-Op, after December 31, 1987, so only special fuel totals are shown after that date.) Additional Taxable Gallons: Motor Fuel Adding the beginning inventory and purchases yields the "available fuel" for the month. Subtracting the ending inventory from this figure yields the month's "inventoried fuel accounted for." "Gain" from expansion of fuel above the "net" gallons purchased would equal the difference between a larger amount of fuel sold through the meters, the "metered sales," and a smaller "inventoried fuel accounted for." "Loss" from contraction of fuel below the "net" gallonage purchased (plus other possible losses from spillage, leakage or evaporation) would equal the difference between a larger "inventoried fuel accounted for" and a smaller amount of fuel sold through the meters, the "metered sales." Using the arithmetic operations described in the preceding paragraph on the samples of motor fuel, it can be calculated that Co-Op had gains of: 4,060 gallons for July 1986; 6,645 gallons for July 1987; and 77 gallons for December 1987. In the month of December 1986, there was a loss of 1,482 gallons. The net gain in motor fuel for those months was 9,300 gallons. Meanwhile, the total purchases of motor fuel for those months was 2,306,269 gallons. Comparing the net gain with the total purchases yields a gain or error ratio of .004032487 for motor fuel. The total number of gallons of motor fuel purchased by Co-Op during 1986 and 1987 was 14,190,105. Application of this gain ratio to the total number of gallons purchased yields 57,223 "additional taxable gallons" of motor fuel for 1986 and 1987. Computation of Additional Motor Fuel Tax, Penalty and Interest Multiplying each month's additional taxable gallons by .057 for the Chapter 212, Part II, motor fuel tax, and by .04 for the Chapter 206 motor fuel tax, the total taxes due for motor fuel are $3,262.29 for Chapter 212, Part II, and $2,288.92 for Chapter 206. Computed at 12 percent per annum or 1 percent monthly, interest or motor fuel taxes under Chapter 212, Part II, Fla. Stat., was $2,592.51 through July 28, 1993, with daily interest accruing at $1.07 per day from that day forward. Also computed at 12 percent per annum or 1 percent monthly, interest on the motor fuel tax under Chapter 206, Fla. Stat., was $1,500.15 through July 28, 1993, with daily interest accruing at $.75 per day from that day forward. To calculate the penalty for motor fuel for both Chapter 212, Part II, and Chapter 206, the tax due is multiplied by 25 percent to arrive at total amounts for penalties of $815.57 and $572.23, respectively. Additional Taxable Gallons: Special Fuel Using the same arithmetic operations described for motor fuel, the taxable gains for special fuel can be calculated for the sample months. (Special fuel was taxable upon resale at the pump for the entire audit period, and the sample months are examined for the entire audit period.) These calculations show the total net gain for the eight month sample period to be 3,892 gallons, as follows: Month Gain/Loss Gallons 686 458 488 284 215 152 July, 1986 December, 1986 July, 1987 December, 1987 July, 1988 December, 1988 July, 1989 Gain Gain Gain Loss Gain Loss Gain + + + - + - +2,574 December, 1989 93 Loss - (net gain) +3,892 Meanwhile, the total purchases of special fuel for those months was 594,203 gallons. Comparing the net gain with the total purchases yields a gain or error ratio of .00655 for special fuel. The total number of gallons of special fuel purchased by Co-Op during the years 1986 through 1989 was 3,910,608. Application of the gain ratio for special fuel to the total number of gallons purchased yields 25,614 "additional taxable gallons" of special fuel for 1986 through 1989. Computation of Additional Special Fuel Tax, Penalty and Interest Multiplying each month's additional taxable gallons of special fuel by $.057 per gallon for the Chapter 212, Part II, special fuel tax, and by $.04 per gallon for the Chapter 206 special fuel tax (except for the months July, 1987, through December, 1987, for which they are multiplied by the $.09 per gallon tax during that period of time), yields Chapter 212, Part II, special fuel tax due in the amount of $1,460.32, and Chapter 206 special fuel tax due in the amount of $1,171.76. Computing interest using exactly the same method as for the motor fuel taxes yields interest on the special fuel tax due under Chapter 212, Part II, in the amount of $1,067.32 through July 28, 1993, with daily interest accruing at $.48 per day from that day forward, and in the amount of $858.69 for the special fuel tax due under Chapter 206 through July 28, 1993, with daily interest accruing at $.39 per day from that day forward. The penalty for overdue special fuel tax for both Chapter 212, Part II, and Chapter 206 is calculated at 25 percent of the tax due, for total amounts of penalty of $365.08 and $292.94, respectively. The total of special fuel tax, interest and penalty due as of July 28, 1993, was $2,892.72 for special fuel under Chapter 212, Part II, and $2,323.29 for special fuel under Chapter 206. Rejection of Co-Op's Proposed Alternative Method Co-Op pointed out that for the month of July, 1986, it sold 17,097 gallons more than it purchased, but that for the subsequent sample months it was actually purchasing more gallons than it was selling. Co-Op argues that this demonstrates the payment of tax on 31,695 gallons more than it actually sold. However, a review of each month shows that, although purchases did exceed sales in several months, the ending inventories generally were larger than the number calculated by subtracting metered sales for the month from the total of beginning inventories plus purchases for the month. Actual dip stick measurements of the inventory in the tanks demonstrates a net increase over the computed book inventory of 9,300 gallons for motor fuel and 3,892 gallons for special fuel. In addition, sales of motor fuel for 1986 and 1987 totalled 14,247,541 gallons (8,228,593 for 1986, and 6,018,948 for 1987), while total purchases for that same period were only 14,190,105 gallons. For special fuel, sales of special fuel for 1986 through 1989 totalled 3,962,263 gallons (1,685,959 for 1986, 945,775 for 1987, 721,547 for 1988, and 608,982 for 1989), while total purchases of special fuel were only 3,910,608 gallons. In each case, due to expansion gains in the fuels, sales always exceeded purchases. Local Option Taxes The Chapter 336 local option taxes on motor fuel were not affected by the amendments to Chapters 206 and 212, Part II, effective January 1, 1988. The total that Co_Op reported for motor fuel purchases for the period January 1, 1986, through December 31, 1989, was 24,798,440. Multiplying by the gain ratio for motor fuel of .004032487 yields 100,000 gallons of additional taxable motor fuel. Adding the additional taxable gallons of motor fuel to the 25,614 gallons of additional taxable special fuel yields of 125,614 additional taxable gallons or net gain for the period. Throughout the audit period, the local option tax rate under Section 336.025 was $.04 per gallon for Lake and Lee County and $.06 per gallon for Manatee and Orange County. Polk County started with a $.04 per gallon rate and increased that to a $.06 per gallon rate in September, 1986. Pinellas and Citrus County increased the tax rate from the beginning figure of $.04 per gallon to $.06 per gallon in September, 1987. Because of the difference in rates between counties and the changes of rates within counties, it is necessary to calculate effective tax rates and compute the percentage of reported taxable gallons for Co-Op's business in each of the respective counties, as follows: Ratio of Reported Effective Tax County Gallons Rate .051 .040 .040 .060 Citrus 21 percent Lake 01 percent Lee 03 percent Manatee 11 percent .060 .050 .055 Orange 02 percent Pinellas 37 percent Polk 25 percent Taking the total net gain of 125,614 gallons and multiplying it by the appropriate percentage (i.e., the ratio of fuel sold in an individual county) yields the total taxable gains in each county. To ascertain the additional local option taxes due under Section 336.025, Fla. Stat., the total taxable gains calculated for each county option tax must be multiplied by each county, as follows: County for the purposes of the local effective tax rate for Tax Due Citrus $1,345.33 Lake 50.25 Lee 150.74 Manatee 829.05 Orange 150.74 Pinellas 2,323.86 Polk 1,727.19 Total $6,577.14 The statutory 25 percent penalty on the past due local option taxes amounts to $1,644.29. The statutory interest due on the past due local option taxes amounted to $4,415.33 through July 28, 1993, and has been accruing at a daily rate of $2.16 from that date (the date of the hearing). In sum, as of July 28, 1993, Co-Op owed local option tax under Section 336.025, penalty follows: and interest as Tax $6,577.14 Penalty 25 percent 1,644.29 Interest thru 7/28/93 4,415.33 Total $12,636.76 Interest continues to accrue at the $2.16 daily rate. Of the seven counties in which Co_Op was doing business that had enacted the local option tax under Section 336.025, Fla. Stat., only Lake, Lee and Manatee Counties had enacted the Section 336.021, Fla. Stat., tax of $.01 per gallon. They had only approximately 14.26 percent of the 125,614 additional taxable gallon (net gain) for purposes of local option taxes, or 17,913 additional taxable gallons. Using the statutory 1 percent taxable rate, Co-Op owes the following additional taxes: County Total Tax Percent Ratio Tax Due 8.60 Lake 171.93 5 Lee 171.93 28 48.14 Manatee 171.93 67 115.19 The statutory 25 percent penalty on the additional Section 336.021 local option tax amounts to $42.98. At the statutory rate, interest owing on the additional Section 336.021 local option tax totalled $127.97 through July 28, 1993, with interest accruing at the rate of $.06 per day thereafter. In sum, as of July 28, 1993, Co-Op owed local option tax under Section 336.021, penalty and interest in the amount of $342.88, with interest accruing at $.06 per day from that day forward. Estoppel Since 1957, each month Co-Op reported and paid motor fuel and special fuel tax based on the number of "net" gallons purchased during the preceding month. Four years before the audit which is the subject of this case, Co-Op was audited and was not told that it was in error in reporting and paying motor fuel and special fuel tax based on the number of "net" gallons purchased. However, at all times when Co-Op reported and paid motor fuel and special fuel tax based on the number of "net" gallons purchased, it also collected tax from the ultimate purchasers on the number of "gross" gallons pumped through the meter. Offer to Compromise Penalty The Department, in its Notice of Decision and Notice of Reconsideration offered to compromise the penalty on all taxes from the 25 percent level to a 5 percent level, but Co-Op protested both of these notices. The offer of compromise was only good for the duration of the Closing Agreement which was attached to the Notice of Reconsideration. In light of the prior audit, which did not alert Co-Op that it was reporting and paying taxes incorrectly, it could perhaps initially have been argued by Co-Op that its failure to report and pay these taxes when due was reasonable, and not fraudulent or willful neglect or negligence. But the prior audit cannot justify its decision to contest its liability for these taxes through formal administrative proceedings.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Department of Revenue enter a final order finding the Petitioner, Co- Op Oil Company, Inc., liable for the following taxes: Ch. 212, Part II, Motor Fuel.--$6,670. 37, with interest accruing at $1.07 per day from July 29, 1993. Ch. 212, Pt. II, Special Fuel.-- $2,892.72, with interest accruing at $.48 per day from July 29, 1993. (3) Ch. 206, Motor Fuel.--$4,361.30, with interest accruing at $.75 per day from July 29, 1993. (4) Ch. 206, Special Fuel.--$2,323.39, with interest accruing at $.39 per day from July 29, 1993. Ch. 336.025, Motor/Special Fuel.-- $12,636.76, with interest accruing at $2.16 per day from July 29, 1993. Ch. 336.021, Motor/Special Fuel.-- $342.88, with interest accruing at $.06 per day from July 29, 1993. TOTAL - $29,277.42, with interest accruing at $4.91 per day from July 29, 1993. RECOMMENDED this 22nd day of September, 1993, in Tallahassee, Florida. 1550 J. LAWRENCE JOHNSTON Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399- (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 22nd day of September, 1993. COPIES FURNISHED: James E. Smith, President Co-Op Oil Company, Inc. 4911 - 8th Avenue South Gulfport, Florida 33707 Ralph R. Jaeger, Esquire Assistant Attorney General Department of Legal Affairs Tax Section, Capitol Building Tallahassee, Florida 32399-1050 Linda Lettera, Esquire General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 Larry Fuchs Executive Director Department of Revenue 102 Carlton Building Tallahassee, Florida 32399-0100
The Issue Whether the Department of Revenue's ("Department") assessment of tax, penalty, and interest against American Import Car Sales, Inc., is valid and correct.
Findings Of Fact The Department is the agency responsible for administering the revenue laws of the State of Florida, including the imposition and collection of the state's sales and use taxes. Petitioner, American Import Car Sales, Inc., is a Florida S-corporation with its principle place of business and mailing address in Hollywood, Florida. Petitioner, during the period of June 1, 2007, through May 31, 2010 ("assessment period"), was in the business of selling and financing new and used motor vehicles. On June 29, 2010, the Department issued to Petitioner a Notice of Intent to Audit Books and Records (form DR-840) for sales and use tax for the assessment period. Said notice informed Petitioner that the audit would begin on or around 60 days from the date of the notice and included an attachment identifying the records and information that would be reviewed and should be available when the audit commenced. Specifically, the Sales and Use Tax Information Checklist attachment requested the following: chart of accounts, general ledgers, cash receipts journals, cash disbursement journals, federal income tax returns, county tangible property returns, Florida Sales and Use Tax returns, sales journals, sales tax exemption certificates (resale certificates), sales invoices, purchase invoices, purchase journals, lease agreements for real or tangible property, depreciation schedules, bank and financial statements, detail of fixed asset purchases, and other documents as needed. On the same date, in addition to the Notice of Intent, the Department issued to Petitioner, inter alia, an Electronic Audit Survey, and a Pre-Audit Questionnaire and Request for Information. On September 17, 2010, the auditor requested the following records to review by October 4, 2010: (1) general ledger for the assessment period; (2) federal returns for 2007, 2008, and 2009; (3) lease agreement for the business location; (4) deal folders for the assessment period; (5) all expense purchase invoices for the assessment period; (6) all purchase invoices relating to assets added to the Depreciation Schedule during the assessment period; (7) resale/exemption certificates, shipping documents, and any other exempt sales documentation to support exempt sales during the assessment period; (8) bank statements for the assessment periods; and (9) all worksheets used to prepare monthly sales tax returns for the assessment period. On October 5, 2010, the auditor met with Petitioner's President Joe Levy, Petitioner's Secretary Joanne Clements, and Petitioner's Certified Public Accountant, Steve Levy. At that time, Petitioner provided a hard copy of the 2007 and 2008 general ledger and profit and loss statements. At that time, the auditor again advised Petitioner that the Department needed the federal returns, as well as the completed electronic audit survey and pre-audit questionnaire. On October 5, 2010, the Department and Petitioner signed a Consent to Extend the Time to Issue an Assessment or to File a Claim for Refund (form DR-872). The consent provided that assessments or claims for refunds may be filed at any time on or before the extended statute of limitations, December 31, 2011. On October 18, 2010, Petitioner provided the Department with the completed electronic audit survey and pre-audit questionnaire. Thereafter, Petitioner provided the Department with the following books and records: (1) 2009 "deal folders;" Petitioner's general ledger in Excel format for June 1, 2007, through December 31, 2010; (3) January 2009 through May 2010 bank statements; (4) a listing of exempt sales; and (5) lease agreements with attendant invoices. On August 25, 2011, the Department issued its assessment, entitled a Notice of Intent to Make Audit Changes (form DR-1215)("NOI"). Said notice provided that Respondent owed $2,324,298.42 in tax, $581,074.61 in penalties, and $515,117.04 in interest through August 25, 2011. The NOI addressed Petitioner's alleged failure to collect and remit tax on: (1) certain vehicle sales (audit Exhibit A01-Sales Tax Collected and Not Remitted)1/; (2) vehicle sales with no documentation regarding its exempt status (audit Exhibit A02-Disallowed Exempt Sales)2/; (3) motor vehicle sales where no discretionary tax was assessed (audit Exhibit A03- Discretionary Surtax)3/; and (4) unreported sales (audit Exhibit A04-Unreported Sales). The assessment also related to Petitioner's alleged failure to pay/accrue tax on: (1) taxable purchases (audit Exhibit B01-Taxable Purchases); (2) fixed assets (audit Exhibit B02-Fixed Assets); and (3) commercial rent (Exhibit B03-Commercial Realty). At hearing, Petitioner stipulated that the only component of the NOI remaining at issue pertains to audit Exhibit A04-Unreported Sales, as Petitioner has conceded A01, A02, A03, and all fee schedules. An understanding of audit Exhibit A04, and the assessment methodology employed by the auditor, is articulated in the Department's Exhibit MM, entitled Explanation of Items, which is set forth, in pertinent part, as follows: Reason for Exhibit: The records received for the audit were inadequate. The taxpayer provided bank statements for the period of January 2009 through May 2010. This period was deemed the test period for unreported sales. A review of the bank statements for the test period revealed that sales were underreported. This exhibit was created to assess for sales tax on unreported sales. Source of Information: Sales tax returns and Bank of America bank statements for the test period of January 2009 through May 2010; The Department of Motor Vehicles (DMV) [sic] was acquired for the period of June 2007 through May 2010. Description of Mathematical Adjustments: The bank statements were reviewed for the period of January 2009 through May 2010. Taxable Sales on sales tax returns, sales tax on sales tax returns, taxable sales on Exhibit on [sic] Exhibit A01, sales tax Exhibit A01 and Exempt Sales on Exhibit A02 was subtracted from Bank Deposits to arrive at unreported sales. See calculations on page 53. Unreported sales for the period of January 2009 through May 2010 were scheduled into this exhibit. A rate analysis of the DMV database resulted in an effective tax rate of 6.2689. Scheduled transactions were multiplied by the effective tax rate of 6.2689 to determine the tax due on the test period. A percentage of error was calculated by dividing the tax due by the taxable sales for each test period. The percentage of error was applied to taxable sales for each month of the audit period which resulted in additional tax due. The auditor's analysis of the test period, applied to the entire assessment period, resulted in a determination that Petitioner owed $1,599,056.23 in tax for unreported sales. On August 25, 2011, the auditor met with Joe and Steve Levy to discuss and present the NOI. At that time, Joe and Steve Levy were advised that Petitioner had 30 days to provide additional documents to revise the NOI. On September 28, 2011, the Department issued correspondence to Petitioner advising that since a response to the NOI had not been received, the case was being forwarded to Tallahassee for issuance of the Notice of Proposed Assessment ("NOPA")(form DR-831). On October 7, 2011, the Department issued the NOPA, which identified the deficiency resulting from an audit of Petitioner's books and records for the assessment period. Pursuant to the NOPA, Petitioner was assessed $2,324,298.42 in tax, $31,332.46 in penalty, and $534,284.54 in interest through October 7, 2011. The NOPA provided Petitioner with its rights to an informal written protest, an administrative hearing, or a judicial proceeding. On December 5, 2011, Petitioner filed its Informal Written Protest to the October 7, 2011, NOPA. The protest noted that the NOPA was "not correct and substantially overstated." The protest raised several issues: (1) that the calculation was primarily based upon bank statement deposits; (2) not all deposits are sales and sources of income; and (3) a substantial amount of the deposits were exempt sales and loans. The protest further requested a personal conference with a Department specialist. On January 10, 2013, Martha Gregory, a tax law specialist and technical assistance dispute resolution employee of the Department, issued correspondence to Petitioner. The documented purpose of the correspondence was to request additional information regarding Petitioner's protest of the NOPA. Among other items, Ms. Gregory requested Petitioner provide the following: [D]ocumentation and explanations regarding the source of income—vehicle sales, loan payments, etc.—for each deposit. For vehicle sales deposits, provide the customer name, vehicle identification number and amount; for loan payments, provide proof of an existing loan and the amount received from the borrower; and for any other deposits, provide documentation of the source of this income. A conference was held with Petitioner on February 7, 2013. At the conference, Ms. Gregory discussed the January 10, 2013, correspondence including the request for information. The Department did not receive the requested information. Following the conference, the Department provided the Petitioner an additional 105 days to provide documentation to support the protest. Again, Petitioner failed to provide the information requested. On June 14, 2013, the Department issued its Notice of Decision ("NOD"). The NOD concluded that Petitioner had failed to demonstrate that it was not liable for the tax, plus penalty and interest, on unreported sales as scheduled in audit Exhibit A04, Unreported Sales, as assessed within the compliance audit for the assessment period. Accordingly, the protested assessment was sustained. On July 15, 2013, Petitioner filed a Petition for Reconsideration to appeal the Notice of Decision ("POR"). The POR advanced the following issues: (1) the records examined were not the books and records of Petitioner; (2) the audit should be reduced because the auditor's methodology was incorrect; and the Petitioner should be allowed a credit for bad debts taken during the audit period. At Petitioner's request, on October 22, 2013, Petitioner and Ms. Gregory participated in a conference regarding the POR. At the conference, Petitioner requested a 30-day extension to provide documentation in support of Petitioner's POR. No additional documentation was subsequently provided by Petitioner. On April 29, 2014, the Department issued its Notice of Reconsideration ("NOR"). The NOR sustained the protested assessment. Petitioner, on June 30, 2014, filed its Petition for Chapter 120 Hearing to contest the NOR. Petitioner did not file its federal tax returns for the years 2008, 2009, and 2010 until after the Department issued the NOR. Indeed, the federal returns were not filed until June 3, 2014.4/ Ms. Kruse conceded that the auditor's assessment utilized Petitioner's bank statements to determine unreported sales; however, the auditor did not make any adjustments for "unusual items that would have been on the face of the bank statements." Ms. Kruse further acknowledged that the auditor's assessment does not reference Petitioner's general ledger information. Ms. Kruse acknowledged that, for several representative months, the general ledger accurately reported the deposits for the bank statements provided. When presented with a limited comparison of the bank statement and the general ledger, Ms. Kruse further agreed that, on several occasions, deposits noted on the bank statements were probably not taxable transactions; however, the same were included as taxable sales in the auditor's analysis. Ms. Kruse credibly testified that the same appeared to be transfers of funds from one account into another; however, because the Department only possessed the bank statements from one account, and never received the requested "back up information" concerning the other account, the Department could not discern the original source of the funds.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that The Department conduct a new assessment of Petitioner's sales and use tax based on a test or sampling of Petitioner's available records or other information relating to the sales or purchases made by Petitioner for a representative period, giving due consideration to Petitioner's available records, including Petitioner's general ledger, to determine the proportion that taxable retail sales bear to total retail sales. DONE AND ENTERED this 17th day of April, 2015, in Tallahassee, Leon County, Florida. S TODD P. RESAVAGE 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 17th day of April, 2015.
Findings Of Fact Ware Oil and Supply Company, Inc. (hereafter "Petitioner" or "Ware Oil"), is a wholesale and retail dealer of petroleum products. Ware Oil is a licensed dealer of special and motor fuels. Special fuels are primarily diesel and are used to operate off-highway equipment such as boats, farm tractors and industrial machinery. Beginning March 1980, the Department conducted a special fuels tax audit of the records of the Petitioner for the period January 1, 1977, through January 31, 1980. The special fuels tax audit resulted in a levy of a tax deficiency pursuant to Part II, Chapter 206, Florida Statutes. The taxes assessed together with penalty and interest are $6.868.06, with interest accruing at $1.70 per day from April 14, 1980. The assessment was based in sales of special fuels made by the Petitioner to four customers; Hoxie Brothers Circus, Jackson United Shows, Tommy Lynn and Pace's 66 Marina. The assessment relative to the sales of special fuel to Hoxie Brothers Circus and Jackson United Shows was due to the absence of a purchaser's affidavit of exemption from these customers and the Department's belief that they were dual users of special fuel due to the nature of their businesses. The assessment relative to Tommy Lynn was based on the Department's conclusion that Mr. Lynn was a dual user of special fuel and was an unlicensed dealer at the time the sales were made. The assessment relative to Pace's 66 Marina was based on Pace's resale of special fuels for which a dealer's license is required at the time of purchase. The taxes assessed by the Department are derived from the number of gallons of special fuel which was sold by the Petitioner to Hoxie Brothers Circus, Jackson United Shows, Tommy Lynn and Pace's 66 Marina, on which the $.08 per gallon tax was not collected. During 1977 Petitioner sold 550 gallons of special fuel to Hoxie Brothers Circus for purposes of generating electricity in order to operate circus rides and lights. The Petitioner did not have an exemption certificate from Hoxie relative to this sale although the sale invoice indicated that the fuel was for "off-road use". Sales tax of $.04 per gallon was collected by the Petitioner from Hoxie. No testimony or documentary evidence was produced to demonstrate that Hoxie in fact used the special fuel for an exempt purpose, that the special fuel was not placed into a receptacle connected to the fuel supply system of a motor vehicle and that the special fuel was not purchased for resale or far a dual use. In 1978, the Petitioner sold 300 gallons of special fuel to Jackson United a circus which generates its own electricity for circus rides and lights. The Petitioner has no exemption certificates for this sale; however, like Hoxie, the sales invoice has the term "off-road use" noted on its face. No testimony or documentary evidence was introduced to demonstrate that Jackson in fact used the special fuel for an exempt purpose, that the special fuel was not placed into a receptacle to the fuel supply system of a motor vehicle and that the special fuel was not purchased for resale or for a dual use. In 1977 the Petitioner sold 11,200 gallons of special fuel to Tommy Lynn. At that time Mr. Lynn was an independent logger who used all the special fuel purchased from the Petitioner for his logging equipment in the field and for off-road use. At the time of his purchases from the Petitioner, Mr. Lynn was a dual user of special fuels in that he used special fuel for both on and off road equipment. Mr. Lynn bought his off-road special fuels exclusively from the Petitioner and his on-road special fuel from another dealer. When audited by the Department, Petitioner did not have an exemption certificate for Mr. Lynn on file in its records. The Department in the past accepted exemption certificates obtained after sales were made. Mr. Lynn executed two after the fact exemption certificates. The first certificate was erroneously executed and a second drafted and signed in which Mr. Lynn stated that his purchases were for off-road use. The second certificate corroborates Mr. Lynn's direct testimony that the special fuel purchased from the Petitioner was used solely for off-road use. Neither of these certificates demonstrates that Mr. Lynn was a licensed dealer in special fuels. During 1977, 1978 and 1979 the Petitioner sold 52,484 gallons of special fuel to Pace's 66 Marina. Pace's used this special fuel for resale to users of commercial and pleasure boats and therefore, no sales tax was collected. The location of the special fuel pumps at Pace's make it virtually impossible to use the fuel for purposes other than boating. At the time of the fuel's purchase, Pace's presented an exemption certificate to the Petitioner. At that time, Pace's was not a licensed dealer of special fuels and its dealer's license number did not appear on the exemption certificate furnished to the Petitioner. Petitioner was unaware that Tommy Lynn and Pace's 66 Marina were required to be licensed as dealers and the exemption certificates provided by them should have that contained their dealer's license numbers and therefore, had no knowledge that the exemption certificates of Mr. Lynn and Pace's were incomplete. The sales were made by Petitioner in reliance on the certificates supplied by these two customer. The Department imposed the assessment against Hoxie and Jackson due to the lack of appropriate exemption certificates. The assessment was levied against Tommy Lynn and Pace's due to improperly completed exemption certificates which failed to reflect the dealer's license number. The Department did not consider whether the involved special fuels were in fact used for exempt purposes. The unrebutted testimony and documentary evidence regarding the sales to Tommy Lynn and Pace's 66 Marina supports Petitioner's position that the fuels sold to these two customers were in fact used for exempt purposes.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the Department enter a final order upholding the tax assessment against the Petitioner, Ware Oil and Supply Company. DONE and ENTERED this 31st day of August 1981, in Tallahassee, Florida. SHARYN L. SMITH Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 FILED with the Clerk of the Division of Administrative Hearings this 31st day of August 1981. COPIES FURNISHED: Nicholas Yonclas, Esquire Akerman, Senterfitt & Eidson Post Office Box 1794 Tallahassee, Florida 32302 Jeff Kielbasa, Esquire Assistant Attorney General Department of Legal Affairs The Capitol, LLO4 Tallahassee, Florida 32301
The Issue The issues in this bid protest are, first, whether, as Petitioner alleges, Intervenor's failure to attach copies of "occupational licenses" to its proposal was a deviation from the requirements of the Request for Proposal; second, whether any such deviation was material; and third, whether Respondent's preliminary decision to award Intervenor the contract at issue was clearly erroneous, arbitrary or capricious, or contrary to competition.
Findings Of Fact On September 18, 2009, Respondent Department of Transportation ("Department") issued Request for Proposal No. RFP-DOT-09/10-4007FS (the "RFP"). Through the RFP, which is entitled, "Treasure Coast Road Ranger Service Patrol," the Department solicited written proposals from qualified providers who would be willing and able to perform towing and emergency roadside services on Interstate 95 in Martin County, St. Lucie County, and Indian River County. The Department intended to award a three-year contract to the "responsive and responsible Proposer whose proposal is determined to be the most advantageous to the Department." The Department anticipated that the contract would have a term beginning on December 1, 2009, and ending on November 31, 2012. The annual contract price was not to exceed $1.59 million. Proposals were due on October 13, 2009. Four firms timely submitted proposals in response to the RFP, including Petitioner Sunshine Towing @ Broward, Inc. ("Sunshine") and Intervenor Anchor Towing and Marine of Broward, Inc. ("Anchor"). An evaluation ensued, pursuant to a process described in the RFP, during which the Department rejected two of the four proposals for failing to meet minimum requirements relating to technical aspects of the project. As a result, Sunshine and Anchor emerged as the only competitors eligible for the award. Sunshine offered to perform the contractual services for an annual price of $1,531,548. This sum was less than the price that Anchor proposed by $46,980 per year. Despite Sunshine's lower cost, Anchor nevertheless edged Sunshine in the final score, receiving 92.86 points (out of 100) from the Department's evaluators, to Sunshine's 87.75. On November 30, 2009, the Department duly notified the public of its intent to award the contract to Anchor. Sunshine promptly initiated the instant protest, whereby Sunshine seeks to have Anchor's proposal disqualified as nonresponsive, in hopes that the Department will then award the contract to Sunshine as the highest-ranked (indeed the sole) responsive proposer. Sunshine alleges that Anchor's proposal failed to conform strictly to the specifications of the RFP, principally because Anchor did not attach copies of its "occupational licenses" to the proposal. Anchor insists that its proposal was responsive but argues, alternatively, that if its proposal deviated from the specifications, the deviation was merely a minor irregularity which the Department could waive. Anchor further contends that Sunshine's proposal contains material deviations for which it should be deemed nonresponsive. The Department takes the position that Anchor's failure to attach "occupational licenses" was a minor irregularity that could be (and was) waived.1 The RFP includes a "Special Conditions" section wherein the specifications at the heart of this dispute are located. Of particular interest is Special Condition No. 8, which specifies the qualifications a provider must have to be considered qualified to perform the services called for under the contract to be awarded. Special Condition No. 8 provides as follows: QUALIFICATIONS General The Department will determine whether the Proposer is qualified to perform the services being contracted based upon their proposal demonstrating satisfactory experience and capability in the work area. The Proposer shall identify necessary experienced personnel and facilities to support the activities associated with this proposal. Qualifications of Key Personnel Those individuals who will be directly involved in the project should have demonstrated experience in the areas delineated in the scope of work. Individuals whose qualifications are presented will be committed to the project for its duration unless otherwise excepted by the Department's Project Manager. Where State of Florida registration or certification is deemed appropriate, a copy of the registration or certificate should be included in the proposal package. Authorized To Do Business in the State of Florida In accordance with sections 607.1501, 608.501, and 620.169, Florida Statutes, foreign corporations, foreign limited liability companies, and foreign limited partnerships must be authorized to do business in the State of Florida. Such authorization should be obtained by the proposal due date and time, but in any case, must be obtained prior to the posting of the intended award of the contact. For authorization, [contact the Florida Department of State].[2] Licensed to Conduct Business in the State of Florida If the business being provided requires that individuals be licensed by the Department of Business and Professional Regulation, such licenses should be obtained by the proposal due date and time, but in any case, must be obtained prior to the posting of the intended award of the contract. For licensing, [contact the Florida Department of Business and Professional Regulation]. References and experience must entail a minimum of three (3) years of experience in the towing industry in Florida. NOTE: Copies of occupational licenses must also be attached to the back of Form 'F'. (Boldface in original.) Special Condition No. 19, which defines the term "responsive proposal," provides as follows: RESPONSIVENESS OF PROPOSALS Responsiveness of Proposals Proposals will not be considered if not received by the Department on or before the date and time specified as the due date for submission. All proposals must be typed or printed in ink. A responsive proposal is an offer to perform the scope of services called for in this Request for Proposal in accordance with all the requirements of this Request for Proposal and receiving fifty (50) points or more on the Technical Proposal.[3] Proposals found to be non-responsive shall not be considered. Proposals may be rejected if found to be irregular or not in conformance with the requirements and instructions herein contained. A proposal may be found to be irregular or non-responsive by reasons that include, but are not limited to, failure to utilize or complete prescribed forms, conditional proposals, incomplete proposals, indefinite or ambiguous proposals, and improper and/or undated signatures. (Emphasis and boldface in original.) In the "General Instructions to Respondents" section of the RFP there appears the following reservation of rights: 16. Minor Irregularities/Right to Reject. The Buyer reserves the right to accept or reject any and all bids, or separable portions thereof, and to waive any minor irregularity, technicality, or omission if the Buyer determines that doing so will serve the State's best interests. The Buyer may reject any response not submitted in the manner specified by the solicitation documents. Anchor did not attach copies of any "occupational licenses" to the back of Form 'F' in its proposal. Anchor contends that it did not need to attach such licenses because none exists. This position is based on two undisputed facts: (1) The Florida Department of Business and Professional Regulation ("DBPR") does not regulate the business of providing towing and emergency roadside assistance; therefore, neither Anchor nor Sunshine held (or could hold) a state-issued license to operate, and neither company fell under DBPR's regulatory jurisdiction. (2) The instrument formerly known as an "occupational license," which local governments had issued for decades, not for regulatory purposes but as a means of raising revenue, is presently called (at least formally) a "business tax receipt," after the Florida Legislature, in 2006, amended Chapter 205 of the Florida Statutes, changing the name of that law from the "Local Occupational License Tax Act" to the "Local Business Tax Act." See 2006 Fla. Laws ch. 152. Sunshine asserts that the terms "occupational license" and "business tax receipt" are synonymous and interchangeable, and that the RFP required each offeror to attach copies of its occupational licenses/business tax receipts to the proposal. Sunshine insists that Anchor's failure to do so constituted a material deviation from the specifications because, without such documentation, the Department could not be sure whether an offeror was authorized to do business in any given locality. Sunshine presses this argument a step further based on some additional undisputed facts. As it happened, at the time the proposals were opened, Anchor held a local business tax receipt from the City of Pembroke Pines, which is the municipality in which Anchor maintains its principal place of business. Anchor had not, however, paid local business taxes to Broward County when they became due, respectively, on July 1, 2008, and July 1, 2009. Anchor corrected this problem on December 14, 2009, which was about two weeks after the Department had posted notice of its intent to award Anchor the contract, paying Broward County a grand total of $248.45 in back taxes, collection costs, and late penalties. As of this writing, all of Anchor's local business tax obligations are paid in full. Sunshine contends, however, that during the period of time that Anchor's Broward County business taxes were delinquent, Anchor was not authorized to do business in Broward County and hence was not a "responsible" proposer eligible for award of the contract. In support of this proposition, Sunshine relies upon Section 20-15 of the Broward County, Florida, Code of Ordinances ("Broward Code"), which states: Pursuant to the authority granted by Chapter 205, Florida Statutes, no person shall engage in or manage any business, profession or occupation, as the same are contemplated by Chapter 205, Florida Statutes, unless such person first obtains a business tax receipt as required by this article, unless other exempt from this requirement . . . . On this latter point regarding Anchor's authority to operate in Broward County, Sunshine appears to be correct, at least in a narrow legal sense. It is abundantly clear, however, and the undersigned finds, that, as a matter of fact, Anchor was never in any danger of being shut down by the county. Indeed, even under the strict letter of the local law, Anchor was entitled to continue operating in Broward County unless and until the county took steps to compel the payment of the delinquent taxes. Broward Code Section 20-22, which deals with the enforcement of the business tax provisions, provides: Whenever any person who is subject to the payment of a business tax or privilege tax provided by this article shall fail to pay the same when due, the tax collector, within three (3) years from the due date of the tax, may issue a warrant directed to the Broward County Sheriff, commanding him/her to levy upon and sell any real or personal property of such person liable for said tax for the amount thereof and the cost of executing the warrant and to return such warrant to the tax collector and to pay him/her the money collected by virtue thereof within sixty (60) days from the date of the warrant. . . . The tax collector may file a copy of the warrant with the Clerk of the Circuit Court of Broward County[, which shall be recorded in the public records and thereby] become a lien for seven (7) years from the due date of the tax. . . . Any person subject to, and who fails to pay, a business tax or privilege tax required by this article, shall, on petition of the tax collector, be enjoined by the Circuit Court from engaging in the business for which he/she has failed to pay said business tax, until such time as he/she shall pay the same with costs of such action. There is no evidence suggesting that the county ever sought to enjoin, or that a court ever issued an injunction prohibiting, Anchor from engaging in business, nor does it appear, based on the evidence, that a tax warrant ever was issued, filed, or executed to force Anchor to pay its back taxes. Given the relatively small amount of tax due, the likelihood of such enforcement actions being taken must reasonably be reckoned as slim to none. While paying taxes when due is certainly the obligation of a good corporate citizen, it would not be reasonable, based on the facts established in this case, to infer that Anchor is a scofflaw for failing to timely pay a local tax amounting to about $80 per year. Anchor, in short, was a responsible proposer. Sunshine's other argument has more going for it. The RFP clearly and unambiguously mandated that "occupational licenses" be attached to a proposal. If, as Sunshine maintains, the terms "occupational license" and "business tax receipt" are clearly synonymous, then Anchor's proposal was noncompliant. For reasons that will be explained below, however, the undersigned has concluded, as a matter of law, that the term "occupational license" does not unambiguously denote a "business tax receipt"——at least not in the context of Special Condition No. 8. The specification, in other words, is ambiguous. No one protested the specification or otherwise sought clarification of the Department's intent. The evidence shows, and the undersigned finds, that the Department understood and intended the term "occupational license" to mean the instrument now known as a "business tax receipt." The Department simply used the outdated name, as many others probably still do, owing to that facet of human nature captured by the expression, "old habits die hard." The Department's interpretation of the ambiguous specification is not clearly erroneous and therefore should not be disturbed in this proceeding. Based on the Department's interpretation of Special Condition No. 8, the undersigned finds that Anchor's failure to attach copies of its occupational licenses was a deviation from the requirements of the RFP. That is not the end of the matter, however, for a deviation is not necessarily disqualifying unless it is found to be material. The letting authority may, in the exercise of discretion, choose to waive a minor irregularity if doing so will not compromise the integrity and fairness of the competition. There is no persuasive direct evidence in the record that the Department made a conscious decision to waive the irregularity in Anchor's proposal. Documents in the Department's procurement file show, however, that the Department knew that Anchor's proposal lacked copies of occupational licenses, and in any event this was a patent defect, inasmuch as nothing was attached to the back of Anchor's Form 'F'. It is therefore reasonable to infer that the Department elected to waive the irregularity, and the undersigned so finds. Necessarily implicit in the Department's action (waiving the deficiency) is an agency determination that that the irregularity was a minor one. The question of whether or not Anchor's noncompliance with Special Condition No. 8 was material is fairly debatable. Ultimately, however, the undersigned is unable to find, for reasons more fully developed below, that the Department's determination in this regard was clearly erroneous. Because the Department's determination was not clearly erroneous, the undersigned accepts that Anchor's failure to submit occupational licenses was a minor irregularity, which the Department could waive. The Department's decision to waive the minor irregularity is entitled to great deference and should be upheld unless it was arbitrary or capricious. The undersigned cannot say that waiving the deficiency in question was illogical, despotic, thoughtless, or otherwise an abuse of discretion; to the contrary, once it has been concluded that the irregularity is minor and immaterial, as the Department not incorrectly did here, waiver seems the reasonable and logical course of action. The upshot is that the proposed award to Anchor should be allowed to stand. The foregoing determination renders moot the disputed issues of fact arising from Anchor's allegation that Sunshine's proposal was nonresponsive. It is unnecessary, therefore, for the undersigned to make additional findings on that subject.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department enter a Final Order consistent with its preliminary decision to award Anchor the contract at issue. DONE AND ENTERED this 6th day of April, 2010, in Tallahassee, Leon County, Florida. JOHN G. VAN LANINGHAM Administrative Law Judge Division of Administrative Hearings 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 April, 2010.
