The Issue Whether or not Sohio, a subsidiary of BP Oil Company, Inc., is liable for the payment of certain local option gas taxes to the Department of Revenue under the facts of this case.
Findings Of Fact This cause was initiated by the Petition for Formal Hearing filed with the Department of Revenue on or about February 2, 1989. This petition was in response to the Department's assessment of February 29, 1988. During the period from January 1, 1986 to December 31, 1987, Petitioner Sohio made sales of gasoline to various customers including 290,698 gallons of gasoline to Enos Ying (Ying), and 634,555 gallons of gasoline to Basil Roberts (Roberts). Petitioner's sales to Ying and to Roberts occurred at their respective places of business in Broward County, Florida, which imposed a six cent per gallon local option gas tax, pursuant to Chapter 336, F.S. during 1986 and 1987. At all times material, Petitioner was licensed in the State of Florida as a "refiner". Petitioner collected motor fuel tax under Chapter 206, F.S., but did not collect or remit local option gasoline tax under Chapter 336, F.S., with regard to its sale of gasoline to Ying and to Roberts. Petitioner did not obtain resale certificates or affidavits from Ying or Roberts covering its sales to them. On November 1, 1985, the Department of Revenue published an "Important Notice to all Retail Gasoline Dealers" which stated that: Effective January 1, 1986, Sections 336.021 and 336.025, Florida Statutes, requires (sic) the Retail Gasoline Dealer to collect and remit the local option gas tax and the voted gas tax on the sale of motor or special fuel at the retail level within a county which imposes one of the above taxes. On January 17, 1986, the Department of Revenue issued an "Important Notice to Motor Fuel Wholesalers, Importers or Distributors Concerning 1986 Licenses" and a list of retail service stations licensed for 1986 as of January 10, 1986, which notice stated: Those accounts that are unlicensed in 1986 will be receiving notification concerning their account and should secure their licenses immediately in order to prevent further complications, On the reverse side of the aforesaid notice, it was stated, Those accounts that are licensed in 1986 are responsible for remitting the local option gas taxes under Chapter 336, Florida Statutes. If you sell to an unlicensed retail dealer, the wholesaler, importer or refiner is responsible for collecting and remitting the local option taxes due under Chapter 336, Florida Statutes. Evidence should be obtained from the retail dealers as to his (sic) current status with the Department prior to selling to the account on a tax-free (Chapter 336, F.S.) basis. No rules or regulations of the Respondent Department under Chapter 336, F.S. or which make specific reference to Chapter 336, F.S. were promulgated by the Department during the period in question. On February 29, 1988, the Respondent issued a notice of delinquent local option gas tax, penalty and interest due and assessed against Petitioner in the amount of $1,302,545.13 (tax of $956,420.65, penalty of $229,806.11 and interest of $116,318.37) regarding sales made by the Petitioner to its customers including Ying and Roberts. A schedule describing the items forming the basis of the assessment was enclosed therewith, which schedule described the transaction subject to the assessment as being sales made to unlicensed retail dealers. The Respondent has never pursued collection of the tax, penalty and interest at issue from either Ying or Roberts. Petitioner did not know or have reason to know whether or not Ying or Roberts had paid the tax in question. On March 17, 1988, Petitioner filed a protest with the office of the General Counsel of the Florida Department of Revenue objecting to the entire assessment on the grounds Petitioner was not liable for the local option tax in regard to the subject transactions and in the alternative, that the retail dealers involved were either listed by the Department of Revenue as being licensed or had filed returns and previously paid their tax. By letter dated April 5, 1988, Petitioner was informed by Christine F. McCann, Special Programs Analyst, Bureau of Enforcement of the Florida Department Revenue, that the above referenced assessment had been revised downward to reflect the liability of $253,260.11 (tax of $182,813.42, penalty of $45,370.91, and interest of $25,075.78) on the grounds that the Petitioner had identified certain dealers as being licensed by the Department, who were part of a transaction for which the Respondent sought to tax Petitioner. As a result of an informal conference held on May 27, 1988, a Notice of Reconsideration was issued on December 7, 1988 which further reduced the assessment against Petitioner to a total of $80,463.39 (tax of $57,769.38, interest of $8,251.61 and penalty of $14,442.40) on the grounds that the Petitioner either identified additional dealers as being licensed by the Department or demonstrated that the retail dealers though not licensed by the Department, had paid the tax in question in regard to the subject transactions. The assessment as revised by the Department's Notice of Reconsideration continues to be in error in that it yet includes certain retail dealers although not licensed and other than Ying and Roberts, who have already paid the tax in question and therefore the assessment should be revised downward further. After the above-referenced adjustment, there remains and is now in controversy in this case the following amounts: SALES TO YING SALES TO ROBERTS Tax $17,436.48 Tax $38,073.30 Penalty 4,359.13 Penalty 9,518.37 Interest to Interest to 4/20/89 4,073.15 4/20/89 9,679.30 TOTAL $25,868.76 $57,270.97 GRAND TOTAL $83,139.73 as of 4/20/89. Should the Respondent prevail in this matter, interest will continue to accrue until the tax is paid. During the course of the informal protest procedures before the Department of Revenue, Petitioner established that all the sales which were the subject of the original notice, except those to Ying and to Roberts, were either to licensed gasoline retailers or to unlicensed gasoline retailers who had collected and remitted the local option tax due. Upon the testimony of Charles (Chuck) M. Reed Jr., Retail Marketer, who has been a dealer lease and supply agent for Ying and for Roberts from Gulf BP, parent corporation of Petitioner Sohio, it is found that Sohio's customary sales both to Ying and to Roberts were made exclusively by filling underground gasoline tanks at the respective establishments of Ying and of Roberts on delivery by the truckload of no less than 7,100 gallons and no more than 8,402 gallons at a time. Also upon the basis of his testimony and the photographs he took which were admitted in evidence, it is found that Ying and Roberts made retail sales to the general motoring public. More specifically, signs posting product affiliation and prices [see Section 206.01 (7) F.S.] which were observed by Mr. Reed identified each of these establishments as retail outlets. The sales agreements between Petitioner and Ying and between Petitioner and Roberts are also clearly in support of this finding. It is also proper to infer from Mr. Reed's testimony that he watched a majority of the gasoline gallons sold to Roberts and to Ying pumped into their respective underground tanks and then observed them pumping gasoline out of those tanks into motorists' cars via the traditional hose arrangements found in commercial gasoline stations, that it was the same Sohio gasoline which was pumped and sold by Ying and Roberts at retail. It was not necessary for Mr. Reed to physically observe the gasoline coursing through the hoses or account specifically day by day from delivery in bulk by Sohio to dispensation one car gasoline tank at a time by Ying and by Roberts in light of the exclusivity clauses of their contracts with Sohio. Therefore, Sohio established that the gasoline it sold to Ying and to Roberts was resold by Ying and by Roberts to the general motoring public. Ying and Roberts therefore fall in the category of being gasoline retailers unlicensed by the Department of Revenue, of whom it is undetermined whether they submitted their county local option gas tax due and from whom Petitioner Sohio, licensed as a refiner, did not obtain resale certificates or affidavits covering Sohio's sales to them. Petitioner did not establish that Ying and Roberts had collected and remitted the local option gasoline tax in controversy. There is no statute or rule which precludes Petitioner selling to an unlicensed dealer. Respondent Department of Revenue requested that Petitioner Sohio provide information which would indicate whether Ying and Roberts had collected and remitted the local option gasoline tax. Since all of the revisions and reductions of the original assessment against Petitioner as set out above were done by the Respondent based on information supplied by the Petitioner, the Respondent anticipated that Petitioner also would be able to provide information on Ying and Roberts. Respondent could have searched its records to find out if Ying and Roberts had paid their tax, and then gone directly to Ying and Roberts to find out why they did not pay the tax, if that were the case. However, due to the agency's search system which is geared to retailer license numbers, Department of Revenue employees asserted that such a search is probably impossible and certainly is impractical. All retail gasoline dealers are required to be licensed in order to sell gasoline. Accordingly, income tax forms are mailed by the agency only to those retail dealers who have obtained a license, despite the assertion in the agency's Notice described in Finding of Fact 8 that unlicensed retailers who had paid their tax without such a number/license were traceable. The problem appears to be that Petitioner sold to persons (unlicensed retailers Ying and Roberts) who had no vehicles (respective retail license numbers) by which to submit the local option gas tax. Instead of pursuing Ying and Roberts for payment of the county local option gas tax, the agency chose to come back against Petitioner for either the certificates or affidavits specifically required with regard to collection and remittance of the state motor fuel tax under Section 206.425 F.S., or for other proof of Roberts' and Ying's compliance concerning the county local option gas tax. According to Mr. Zych, Administrator of the Disposition Section of the Office of the General Counsel and superior to Ms. McCann, the agency would have accepted properly executed retail certificates if Petitioner had gotten them. Without such proof forthcoming from Petitioner, the agency held Petitioner liable for the local option gas tax imposed by the statute upon the retailer. So far as Ms. McCann, Respondent's Special Program Analyst, was concerned, this election to proceed against Sohio was completely in the discretion of her superior. There is no rule that requires Petitioner to get an exemption certificate or affidavit before they sell to a retail dealer.
Recommendation Upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order rescinding its Notice of Assessment against Petitioner with regard to its sales to Ying and Roberts and letting Petitioner go hence without ay. DONE AND ENTERED this 16th day of June, 1989, in Tallahassee, Leon County, Florida. ELLA JANE P. 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 16th day of June, 1989. APPENDIX TO THE RECOMMENDED ORDER IN CASE NO. 89-0638 The following constitutes specific rulings pursuant to Section 120.59(2), Florida Statutes, upon the parties respective proposed findings of fact (PFOF): Petitioner' s PFOF: All of Petitioner's proposed findings of fact are accepted, but those not adopted have not been adopted because they are unnecessary, subordinate to the facts as found or mere legal argument. Respondent ` s PFOF: 1.-6. Accepted. 7. Accepted as modified to conform to the record and the natural inferences of the evidence of record. 8.-11. Accepted but not necessarily adopted as subordinate and unnecessary to the facts as found. 12. Accepted. 13.-15. Accepted but not necessarily adopted as subordinate and unnecessary to the facts as found. Rejected as not supported by the greater weight of the competent substantial evidence and the natural logical inferences there from. Accepted but not adopted because not dispositive of any material issue of fact in dispute in this cause. COPIES FURNISHED: Mark A. Taylor, Esquire Excise Tax Analyst Ira L Smith, Esquire Director, Ad Volorem Tax Division BP America, Inc. 200 Public Square 38-3600-L Cleveland, Ohio 44114-2375 Lealand McCharen Assistant Attorney General Department of Legal Affairs Tax Section, The Capitol Tallahassee, FL 32399-1050 William D. Townsend General Counsel Department of Revenue 203 Carlton Building Tallahassee, FL 32399-0100 Katie D. Tucker Executive Director 102 Carlton Building Tallahassee, FL 32399-0100
The Issue There is little controversy as to the facts in this cause. The issue is essentially a legal issue and is stated as follows: When parties act in reliance and in conformity to a prior construction by an agency of a statute or rule, should the rights gained and positions taken by said parties be impaired by a different construction of said statute by the agency? Both parties submitted post hearing proposed findings of fact in the form of proposed recommended orders filed March 17 and 18, 1983. To the extent the proposed findings of fact have not been included in the factual findings in this order, they are specifically rejected as being irrelevant, not being based on the most credible evidence, or not being a finding of fact.
Findings Of Fact The Petitioner, Vanguard Investment Company, is a Florida corporation with its principal offices at 440 Northeast 92nd Street, Miami Shores, Florida 33138. On or about March 3, 1981, Vanguard purchased an aircraft described as a Turbo Commander, serial number N9RN, from Thunderbird Aviation, Inc., for a purchase price of $120,000 plus $4,800 in sales tax. The sale price plus the sales tax was paid by Vanguard to Thunderbird, which remitted the $4,800 in sales tax to the Department of Revenue (DOR) less a three percent discount as authorized by law. On February 27, 1981, Vanguard had executed a lease of said aircraft to General Development Corporation for a term of two years commencing on March 1, 1981, contingent upon Vanguard's purchase of said aircraft from Thunderbird. Prior to March 1, 1981, General Development had leased said aircraft from Thunderbird, and the least terminated on February 28, 1981. Vanguard purchased said aircraft for the sole purpose and in anticipation of continuing its lease to General Development. Vanguard never took possession or control of said aircraft, which remained in General Development's possession at Opa-locka Airport in Dade County, Florida. No controversy exists that all sales tax payable under General Development's lease of the aircraft, both with Thunderbird and subsequently with Vanguard, had been remitted to DOR with no break in continuity of the lease as a result of the change in ownership of the aircraft on or about March 1, 1981. At the time Vanguard purchased the aircraft from Thunderbird, Vanguard had not applied for or received a sales and use tax registration number pursuant to Rule 12A-1.38, Florida Administrative Code. Vanguard applied for said sales and use tax registration number on or about April 2, 1981, approximately 30 days after the purchase of said aircraft. The sales and use tax registration number was granted by DOR on or about April 23, 1981. Shortly thereafter, Vanguard inquired of DOR concerning a refund of the $4,800 in sales tax paid on the aircraft plus the three percent discount taken by Thunderbird. In lieu of Vanguard's providing Thunderbird a resale certificate and having Thunderbird apply for the sales tax refund, it was suggested that Vanguard obtain an assignment of rights from Thunderbird and apply directly for the refund because Thunderbird had been dissolved immediately after the sale of the aircraft to Vanguard. Acquisition of the assignment of rights from Thunderbird by Vanguard was delayed by the dissolution of Thunderbird and the death of Thunderbird's principal officer. Vanguard received the assignment of rights from Thunderbird on or about July 1, 1982, and immediately applied for a refund of the sales tax. Said application for refund was well within the three years permitted by Florida law to apply for a sales tax refund. On November 22, 1982, the Office of Comptroller (OOC) notified Vanguard of its intent to deny Vanguard's application for the sales tax refund because Vanguard had failed to obtain a sales and use tax registration number prior to purchasing the aircraft from Thunderbird. At the time of the purchase, it was the policy of DOR to permit individuals to apply late for a sales and use tax registration number and not to deny refunds on the basis that the applicant did not have the sales and use tax registration number at the time of the taxable purchase. On or about July 1, 1982, this policy of DOR was altered to conform with the decision of the Florida Supreme Court in State Department of Revenue v. Robert N. Anderson, 403 So.2d 297 (Fla. 1981). Vanguard was aware of the DOR policy at the time of the sale, relied on that policy, and conformed to that policy. It was clearly stated that had Vanguard applied for its refund even a month earlier, in June of 1982, the refund would have been approved under the then-existing policy.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the application of Vanguard Investment Company for refund of sales tax be approved, and that said refund be paid by the Office of Comptroller. DONE and RECOMMENDED this 25th day of April, 1983, in Tallahassee, Leon County, Florida. STEPHEN F. DEAN, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 25th day of April, 1983. COPIES FURNISHED: Edward S. Kaplan, Esquire 907 DuPont Plaza Center Miami, Florida 33131 William G. Capko, Esquire Assistant Attorney General Office of Comptroller The Capitol, Suite 203 Tallahassee, Florida 32301 Thomas L. Barnhart, Esquire Assistant Attorney General Department of Legal Affairs The Capitol, LL04 Tallahassee, Florida 32301 The Honorable Gerald A. Lewis Office of Comptroller The Capitol Tallahassee, Florida 32301
Findings Of Fact Based upon the oral and documentary evidence adduced at the final hearing and the entire record in this proceeding, the following findings of fact are made. On September 15, 1960, Earman Oil Company, Inc., was granted License Number 1748 (the "Special Fuels Dealer's License") authorizing it to operate as a User-Dealer of special fuels in the State of Florida. On the face of that License was the following notation: This license is NOT TRANSFERRABLE but will continue in full force and effect until cancelled or revoked as provided by law. The Special Fuels Dealer's License also contained a notation that provided as follows: This license must be returned to RAY F. GREEN, Comptroller, when a licensee terminates his operation as a User-Dealer. On April 1, 1967, Earman Oil Company, Inc., was issued State License Number 375 (the "Motor Fuels Distributor's License") by the Florida Revenue Commission, authorizing Earman to engage in the business of distributing motor fuels in the State of Florida. On the face of that License was the following notation: This license is not transferrable or assignable, and must be displayed conspicuously at all times at the Distributor's office or principle place of business. A Special Fuels Dealer's License and a Motor Fuels Distributor's License entitle a holder to purchase diesel fuel and gasoline for distribution without paying local option taxes pursuant to Chapter 336, Florida Statutes, motor fuel retail sales tax pursuant to Chapter 212, Part II, Florida Statutes and motor fuels tax pursuant to Chapter 206, Part I, Florida Statutes. A holder of such licenses is obligated to collect the taxes upon resale to customers and to remit those taxes to the state. If the resale is to another distributor who holds a valid license, the sale can be made tax free provided the seller follows the procedures set forth in the statutes and applicable DOR rules. In order to obtain either of the licenses during all times pertinent to this case, a company was required to have been in operation for at least one year and had to meet certain other requirements, including the posting of a bond. Sometime in 1983, Barkett, a licensed dealer of special and motor fuels in the state of Florida, purchased Florida Coast Oil Company, Inc. ("Florida Coast"), another licensed dealer of special and motor fuels in the State of Florida. The evidence did not establish the specific terms and details of that acquisition. The licenses held by Florida Coast which enabled it to purchase motor fuels on a tax exempt basis were not cancelled or revoked following Barkett's acquisition of the company. Barkett apparently acquired all of the stock of Florida Coast and Florida Coast continued in operation under that same name. Many, if not all, of the officers and directors of Barkett at this time also became officers and directors in Florida Coast. The evidence was conflicting and confusing as to the status of Earman Oil during 1980-1984. After review of all the evidence, it is concluded that Florida Coast acquired Earman Oil Company in 1980. The evidence did not establish the specific terms and details of that transaction. Apparently, this acquisition was also a stock purchase arrangement and Earman Oil Company initially remained in existence following its acquistion by Florida Coast. However, on August 31, 1981, Earman Oil Company was officially merged into Florida Coast. Harry Barkett, the president of Barkett and Florida Coast (after its acquisition by Barkett in 1983,) testified that the Department was advised of Florida Coast's acquisition of Earman Oil Company and Florida Coast was told by DOR that it could continue to use the licenses issued to Earman Oil Company in order to purchase motor fuels on a tax exempt basis. However, it does not appear that Mr. Barkett had any interest in Florida Coast at the time of the acquisition of Earman and no explanation was provided as to how he learned of DOR's alleged approval of the continued use of Earman's licenses. This contention is discussed in more detail in Findings of Fact 24 below. On September 10, 1984, Florida Coast sold certain assets to Alfred Vittorino. Vittorino had previously worked as a manager for Barkett. The sales agreement provided that the assets being sold included ll rights to operate as Earman Oil Company including but not limited to all rights to the stock, licenses, permits or trademarks that are titled to Earman Oil Company that are required to operate the business. The parties have stipulated that on September 12, 1984, a Certificate of Incorporation for a new Earman Oil Company, Inc., was filed with the Office of the Secretary of State for Florida and that Alfred Vittorino was the president and sole stock holder for that company. The licenses issued to the original Earman Oil Company could not legally be transferred or assigned to the new company. Moreover, the new company could not qualify for new licenses on its own since it had not been in operation for at least one year. There is no dispute that at the time Vittorino acquired the assets from Florida Coast and began operating under the name Earman Oil Company, the Special Fuel Dealer's License and the Motor Fuel Distributor's License previously issued in the name of Earman Oil Company were delivered to Vittorino by Florida Coast. Harry Barkett, who was the president of both Barkett and Florida Coast at the time of the sale to Vittorino, testified that Vittorino told him that he would take whatever steps were necessary to get the licenses reissued and/or obtain new licenses so that Earman could continue to purchase fuel on a tax exempt basis. Earman Oil Company never applied for new licenses after its acquisition by Vittorino. Instead, the company merely obtained and used the old licenses. Since the Special Fuel Dealer's License and the Motor Fuel Distributor's Licenses issued to the original Earman Oil Company has never been cancelled, "Earman Oil Company" was still registered with DOR as a distributor of motor fuel and a dealer of special fuels and it remained registered during the entire period in question, September 1984 to April 1985. Although Harry Barkett testified that he believes DOR was notified of Florida Coast's sale of Earman's assets to Vittorino, DOR has no record of the sale and/or the transfer of the licenses of Earman Oil Company to Vittorino. No persuasive evidence was presented to establish that DOR was fully advised as to the terms of the sale and the status of the companies at the time of the sale. The contention that DOR approved the transfer of the licenses to the new company established by Vittorino is rejected. After Vittorino purchased the above described assets from Florida Coast, Earman Oil Company began engaging in the business of selling motor fuel and special fuels to its customers. During the period from September 1984 through April 1985, Earman Oil Company purchased gasoline and diesel fuel from Barkett and other companies and sold that fuel to, among others, Miami Petroleum Oil Company, Inc., an unlicensed distributor of gasoline and diesel fuel. During that period, the invoices for the sales by Barkett to Earman Oil Company indicated that the sales were tax exempt and there is no indication that taxes were being collected from Earman. Barkett did not obtain an affidavit or "resale" certificate from Earman Oil Co. prior to selling tax exempt. However, Barkett filed tax returns with DOR indicating that the sales were tax exempt. Barkett contends that its typical procedure for selling tax exempt to a customer is to obtain the customer's license number and verbally confirm the validity of that number with the Department. Petitioner contends that it followed this procedure prior to selling tax exempt to Earman Oil Company and that the Department confirmed that the license numbers provided by Earman Oil Company were valid. While Petitioner contends that it contacted the Respondent in order to verify that Earman Oil Company was in possession of a valid license, there is no written evidence of any such communication. The applicable statutes and regulations require a distributor to obtain an affidavit or a "resale certificate" in order to sell fuel tax exempt. There is no provision in the rules or the statutes for verbal confirmation of licensure status. From September 1984 through April 1985, Earman Oil collected motor fuel taxes under Chapters 206 and 212, Florida Statutes, from its customers, but never remitted those taxes to the state. There is no evidence that any of the taxes collected by Earman Oil were transferred to Barkett. Earman Oil Company filed tax returns with DOR indicating that it had not collected any taxes. Criminal charges were subsequently brought against Vittorino for failure to remit collected motor fuel taxes for the period September 1984 through April 1985. Vittorino was found guilty by a jury of failure to remit collected motor fuel taxes and was initially sentenced to nine years in prison, which was subsequently reduced to six years on appeal. As of the date of the hearing in this administrative proceeding, the state has not collected any of the outstanding taxes from Vittorino or Earman Oil. Petitioner contends that during the trial of Vittorino, the State of Florida maintained that Earman Oil Company held valid licenses as a distributor of motor fuel and as a dealer of special fuels during the period September 1984 through May 1985. The transcript of that criminal proceeding confirms that this was one theory advanced by the prosecution during that case. However, there was considerable confusion during that trial as to the licensure status of Earman. Ultimately, Vittorino was convicted of failure to remit collected motor fuel taxes. It was not an essential element of this offense for Earman to be a valid license holder. DOR conducted an audit of Barkett (Audit Number 86-17412886) for the period September 1984 through April 1985. The Department's audit indicated that Barkett sold 9,548,414 gallons of motor fuel on a tax free basis to Earman Oil Company during the period from September 1, 1984 through April 30, 1985. During the audit, the auditor requested Barkett to provide resale certificates or affidavits from Earman Oil Company to substantiate the basis for the tax exempt sales. Barkett was unable to produce any such resale certificates or affidavits. As a result, DOR concluded that Barkett was responsible for collecting and remitting to the state taxes on all the sales made during this period by Barkett to Earman. Barkett contested the results of the audit and the Department's Notice of Decision issued on August 4, 1988. Barkett timely petitioned for reconsideration of that decision on September 2, 1988. The Department issued its Notice of Reconsideration on January 19, 1989. In its Notice of Reconsideration, the Department determined that the balance due for the Local Option Tax pursuant to Chapter 336, Florida Statutes, was $540,173.68, which consisted of $381,936.56 tax, $95,484.14 penalty and $62,752.98 interest (with interest accruing at the rate of $125.50 per day from June 6, 1986, until date of payment.) The Department also determined that the balance due for motor fuel retail sales tax pursuant to Chapter 212, Part II, Florida Statutes, was $769,747.50, which consisted of $544,259.60 tax, $136,064.90 penalty and $89,423.00 interest (with interest accruing at the rate of $178.93 per day from June 6, 1988 until date of payment.) Finally, the Department determined that the balance due for motor fuels tax pursuant to Chapter 206, Part I, Florida Statutes, was $540,173.68, which consisted of $381,936.56 tax, $95,484.14 penalty, and $62,752.98 interest (with interest accruing at the rate of $125.57 per day from June 6, 1986 until date of payment.) 1/ As part of its reconsideration, the Department deleted the fraud penalties that had previously been assessed against Barkett. Barkett timely filed a challenge to the Department's conclusions in the Notice of Reconsideration. 2/ During the late 70's and early 1980's, Barkett Oil acquired a number of different oil companies (including Florida Coast, which had previously acquired Earman). Several of the companies that were acquired by Barkett held licenses from the Department that enabled them to purchase motor fuels on a tax exempt basis for resale. Barkett contends that it notified the Department of each of those acquisitions and was never instructed that it had to reapply for a license to purchase tax exempt. Barkett suggests that these prior experiences justified its conclusion that Earman Oil Company could continue to purchase tax exempt following the sale and transfer of licenses to Vittorino. However, the circumstances and terms of the prior acquisitions by Barkett were not established in this case. It is not clear whether those transactions were stock purchase agreements or simply the acquisition of assets. Furthermore, the evidence regarding the notification supposedly given to the Department was vague and unconvincing. Although Petitioner contends that it notified the Department that Earman Oil Company had been sold to Vittorino, there is no written evidence of any such communication. It is not clear who at the Department was notified of the sale nor is it clear what information was provided regarding the sale. In sum, Petitioner's contention that Respondent should be estopped from claiming that Earman Oil Company did not hold a valid Distributor's License and/or Special Fuel License is rejected. There was insufficient persuasive evidence to establish that an authorized representative of the Department who was provided with full disclosure of the facts surrounding the transfer to Vittorino advised Petitioner that it could sell tax exempt to Earman Oil Company.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is recommended that a Final Order be entered upholding the assessments set forth in the Notice of Reconsideration. RECOMMENDED this 10th day of February, 1992, at Tallahassee, Florida. J. STEPHEN MENTON 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 10th day of February, 1992.
Findings Of Fact The parties stipulated to certain facts, legal issues, and their respective contentions, as follow: "1. At all times pertinent to this action, Petitioner Lawrence Nali Construction Company, Inc., was a Florida Corporation licensed and doing business in the State of Florida. At all times pertinent to this action, Respondent Department of Revenue, State of Florida, was an agency of the State of Florida exercising duties relating to the assessment and collection of sales and use taxes pursuant to Chapter 212, Florida Statutes. Respondent conducted an audit of tran- sactions involving Petitioner for the period November 1, 1972, through October 31, 1975. As a result of that audit, Respondent claims that as of September 17, 1976, the Petitioner had a balance due to the Depart- ment of Revenue of $17,383.58 in taxes, interest and penalties. The assessment indicating the above amount is attached as Exhibit A. Petitioner is in agreement that if the assessment is upheld, Petitioner owes to the Respondent the amount of $17,383.58 plus interest calculated to date of payment to Respondent. The tax assessment in this case is based upon two factual situations: Petitioner, manufactured and installed asphaltic concrete from raw material at a rate certain per ton determined by bid, as an improvement to the real property of political entities consisting of cities, towns, municipalities, counties, school boards, junior colleges and others. Petitioner also hauled the asphalt to the job cite (sic) at a fixed ton/mile rate determined by bid. Petitioner, as a subcontractor, manu- factured and installed asphaltic concrete from raw material at a rate certain per ton determined by bid, as an improvement to the real property of political entities above described. The general contractor contracted with the political entities in various fashions but the Petitioner's duties were always the same and included manufacture, installation and hauling of asphaltic concrete based on a rate certain per ton and per ton mile. The issue in this case is whether the Respondent is correct in contending that the Petitioner must pay a sales and use tax on the produced asphalt which it uses in the performance of the construction contract jobs described in paragraph 6. It is agreed by the parties that no sales or use tax was remitted, by the Petitioner on the produced asphalt. It is agreed by the parties that no sales or use tax was paid by the instant customers to the Petitioner. It is Respondent's contention that, pursuant to the above-cited rules, the Peti- tioner is required to pay sales or use tax on the produced asphalt which is used to construct real property pursuant to a con- tract described in Rule 12A-1.51(2)(a), F.A.C. It is Petitioner's contention that the above-cited rules do not apply in the instant case since the customers involved in the instant fact situations are political subdivision or because the transaction was of the type described by Rule 12A-1.51(2)(d), F.A.C. Petitioner is entitled to rely on the earlier 1967 audit by Respondent because neither Petitioner's method of doing business, nor the law, has changed materially since 1967. Respondent agrees that this is an issue but fails to agree that Petitioner is so entitled to rely." All purchase orders or invitations for bid received by petitioner from political subdivisions stated that the entity was exempt from federal and state sales taxes and that such taxes should not be included in the bid. Typical bid forms entitled "Specifications for Asphaltic Concrete" called for a lump-sum price per ton for delivery and placement of the material by the vendor plus a sum per ton per mile for transportation costs. No breakdown of amounts for the cost of materials and cost of installation is reflected in the bid documents. (Testimony of Cowan, Cook, Exhibits 3, 7 (late filed)) Respondent audited petitioner's operations in 1967 and, although it had had previous transactions with governmental entities prior to that date, no assessment for back taxes was issued for failure to pay sales tax on such transactions nor was petitioner advised to do so in the future by state officials. After 1967, petitioner did not seek information from respondent concerning the subject of sales tax. As a consequence of the 1967 audit, petitioner believed that it was unnecessary to charge or pay sales tax on such transactions with political subdivisions. (Testimony of Cowan, Cook) As of April 1, 1977, Brevard County had a population of over 250,000. Although it is a large county in terms of size, respondent has only two auditors in the sales tax division to cover the entire county. (Testimony of Alberto, Cowan, Exhibit 4)
Recommendation That the petitioner Lawrence Nali Construction Company, Inc. be held liable for sales tax, penalty, and interest under Chapter 212, Florida Statutes, as set forth in respondent's proposed assessment. DONE and ENTERED this 9th day of September, 1977, in Tallahassee, Florida. THOMAS C. OLDHAM Hearing Officer Division of Administrative Hearings 530 Carlton Building Tallahassee, Florida 32304 COPIES FURNISHED: Daniel Brown, Esquire Department of Legal Affairs The Capitol Tallahassee, Florida 32304 Andrew A. Graham, Esquire Post Office Box 1657 Cocoa, Florida 32922
Findings Of Fact In a letter dated April 13, 1990, the Department informed the Petitioner, Cherokee Rental And Construction Co., Inc., that it was denying the Petitioner's request for refund of the $95.00 fuel tax and civil penalty assessment it had previously paid to the Department. In a letter received by the Department on February 13, 1990, the Petitioner requested an administrative hearing to contest the Department's decision. The address included on the Petitioner's letter was the address used by the Department to notify the Petitioner of its decision to deny its request for a refund. A Notice of Assignment and Order was issued on June 1, 1990, giving the parties an opportunity to provide the undersigned with suggested dates and a suggested place for the formal hearing. The information was to be provided within ten days of the date of the Notice. This Notice was sent by United States mail to the Petitioner at the address listed in its letter requesting a formal hearing. Neither party responded to the Notice. On July 12, 1990, a Notice of Hearing was issued setting the formal hearing for 11:00 a.m., September 11, 1990. The location of the hearing was listed in the Notice. The Notice of Hearing was sent by United States mail to the Petitioner at the address listed in his letter requesting a formal hearing. The Petitioner did not appear at the place set for the formal hearing at the date and time specified on the Notice of Hearing. The Department was present at the hearing. The Petitioner did not request a continuance of the formal hearing or notify the undersigned that he would not be able to appear at the formal hearing. After waiting fifteen minutes for the Petitioner to appear, the hearing was commenced. At the commencement of the formal hearing the Department was informed that it could proceed with the formal hearing or, since Petitioner had the burden of proof in this case, move for dismissal of the case. The Department elected to make an ore tenus motion for dismissal. The Department was informed that a Recommended Order would be issued recommending dismissal of this case.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Department enter a Final Order dismissing the Petitioner's request for hearing in this case for failure to appear at the final hearing. RECOMMENDED this 18th day of October, 1990, in Tallahassee, Leon County, Florida. DIANE CLEAVINGER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 18th day of October, 1990. COPIES FURNISHED: Bill Read Cherokee Rental & Construction Co., Inc. Post Office Box 850606 Mobile, Alabama 36685 Vernon L. Whittier, Esquire Department of Transportation 605 Suwannee Street Tallahassee, Florida 32399-0450 Ben G. Watts, Secretary Attn: Eleanor F. Turner, M.S. 58 Haydon Burns Building 605 Suwannee Street Tallahassee, Florida 32399-0458 Thornton J. Williams, Esquire 562 Haydon Burns Building Tallahassee, Florida 32399-0458
The Issue Whether surcharge taxes and excise taxes, plus penalties and interest, attributable to the sale of alcoholic beverages should be assessed against the Respondent, Trans World Airlines, Inc., d/b/a Trans World Airlines? Whether the Respondent's Division of Alcoholic Beverages and Tobacco license/permit number 78-14 should be subjected to a civil penalty or should be suspended or revoked for failure to timely file surcharge and excise tax reports and surcharge and excise taxes to the Petitioner?
Findings Of Fact The Petitioner is the State of Florida, Department of Business Regulation, Division of Alcoholic Beverages and Tobacco. The Respondent is Trans World Airlines, Inc., d/b/a Trans World Airlines. The Respondent has be granted an alcoholic beverage license by the Petitioner. That license is identified as license number 78-14, series X (hereinafter referred to as the "License"). At all times relevant to this proceeding the Respondent held the License. From January 1, 1988, through January 15, 1991 (hereinafter referred to as the "Tax Period"), the Respondent operated as an air carrier in the State of Florida. During the Tax Period the Respondent sold alcoholic beverages to passengers on aircraft flights over the State of Florida. As a result of the sales of alcoholic beverages over Florida airspace, the Respondent has incurred surcharge and excise tax liability to the Petitioner for the Tax Period. The Respondent has not remitted any amount of its surcharge or excise tax liability to the Petitioner for the Tax Period. The Respondent has failed to file monthly surcharge or excise tax reports during the Tax Period. In February, 1991, the Petitioner performed an audit of the Respondent for the Tax Period. During the Petitioner's audit of the Respondent, the employee of the Respondent responsible for remitting alcoholic beverage reports and taxes to various states, including Florida, admitted to the Petitioner that the Respondent remitted its alcoholic beverage taxes to other states and did not understand why the Respondent did not remit its alcoholic beverage surcharge and excise taxes to Florida. The Petitioner, as a result of its audit of the Respondent, computed the Respondent's liability for surcharge and excise taxes for the Tax Period. The Petitioner used a standard airline industry apportionment formula to compute the Respondent's tax liability. The apportionment formula utilized by the Petitioner to compute the Respondent's tax liability to Florida for the Tax Period consisted of the following computation (hereinafter referred to as the "Apportionment Formula"): (a) a ratio is computed by dividing total revenue air miles (based upon revenue plane miles) flown by the Respondent by the total revenue miles flown by the Respondent in Florida; (b) the ratio is multiplied by the total gallons of alcohol sold by the Respondent to determine the estimated amount of alcohol sold in Florida; and (c) the estimated amount of alcohol sold in Florida is multiplied by the Florida tax rate(s) to determine the total alcohol tax payable. In applying the Apportionment Formula, the Petitioner used revenue plane miles in calculating the first ratio of the Apportionment Formula. Line 22, page 18, line 9, page 28, lines 13-20, page 37, Transcript of August 21, 1991. The Petitioner did not use revenue passenger miles as argued by the Respondent. Revenue plane miles looks at the total miles flown by an aircraft without regard to the number of passengers on a flight. Revenue passenger miles takes into account the number of passengers on each flight by including the number of miles a plane flies times the number of passengers on board that flight. Revenue passenger miles takes into account the difference in the size of each plane involved in a flight. Revenue passenger miles more accurately reflects the amount of alcohol which may be consumed. The information utilized by the Petitioner in applying the Apportionment Formula to the Respondent for the Tax Period was information provided by the Respondent. The Respondent provided the Petitioner with revenue plane miles and not revenue passenger miles. Therefore, the Petitioner reasonably relied upon and used the best information available to it to compute the Respondent's liability for surcharge and excise taxes. It is reasonable for the Petitioner to use revenue plane miles to compute surcharge and excise taxes attributable to the sale of alcohol in Florida absent a taxpayer providing revenue passenger miles. The Apportionment Formula utilized by the Petitioner is a fair method of computing the tax liability of the Respondent to the State of Florida for the Tax Period. Using the data provided by the Respondent was reasonable. If the Respondent had provided revenue passenger miles, the Petitioner should have used that information in applying the Apportionment Formula. Based upon an application of the Apportionment Formula and using the data provided by the Respondent to the Petitioner, the Respondent owes the following amounts for the Tax Period: Surcharge: Surcharge $ 9,580.38 Penalty 1,699.87 Interest 356.01 Total $11,636.26 Excise: Excise $40,285.49 Interest 7,279.60 Total $47,565.09 The total liability of the Respondent for the Tax Period is $59,201.34. After the Petitioner's audit of the Respondent, the Respondent provided the Petitioner with revenue passenger miles and revenue ton miles. Revenue ton miles have no substantive affect on the taxable event at issue in this proceeding; the sale of alcohol in Florida. It is not clear whether the revenue passenger miles provided by the Respondent can be used by the Petitioner in applying the Apportionment Formula. If so, that information should be used to calculate the Respondent's liability for taxes, penalties and interest in this case. If the information is not sufficient, the parties agreed that the record would remain open to give the Respondent an opportunity to provide any information needed to calculate the Respondent's liability. The Respondent presented evidence concerning the percentage of flights by the Respondent during which alcoholic beverages were served over Florida and the percentage of flights by the Respondent during which alcoholic beverages were not served over Florida. This evidence is rejected because it did not specifically apply to the Tax Period and is not otherwise credible to prove the facts the Respondent was attempting to prove. So called "complimentary" alcoholic beverages are provided by the Respondent to some passengers. These beverages, however, are received as part of the consideration a passenger receives for purchasing a ticket from the Respondent. Such beverages are, therefore, sold by the Respondent.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is recommended that a final order be issued requiring the Respondent, Trans World Airlines, Inc., d/b/a Trans World Airlines, to pay surcharge and excise taxes, plus penalties and interest thereon, based upon application of the Apportionment Formula in the amounts set out in finding of fact 19. The amount of surcharge and excise taxes, plus penalties and interest thereon, may be recalculated by the Petitioner based upon an application of the Apportionment Formula utilizing revenue passenger miles for the Tax Period if revenue passenger miles have been, or are subsequently, provided to the Petitioner by the Respondent. It is further recommended that the Respondent be assessed a civil penalty of $1,000.00 for its failure to remit surcharge taxes and a civil penalty of $1,000.00 for its failure to remit excise taxes. RECOMMENDED this 13th day of November, 1991, in Tallahassee, Florida. LARRY J. SARTIN Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 13th day of November, 1991. APPENDIX TO RECOMMENDED ORDER, CASE NO. 91-2441 The parties have submitted proposed findings of fact. It has been noted below which proposed findings of fact have been generally accepted and the paragraph number(s) in the Recommended Order where they have been accepted, if any. Those proposed findings of fact which have been rejected and the reason for their rejection have also been noted. The Petitioner's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 2. 2 3. 3 5. 4 6. 5-6 Hereby accepted. 7 10/ 8 7. 9-11 11. 12 12. 13 13. 14 16. 15 18. But see 15-17. 16 17. See 12 and 18. Conclusion of law. Not relevant. See 12. 21-22 Although true, the burden of proof in this case was on the Petitioner. 23 8-9. 24 Not relevant. 25-26 19. 27 20. The Respondent's Proposed Findings of Fact Proposed Finding Paragraph Number in Recommended Order of Fact Number of Acceptance or Reason for Rejection 1 1. 2 2-3. 3 5. 4 6. 5 12-13. 6 See 14-15. 7 See 21. 8-10 Not supported by the weight of the evidence. COPIES FURNISHED: Robin L. Suarez Assistant General Counsel Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32399-1007 Thomas P. Lombardi Director - Tax Administration 100 S. Bedford Road Mt. Kisco, New York 10549 Donald D. Conn, Esquire General Counsel Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32399-1000 Richard W. Scully, Director Division of Alcoholic Beverages and Tobacco Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32399-1000
Findings Of Fact On January 22, 1986, American Aviation Resources, Inc., sold an airplane to Munur Yurtsever, a resident of Brazil. This aircraft was a Hansa jet model HFB-320 with U.S. registration number N71DL (the subject aircraft). On January 28, 1986, Mr. Yurtsever transferred title of the subject aircraft to Petitioner, Selcuk Yetimoglu. At the time of the transfer, the subject aircraft was in the State of Florida undergoing repairs. At all times pertinent to this proceeding, Mr. Yetimoglu resided at 20530 Jacaranda Road, Cutler Ridge, Miami, Florida, in a residence owned by Mr. Yurtsever. The aircraft bill of sale dated January 28, 1986, reflects that Mr. Yetimoglu was the purchaser of the subject aircraft and that Mr. Yurtsever was the seller. The bill of sale recited that the consideration paid was $20.00 and other good and valuable consideration. While the bill of sale reflects that Mr. Yetimoglu resided in Miami, Florida, the bill of sale does not state that the sale occurred in the State of Florida. On January 29, 1986, Mr. Yetimoglu applied to the U.S. Federal Aviation Administration (FAA) for the registration of the subject aircraft in his name. On March 13, 1986, Mr. Yetimoglu wrote to the FAA regarding the registration and stated, in pertinent part, as follows: Mr. Munur Yurtsever sold the aircraft to me on January 28, 1986, five days after he bought the aircraft from American Aviation Resources, Inc. when he found out that the government of Brazil did not give him a (sic) permission to import the aircraft and that he could not register the aircraft in the United States because he was not a citizen of the United States. By letter dated May 15, 1986, Mr. Yetimoglu provided the FAA proof that the subject aircraft had not been registered in Brazil. Mr. Yetimoglu was the record owner of the subject aircraft between January 28, 1986, and March 13, 1987. On March 13, 1987, Mr. Yetimoglu sold the subject aircraft back to Mr. Yurtsever. The bill of sale identifies the purchaser as being: Munur Yurtsever Rico Taxi Aereo Ltda. Av. Mal. Camara 160-GR. Rio de Janeiro - RJ Brazil On April 8, 1987, Mr. Yetimoglu wrote the FAA and stated, in pertinent part: ... I request cancelation of U.S. registra- tion for the aircraft ... because I sold the aircraft back to Rico Taxi Aereo Ltda. ... On January 11, 1988, Respondent issued to Petitioner a "Notice of Delinquent Tax Penalty and Interest Due and Assessed" (Notice of Assessment) based on the transaction involving Mr. Yetimoglu, Mr. Yurtsever, and the subject aircraft. The Notice of Assessment contained the following statement: "This Department has information that you purchased the following aircraft. However, there is no evidence of payment of Florida Sales and/or Use Tax". The Notice of Assessment reflected that Respondent had, pursuant to Section 212.12(5)(b), Florida Statutes, estimated the value of the aircraft as being $320,000 and assessed the following taxes, interest, and penalties: Florida State Sales/Use Tax 5% $16,000.00 (Estimated) Per 212.06(8), F.S. Penalty 5% per month; Maximum 25% of 4,000.00 (25%) Tax Due Per Section 212.12(2), F.S. Additional Penalty 11,840.00 (50%) Per 212.12(2)(a), F.S. Interest = 1% per month from date of 3,680.00 (23%) Purchase To Date of Payment Per Section 212.12(3), F.S. Less Tax Paid ----------------- TOTAL DUE WITH THIS NOTICE $35,520.00 Respondent requested that Mr. Yetimoglu provide it information and documentation as to the value of the aircraft. Mr. Yetimoglu contends that he paid Mr. Yurtsever nothing for the aircraft, that the title was transferred to him and registered in the FAA in his name so that the aircraft could be test flown after it was repaired, and that Mr. Yurtsever had paid $100,000 for the aircraft. There was no evidence as to the sales price that Mr. Yetimoglu paid for the aircraft other than Mr. Yetimoglu's testimony. Respondent estimated that the reasonable value of the subject aircraft on January 28, 1986, was $320,000. This estimate was based on an appraisal prepared for Respondent and assumed that the aircraft was in a scrapped or junked condition. Respondent generally uses a standard reference work on the value of aircraft to assist it in estimating the value of the subject aircraft. Because of its age and model, the subject aircraft is no longer listed in this standard reference. In support of his contention that Mr. Yurtsever paid $100,000 for the aircraft, Mr. Yetimoglu provided Respondent with a copy of a wire transfer of funds from Mr. Yurtsever to American Aviation Resources, Inc. in the amount of $100,000. However, there was no documentation provided that established that the $100,000 constituted the entire purchase price paid by Mr. Yurtsever. The dispute between the parties as to the value of the aircraft is resolved by finding, based on the greater weight of the evidence, that the reasonable value of the aircraft at the times pertinent to this proceeding was $320,000.00. In December 1986, while Mr. Yetimoglu was the record owner, the subject aircraft engaged in international flight between the Turks and Caicos Islands and the State of Florida. Respondent's Notice of Redetermination, dated February 26, 1990, upheld the Notice of Assessment on the basis that the underlying transaction was subject to use tax pursuant to Section 212.06(8), Florida Statutes. The issue to be resolved was framed by the Notice of Redetermination as being: "The only issue involved pertains to a use tax assessment upon an aircraft brought into this country". This determination was based, in part, upon a letter to Respondent from an attorney who was representing Mr. Yetimoglu at the time the letter was written. 1/ The letter implied that the aircraft was brought into Florida after the title was transferred to Mr. Yetimoglu, and provided, in pertinent part, as follows: The transferor of the aircraft, Munur Yurtsever, is a nonresident alien. His inten- tion is to deliver the plane to a purchaser outside the country. Mr. Yurtsever advises that the F.A.A. will not allow the plane to be flown in this country unless it is owned by a U.S. resident. As it was imperative to fly the plane here in order to prepare it for its flight outside the country, Mr. Yurtsever transferred the plane to his partner, Selcuk Yetimoglu, who is a resident of the United States. ... At the formal hearing, Mr. Yetimoglu established that the aircraft was in Florida undergoing repairs at the time the title was transferred to him. Prior to and at the formal hearing, Respondent asserted the position that use taxes, interest, and penalties were due for this transaction. In its post- hearing submittal, Respondent, for the first time in this proceeding, contends that sales taxes, interest and penalties are due for this transaction.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is recommended that a Final Order be entered which withdraws the subject assessment. RECOMMENDED in Tallahassee, Leon County, Florida, this 11th day of March, 1991. CLAUDE B. ARRINGTON 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 11th day of March, 1991.
The Issue The issue for determination is whether the Commercial Motor Vehicle Review Board's decision in this matter is proper; a determination that necessarily requires a finding of whether Respondent is liable, in two separate instances, for payment of a civil penalty for commission of the infraction of interstate operation of a commercial motor vehicle without first obtaining a fuel use permit.
Findings Of Fact On November 18, 1990, Respondent was driving on Interstate Highway 95 (I-95) in a three axle truck powered by motor fuel. He stopped the vehicle at Petitioner's weigh station located on I-95 near Yulee, Florida. Petitioner's station law enforcement personnel observed that there was no fuel tax identification on the truck and no temporary fuel tax permit. Respondent was assessed a civil penalty by weigh station law enforcement personnel of $50 as a result of Respondent's failure to comply with the State of Florida's fuel tax registration requirements. He was also issued a 10 day temporary fuel tax permit for a fee of $45 to enable the vehicle to proceed from the weigh station. On December 4, 1990, Respondent was again driving on Interstate Highway 95 (I-95) in the same three axle truck. Again, he stopped the vehicle at Petitioner's weigh station located on I-95 near Yulee, Florida. Petitioner's station law enforcement personnel again observed that there was no fuel tax identification on the truck and no temporary fuel tax permit. Respondent informed station personnel that an application for the appropriate permit had been made, but offered no documentation to support this claim. Respondent was assessed another civil penalty by weigh station law enforcement personnel of $50 as a result of this second failure to comply with the State of Florida's fuel tax registration requirements. He issued a second 10 day temporary fuel tax permit for a fee of $45 to enable the vehicle to proceed from the weigh station. Respondent requested that the Commercial Motor Vehicle Review Board review the civil penalty assessment. Subsequently, the Board met on May 9, 1991, and reviewed the civil penalty assessed against Respondent on each occasion. The Board determined that a refund of the penalties paid by Respondent was not appropriate. By written request filed with Petitioner on June 10, 1991, Respondent requested a formal hearing regarding the propriety of the penalties assessed against him.
Recommendation Based on the foregoing, it is hereby RECOMMENDED that a Final Order be entered confirming the imposition of two civil penalties of $50 each upon Respondent and affirming Respondent's two payments of $45 for the two fuel use permits received in conjunction with the assessment of the civil penalties. DONE AND ENTERED this 16th day of October, 1991, in Tallahassee, Leon County, Florida. DON W.DAVIS Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Fl 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 16th day of October, 1991. Copies furnished: Jay O. Barber, Esq. Department Of Transportation 605 Suwannee Street Tallahassee, FL 32399-0450 Kenneth R. Koozer 5469 Riverbluff Circle Sarasota, FL 34231 General Counsel Department of Transportation 605 Suwannee Street Tallahassee, FL 32399-0450 Ben G. Watts Secretary Haydon Burns Building 605 Suwannee Street Tallahassee, FL 32399-0458
Findings Of Fact Petitioner is a dealer in liquefied petroleum gas (LPG), duly licensed in Florida. Petitioner buys LPG in Florida and resells it to dealers who in turn sell most of it at retail, but use part of it as fuel for their trucks. During the period July 1, 1975, through February 28, 1977, neither petitioner nor any of its customers paid any tax on account of petitioner's sales of LPG, other than LPG used by its customers to propel trucks. Petitioner's customers kept records as to how much LPG was sold by them for home cooking or heating use by their customers, the ultimate consumers. Until the summer of 1977, petitioner's customers who used LPG as truck fuel kept records of how far the trucks so fueled were driven. Using the resulting mileage figure, they calculated the amount of LPG that had been used as truck fuel. Until the summer of 1977, petitioner collected from its customers a tax of eight cents ($.08) per gallon on LPG used as truck fuel. During the period from July 1, 1975, through February 28, 1977, none of petitioner's Florida customers held Florida dealer's licenses, except Gene Lewis Auto Brokers, which obtained a license as a special fuel dealer in August of 1976. Also in August of 1976, Gene Lewis Auto Brokers purchased 2,052 gallons of LPG from petitioner, on which no tax was paid. Thereafter, the same customer bought 41,011 gallons from petitioner in the period ending February, 1977, on which no tax was paid. Petitioner made tax returns monthly, using forms furnished by respondent. With respect to respondent's Form DR-115-F, styled "Special Fuel Sold . . . Within the State to Licensed Dealers Tax-Free," general instructions furnished to petitioner by respondent provided: To be used in support of claims for exemp- tion ... for sales ... to other licensed dealers. Signed resale certificates ... which bear the name and address of the pur- chaser and the number of his dealer's license are required to be retained in the seller's permanent file .... Petitioner's exhibit No. 2. (emphasis supplied) Monthly, petitioner listed on Form DR-115-F the amounts of LPG sold to its Florida customers, less amounts its Florida customers advised had been used to propel trucks. On another form furnished by respondent, Form DR-115-J, petitioner listed monthly, by county, the LPG used by its Florida customers to propel motor vehicles and on which petitioner had collected tax at the rate of eight cents ($.08) per gallon. At the time petitioner filed its monthly tax return, it forwarded to respondent the taxes it had collected from its Florida customers. The foregoing findings of fact should be read in conjunction with the statement required by Stuckey's of Eastman, Georgia v. Department of Transportation, 340 So.2d 119 (Fla. 1st DCA 1976), which appears as an appendix to the recommended order.
Recommendation Upon consideration of the foregoing, it is RECOMMENDED: That respondent's assessment be upheld with respect to petitioner's tax deficiency, except for the portion attributable to sales by petitioner to Gene Lewis Auto Brokers after August of 1976, being three thousand two hundred eighty and eighty-eight hundredths dollars ($3,280.88). That interest and penalty be adjusted accordingly. DONE and ENTERED this 8th day of March, 1978, in Tallahassee, Florida. ROBERT T. BENTON, II Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Mr. John Radey, Esquire Holland & Knight Post Office Drawer 810 Tallahassee, Florida 32302 Mr. Cecil L. Davis, Jr., Esquire Assistant Attorney General The Capitol, Room LL04 Tallahassee, Florida 32304 APPENDIX Paragraph one of petitioner's proposed findings of fact has been adopted, in substance, except that the evidence did not show that petitioner's customers used LPG for home heating or cooking, only that persons to whom petitioner's customers sold used the LPG in this fashion. Paragraph two of petitioner's proposed findings of fact has been adopted in substance. Paragraph three of petitioner's proposed findings of fact has been adopted in large part. The gist of the information supplied to petitioner by its dealers was that LPG not used by them would be resold to domestic users. Although respondent did not undertake to determine whether petitioner listed the same LPG as taxable and as tax-exempt on the same tax return, there is no reason to believe that petitioner did so. Paragraph four of petitioner's proposed findings of fact has been adopted, in substance, except that petitioner's tax returns were inaccurate as to its customers' status as dealers. The final three paragraphs of petitioner's proposed findings of fact accurately reflect evidence adduced at the hearing, but are not relevant to a decision of this controversy.
The Issue 1. Whether the Emergency Rules on Sales and Use Tax on Services and Other Transactions adopted by the Respondent effective July 1, 1987, were adopted pursuant to Section 33, Chapter 87-6, l987 Laws of Florida, and Section 120.54(9), Florida Statutes (1987)? 2. Whether Rules 12AER87-31(1)(c), (5), (7)(i)(7)(k), (10), (12) and (13), Florida Administrative Code, constitute an invalid exercise of delegated legislative authority?
Findings Of Fact The Respondent is an agency of the State of Florida. It is charged with the responsibility to implement, enforce and collect the taxes levied by the State of Florida, including Chapter 212, Florida Statutes (1987). During the 1987 Legislative Session the Legislature enacted Committee Substitute for Senate Bill 777, which is codified as Chapter 87-6, 1987 Laws of Florida (hereinafter referred to as "Chapter 87-6"). This act, which amended Chapter 212, Florida Statutes, was signed into law by the Governor on April 23, 1987. Section 5 of Chapter 87-6, created Section 212.0594, Florida Statutes. This new Section of Chapter 212 imposed a sales tax on construction services performed on or after July 1, 1987. Section 33 of Chapter 87-6, authorized the Respondent to adopt emergency rules pursuant to Section 120.54(9), Florida Statutes, to implement the new law. In authorizing the adoption of emergency rules, the Legislature determined that the failure to promptly implement the provisions of Chapter 87-6 would present an immediate threat to the welfare of the State because revenues needed for the operation of the State would not be collected. On June 6, 1987, the Legislature enacted Committee Substitute for House Bill 1506, which is codified as Chapter 87-101, 1987 Laws of Florida (hereinafter referred to as "Chapter 87-101"). Chapter 87-101 is commonly known as the Sales Tax Glitch Bill. Chapter 87-101 was passed by the Legislature on June 6, 1987, signed into law by the Governor on June 30, 1987, and was effective beginning July 1, 1987. Section 5 of Chapter 87-101 repealed Section 5 of Chapter 87-6. Section 6 of Chapter 87-101, created a new Section 212.0594, Florida Statutes, taxing construction services, in replace of the Section 212.0594, Florida - Statutes, previously created by Section 5 of Chapter 87-6. Thus the Legislature substantially changed the manner in which sales tax was to be imposed upon construction services. Section 20 of Chapter 87-101 amended Section 33 of Chapter 87-6 but continued the authorization to adopt emergency rules and the justification for doing so. On May 8, 1987, the Respondent published notice in the Florida Administrative Weekly of its intent to hold public meetings and workshops on May 19 and 26, 1987, and June 6, 1987. Proposed rules relating to Chapter 87-6 were to be considered at these meetings and workshops. On May 22, 1987, the Respondent published notice in the Florida Administrative Weekly of its intent to hold public meetings and workshops on May 26, 1987, and June 26, 1987. Proposed rules relating to Chapter 87-6 were to be considered at these meetings and workshops. On May 29, 1987, the Respondent published notice in the Florida Administrative Weekly of its intent to hold a public meeting and workshop on June 6, 1987, to consider proposed rules relating to Chapter 87-6. On June 5, 1987, the Respondent published notice in the Florida Administrative Weekly of its intent to hold a public meeting and workshop on June 12, 1987, to consider proposed rules relating to Chapter 87-6. Ultimately, the Respondent held four workshops concerning the emergency rules: May 19 and 26, 1987, and June 6 and 12, 1987. The workshop conducted on June 12, 1987, was conducted to consider Rules 12AER87-31, Florida Administrative Code. The rules considered at the June 12, 1987, workshop had been redrafted to implement Chapter 87-101. The rules considered at the workshop were available for a short period of time before the workshop and during the workshop. Comments were received by the Department at the June 12, 1987, workshop from the public, including representatives of the construction industry. As a result of these comments, changes in the Emergency Rules were made following the workshop. The Emergency Rules took into account the method of taxing construction services provided for in Chapter 87-101 rather than the method previously provided for in Chapter 87-6. The Respondent's emergency rules, including Rule 12AER87-31, Florida Administrative Code, were certified by the Executive Director of the Respondent and delivered to the Secretary of State for publication on June 18, 1987. The Respondent delivered the full text of the emergency rules, a statement of the specific reasons for finding an immediate danger, a statement of the reasons for concluding that the procedure followed to adopt the rules was fair under the circumstances and a summary of the purpose of the rules for publication in the first available issue of the Florida Administrative Weekly. The emergency rules had to be filed with the Secretary of State no later than June 18, 1987, in order to be published in the Florida Administrative Weekly by July 1, 1987, the effective date of Chapters 87-6 and 87-101 and the emergency rules. The full text of the emergency rules was published in the Florida Administrative Weekly on June 26, 1987. The text of this notice, which was accepted into evidence as Petitioner's exhibit 4, is hereby incorporated into this Final Order. The Emergency Rules had an effective date of July 1, 1987. Initially the Emergency Rules were to expire January 1, 1988, six months after their effective date, as specified in Chapter 87-101. Pursuant to Section 1, Chapter 87-539, 1987 Laws of Florida, the Emergency Rules are effective through June 30, 1988. Representatives of the Respondent and the Petitioner met between the passage of Chapter 87-101 by the Legislature and June 18, 1987, and discussed the act. The Respondent expended a great deal of time and effort in adopting the emergency rules implementing Chapters 87-6 and 87-101, and in providing information to the public. The method of taxation to be implemented was unique and, therefore, the Respondent was unable to look to other jurisdictions for guidance concerning implementation of the tax. The taxation of construction services was one of a multitude of services taxed. Chapter 87-101, required substantial redrafting of the emergency rules, including Rule 12AER87-31, Florida Administrative Code, within a relatively short period of time. The new tax necessitated the registration of 100,000 to 150,000 new sales tax "dealers" by July 1, 1987. Prior to July 1, 1987, the Respondent received thousands of telephone calls and thousands of written requests seeking information concerning the sales tax on services. The Respondent was extensively involved with the Legislature during the period of time when Chapters 87-6 and 87-101 were adopted. Representatives of the Respondent discussed the acts with Legislative members and staff. Dr. James Francis acted as a liaison between the Respondent and the Legislature. Dr. Francis also served on the Revenue Estimating Conference. In his capacity with the Revenue Estimating Conference, Dr. Francis prepared estimates of tax revenues from the services tax. A revenue impact analysis of the services tax was also provided by the Respondent to the Legislature based upon each amendment and proposed amendment to Chapters 87-6 and 87-101. Representatives of the petitioner expressed dissatisfaction with the method of taxation of construction services contained in Chapter 87-6 because of the required itemization of building material costs on each contract. The Respondent prepared a revenue neutral (no loss of tax revenue previously estimated to be generated by Chapter 87-6) method of imposing the services tax on construction services without requiring itemization of building material costs. Pursuant to this method, a set percentage, generally equal to the average percentage of building material costs, is backed out of "contract price" or "cost price." The remainder is treated as the amount of the "contract price" or "cost price" attributable to the construction services. The revenue estimated by the Respondent and provided to the Legislature, based upon the elimination of an average percentage of building material costs, was based upon the inclusion in "contract price" and "cost price" of all expenditures associated with the construction industry, including the total expenditures for building materials supplied by owners to contractors. The Legislature was aware of this fact before it adopted Chapter 87-101. Fiscal notes for Chapter 87-101, which the Respondent had available prior to the adoption of the Emergency Rules, numerically quantified the estimated revenue to be generated by Chapter 87-101. The Respondent also knew what amounts were included in the estimate of revenue contained in the fiscal notes. These amounts were consistent with the revenue estimates provided by the Respondent to the Legislature. The Emergency Rules represent a contemporaneous administrative construction of Chapters 87-6 and 87-101 by an agency charged with responsibility to administer the acts and which was intimately involved in the adoption of the acts. The Petitioner has challenged the validity of Rules 12AER87-31(1)(c), (5), (7)(i), (7)(k), (10), (12) and (13) Florida Administrative Code. The Petitioner withdrew its challenge of other portions of the Emergency Rules. Rule 12AER87-31(7)(i), Florida Administrative Code, defines the terms "contract price" which determines the amount of tax due on construction work performed pursuant to a contract and any speculative construction which is sold within six months of completion. The Petitioner has challenged Rule 12AER87-31(7)(i), Florida Administrative Code, to the extent that contract price is defined to include the fair market value of materials used by a contractor if the value of those materials is not otherwise included in the contract price. The Petitioner's contractor witnesses' understanding of Rule 12AER87- 31(7)(i), Florida Administrative Code, that the fair market value of materials supplied by the owner are to be included in the computation of contract price, is consistent with the Respondent's interpretation of the Rule. Prime contractors often estimate the cost of building materials in their daily business activities. The Respondent's interpretation of Rule 12AER87-31(1)(c), Florida Administrative Code, does not require a contractor or subcontractor who uses building materials which are purchased tax free to remit a tax. The rule simply makes it clear that there is not necessarily any link between the question of whether the purchase of building materials and the provision of construction services are tax exempt.
