The Issue The issue is whether Petitioner is liable for sales and use taxes, penalties, and interest and, if so, how much.
Findings Of Fact Petitioner operated a bar and grill in Punta Gorda that served beer, wine, liquor, and food at retail. In the course of business, Petitioner collected tax from the customers. Petitioner reported to Respondent sales tax collections for May 1996, November 1996, March 1997, November 1997, and December 1997. In connection with these collections, Petitioner remitted to Respondent seven checks representing the net tax due Respondent. These checks totaled $6700.64. The bank on which the checks were drawn dishonored them. The remittance of net sales tax proceeds by payment through checks that are later dishonored implies a fraudulent, willful intent to evade the payment of these sums. Respondent has issued five warrants concerning the unremitted taxes, penalties, and interest. Warrant 953620064 shows that Petitioner owes $1171 in sales tax remittances for the five months from July through November 1995. With penalties and interest, the total due on this warrant, through June 5, 1998, is $1832.37. Interest accrues after June 5 at the daily rate of $0.35. Warrant 467049 shows that Petitioner owes $2940.25 in sales tax remittances for the following months: April 1996, October 1996, December 1996, and January 1997. Petitioner purportedly paid each of these remittances with five (two in January) checks that were later dishonored. With penalties, including the 100 percent penalty for fraud, and interest, the total due on this warrant, through June 5, 1998, is $7480.12. Interest accrues after June 5 at the daily rate of $0.95. Warrant 971680037 shows that Petitioner owes $1301.85 in sales tax remittances for the following months: December 1995, June 1996, July 1996, September 1996, November 1996, and February 1997. With penalties and interest, the total due on this warrant, through June 5, 1998, is $2669.69. Interest accrues after June 5 at the daily rate of $0.43. Warrant 471481 shows that Petitioner owes $2912.48 in sales tax remittances for October and November 1997, for which Petitioner made remittances with two dishonored checks. With penalties, including the 100 percent penalty, and interest, the total due on this warrant, through June 5, 1998, is $6751.49. Interest accrues after June 5 at the daily rate of $0.95. Warrant 989840034 shows that Petitioner owes $8077.76 in sales tax remittances for the following months: August 1997, September 1997, December 1997, January 1998, and February 1998. With interest, the total due on this warrant, through June 5, 1998, is $8285.21. Interest accrues after June 5 at the daily rate of $2.65. Totaling the five warrants, Petitioner owes a total of $27,018.88 in taxes, penalties, and interest through June 5, 1998, and $5.33 per day for each ensuing day until the amount is paid.
Recommendation It is RECOMMENDED that the Department of Revenue enter a final order determining that Petitioner owes $27,018.88 in taxes, penalties, and interest through June 5, 1998, and $5.33 per day for each ensuing day until the amount is paid. DONE AND ENTERED this 10th day of July, 1998, in Tallahassee, Leon County, Florida. ROBERT E. MEALE 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 Filed with the Clerk of the Division of Administrative Hearings this 10th day of July, 1998. COPIES FURNISHED: John N. Upchurch Nicholas Bykowsky Assistant Attorneys General Office of the Attorney General The Capitol, Tax Section Tallahassee, Florida 32399-1050 Judith Crown, President Tombstone, Inc. Suite P-50 1200 West Retta Esplanade Punta Gorda, Florida 33950 Linda Lettera, General Counsel Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668 Larry Fuchs, Executive Director Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: Background Petitioner, Gainesville Amateur Radio Society, Inc. (GARS or petitioner), a Florida non-profit corporation, was incorporated on December 31, 1975. Its stated purpose is to promote an interest in amateur radio operation. Among other things, GARS provides preparation for Federal Communication Commission licensing examinations, supports community activities with free communication services, and encourages public awareness of ham radio activities through the publication of a monthly newsletter called the GARS-MOUTH. Respondent, Department of Revenue (DOR), is charged with the responsibility of administering and implementing the Florida Revenue Act of 1949, as amended. It has the specific task of collecting sales taxes and enforcing the state tax code and rules. By law, certain transactions are exempt from the state sales and use tax. Among these are sales or lease transactions involving "scientific organizations." In order for an organization to be entitled to an exemption, it must make application with DOR for a consumer's certificate of exemption and demonstrate that it is a qualified scientific organization within the meaning of the law. Once the application is approved, the certificate entitles the holder to make tax exempt purchases that are otherwise taxable under Chapter 212, Florida Statutes. In the case of petitioner, a certificate would enable it to save a hundred or so dollars per year. Claiming that it was entitled to a certificate of exemption as a charitable organization, GARS filed an application with DOR on December 21, 1993. After having the application preliminarily disapproved by DOR on the ground it did not expend "in excess of 50.0 percent of the . . . organization's expenditures toward referenced charitable concerns, within (its) most recent fiscal year," a requirement imposed by DOR rule, GARS then amended its application to claim entitlement on the theory that it was a scientific organization. Although DOR never formally reviewed the amended application, it takes the position that GARS still does not qualify for a certificate under this new theory. Is GARS a Scientific Organization? Under Section 212.08(7)(o)2.c., Florida Statutes, a scientific organization is defined in relevant part as an organization which holds a current exemption from the federal income tax under section 501(c)(3) of the Internal Revenue Code. A DOR rule tracks this statute almost verbatim. Accordingly, as a matter of practice, in interpreting this statutory exemption, DOR simply defers to the final determination of the Internal Revenue Service (IRS). If the IRS grants an organization a 501(c)(3) status based on the determination that it is a scientific organization, then DOR accepts this determination at face value. DOR does not make an independent determination whether the organization is "scientific" or question the decision of the IRS. This statutory interpretation is a reasonable one and was not shown to be erroneous or impermissible. GARS received a federal income tax exemption from the IRS regional office in Atlanta, Georgia by letter dated August 12, 1993. The record shows that GARS was granted an "exempt organization" status as a "charitable organization" and as an "educational organization" under Treasury Regulation Section 1.501(c)(3). However, GARS did not receive an exempt status as a "scientific organization" nor did the IRS make that determination. Therefore, GARS does not qualify as a scientific organization within the meaning of the law. While petitioner submitted evidence to show that it engages in what it considers to be a number of scientific endeavors, these activities, while laudable, are irrelevant under Florida law in making a determination as to whether GARS qualifies for a sales tax exemption as a scientific organization. Therefore, the application must be denied.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that respondent enter a final order denying petitioner's application for a consumer certificate of exemption. DONE AND ENTERED this 23rd day of June, 1995, in Tallahassee, Florida. DONALD R. ALEXANDER 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 23rd day of June, 1995. APPENDIX TO RECOMMENDED ORDER, CASE NO. 94-1200 Petitioner: 1-2. Partially accepted in finding of fact 4. 3. Partially accepted in finding of fact 6. 4. Partially accepted in finding of fact 1. 5. Rejected as being irrelevant. 6. Rejected as being unnecessary. 7. Partially accepted in finding of fact 5. 8-9. Partially accepted in finding of fact 7. 10. Partially accepted in finding of fact 5. 11. Partially accepted in finding of fact 7. 12. Partially accepted in finding of fact 6. 13. Rejected as being unnecessary. 14. Partially accepted in finding of fact 6. Respondent: 1. Partially accepted in finding of fact 1. 2. Partially accepted in finding of fact 2. 3. Rejected as being unnecessary. 4. Rejected as being cumulative. 5-12. Partially accepted in finding of fact 7. 13-14. Partially accepted in finding of fact 4. 15. Partially accepted in finding of fact 3. 16. Covered in preliminary statement. 17. Partially accepted in finding of fact 4. 18-19. Partially accepted in finding of fact 6. 20-21. Rejected as being unnecessary. 22. Partially accepted in finding of fact 5. 23-24. Partially accepted in finding of fact 6. Note - Where a proposed finding has been partially accepted, the remainder has been rejected as being irrelevant, unnecessary for a resolution of the issues, not supported by the evidence, cumulative, subordinate, or a conclusion of law. COPIES FURNISHED: Mr. Larry Fuchs Executive Director Department of Revenue 104 Carlton Building Tallahassee, FL 32399-0100 Linda Lettera, Esquire General Counsel Department of Revenue 204 Carlton Building Tallahassee, FL 32399-0100 Sidney Schmukler, Esquire 3922 N. W. 20th Lane Gainesville, Florida 32605-3565 Olivia P. Klein, Esquire Department of Legal Affairs The Capitol-Tax Section Tallahassee, Florida 32399-1050
The Issue Does the taxpayer owe sales tax, penalty, and interest as assessed by the Department of Revenue.
Findings Of Fact Petitioner, Department of Revenue, is an agency of the State of Florida, lawfully created and organized pursuant to Section 20.21, Florida Statutes. By law, the Department is vested with the responsibility of regulating, controlling and administering the revenue laws of the State of Florida, including, specifically, the laws relating to the imposition and collection of the state's sales and use tax, pursuant to Chapter 212, Florida Statutes. Respondent, Worldwide Equipment Group, LLC, is a Florida limited liability company, whose principal address is Post Office Box 1050, Freeport, Florida 32439. Respondent sells and leases heavy equipment. In early 2006, Petitioner, Department of Revenue, conducted an audit of the books and records of Petitioner, pursuant to statutory notice. The period covered by the audit was March 1, 2002, through February 28, 2005. The audit was conducted by Department of Revenue auditor David Collins and addressed three issues. Issue A-01 addressed misclassified exempt sales, i.e. failure to collect appropriate sales and use tax or lack of documentation to prove tax exempt status of certain sales. Issue A-03 addressed discrepancies in sales for 2003 as reported for federal income tax returns and for state sales and use tax returns. Issue A-03 addressed interest owed due to a timing difference between actual transactions and the filing of state returns: basically a manipulation of the grace period for payment of sales and use taxes. Respondent was notified of the apparent discrepancies observed by the auditor. The original Notice of Intent To Make Audit Changes was issued February 17, 2006, and started at more than $75,000.00 in taxes, penalty, and interest due. Respondent then filed amended federal income tax returns, reflecting larger sales figures covering a portion of the audit period which reduced the discrepancy. The dispute was originally referred to the Division of Administrative Hearings (DOAH) on or about August 30, 2006. The original facts in dispute surrounded an addendum to the Notice of Proposed Assessment showing a balance due of $31,434.82. This was DOAH Case No. 06-3287. The request for a disputed-fact hearing was made by David R. Johnson CPA, who has a power of attorney on file with Petitioner Agency permitting him to represent Respondent. Throughout these proceedings, Worldwide has been served through Mr. Johnson by Petitioner and by DOAH. The parties filed a Joint Motion for Provisional Closing Order in DOAH Case No. 06-3287 on November 1, 2006. On November 2, 2006, DOAH Case No. 06-3287 was closed with leave to return if the parties' proposed settlement was not finalized. Mr. Johnson met once with counsel for Petitioner during the time the case was returned to the Agency. At some point, Respondent had produced certain accounting entries and supporting documents to the auditor. These were used to adjust the assessment levied by the Department. A Revised Notice Of Intent To Make Audit Changes dated March 13, 2007, was issued with a letter of the same date. The revised, and final Notice included an assessment of tax, penalty and interest totaling $15,065.24, as of the date of issue and information that the tax accrues interest at the rate of $3.10 per diem. On April 4, 2007, Petitioner filed before DOAH its Motion to Re-open Case and Notice for Trial. No timely response in opposition was filed by Respondent. By an Order to Re-open Case File, entered April 19, 2007, the case was re-opened as the instant DOAH Case No. 07-1710. Petitioner has established that the amount of $15,065.24 as tax, penalty, and interest was due as of March 13, 2007.
Recommendation Based on the foregoing Findings of Facts and Conclusions of Law, it is RECOMMENDED that the Department of Revenue sustain the March 13, 2007, assessment of the subject sales tax, penalties and interest to Petitioner. DONE AND ENTERED this 8th day of October, 2007, in Tallahassee, Leon County, Florida. S ELLA JANE P. DAVIS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 8th day of October, 2007. COPIES FURNISHED: Warren J. Bird, Esquire Office of the Attorney General The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050 Bruce Hoffmann, General Counsel Department of Revenue The Carlton Building, Room 204 501 South Calhoun Street Tallahassee, Florida 32399-0100 Lisa Echeverri, Executive Director Department of Revenue The Carlton Building, Room 104 501 South Calhoun Street Tallahassee, Florida 32399-0100 David R. Johnson, CPA 1265 Highway 331 South Defuniak Springs, Florida 32435 Worldwide Equipment Group LLC Post Office Box 1050 Freeport, Florida 32439
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 Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: Petitioner, a corporation headquartered in Charlotte, North Carolina, is in the business of operating movie theatres both within and without the State of Florida. At these theatres Petitioner Operates concession stands which sell both candy items and drinks in various sizes at different prices to persons who frequent the theatres. For the period of time from September, 1985 through May, 1985, Petitioner remitted to the Department of Revenue sales tax on the total taxable value of all taxable items sold at its concession stands in all of its Florida theatres, in accordance with the presumptive effective rate of tax of 5.63 percent contained in Rule 12A-1.11(37), Florida Administrative Code. As a result of an audit for a previous period dated October 1, 1982, Petitioner remitted to the Department of Revenue the amount of $10,637.00 for sales tax on taxable items sold at its concession stands during this audit period in accordance with the presumptive effective tax rate of 4.5 percent as contained in Rule 12A-1.11(37), Florida Administrative Code during the audit period. On August 15, 1985, Petitioner filed with the Department of Revenue, as agent for Respondent, two (2) applications for sales tax refund in the amount of $16,876.52 and $10,637.00. The applications were dated August 13, 1985, and were timely filed. During the refund periods at issue in this matter, the Petitioner: (a) posted and charged flat prices for the various items offered for sale, which prices included sales tax (b) kept records of daily and weekly sales of taxable items at each of its Florida theatres (c) kept records of daily attendance at each movie shown by each Florida theatre and (d) kept records of weekly calculations, through inventory analysis, of sales of drinks and candy items, including the number, size and price of each item sold at each of its Florida theatre. During the refund periods at issue in this matter, the Petitioner did not maintain cash registers at its concession stands in its Florida theatres and did not maintain records made contemporaneously with the sale of taxable items from the concession stands which separately itemized the amounts of sales tax collected on each sale transaction occurring at the theatres' concession stands. Rather, Petitioner chose, for its own convenience, to operate a "cash box" operation at each of its concession stands in its Florida theatres and willingly remitted sales tax to the Department of Revenue pursuant to the presumptive effective tax rate contained in Rule 12-1.11(37), Florida Administrative Code for the relevant periods. In April, 1985, Petitioner placed computerized cash registers in each of its Florida theatre concession stands. These cash registers provided tapes of each individual transaction each day, specifically recording each taxable and nontaxable sale and the amount of sales tax due on each taxable sale with a daily summation on each tape at each theatre. Rule 12A-1.11(37), Florida Administrative Code, requires concessionaires such as Petitioner to remit sales tax at a rate of 5.63 percent of taxable sales under the present 5 percent statutory sales tax schedule and at 4.5 percent of taxable sales under the previous statutory sales tax schedule unless a concessionaire, through its records, shows another effective rate by "proof to the contrary". Petitioner produced an effective tax rate of 5.13 percent for the month of April 1985, for all its Florida theatres by dividing the total sales tax collected during April, 1985 by the total taxable sales during April, 1985, as evidenced by the cash register tapes from all of Petitioner's concession stands in Florida. Petitioner then used that tax rate as a base to retroactively reconstruct an effective tax rate for the refund periods by assuming that the product sales mix (product mix of products sold) and the transactional sales mix (the number of items purchased together in a single transaction by a customer) experienced during the refund periods were the same as that experienced during the month of April, 1985. There was no competent evidence that the product sales mix or the transactional sales mix experienced during the refund periods were the same as that experienced during the nonth of April, 1985. There is insufficient evidence in the record to support Petitioner's reconstructed effective tax rates that were used to calculate the refunds. Therefore, Petitioner has failed to show "proof to the contrary" that its reconstructed effective tax rates are correct or that the presumptive effective tax rate contained in Rule 12A-1.11(37), Florida Administrative Code were incorrect for the refund periods at issue in this matter.
Recommendation Based on the findings of fact and conclusions of law recited herein, it is RECOMMENDED that the Comptroller enter his final order DENYING Petitioner's refund applications. Respectfully submitted and entered this 25th day of September, 1986, in Tallahassee, Leon County, Florida. WILLIAM R. CAVE 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 September, 1986.
The Issue Whether or not, on or about December 2, 1976, investigation revealed that Robert W. Pope, licensed under the Beverage Laws of the State of Florida, failed to file and pay his State Sales Tax for the licensed premises, known as Kitty's, located at 1020, 4th Street, South, St. Petersburg, Florida, in violation of 212, F.S., thereby violating 561.29, F.S.
Findings Of Fact Robert W. Pope is and at all times pertinent to this cause has been the holder of license no. 62-512, series 4-COP, held with the State of Florida, Division of Beverage to trade as Kitty's, located at 1020, 4th Street, South, St. Petersburg, Pinellas County, Florida. When the Respondent, Pope, began to operate the licensed premises he was given a registration sales tax number by the State of Florida, Department of Revenue. This number was provided in accordance with 212, F.S. That law required the remittance of the collected sales tax on a month to month basis, the period beginning with the first day of the month and ending with the last day of the month. The remittance was due on the first day of the following month and payable by the 20th day of the following month. Failure to pay by the 20th would result in a 5 percent penalty and 1 percent interest per month. The sales tax remittance due from the licensed premises for July, 1976 through November, 1976 was not made to the Department of Revenue. In December, 1976 the Department of Revenue filed a lien against the licensed premises to collect an amount due at that time of $2,200.66. As an aid to the collection of the account, the Department of Revenue levied the subject liquor license. Subsequently, in February, 1977 the Respondent made a $10,000 initial payment and three monthly installments to satisfy the lien on this licensed premises and another licensed premises which the Respondent owned. At present all taxes due and owing under 212, F.S. are current. The above facts establish that the Respondent failed to comply with the provisions of 212, F.S. pertaining to the remittance of sales tax from the Respondent to the State of Florida, Department of Revenue. This violation, thereby subjects the Respondent to the possible penalties of 561.29, F.S.
Recommendation It is recommended that the Respondent, Robert W. Pope, be required to pay a civil penalty in the amount of $750.00 or have the license no. 62-512, series 4- COP, suspended for a period of 20 days. DONE AND ENTERED this 28th day of July, 1977, in Tallahassee, Florida. CHARLES C. ADAMS Hearing Officer Division of Administrative Hearings 530 Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: William Hatch, Esquire Division of Beverage 725 South Bronough Street Tallahassee, Florida 32304 Robert W. Pope, Esquire 611 First Avenue, North St. Petersburg, Florida 33701
Findings Of Fact Petitioner purchased a used car in Florida in May of 1983 and paid 5 percent sales tax. Petitioner did not title said car in the State of Florida. When Petitioner returned to Maryland, his state of residence, Maryland imposed a 5 percent tax on said car when Petitioner titled said car. Petitioner applied for a sales tax refund to the Department of Revenue in the amount of $225.00. Respondent issued a Notice of Intent to deny said refund application on December 1, 1983. From the exhibits to which the parties stipulated, additional facts are found by the Hearing Officer. A bill of sale indicates that Petitioner purchased a 1979 Buick Regal from Eddy Auto Sales on May 14, 1983. A temporary registration and receipt issued by the State of Maryland on June 17, 1983, shows that Petitioner paid a "title tax" of $222.50 to the State of Maryland. By letter dated January 27, 1984, Agnes Stoicos of the Maryland Department of Transportation indicates that the Maryland tax is a 5 percent excise tax upon the issuance of all original and subsequent certificates of title, and the tax is used primarily for the construction and the maintenance of the Maryland highway system.
The Issue The petition that initiated this proceeding challenged the taxes, interest, and penalties assessed against Petitioner by Respondent following an audit and identified the following four issues: Issue One. Does the sale of obsolete games at the "annual game sale" qualify for exemption from sales tax as an occasional or isolated sale? Issue Two. Are the purchases of video games exempt from Florida sales and use tax as sales for resales? Issue Three. Are the purchases of plush exempt from Florida sales and use tax as sales for resale or, alternatively, does taxation of the vending revenues and taxation of purchases of plush represent an inequitable double taxation? Issue Four. Should penalties be assessed based upon the facts and circumstances [of this proceeding].
Findings Of Fact Petitioner is an Illinois Corporation headquartered in Texas and licensed to do business in Florida. Petitioner owns and operates video and arcade game amusement centers, hereafter referred to as centers. Petitioner sells to center customers the opportunity to play the games in the centers. Petitioner purchases the games from sources outside itself; it does not manufacture the games it makes available in its centers. Petitioner paid sales tax upon the purchase of machines purchased in Florida and use tax upon the purchase of machines outside Florida and imported for use inside Florida. The Florida Department of Revenue (DOR) is the State of Florida agency charged with the enforcement of Chapter 212, Florida Statutes, Tax on Sales, Use and Other Transactions, the Transit Surtax, and the Infrastructure Surtax -- the state and local taxes at issue in this case. The DOR audited Petitioner for the period December 1, 1986 through November 30, 1991, hereafter referred to as the audit period. During the audit period, Petitioner operated 12 centers in the State of Florida. For purposes of the instant litigation, references to the centers will mean only the centers located in Florida. The audit determined that Petitioner owed $51,593.37 in sales and use tax, $440.81 in transit surtax, and $1,459.80 in infrastructure surtax. Each of the sums assessed included penalty and interest accrued as of September 13, 1994. In accordance with section 120.575(3), Florida Statutes, Petitioner paid $32,280 as follows: a. sales and use tax $22,411 b. interest 8,575 c. charter transit surtax 234 d. interest 64 e. infrastructure surtax 750 f. interest 246 The centers make available three types of games. The games are activated either by a coin or a token that is purchased at the center. Video games include pinball machines and electronic games which do not dispense coupons, tickets or prizes. Redemption games include skeeball, hoop shot and water race which dispense coupons or tickets which the player earns according to his or her skill. Merchandise games include electronic cranes which the operator or player maneuvers to retrieve a prize directly from the machine. Merchandise games do not dispense coupons or tickets. The tickets earned in the course of playing redemption games can be exchanged for prizes displayed at the centers. The prizes obtained directly from the merchandise games and exchanged following receipt from redemption games are termed "plush." Plush may be obtained only by seizing it in a redemption game or by redeeming coupons earned during the play of redemption games; it may not be purchased directly for cash. A merchandise game does not dispense an item of plush upon the insertion of a coin or token and activation of the crane's arm -- acquisition of plush requires a certain level of skill on the player's part. A redemption game does not dispense an item of plush upon the insertion of a coin or token and the push of a button -- acquisition of tickets requires a certain level of sill on the player's part. Petitioner purchases plush in bulk and distributes it to the various centers. Each of the centers sells some of its games to individual buyers. Petitioner's headquarters coordinates the sale. For each of the years in the audit period, the centers sold games at various dates. Petitioner characterizes as its "annual sale" the period November 1 through January 10 when most of the sales took place. The specific dates for the sales that took place during the audit period follow; numbers in square brackets indicate the number of sales on a particular date if there is more than one. a. December 1986 through July 1987 -- no information available -- but more than one sale was made during this time. b. November 1987: 2, 5, 7, 10, 17, 18[2], 20, 22, 25, 28[3] c. December 1987: 2, 4, 7, 15, 18, 23 d. November 1988: 4, 5, 7[2], 9, 10, 11, 17, 18, 20[2], 21[2], 25, 26, 28, 29 e. December 1988: 6, 7, 8, 10[2], 12[2], 16, 21, 22, 23[2], 24 f. January 1989: 3, 6, 7[4], 9, 12 g. November 1989: 6, 15, 16[2], 20 h. December 1989: 1, 6, 10, 22, 29[3], 31 January 1990: 26 March 1990: 26 April 1990: 26 l. June 1990: 12 m. November 1990: 3, 9, 13[2], 14, 16, 19, 24, 26 n. December 1990: 1, 2, 7, 20 January 1991: 8 May 1991: at least 1 q. November 1991: 4, 9, 10, 14, 15, 21 Petitioner did not provide its machine vendors resale certificates upon Petitioner's purchase of the games. Petitioner did not provide its plush vendors resale certificates upon Petitioner's purchase of plush. Petitioner did not apply for a refund of sales tax paid upon its purchase of games in Florida.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent enter a final order that adopts the findings of fact and the conclusions of law contained herein. The assessments against Petitioner should be sustained to the extent the assessments are consistent with the findings of fact and the conclusions of law contained in this Recommended Order. DONE AND ENTERED this 28th day of June, 1996, in Tallahassee, Leon County, Florida. 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 28th day of June, 1996.
The Issue Whether the contested and unpaid portions of the tax, penalty and interest assessment issued against Petitioners as a result of Audit No. 9317210175 should be withdrawn as Petitioners have requested?
Findings Of Fact Based upon the evidence adduced at hearing, and the record as a whole, the following Findings of Fact are made: Shuckers is an oceanfront restaurant and lounge located at 9800 South Ocean Drive in Jensen Beach, Florida. In November of 1992, Petitioner Mesa's brother, Robert Woods, Jr., telephoned Mesa and asked her if she wanted a job as Shuckers' bookkeeper. Woods had been the owner of Shuckers since 1986 through his ownership and control of the corporate entities (initially Shuckers Oyster Bar Too of Jensen Beach, Florida, Inc., and then NAT, Inc.) that owned the business. Mesa needed a job. She therefore accepted her brother's offer of employment, notwithstanding that she had no previous experience or training as a bookkeeper. When Mesa reported for her first day of work on November 19, 1992, she learned that Woods expected her to be not only the bookkeeper, but the general manager of the business as well. Mesa agreed to perform these additional responsibilities. She managed the day-to-day activities of the business under the general direction and supervision of Woods. After a couple of weeks, Woods told Mesa that it would be best if she discharged her managerial responsibilities through an incorporated management company. Woods had his accountant draft the documents necessary to form such a corporation. Among these documents were the corporation's Articles of Incorporation. Mesa executed the Articles of Incorporation and, on December 3, 1992, filed them with the Secretary of State of the State of Florida, thereby creating Petitioner TAN, Inc. TAN, Inc.'s Articles of Incorporation provided as follows: The undersigned subscribers to these Articles of Incorporation, natural persons competent to contract, hereby form a corporation under the laws of the State of Florida. ARTICLE I- CORPORATE NAME The name of the corporation is: TAN, INC. ARTICLE II- DURATION This corporation shall exist perpetually unless dissolved according to Florida law. ARTICLE III- PURPOSE The corporation is organized for the purpose of engaging in any activities or business permitted under the laws of the United States and the State of Florida. ARTICLE IV- CAPITAL STOCK The corporation is authorized to issue One Thousand (1000) shares of One Dollar ($1.00) par value Common Stock, which shall be designated "Common Shares." Article V- INITIAL REGISTERED OFFICE AND AGENT The principal office, if known, or the mailing address of this corporation is: TAN, INC. 9800 South Ocean Drive Jensen Beach, Florida 34957 The name and address of the Initial Registered Agent of the Corporation is: Linda A. W. Mesa 9800 South Ocean Drive Jensen Beach, Florida 34957 ARTICLE VI- INITIAL BOARD OF DIRECTORS This corporation shall have one (1) director initially. The number of directors may be either increased or diminished from time to time by the By-laws, but shall never be less than one (1). The names and addresses of the initial directors of the corporation are as follows: Linda A. W. Mesa 9800 South Ocean Drive Jensen Beach, Florida 34957 ARTICLE VII- INCORPORATORS The names and addresses of the incorporators signing these Articles of Incorporation are as follows: Linda A. W. Mesa 9800 South Ocean Drive Jensen Beach, Florida 34957 On the same day it was incorporated, December 3, 1992, TAN, Inc., entered into the following lease agreement with the trust (of which Woods was the sole beneficiary) that owned the premises where Shuckers was located: I, Michael Blake, Trustee, hereby lease to Tan, Inc. the premises known as C-1, C-2, C-3, C-4, 9800 South Ocean Drive, Jensen Beach, Florida for the sum of $3,000.00 per month. This is a month to month lease with Illinois Land Trust and Michael Blake, Trustee. Mesa signed the agreement in her capacity as TAN, Inc.'s President. She did so at Woods' direction and on his behalf. No lease payments were ever made under the agreement. 3/ The execution of the lease agreement had no impact upon Shuckers. Woods remained its owner and the person who maintained ultimate control over its operations. At no time did he relinquish any part of his ownership interest in the business to either Mesa or her management company, TAN, Inc. Mesa worked approximately 70 to 80 hours a week for her brother at Shuckers doing what he told her to do, in return for which she received a modest paycheck. Woods frequently subjected his sister to verbal abuse, but Mesa nonetheless continued working for him and following his directions because she needed the income the job provided. As part of her duties, Mesa maintained the business' financial records and paid its bills. She was also required to fill out, sign and submit to Respondent the business' monthly sales and use tax returns (hereinafter referred to as "DR- 15s"). She performed this task to the best of her ability without any intention to defraud or deceive Respondent regarding the business' tax liability. The DR-15s she prepared during the audit period bore NAT, Inc.'s Florida sales and use tax registration number. On the DR-15 for the month of December, 1992, Mesa signed her name on both the "dealer" and "preparer" signature lines. Other DR-15s were co-signed by Mesa and Woods. In April of 1993, Woods told Mesa that she needed to obtain a Florida sales and use tax registration number for TAN, Inc., to use instead of NAT, Inc.'s registration number on Shuckers' DR-15s. In accordance with her brother's desires, Mesa, on or about May 14, 1993, filed an application for a Florida sales and use tax registration number for TAN, Inc., which was subsequently granted. On the application form, Mesa indicated that TAN, Inc. was the "owner" of Shuckers and that the application was being filed because of a "change of ownership" of the business. In fact, TAN, Inc. was not the "owner" of the business and there had been no such "change of ownership." By letter dated June 22, 1993, addressed to "TAN INC d/b/a Shuckers," Respondent gave notice of its intention to audit the "books and records" of the business to determine if there had been any underpayment of sales and use taxes during the five year period commencing June 1, 1988, and ending May 31, 1993. The audit period was subsequently extended to cover the six year period from June 1, 1987 to May 31, 1993. Relying in part on estimates because of the business' inadequate records, auditors discovered that there had been a substantial underpayment of sales and use taxes during the audit period. The auditors were provided with complete cash register tapes for only the following months of the audit period: June, July, August and December of 1992, and January, February, March, April and May of 1993. A comparison of these tapes with the DR-15s submitted for June, July, August and December of 1992, and January, February, March, April and May of 1993 revealed that there had been an underreporting of sales for these months. Using the information that they had obtained regarding the three pre- December, 1992, months of the audit period for which they had complete cash register tapes (June, July and August of 1992), the auditors arrived at an estimate of the amount of sales that had been underreported for the pre- December, 1992, months of the audit period for which they did not have complete cash register tapes. The auditors also determined that Shuckers' tee-shirt and souvenir sales, 4/ Sunday brunch sales, cigarette vending sales, vending/amusement machine location rentals 5/ and tiki bar sales that should have been included in the sales reported on the DR-15s submitted during the audit period were not included in these figures nor were these sales reflected on the cash register tapes that were examined. According of the "Statement of Fact" prepared by the auditors, the amount of these unreported sales were determined as follows: TEE-SHIRT SALES: Sales were determined by estimate. This was determined to be $2,000/ month. No records were available and no tax remitted through May, 1993. SUNDAY BRUNCH SALES: Sales were determined by estimate. This was determined to be 100 customers per brunch per month (4.333 weeks). No audit trail to the sales journal was found and no records were available. CIGARETTE VENDING SALES: The estimate is based on a review of a sample of purchases for the 11 available weeks. The eleven weeks were averaged to determine monthly sales at $3/pack. VENDING MACHINE LOCATION RENTAL REVENUE: The revenue estimate is based on a review of a one month sample. TIKI BAR SALES: The sales estimate is based on a review of infrequent cash register tapes of February, 1993. The daily sales was determined by an average of the sample. The number of days of operation per month was determined by estimate. In addition, the auditors determined that TAN, Inc. had not paid any tax on the lease payments it was obligated to make under its lease agreement with Illinois Land Trust and Michael Blake, Trustee, nor had any tax been paid on any of the pre-December, 1992, lease payments that had been made in connection with the business during the audit period. According to the "Statement of Fact" prepared by the auditors, the amount of these lease payments were determined as follows: The estimate is based on 1990 1120 Corporate return deduction claimed. This return is on file in the Florida CIT computer database. The 1990 amount was extended through the 6/87 - 11/92 period. For the period 12/92 - 5/93 audit period, TAN's current lease agreement of $3,000/month was the basis. No documentation was produced during the audit supporting any the sales tax exemptions that the business had claimed during the audit period on its DR-15s. 6/ Accordingly, the auditors concluded that the sales reported as exempt on the business' DR-15s were in fact taxable. Using records of sales made on a date selected at random (February 1, 1993), the auditors calculated effective tax rates for the audit period. They then used these effective tax rates to determine the total amount of tax due. An initial determination was made that a total of $201,971.71 in taxes (not including penalties and interest) was due. The amount was subsequently lowered to $200,882.28. On or about December 22, 1993, TAN, Inc., entered into the following Termination of Lease Agreement with Ocean Enterprises, Inc.: TAN, Inc., a Florida corporation, hereby consents to termination of that certain lease of the premises known as C-1, C-2, C-3 and C-4 of ISLAND BEACH CLUB, located at 9800 South Ocean Drive, Jensen Beach, Florida, dated December 3, 1992, acknowledges a landlord's lien on all assets for unpaid rent; and transfers and sets over and assigns possession of the aforesaid units and all of its right, title and interest in and to all inventory, equipment, stock and supplies located on said premises 7/ in full satisfaction of said unpaid rent; all of the foregoing effective as of this 22nd day of December, 1993. FOR AND IN CONSIDERATION of the foregoing termin- ation of lease, OCEAN ENTERPRISES, Inc., a Florida corporation, hereby agrees to pay Linda Mesa, each month all of the net revenues of the operation of the bar and restaurant located on said premises, up to the sum of $15,000.00, for sales tax liability asserted against TAN, Inc. or Linda A. W. Mesa based upon possession or ownership of said premises or any of the assets located thereon, plus attorney's fees incurred in connection with defending or negotiating settlement of any such liability. Net revenue shall mean gross revenue, less operating expenses, includ- ing, but not limited to, rent, up to the amount of $5,000.00 per month, costs of goods sold, utilities, payroll and payroll expense and insurance. OCEAN ENTERPRISES, Inc. represents that it has entered into a lease of said premises for a term of five years commencing on or about December 22, 1993, pursuant to the terms and conditions of which OCEANFRONT [sic] ENTERPRISES, Inc. was granted the right to operate a restaurant and bar business on said premises. Ocean Enterprises, Inc., leases the property from Island Beach Enterprises, which obtained the property through foreclosure. TAN, Inc., has been administratively dissolved.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Department of Revenue enter a final order withdrawing the contested and unpaid portions of the assessment issued as a result of Audit No. 9317210175, as it relates to TAN, Inc., and Linda A. W. Mesa. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 27th day of June, 1995. STUART M. LERNER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 27th day of June, 1995.
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.
