The Issue The issue is whether the Department of Revenue (the "Department") may levy on deposits of Bell Industries, Inc. ("Bell Industries") held at Wells Fargo Bank as proposed in the Department's March 5, 2012, Notice of Intent to Levy.
Findings Of Fact The Department is the agency of the state of Florida charged with the duty to enforce the collection of taxes imposed pursuant to chapter 212, Florida Statutes, including the authority to levy against the credits or personal property of delinquent taxpayers. § 213.67, Fla. Stat. Bell Industries is a holding company for the operation of several operating entities. In early 2007, Bell Industries purchased Skytel, a telecommunications services company, from Verizon. The purchased entity was subject the communications services tax set forth in chapter 202, Florida Statutes. Mark A. Begle, an officer of Bell Industries, testified that the tax compliance issues undertaken by his company in this purchase were "quite painful and took a lot of time." Mr. Begle stated that the complexity of filings under the Florida communications services tax necessitated the hiring of Tax Partners, an outside specialty company based in Atlanta, to fulfill the Skytel tax obligations. It took Tax Partners several months to get the systems in place to properly file the Florida tax forms. Mr. Begle acknowledged that his company's initial Florida tax returns were late filed. After the Department received and processed the initial returns, it sent initial notices to Bell Industries advising the company of the late filing penalty and interest amounts due for the delinquent months. The Department sent the initial notices on August 23, 2007. Eventually, the Department sent out a Notice of Final Assessment to Bell Industries for each of the two tax periods for which the company had filed delinquent returns. The Notice of Final Assessment for the reporting periods of February 2007 through May 2007, was mailed on September 25, 2007. The Notice of Final Assessment for the reporting period of May 2008, was mailed on February 6, 2009. The Department's Notice of Final Assessment offers a taxpayer two routes for contesting an assessment. First, the taxpayer may commence an informal protest process by submitting a letter requesting review to the Department within 20 days of the date of the assessment. § 213.21, Fla. Stat. and Fla. Admin. Code R. 12-6.0033. Second, the taxpayer may choose to bypass the informal protest process and commence the formal appeals process provided by chapter 72, Florida Statutes, within 60 days of the date of the assessment. Bell Industries did not timely invoke either method of contesting the assessments. Therefore, the assessments became final. The Department filed a warrant, dated September 2, 2008, in Leon County stating that Bell Industries was indebted to the Department in the amount of $23,800.41.2/ Of this amount, $23,780.41 was listed as "penalty." The remaining $20.00 was listed as a "filing fee." Thus, for all practical purposes, the claimed amount of indebtedness is entirely a penalty. Department records indicated that the Department twice rejected Bell Industries' requests for compromise or waiver of the assessments, on September 14, 2007, and December 19, 2008. The Department issued a Notice of Freeze, dated March 5, 2012, to Wells Fargo Bank, a financial institution in Philadelphia, Pennsylvania. The Notice of Freeze instructed the bank that Bell Industries had a delinquent liability for tax, penalty and interest owed to the Department pursuant to section 213.67, and that the bank "may not transfer, dispose of, or return any credits, debts, or other personal property owned/controlled by, or owed to, this taxpayer which are in your possession or control or become under your possession or control up to the amount of $23,800.41." On March 15, 2012, Wells Fargo Bank reported to the Department that it was holding $23,800.41 in Bell Industries deposits. On March 5, 2012, the Department issued a Notice of Intent to Levy on credits or personal property belonging to Bell Industries. On March 21, 2012, the Department issued a Notice of Contested Intent to Levy, in acknowledgement that Bell Industries was contesting the Department's intended levy. At the hearing, Bell Industries essentially conceded its liability for the amount owed. Mr. Begle, Bell Industries' representative, credibly testified that the company endeavors to be timely and in full compliance as regards all of its tax obligations. Mr. Begle noted that his company sold Skytel in March 2008, which led to the termination of the relationship with Tax Partners and the dismantling of the entire management structure related to Skytel. Mr. Begle blamed these activities for Bell Industries' slow response, because correspondence from the Department regarding these tax issues was being sent to personnel no longer associated with Bell Industries. Mr. Begle requested that these unusual circumstances be taken into account and that the Department consider waiving or negotiating the penalty at issue in this proceeding. At the hearing, the Department took the position that section 213.21 allows the Department to negotiate a compromise of an assessment of tax, interest and penalty, but that once the time for filing a challenge to the assessment passes, as set forth in Florida Administrative Code Rule 12-6.0033, the Department no longer has the authority to compromise a claim. Because Bell Industries failed to file a timely challenge, the Department could not accept less than the amount claimed in the Notice of Intent to Levy.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order finding that the $23,800.41 in the Wells Fargo Bank belonging to Bell Industries is subject to the Notice of Intent to Levy that the Department of Revenue issued on March 5, 2012, in accordance with section 213.67, Florida Statutes, but that the levy should not occur until Bell Industries is provided a reasonable period of time in which to submit a request for settlement or compromise pursuant to Florida Administrative Code Rule 12-13.003. DONE AND ENTERED this 27th day of August, 2012, in Tallahassee, Leon County, Florida. S LAWRENCE P. STEVENSON 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 27th day of August, 2012.
The Issue The issue presented is whether the $5.00 per gallon tax on perchloroethylene provided for in Section 376.75, Florida Statutes, is subject to Florida sales and use tax pursuant to Chapter 212, Florida Statutes. STIPULATED FACTS Petitioner is a for-profit Florida corporation that sells perchloroethylene and other dry-cleaning supplies to the dry-cleaning industry. It is a "wholesale supply facility" as that term is defined in Section 376.301(17), Florida Statutes. Petitioner is a member of the Florida Drycleaners' Coalition, a state-wide trade association whose members consist of the owners/operators of dry-cleaning facilities and wholesale supply facilities. In 1993 and prior to and during the 1994 Florida legislative session, the Florida Drycleaners' Coalition employed lawyers-lobbyists to suggest and seek passage of amendments to Chapter 376, Florida Statutes, commonly known as the Florida Dry-Cleaning Solvents Cleanup Program. In 1994, the Florida Legislature enacted Chapter 94- 355, Laws of Florida, which amended Chapter 376, Florida Statutes. Chapter 94-355 created Section 376.3078(2)(a), Florida Statutes, which provides that: All penalties, judgments, recoveries, reimbursements, loans, and other fees and charges related to the implementation of this section and the tax revenues levied, collected, and credited pursuant to ss. 376.70 and 376.75, and registration fees collected pursuant to s. 376.303(1)(d), shall be deposited into the Water Quality Assurance Trust Fund, to be used upon appropriation as provided in this section. Charges against the funds for dry-cleaning facility or wholesale supply site rehabilitation shall be made in accordance with the provisions of this section. Chapter 94-355, Laws of Florida, also created Section 376.75, Florida Statutes, which provides, in part, as follows: Beginning October 1, 1994, a tax is levied on the privilege of producing in, importing into, or causing to be imported into the state perchloroethylene (tetrachloroethylene). A tax of $5.00 per gallon is levied on each gallon of perchloroethylene when first imported into or produced in the state. The tax is imposed when transfer of title or possession, or both, of the product occurs in this state or when the product commingles with the general mass of this state. Petitioner's corporate secretary and 50 percent shareholder is David J. Pilger. He contributed financially to the employment by the Florida Drycleaners' Coalition of lawyers- lobbyists charged with seeking passage of amendments to Chapter 376, Florida Statutes, and met several times with those lawyers- lobbyists in Tallahassee. He was assured during those meetings that it was the opinion of those lawyers-lobbyists that there was no danger of Florida sales tax being applied to the $5.00 per gallon tax on perchloroethylene. The Department conducted an audit of Petitioner for the period of January 1, 1993, through January 31, 1998. At no time prior to the Department's audit of Petitioner's financial records did Petitioner receive from the Department materials of any kind indicating that Florida sales and use tax would apply to the $5.00 per gallon tax on perchloroethylene. The Department had, however, adopted emergency Rule 12BER94-2, effective October 1, 1994, and Rule 12B-12.003(2)(b), Florida Administrative Code, effective February 19, 1995. The 1998 Florida Legislature amended Section 376.75, Florida Statutes, by enacting Chapter 98-189, Laws of Florida, effective July 1, 1998, which added a sentence regarding the $5.00 per gallon tax, as follows: "This tax is not subject to sales and use tax pursuant to ch. 212." The Department has assessed and/or collected from certain taxpayers Florida sales and use tax on the sales price of perchloroethylene and the $5.00 per gallon tax on perchloroethylene. The sales and use taxes are deposited into the general revenue fund pursuant to Section 212.20(1), Florida Statutes. The $5.00 per gallon tax on perchloroethylene is deposited into the Water Quality Assurance Trust Fund, pursuant to Section 376.3078(2)(a), Florida Statutes. The Department issued its Notice of Proposed Assessment to Petitioner on October 22, 1998, assessing sales and use tax of $39,098.66, penalties of $19,549.64, and interest of $11,184.10 through October 22, 1998, with interest of $12.85 to accrue per day. The Department issued its Notice of Proposed Assessment to Petitioner on October 22, 1998, assessing indigent care surtax of $2,128.98, penalties of $1,064.48, and interest of $611.97 through October 22, 1998, and interest of $.70 to accrue per day. Petitioner charged its customers and remitted to the Department the $5.00 per gallon tax on perchloroethylene provided for in Section 376.75, Florida Statutes, but neither collected from the customer nor remitted to the Department sales and use tax on this $5.00 per gallon tax. The $5.00 per gallon tax collected by Petitioner from its customers was reflected at the bottom of Petitioner's invoices as "the ENVRN TAX." Petitioner charged its customers and remitted to the Department the excise tax provided for in Section 206.9935(2), Florida Statutes, but neither collected from its customers nor remitted to the Department sales and use taxes or indigent care surtax on this excise tax. This tax was reflected at the bottom of Petitioner's invoices as "PERC TAX." Petitioner does not contest the Department's assessment of sales and use taxes and indigent care surtax on the water quality tax provided for in Section 206.9935(2), Florida Statutes. Petitioner does not dispute that its sales to its customers during the audit period were paid for by its customers.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered sustaining the assessment against Petitioner, together with interest, but compromising the entire penalty amount. DONE AND ENTERED this 22nd day of November, 1999, in Tallahassee, Leon County, Florida. LINDA M. RIGOT 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 22nd day of November, 1999. COPIES FURNISHED: Jarrell L. Murchison, Esquire John Mika, Esquire Department of Legal Affairs The Capitol, Tax Section Tallahassee, Florida 32399-1050 Fred McCormack, Esquire Landers & Parsons, P.A. 310 West College Avenue Tallahassee, Florida 32301 Linda Lettera, General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32314-6668 Joseph C. Mellichamp, III, Esquire Office of the Attorney General Department of Legal Affairs The Capitol, Tax Section Tallahassee, Florida 32399-1050 Larry Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100
The Issue Is the taxpayer, Epic Hotel, LLC, entitled to a refund of $10,000 of sales tax paid for building materials that were used for the rehabilitation of real property located in an enterprise zone, on the basis that 20 percent of its permanent, full-time employees are residents of the Enterprise Zone?
Findings Of Fact The Department is an agency of the State of Florida and is authorized to administer the tax laws of the State of Florida. In 2008 Epic constructed and began operation of a hotel in a State of Florida Enterprise Zone in Miami-Dade County, Florida. Epic sought a refund of sales tax paid on building materials for the construction of the hotel. The sales tax paid on building materials used in the rehabilitation of real property located in an Enterprise Zone may be exempt up to $10,000, upon a showing that the items have been used for the rehabilitation of real property located in an Enterprise Zone and that 20 percent or more of the taxpayer’s fulltime, permanent employees reside in the Enterprise Zone. On or about August 24, 2009, Epic filed an Application for Refund–Sales and Use Tax. It requested refund of $10,000 in sales tax for building materials used to build the hotel. It submitted a completed Department form DR-26S and other documents, including a completed Department form EZ-M. The form EZ-M is the Department’s “Application for Eligibility” for the Florida Enterprise Zone Program Building Materials Sales Tax Refund. The form included a completed Section I identifying permanent, full-time employees Epic represented reside in the Enterprise Zone. The form represented that 22 percent of Epic’s full-time, permanent employees reside in the Enterprise Zone. The Enterprise Zone Coordinator for the area signed the EZ-M certifying, “that I have examined the statements contained on this application certificate, and to the best of my knowledge and belief they are true, correct and complete.” The record does not indicate whether the Enterprise Zone Coordinator is an employee of the Department. John Shettle, Tax Auditor for the Department, audited Epic’s refund application. Mr. Shettle is responsible for auditing refund applications. His duties include verifying that refund applications are complete and accurate, and that the applicant has provided the documentation required by the refund statute. The Department issued Epic a Notice of Intent to Make Refund Claim Changes, Form DR-1200R (for Refund Number R09246069). It proposed to deny the refund claim for $10,000. The Notice asked Epic to provide additional documentation aimed at establishing that Epic owned the property where the hotel was located and that the individuals identified in Section I to the form EZ-M were full-time, permanent employees of Epic. The requested documents included a copy of Epic’s 940 Federal Unemployment Tax Return and a copy of Epic’s W3 form. Mr. Shettle conducted independent research on the employee issue. He used the State’s unemployment tax records and the Department of Business and Professional Regulation’s employee leasing company registration data. He was unable to locate any evidence that the employees listed in Schedule A were employed by Epic. Epic has not presented any. Epic has a Hotel Operating Agreement with Kimpton Hotel & Restaurant Group, LLC. The Agreement provides for Kimpton to “supervise, direct, and control the management, operation, and promotion of the Epic hotel.” The employees identified as Epic employees on Section I of Epic’s EZ-M form are employees of Kimpton who provide the contracted services at Epic. They are not direct employees of Epic or employees leased by Epic. Epic relied upon the Final Order of the Department of Revenue in The Angler Resorts, LLC v. State of Florida, Department of Revenue, Case No. DOR-08-17-FOI (Fla. Dept. of Rev., March 16, 2008), in its dealings with the Department. In reliance upon that Final Order, Epic maintained that it was not required to provide anything more than the certified form EZ-M and a completed Department form DR-26S. The Department denied Epic’s refund application on the basis that Epic could not be verified as the owner, lessee, or lessor of the rehabilitated parcel, and that the individuals listed in Section I could not be confirmed as employees of Epic. During the course of this dispute about entitlement to the refund, Epic established ownership of the property at the time of the application. The Department consequently issued Epic a refund of $5,000. The Department has adopted rules governing the manner and form of refund applications.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is Recommended that the Department of Revenue grant Epic’s refund application and approve a sales tax refund for the total amount of $10,000. DONE AND ENTERED this 2nd day of August, 2010, in Tallahassee, Leon County, Florida. S JOHN D. C. NEWTON, II 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 2nd day of August, 2010. COPIES FURNISHED: Marshall Stranburg, General Counsel Department of Revenue The Carlton Building, Room 204 501 South Calhoun Street Tallahassee, Florida 32314-6668 Carrol Y. Cherry, Esquire Office of the Attorney General Revenue Litigation Bureau The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050 Herb Friesner Economic Development Consultants, Inc. 14361 Commerce Way, Suite 205 Miami Lakes, Florida 33016 Lisa Echeverri, Executive Director Department of Revenue The Carlton Building, Room 104 501 South Calhoun Street Tallahassee, Florida 32399-0100
The Issue Whether the Petitioner is liable for sales tax, interest, and penalties as alleged by the Department of Revenue (Department).
Findings Of Fact Based on the oral and documentary evidence presented at the final hearing, the following Findings of Fact are made: The Petitioner is a Florida corporation formed in October 2004. The principal office and mailing address of the Petitioner is 518 North Tampa Street, Suite 300, Tampa, Florida 33602. The directors of the corporation are Brenda Dohring and Robert Hicks (husband and wife), and Joshua Dohring (their son). Brenda Dohring and Robert Hicks are residents of Tampa, Florida, and registered voters in Hillsborough County. Brenda Dohring and Robert Hicks hold Florida driver's licenses. Joshua Dohring is a resident of the United States Virgin Islands, where he operates a charter boat business. On November 8, 2004, the Petitioner purchased, in St. Petersburg, Florida, a 36-foot catamaran sailboat (hull No. QPQ0000D089) for $113,000. On November 15, 2004, the Petitioner purchased, in St. Petersburg, Florida, an inflatable tender with outboard motor and accessories (hull No. XMO18119G405) for $4,865. The catamaran and tender were purchased for the use of Joshua Dohring in his charter boat business in the Virgin Islands. They were to replace his previous boat that was destroyed by Hurricane Ivan. Because Joshua Dohring did not have sufficient financial resources or credit, Brenda Dohring and Robert Hicks decided to make the purchases for him. They created the Petitioner corporation to purchase and own the catamaran and tender because they wanted protection from personal liability that might arise from Joshua Dohring's use of the vessels in the Virgin Islands. At the time of each purchase, Joshua Dohring was provided a Department affidavit form to be completed and filed with the Department to claim exemption from sales tax. Joshua Dohring indicated the name of the Petitioner corporation on the affidavit forms along with the names of the corporation's directors. The Department's affidavit form for sales tax exemption includes several statements that the affiant must attest to, including the following: 4. I represent a corporation which has no officer or director who is a resident of, or makes his or her permanent place of abode in Florida. David Erdman, a licensed yacht broker in Florida who assisted Joshua Dohring in the purchase of the catamaran and tender, believed that the purchases were exempt from Florida sales tax because Joshua Dohring was not a Florida resident and was going to remove the vessels from Florida. Mr. Erdman did not understand that, because the purchaser was not Joshua Dohring, but a Florida corporation, the sales tax exemption did not apply. Mr. Erdman advised Joshua Dohring that the purchases were exempt from Florida sales tax. There is no evidence in the record, and the Department did not allege, that the Petitioner intended to defraud the State. On this record, it is clear that the Petitioner's directors were simply mistaken in their belief that the purchases of the boats were exempt from Florida sales tax, based primarily on the erroneous advice of Mr. Erdman. The Department made a routine investigation after its receipt of the sales tax exemption affidavits signed by Mr. Dohring and determined that the exemption did not apply because the Petitioner is a Florida corporation with directors who are residents of Florida. In January 2005, the Department notified the Petitioner of its billing for the sales tax due on the boat purchases, plus penalty and interest, totaling $8,474.67. An informal conference regarding the billing was requested by the Petitioner, and a conference was held in an attempt to resolve the matter. Subsequently, the Department's Final Assessment was issued on January 23, 2005, indicating tax, penalty, and interest totaling $9,229.26. Because of the circumstances indicating that the Petitioner's failure to pay was due to a mistake and bad advice, the Department proposes to eliminate the penalty.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department issue an final order: finding that the Petitioner's purchases of the catamaran and inflatable tender are subject to sales tax; and assessing sales tax of six percent on the purchases; and imposing interest on the taxes until paid; and imposing no penalty. DONE AND ENTERED this 22nd day of September, 2005, in Tallahassee, Leon County, Florida. BRAM D. E. CANTER 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 22nd day of September, 2005.
The Issue Whether the Department of Revenue should assess Heftler Construction Company ("Taxpayer") for Florida corporate income taxes on a claim that: Taxpayer realized a gain under the Florida Income Tax Code when an asset acquired in 1971 (on liquidation of a joint venture) was sold in 1975 in satisfaction of an outstanding debt; and Taxpayer's losses created by the subtraction of foreign source income cannot operate to create or increase the Florida portion of the net operating loss carryover.
Findings Of Fact Formation and Liquidation of Joint Venture; Subsequent Sale of Asset Taxpayer is a New Jersey corporation, authorized to transact business in Florida. Heftler Realty Company ("Realty") is a Florida corporation, and is a subsidiary of Taxpayer. Taxpayer, for all years material to these proceedings, filed consolidated income tax returns with the Internal Revenue Service of the United States ("IRS") . Pursuant to the applicable provisions of the Internal Revenue Code ("IRC"), Taxpayer included in the income and expenses of its consolidated income tax returns the income and expenses of its operations in Puerto Rico. Taxpayer, for all years material to these proceedings, timely filed with the Department consolidated income tax returns. In 1969, Realty formed a joint venture with a company known as GACL, Inc., for the purpose of developing real property Realty, in accordance with its Joint Venture Agreement with GACL, Inc., prior to 1971, contributed to the joint venture the following assets with the following cost basis to Taxpayer on the date of contribution: ASSET DATE CONTRIBUTED TO JOINT VENTURE COST BASIS TO TAXPAYER ON DATE CONTRIBUTED Cash 3-5-69 $250,000 Land 3-5-69 2,000,000 In 1971, prior to the effective date of the Florida Income Tax Code ("Florida Code"), Chapter 220, Florida Statutes, the joint venture between Realty and GACL, Inc., was liquidated effective as of January 1, 1971. Pursuant to the plan of liquidation, Realty received, in liquidation of the joint venture, the assets as described in the attached Appendix. These assets had a then cost basis to the joint venture as described in the Appendix. The assets acquired by Realty in liquidation of the joint venture were subject to the debts described in the Appendix. Pursuant to the plan of liquidation of the joint venture, Realty agreed to acquire the assets and assume the attendant debts (itemized in the Appendix) as of January 1, 1971. At the time of the liquidation of the joint venture, Realty had a cost basis for its interest in the joint venture of a negative $285,749. (Realty had a negative basis in the assets because it sustained joint venture losses in excess of its contributions to the joint venture.) The net gain to Realty as' reported upon the federal income tax return of Taxpayer, after adjustment for depreciation, as a result of the liquidation was $1,238,37l. In 1971, Realty reduced its tax basis in the assets acquired in the liquidation. This adjustment (reduction) in the tax basis of the assets acquired by Taxpayer occurred prior to the effective date of the Florida Code. An asset acquired by Realty in 1971, pursuant to the plan of liquidation of the joint venture, was conveyed by Realty in 1975 to a creditor of Realty in satisfaction of debt. After adjusting the tax basis of the asset, a comparison of its book basis (to the joint venture) with the tax basis to Taxpayer after liquidation, reflects the following: Adjusted Basis as of Jan. 1, Tax Basis to Tax- Book Basis to payer or After Joint Venture Liquidation Difference 1971 $4,466,764 $3,055,722 $1,411,042 Accumulated Depreciation to Date of Sale (587,212) (414,541) (172,671) Adjusted Basis $3,879,552 $2,641,181 $1,238,371 For purposes of its Federal Income Tax, Taxpayer reported the transaction as a sale and computed the gain thereon as follows: $3,951,708 Expense of Sale $2,713,337 3. Total Gain $1,238,371 Gross Sale Price Cost or Other Basis and (The difference between the gross sales price and the adjusted basis referred to in paragraph 13 of $72,156 is an increase to the price due to escrow funds deposited with a mortgagee and assigned to the purchaser of the asset by Realty without Realty receiving reimbursement.) In computing the Florida income tax, pursuant to the Florida Code, for the fiscal year ending July 31, 1976, Taxpayer took as a subtraction an adjustment on line 8, Schedule II, page 2 of its income tax return. The subtraction was in the amount of the capital gain received upon the sale of the asset received in liquidation in the amount of $1,238,371. Taxpayer subtracted the gain, contending that it was realized prior to the effective date of the Florida Code. When acquired, the asset received in liquidation had a cost basis to the joint venture Of approximately $4,500,000. When the asset was distributed to Taxpayer, after the reduction by Taxpayer to the tax basis referred to in paragraph 11, the basis to Taxpayer of the asset was approximately $3,000,000. The tax basis in the amount of $3,000,000 was evidenced by the debts assumed by Taxpayer upon the liquidation; such assumption of debt is referred to in paragraph 7. Department contends that the gain on the sale of the asset acquired in liquidation was both realized and recognized in 1975 when the property was sold in satisfaction of a debt; it has issued a proposed assessment on that basis. Taxpayer contends that the gain was realized by Taxpayer for federal income tax purposes prior to the effective date of the Florida Code and that only the recognition of the gain occurred after the effective date of the Florida Code. II. 1975 Loss Created by Subtraction of Foreign Source Income; Attempt to Carryover Loss to Subsequent Years Taxpayer, in addition to the adjustment referred to above, in reporting income for its fiscal years ending July 31, 1976, July 31, 1977, and July 31, 1978, deducted a net operating loss carry-forward which included an item of $335,037 from its 1975 return (fiscal year ending July 31, 1976) and an item of $916,030 for fiscal year ending July 31, 1978, represented by a subtraction resulting from income earned in Puerto Rico. The subtraction resulted in losses during each of such years, which losses were carried forward by Taxpayer to the next ensuing year. Department contends that the losses created by the subtraction of foreign source income cannot be carried over to subsequent years to determine income and has issued a proposed assessment on that basis. Taxpayer contends that it is not the intent of the Florida Legislature to tax income derived from sources outside the United States and that the effect of a denial of the subtraction will result in the taxation, by Florida, of foreign source income received by Taxpayer.
Recommendation Based on the foregoing, it is RECOMMENDED: That the Department's proposed assessment of Taxpayer for corporate income tax deficiencies be issued. DONE AND RECOMMENDED this 21st day of January, 1982, in Tallahassee, Florida. R. L. CALEEN, JR. 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 21st day of January, 1982.
Findings Of Fact National Sun Control Company sells reflective film for installation on windows and glass doors throughout the southeastern United States. Sales are made only to distributors and dealers who do the installation or resell the film to customers. Petitioner holds a wholesalers occupational license and makes no sales to individuals for their own use. Petitioner sells the film only in 100 foot rolls and the normal order exceeds $100. Throughout Florida its maximum number of dealers has been about 25 and at present there are only 4 or 5 actively engaged in installing this film for their customers. Petitioner failed to ascertain that each of its dealers had a tax exemption number and when his accounts for the years 1974 - 1976 were audited by the Respondent, a sales tax was levied on all of Petitioner's sales to Florida dealers in the amount of $3,814.47. To this was added a 25 percent delinquent penalty of $953.62 and interest in the amount of $743.82. Petitioner has recovered some of the sales taxes for which it was assessed and remitted same to the Respondent. In the revised assessment dated April 5, 1977 the tax was shown to be $1,362.38, the penalty (reduced to 5 percent) to be $68.13 and interest $290.00. From this is deducted a partial payment made by Petitioner of $636.60, leaving a balance owed by Petitioner of $1083.91 Petitioner has provided Respondent with the names and addresses of each of the dealers to whom he shipped reflective film for installation and resale and has requested Respondent to collect the taxes owed from those dealers. One area supervisor responded (Exhibit 3) that the dealer said he had been told by Petitioner that the film was tax exempt and he refused to reimburse Petitioner for "the Florida Sales Tax that you [Petitioner) failed to collect."
Findings Of Fact During the three year period from October 1, 1974 through September 30, 1977 Air Jamaica purchased prepared meals from Jerry's Caterers at Miami (Jerry's) in the total amount of $740,760.04 and Taca purchased prepared meals from Jerry's in the total amount of $161,379.72. Sales tax, penalty and interest through March 20, 1978 were assessed against Air Jamaica in the amount of $35,291.54 on the total paid for meals from Jerry's. Sales tax plus interest through November 20, 1977 were assessed against Taca in the amount of $9,359.86 on the total paid for meals from Jerry's. These figures are accepted as accurately representing 4 percent of the cost of meals purchased plus interest and penalties. The operations with respect to the meals were identical for both Air Jamaica and Taca. Prepared meals were delivered to the aircraft by Jerry's in trays holding 25 meals. These trays are supplied with heating elements and act as ovens in which the meals are heated. When placed aboard the aircraft by Jerry's' employees the trays holding meals intended to be served hot are plugged into electrical outlets on the plane. Prepared food delivered to the aircraft by Jerry's intended to be served cold obviously are not plugged into the electrical outlets. Air Jamaica departs from Miami and serves only Montego Bay and Jamaica. Taca departs from Miami and serves the cities of Belize, El Salvador, Nicaragua and Panama. Some 30 to 50 minutes after leaving Miami each company serves a meal for which no separate charge is made to the passenger. At the time these meals are served the aircraft is well outside the boundaries of Florida and either over Cuba or international waters. Although no separate charge is made for the meal served the cost of the meal, like every other operational and administrative cost, is considered in arriving at the air fare charged to the passenger for the transportation from Miami to destination. Jerry's bills the airlines for the number of meals delivered at a wholesale price of $3.48 per meal for meals served to first class passengers and $2.19 for meals served to economy passengers. Each airline provided Jerry's with tax resale certificates which relieved Jerry's from the collection of sales tax on meals delivered to the aircraft.
Findings Of Fact Certain hospital equipment ("Equipment") was sold in 1973 and 1974 by Hospital Contract Consultants ("Vendor") to F & E Community Developers and Jackson Realty Builders (hereinafter referred to as "Purchasers") who simultaneously leased the Equipment to Petitioner. These companies are located in Indiana. At the time of purchase, Florida sales tax ("Tax") was paid by the Purchasers and on or about March 18, 1974, the tax was remitted to the State of Florida by the Vendor. However, the Tax was paid in the name of Medical Facilities Equipment Company, a subsidiary of Vendor. In 1976, the Department of Revenue audited Petitioner and on or about April 26, 1976 assessed a tax on purchases and rental of the Equipment. On or about April 26, 1976, petitioner agreed to pay the amount of the assessment on the purchases and rentals which included the Equipment, in monthly installments of approximately Ten Thousand and no/100 Dollars ($10,000.00) each and subsequently paid such amount of assessment with the last monthly installment paid on or about November 26, 1976. On or about December, 1976, the Department of Revenue, State of Florida, checked its records and could not find the Vendor registered to file and pay sales tax with the State of Florida. Petitioner then looked to the State of Indiana for a tax refund. On or about January 4, 1977, Petitioner filed for a refund of sales tax from the State of Florida in the amount of Thirty Five Thousand One Hundred Four and 02/100 Dollars ($35,104.02). This amount was the sales tax paid to and remitted by various vendors for certain other equipment purchased in 1973 and 1974 and simultaneously leased. The amount of this refund request was granted and paid. Relying upon the facts expressed in paragraph 4 heretofore, Petitioner on or about June 2, 1977 filed with the Department of Revenue of the State of Indiana for the refund of the Tax. On or about June 7, 1979, the Department of Revenue of Indiana determined that the Vendor was registered in the State of Florida as Medical Facilities Equipment Company and therefore Petitioner should obtain the refund of the Tax form the State of Florida. So advised, Petitioner then filed the request for amended refund, which is the subject of this lawsuit, on July 16, 1979 in the amount of Seventeen Thousand Two Hundred Sixteen and 28/100 Dollars ($17,216.28). This request for refund was denied by Respondent, Office of the Comptroller, on the basis of the three year statute of non-claim set forth in section 215.26, Florida Statutes. Purchasers have assigned all rights, title and interest in sales and use tax refunds to Petitioner. During the audit of Petitioner in 1976 the lease arrangement on the equipment apparently came to light and Petitioner was advised sales tax was due on the rentals paid for the equipment. This resulted in an assessment against Petitioner of some $80,000 which was paid at the rate of $10,000 per month, with the last installment in November, 1976. The auditor advised Petitioner that a refund of sales tax on the purchase of this equipment was payable and he checked the Department's records for those companies registered as dealers in Florida. These records disclosed that sales taxes on the sale of some of this rental equipment had been remitted by the sellers of the equipment but Hospital Contract Consultants was not registered. Petitioner was advised to claim a refund of this sales tax from Indiana, the State of domicile of Hospital Contract Consultants. By letter on March 18, 1974, Amedco Inc., the parent company of wholly owned Hospital Contract Consultants, Inc. had advised the Florida Department of Revenue that Medical Facilities Equipment Company, another subsidiary, would report under ID No. 78-23-20785-79 which had previously been assigned to Hospital Contract Consultants Inc. which had erroneously applied for this registration. (Exhibit 2) Not stated in that letter but contained in Indiana Department of Revenue letter of April 18, 1979 was the information that the name of Hospital Contract Consultants had been changed to Medical Facilities Equipment Company. The request for the refund of some $17,000 submitted to Indiana in 1976 was finally denied in 1979 after research by the Indiana Department of Revenue showed the sales tax had been paid to Florida and not to Indiana.
Findings Of Fact Upon consideration of the pleadings, stipulations and oral representations of the parties, the following facts are found: During the years in question, petitioner was a corporation organized under the laws of the State of Delaware and was duly qualified and authorized to do business in the State of Florida. Petitioner is the parent corporation of a consolidated group of corporations, two of which (including petitioner) had Florida transactions or were otherwise separately subject to the Florida corporate income tax code. None of the other members of the consolidated group were subject to taxation in Florida. For the fiscal and calendar years 1972 through 1974, Petitioner filed federal and Florida income tax returns on behalf of the parent corporation, which included the returns for the consolidated group of corporations -- both the Florida and non- Florida members. Each member of the group consented to such consolidated filing and the component members of the Florida return group were identical to the members of the federal return group. Respondent issued its proposed deficiencies for the 1972 and 1973 tax years, ruling that for a parent corporation to include all of its subsidiary corporations for the purposes of consolidating its taxable income, it must be incorporated in Florida. For the years 1972, 1973 and 1974, respondent's Rule 12C-1.131(1), F.A.C., contained a definition of a "Florida parent company" as the term is used in the second sentence of Florida Statutes 220.131(1). This rule was amended on August 4, 1975, to delete said sentence defining the term "Florida parent company."
Recommendation Based upon the findings of fact and conclusions of law recited above, it is recommended that: petitioner pay the assessment of $3,786.33 for the year 1972, with interest, as stipulated by petitioner, the proposed assessment for the year 1973 in the amount of $112,281.06 be dismissed and set aside, and the petitioner's method of computing its corporate income tax for the year 1974 be upheld. Respectfully submitted and entered this 21st day of June, 1977, in Tallahassee, Florida. DIANE D. TREMOR Hearing Officer Division of Administrative Hearings Room 530 Carlton Building Tallahassee, Florida 32304 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 21st day of June, 1977. COPIES FURNISHED: M. Lewis Hall, Jr. Hall and Hedrick Greater Miami Federal Building 200 Southeast First Street Miami, Florida E. Wilson Crump, II Assistant Attorney General Department of Legal Affairs Tax Division, Northwood Mall Tallahassee, Florida 32303
