The Issue The issue presented is whether Respondent is guilty of the allegations contained in the Administrative Complaint filed against him, and, if so, what disciplinary action should be taken against him, if any.
Findings Of Fact At all times material hereto, Respondent has been licensed as a certified public accountant in the State of Florida, having been issued license number 0018740. Eileen and Robert Organ engaged Respondent's services to prepare income tax returns for Ma's Kitchen, Inc., and Respondent prepared several years of returns for them. In a letter dated March 19, 1999, the Organs advised Respondent that his services were no longer required. Thereafter, Respondent gave his file on Ma's Kitchen to his attorney to collect Respondent's outstanding bill for services rendered to the Organs in the amount of $6,000. On July 6, 1999, the Organs sent Respondent a letter stating that their new accountant needed the ledger books and files of Ma's Kitchen, that the Organs would pick up those records from Respondent, that Respondent's attorney had sent them letters, and that they would file a complaint against Respondent if they did not hear from Respondent. Respondent thereafter made unsuccessful attempts to contact the Organs. The Organs did not contact Respondent after their July 6 letter to make arrangements to pick up their file. Further, the Organs' new accountant did not contact Respondent to obtain copies of Respondent's records although he contacted someone in Respondent's attorney's office who told him he could come there to look at the file. The new accountant never went to Respondent's attorney's office to look at the records for Ma's Kitchen, Inc. Respondent had told his attorney to give the Organs any documents they asked for if they contacted him as long as they paid any copying charges. Respondent's attorney and the Organs' attorney wrote letters to each other, containing their interpretations of their clients' positions. Respondent's attorney took the position that all records provided by the Organs had been returned and that Respondent's work product was not needed by the Organ's new accountant but would be released when Respondent's bill was paid. The Organs' attorney demanded that Respondent return all records in his possession and suggested that Respondent owed money to his clients. The Organs had provided to Respondent check stubs, bank statements, payroll tax returns, and other financial information to be used to prepare tax returns for them. Using those documents, Respondent had entered the data in his computer and had created a computer-generated general ledger. He had returned to the Organs all records they gave him long before they terminated his services, and their attorney's demand that he return records already returned was non-productive. The demand of the Organs' attorney that Respondent return all corporate books and records was also non-productive. Respondent had never possessed Ma's Kitchens' articles of incorporation, corporate seal, by-laws, or minutes of meetings, those items commonly referred to as corporate books and records.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered finding Respondent not guilty and dismissing the Administrative Complaint filed against him in this cause. DONE AND ENTERED this 1st day of November, 2001, 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 1st day of November, 2001. COPIES FURNISHED: Charles F. Tunnicliff, Esquire Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-2202 Samuel Francis May, Jr. 20283 State Road 7, Suite 300 Boca Raton, Florida 33498 Martha Willis, Division Director Division of Public Accounting Department of Business and Professional Regulation 240 Northwest 76 Drive, Suite A Gainesville, Florida 32607 Hardy L. Roberts, III, General Counsel Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-2202
The Issue The issue is whether petitioner's candidacy for the office of Tax Collector would conflict or interfere with his employment as an auditor for the Department of Revenue.
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: Petitioner, Robert M. Hendrick, a career service employee, is employed with respondent, Department of Revenue (DOR), as a Tax Auditor IV in its Leesburg, Florida field office. He has been employed by DOR since September 1991. In his position, petitioner primarily audits tangible personal property assessments performed by the local Property Appraiser and, on occasion, he inspects the property which is the subject of the assessment. In March 1996, the Lake County Tax Collector publicly announced that he would not run for reelection. After learning of this decision, by letter dated March 19, 1996, petitioner requested authorization from his employer to run for that office. The letter was received by DOR's Executive Director on April 1, 1996. On April 10, 1996, the Executive Director issued a letter denying the request on the ground the candidacy would conflict with petitioner's job duties. More specifically, the letter stated in relevant part that: Under section 195.002, Florida Statutes, the Department of Revenue has supervision of the tax collection and all other aspects of the administration of such taxes. Your position with the Department may require you to review or audit the activities of the office you propose to seek. Also some of your duties in supervising other officials in the administration of property taxes may be affected by your proposed candidacy. Your job requires you to review appropriate tax returns, and other records to resolve complex issues related to taxing statutes administered by the Department of Revenue. It also requires you to identify and scrutinize transactions to ascertain whether taxpayers have escaped paying property taxes. In addition, it also requires you to review and audit procedures used by counties to identify and value tangible personal property and accomplish statutory compliance, to investigate taxpayer complaints, to conduct field review with county staff as appropriate, and to provide education and assistance to county taxing officials. Because of the Department's statutory supervision of the office of tax collector, there cannot be a certification that your candidacy would involve "no interest which conflicts or activity which interferes" with your state employment within the definitions in section 110.233(4), Florida Statutes. The letter went on to say that This letter is a specific instruction to you that you should not qualify or become a candidate for office while employed in your current position. If you wish to commence your campaign by performing the pre-filing requirements, the law requires that you first resign from the Department. Failure to do so shall result in disciplinary action to dismiss you from your position in accordance with the Department's disciplinary standards and procedures, and Rule 60K-4.010, F.A.C., on the grounds that you are in violation of the Department's Code of Conduct, Section 110.233, Florida Statutes, and Rule 60K- 13.002(3), F.A.C. After receiving the above decision, by letter dated April 15, 1996, petitioner requested that the Executive Director reconsider his decision. Thereafter, on April 24, 1996, petitioner filed a request for a formal hearing to contest the agency's decision. Both the Property Appraiser and Tax Collector play a role in the property tax program in the State of Florida. The Property Appraiser generally values or assesses property subject to taxation and applies the millage rate set by the taxing authority. After the tax roll is approved by DOR, it is certified to the Tax Collector who then collects the taxes and distributes them to the appropriate taxing authorities. It is noted that ad valorem taxes make up the lion's share of taxes at the local level while tangible personal property taxes are a very small source of revenues. DOR is charged with the duties of providing oversight to the property tax program and aid and assistance to the Property Appraiser and Tax Collector. In this regard, DOR views the two offices as an integral part of the property tax program rather than two separate entities. It characterizes the program as "a stream or process where (the) lines of delineation (between the two offices) are not as distinct as they might have been ten or fifteen years ago." Because of the highly sensitive nature of the tax program, it follows that a certain degree of trust and integrity must exist between DOR (and its employees) and the local offices. Petitioner does not interface with the office of Tax Collector in any respect, and his duties do not require that he audit any of that office's records. His only duties are to audit the tangible personal property assessments performed by the Property Appraiser. These facts were not controverted. Although he has never differed with a valuation of the Property Appraiser during his five year tenure at DOR, and no such disagreement has occurred in Lake County during the last twenty-five years, petitioner could conceivably disagree with an assessment while running for office during the next few months. If the matter could not be informally settled, the tax rolls would not be certified by DOR, and litigation against DOR could be initiated by the Property Appraiser. Under those unlikely circumstances, petitioner might be called as a witness in the case, although the general practice has always been for DOR to use personnel from the Tallahassee office in litigation matters. To the very minor extent that petitioner could affect the tax rolls by disagreeing with the Property Appraiser's valuations, this could also impact the amount of money collected by the Tax Collector. DOR cites these circumstances as potentially affecting in an adverse way the level of trust and integrity between DOR and the office of Tax Collector. However, under the facts and circumstances of this case, this potential conflict is so remote and miniscule as to be wholly immaterial. The evidence also shows that in his audit role, petitioner has the "opportunity . . . to look and have access to tax returns," some of which "are of TPP (tangible personal property) nature (and) have attached to them federal tax returns" which might be used by the Property Appraiser for establishing the value of tangible personal property. Whether petitioner has ever had access to, or reviewed such, returns is not of record. In any event, to the extent this set of circumstances would pose a potential conflict with the Property Appraiser, as to the Tax Collector, it would be no more significant than the purported conflict described in finding of fact 7. Finally, DOR suggests that if petitioner was unsuccessful in his bid for office, it would likely damage the "relationship of trust" that now exists between DOR and the Tax Collector. Again, this purported conflict is so speculative as to be deemed immaterial. The parties have stipulated that, as of the date of hearing, petitioner's only option for qualifying to run for office is to pay a $6,173.00 qualifying fee no later than noon, July 19, 1996. The opportunity for submitting an appropriate number of signatures in lieu of a filing fee expired on June 24, 1996. On the few, isolated occasions during the last twenty-five years when the Lake County Tax Collector has requested information from DOR personnel, he has spoken by telephone with DOR legal counsel in Tallahassee. Those matters of inquiry, primarily relating to ad valorem taxes, do not concern any area related to petitioner's job duties. He also pointed out that his office always cooperates with the office of the Property Appraiser, especially when "corrections" must be made due to errors by that office. Even so, he described the two offices as being separate and with entirely different duties. This testimony is accepted as being the most persuasive on this issue. At least four persons have already announced that they would run for Tax Collector for Lake County. The parties have stipulated that one of those persons is a regional administrator for the Department of Highway Safety and Motor Vehicles who was not required to resign his position in order to run for office. According to the incumbent Tax Collector, that individual supervises other state employees who occasionally audit certain aspects of his office pertaining to automobile license plates and decals. Because of the time constraints in this case, and although not legally obligated to do so, respondent has voluntarily agreed to allow petitioner to take annual leave (or presumably leave without pay) commencing on the date he qualifies for local public office, or July 19, 1996, and to remain on leave until a final order is issued by the agency. At that time, if an adverse decision is rendered, petitioner must choose between resigning or withdrawing as a candidate. These terms are embodied in a letter from DOR's counsel to petitioner dated July 3, 1996. If petitioner is allowed to run for office without resigning, he has represented that he will campaign while on leave or after regular business hours. He has also represented, without contradiction, that his campaign activities will not interfere with his regular duties. If elected, he intends to resign his position with DOR.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department of Revenue enter a final order granting petitioner's request that it certify to the Department of Management Services that his candidacy for the office of Lake County Tax Collector would involve no interest which conflicts, or activity which interferes, with his state employment. DONE AND ENTERED this 10th day of July, 1996, 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 10th day of July, 1996. APPENDIX TO RECOMMENDED ORDER Respondent: Partially accepted in finding of fact 1. Partially accepted in findings of fact 2 and 3. 3-5. Partially accepted in finding of fact 1. 6. Partially accepted in finding of fact 5. 7-9. Partially accepted in finding of fact 4. 10-11. Partially accepted in finding of fact 7. 12. Rejected as being irrelevant since petitioner was not an employee of DOR in 1990. 13-17. Partially accepted in finding of fact 7. 18. Rejected as being unnecessary. 19-20. Partially accepted in finding of fact 5. 21. Partially accepted in finding of fact 8. 22-23. Partially accepted in finding of fact 5. Partially accepted in finding of fact 9. Rejected as being unnecessary. Note - Where a proposed finding of fact has been partially accepted, the remainder has been rejected as being irrelevant, not supported by the evidence, unnecessary, subordinate, or a conclusion of law. COPIES FURNISHED: L. H. Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100 Linda Lettera, Esquire Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 Mr. Robert M. Hendrick 5022 County Road 48 Okahumpka, Florida 34762 Peter S. Fleitman, Esquire Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668
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.
The Issue The issue in this case is whether SNS Lakeland, Inc. (Petitioner), collected and remitted the correct amount of sales and use tax on its operations for the audit period.
Findings Of Fact DOR is the state agency charged with the responsibility of administering and enforcing the tax laws of the state of Florida. In conjunction with that duty, DOR performs audits of business entities conducting sales and use transactions. At all times material to the issue of this case, Petitioner conducted business as a convenience store located at 811 East Palmetto Street, Lakeland, Florida. Petitioner was obligated to collect and remit sales and use tax in connection with the activities of its business enterprise. Petitioner’s Federal Identification Number is 26-0412370. Petitioner is authorized to conduct business within the state and its certificate of registration number is 63-8013863272-3. In order to properly perform its audit responsibilities, DOR requires that businesses maintain and present business records to support the collection of sales and use taxes. In this case, DOR notified Petitioner that it intended to audit the business operations for the audit period, June 1, 2007, through September 30, 2009. After the appropriate pre-audit notice and exchange of information, DOR examined Petitioner’s financial records. Since Petitioner did not maintain register tapes (that would track sales information most accurately), the Department examined all records that were available: financial statements, federal and state tax returns, purchase invoices/receipts, bank records, and register tapes that were available from outside the audit period. Petitioner’s reported tax payments with the amounts and types of taxes that it remitted should have been supported by the records it maintained. Theoretically, the sums remitted to the Department should match the records of the business entity. In this case, the amount remitted by Petitioner could not be reconciled with the business records maintained by the business entity. As a result, the auditor determined the sales tax due based upon the best information available. First, the auditor looked at the actual register tapes for the period November 10, 2010, through November 29, 2010 (sample tapes). Had Petitioner kept its sales receipts, the actual receipts for the audit period would have been used. Nevertheless, the sample tapes were used to estimate (based upon the actual business history of the company) the types and volumes of sales typically made at the store. Secondly, in order to determine the mark-up on the sales, the auditor used Petitioner’s purchase invoices, worksheets, profit and loss statements, and federal and state tax returns. In this regard, the auditor could compare the inventory coming in to the store with the reported results of the sales. Third, the auditor determined what percentage of the sales typically would be considered exempt from tax at the time of acquisition, but then re-sold at a marked-up price for a taxable event. Petitioner argued that 70 percent of its gross sales were taxable, but had no documentary evidence to support that conclusion. In contrast, after sampling records from four consecutive months, the Department calculated that the items purchased for sale at retail were approximately 78 percent taxable. By multiplying the effective tax rate (calculated at 7.0816) by the amount of taxable sales, the Department computed the gross sales tax that Petitioner should have remitted to the state. That gross amount was then reduced by the taxes actually paid by Petitioner. Petitioner argued that the mark-up on beer and cigarettes used by the Department was too high (thereby yielding a higher tax). DOR specifically considered information of similar convenience stores to determine an appropriate mark-up. Nevertheless, when contested by Petitioner, DOR adjusted the beer and cigarette mark-up and revised the audit findings. Petitioner presented no evidence of what the mark-up actually was during the audit period, it simply claimed the mark-up assumed by DOR was too high. On March 30, 2011, DOR issued the Notice of Proposed Assessment for sales and use tax, penalty, and interest totaling $27,645.79. Interest on that amount accrues at the rate of $4.20, per day. In reaching these figures, DOR abated the penalty by 80 percent. The assessment was rendered on sales tax for sales of food, drink, beer, cigarettes, and tangible personal property. Petitioner continues to contest the assessment. Throughout the audit process and, subsequently, Petitioner never presented documentation to dispute the Department’s audit findings. DOR gave Petitioner every opportunity to present records that would establish that the correct amounts of sales taxes were collected and remitted. Simply stated, Petitioner did not maintain the records that might have supported its position. In the absence of such records, the Department is entitled to use the best accounting and audit methods available to it to reconcile the monies owed the state.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order sustaining the audit findings, and require Petitioner to remit the unpaid sales and use taxes, penalty, and interest as stated in the Department’s audit findings. DONE AND ENTERED this 9th day of November, 2011, in Tallahassee, Leon County, Florida. S J. D. PARRISH 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 9th day of November, 2011. COPIES FURNISHED: Marshall Stranburg, General Counsel Department of Revenue The Carlton Building, Room 204 501 South Calhoun Street Tallahassee, Florida 32314-6668 Ashraf Barakat SNS Lakeland, Inc 811 East Palmetto Street Lakeland, Florida 33801 Carrol Y. Cherry, Esquire Office of the Attorney General The Capitol, PL-01 Revenue Litigation Bureau Tallahassee, Florida 32399 Brent Hanson B and M Business Services, Inc. 6735 Conroy Road, Suite 210 Orlando, Florida 32835 Lisa Vickers, Executive Director Department of Revenue The Carlton Building, Room 104 501 South Calhoun Street Post Office Box 6668 Tallahassee, Florida 32314-6668
Findings Of Fact Gardinier Big River is a New Jersey corporation authorized to transact business within the State of Florida. Gardinier is a Delaware corporation authorized to transact business within the State of Florida. Gardinier is a wholly owned subsidiary of Gardinier Big River. Petitioners were subject to the corporate income tax imposed by Chapter 220, Florida Statutes, for the tax years 1974 through 1981. For the tax years 1974 and 1975, Gardinier and Gardinier Big River each filed separate annual corporate income tax returns. Beginning with the tax year 1976, and continuing through the tax year 1981, Petitioners filed consolidated annual corporate income tax returns as authorized by Section 220.131, Florida Statutes. Annual corporate income tax returns were filed by Petitioners as follows: (a) Gardinier timely filed on April 1, 1975, an annual corporate income tax return for its tax year ending June 30, 1974; (b) Gardinier Big River timely filed on January 1, 1976, an annual corporate income tax return for its tax year ending March 31, 1975; (c) Gardinier timely filed on April 1, 1976, an annual corporate income tax return for its tax year ending June 30, 1975; (d) Petitioners timely filed on January 3, 1977, a consolidated annual corporate income tax return for their tax year ending March 31, 1976; (e) Petitioners timely filed on March 30, 1977, a consolidated annual corporate income tax return for their tax year ending June 30, 1976; (f) Petitioners timely filed on March 21, 1978, a consolidated annual corporate income tax return for their tax year ending June 30, 1977; (g) Petitioners timely filed on March 27, 1979, a consolidated annual corporate income tax return for their tax year ending June 30, 1978; (h) Petitioners timely filed on April 1, 1980, a consolidated annual corporate income tax return for their tax year ending June 30, 1979; (i) Petitioners timely filed on April 1, 1981, a consolidated annual corporate income tax return for their tax year ending June 30, 1980; (j) Petitioners timely filed on December 8, 1981, a consolidated annual corporate income tax return for their tax year ending June 30, 1981. For each of the years 1974 through 1981, Petitioners, either individually or jointly, timely paid the corporate income tax which Petitioners determined to be due pursuant to Chapter 220, Florida Statutes (1983), by the return date specified in Section 220.222, Florida Statutes (1983), without regard for extensions. Specifically, corporate income taxes were paid by the Petitioners on the following dates for the following tax years: (a) tax year ending June 30, 1975--taxes paid by October 1, 1975; (b) tax year ending March 31, 1975--taxes paid by July 1, 1976; and (c) tax year ending June 30, 1980-- taxes paid by October 1, 1980. On several occasions, the latest of which was April 5, 1983, Petitioners and the Department agreed, for the tax years 1974 through 1981, to extensions of the assessment and refund limitation provisions found at Sections 214.09 and 214.16, Florida Statutes. On or about February 21, 1983, the Department commenced a corporate income tax audit of the Petitioners for the tax years 1974 through 1981. On or about April 23, 1983, as a result of the foregoing audit, the Department issued to Gardinier a Notice of Intent to Make Audit Changes indicating an overpayment of corporate income taxes for the tax year ending June 30, 1975, and an underpayment of corporate income taxes for the tax year ending June 30, 1974. On that same date, the Department issued to Petitioners jointly two separate Notices of Intent to Make Audit Changes indicating overpayments of corporate income taxes for the tax years ending March 31, 1976, and June 30, 1980, and underpayments of corporate income taxes for the tax years ending March 31, 1975, and June 30, 1979. In addition, these Notices indicated that penalty and interest assessments would be made against Gardinier for the alleged late payment of estimated taxes for the tax year ending June 30, 1975, and against Petitioners jointly for the alleged late payment of estimated taxes for the tax year ending March 31, 1976. A Notice of Intent to Make Audit Changes is a form used by the Department to advise taxpayers of overpayments or underpayments of taxes determined by the Department in an audit of the taxpayers' books and records. The notice forms are also referred to by the reference "DR 802." If the taxpayer agrees with the results set forth in the notice, it is instructed by the Department to sign the notice at the space indicated thereon and return it to the Department. By letters dated July 11, 1983, the Department advised Petitioners of its receipt of an unagreed Notice of Intent to Make Audit Changes from the Department's audit staff. The letters further stated that the audit resulted in a refund of taxes to Petitioners' account and that signed agreements to the refunds were required to be reviewed by the Department by September 12, 1983. By letter dated July 21, 1983, Petitioners notified the Department of their disagreement with certain aspects of the Notices of Intent to Make Audit Changes. Specifically, Petitioners disagreed with the assessment of penalty and interest for the alleged late payment of corporate income taxes for the tax years 1975 and 1976. In addition, Petitioners indicated their disagreement with the Department's failure to provide for the payment of interest on Petitioners' overpayments of corporate income taxes for the tax years 1975, 1976, and 1980. By letter dated August 4, 1983, the Department advised Petitioners of its agreement that penalty and interest assessments should not have been made for the tax years 1975 and 1976. In addition, the Department advised Petitioners that interest would not be paid upon the overpayments of corporate income taxes for the tax years 1975, 1976, and 1980. On August 16, 1983, Petitioners submitted to the Department signed Notices of Intent to Make Audit Changes indicating Petitioners' agreement and entitlement to a refund of the net overpayments of corporate income taxes for the tax years 1974 through 1981. By letter dated August 16, 1983, Petitioners protested the Department's failure to pay interest upon the overpayments of corporate income taxes and made a formal claim for payment pursuant to Section 214.14, Florida Statutes (1983), for said interest. On November 10, 1983, the Department issued to Petitioners a Notice of Decision denying Petitioners' claim for interest upon the overpayments of corporate income taxes. Petitioners did not request reconsideration of this Notice of Decision. The overpayment of corporate income taxes by Gardinier for the tax year ending June 30, 1975, was $204,277.61. The overpayment of corporate income taxes by Petitioners for the tax year ending March 31, 1976, was $109,658.00. The overpayment of corporate income taxes by Petitioners for the tax year ending June 30, 1980, was $222,021.00. Total overpayments of corporate income taxes by Petitioners, either individually or jointly, for the tax years 1975, 1976, and 1980 were $535,956.61. Total underpayments of corporate income taxes by Petitioners for the tax years 1974, 1975, and 1979, including penalties and interest assessed thereon, were $153,595.92. The Department refunded to Petitioners, by checks dated October 13 and November 16, 1983, $382,360.69 which amount represented the difference between total overpayments and underpayments by Petitioners of corporate income taxes for the tax years 1974 through 1981. The provisions of Chapters 214 and 220, Florida Statutes (1983), are applicable to the circumstances of this action. The parties hereby agree that the Joint Exhibits are true and accurate copies of the original documents. It is the intent of the parties hereto that this stipulation resolve all material facts necessary for a determination of the rights and liabilities of the parties in this action.
Findings Of Fact In 1972 Petitioner received $743,982 of income from state and municipal bonds. On its federal income tax return the Petitioner allocated $471,229 of this amount to the policyholders' share as required by law and $272,753 to the company's share (Phase I). The Phase II figures were $359,669 and $384,313 respectively. Respondent has added back the entire $743,982 for purposes of computing Petitioner's Florida taxable income. Petitioner added back the $272,753 (Phase I) and $384,313 (Phase II). For 1972 Petitioner accrued $350,000 of Florida taxes on its federal income tax return. In computing its deductions on its federal income tax return 36.6612 percent of this amount was deducted in the Phase I computation and 51.6564 percent in the Phase II computation. Respondent has added back all of the Florida tax accrued in computing the Florida income tax owed by Petitioner. Petitioner's position is that only the company's percentages were deductible and only these amounts should be added back. The amount of additional Florida income tax assessment proposed for 1972 by the Respondent over that paid by Petitioner is $21,234. In 1973 Petitioner received $552,408 of income from state and municipal bonds. On its federal income tax return Petitioner allocated $335,662 of this amount to policyholders' share as required by law and $216,786 to the company's share (Phase I). The Phase II figures were $248,789 and $303,619 respectively. Respondent has added back the entire $552,408 for purposes of computing Petitioner's taxable income. Petitioner added back the $216,786 (Phase I) and $303,619 (Phase II). For 1973 Petitioner accrued $475,000 of Florida taxes on its federal income tax return. In computing its deductions on its federal income tax return 39.2438 percent of this amount was deductible in Phase I and 54.9628 percent in Phase II. Respondent has added back all of the Florida tax accrued. Petitioner's position is that only the company's percentages were deductible and only these amounts should be added back. The amount of additional Florida income tax assessment proposed for 1973 by Respondent was $20,184. It was further stipulated that the sole issues here involved are: The computation of the amount of tax exempt interest which is excludable from taxable income under section 103(a) Internal Revenue Code for purposes of the Florida corporate income tax; and The computation of the amount of Florida income tax accrued which is deductible for purposes of federal income tax and added back for purposes of computing the Florida income tax.
The Issue The issue for determination is whether interest is due upon additional tax paid by Petitioners from the date of amended returns or whether interest should accrue from the date of Petitioners’ original returns.
Findings Of Fact First Florida timely filed consolidated federal corporate income tax returns and consolidated Florida Chapter 220 tax returns for the tax years ending 12/31/86, 12/31/87, 12/31/88, 12/31/89, and 12/31/90. Barnett timely filed consolidated federal corporate income tax returns and consolidated Florida Chapter 220 tax returns for 12/31/88, 12/31/89, 12/31/90, and 12/31/91. Barnett acquired First Florida on December 7, 1992. At the time of the merger, First Florida was being audited by the Internal Revenue Service (IRS) for the tax years 1986, 1987, 1988, 1989, and 1990. Barnett subsequently agreed with the IRS to federal tax adjustments for each of the respective tax years with regard to First Florida and itself. Alternatively, it may be stated that Petitioners under- reported “federal taxable income,” on line 30 of their original federal corporate income tax returns (“original federal returns”), and correspondingly, on line 1 of their original Florida corporate income tax returns (“original Florida returns”), for the tax years at issue. As a result of an audit by the Internal Revenue Service, various adjustments were made to “federal taxable income.” These adjustments became final and were agreed upon by the Petitioners and the Internal Revenue Service. The effect of these adjustments was to increase “federal taxable income” beyond that which had been previously reported by Petitioners on line 30 of their original federal returns, and, therefore, to increase Petitioners’ federal and Florida tax liability. After the federal audit adjustments became final in 1995, Petitioners paid to the federal government the additional amount of tax determined by the Internal Revenue Service to be due. Also in 1995, Petitioners timely reported the federal audit adjustments to the State of Florida, within sixty days after the federal audit changes became final, pursuant to Section 220.23, Florida Statutes. This was done by filing Form F-1120X notifications, in order to “amend” their original Florida return filings, for each of the pertinent tax years (hereinafter, “amendatory notifications”). The amendatory notifications filed by Petitioners increased and revised the amounts which were previously reported on line 1 of the original Florida returns, for each of the pertinent tax years. The purpose of filing amendatory notifications was to remit additional taxes determined to be due to the State of Florida, as a result of the federal audit adjustments. However, Petitioners did not remit any interest to the State of Florida at the time of filing the amendatory notifications. After receipt of the amendatory notifications, Respondent issued Notices of Tax Action to Petitioner Barnett Banks, Inc., as successor in interest to First Florida Banks, Inc., informing Petitioner that additional interest was due in the following amounts: $86,234.80 for 1986, $70,901.18 for 1987, $55,883.73 for 1988, $27,620.11 for 1989, and $15,115.37 for 1990. Respondent also issued Notices of Tax Action to Petitioner Barnett Banks, Inc., and/or its subsidiaries informing Petitioner and/or its subsidiaries that additional interest was due in the following amounts: $74,658.99 for 1988, $21,463.16 for 1989, $34,930.18 for 1990, and $6,850.31 for 1991. Respondent did not assess any penalties against Petitioners, because both the original returns and the subsequent amendatory notifications were timely filed and because no finding of willful or negligent under-reporting was made by Respondent. Petitioners paid under protest the amounts of interest claimed to be due by Respondent and timely sought a refund, which was denied. This action for formal administrative review challenges Respondent’s assessment of liability for interest and related refund denial. No dispute exists concerning the mathematical computation of the assessed amount. Prior to 1993, Respondent’s policy, with regard to payment of interest under circumstances similar to those presented in these proceedings, did not require the payment of interest if the amendatory notifications were timely filed and additional tax timely paid. This finding is established by the testimony of Joan Eckert, formerly employed by Respondent during the years 1987-93 as a technical assistant and as a tax law specialist. In addition to routinely advising that interest was not payable where additional taxes were timely paid, Eckert participated in the drafting of a proposed rule that was subsequently published in 1993, further documenting and describing Respondent’s policy at that time in such situations. Published in Volume 19, No. 24, June 18, 1993, of the Florida Administrative Weekly, the proposed rule provided in pertinent part as follows: If the amended return concedes the accuracy of a federal change or correction, any deficiency in Florida corporate income, franchise, or emergency excise tax is deemed assessed on the date of filing the amended return. Therefore, no penalty or interest will be assessed if the amended return is filed not later than 60 days after the date notification is required by s. 220.23(2)(a)2., F.S. However, the proposed rule was never formerly adopted in the form and content as originally published. By May 17, 1994, Respondent’s policy solidified in another direction and Florida Administrative Code Rule 12C-1.023(6), was enacted, which provides: If the amended return concedes the accuracy of a federal change or correction, any deficiency in Florida corporate income, franchise, or emergency excise tax is deemed assessed on the date of filing the amended return. No penalty will be assessed if the amended return is filed not later than 60 days after the date notification is required by Section 220.23(2)(a)3., F.S. and subsection (5) of this rule. However, interest will be due on any deficiency from the original due date of the return through the date of payment. In this proceeding, Respondent’s representatives have deliberately elected to rely upon Respondent’s statutory authority for the instant assessment, as opposed to a duly enacted rule on the basis that the formal rule was not in effect until 1994, and the assessment was for interest on taxes that predated the rule.
Recommendation Based on the foregoing, it is hereby RECOMMENDED that a Final Order be entered directing refunds to Petitioners of interest payments made to Respondent in these consolidated cases. DONE AND ENTERED this 10th day of June, 1998, in Tallahassee, Leon County, Florida. DON W. 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 Filed with the Clerk of the Division of Administrative Hearings this 10th day of June, 1998. COPIES FURNISHED: Jeffrey M. Dikman, Esquire Department of Legal Affairs The Capitol, Tax Section Tallahassee, Florida 32399-1050 David M. Wells, Esquire Eric Bilik, Esquire McGuire, Woods, and Criser 50 North Laura Street, Suite 3300 Jacksonville, Florida 32202 Linda Lettera, General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 Larry Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100
The Issue The issues are whether Respondent violated Chapter 212, Florida Statutes, by failing to pay sales tax and local government infrastructure surtax, and if so, what penalty should be imposed.
Recommendation Based upon the findings of fact and conclusions of law, it is RECOMMENDED: That Respondent enter a Final Order upholding its assessment against Petitioner in full, including all taxes, penalties, and interest statutorily due until date of payment for both the sales and use tax and the local government infrastructure. DONE AND ENTERED this 29th day of September, 1998, in Tallahassee, Leon County, Florida. SUZANNE F. HOOD 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 29th day of September, 1998.
The Issue Whether Respondent properly assessed a tourist development tax, penalty, and interest against Petitioner.
Findings Of Fact The Tax Collector is empowered to impose a tourist development tax (“TDT”) on the privilege of renting, leasing, or letting “for consideration of any living or accommodations in any hotel, apartment hotel, motel, [or] resort motel.” § 125.0104(3)(a)1., Fla. Stat. The Tax Collector is the entity operating pursuant to Palm Beach County Ordinance, Chapter 17, Article III, Section 17-111 through 116, and is authorized to impose TDT at a six percent rate on taxpayers. See also § 125.0104(4)(a), Fla. Stat. As part of its duties, Respondent audits taxpayers and attempts to recover TDT owed. At all times material to this case, Homing Inn was a 103-room hotel located in Boynton Beach, Florida. As a taxpayer and operator of a hotel that rents rooms, Homing Inn was subject to audit of its revenues by Respondent. Respondent initiated an audit against Petitioner for the period of July 1, 2016, through June 30, 2019 (“audit period”), to determine if Petitioner had properly remitted TDT, as reflected on Petitioner’s TDT returns. In July 2019, Suzanne Englhardt (“Englhardt” or “Auditor”), revenue auditor, was assigned to conduct Homing Inn’s audit. Englhardt started the audit of Homing Inn by conducting pre-audit research, which included her looking up Petitioner on Sunbiz, the property appraisers’ website, and preparing an audit notice. On or about July 3, 2019, Englhardt sent Homing Inn a certified notice informing Petitioner that their account had been selected for a Tourist Development Audit (“audit”) of Petitioner’s books and records. In the notice, Respondent requested Homing Inn “make available all records, receipts, invoices, and related documentation” to review for the audit. Petitioner complied with Respondent’s request for records and provided bank statements for November 2017 through June 2019; federal income tax returns for years 2016, 2017, and 2018; and room revenue reports, which were typed pages of purported revenue reported by Petitioner on its TDT returns. After Homing Inn provided the records, Englhardt reviewed the submitted documentation and found that Homing Inn failed to maintain records of sales at the hotel. As a result, Englhardt used the best information supplied and available to conduct the audit, Petitioner’s federal tax returns and bank statements. She did not utilize Petitioner’s revenue reports during the audit because no source documents were provided to support or back up any of the listed numbers typed on the revenue reports. 2018 Englhardt started the audit by reviewing Petitioner’s 2018 gross income reported on its supplied federal income tax return in the amount of $1,122,076.00. Englhardt compared the supplied 2018 bank deposits on the bank statements that amounted to $1,122,048.73 to the federal income tax return. Englhardt also reviewed Petitioner’s 2018 TDT returns, which amounted to $653,202.13. Homing Inn did not provide Respondent any documentation to account for the difference in reported income. Next, Englhardt decided that since the gross revenues on the federal income tax return and the bank deposit statements balanced, she presumed TDT and sales tax were included. After she backed out the six percent TDT and seven percent sales tax, the Auditor ultimately calculated and arrived at the adjusted income of $992,963.48 that she utilized to calculate the additional TDT. Englhardt calculated the additional TDT by subtracting the income reported by Petitioner on the TDT returns, $653,202.13, from the gross adjusted amount she established, $992,963.48, and determined that the total unreported income was $339,761.85. She then charged a six percent rate of TDT, which lead to the additional TDT of $20,385.68 for 2018. Englhardt calculated the remaining years of the audit with the same methodology. 2016 When auditing 2016, Englhardt reviewed Homing Inn’s 2016 federal income tax return provided and determined that Petitioner’s gross income was $1,042,188.00. However, when the Auditor looked at the income reported on the 2016 TDT returns, the amount differed, and the reported income on the TDT returns was $724,929.42. Englhardt backed out the TDT and sales tax from the income reported on the federal tax return and ultimately calculated and arrived at the adjusted income of $922,290.27. Next, Englhardt subtracted the reported income on the TDT return from the adjusted income and determined the total 2016 unreported income was $197,360.85. To determine the additional TDT taxes Homing Inn owed, Englhardt charged the six percent rate by $197,360.85 for an additional $11,841.53 owed. 2017 Englhardt reviewed Homing Inn’s 2017 federal income tax return and determined the gross income reported was $1,032,331.00. Englhardt also reviewed Petitioner’s 2017 TDT returns, which amounted to $658,435.37. Englhardt backed out TDT and sales tax from the income reported on the federal tax return and ultimately calculated and arrived at the adjusted income of $913,567.26. Next, Englhardt subtracted the reported income on the TDT return from the adjusted income to determine the total 2017 unreported income was $255,131.89. To determine the additional TDT taxes Homing Inn owed, Englhardt charged the unreported income of $255,131.89 by the six percent rate for an additional $15,307.91 owed. 2019 Englhardt reviewed Homing Inn’s bank statements from January 2019 to June 2019 to determine the 2019 gross income. The total deposits reported were $614,992.28. Englhardt also reviewed Petitioner’s 2019 TDT returns, which amounted to $350,925.07. Englhardt backed out TDT and sales tax from the income reported from the deposits on the bank statements, and ultimately calculated and arrived at the adjusted income of $544,240.96. Next, Englhardt subtracted the reported income on the TDT return from the adjusted income and determined the total 2019 unreported income was $193,315.89. To determine the additional TDT taxes Homing Inn owed for 2019, Englhardt charged the unreported income of $193,315.89 by the six percent rate for an additional $11,598.95 owed. After completing the audit, Englhardt added the unreported income for each year and the TDT amounts owed. She found that Homing Inn had a total unreported income of $985,569.97 and owed an additional TDT of $59,134.20 from the audit period. On or about September 27, 2019, the Tax Collector issued a Notice of Intent to Make Audit Changes to Petitioner (“Notice of Intent”) and advised Petitioner of the additional TDT in the amount of $59,134.20 owed. The Notice of Intent also notified Homing Inn that Respondent also sought a penalty and interest and provided, in pertinent part: The $59,134.20 total tax due was carried over from the Summary of Tax Due scheduled to the Calculation of Tax Penalty and Interest spreadsheet. The floating rate of interest on tax due is based on the applicable rates established by the Florida Department of Revenue, which is currently an annual rate of 9%. As also prescribed by the State due to findings previously identified in a prior audit, penalty is assessed at 100% of tax due per Florida Statute 212.07(3)(b). As of 09/30/2019, Mata Chorwadi Inc., d/b/a: Homing Inn, currently owes a total of $125,460.97 in tax, penalty and interest. On or about December 16, 2019, Respondent issued a Notice of Proposed Assessment (“NOPA”). Petitioner requested and was granted an extension until April 14, 2020, to respond to the NOPA. On or about April 11, 2020, Petitioner timely protested Respondent’s audit findings. Petitioner’s protest letter claimed that the unreported revenue was made up of Homing Inn’s snack sales sold for $1.00 each; coins collected from a laundromat; proceeds from additional room cleaning services; and proceeds from charges for lost room keys. Petitioner informed Respondent in the protest letter that all the unreported revenue was deposited in the hotel’s bank account. Petitioner requested that Respondent fully abate the penalties and interest for reasonable cause and not willful neglect pursuant to section 213.21(3)(a), Florida Statutes. To support its position in the protest, Petitioner produced purchase receipts from Sam’s Club, which included purchases for snacks and cleaning supplies, and produced a laundry room collection log allegedly showing the coins collected from the laundromat at Homing Inn. Homing Inn did not produce any documents to show any revenue allegedly earned for additional cleaning services or lost room keys. On or about May 4, 2020, Respondent issued the Notice of Decision denying Homing Inn’s protest letter and sustaining the assessment. The Tax Collector considered Homing Inn’s argument and documents, but determined that Petitioner did not provide any proof that the snacks, coins listed on the collection log, or other expenses accounted for the unreported revenue since the Tax Collector was not provided any documents from Homing Inn relating to alleged revenue for additional cleaning services or lost room keys, sales receipts, or bank deposit slips that correspond to verify the amounts listed on the collection log. On June 3, 2020, Petitioner timely filed a Motion for Reconsideration (“Motion”). Homing Inn disputed the assessment and penalty and asked that it be reevaluated. Homing Inn again asserted in its Motion that the unreported revenue consisted of snack sales, revenue from the laundromat, revenue from additional cleaning services, and revenue from lost room keys. However, Petitioner did not provide any additional documents to support its position. On June 9, 2020, Respondent issued a Notice of Reconsideration-Final Assessment (“Notice of Reconsideration”) denying the Motion and sustaining the assessment since no new information was provided by Petitioner. The Tax Collector also notified Petitioner in the Notice of Reconsideration how to appeal the Tax Collector’s decision if Homing Inn was not in agreement with the tax assessment and stated, in pertinent part: If the taxpayer is not in agreement with the assessment, pursuant to Florida Statute 72.011, Mata Chorwadi Inc. may contest the assessment by “filing an action in circuit court; or, alternatively, the taxpayer may file a petition under the applicable provisions of chapter 120.” As a settlement offer, Petitioner remitted a $28,000.00 check to Respondent dated June 8, 2020, that had “paid in full” on the memo line. Respondent returned the check to Homing Inn since the amount was not for the assessment due. Afterwards, Petitioner remitted a second check in the amount of $28,000.00. Respondent applied the $28,000.00 to the total outstanding balance of Homing Inn’s tax. On July 17, 2020, Petitioner timely filed a Petition for Chapter 120 Hearing contesting tax, penalty, and interest from the Tax Collector’s assessment in the Notice of Reconsideration and requested a hearing. Audit History In 2007, Homing Inn had been audited by the Tax Collector. The first audit resulted in Petitioner owing additional TDT based on unreported revenue. The current audit is the second audit of Homing Inn for TDT. Hearing At hearing, Englhardt testified that at the beginning of the audit, Petitioner informed her that all records before November 2017 were destroyed in a flood and could not be provided. Englhardt testified that snack sales, laundry coins, key card replacement monies, and room cleaning proceeds were not revenues subject to TDT. However, she explained during the hearing, that Homing Inn failed to provide any documents to demonstrate sales or revenue for the items they were asserting, so she was not able to make any of the revenue deductions Petitioner requested. At hearing, Englhardt addressed in detail each item Petitioner was contesting and all of the documentation Homing Inn provided the Tax Collector requesting a reduction of the assessment amount determined from the audit. Englhardt started with Homing Inn’s purchase receipts for the snacks supplied. On the point of snacks, Englhardt testified that she asked Homing Inn for sales receipts during the conference they had so that she could adjust for the snacks. However, Homing Inn never provided any sales receipts. Englhardt explained that the receipts supplied by Homing Inn demonstrated expenses, not revenue, so she could not use the documents supplied for the audit. Englhardt also explained that she did not use the coin laundry log because Homing Inn did not provide any deposit slips to back up those alleged deposits. She needed additional source documentation to delineate that particular revenue stream, and Petitioner failed to provide documentation to substantiate any of the items on the log. Englhardt explained further that she was not able to use the alleged extra cleaning charge proceeds for the audit because there was nothing to quantify it. There was no audit trail, folios, sales receipts, or anything to demonstrate any such payments. Englhardt also explained that the alleged charge of $5 per lost key was considered. She testified that she saw the purchase receipt for the room keys but could not use it because nothing showed revenue for lost keys. There were no customer bills, folios, or credit card receipts. Englhardt testified she had to conduct the audit following section 212.12(5)(b), Florida Statutes, because if records were unavailable, she was to make an assessment from an estimate based on the best information available, which for Homing Inn were the federal income tax returns, TDT reports, and bank statements that she used. Englhardt also testified that she considered Homing Inn’s request to reduce the assessment amount, but denied it, because there was no documentation to make any reductions or adjustments. At hearing, Englhardt also addressed the interest and penalty the Tax Collector was imposing. She explained that the penalty is 100 percent, according to the statute, if there is a previous audit finding as there had been with Homing Inn. She also testified that interest is “never compromised.” Englhardt also testified that she applied the $28,000.00 remitted by Homing Inn to the tax, which reduced their TDT of $59,134.20 to $31,134.20, but the penalty amount was still the $59,134.20, and $7.66 per day interest. At hearing, Homing Inn produced purchase receipts for snacks and cleaning supplies, Exhibit 3; a laundromat collection log, Exhibit 4; purchase receipts for key cards, Exhibit 5; a list showing charges for room damages and a list of additional cleaning services, Exhibit 7; and a copy of a check that represented repayment for a loan, Exhibit 6. Homing Inn used its corporate representative, Dipika Shah (“Shah”), to testify at hearing. Shah explained that her husband owns Homing Inn, and she works at the desk occasionally, but mainly runs errands and purchases items needed for the hotel. Shah testified that all income collected from the snacks, key cards, and other revenues are deposited in one bank, PNC Bank. Shah explained that the computer system checks guests in and out. There are four or five people that work at the desk. She testified there are weekly customers, and the weekly rental comes with one cleaning. If a customer wants an additional cleaning, it is an additional $20.00 per room cleaning. Shah also testified that there is an additional charge for any room damage, but often times the damage amount is not paid. Shah described the Homing Inn’s coin-operated laundromat on the hotel premises contained four washers and four dryers. She explained that her husband pulls the coins out of the machines, logs the amount collected, rolls up the coins, and makes laundromat deposits in the Homing Inn general bank account. Shah admitted that she has no personal knowledge of what her husband has collected. Shah verified the purchase of 5,800 room key cards at hearing. However, she admitted there was no receipts for sales of lost keys in the amount of $5.00 each to customers. Shah also explained that Homing Inn has snacks for purchase. Shah testified that Homing Inn does not keep records of snacks sales and most of the snack purchases are cash. Shah testified that their accountant prepares the TDT returns monthly. Shah testified that she is unsure if the business maintains a general ledger and has never seen a profit and loss statement for the business. Findings of Ultimate Fact In this case, the Tax Collector established that the audit giving rise to this proceeding was properly conducted. After reviewing the records Homing Inn submitted for the audit, the Auditor determined that the amounts on the bank statements and federal tax returns matched, but the amounts listed in Homing Inn’s TDT returns were underreported. Homing Inn failed to provide the Auditor with any records to account for the difference between the federal income tax and TDT returns. The Auditor correctly performed Homing Inn’s audit using an acceptable methodology of assessing unreported revenue based on the federal income tax returns, bank statements, and income reflected in the TDT returns. During the audit, Petitioner failed to supply requested records to the Tax Collector that accurately reflected sales at the hotel or source documentation that explains any of the contested unreported revenue. Therefore, the Auditor could not use Petitioner’s supplied documentation as part of the calculations for the audit to reduce the assessment amount. Additionally, the record is void of any evidence to support reducing the assessment amount for any snack sales, laundromat revenue, cleaning revenue, key sale monies, and room damage proceeds. Shah’s limited involvement and knowledge in the daily operations of Homing Inn did not allow her to present relevant firsthand testimony or competent evidence to support Petitioner’s assertions. Therefore, the Auditor properly determined Petitioner’s TDT liability utilizing the method in section 212.12(5)(b), which allows the Auditor to rely on an estimation for the assessment when the taxpayer fails to provide records for the audit, and the Tax Collector’s assessment of $59,134.20 tax is proper.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent, Palm Beach County Tax Collector, enter a final order directing Mata Chorwadi, Inc., d/b/a Homing Inn, to pay the Tax Collector’s assessment for $31,134.20 of TDT; $59,134.20 of penalty; and $12,444.95 of interest, accruing at $7.66 per day. DONE AND ENTERED this 21st day of May, 2021, in Tallahassee, Leon County, Florida. S JUNE C. MCKINNEY Administrative Law Judge 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 21st day of May, 2021. COPIES FURNISHED: Orfelia Mayor, General Counsel Palm Beach County Tax Collector 301 North Olive Avenue Post Office Box 3715 West Palm Beach, Florida 33402-3715 Rex D. Ware, Esquire Moffa, Sutton & Donnini, P.A. 3500 Financial Plaza, Suite 330 Tallahassee, Florida 32312 Joseph C. Moffa, Esquire Moffa, Sutton & Donnini, P.A. Trade Center South, Suite 930 100 West Cypress Creek Road Fort Lauderdale, Florida 33309 Manshi Shah, Esquire 6525 Jessy Court Lake Worth, Florida 33467 Jonathan W. Taylor, Esquire Moffa, Sutton & Donnini, P.A. Trade Center South, Suite 930 100 West Cypress Creek Road Fort Lauderdale, Florida 33309 Hampton C. Peterson, General Counsel Palm Beach County Tax Collector 301 North Olive Avenue Post Office Box 3715 West Palm Beach, Florida 33402-3715
The Issue The issue is whether Petitioner owes money to Respondent due to an overpayment of compensation.
Findings Of Fact At all relevant times, Respondent has employed Petitioner. By Stipulation, the parties agree that Respondent overpaid Petitioner the sum of $6282.41 by check dated February 14, 2005. The dispute is whether Respondent is entitled to repayment of an additional $2332 in withheld federal income taxes associated with the agreed-upon overpayment. On the date of the overpayment in February 2005, Respondent credited Petitioner with the gross sum of $9328. The net payment to Petitioner was $6282.41. The difference between the gross and the net was $2332 in withheld federal income taxes and $713.59 in employee-paid FICA and Medicaid. Respondent is not seeking repayment of the employee-paid FICA and Medicaid. Respondent discovered the error on December 31, 2005, so it was unable to process the paperwork necessary correct the situation with the tax withholding in the same tax year of 2005. By failing to discover the error in time to process the paperwork in the same tax year, Respondent was unable to effectively reverse the withholding transaction with the Internal Revenue Service. Thus, when Petitioner filed his 2005 federal income tax return, his gross income included this overpayment, and the amount of tax already paid included the $2332 that was erroneously withheld in Respondent's overpayment in February 2005. It is thus clear that Respondent overpaid Petitioner $6282.41 in net pay plus $2332 in income taxes that it withheld from Petitioner and submitted, to Petitioner's credit, to the Internal Revenue Service. The total overpayment is therefore $8614.41.
Recommendation It is RECOMMENDED that the Department of Juvenile Justice enter a final order determining that, due to an overpayment in 2005, Petitioner shall repay $8614.41, upon such terms, if any, as the department shall determine. DONE AND ENTERED this 24th day of October, 2006, in Tallahassee, Leon County, Florida. S 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 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 24th day of October, 2006. COPIES FURNISHED: Anthony J. Schembri, Secretary Department of Juvenile Justice Knight Building 2737 Centerview Drive Tallahassee, Florida 32399-3100 Jennifer Parker, General Counsel Department of Juvenile Justice Knight Building 2737 Centerview Drive Tallahassee, Florida 32399-1300 Michael B. Golen Assistant General Counsel Department of Juvenile Justice 2737 Centerview Drive Tallahassee, Florida 32399 Theodore E. Morakis 11904 Southwest 9th Manor Davie, Florida 33325
