The Issue The issues in this case are: (1) whether portions of Florida Administrative Code Rules 12D-9.020 and 12D-9.025 constitute invalid exercises of delegated legislative authority; (2) whether sections of Modules Four and Six of the 2010 Value Adjustment Board Training are unpromulgated rules; and (3) whether Property Tax Oversight Bulletin 11-01 is an unpromulgated rule.
Findings Of Fact The Parties Petitioner Turner is the Property Appraiser for Hillsborough County, Florida. Petitioners Crapo, Higgs, and Smith are the Property Appraisers for Alachua, Monroe, and Okaloosa Counties, respectively. Respondent, the Department of Revenue ("DOR"), is an agency of the State of Florida that has general supervision over the property tax process, which consists primarily of "aiding and assisting county officers in the assessing and collection functions." § 195.002(1), Fla. Stat. DOR is also required to prescribe "reasonable rules and regulations for the assessing and collecting of taxes . . . [to] be followed by the property appraisers, tax collectors . . . and value adjustment boards." § 195.027(1). Petitioner-Intervenor Roger A. Suggs is the Clay County Property Appraiser. Petitioner-Intervenor Gary R. Nikolitis is the Palm Beach County Property Appraiser. Petitioner-Intervenor PAAF is a statewide nonprofit professional association consisting of 35 property appraisers in various counties throughout Florida. Petitioner-Intervenor FAPA is a statewide nonprofit professional organization of Florida property appraisers. Respondent-Intervenor FUTMA is a statewide nonprofit association consisting of 46 of the largest property taxpayers in Florida. Ms. Cucchi, the second Respondent-Intervenor, is a property owner and taxpayer in Hillsborough County. Background of Florida's Property Tax System Article VII, Section Four of the Florida Constitution mandates that all property be assessed at "just value," and further requires that the Legislature prescribe, by general law, regulations that "shall secure a just valuation of all property for ad valorem taxation." Pursuant to chapters 192 through 196 of the Florida Statutes, locally elected property appraisers in each of Florida's 67 counties develop and report property assessment rolls. The assessment rolls——which property appraisers prepare each year and submit to DOR by July 1——contain information such as the names and addresses of the property owners, as well as the just, assessed, and taxable values of the properties within each appraiser's respective county. DOR is responsible for reviewing and ultimately approving or disapproving the assessment rolls. § 193.1142, Fla. Stat. Once DOR approves the assessment rolls, the property appraiser mails a "Notice of Proposed Property Taxes and Non-ad Valorem Assessments" (known as a "TRIM" notice) to each property owner. § 200.069, Fla. Stat. The notices advise each owner of his property's assessment for that year, the millage (tax) rate set by the taxing authorities, and the dates of the budget hearing for those authorities. After receiving a TRIM notice, a property owner may request an informal conference with the property appraiser's office to discuss the assessment of his or her property. Alternatively, or in addition to the informal conference, a property owner may challenge the assessment by filing a petition with the county value adjustment board or by brining a legal action in circuit court. § 194.011(3), Fla. Stat.; § 194.171, Fla. Stat. Value Adjustment Boards Pursuant to section 194.015(1), Florida Statutes, each of Florida's 67 value adjustment boards is composed of two members of the county commission, one member of the school board, and two citizen members.1 Of particular import to the instant case, section 194.015(1) requires value adjustment boards to retain private counsel to provide advice regarding legal issues that may arise during value adjustment hearings.2 In counties with populations greater than 75,000, the value adjustment board must appoint special magistrates3 to conduct hearings and issue recommended decisions. § 194.035(1), Fla. Stat. Hearings in counties with 75,000 citizens or fewer may be conducted by either magistrates or the value adjustment board itself. Id. DOR has no involvement in the appointment or removal of board attorneys, magistrates, or the members of value adjustment boards. Should a property owner choose to contest an assessment through the value adjustment board process, the board's clerk schedules an administrative hearing and sends a notice of hearing to the property owner and the property appraiser. § 194.032(2), Fla. Stat. At the hearing, the determinative issue is whether the assessment of the particular property at issue exceeds just value. In the event that a property owner is dissatisfied with the outcome of a value adjustment hearing, an appeal may be taken to the circuit court, where a de novo hearing will be conducted. § 194.036(2) & (3), Fla. Stat. Under certain conditions, the property appraiser may likewise appeal an adverse value adjustment board decision to the circuit court. § 194.036(1).4 2008 Legislative Reforms Prior to 2008, DOR was not charged with the responsibility of training value adjustment boards or their magistrates. However, pursuant to chapter 2008-197, Laws of Florida, the Legislature enacted a series of changes to the VAB process, including a new requirement that DOR "provide and conduct training for special magistrates at least once each state fiscal year." See § 194.035(3), Fla. Stat. Immediately after enactment of the law, DOR initiated rulemaking and developed 2008 interim training for value adjustment boards and special magistrates. Persons required to take the training include all special magistrates, as well as value adjustment board members or value adjustment board attorneys in counties that do not use special magistrates. § 194.035(1) & (3), Fla. Stat. In addition to the new training requirement, chapter 2008-197 mandated that DOR develop a Uniform Policies and Procedures Manual for use by value adjustment boards and magistrates. The Uniform Policies and Procedures Manual ("The Manual"), which is posted on DOR's website and is separate and distinct from DOR's training materials for value adjustment boards, consists of relevant statutes, administrative rules, provisions of the Florida Constitution, as well as forms. The Manual is also accompanied by two sets of separate documents, which are likewise available on DOR's web page: (1) "Other Legal Resources Including Statutory Criteria; and (2) "Reference Materials Including Guidelines," consisting of guidelines and links to other reference materials, including DOR's value adjustment board training materials, bulletins, and advisements. The introduction to the "Reference Materials Including Guidelines" reads in relevant part as follows: The set of documents titled "Reference Materials Including Guidelines," contains the following items: Taxpayer brochure General description and internet links to the Department's training for value adjustment boards and special magistrates; Recommended worksheets for lawful decisions; The Florida Real Property Appraisal Guidelines; * * * 7. Internet links to Florida Attorney General Opinions, Government in the Sunshine Manual, PTO Bulletins and Advertisements, and other reference materials. These reference materials are for consideration, where appropriate, by value adjustment boards and special magistrates in conjunction with the Uniform Policies and Procedures Manual and with the Other Legal Resources Including Statutory Criteria. The items listed above do not have the force or effect of law as do provisions of the constitution, statutes, and duly adopted administrative rules. Revisions to Value Adjustment Board Procedural Rules Pursuant to section 194.011, Florida Statutes, the Legislature charged DOR with the responsibility to prescribe, by rule, uniform procedures——consistent with the procedures enumerated in section 194.034, Florida Statutes——for hearings before value adjustment boards, as well as procedures for the exchange of evidence between taxpayers and property appraisers prior to value adjustment hearings. On February 24, 2010, following a 12-month period of public meetings, workshops, and hearings, the Governor and Cabinet approved the adoption of chapter 12D-9, Florida Administrative Code, which is titled, "Requirements for Value Adjustment Board in Administrative Reviews; Uniform Rules of Procedure for Hearings Before Value Adjustment Boards." As discussed in greater detail in the Conclusions of Law of this Order, Petitioner Turner contends that portions of Florida Administrative Code Rule 12D-9.020, which delineate the procedures for the exchange of evidence between property appraisers and taxpayers, contravene section 194.011. Petitioner Turner further alleges that section 194.011 is contravened by parts of Florida Administrative Code Rule 12D- 9.025, which governs the procedures for conducting a value adjustment hearing and the presentation of evidence. 2010 Value Adjustment Training Materials In 2010, following the adoption of Rule Chapter 12D-9, DOR substantially revised the value adjustment board training materials. After the solicitation and receipt of public comments, the 2010 VAB Training was made available in late June 2010 on DOR's website. The 2010 VAB Training is posted on DOR's website in such a manner that an interested person must first navigate past a bold-font description which explains that the training is not a rule: This training is provided to comply with section 194.035, Florida Statutes. It is intended to highlight areas of procedure for hearings, consideration of evidence, development of conclusions and production of written decisions. This training is not a rule. It sets forth general information of which boards, board attorneys, special magistrates and petitioners / taxpayers should be aware in order to comply with Florida law. (Emphasis in original). The 2010 VAB Training consists of eleven sections, or "modules," portions of two of which Petitioners allege constitute unadopted rules: Module 4, titled "Procedures During the Hearing"; and Module 6, titled "Administrative Reviews of Real Property Just Valuations." While words and phrases such as "must," "should," and "should not" appear occasionally within the materials, such verbiage is unavoidable——and indeed necessary——in carrying out DOR's statutory charge of disseminating its understanding of the law to magistrates and value adjustment board members. Although DOR is required to create and disseminate training materials pursuant to section 194.035, the evidence demonstrates that the legal concepts contained within the 2010 VAB Training are not binding. Specifically, there is no provision of law that authorizes DOR to base enforcement or other action on the 2010 VAB Training, nor is there a statutory provision that provides a penalty in situations where a value adjustment board or special magistrate deviates from a legal principle enumerated in the materials. Further, the evidence demonstrates DOR has no authority to pursue any action against a value adjustment board or magistrate that chooses not to adhere to the legal concepts contained within the training. PTO Bulletin 11-01 On January 21, 2011, DOR issued Property Tax Oversight Bulletin 11-01, titled "Value Adjustment Board Petitions and the Eighth Criterion," to the value adjustment board attorneys for all 67 counties. DOR also disseminated courtesy copies of the bulletin by e-mail to over 800 interested parties. The bulletin, the full text of which is reproduced in the Conclusions of Law section of this Summary Final Order, consisted of a non-binding advisement regarding the use of the eighth just valuation criterion (codified in section 193.011(8), Florida Statutes5) in administrative reviews. The bulletin advised, in relevant part, that the eighth just value criterion: "must be properly considered in administrative reviews"; "is not limited to a sales comparison valuation approach"; and "must be properly considered in the income capitalization and cost less depreciation approaches" to valuation. The bulletin further advised that when "justified by sufficiently relevant and credible evidence, the Board or special magistrate should make an eighth criterion adjustment in any of the three valuation approaches." Although certain interested parties (i.e., a special magistrate in Nassau County, the director of valuation for the Hillsborough County Property Appraiser's Office, and legal counsel for the Broward County value adjustment board) perceived the bulletin to be mandatory, the evidence demonstrates that value adjustment boards and magistrates were not required to abide by the bulletin's contents. As with the training materials, DOR possesses no statutory authority to base enforcement action on the bulletin, nor could any form of penalty be lawfully imposed against a magistrate or value adjustment board that deviates from the legal advice contained within the document. Further, there is no evidence that DOR has taken (or intends to take) any agency action in an attempt to mandate compliance with the bulletin.
The Issue The issue is whether petitioner, a sales tax dealer, must pay taxes, interest and penalties for collecting sales taxes on certain nontaxable transactions and then failing to remit those funds to respondent.
Findings Of Fact Based upon all of the evidence, including the pleadings, filings, and stipulation of counsel, the following findings of fact are determined: On an undisclosed date, respondent, Department of Revenue (DOR), conducted an audit of petitioner, Blackshears II Aluminum, Inc. (Blackshears), a registered sales tax dealer located in Crystal River, Florida. The audit covered the period from June 1, 1985, through March 31, 1989. As a result of that audit, on December 27, 1989, DOR issued a notice of intent to make sales and use tax audit charges. After petitioner availed itself of various informal procedures, a notice of reconsideration (notice) was issued on January 7, 1992, imposing a final assessment of $623,131.69. This action prompted Blackshears to initiate this proceeding. Although the notice addressed five issues, only issue three is relevant to this proceeding. That issue is broadly defined in the notice as "whether taxes collected on nontaxable transactions are state funds." According to the notice, the issue should be answered in the affirmative because (e)very dealer in the State of Florida is an agent for the state in that it is their responsibility to collect and remit sales tax. Blackshears collected the funds in the name of the State of Florida and has presented no refund assignments from the purchasers to permit them to apply for refunds, therefore, the State of Florida is due the funds. If the Department were to permit the use of its name to unjustly enrich Blackshears, a continuing deception would occur. The parties agree that petitioner collected sales taxes on various transactions (real property contracts) during the audit period. Whether such transactions were subject to the sales tax is in dispute, but for purposes of resolving the issue presented here, the parties have agreed that the undersigned can assume that the transactions were nontaxable. It is further agreed that even though petitioner collected the taxes from its customers, it failed to remit them to the state, and it has likewise failed to furnish proof that it refunded those moneys to its customers. Accordingly, DOR's assessment seeks to collect those taxes together with interest and substantial penalties. The parties have also agreed that the portion of the total tax assessment attributable to real property contracts is $277,406.53. As of March 29, 1993, the assessment totaled $636,570.37, after the accrual of interest and penalties. However, petitioner has paid to the state $16,180.19, for which it should receive credit. During the audit period, Rule 12A-1.014(6), Florida Administrative Code, was in effect and provided as follows: (6) Whenever a dealer credits a customer with tax on returned merchandise or for tax erroneously collected, he must refund such tax to his customer before his claim to the State for credit or refund will be approved. Under the terms of this rule, which interpreted the provisions of Chapter 212, Florida Statutes, any moneys erroneously collected by a dealer as taxes were to be remitted to the state. However, if the moneys were refunded to the customer, the dealer could then receive a refund of the moneys previously paid or a credit towards other taxes due.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that respondent enter a final order granting its motion for partial summary adjudication and sustaining the assessment on issue three of its notice of reconsideration, plus interest and penalties, less those taxes already paid and identified in paragraph 2 of the parties' joint stipulation. DONE and ENTERED this 3rd day of May, 1993, 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 3rd day of May, 1993. COPIES FURNISHED: Larry Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, FL 32399-0100 Linda Lettera, Esquire 204 Carlton Building Tallahassee, FL 32399-0100 C. Lynne Chapman, Esquire Department of Legal Affairs The Capitol-Tax Section Tallahassee, FL 32399-1050 Harold F. X. Purnell, Esquire 315 South Calhoun Street Suite 500 Tallahassee, FL 32301
The Issue The issue to be determined is whether Respondent, Ronald M. Shultz, violated section 473.323(1)(g) and (h), Florida Statutes (2014), and Florida Administrative Code Rule 61H1-23.002(1)(a) and (b), as alleged in the Administrative Complaint, and if so, what penalty should be imposed.
Findings Of Fact Based upon the documentary evidence and the witness testimony presented, and the entire record of this proceeding, the following findings of fact are found: The Florida Board of Accountancy is the state agency charged with the licensing and regulation of the practice of certified public accounting pursuant to section 20.165 and chapters 455 and 473, Florida Statutes. Respondent, Ronald M. Shultz, is a certified public accountant (CPA) licensed in the state of Florida. Respondent has been licensed since 1997 and holds license number AC 003065. His license is currently active, and he has no history of discipline by the Board. Respondent’s address of record is 1031 Northwest 6th Street, Suite F-2, Gainesville, Florida 32601. At all times material to the allegations in the Administrative Complaint, Respondent was the owner of a CPA firm in the state of Florida, i.e., Ronald M. Shultz, CPA, PA. The firm’s license was first issued in May of 2006, and is also in active status. Respondent is the president and sole shareholder for his firm. While he employed others who worked in the firm, Respondent is ultimately responsible for all aspects of business conducted by the firm. Ronald M. Shultz, CPA, PA, is in the business of providing tax services to clients, including the preparation of federal income tax returns. The normal procedure employed in Respondent’s office required that, once a client’s tax return had been prepared, the client was called to come in and receive a copy of the return for review. The client also was given a copy of an IRS E-File signature authorization form (Form 8879), although the evidence was unclear as to when the form was given to the client. In any event, the client was usually told to review the return, and then a meeting would be scheduled to go over the return, especially in those cases where the return was complex or had a lot of “moving parts.” Once the client had an opportunity to review the return and discuss it with Respondent, the client would provide a signed copy of Form 8879 and Respondent’s firm’s personnel would electronically file the return. No return is supposed to be filed without a signed Form 8879. During the period giving rise to these proceedings, Respondent had a part-time employee named Jeff Gruver, and a former IRS-enrolled agent named Jeff Conklin. Mr. Gruver usually answered the phones, took messages, provided copies of returns to clients, and, once things were finalized with a return, electronically filed returns as directed. Mr. Gruver could answer simple tax-related questions such as, “the return indicates you are getting a refund of this amount,” or the return shows that you need to pay this much in taxes.” Any more complicated questions were fielded by Mr. Conklin, or if necessary, Mr. Shultz. Mr. Conklin is someone with whom Mr. Shultz had worked previously, and actually prepared tax returns for the firm. Mr. Shultz would generally review his work, and would go over the return with the client. During this time period, Respondent relied on Mr. Conklin to a greater extent than was his normal practice. Mr. Shultz was in the midst of a protracted divorce, and helping with the care of his father, who was in declining health. William and Jo Lee Beaty were clients of Respondent, and had been clients for several years. Respondent’s office prepared their federal income taxes since at least 2009. The Beatys’ tax return generally has a lot of “moving parts.” They typically request an extension of time for filing, and bring their paperwork to Respondent’s office early in October, in order to have the return prepared by the October 15 deadline. Normally, the Beatys will owe additional taxes. They generally reviewed the return with Mr. Shultz, signed the Form 8879, and provided a check to send to the IRS when the return was filed. In 2014, Mr. Beaty took the documents necessary for the preparation of the Beatys’ 2013 tax return to Respondent’s office. Mr. Beaty acknowledged that he often delivered the documentation very late in the process–-often just days before the October 15 deadline--but thought that this year, he had delivered it as much as six weeks before. The complaint the Beatys filed with the Department indicates that the documents were delivered on or about October 1. While Respondent had no direct knowledge of when the documents were delivered to the office, he testified that his office records indicated that it was no earlier than October 1.1/ After consideration of all of the evidence, the documents were delivered most likely sometime in very late September or on October 1, 2014. Respondent directed Jeff Conklin to prepare the Beatys’ tax return. Mr. Conklin had prepared their tax return the year before. In the days immediately preceding the October deadline, Jo Lee Beaty started calling Respondent’s office to see when she and her husband would be able to review the return and determine how much money they owed in taxes. She could not reach anyone from the firm, despite repeated phone calls. Someone from Respondent’s office (presumably either Mr. Conklin or Mr. Gruver) electronically submitted the Beatys’ 2013 federal income tax return to the IRS on October 15, 2014. However, Respondent did not review the return before it was filed and the Beatys did not see it, and were not informed as to its contents. On or about November 6, 2014, Mr. Conklin notified Mr. Shultz that he was quitting his job, effective immediately. He did not notify Respondent that there were any problems with the Beatys’ tax return. Respondent was knowledgeable about the Beatys’ prior returns, and knew that the 2013 return would include a significant amount of information, including multiple Schedule Cs, Schedule K-1s, significant information regarding businesses owned by the Beatys, and property rentals. Respondent was also aware that the Beatys typically wanted to review their tax return with him prior to its filing. Not only were the Beatys unable to contact Respondent in order to schedule a meeting prior to the tax-filing deadline, but they were unable to contact him to determine whether the return was actually filed or to determine how much money was owed. Mrs. Beaty called the office the day after the deadline and no one answered. The office was actually closed that day. Mrs. Beaty made other calls to the office, although she was unable to say specifically how many times. However, when she was still unable to speak to anyone on November 13, 2014, nearly a month after the filing deadline, she made a request to the IRS to get a copy of the couple’s tax return. The IRS sent the Beatys a transcript of their filed return that same day, although it is unclear when they received it. Mrs. Beaty continued to attempt to reach Respondent, with no success. She even spoke to Respondent’s wife on the phone, and requested that she have Respondent return Mrs. Beaty’s phone calls. Respondent first learned that the Beatys were trying to reach him when his wife called him with the message from Mrs. Beaty. Respondent finally spoke to Mrs. Beaty on November 18, 2014. During this phone call, Respondent advised Mrs. Beaty that he would have their materials ready the following week. The Beatys did not receive the return or their documents as promised. On or about December 9, 2014, Mrs. Beaty sent Respondent an email requesting their return and backup materials. The email states: Ron, We were not given an opportunity to review the return with you prior to you submitting it to the IRS electronically. I called for several days prior to the final October 15th deadline to file trying to talk with you an/or [sic] Jeff. No one was available. My calls were not returned. October 14th and 15th I called more than once trying to find out what we were going to owe so that we could be prepared to include a check with the return we would need to sign and send to the IRS. Still no return phone call. Late in the day on October 15, I was assured by Jeff Gruver that the return would be filed and we would be able to take care of everything October 16th. It is nearly two months now, we have not reviewed our return with you, for accuracy, as has been the procedure in years past. We have not received the return for our signatures and instructions for submission. It is not for a lack of trying. After the filing deadline, on October 16th we began calling the office on numerous occasions to talk with you or Jeff and get our return. We left messages both with Jeff Gruver and on the various voice mailboxes to no avail. I have driven to the office only to find the man who was renting space from you there. He knew nothing of your schedule or when I might find you. He did indicate that Jeff C. now [sic] longer worked there. After calling Debra at the numbers on your sign twice you finally called. That was on or about November 18th or 19th. You told me you needed to review the return and would get it to us that week. I told you it needed to be before Friday November 21, 2014 as I was having surgery that day. You told me it would be before my surgery. We didn’t hear from you as promised. I called again the beginning of the next week (Thanksgiving week) and left a message which you returned early Tuesday afternoon I believe. You said you would get it to me later probably that day (this was a day that you had an afternoon doctor appointment). To date I have not heard from you again and had it not been for my call to the IRS I would have no proof that the return was filed nor any idea of what we owe. We are sorry to have to terminate our relationship under these circumstances. We had previously been very satisfied with your service and as you know we had referred people to you. Ron, your negligence and non-feasance comes as a great surprise. It is nonetheless inexcusable. We are contemplating reporting your inaction to the Florida DBPR. Please respond to this email and tell me what time before 5:00 p.m. Tuesday, December 9, 2014, so I can pick up all of the documents we gave you to prepare our 2013 tax return, and copies of all of our records. With disappointment, Jo Beaty Respondent did not respond to this email in a timely fashion and states that he did not do so because he was not checking his email regularly due to the issues with his father’s health. As a consequence, his first response to the email was dated December 22, 2014, in which he stated in part: First speaking about your federal tax return. Jeff Conklin told me your return was complete. He then told me basically he had to quit his current position with me for personal reason [sic] and simply walked out. When I went to find your file, none of your paperwork had been copied for what we call work papers . . . . Since Jeff left your file is [sic] disarray, I had to organize your paper work so that I could do an accurate review of your return. Yesterday I completed putting all of your paper work together and is now ready for my review. My plan is to complete the review tonight. And then, we can arrange a time to meet to go over your return. Despite this communication over two months after the filing of the Beatys’ tax return, they still did not receive their tax return or supporting documentation. The Beatys hand-delivered a complaint to the Department on December 22, 2014. Respondent was sent a notification letter regarding the complaint on December 29, 2014. He placed the documentation in the Beatys’ mailbox that same day. With the tax return and supporting documentation was an invoice for his services at a 50-percent discounted rate of $350. The Beatys were going to owe money, including some interest and penalties for being late, even had they paid their taxes on October 15, because payment was actually due on April 15. The IRS charges a failure to pay proper estimate penalty of $200. When taxes are paid after the due date, the IRS also charges a penalty of .5 percent of the unpaid amount due per month, up to 25 percent of the amount due. Any portion of a month is treated as a full month. On November 24, 2014, the IRS sent the Beatys a letter notifying them that they owed their taxes, including the $200 failure to pay proper estimated tax penalty; $879.08 in penalties, and $406 in interest. Some, but not all, of the penalties and interest are due to Respondent’s failure to timely provide a copy of their tax return. The Department expended $260 in costs, not including time by the legal section, in the investigation of this case.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Florida Board of Accountancy enter a final order finding that Respondent, Ronald M. Shultz, violated section 473.323(1)(g) and (h), and rule 61H1-23.002(1)(a) and (b). It is further recommended that Respondent’s license be reprimanded; that he be placed on probation for a period of one year, subject to conditions determined by the Board; and that he pay an administrative fine of $500 and investigative costs of $260.00 DONE AND ENTERED this 8th day of April, 2016, in Tallahassee, Leon County, Florida. S LISA SHEARER NELSON 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 8th day of April, 2016.
Findings Of Fact At the times pertinent to this proceeding, James W. Johnson and James E. Cotter were the officers and owners of Underground Supply Company. In October 1986, Mr. Johnson and Mr. Cotter sold their interest in Underground Supply Company to Ferguson Enterprises. Mr. Johnson and Mr. Cotter remained liable for any contingent tax liabilities following the sale. Underground Supply Company was required by Section 199.042(1), Florida Statutes, to file its corporate intangible tax return for 1986 on or before June 30, 1986. Mr. Johnson, who was the president of Underground Supply Company from 1972 through 1987, knew of the intangible tax filing requirement and had the ultimate responsibility to file tax returns on behalf of the corporation. During an audit conducted by Respondent in 1989, it was determined that Underground Supply Company's corporate intangible tax return for 1986 had not been filed. Following the audit, Underground Supply Company was assessed taxes and interest on the taxes. In addition, a delinquency penalty was assessed pursuant to Section 199.282(3)(a), Florida Statutes. The taxes and interest were promptly paid by Mr. Johnson on behalf of Underground Supply Company. A failure to file penalty was initially assessed against Petitioner pursuant to Section 199.282(3)(b), Florida Statutes, but this penalty was removed by Respondent after it determined that the failure to file penalty was not applicable. The delinquency penalty in the amount of $1,078.86 was properly calculated and was properly assessed. From 1973 until Mr. Johnson and Mr. Cotter sold their business, one accountant, Mr. Melvin Fancher, performed the accounting services required by Underground Supply Company. From 1973 to August 1985, Mr. Fancher was an independent contractor who performed his services through the various accounting firms with which he was associated. In August 1985, Underground Supply Company hired Mr. Fancher as its in-house accountant. Mr. Fancher was familiar with the books and records of Underground Supply Company and had prepared intangible tax returns on behalf of the company in the past. Underground Supply Company had, prior to the 1986 intangible tax return, promptly filed all of its tax returns and had promptly paid all taxes due of it. The failure to file the 1986 intangible tax return was caused by Mr. Fancher's oversight and by Mr. Johnson's and Mr. Cotter's reliance on Mr. Fancher. The failure to file was an honest error. There was no intention on the part of Mr. Fancher, Mr. Johnson, Mr. Cotter or anyone else on behalf of Underground Supply Company to avoid the payment of the intangible tax for 1986. There was no evidence of extenuating circumstances which caused Mr. Fancher's failure to file the 1986 intangible tax return or for Underground Supply Company's failure to detect such failure. Mr. Johnson did not know why the tax return was not filed and he did not know why the failure to file was not detected prior to the 1989 audit. Although Underground Supply Company referenced Mr. Fancher's change of status from independent contractor to in- house accountant in August 1985 in an attempt to explain the failure to file the intangible tax return due June 1986, there was no evidence of a connection between the two events. In October 1986 Mr. Johnson and Mr. Cotter sold Underground Supply Company to Ferguson Enterprises. During the examination of the books and records of Underground Supply in connection with the sale, no one discovered the omission to file the 1986 intangible tax return. Respondent denied Petitioner's request to waive the delinquency penalty, but it did review and revise the assessments, which resulted in a reduction of Petitioner's liability. Respondent's letter of December 14, 1989, which notified Petitioner of its final decision provided, in pertinent part, as follows: Section 213.21, F.S. grants the Department authority to settle or compromise penalty if there exists a reasonable cause as to the delinquent payment of tax due. The burden of showing the existence of reasonable cause and the absence of willful neglect is on the taxpayer. See Florida Administrative Code, Rule 12- 3.007. It is the position of the Department that the mistake of not filing a return due to a change in your CPAs is not an extenuating or unusual circumstance and does not meet the criteria of reasonable cause as provided by the rule cited above. The statute provided for an amnesty program in 1987 which gave relief to taxpayers who had not filed their intangible tax returns in prior periods. Accordingly, the revised assessment is sustained.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that Respondent enter a final order which denies Petitioner's request for a waiver of the delinquency penalty assessed for the failure to timely file the 1986 intangible tax return. DONE AND ENTERED this 21st day of May, 1990, in Tallahassee, Leon County, Florida. CLAUDE B. ARRINGTON Hearing Officer The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 904/488-9675 Filed with the Clerk of the Division of Administrative Hearings this 21st day of May, 1990. APPENDIX TO THE RECOMMENDED ORDER IN CASE 90-0755 The post-hearing submittal filed by Petitioner contained no proposed findings of fact. The proposed findings of fact submitted by Respondent are adopted in material part by the Recommended Order. Copies furnished: James E. Cotter Qualified Representative 4460 Northwest 19th Terrace Fort Lauderdale, Florida Lealand L. McCharren Assistant Attorney General Department of Legal Affairs The Capitol - Tax Section Tallahassee, Florida 32399-1050 Mr. James W. Johnson Underground Supply Company 6969 Northwest 87th Avenue Parkland, Florida 33067 William D. Moore General Counsel Department of Revenue 203 Carlton Building Tallahassee, Florida 32399-0100 J. Thomas Herndon Executive Director Department of Revenue 203 Carlton Building Tallahassee, Florida 32399-0100
The Issue The issue in this case is whether the Respondent's certificates of registration should be revoked for an alleged failure to file tax returns and to remit taxes to the Petitioner.
Findings Of Fact The Petitioner is the state agency responsible for collection of sales and use taxes in Florida, pursuant to chapter 212, Florida Statutes (2011).1/ The Respondent is a Florida company doing business at 7810 U.S. Highway 19, Port Richey, Florida, and is a "dealer" as defined at section 212.06(2). The Respondent holds two certificates of registration issued by the Petitioner (Certificate No. 61-8012297146-3 and Certificate No. 61-8012297147-0) and is statutorily required to file tax returns and remit taxes to the Petitioner. As set forth herein, the Respondent has failed to file tax returns or has filed returns that were not accompanied by the appropriate tax payments. During the time the Respondent has held the certificates, the Petitioner has filed 15 separate warrants against the Respondent related to unpaid taxes, fees, penalties, and interest. The Petitioner is authorized to cancel a dealer's certificate of registration for failure of a dealer to comply with state tax laws. Prior to such cancellation, the Petitioner is required by statute to convene a conference with a dealer. On June 24, 2011, the Petitioner issued a Notice of Conference on Revocation of Certificate of Registration (Notice). The conference was scheduled for July 27, 2011. The Respondent received the Notice and attended the conference. Certificate of Registration No. 61-8012297146-3 The Respondent failed to file tax returns related to Certificate No. 61-8012297146-3 for the period of August through December 2001. The Petitioner assessed estimated taxes of $587.50, fees of $110.95, and a penalty of $285.00. As of the date of the Notice, the accrued interest due was $633.79. Additionally, the Respondent failed to remit taxes of $5,623.63 related to Certificate No. 61-8012297146-3 that were due according to his filed tax returns. Based thereon, the Respondent assessed fees of $994.58 and a penalty of $2,478.26. As of the date of the Notice, the accrued interest due was $4,702.27. As of the date of the Notice, the Respondent's total unpaid obligation on Certificate No. 61-8012297146-3 was $15,415.98, including taxes of $6,211.13, fees of $1,105.53, penalties of $2,763.26, and accrued interest of $5,336.06. Certificate of Registration No. 61-8012297147-0 The Respondent failed to file tax returns related to Certificate No. 61-8012297147-0 for the months of June 2000, September 2000, May 2001, and August 2001. The Petitioner assessed estimated taxes of $619.00 and fees of $202.00. As of the date of the Notice, the accrued interest due was $782.56. Additionally, the Respondent failed to remit taxes related to Certificate No. 61-8012297147-0 of $4,332.48 that were due according to his filed tax returns. Based thereon, the Respondent assessed fees of $771.71 and a penalty of $1,576.87. As of the date of the Notice, the accrued interest due was $4,725.27. As of the date of the Notice, the Respondent's total unpaid obligation related to Certificate No. 61-8012297147-0 was $13,009.89, including taxes of $4,951.48, fees of $973.71, penalties of $1,576.87, and accrued interest of $5,507.83. The Audit A separate audit of the Respondent's business records for the period of February 2004 through January 2007 resulted in an additional assessment totaling $9,314.07, including taxes of $5,048.23, fees of $661.76, and a penalty of $252.42. As of the date of the Notice, the accrued interest due was $3,351.66. At the July 27, 2011, conference, the parties negotiated a compliance agreement under which the Respondent would have retained the certificates of registration. The agreement required the Respondent to make an initial deposit of $2,000.00 by August 15, 2011, and then to make periodic payments towards satisfying the unpaid obligation. The Respondent failed to pay the $2,000.00 deposit, and the Petitioner subsequently filed the Complaint at issue in this proceeding. As of the date that the Complaint was filed, the Respondent owed a total of $37,797.66 to the State of Florida, including taxes of $15,004.34, estimated taxes of $1,206.50, fees of $2,741.00, penalties of $4,592.55, and accrued interest of $14,253.27.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue issue a final order revoking the certificates of registration held by the Respondent. DONE AND ENTERED this 1st day of May, 2012, in Tallahassee, Leon County, Florida. S WILLIAM F. QUATTLEBAUM 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 1st day of May, 2012.
Findings Of Fact Having listened to the testimony and considered the evidence presented in this cause, it is found as follows: Petitioner is a domestic corporation. Petitioner provided medicare services to patients in the 1969-70 fiscal year. An on-site audit by the medicare auditing team was concluded in December of 1971, and petitioner received $56,131.00 of medicare reimbursements in January of 1972, for the services provided in the 1969-70 fiscal year. The petitioner did not file an amended federal income tax return for the fiscal year ending September 30, 1979. The adjusted federal income reported on petitioner's federal income tax return for the fiscal year ending September 30, 1972, included the $56,131.00 of medicare reimbursements received by petitioner in January of 1972. On petitioner's Florida income tax return for its fiscal year ending September 30, 1972, petitioner did not include the $56,131.00 figure in its adjusted federal income. On March 31, 1975, the respondent notified petitioner of a proposed deficiency in the amount of $2,100.99 arising from the petitioner's omission of the medicare reimbursements from its adjusted federal income as shown on its Florida corporate income tax return for the fiscal year ending September 30, 1972. Further correspondence ensued between the petitioner and the Corporate Income Tax Bureau of the respondent and the petitioner filed the present petition requesting a hearing on the issue. The respondent requested the Division of Administrative Hearings to conduct the hearing.
Recommendation Based upon the above findings of fact and conclusions of law, it is my recommendation that there is no legal basis for affording the petitioner any relief from the proposed deficiency and that said deficiency in the amount of $2,100.00 be sustained. Respectfully submitted and entered this 17th day of September, 1975, in Tallahassee, Florida. DIANE D. TREMOR, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: E. Wilson Crump, II, Esquire Assistant Attorney General Department of Legal Affairs Tax Division, Northwood Mall Tallahassee, Florida 32303 Homer E. Ward, N.H.A. Administrator/President University Park Convalescent Center 1818 E. Fletcher Avenue Tampa, Florida 33612
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 The issue for determination is whether Respondent abused its discretion in failing to settle or compromise the outstanding tax assessment against Petitioner, based on Petitioner's inability to pay, pursuant to Section 213.21, Florida Statutes.
Findings Of Fact Petitioner is a Florida corporation, engaged in the business of painting and repairing damaged automobiles and other vehicles. Petitioner's principal place of business and home office is located at 100 Northwest 9th Terrace, Hallandale, Florida. Respondent is the agency charged with administering the tax laws of the State of Florida, pursuant to, among other provisions, Section 213.05, Florida Statutes. Respondent is authorized to conduct audits of taxpayers. It is further authorized to request information to ascertain the tax liability of taxpayers, if any, pursuant to Section 213.34, Florida Statutes. It is undisputed that Petitioner is a taxpayer. From September 2, 1997 through March 12, 1999, Respondent conducted an audit of Petitioner to determine whether Petitioner had been properly collecting and remitting sales and use tax and whether any additional sales and use tax amounts were due. On September 2, 1997, Respondent forwarded its form DR-840, Notice of Intent to Audit Books and Records, to Petitioner. The period of time being audited was from August 1, 1992 through July 31, 1997. For part of the audit period, Petitioner's records were inadequate. Petitioner's record keeping was poor. For the remainder of the audit period, Petitioner's records were voluminous. A higher amount of gross sales were reported on Petitioner's federal tax return than on Florida's tax return. Petitioner could not document 95 percent of its exempt sales reported to the State of Florida. Petitioner reported a ratio of 35 percent for exempt sales on its filed Florida sales and use tax returns. Because of the two factors of inadequate and voluminous records, sampling was required by Respondent. On January 12, 1998, Petitioner and Respondent entered into a written audit sampling agreement. On June 5, 1998, Respondent provided its Notice of Intent to Make Audit Changes to Petitioner. On July 21, 1998, Respondent issued its Notice of Intent to Make Audit Changes (revised), which was the first revision, to Petitioner. On January 12, 1999, Respondent issued its Notice of Intent to Make Audit Changes (revised), which was the second revision, to Petitioner. On March 12, 1999, Respondent issued its Notice of Proposed Assessment to Petitioner. This notice indicated that Petitioner owed additional sales and use tax in the amount of $166,306.93, penalty in the amount of $81,443.38, and interest through March 12, 1999, in the amount of $77,468.37. Consequently, the notice further indicated that the total amount of the assessment against Petitioner was $325,218.68. A compromise of the assessed tax, interest, or penalty can be performed at Respondent's field level after an audit is completed and the case is still in Respondent's field office. However, the field office's authority is limited in that affected taxpayer must agree to the amount of the tax assessed. In the present case, Petitioner did not agree to the amount of the tax assessed and, therefore, Respondent's field office could not compromise the assessed tax, interest, or penalty against Petitioner. On September 17, 1999, Respondent issued its Notice of Decision. Respondent notified Petitioner that the assessment would not be changed. Petitioner requested a reconsideration as to whether Respondent should compromise the tax, interest, and penalty, based on grounds of doubt of collectibility. By Notice of Reconsideration issued January 7, 2000, Respondent notified Petitioner of Petitioner's failure to establish an inability to pay the assessment in full. Petitioner timely challenged Respondent's determination of Petitioner's inability to pay the assessment and requested a hearing. It is undisputed that Respondent has the discretion to compromise an assessment. Respondent may compromise tax or interest based on doubt of collectibility of the tax or interest. The taxpayer bears the burden of providing documentation to support the taxpayer's position that it cannot pay the tax or interest. Respondent examines whether a compromise is in the best interests of the State of Florida in determining whether to compromise an assessment. Respondent considers a compromise to be in the best interests of the State and may compromise the assessment under the following circumstances: (1) on the basis of the taxpayer providing documentation of the taxpayer's inability to pay the assessment in full but having the cash flow to make payments in installments; or (2) when a taxpayer's business or the taxpayer-corporation is insolvent and the taxpayer's or corporation's assets were used to satisfy legitimate liabilities and not used to enrich any person closely related to the taxpayer or corporation; or (3) when a taxpayer is gravely ill and the cash flow of the taxpayer's business is poor. When it considers compromising any tax, interest, or penalty, Respondent reviews several factors, including the audit file, financial information, and any other factors or circumstances which may affect collectibility. The financial information considered includes positive and negative sales trends, cost of goods sold, profitability, and net worth. Additionally, any changes in assets, in particular fixed assets, and liabilities are taken into account. Other factors or circumstances considered include the fair market value of a taxpayer's assets, the future prospects of a taxpayer's business, and the solvency or insolvency of a taxpayer's business. Respondent does not consider the liquidation value of a taxpayer's business. Petitioner was, and is, not familiar with the State of Florida's sales and use tax law, as the law relates to Petitioner's business. Petitioner's president has no prior experience in maintaining the books and records of a company or in completing financial statements of a company. Petitioner's president never attended a seminar, presented or sponsored by Respondent, on Florida's sales and use tax, or read any of Respondent's pamphlets on sales and use tax. Petitioner has a New York accountant, who never provided Petitioner's president or treasurer with any instructions regarding Florida's sales and use tax. During the audit period, Petitioner never requested written advice from Respondent regarding the application of Florida's sales and use tax to its business. For the last three years, Petitioner's sales have been a little less than $1,000,000. For the years 1996 and 1997, Petitioner's federal tax returns showed cash balances at the beginning of each year even though the cash balance for 1997, $51,431, was less than for 1996, $93,497. Petitioner's federal tax returns for 1996 through 1998 indicate a loss for each year during that time period. However, a comparison between Petitioner's sales income in its federal tax returns and its state tax returns shows that Petitioner's sales income was grossly underreported. Respondent's analysis worksheet, referred to as Doubt as to Collectibility Analysis Worksheet, indicated a negative dollar figure as to cash available by Petitioner to pay Respondent. Inconsistencies existed between the information reported in Petitioner's tax returns and information provided by Petitioner during the protest period. Petitioner's sales figure as of August 31, 1999, an eight-month sales period for 1999, stated in its Petition for Reconsideration, dated October 6, 1999, was substantially less than the sales figure reported on Petitioner's sales and use tax returns filed during the same time period. Additionally, Petitioner overstated the cost of goods sold in one of its federal tax returns, which resulted in an overstated net loss. The fair market value of Petitioner's assets indicated in its Petition for Reconsideration, $30,000, was more than 100 percent of the value reflected on Petitioner's county tangible personal property return, $13,000. Also, further areas of inconsistencies existed between the information provided by Petitioner and the information reported on Petitioner's tax returns. Petitioner indicated that its former treasurer received a deferred compensation payment of $60,000, but neither Petitioner's tax returns nor financial statements reflected a payment for the expense. Petitioner showed a loss on its 1996 federal tax return, which, according to Petitioner, was a result of moving expenses and expenses in the construction business; however, no expense unique to moving or the construction business was reflected on Petitioner's tax return or financial statement. Petitioner's financial data, including federal tax returns and state wage reports, showed trends and deficiencies. A trend of an increase in gross sales for Petitioner was shown for the years 1997 through 1999, in Petitioner's federal tax returns for the same years and in Petitioner's Petition for Reconsideration, regarding its gross sales as of August 31, 1999. Additionally, the same federal tax returns showed a trend of an increase in net income for the same years in that deductions in relation to sales were less than the previous years. For the years 1994 through 1997, as reported on Petitioner's federal tax returns, Petitioner's depreciable assets increased each year. Respondent's analysis worksheet also showed a negative dollar figure as to Petitioner's adjusted net worth. As of August 31, 1999, the first eight months of 1999, Petitioner's total assets were $40,814 and its total loans, payable to banks, were $90,000. Taking into consideration the totality of the circumstances, Petitioner failed to provide Respondent with adequate and complete documentation and information in order for Respondent to make a determination of collectibility.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order sustaining the assessment of tax, penalty, and interest against Copo Paint and Body Shop, Inc., and sustaining the refusal to compromise the tax, penalty, or interest. DONE AND ENTERED this 4th day of June, 2001, in Tallahassee, Leon County, Florida. ERROL H. POWELL 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 4th day of June, 2001. COPIES FURNISHED: Joseph C. Moffa, Esquire Moffa & Moffa, P.A. One Financial Plaza, Suite 2202 100 Southeast Third Avenue Fort Lauderdale, Florida 33394 Nicholas Bykowsky, Esquire Office of the Attorney General The Capitol, Tax Section Tallahassee, Florida 32399-1050 Linda Lettera, General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 James Zingale, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100
The Issue Whether or not the Petitioner is required to pay taxes under the authority of Chapter 212, Florida Statutes, which are set forth in the assessment by the Respondent, State of Florida, Department of Revenue, dated May 18, 1977.
Findings Of Fact The Respondent, State of Florida, Department of Revenue, performed an audit of the business which is the Taj Apartments, for purposes of determining if sales and use taxes were owed by that operation. At the time of the initial contact by the Respondent, the Taj Apartments were owned by individuals other than the Petitioner, Robert Hartley. However, in the process of the audit, it was determined that Hartley would be responsible for paying some of the assessments which were being alleged against the operation located on the premises which constitutes the Taj Apartments. Further liability for the audit period was established when Robert Hartley foreclosed a mortgage which he held from the owners of record who were the owners when the tax audit was first commenced. By his action of foreclosure, he became responsible for any tax assessments under Chapter 212, Florida Statutes, which were mete and proper during the audit period, which dated from September 1, 1973, through May 31, 1975. Those dates include the time that Robert Hartley d/b/a Taj Apartments was still in control of the premises. The assessment of the property from September 1, 1973, through May 31, 1975, was made upon the basis of a consideration of the rents collected as reflected in Hartley's ledger cards and receipts. The taxation was based upon a consideration of the number of units, in contrast to a consideration of the number of tenants found in the apartment building. The distinction of taxation on units and not tenants is significant because Hartley, in his petition, challenges the right of the Respondent to tax on a formula which pertains to units and not tenants. The language of the applicable section of Chapter 212, Florida Statutes, specifically, Section (7)(c), Florida Statutes, states the following: The rental of facilities, including trailer lots, which are intended primarily for rental as a principal or permanent place of residence is exempt from the tax imposed by this chapter. The rental of facilities that primarily serve transient guests is not exempt by this subsection. In the application of this law, or in making any determination against the exemption, the department shall consider and be guided by, among other things: Whether or not a facility caters primarily to the traveling public; Whether less than half of its tenants have a continuous residence in excess of 3 months; and The nature of the advertising of the facility involved. It can be seen that the language of that provision clearly invisions that permanent residents are exempt from consideration of the tax, and transient guests are not exempt. Discussion of tenants is used only in describing some of the matters that the Respondent shall consider and be guided by, and is not the only determination which the Respondent must look to in determining whether an exemption from the provisions of this subsection has been established. Furthermore, the fact that Rule 12A-1.61, Florida Administrative Code, which implements Chapter 212, Florida Statutes, in this particular taxing theory speaks in terms of units and not tenants is not inconsistent or in violation of the above quoted statutory provision, because that statutory provision allows the Respondent to look at other things in making its determination of an exemption. The language of Rule 12A-1.61, Florida Administrative Code, spoken of, states the following: Rental of living quarters, sleeping or housekeeping accommodations. (1) Every person, except housing authorities which are specifically exempt from provisions hereof by Section 212.08(10), F.S., is exercising a taxable privilege when he engages in the business of renting, leasing or letting any living quarters, sleeping or housekeeping accommodations in connection with any hotel, motel, apartment house, duplex, rooming house, tourist or mobile home court subject to the provisions of Chapter 212, F.S. Notwithstanding the aforesaid provisions of this paragraph, effective March 1, 1972, the tax shall not apply to the rental of living accommodations which are rented primarily to persons as their principal or permanent place of residence but the tax shall apply to the rental of such facilities at hotels, motels, and seasonal lodging facilities that primarily serve transient guests. (See paragraph 9 of this rule.) When a lodging facility does not primarily cater or advertise that it primarily caters to seasonal or transient guests, or to the traveling public, and when fifty percent or more of its total units are rented to persons who have resided thereat continuously for the three months immediately preceding March 1, 1972, the facility shall have an exempt status until a redetermination has been made. Landlords beginning business after March 1, 1972 shall determine the taxable status of their lodging facility as of the commencing of business. In making their determination, the above guidelines will be applied except that the three months prior residence requirement will be waived in those instances where leases or other records of the facility clearly reflect that the facility does not primarily cater to or advertise that it caters to seasonal or transient guests or the traveling public. All landlords are required to make a redetermination of the taxable status of their businesses on July 1 of each year and in the event that his taxable status has changed, he shall notify the Department of such change. Therefore, the Petitioner's challenge to the Respondent's utilization of rental units, as opposed to tenants residing in the apartment building of the Petitioner during the pendancy of the audit period, to decide the issue whether less than half of the tenants (units) have a continuous residence in excess of three months must fail. Moreover, when an assessment is made under the theory of Section 212.03, Florida Statutes, it is incumbent on the taxpayer to establish an exemption and the petitioner offered no evidence to establish an exemption. In view of the fact that the information for the assessment was taken from the books and records of the Petitioner, and their being no testimony to establish an exemption from the tax imposed on the rentals of the Taj Apartments which was serving transient guests in the time period at issue; the tax together with penalties and interest as set forth in the assessment document (Respondent's Exhibit No. 1, admitted into evidence) should stand. The audit brought about a further assessment for use tax due and owing during the period of the audit. The use tax pertains to Robert Hartley's rental of television sets to the guests in his rental facility and the rental of parking spaces to the guests in the rental facility. The determination of taxes owed for those rentals was also premised upon an examination of Mr. Hartley's books and records. No reason was established for not using the figures found in the hooks and records, in assessing any tax that might be owed for the rental of television sets and parking spaces. Consequently, the portion of the assessment of May 18, 1977, pertaining to a use tax on the rentals of the television sets and parking spaces should be upheld. The imposition of the assessment of May 18, 1977, is a revision of a prior assessment which was rendered before Mr. Hartley provided his books and records. This revised assessment reduced the initial assessment, premised upon an examination of Mr. Hartley's books and records and certain credits for exemptions in the year 1974. The revised assessment reflects this in its provision entitled "Abatements:" The revised assessment then becomes an assessment of $15,960.92. This assessment is constituted of a tax on the transient rentals, parking spaces and television sets; together with penalties on that tax amount and interest through May 8, 1977. The facts show that the revised assessment of May 18, 1977, is correct.
Recommendation It is recommended that the assessment of May 18, 1977, which has been placed against the Petitioner, Robert F. Hartley, d/b/a Taj Apartments, be upheld. DONE AND ENTERED this 17th day of February, 1978, in Tallahassee, Florida. CHARLES C. ADAMS, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Mr. Robert F. Hartley Post Office Box 82 Middletown, California 95461 and Mr. Robert F. Hartley 33 Southwest 2nd Avenue Miami, Florida 33130 Edwin Stacker, Esquire Assistant Attorney General Department of Legal Affairs The Capitol Tallahassee, Florida 32304 John D. Moriarty, Esquire Department of Revenue Room 104 Carlton Building Tallahassee, Florida 32304
