The Issue The issue is whether a proposed sales tax assessment should become final agency action.
Findings Of Fact Respondent is the agency responsible for administering the state sales tax imposed in Chapter 212, Florida Statutes (2001).1 From May 1, 2002, through April 30, 2005 (the audit period), Petitioner was a dealer, defined in Subsection 212.06(2), and was required to collect and remit sales tax to the state. Petitioner is a closely held Florida corporation located at 2802 Thomasson Drive, Naples, Florida 34112. Petitioner is engaged in the business of retail sales, including the sale of tangible personal property such as food, beer, beverages, and fishing bait (goods). Petitioner uses the accrual method of accounting. Petitioner elects, under Subchapter S of the Internal Revenue Code, to report income and deductions for purpose of the federal income tax on form 1120S. Sometime in June 2005, Respondent sent Petitioner a Notification of Intent to Audit Books and Records identified in the record by audit number A200015450. Upon completion of the audit, Respondent concluded that Petitioner had not reported all of the gross sales that occurred during the audit period (unreported sales) and assessed tax, penalty, and interest, through July 13, 2006, in the amount of $163,914.16. During the audit period, it is undisputed that Petitioner did not maintain cash register receipts identified in the record as Z-tapes (Z-tapes).2 Respondent claims the absence of Z-tapes deprives Respondent of adequate records to determine the amount of a tax deficiency, if any. Respondent defines adequate records in Florida Administrative Code Rule (Rule) 12-3.0012(3). The definition of adequate records does not include a requirement for Z-tapes. The trier of fact finds the evidence from Petitioner concerning the adequacy of its records to be credible and persuasive. Petitioner maintained adequate records within the meaning of Rule 12-3.0012(3). The records include books, accounts, and other records that are sufficient for Respondent's auditors (the auditors) to reliably determine a tax deficiency. The available records are accurate within the meaning of Rule 12-3.0012(3)(a)1. The records are adequate for the auditors to reconcile differences between gross sales reported for federal and state tax purposes. The available records are inclusive within the meaning of Rule 12-3.0012(3)(a)2. The records capture the transactions necessary to determine a tax deficiency. The available records include a breakdown of individual suppliers for all products that Petitioner sold during the audit period. The amount charged by each vendor ties into the total claimed for federal tax purposes on Petitioner's 1120S tax returns. The available records are authentic within the meaning of Rule 12-3.0012(a)3. It is undisputed that the available records are authentic. The available records are systematic within the meaning of Rule 12-3.0012(a)4. Available records include: daily summary tapes for each shift, spread sheets, and quarterly summaries, each of which is maintained by Petitioner, and journals and general ledgers, which are maintained by Petitioner's accountants. During the audit period, each shift operator manually prepared a worksheet for daily sales and reconciled those numbers with the corresponding bank deposit. Petitioner maintained working papers supported by summary tapes. The summary tapes document totals for each day's operations. Each summary tape is proofed against two of three tapes prepared by different employees. The daily totals are entered on a monthly spreadsheet and submitted to Petitioner's accountants quarterly for preparation of sales tax returns. The auditors were not satisfied with the records Petitioner maintained during the audit period. The cost of goods sold exceeded gross sales (operating losses) for two federal tax years during the three-year audit period (operating loss years).3 The auditors regarded the operating loss years as evidence of unreported sales. As Respondent explains: The controversy regarding the true amount of total sales made by Petitioner arose because [Respondent] could not accept as correct Petitioner's assertion that for two of the three years under audit, Petitioner's reported costs of goods sold were greater than its reported gross receipts [operating losses]. . . . The question puzzling the . . . auditors was - how could a business continue to operate if its costs were greater than its revenue? [Respondent] concluded unreported sales were indicated. . . . Respondent's PRO, paragraph 8, page 6. Respondent knew, or should have known, that unusual facts and circumstances existed during the audit period which answered the auditor's questions concerning the operating loss years. During a substantial part of the audit period, the road fronting the store, which provided virtually all practical access to the store, was closed for construction by the county government. The road closure depressed sales substantially and required Petitioner to sell some goods for less than cost and to offer customer incentives and promotions in an effort to maintain the customer base. The owner and her mother financed the operating losses with annual shareholder loans of approximately $200,000 for each of the two operating loss years. Petitioner provided the auditors with material information, including documentation of the road construction and shareholder loans. That information concerned the nature of the taxpayer's business and included information authorized in Rule 12-3.00112(3) such as third-party confirmations, corroborating evidence, and related supporting documentation. The auditors were not satisfied. They concluded that available records were not adequate. When records are inadequate, Respondent has statutory authority to conduct an audit on the basis of: test or sampling of the dealer's available records or other information relating to the sales or purchases made by such dealer for a representative period. (Emphasis supplied) § 212.12(6)(b). Subsection 212.12(6)(b) is the statutory basis for the proposed agency action. The Notice of Decision, in relevant part, cites Subsection 212.12(6)(b) as statutory authority for the proposed assessment. The available records were adequate for the auditors to use sampling authorized in Subsection 212.12(6)(b) based on Petitioner's federal tax information.4 For example, the auditors could have used the gross profit percentage reported for the federal tax year during the audit period in which Petitioner reported a profit (the profit year) to increase either: the cost of goods sold reported for federal tax purposes during the operating loss years, or the undisputed purchase invoice costs that Petitioner provided to Respondent. Respondent does not assert in its PRO that the proposed assessment is authorized by Subsection 212.12(6)(b). Rather, Respondent reasons at paragraph 23, page 9, of the PRO that the proposed assessment is based on an estimate authorized in Subsection 212.12(5)(b). Subsection 212.12(5)(b) would have authorized Respondent to "make an assessment" against Petitioner "based on an estimate from the best information then available" (emphasis supplied) if it were shown that Petitioner failed or refused to make records available, Respondent suspected fraud, or any of the other statutory prerequisites for an estimate existed. However, it is undisputed that none of the statutory prerequisites for an estimate authorized in Subsection 212.12(5)(b) exist in this proceeding. The Notice of Decision does not reference Subsection 212.12(5)(b), much less cite Subsection 212.12(5)(b) as authority for the proposed assessment. Nevertheless, the auditors estimated unreported gross sales for state tax purposes (unreported sales) based on three field visits to the store.5 In the first field visit, an auditor walked through the store with one of Petitioner's employees and compared the sale price marked on selected goods with costs recorded in the purchase invoices for those goods. The auditor estimated that Petitioner marked up purchase invoice costs for all goods by 50 percent (the 50 percent markup). The auditor estimated sales tax due on unreported sales in four steps. First, the auditor estimated gross sales by marking up the cost of goods sold on Petitioner's federal tax returns by 50 percent. Second, the auditor multiplied the estimated gross sales by 33.33 percent; a percentage derived from the ratio of taxable sales to gross sales (taxable sales ratio) reported by Petitioner. The auditor used the mathematical product of that calculation as the estimated taxable sales. In the third step, the auditor multiplied estimated taxable sales by the effective tax rate to estimate the total tax. Finally, the auditor estimated that the tax due on unreported sales was equal to the difference between the estimated total tax and the amount of taxes paid. The auditors were not satisfied. The auditors believed the taxable sales ratio reported by Petitioner was lower than the actual taxable sales ratio. The parties reached an audit agreement during a meeting conducted on December 8, 2005, subject to Petitioner's objection to an assessment based on any sampling or estimate. Each party determined a taxable sales ratio based on Z-tapes that were available from July 16 through November 2005 (the representative period) and applied the taxable sales ratio back over the entire audit period. Prior to the representative period, an auditor made a second field visit and identified certain goods, including potato chips, which he believed employees were incorrectly selling as non-taxable items. The auditor asked the employees to keep register tapes for the representative period in accordance with his instructions. After the second visit to the store, store employees kept Z-tapes during 141 shifts. The Z-tapes for the 141 shifts provide a "sample . . . for a representative period" within the meaning of Subsection 212.12(6)(b). Respondent determined the applicable taxable sales ratio to be 55.2 percent.6 A certified public accountant (CPA) retained by Petitioner determined that the taxable sales ratio during the representative period was 43 percent. The auditors were not satisfied. They conducted a third "field visit" to the store prior to March 1, 2006. In the third field visit, auditors again viewed goods for sale on store shelves. The auditors estimated the taxable sales ratio to be 75 percent and retained the 50 percent markup. Based on selected goods the auditors viewed on store shelves, the proposed assessment incorrectly estimates unreported sales using a taxable sales ratio and markup of 75 and 50 percent.7 The 50 percent markup lacks economic reality. The markup is necessarily limited to selected items and does not accurately reflect actual markup for all goods sold. Nor does the markup accurately reflect the impact of construction on Petitioner's business within the meaning of Rule 12-.0012(3)(b). Petitioner presented credible and persuasive testimony that the correct markup is 23 percent. That testimony is consistent with evidence sanctioned in Rule 12-3.0012(3)(b) that the industry operates on a markup of only 20 percent. A taxable sales ratio of 55.2 percent is reasonable and accurately reflects economic reality. The taxable sales ratio of 55.2 percent was correctly determined by a sampling method authorized in Subsection 212.12(6)(b). The sampling method used to determine a taxable sales ratio of 55.2 percent is consistent with the legislative description of sampling in Subsection 212.12(6)(c) that the Legislature authorizes when available records are adequate but voluminous.8 If the proposed assessment were correct, Respondent should not assess any penalties against Petitioner. It is undisputed that an alleged failure to maintain adequate records was unintentional and that Petitioner fully cooperated in the audit. On July 10, 2007, Petitioner paid Respondent an additional $47,727.41; comprised of additional tax totaling $35,589 and accrued interest of $12,138.41.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent enter a final order assessing sales tax based on the available records maintained by Petitioner, and, if sampling is authorized, using a taxable sales ratio and markup that do not exceed 55.2 and 23 percent, respectively. DONE AND ENTERED this 4th day of March 2008, in Tallahassee, Leon County, Florida. S DANIEL MANRY 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 March, 2008.
The Issue The issue for determination is whether Respondent committed the offenses set forth in the Administrative Complaint for Revocation of Certificate of Registration issued on November 16, 2009, and, if so, what action should be taken.
Findings Of Fact There is no dispute that the Department is the state agency charged with the responsibility of regulating, controlling, and administering the revenue laws of the State of Florida, including the laws relating to the imposition and collection of the state's sales and use tax pursuant to chapter 212, Florida Statutes. There is no dispute that Abkey is a Florida corporation whose principal address is 7800 Southwest 104th Street, Miami, Florida 33156. Abkey is a restaurant. At the time of hearing, Abkey had 33 employees and was operating at a deficit. There is no dispute that, at all times material hereto, Abkey possessed Florida sales tax certificate of registration number 23-8012096448-9, issued by the Department on April 18, 1994. There is no dispute that Abkey is a dealer as defined in section 212.06(2), Florida Statutes, and has been a dealer at all times material hereto. For the month of June 2009, Abkey failed to file a sales tax return. As a result of this failure, the Department assessed Abkey an estimated sales tax due in the amount of $9,500.00. For 2005, Abkey failed to remit its self-reported sales tax liability to the Department for the months of July, September, October, November, and December. Abkey self-reported its tax liability, by filing sales tax returns, for the said months. For 2006, Abkey failed to remit its self-reported sales tax liability to the Department for the months of January and May. Abkey self-reported its tax liability, by filing sales tax returns, for the said months. Also, for 2006, Abkey failed to timely remit its sales tax liability for the month of October for which the Department assessed a penalty and an administrative/collection/processing fee. For 2007, Abkey failed to remit its self-reported sales tax liability to the Department for the months of February and August. Abkey self-reported its tax liability, by filing sales tax returns, for the said months. Also, for 2007, Abkey failed to timely remit its sales tax liability for the month of October, for which the Department assessed a penalty and an administrative/collection/processing fee. In total, for 2005, 2006, and 2007, Abkey self- reported sales tax due and failed to remit to the Department sales tax reportedly due in the amount of $122,355.36. As a result of Abkey's failure to file the sales tax return, to remit the $122,355.36 in sales tax, and to remit timely sales tax, the Department assessed Abkey, as of October 29, 2009, $16,287.59 in interest, $4,891.73 in penalties, and $13,845.10 in administrative/collection/ processing fees. Additionally, for the month of February 2007, Abkey issued to the Department a dishonored check (electronic funds transfer) on March 23, 2007, in the amount of $18,254.00. The Department assessed a $150.00 return check fee for the dishonored check. Shortly after being notified of the dishonored check by the Department, Abkey paid the $18,254.00. Abkey has a significant history of delinquency in remitting payments to the Department. The Department made several attempts, unsuccessfully, to collect the delinquent tax liabilities, including issuing Tax Warrants. In January 2007, the Department sought to revoke Abkey's Certificate of Registration for delinquent returns and outstanding liability and engaged in an informal conference with Abkey. As a result of the informal conference, Abkey and the Department entered into a Compliance Agreement executed on February 15, 2010. The Compliance Agreement required Abkey, among other things, to remit all past due payments; for 12 months (January through December 2007), to timely file tax returns and to timely remit all sales tax due; and to make a down payment of $45,000.00 (in three monthly installments but no later than April 1, 2007), 11 monthly payments of $5,000.00 (beginning May 1, 2007), and a balloon payment of $141,982.43 on April 1, 2008. Further, regarding the balloon payment of $141,982.43, the Compliance Agreement provided that the balloon payment might be negotiated for another 12 months. However, in order for Abkey to take advantage of this provision, Abkey was required to be compliant with the terms of the Compliance Agreement and its account was required to be in good standing with the Department. In accordance with the Compliance Agreement, Abkey paid the down payment of $45,000.00 (in three monthly installments) and the 11 payments of $5,000.00 although the 11 payments were late. Additionally, for the period of January through December 2007, Abkey was late filing tax returns and remitting sales tax. Abkey requested a renewal of the Compliance Agreement. Despite the late payments, the Department approved the renewal of the Compliance Agreement. A Compliance Agreement Renewal was executed on May 1, 2008. It required Abkey, among other things, to remit all past due payments and to timely file tax returns and timely remit all sales tax due for the next 12 months (May 1, 2008 through April 30, 2009); and to make 11 monthly payments of $5,000.00 (beginning May 1, 2008), and a balloon payment of $120,749.14 on April 1, 2009. Furthermore, regarding the balloon payment of $120,749.14, the Compliance Agreement Renewal provided that the balloon payment might be negotiated for another 12 months. However, in order for Abkey to take advantage of this provision, Abkey was required to be compliant with the terms of the Compliance Agreement Renewal and its account was required to be in good standing with the Department. Under the Compliance Agreement Renewal, Abkey made four payments of $5,000.00 but the payments were late. Abkey requested a reduction in the amount of the monthly payments from $5,000.00 to $2,000.00. The Department granted Abkey's request. Abkey made 12 payments of $2,000.00 but the payments were late. Additionally, for the period of May 1, 2008 through April 30, 2009, Abkey was late filing tax returns and remitting sales tax. Further, Abkey failed to make the balloon payment of $120,749.14 that was due on April 1, 2009. Abkey did not request a renegotiation of the balloon payment. At that time, Abkey did not request another Compliance Agreement. As of September 28, 2010, Abkey owed the Department $122,355.36 in actual sales tax (per Abkey's sales tax returns), $9,500.00 in estimated tax, $4,419.73 in penalty2, $14,572.80 in administrative/collection/processing fees3, $25,032.28 in interest, and $20.00 in warrant fees; totaling $175,900.17. The Department seeks to revoke Abkey's Certificate of Registration.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order revoking the Certificate of Registration issued to and held by Abkey No. 1 Limited. DONE AND ENTERED this 18th day of February, 2011, in Tallahassee, Leon County, Florida. S 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 18th day of February, 2011.
The Issue Whether the Respondent, Holiday Inn Oceanside/Cleveland Caribbean, Inc., is liable for the payment of $10,176.18, together with a penalty of 5 percent and interest accruing daily as claimed in the audit by the Petitioner, State of Florida, Department of Revenue, for the period September 1, 1975, through August 31, 1970.
Findings Of Fact This cause comes on for consideration based upon the Respondent, Holiday Inn Oceanside/Cleveland Caribbean, Inc.`s challenge to the tax audit conducted by the Petitioner, State of Florida, Department of Revenue, covering the period September 1, 1975, through August 31, 1978. The claim of the audit is for sales tax due pursuant to Chapter 212, Florida Statutes, and its supporting rules found in the Florida Administrative Code. The audit document showing the Proposed Notice of Assessment of Tax, Penalties and Interest may be found as the Petitioner's Exhibit A admitted into evidence. Although the audit document originally claimed tax in the amount of $29,600.37, at the commencement of the hearing the amount remaining in dispute was $15,288.75, together with a penalty of 5 percent and interest accruing until date of payment. During the hearing, a stipulation was entered into between the parties to the effect that, of the remaining disputed tax, penalty and interest, $5,112.57, together with the applicable penalty and interest was acknowledged to be owed by the Respondent. Therefore, there remains in dispute the amount of $10,176.18, with a 5 percent penalty and interest accruing until date of payment. This amount of tax, penalty and interest claimed represents the difference between the tax rate which the Petitioner has applied in this assessment process and the tax rate that the Respondent claims to be applicable. The Petitioner claims that a tax rate of 4.5 percent against total receipts, in keeping with the authority of Rule 12A-1.57(3), Florida Administrative Code. The Respondent counters that position by offering its own formula arrived at in view of the nature of its prices charged its customers, and that tax rate is 4.1666667 percent. The sales in question during the audit period pertain to sales of alcoholic and malt beverage in the lounges of the Respondent's licensed premises located in Dade County, Florida. The facts reveal that the sale of all alcoholic beverages in the time period at issue were made in increments of a quarter dollar ($.25). These quarter-dollar increments included the imposition of sales tax. As example: SALES PRICE TAX TOTAL $ .48 $.02 $ .50 .72 .03 .75 .96 .04 1.00 1.20 .05 1.25 1.44 .06 1.50 1.68 .07 1.75 Although the tax was computed on the sales price and this system was made known to the public by prominently displaying the price list, which list indicated that the beverage prices included tax; the Respondent did not separate the increment of the total price into categories of sales price and tax at the time of each transaction. Consequently, the books audited in the process of making the claim for assessment only demonstrated the total sales price of a given day's alcoholic beverage sales as an aggregate and did not reflect the tax as a separate item from the sales price. To this aggregate amount the Respondent applied its tax rate formula of 4.166667 by taking the amount of total receipts for the day and dividing by 1.04666667 to get gross sales. The gross sales were then subtracted from the amount of total receipts to obtain the figure for tax collected. This method was rounded off to the nearest penny on each day of computation. The Petitioner, as stated before, relies on Rule 12A-1.57(3), Florida Administrative Code, as a basis for its claim that the rate of tax should be 4.5 percent. That provision states: (3) Dealers in alcoholic and malt beverages are required to remit the actual tax collected to the State. In some instances, however, it may be impractical for such dealers to separately record the sales price of the beverage and the tax collected thereon. In such cases, dealers may elect to report tax on the following basis. Package stores who sell no mixed drinks should remit the tax at 4.3 percent of total receipts and dealers who sell mixed drinks or a combination of mixed drinks and packaged goods should remit the tax at the rate of 4.5 percent of total receipts. In those instances where the sales price and the tax have not been separately recorded but where it can be demonstrated that the public has been put on notice by means of price lists posted prominently throughout the establishment that the total charge includes tax, the dealer may deduct the tax from the total receipts to arrive at the appropriate tax and gross sales figures using the method shown below: Total receipts divided by the tax rate = gross sales. For example, a package store which sells no mixed drinks and whose total receipts are $2,000 would compute sales as follows: $2,000 divided by 1.043 percent = gross sales $1,917.54 tax collected 82.46 A dealer who sells drinks or a combination of drinks and package goods and whose total receipts are $2,000 would compute sales as follows: $2,000 divided by 1.045 percent = gross sales $1,913.87 tax collected 86.12 When the public has hot been put on notice through the posting of price lists that tax is included in the total charge, tax shall be computed by multiplying total receipts by the applicable rates referred to in this rule. In the mind of the Petitioner, by failing to segregate the total amounts collected into the categories of sales price and tax and then to remit the tax collected as a separate item, the Respondent is relegated to the utilization of Rule 12A-1.57(3), Florida Administrative Code, in remitting its tax. Under its theory, the Petitioner has taken the total receipts recorded in the Respondent's work sheets and divided those total receipts by the formula 1.045 percent to get gross sales and then subtracted the gross sales from the amount of total receipts to get the amount of tax that should have been collected, and then made a further subtraction of the tax which the Respondent remitted, from the tax formula which the Petitioner claims to be due on the transactions to arrive at the tax presently outstanding. This amount being the figure referenced above. From that computation, the amount of penalty and interest has been claimed. (By its position the Petitioner does not seem to question the fact that the public has been put on notice by price lists posted throughout the establishment that the total charge reflected on the price lists includes tax, as referred to in the subject Rule 12A-1.57(3), Florida Administrative Code.) According to the Respondent, the reason for the utilization of the rate of 4.1666667 percent was the fact that all beverages having a break in price increments of a quarter-dollar ($.25), it is mathematically impossible for the proper effective rate being charged on all beverages sold in the lounges to vary from their tax rate of 4.1666667 percent because each increment of increase has the same ratio of sales price to tax. The Respondent argues that to claim a rate of 4.5 percent causes the collection in excess of the amount allowed by Chapter 212, Florida Statutes. After considering the position of the parties, the Respondent is found to be correct in its position. The overall scheme of Chapter 212, Florida Statutes, calls for the taxation of sales of tangible personal property at a rate of 4 percent, see Section 212.05, Florida Statutes. A further refinement of that theory is found in Subsection 212.12(10), Florida Statutes, which creates a bracketing system for sales representing the various fractions of a dollar in amount. This bracketing system thereby causes imposition of a sales tax greater than 4 percent in some transactions. The Petitioner is granted further authority to refine the system of taxation by those provisions of Subsections 212.17(6) and 212.18(2), Florida Statutes, which state in turn: 212.17(6) The department shall have the power to make, prescribe and publish reasonable rules and regulations not inconsistent with this chapter, or the other laws, or the constitution of this state, or the United States, for the enforcement of the provisions of this chapter and the collection of revenue hereunder, and such rules and regulations shall when enforced be deemed to be reasonable and just. 212.18(2) The department shall administer and enforce the assessment and collection of the taxes, interest, and penalties imposed by this chapter. It is authorized to make and publish such rules and regulations not inconsistent with this chapter, as it may deem necessary in enforcing its provisions in order that there shall not be collected on the average more than the rate levied herein. The department is authorized to and it shall provide by rule and regulation a method for accomplishing this end. It shall prepare instructions to all persons required by this chapter to collect and remit the tax to guide such persons in the proper collection and remission of such tax and to instruct such persons in the practices that may be necessary for the purpose of enforcement of this chapter and the collection of the tax imposed hereby. The use of tokens in the collection of this tax is hereby expressly forbidden and prohibited. It can be seen that the Petitioner has the authority to promulgate the necessary rules for the accomplishment of the purpose of Chapter 212, Florida Statutes, but is restricted in this task by being prohibited from making rules and regulations which are inconsistent with this chapter or other statutes within the laws of the State of Florida or the Constitution of the United States or the Constitution of the State of Florida and it is further restricted from imposing rules or regulations which cause the tax to be collected on the average more than the rate levied in Chapter 212, Florida Statutes. While it is clear that the legislature intended to keep the effective rate of tax as near the 4 percent level as possible, it is also evident that the system contemplated a segregation of the amount collected in a sale as sales price, and the amount of tax applied to the sale at the point of the transaction. This is a means of accountability that helps insure that the proper remittance of tax due on each and every retail sales occurs. However, the preeminent charge to the Petitioner is the duty to collect the tax at a rate which most closely approximates the 4 percent called for, without abandoning responsibility or the close monitoring of the records of a given taxpayer. When considered in the overall context of the purpose of Chapter 212, Florida Statutes, the method which the Respondent used to collect and remit tax, does not violate the conditions of Chapter 212, Florida Statutes, nor the rules designed to enforce that chapter. The tax rate of 4.1666667 percent has been proven to be correct, in the sense of more closely approximating the 4 percent tax rate called for than the application of a tax rate of 4.5 percent. The correctness is established because the increments charged for alcoholic beverages are always in the amount of a quarter-dollar ($.25) and each increment of increase carries the same tax rate. This fact, when considered with the additional fact that the break-out of the tax in the price structure as established by the Respondent, is in keeping with the tables of the bracket system found in Subsection 212.12(10), Florida Statutes, is sufficiently convincing to demonstrate the propriety of the Respondent's position. Nonetheless, a further examination of the Petitioner's argument is indicated. The focus of the Petitioner's position is Rule 12A-1.57(3), Florida Administrative Code, and a detailed reading of this rule reveals that dealers who have properly put the public on notice that their sales prices include tax, "may" elect to remit tax by using the formula of the rate of 4.5 percent of total receipts as the tax due. The use of the word "may" in this instance creates an option on the part of the Respondent, an option which it has elected not to proceed under and by the facts of this case, the alternate method which the Respondent used in computing this tax, i.e., the rate 4.1666667 percent is efficacious. Finally, the Petitioner has advanced the argument that the formula found in Rule 12A-1.57(3), Florida Administrative Code, is unique to that rule and may not be utilized unless the prerequisite factors are shown and unless the tax rate factor 4.5 percent is part of the formula. Even though the formula as expressed in Rule 12A-1.57(3), Florida Administrative Code, may have legitimate application to some cases, it is not preemptive in its scope and it would not prohibit the Respondent in this case from using the formula and substituting the rate of tax of 4.1666667 percent for the rate of 4.5 percent in that part of the formula. In summary, the Petitioner has failed to demonstrate its entitlement to the tax, penalty and interest under its claim founded on Rule 12A-1.57(3), Florida Administrative Code. (Petitioner in this cause had submitted Proposed Findings of Fact, Conclusions of Law and a Recommendation in the case styled, Holiday Inn Oceanside/Cleveland Caribbean, Inc., Petitioner, vs. State of Florida, Department of Revenue, Respondent, D.O.A.H. Case No. 70-1003R, and in doing so made reference to matters which have been considered in the present case. Therefore, to the extent that those matters are not inconsistent with this Recommended Order they have been utilized. To the extent that those proposals are inconsistent with this Recommended Order they are specifically rejected. The Respondent has also submitted Proposed Findings of Fact, Conclusions of Law and a Recommended Order and to the extent that those matters are not inconsistent with this Recommended Order they have been utilized. To the extent that those proposals are inconsistent with this Recommended Order they are specifically rejected.)
Recommendation It is recommended that the Respondent, Holiday Inn Oceanside/Cleveland Caribbean, Inc., be relieved from further responsibility to pay the amount of tax, $10,176.18 and the 5 percent penalty and interest accruing on that amount of tax. DONE AND ENTERED this 29th day of June, 1979, in Tallahassee, Florida. CHARLES C. ADAMS, Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: Martha J. Cook, Esquire Department of Revenue Room 422, Fletcher Building Tallahassee, Florida 32301 Richard Watson, Esquire c/o Spieth, Bell, McCurdy & Newell 1190 Union Commerce Building Cleveland, Ohio 44115 Mark J. Wolff, Esquire and Howard E. Roskin, Esquire First Federal Building, 30th Floor One Southeast Third Avenue Miami, Florida 33131
The Issue Whether the Department of Revenue's ("Department") assessment of tax, penalty, and interest against American Import Car Sales, Inc., is valid and correct.
Findings Of Fact The Department is the agency responsible for administering the revenue laws of the State of Florida, including the imposition and collection of the state's sales and use taxes. Petitioner, American Import Car Sales, Inc., is a Florida S-corporation with its principle place of business and mailing address in Hollywood, Florida. Petitioner, during the period of June 1, 2007, through May 31, 2010 ("assessment period"), was in the business of selling and financing new and used motor vehicles. On June 29, 2010, the Department issued to Petitioner a Notice of Intent to Audit Books and Records (form DR-840) for sales and use tax for the assessment period. Said notice informed Petitioner that the audit would begin on or around 60 days from the date of the notice and included an attachment identifying the records and information that would be reviewed and should be available when the audit commenced. Specifically, the Sales and Use Tax Information Checklist attachment requested the following: chart of accounts, general ledgers, cash receipts journals, cash disbursement journals, federal income tax returns, county tangible property returns, Florida Sales and Use Tax returns, sales journals, sales tax exemption certificates (resale certificates), sales invoices, purchase invoices, purchase journals, lease agreements for real or tangible property, depreciation schedules, bank and financial statements, detail of fixed asset purchases, and other documents as needed. On the same date, in addition to the Notice of Intent, the Department issued to Petitioner, inter alia, an Electronic Audit Survey, and a Pre-Audit Questionnaire and Request for Information. On September 17, 2010, the auditor requested the following records to review by October 4, 2010: (1) general ledger for the assessment period; (2) federal returns for 2007, 2008, and 2009; (3) lease agreement for the business location; (4) deal folders for the assessment period; (5) all expense purchase invoices for the assessment period; (6) all purchase invoices relating to assets added to the Depreciation Schedule during the assessment period; (7) resale/exemption certificates, shipping documents, and any other exempt sales documentation to support exempt sales during the assessment period; (8) bank statements for the assessment periods; and (9) all worksheets used to prepare monthly sales tax returns for the assessment period. On October 5, 2010, the auditor met with Petitioner's President Joe Levy, Petitioner's Secretary Joanne Clements, and Petitioner's Certified Public Accountant, Steve Levy. At that time, Petitioner provided a hard copy of the 2007 and 2008 general ledger and profit and loss statements. At that time, the auditor again advised Petitioner that the Department needed the federal returns, as well as the completed electronic audit survey and pre-audit questionnaire. On October 5, 2010, the Department and Petitioner signed a Consent to Extend the Time to Issue an Assessment or to File a Claim for Refund (form DR-872). The consent provided that assessments or claims for refunds may be filed at any time on or before the extended statute of limitations, December 31, 2011. On October 18, 2010, Petitioner provided the Department with the completed electronic audit survey and pre-audit questionnaire. Thereafter, Petitioner provided the Department with the following books and records: (1) 2009 "deal folders;" Petitioner's general ledger in Excel format for June 1, 2007, through December 31, 2010; (3) January 2009 through May 2010 bank statements; (4) a listing of exempt sales; and (5) lease agreements with attendant invoices. On August 25, 2011, the Department issued its assessment, entitled a Notice of Intent to Make Audit Changes (form DR-1215)("NOI"). Said notice provided that Respondent owed $2,324,298.42 in tax, $581,074.61 in penalties, and $515,117.04 in interest through August 25, 2011. The NOI addressed Petitioner's alleged failure to collect and remit tax on: (1) certain vehicle sales (audit Exhibit A01-Sales Tax Collected and Not Remitted)1/; (2) vehicle sales with no documentation regarding its exempt status (audit Exhibit A02-Disallowed Exempt Sales)2/; (3) motor vehicle sales where no discretionary tax was assessed (audit Exhibit A03- Discretionary Surtax)3/; and (4) unreported sales (audit Exhibit A04-Unreported Sales). The assessment also related to Petitioner's alleged failure to pay/accrue tax on: (1) taxable purchases (audit Exhibit B01-Taxable Purchases); (2) fixed assets (audit Exhibit B02-Fixed Assets); and (3) commercial rent (Exhibit B03-Commercial Realty). At hearing, Petitioner stipulated that the only component of the NOI remaining at issue pertains to audit Exhibit A04-Unreported Sales, as Petitioner has conceded A01, A02, A03, and all fee schedules. An understanding of audit Exhibit A04, and the assessment methodology employed by the auditor, is articulated in the Department's Exhibit MM, entitled Explanation of Items, which is set forth, in pertinent part, as follows: Reason for Exhibit: The records received for the audit were inadequate. The taxpayer provided bank statements for the period of January 2009 through May 2010. This period was deemed the test period for unreported sales. A review of the bank statements for the test period revealed that sales were underreported. This exhibit was created to assess for sales tax on unreported sales. Source of Information: Sales tax returns and Bank of America bank statements for the test period of January 2009 through May 2010; The Department of Motor Vehicles (DMV) [sic] was acquired for the period of June 2007 through May 2010. Description of Mathematical Adjustments: The bank statements were reviewed for the period of January 2009 through May 2010. Taxable Sales on sales tax returns, sales tax on sales tax returns, taxable sales on Exhibit on [sic] Exhibit A01, sales tax Exhibit A01 and Exempt Sales on Exhibit A02 was subtracted from Bank Deposits to arrive at unreported sales. See calculations on page 53. Unreported sales for the period of January 2009 through May 2010 were scheduled into this exhibit. A rate analysis of the DMV database resulted in an effective tax rate of 6.2689. Scheduled transactions were multiplied by the effective tax rate of 6.2689 to determine the tax due on the test period. A percentage of error was calculated by dividing the tax due by the taxable sales for each test period. The percentage of error was applied to taxable sales for each month of the audit period which resulted in additional tax due. The auditor's analysis of the test period, applied to the entire assessment period, resulted in a determination that Petitioner owed $1,599,056.23 in tax for unreported sales. On August 25, 2011, the auditor met with Joe and Steve Levy to discuss and present the NOI. At that time, Joe and Steve Levy were advised that Petitioner had 30 days to provide additional documents to revise the NOI. On September 28, 2011, the Department issued correspondence to Petitioner advising that since a response to the NOI had not been received, the case was being forwarded to Tallahassee for issuance of the Notice of Proposed Assessment ("NOPA")(form DR-831). On October 7, 2011, the Department issued the NOPA, which identified the deficiency resulting from an audit of Petitioner's books and records for the assessment period. Pursuant to the NOPA, Petitioner was assessed $2,324,298.42 in tax, $31,332.46 in penalty, and $534,284.54 in interest through October 7, 2011. The NOPA provided Petitioner with its rights to an informal written protest, an administrative hearing, or a judicial proceeding. On December 5, 2011, Petitioner filed its Informal Written Protest to the October 7, 2011, NOPA. The protest noted that the NOPA was "not correct and substantially overstated." The protest raised several issues: (1) that the calculation was primarily based upon bank statement deposits; (2) not all deposits are sales and sources of income; and (3) a substantial amount of the deposits were exempt sales and loans. The protest further requested a personal conference with a Department specialist. On January 10, 2013, Martha Gregory, a tax law specialist and technical assistance dispute resolution employee of the Department, issued correspondence to Petitioner. The documented purpose of the correspondence was to request additional information regarding Petitioner's protest of the NOPA. Among other items, Ms. Gregory requested Petitioner provide the following: [D]ocumentation and explanations regarding the source of income—vehicle sales, loan payments, etc.—for each deposit. For vehicle sales deposits, provide the customer name, vehicle identification number and amount; for loan payments, provide proof of an existing loan and the amount received from the borrower; and for any other deposits, provide documentation of the source of this income. A conference was held with Petitioner on February 7, 2013. At the conference, Ms. Gregory discussed the January 10, 2013, correspondence including the request for information. The Department did not receive the requested information. Following the conference, the Department provided the Petitioner an additional 105 days to provide documentation to support the protest. Again, Petitioner failed to provide the information requested. On June 14, 2013, the Department issued its Notice of Decision ("NOD"). The NOD concluded that Petitioner had failed to demonstrate that it was not liable for the tax, plus penalty and interest, on unreported sales as scheduled in audit Exhibit A04, Unreported Sales, as assessed within the compliance audit for the assessment period. Accordingly, the protested assessment was sustained. On July 15, 2013, Petitioner filed a Petition for Reconsideration to appeal the Notice of Decision ("POR"). The POR advanced the following issues: (1) the records examined were not the books and records of Petitioner; (2) the audit should be reduced because the auditor's methodology was incorrect; and the Petitioner should be allowed a credit for bad debts taken during the audit period. At Petitioner's request, on October 22, 2013, Petitioner and Ms. Gregory participated in a conference regarding the POR. At the conference, Petitioner requested a 30-day extension to provide documentation in support of Petitioner's POR. No additional documentation was subsequently provided by Petitioner. On April 29, 2014, the Department issued its Notice of Reconsideration ("NOR"). The NOR sustained the protested assessment. Petitioner, on June 30, 2014, filed its Petition for Chapter 120 Hearing to contest the NOR. Petitioner did not file its federal tax returns for the years 2008, 2009, and 2010 until after the Department issued the NOR. Indeed, the federal returns were not filed until June 3, 2014.4/ Ms. Kruse conceded that the auditor's assessment utilized Petitioner's bank statements to determine unreported sales; however, the auditor did not make any adjustments for "unusual items that would have been on the face of the bank statements." Ms. Kruse further acknowledged that the auditor's assessment does not reference Petitioner's general ledger information. Ms. Kruse acknowledged that, for several representative months, the general ledger accurately reported the deposits for the bank statements provided. When presented with a limited comparison of the bank statement and the general ledger, Ms. Kruse further agreed that, on several occasions, deposits noted on the bank statements were probably not taxable transactions; however, the same were included as taxable sales in the auditor's analysis. Ms. Kruse credibly testified that the same appeared to be transfers of funds from one account into another; however, because the Department only possessed the bank statements from one account, and never received the requested "back up information" concerning the other account, the Department could not discern the original source of the funds.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that The Department conduct a new assessment of Petitioner's sales and use tax based on a test or sampling of Petitioner's available records or other information relating to the sales or purchases made by Petitioner for a representative period, giving due consideration to Petitioner's available records, including Petitioner's general ledger, to determine the proportion that taxable retail sales bear to total retail sales. DONE AND ENTERED this 17th day of April, 2015, in Tallahassee, Leon County, Florida. S TODD P. RESAVAGE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 17th day of April, 2015.
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: Petitioner, a corporation headquartered in Charlotte, North Carolina, is in the business of operating movie theatres both within and without the State of Florida. At these theatres Petitioner Operates concession stands which sell both candy items and drinks in various sizes at different prices to persons who frequent the theatres. For the period of time from September, 1985 through May, 1985, Petitioner remitted to the Department of Revenue sales tax on the total taxable value of all taxable items sold at its concession stands in all of its Florida theatres, in accordance with the presumptive effective rate of tax of 5.63 percent contained in Rule 12A-1.11(37), Florida Administrative Code. As a result of an audit for a previous period dated October 1, 1982, Petitioner remitted to the Department of Revenue the amount of $10,637.00 for sales tax on taxable items sold at its concession stands during this audit period in accordance with the presumptive effective tax rate of 4.5 percent as contained in Rule 12A-1.11(37), Florida Administrative Code during the audit period. On August 15, 1985, Petitioner filed with the Department of Revenue, as agent for Respondent, two (2) applications for sales tax refund in the amount of $16,876.52 and $10,637.00. The applications were dated August 13, 1985, and were timely filed. During the refund periods at issue in this matter, the Petitioner: (a) posted and charged flat prices for the various items offered for sale, which prices included sales tax (b) kept records of daily and weekly sales of taxable items at each of its Florida theatres (c) kept records of daily attendance at each movie shown by each Florida theatre and (d) kept records of weekly calculations, through inventory analysis, of sales of drinks and candy items, including the number, size and price of each item sold at each of its Florida theatre. During the refund periods at issue in this matter, the Petitioner did not maintain cash registers at its concession stands in its Florida theatres and did not maintain records made contemporaneously with the sale of taxable items from the concession stands which separately itemized the amounts of sales tax collected on each sale transaction occurring at the theatres' concession stands. Rather, Petitioner chose, for its own convenience, to operate a "cash box" operation at each of its concession stands in its Florida theatres and willingly remitted sales tax to the Department of Revenue pursuant to the presumptive effective tax rate contained in Rule 12-1.11(37), Florida Administrative Code for the relevant periods. In April, 1985, Petitioner placed computerized cash registers in each of its Florida theatre concession stands. These cash registers provided tapes of each individual transaction each day, specifically recording each taxable and nontaxable sale and the amount of sales tax due on each taxable sale with a daily summation on each tape at each theatre. Rule 12A-1.11(37), Florida Administrative Code, requires concessionaires such as Petitioner to remit sales tax at a rate of 5.63 percent of taxable sales under the present 5 percent statutory sales tax schedule and at 4.5 percent of taxable sales under the previous statutory sales tax schedule unless a concessionaire, through its records, shows another effective rate by "proof to the contrary". Petitioner produced an effective tax rate of 5.13 percent for the month of April 1985, for all its Florida theatres by dividing the total sales tax collected during April, 1985 by the total taxable sales during April, 1985, as evidenced by the cash register tapes from all of Petitioner's concession stands in Florida. Petitioner then used that tax rate as a base to retroactively reconstruct an effective tax rate for the refund periods by assuming that the product sales mix (product mix of products sold) and the transactional sales mix (the number of items purchased together in a single transaction by a customer) experienced during the refund periods were the same as that experienced during the month of April, 1985. There was no competent evidence that the product sales mix or the transactional sales mix experienced during the refund periods were the same as that experienced during the nonth of April, 1985. There is insufficient evidence in the record to support Petitioner's reconstructed effective tax rates that were used to calculate the refunds. Therefore, Petitioner has failed to show "proof to the contrary" that its reconstructed effective tax rates are correct or that the presumptive effective tax rate contained in Rule 12A-1.11(37), Florida Administrative Code were incorrect for the refund periods at issue in this matter.
Recommendation Based on the findings of fact and conclusions of law recited herein, it is RECOMMENDED that the Comptroller enter his final order DENYING Petitioner's refund applications. Respectfully submitted and entered this 25th day of September, 1986, in Tallahassee, Leon County, Florida. WILLIAM R. CAVE Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 25th day of September, 1986.
The Issue Whether the agency has an unpromulgated statement of general applicability that imposed a requirement not specifically required by statute or by an existing rule, and which has been utilized against Petitioners to their detriment.
Findings Of Fact On March 24, 1994, the Department of Revenue (Department) issued a Notice of Reconsideration (NOR) that claimed the Petitioners, Terry and Donna Ernst, had willfully failed to collect sales tax. Petitioners' assertion of an exemption in connection with the sales tax assessment was denied. The NOR provided that the Petitioners are the president and vice- president of Hussh, Inc., a retail apparel store in Palm Beach, Florida and that such company made sales to customers for delivery in the store and for shipment outside of the State of Florida. At issue were the alleged shipments to out of state destinations. Pertinent to this case is the language in the NOR found at page two which provided: Due to the inadequacy and volume of Hussh's records, the auditor sampled the available records, and assessed Hussh for asserted out of state sales that were improperly documented. According to the auditor, many of the sales receipts or invoices of asserted out of state shipments were missing the top portion of the invoice. Significantly, this portion of the invoice would contain the names, addresses, and asserted export destination information on each sale. Other invoices were stamped, "out of state shipped," but no destination information was present on the invoice. [Emphasis added.] The Petitioners maintain that the portions of the NOR emphasized in the foregoing paragraph constitute an agency statement of general applicability and is, therefore, an unpromulgated rule. The Department does not have a rule which lists all documentation which might establish an exemption for sales tax assessment. Similarly, the Department does not have a rule that lists the type of documentation which would be inadequate to establish an exemption for sales taxes. The Department's existing rule, Rule 12A-1.064, Florida Administrative Code, provides, in part: (1)(a) Sales tax is imposed on the sales price of each item or article of tangible personal property, unless otherwise exempt, when the property is delivered to the purchaser or his representative in this state. However, the tax does not apply to tangible personal property irrevocably committed to the exportation process at the time of sale, when such process has been continuous or unbroken. (b) Intent of the seller and the purchaser that the property will be exported is not sufficient to establish the exemption; nor does delivery of the property to a point in Florida for subsequent transportation outside Florida necessarily constitute placing the property irrevocably in the exportation process. Tangible personal property shall be deemed committed to the exportation process if: The dealer is required by the terms of the sale contract to deliver the goods outside this state using his own mode of transportation. The dealer must retain in his records trip tickets, truck log records, or other documentation reflecting the specific items and export destination; The dealer is required by the terms of the sale contract to deliver the goods to a common carrier for final and certain movement of such property to its out of state destination. Sales by a Florida dealer are exempt when the dealer delivers the merchandise to the transportation terminal for shipment outside this state and secures a dock or warehouse receipt and a copy of the bill of lading. On shipments to points outside the United States, a shipper's export declaration shall also be obtained; [Emphasis added.] Rule 12A-1.093, Florida Administrative Code, requires taxpayers to maintain and preserve records. This rule provides, in part: (2) Each dealer defined in Chapter 212, F.S., each licensed wholesaler, and any other person subject to the tax imposed by Chapter 212, F.S., shall keep and preserve a complete record of all transactions, together with invoices, bills of lading, gross receipts from sales, RESALE CERTIFICATES, CONSUMER EXEMPTION CERTIFICATES and other pertinent records and papers as may be required by the Department of Revenue for the reasonable administration of Chapter 212, F.S., and such books of account as may be necessary to determine the amount of tax due thereunder. The terms "bill of lading," "dock or warehouse receipt," and "invoice" are common terms used in the business community. Each connotes that, at the minimum, certain information will be retained on the face of the document. For example, according to Petitioners' witness, the minimum information expected on a bill of lading would be: the name of the person that the item is being shipped to, the item being shipped, the cost of the shipment, and the terms of the shipment with the value of the item being shipped. Similarly, the minimum information which is expected on an "invoice" would be: a description of the item sold, the amount of the sale, and the name of the person to whom the item was sold. The terms "bill of lading," "dock or warehouse receipt," and "invoice" are not defined by rule. The Department determined whether an exemption was documented based upon the results of this audit.
The Issue The issue is whether Petitioner is liable for sales and use taxes, penalties, and interest and, if so, how much.
Findings Of Fact Petitioner operated a bar and grill in Punta Gorda that served beer, wine, liquor, and food at retail. In the course of business, Petitioner collected tax from the customers. Petitioner reported to Respondent sales tax collections for May 1996, November 1996, March 1997, November 1997, and December 1997. In connection with these collections, Petitioner remitted to Respondent seven checks representing the net tax due Respondent. These checks totaled $6700.64. The bank on which the checks were drawn dishonored them. The remittance of net sales tax proceeds by payment through checks that are later dishonored implies a fraudulent, willful intent to evade the payment of these sums. Respondent has issued five warrants concerning the unremitted taxes, penalties, and interest. Warrant 953620064 shows that Petitioner owes $1171 in sales tax remittances for the five months from July through November 1995. With penalties and interest, the total due on this warrant, through June 5, 1998, is $1832.37. Interest accrues after June 5 at the daily rate of $0.35. Warrant 467049 shows that Petitioner owes $2940.25 in sales tax remittances for the following months: April 1996, October 1996, December 1996, and January 1997. Petitioner purportedly paid each of these remittances with five (two in January) checks that were later dishonored. With penalties, including the 100 percent penalty for fraud, and interest, the total due on this warrant, through June 5, 1998, is $7480.12. Interest accrues after June 5 at the daily rate of $0.95. Warrant 971680037 shows that Petitioner owes $1301.85 in sales tax remittances for the following months: December 1995, June 1996, July 1996, September 1996, November 1996, and February 1997. With penalties and interest, the total due on this warrant, through June 5, 1998, is $2669.69. Interest accrues after June 5 at the daily rate of $0.43. Warrant 471481 shows that Petitioner owes $2912.48 in sales tax remittances for October and November 1997, for which Petitioner made remittances with two dishonored checks. With penalties, including the 100 percent penalty, and interest, the total due on this warrant, through June 5, 1998, is $6751.49. Interest accrues after June 5 at the daily rate of $0.95. Warrant 989840034 shows that Petitioner owes $8077.76 in sales tax remittances for the following months: August 1997, September 1997, December 1997, January 1998, and February 1998. With interest, the total due on this warrant, through June 5, 1998, is $8285.21. Interest accrues after June 5 at the daily rate of $2.65. Totaling the five warrants, Petitioner owes a total of $27,018.88 in taxes, penalties, and interest through June 5, 1998, and $5.33 per day for each ensuing day until the amount is paid.
Recommendation It is RECOMMENDED that the Department of Revenue enter a final order determining that Petitioner owes $27,018.88 in taxes, penalties, and interest through June 5, 1998, and $5.33 per day for each ensuing day until the amount is paid. DONE AND ENTERED this 10th day of July, 1998, in Tallahassee, Leon County, Florida. ROBERT E. MEALE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 10th day of July, 1998. COPIES FURNISHED: John N. Upchurch Nicholas Bykowsky Assistant Attorneys General Office of the Attorney General The Capitol, Tax Section Tallahassee, Florida 32399-1050 Judith Crown, President Tombstone, Inc. Suite P-50 1200 West Retta Esplanade Punta Gorda, Florida 33950 Linda Lettera, General Counsel Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668 Larry Fuchs, Executive Director Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668
The Issue Whether the Department of Revenue's (Department) assessment of tax and interest against American Business USA Corp. (Taxpayer) 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 pursuant to chapter 212, Florida Statutes. The Taxpayer is an active for-profit corporation with its principal address and mailing address at 12805 Newton Place, Wellington, Florida 33414-6226. The Taxpayer is a "dealer" as that term is defined by section 212.06(2). The Taxpayer has a federal employer identification number and a certificate of registration number.1/ The Taxpayer began doing business in Florida in January 2001, but did not register with the Department as a sales tax dealer until February 19, 2004. The Taxpayer does business as "1Vende.com." The Department audited the Taxpayer for sales and use tax compliance. The audit period was April 1, 2008, through March 31, 2011. FACTS RELATED TO THE AUDIT PERIOD Mr. Gomez and Ms. Niño, who are husband and wife, each hold 50 percent of the shares in the Taxpayer. There were two principal aspects of the Taxpayer's business during the audit period. First, the Taxpayer specialized in the sale of flowers, gift baskets, and other items of tangible personal property. Second, the Taxpayer specialized in the sale of "prepaid calling arrangements," within the meaning of section 212.05(1)(l). All of the Taxpayer's sales were initiated online. The Taxpayer sold to customers throughout Latin America, in Spain, and in the United States (including Florida). All payments to the Taxpayer were made by credit card or wire transfer. The Taxpayer generated electronic invoices for all its sales. The Taxpayer marketed itself to the public on its website as a company that sells flowers. The Taxpayer did not maintain any inventory of flowers, gift baskets, or other items of tangible personal property. When the Taxpayer received an order over the Internet for items of tangible personal property, the Taxpayer relayed the order to a florist in the vicinity of the customer (the local florist). The Taxpayer utilized the Internet or telephone to relay an order. The Taxpayer did not use telegraph. The Taxpayer used a local florist to fill the order it had received for flowers, gift baskets, and other items of tangible personal property. The Taxpayer charged its customers sales tax on sales of flowers, gift baskets, and other items of tangible personal property delivered in Florida. The Taxpayer did not charge its customers sales tax on sales of flowers, gift baskets, and other items of tangible personal property delivered outside of Florida. The Taxpayer did not charge sales tax on the delivery fee it charged its customers on orders of flowers, gift baskets, and other items of tangible personal property. The Taxpayer primarily sold prepaid calling arrangements in $2.00, $5.00, $10.00, and $20.00 increments. When customers purchased prepaid calling arrangements, the Taxpayer sent them an authorization number by email. The Taxpayer did not charge its customers sales tax on the prepaid calling arrangements it sold. THE AUDIT The Taxpayer filed its federal tax returns on an accrual basis with the fiscal year ending December 31. The taxpayer's accountant recorded sales on the federal tax returns (form IRS 1120) based on the deposits recorded on the bank statements. Mr. Gomez prepared the Florida sales and use tax returns (form DR-15) for the Taxpayer and calculated the tax due by multiplying its taxable sales by the applicable tax rate. On May 9, 2011, the Department mailed the Taxpayer a Notice of Intent to Audit Books and Records, form DR-840, for audit 200105422. The Department requested Mr. Gomez provide for audit the Taxpayer's chart of accounts, general ledgers, cash receipt journals, sales journals, resale certificates, general journals, federal tax returns, state sales tax returns, shipping documents, and bank statements. Along with the DR-840, the Department mailed the Taxpayer a Pre-audit Questionnaire and Request for Information and Electronic Audit Survey. On May 23, 2011, the Taxpayer returned to the Department the completed Pre-audit Questionnaire and Request for Information and Electronic Audit Survey. On June 15, 2011, the Department's auditor and Mr. Gomez had a pre-audit interview, in which they discussed auditing techniques and records available for audit. Mr. Gomez provided for audit a download of the Taxpayer's electronic records, including its sales database, bank statements, and federal tax returns. The Taxpayer did not keep for audit books and records that would allow the Department to reconcile the sales in the electronic database to the deposits on the bank statement. The Department determined that the Taxpayer's books and records were inadequate for audit and relied upon the "best information then available" of the Taxpayers' sales tax liability, in accordance with section 212.12(5)(b). The Taxpayer did not maintain sales invoices, sales journals, or general ledgers. On August 8, 2011, the Department's auditor met with Mr. Gomez and discussed the audit findings regarding sales. On August 18, 2011, the Department's auditor met with Mr. Gomez and discussed the taxability of the prepaid calling arrangements. On October 31, 2011, the Department mailed the Taxpayer a Notice of Intent to Make Audit Changes, form DR-1215, for audit number 200105422. Prior to issuing the DR-1215, the Department compromised in full the assessed penalty. On February 16, 2012, the Department mailed the Taxpayer a Notice of Proposed Assessment for audit number 200105422. The Department assessed the Taxpayer $102,508.28 in sales tax and interest through February 16, 2012, in the amount of $18,097.52. Interest accrues at $19.62 per day until the tax is paid in full.2/ ESTOPPEL In its Amended Petition, the Taxpayer asserts that it "relied on advice and instruction from [the Department] when it failed to collect Telecommunication tax and should not be subject to any taxes or penalties as a result of their [sic] reasonable reliance." Mr. Gomez and Ms. Niño made three visits to the Department's service centers, but only one of those three visits pre-dated the audit period. The other two visits were after the audit period. In February 2001 they visited the service center in Miami, Florida, where they talked to someone named "Maria" about the taxability of their new business. Both Mr. Gomez and Ms. Niño testified that as a result of the first visit with "Maria" in 2001, the Taxpayer only charged customers sales tax on the sales of flowers, gift baskets, and other items of tangible personal property delivered in Florida. The owners testified that they relied on advice given to them by "Maria." "Maria" did not testify at the formal hearing. There was no written confirmation of the advice given by "Maria." After the audit period while the audit was ongoing (between August 8 and August 18, 2011) they visited the service center in Coral Springs, Florida, where they spoke to someone named "Paula" about the ongoing audit. The third and final visit was on August 18, 2011, when they met with Everald Thomas at the service center in West Palm Beach. Mr. Thomas was the Department's auditor in this case. The owners talked to him about the taxability of the prepaid calling arrangements. The Taxpayer timely filed its Amended Petition for Administrative Hearing. The Taxpayer continues to dispute the assessment.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order that validates the assessment against American Business USA Corp. DONE AND ENTERED this 27th day of February, 2013, in Tallahassee, Leon County, Florida. CLAUDE B. ARRINGTON 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 27th day of February, 2013.
The Issue Whether the contested and unpaid portions of the tax, penalty and interest assessment issued against Petitioners as a result of Audit No. 9317210175 should be withdrawn as Petitioners have requested?
Findings Of Fact Based upon the evidence adduced at hearing, and the record as a whole, the following Findings of Fact are made: Shuckers is an oceanfront restaurant and lounge located at 9800 South Ocean Drive in Jensen Beach, Florida. In November of 1992, Petitioner Mesa's brother, Robert Woods, Jr., telephoned Mesa and asked her if she wanted a job as Shuckers' bookkeeper. Woods had been the owner of Shuckers since 1986 through his ownership and control of the corporate entities (initially Shuckers Oyster Bar Too of Jensen Beach, Florida, Inc., and then NAT, Inc.) that owned the business. Mesa needed a job. She therefore accepted her brother's offer of employment, notwithstanding that she had no previous experience or training as a bookkeeper. When Mesa reported for her first day of work on November 19, 1992, she learned that Woods expected her to be not only the bookkeeper, but the general manager of the business as well. Mesa agreed to perform these additional responsibilities. She managed the day-to-day activities of the business under the general direction and supervision of Woods. After a couple of weeks, Woods told Mesa that it would be best if she discharged her managerial responsibilities through an incorporated management company. Woods had his accountant draft the documents necessary to form such a corporation. Among these documents were the corporation's Articles of Incorporation. Mesa executed the Articles of Incorporation and, on December 3, 1992, filed them with the Secretary of State of the State of Florida, thereby creating Petitioner TAN, Inc. TAN, Inc.'s Articles of Incorporation provided as follows: The undersigned subscribers to these Articles of Incorporation, natural persons competent to contract, hereby form a corporation under the laws of the State of Florida. ARTICLE I- CORPORATE NAME The name of the corporation is: TAN, INC. ARTICLE II- DURATION This corporation shall exist perpetually unless dissolved according to Florida law. ARTICLE III- PURPOSE The corporation is organized for the purpose of engaging in any activities or business permitted under the laws of the United States and the State of Florida. ARTICLE IV- CAPITAL STOCK The corporation is authorized to issue One Thousand (1000) shares of One Dollar ($1.00) par value Common Stock, which shall be designated "Common Shares." Article V- INITIAL REGISTERED OFFICE AND AGENT The principal office, if known, or the mailing address of this corporation is: TAN, INC. 9800 South Ocean Drive Jensen Beach, Florida 34957 The name and address of the Initial Registered Agent of the Corporation is: Linda A. W. Mesa 9800 South Ocean Drive Jensen Beach, Florida 34957 ARTICLE VI- INITIAL BOARD OF DIRECTORS This corporation shall have one (1) director initially. The number of directors may be either increased or diminished from time to time by the By-laws, but shall never be less than one (1). The names and addresses of the initial directors of the corporation are as follows: Linda A. W. Mesa 9800 South Ocean Drive Jensen Beach, Florida 34957 ARTICLE VII- INCORPORATORS The names and addresses of the incorporators signing these Articles of Incorporation are as follows: Linda A. W. Mesa 9800 South Ocean Drive Jensen Beach, Florida 34957 On the same day it was incorporated, December 3, 1992, TAN, Inc., entered into the following lease agreement with the trust (of which Woods was the sole beneficiary) that owned the premises where Shuckers was located: I, Michael Blake, Trustee, hereby lease to Tan, Inc. the premises known as C-1, C-2, C-3, C-4, 9800 South Ocean Drive, Jensen Beach, Florida for the sum of $3,000.00 per month. This is a month to month lease with Illinois Land Trust and Michael Blake, Trustee. Mesa signed the agreement in her capacity as TAN, Inc.'s President. She did so at Woods' direction and on his behalf. No lease payments were ever made under the agreement. 3/ The execution of the lease agreement had no impact upon Shuckers. Woods remained its owner and the person who maintained ultimate control over its operations. At no time did he relinquish any part of his ownership interest in the business to either Mesa or her management company, TAN, Inc. Mesa worked approximately 70 to 80 hours a week for her brother at Shuckers doing what he told her to do, in return for which she received a modest paycheck. Woods frequently subjected his sister to verbal abuse, but Mesa nonetheless continued working for him and following his directions because she needed the income the job provided. As part of her duties, Mesa maintained the business' financial records and paid its bills. She was also required to fill out, sign and submit to Respondent the business' monthly sales and use tax returns (hereinafter referred to as "DR- 15s"). She performed this task to the best of her ability without any intention to defraud or deceive Respondent regarding the business' tax liability. The DR-15s she prepared during the audit period bore NAT, Inc.'s Florida sales and use tax registration number. On the DR-15 for the month of December, 1992, Mesa signed her name on both the "dealer" and "preparer" signature lines. Other DR-15s were co-signed by Mesa and Woods. In April of 1993, Woods told Mesa that she needed to obtain a Florida sales and use tax registration number for TAN, Inc., to use instead of NAT, Inc.'s registration number on Shuckers' DR-15s. In accordance with her brother's desires, Mesa, on or about May 14, 1993, filed an application for a Florida sales and use tax registration number for TAN, Inc., which was subsequently granted. On the application form, Mesa indicated that TAN, Inc. was the "owner" of Shuckers and that the application was being filed because of a "change of ownership" of the business. In fact, TAN, Inc. was not the "owner" of the business and there had been no such "change of ownership." By letter dated June 22, 1993, addressed to "TAN INC d/b/a Shuckers," Respondent gave notice of its intention to audit the "books and records" of the business to determine if there had been any underpayment of sales and use taxes during the five year period commencing June 1, 1988, and ending May 31, 1993. The audit period was subsequently extended to cover the six year period from June 1, 1987 to May 31, 1993. Relying in part on estimates because of the business' inadequate records, auditors discovered that there had been a substantial underpayment of sales and use taxes during the audit period. The auditors were provided with complete cash register tapes for only the following months of the audit period: June, July, August and December of 1992, and January, February, March, April and May of 1993. A comparison of these tapes with the DR-15s submitted for June, July, August and December of 1992, and January, February, March, April and May of 1993 revealed that there had been an underreporting of sales for these months. Using the information that they had obtained regarding the three pre- December, 1992, months of the audit period for which they had complete cash register tapes (June, July and August of 1992), the auditors arrived at an estimate of the amount of sales that had been underreported for the pre- December, 1992, months of the audit period for which they did not have complete cash register tapes. The auditors also determined that Shuckers' tee-shirt and souvenir sales, 4/ Sunday brunch sales, cigarette vending sales, vending/amusement machine location rentals 5/ and tiki bar sales that should have been included in the sales reported on the DR-15s submitted during the audit period were not included in these figures nor were these sales reflected on the cash register tapes that were examined. According of the "Statement of Fact" prepared by the auditors, the amount of these unreported sales were determined as follows: TEE-SHIRT SALES: Sales were determined by estimate. This was determined to be $2,000/ month. No records were available and no tax remitted through May, 1993. SUNDAY BRUNCH SALES: Sales were determined by estimate. This was determined to be 100 customers per brunch per month (4.333 weeks). No audit trail to the sales journal was found and no records were available. CIGARETTE VENDING SALES: The estimate is based on a review of a sample of purchases for the 11 available weeks. The eleven weeks were averaged to determine monthly sales at $3/pack. VENDING MACHINE LOCATION RENTAL REVENUE: The revenue estimate is based on a review of a one month sample. TIKI BAR SALES: The sales estimate is based on a review of infrequent cash register tapes of February, 1993. The daily sales was determined by an average of the sample. The number of days of operation per month was determined by estimate. In addition, the auditors determined that TAN, Inc. had not paid any tax on the lease payments it was obligated to make under its lease agreement with Illinois Land Trust and Michael Blake, Trustee, nor had any tax been paid on any of the pre-December, 1992, lease payments that had been made in connection with the business during the audit period. According to the "Statement of Fact" prepared by the auditors, the amount of these lease payments were determined as follows: The estimate is based on 1990 1120 Corporate return deduction claimed. This return is on file in the Florida CIT computer database. The 1990 amount was extended through the 6/87 - 11/92 period. For the period 12/92 - 5/93 audit period, TAN's current lease agreement of $3,000/month was the basis. No documentation was produced during the audit supporting any the sales tax exemptions that the business had claimed during the audit period on its DR-15s. 6/ Accordingly, the auditors concluded that the sales reported as exempt on the business' DR-15s were in fact taxable. Using records of sales made on a date selected at random (February 1, 1993), the auditors calculated effective tax rates for the audit period. They then used these effective tax rates to determine the total amount of tax due. An initial determination was made that a total of $201,971.71 in taxes (not including penalties and interest) was due. The amount was subsequently lowered to $200,882.28. On or about December 22, 1993, TAN, Inc., entered into the following Termination of Lease Agreement with Ocean Enterprises, Inc.: TAN, Inc., a Florida corporation, hereby consents to termination of that certain lease of the premises known as C-1, C-2, C-3 and C-4 of ISLAND BEACH CLUB, located at 9800 South Ocean Drive, Jensen Beach, Florida, dated December 3, 1992, acknowledges a landlord's lien on all assets for unpaid rent; and transfers and sets over and assigns possession of the aforesaid units and all of its right, title and interest in and to all inventory, equipment, stock and supplies located on said premises 7/ in full satisfaction of said unpaid rent; all of the foregoing effective as of this 22nd day of December, 1993. FOR AND IN CONSIDERATION of the foregoing termin- ation of lease, OCEAN ENTERPRISES, Inc., a Florida corporation, hereby agrees to pay Linda Mesa, each month all of the net revenues of the operation of the bar and restaurant located on said premises, up to the sum of $15,000.00, for sales tax liability asserted against TAN, Inc. or Linda A. W. Mesa based upon possession or ownership of said premises or any of the assets located thereon, plus attorney's fees incurred in connection with defending or negotiating settlement of any such liability. Net revenue shall mean gross revenue, less operating expenses, includ- ing, but not limited to, rent, up to the amount of $5,000.00 per month, costs of goods sold, utilities, payroll and payroll expense and insurance. OCEAN ENTERPRISES, Inc. represents that it has entered into a lease of said premises for a term of five years commencing on or about December 22, 1993, pursuant to the terms and conditions of which OCEANFRONT [sic] ENTERPRISES, Inc. was granted the right to operate a restaurant and bar business on said premises. Ocean Enterprises, Inc., leases the property from Island Beach Enterprises, which obtained the property through foreclosure. TAN, Inc., has been administratively dissolved.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Department of Revenue enter a final order withdrawing the contested and unpaid portions of the assessment issued as a result of Audit No. 9317210175, as it relates to TAN, Inc., and Linda A. W. Mesa. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 27th day of June, 1995. STUART M. LERNER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 27th day of June, 1995.
Findings Of Fact At all times pertinent to this cause, Robert W. Pope, has been the holder of license no. 62-600, series 4-COP, SRX, held with the State of Florida, Division of Beverage to trade as The Wedgewood Inn, located at 1701, 4th Street, South, St. Petersburg, Pinellas County, Florida. When the Respondent, Pope, began to operate the licensed premises he was given a registration sales tax number by the State of Florida, Department of Revenue. This number was provided in accordance with 212, F.S. That law required the remittance of the collected sales tax on a month to month basis, the period beginning with the first day of the month and ending with the last day of the month. The remittance was due on the first day of the following month and payable by the 20th day of the following month. Failure to pay by the 20th would result in a 5 percent penalty and 1 percent interest per month. The sales tax remittance due from the licensed premises for September, 1976 through December, 1976 was not made and a lien was recorded to aid collection of the tax. Payment of the amount of $4,500.00 was paid in February or March, 1977 to satisfy the Department of Revenue lien claims. At present all taxes due and owing under 212, F.S. are current. The above facts established that the Respondent failed to comply with the provisions of 212, F.S. pertaining to the remittance of sales tax from the Respondent to the State of Florida, Department of Revenue. This violation, thereby subjects the Respondent to the possible penalties of 561.29, F.S.
Recommendation It is recommended that the Respondent, Robert W. Pope, be required to pay a civil penalty in the amount of $500.00 or have the license no. 62-600, series 4- COP, SRX, suspended for a period of 20 days. DONE AND ENTERED this 28th day of July, 1977, in Tallahassee, Florida. CHARLES C. ADAMS Hearing Officer Division of Administrative Hearings 530 Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: William Hatch, Esquire Division of Beverage 725 South Bronough Street Tallahassee, Florida 32304 Robert W. Pope, Esquire 611 First Avenue, North St. Petersburg, Florida 33701
