Findings Of Fact Petitioner is Carl R. Glass, d/b/a Osceola Forge located at 2749 North Orange Blossom Trail, Kissimmee, Florida 34744. Petitioner is engaged in the business of manufacturing and fabricating burglar bars, steel gates, decorative plastic ornamental castings and injection moldings. Petitioner built and erected one double sided billboard on his business property at 2749 North Orange Blossom Trail, Kissimmee, Florida. It is anchored by its owns supports into the ground as a permanent improvement to Petitioner's real property. The size of the billboard is approximately 12' x 38', plus an apron that runs along the length of the bottom of the billboard. Petitioner leases the face and apron of each side of billboard to customers who are generally required to supply their own labor and material to create an advertising message. The billboard was built to provide double-sided advertising for lanes of traffic going northbound or southbound past Petitioner's place of business. Petitioner has rented the billboard to various lessees for a monthly rental fee over the relevant period. Petitioner did not charge or collect sales and use taxes on the rental fee. Respondent conducted an audit of Petitioner's entire business, for the period May 1, 1986 through April 30, 1991. There was only one item assessed as a result of the audit which was on the lease of the billboard located on Petitioner's business property. Petitioner was assessed sales and use taxes, interest and penalties totalling $6,142.38, including taxes ($4,017.76) with a per diem interest rate of $1.32 to be computed from 10/3/91 to the present. Additional interest due, as of July 1, 1993, was calculated to equal $842.16 (638 days x $1.32). The sales tax assessment was based on invoices and other information provided by the Petitioner and followed the Department of Revenue routine procedures required for all audits. From January 1987 through February 1991, Petitioner, or his secretary, made five telephone calls from Osceola Forge to the Taxpayer Assistance Number of the Department of Revenue's regional office located in Maitland, Florida, requesting assistance. On each occasion, the Department's employee advised Petitioner or his employee that they could call the Department's Tallahassee 800 taxpayer assistance number. On at least one occasion, Petitioner's secretary or Petitioner was advised that the transaction was tax exempt, and need not be collected. Petitioner was aware of the 800 taxpayer assistance number in Tallahassee and tried to call the number. However, he was unable to get through, and called the local office only. On April 9, 1992, Petitioner personally telephoned the Titusville office of the Department of Revenue. On each occasion, Petitioner inquired whether or not sales or use taxes should be collected on the rental of the billboard. A free, updated Sales and Use Tax Rules Book is available to any tax payer upon request. In addition, a taxpayer could personally appear and bring documentation relating to any questions relating to the sales and use tax at any regional office. Petitioner did not obtain an updated rules book or personally appear at a regional office. On April 30, 1992, Petitioner filed a Protest Letter with Respondent challenging the abovementioned tax assessment. Respondent issued to Petitioner a Notice of Decision dated December 1, 1992. On January 8, 1993, Petitioner filed a Request for a Formal Administrative Hearing with Respondent. To date, Petitioner has not paid any of the contested taxes, interest, and penalties to Respondent. Petitioner relied on information provided by his secretary, his accountant, and brief phone conferences with the DOR's Maitland office to determine that the rental fees were tax exempt, and did not collect the sales tax from his customers. The DOR Audit Supervisor testified that there is a clear distinction between the taxable rental of a billboard and the nontaxable services of placing an advertising message on the billboard. The rental of the face of the billboard is a taxable transaction. On the other hand, if a person rents or leases a billboard, then hires a third party to place an advertising message on the billboard, this advertising service is tax exempt.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department of Revenue enter a Final Order upholding its sales and use tax assessment, waive penalties and interest accrued prior to October 2, 1991, and assess a tax of $4,017.76, plus interst from the date due. DONE and ENTERED this 14th day of July, 1993, in Tallahassee, Florida. DANIEL M. KILBRIDE 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 14th day of July, 1993. APPENDIX The following constitutes my specific rulings, in accordance with section 120.59, Florida Statutes, on proposed findings of fact submitted by the parties. Proposed findings of fact submitted by Petitioner. Petitioner did not submit proposed findings of fact. Proposed findings of fact submitted by Respondent. Proposed findings submitted by Respondent are accepted except as noted below. Those proposed findings neither noted below nor included in the Hearing Officer's findings were deemed unnecessary to the conclusions reached. Rejected as argument: paragraphs 37, 38, 39 COPIES FURNISHED: Carl R. Glass 2749 North Orange Blossom Trail Kissimmee, Florida 34741 James McAuley, Esquire Assistant Attorney General Capitol Building Tallahassee, Florida 32399-1050 Larry Fuchs Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100 Linda Lettera General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100
Findings Of Fact Petitioner purchased a used car in Florida in May of 1983 and paid 5 percent sales tax. Petitioner did not title said car in the State of Florida. When Petitioner returned to Maryland, his state of residence, Maryland imposed a 5 percent tax on said car when Petitioner titled said car. Petitioner applied for a sales tax refund to the Department of Revenue in the amount of $225.00. Respondent issued a Notice of Intent to deny said refund application on December 1, 1983. From the exhibits to which the parties stipulated, additional facts are found by the Hearing Officer. A bill of sale indicates that Petitioner purchased a 1979 Buick Regal from Eddy Auto Sales on May 14, 1983. A temporary registration and receipt issued by the State of Maryland on June 17, 1983, shows that Petitioner paid a "title tax" of $222.50 to the State of Maryland. By letter dated January 27, 1984, Agnes Stoicos of the Maryland Department of Transportation indicates that the Maryland tax is a 5 percent excise tax upon the issuance of all original and subsequent certificates of title, and the tax is used primarily for the construction and the maintenance of the Maryland highway system.
Findings Of Fact As a licensed wholesale dealer in cigarettes, respondent filed monthly tax returns on forms furnished by petitioner. The return respondent filed for July of 1977, was notarized on August 10, 1977, and received by petitioner on August 16, 1977. Accompanying the return was respondent's check drawn in favor of petitioner in the amount of $11,927.69. The return for August, 1977, was notarized on September 9, 1977, and received by petitioner on September 12, 1977. Accompanying this return was respondent's check drawn in favor of petitioner in the amount of $12,995.94. The September, 1977, return was notarized on October 14, 1977, and received by petitioner, at the latest, on October 18, 1977. Accompanying this return was respondent's check drawn in favor of petitioner in the amount of $11,845.44. The return for October, 1977, was notarized on November 10, 1977, and received by respondent on November 14, 1977. Accompanying this return was respondent's check drawn in petitioner's favor in the amount of $9,891.76. The return for November, 1977, was notarized on December 10, 1977, and received by petitioner on December 13, 1977. Accompanying this return was respondent's check drawn in petitioner's favor in the amount of $10,693.80. The return for December, 1977, was notarized on January 10, 1978, and received by petitioner on January 13, 1978. Accompanying this return was respondent's check drawn in petitioner's favor in the amount of $16,678.00. The return for January, 1978, was notarized on February 10, 1978, and received by petitioner on February 20, 1978. Accompanying this return was respondent's check drawn in petitioner's favor in the amount of $8,657.86. The return for February, 1978, was notarized on March 10, 1978, and received by petitioner on March 13, 1978. Accompanying this return was respondent's check drawn in petitioner's favor in the amount of $7,115.49. Beginning in March of 1978, respondent made tax payments whenever its Pitney-Bowes cigarette stamping meter was reset by petitioner's cashier, and payments did not accompany respondent's tax returns thereafter. Respondent's return for March, 1978, was notarized on April 17, 1978, and received by petitioner the following day. The return for April, 1978, was notarized on May 17, 1978, and received by petitioner the same day. The return for May, 1978, was notarized on June 9, 1978, and received by petitioner on June 12, 1978. The return for June, 1978, was notarized on July 10, 1978, and received by petitioner on July 12, 1978. The August, 1978, return was notarized on September 7, 1978, and received by petitioner on September 13, 1978. The September, 1978, return was notarized on October 9, 1978, and received by petitioner on October 11, 1978. The October, 1978, return was notarized on November 7, 1978, and received by petitioner on November 21, 1978. The November, 1978, return was notarized on December 8, 1978, and received by petitioner on December 11, 1978. The December, 1978, return was notarized on January 10, 1979, and received by petitioner the following day. The January, 1979, return was notarized on February 10, 1979, and received by petitioner on February 13, 1979. The February, 1979, return was notarized on March 10, 1979, and received by petitioner on March 20, 1979. The March, 1979, return was notarized on April 10, 1979, and received by Petitioner the following day. The April, 1979, return was notarized on May 10, 1979, and received by petitioner on May 16, 1979. The May, 1979, return was notarized on June 14, 1979, and received by petitioner the following day. The June, 1979, return was notarized on July 24, 1979, and received by petitioner on August 2, 1979. Respondent's check No. 1843, dated March 10, 1977, drawn in petitioner's favor, in the amount of $11,264.20, was dishonored by the drawee for insufficient funds. Respondent's check No. 1833, dated January 10, 1978, drawn in petitioner's favor in the amount of $16,678.20, was dishonored by the drawee for insufficient funds. Respondent's check No. 1259, dated March 30, 1978, drawn in petitioner's favor, in the amount of $3,187.57, was dishonored by the drawee for insufficient funds. Respondent's check No. 1260, dated March 31, 1978, drawn in petitioner's favor in the amount of $105.00 was dishonored by the drawee for insufficient funds. Respondent's check No. 1203, dated February 20, 1978, drawn in petitioner's favor, in the amount of $2,591.19, was dishonored by the drawee for insufficient funds. Respondent's check No. 1261, dated April 17, 1978, drawn in petitioner's favor, in the amount of $2,159.32, was dishonored by the drawee for insufficient funds. Respondent's check No. 1997, dated November 9, 1978, drawn in petitioner's favor in the amount of $617.40, was dishonored by the drawee for the stated reason that respondent's account had been closed. In a post hearing memorandum, petitioner's counsel conceded that respondent had subsequently made all of its checks drawn in favor of petitioner good.
Recommendation Upon consideration of the foregoing, it is RECOMMENDED: That Petitioner revoke Respondent's permit as a wholesale cigarette dealer. DONE and ENTERED this 31st day of December, 1979, in Tallahassee, Florida. ROBERT T. BENTON, II Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: Harold F.X. Purnell, Esquire General Counsel Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32301 Gray Tobacco Company, Inc. 8109 N.W. 33rd Street Miami, Florida
The Issue The issue in this case is whether Petitioner is entitled to a waiver of the bond requirement set forth Section 559.927, Florida Statutes.
Findings Of Fact Based upon the oral and documentary evidence adduced at the final hearing and the entire record in this proceeding, the following findings of fact are made: Ladatco is a "seller of travel" as that term is defined in Section 559.927(1)(a), Florida Statutes. Ladatco deals exclusively in wholesale travel packages. Ladatco primarily packages and sells tours of Central and South America to retail travel agents. Until the last few years, the retail travel agents handled virtually all of the ticketing involved in the packages. Changes in the industry have resulted in Ladatco becoming more involved in the ticketing aspect as part of the services it provides in assembling the packages. However, Ladatco has very little direct contact with consumers. Ladatco originally began operations in 1967 as a subsidiary of another company. Ladatco has been conducting business in its current corporate form since 1976. Michelle Shelburne has been working for the company since 1969. She has been the president of Ladatco for at least the last ten years and she owns fifty percent (50 percent) of the outstanding stock. Annie Burke and Rosa Perez are the other officers of the company and they each own approximately twenty two and half percent (22 1/2 percent) of the stock. Both Burke and Perez have worked for Ladatco since approximately 1970. The remaining five percent of the outstanding stock is owned by an attorney who has represented Ladatco since 1967. Ladatco has seven other full time employees and operates out of an office building that is owned jointly by Shelburne, Perez and Burke. Under Section 559.927(10)(b), Florida Statutes, a seller of travel is obligated to post a performance bond or otherwise provide security to the Department to cover potential future claims made by travelers. The security required by this statute is for the benefit of consumers and may be waived by the Department in certain circumstances. On or about May 27, 1994, Ladatco submitted an Application for Security Waiver (the "Application") pursuant to Section 559.927(10)(b)5, Florida Statutes. In lieu of audited financial statements, Ladatco submitted a copy of its 1993 income tax return with the Application. Line 30 of that income tax return reflects a net loss for tax purposes of $100,722. In reviewing an application for a bond waiver, the Department looks at the taxable income on the income tax return. It is the Department's position that if a company shows a loss for tax purposes, it is lacking in financial responsibility and is ineligible for a bond waiver. Based on this policy, the Department denied Ladatco's Application by letter dated August 2, 1994. The certified public accountant who has handled all outside accounting services for Ladatco since 1977 testified at the hearing in this matter. He submitted a history of operations for the company from 1985 through 1993. The accountant explained that, in 1986, Ladatco acquired a very expensive computer system with customized software. The cost of this system was depreciated over a five year period. In addition, until 1991, the company operated out of a building that it owned. The building was sold to the individual principals of the company in 1991. During the years the company owned the building, a significant amount of depreciation was generated for tax purposes. The large depreciation expenses for the years 1986 through 1991 generated losses for tax purposes which have been carried over for future years. Thus, while the company's operations for 1993 generated a profit of $65,000, the loss carry over resulted in a net loss for income tax purposes. The current year forecast for the company, based upon existing bookings, projects a net income in excess of $64,000 for the year ending December 31, 1994. In sum, an isolated look at the taxable income loss reflected on the 1993 income tax return does not provide an accurate picture of the financial responsibility of this company. This closely owned company has been in business for approximately twenty eight (28) years. The three principals in the company have all been with the firm for more than twenty four (24) years. The company has demonstrated a great deal of stability and, while profitability has fluctuated from year to year, the company has continually met its obligations for more than a quarter century. There is every indication that it will continue to do so in the future. Ladatco has maintained a bond with the Airline Reporting Corporation ("ARC") for approximately two and a half years. The amount of the bond varies from year to year, but is generally in the vicinity of $35,000. The statute provides that a company which has successfully maintained a bond with the ARC for three years is entitled to a security waiver. While the ARC bond only protects the airlines and not the travelers, Ladatco will qualify for a waiver under this provision in approximately May of 1995. There is no indication of any unresolved complaints against Ladatco nor is there any evidence of civil, criminal or administrative action against the company.
Recommendation Based upon the forgoing findings of fact and conclusions of law, it is RECOMMENDED that the Department of Agriculture and Consumer Services enter a Final Order granting Ladatco's application for security waiver pursuant to Section 559.927(10)(b)5, Florida Statutes. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 16th day of December 1994. J. STEPHEN MENTON 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 16th day of December 1994. APPENDIX TO RECOMMENDED ORDER Only the Respondent has submitted proposed findings of fact. The following constitutes my ruling on those proposals. Adopted in pertinent part Finding of Fact 6 and also addressing the Preliminary Statement and in the Conclusions of Law. Adopted in substance in Finding of Fact 6. Adopted in substance in Finding of Fact 7. Adopted in substance in Finding of Fact 7. Adopted in substance in Finding of Fact 8. Adopted in substance in Finding of Facts 7 and 8. COPIES FURNISHED: Michelle D. Shelburne, President Ladatco, Inc. d/b/a Ladatco Tours 2220 Coral Way Miami, Florida 33145 Jay S. Levenstein, Senior Attorney Department of Agriculture and Consumer Services Room 515, Mayo Building Tallahassee, Florida 32399-0800 Honorable Bob Crawford Commissioner of Agriculture The Capitol, PL-10 Tallahassee, Florida 32399-0810 Richard Tritschler General Counsel Department of Agriculture and Consumer Services The Capitol, PL-10 Tallahassee, Florida 32399-0810
Findings Of Fact The State of Florida, Department of Revenue issued to the Petitioners a tax warrant dated May 12, 1986, for sales and use tax alleged to be due and delinquent, interest, penalties, and filing fees in the total sum of $8,269.95. Susan R. Bayer is the owner of a parcel of property located in Hillsborough County, Florida, commonly known as 3001 East Hillsborough Avenue, having become the owner of that property on February 29, 1984. Lloyd W. Bayer owned the property in finding 2 above prior to February 29, 1984. When Susan Bayer became the owner of the property, she became the successor in interest to a lease between Brown Bayer, Inc., and Creech Produce, Inc., wherein a portion of the property was leased to Creech Produce, Inc., for use by Creech Produce, Inc., to let sellers of produce use a space to park a vehicle to sell produce out of the vehicle. This business of Creech was licensed by the City of Tampa as a parking lot. The spaces in the lot were rented on a nightly basis and rent was collected on a nightly basis. There were no terms of rentals for periods longer than a nightly basis. The persons parking vehicles in the spaces generally sold wholesale produce out of the vehicles but not all of them did so, and there was no requirement the vehicles occupying these spaces be used for any specific purpose. In 1985, Susan Bayer filed proceedings against Creech Produce, Inc., seeking to revoke the lease to Creech. One ground alleged in this complaint (Exhibit 8) was that Creech was using the property in violation of state laws and regulations in failing to collect sales taxes on the parking fees and remit same to the Department of Revenue. The court not only ruled against Bayer on the eviction proceedings but extended the lease for an additional year. The lease to Creech (Exhibit 5) provided, inter alia, that the lessee would pay 1/2 of the sanitation expense paid by the lessor and that portion of electricity used for the portion of the building used and the lights for the outside of the property." The electricity was billed to the lessor and, pursuant to this lease provision, Creech remitted its share of the bill to the lessor. This payment for electricity by Creech was included by Respondent as rent on which the sales tax was levied. Exhibit 3 clearly conveys the intent of the parties to lease the property to be used by the lessee as a parking lot for the vehicles from which produce was to be sold and that the lessee could collect the fees for the use of these parking spaces. On February 1, 1984, Bayer entered into an Agreement for Purchase and Sale (Exhibit 2) with Bobby Lee McGilvery and Adella Fisher to sell the business known as Farmer Jahn's Ice to the latter. This business consisted of two icemaking machines on the premises of 3001 East Hillsborough Avenue, storage- disposing facilities at about 60 locations in Tampa, a pickup truck, step-van, ice baggers, bags, etc. McGilvery had worked for Bayer in this business of making and selling ice cubes for 15 years and purchased the business with no money down for a total price of $125,000 to be paid at the rate of $1,275 per month at 10 percent interest until the total of $125,000 is paid. Exhibit 2 provided that a separate lease agreement for the property occupied by the business would be executed providing for payment of $500 per month. A promissory note in the amount of $125,000 payable to Bayer was executed by McGilvery and Fisher (Exhibit 3) which provided for payment of $1,725 per month with interest at 10 percent until the total of $125,000 was paid. There appears to have been a scrivener's error in the preparation of the note so far as the monthly payment is concerned. Since the sale agreement provided for the business to be paid for at $1,275 per month and a rental price of $500 per month the monthly payments should have been $1,775. The Business Lease executed February 1, 1984, (Exhibit 4) provided "consideration for this lease is the note on the sale of the business." The auditor for Respondent based his sales tax calculation solely on the Business Lease (Exhibit 4) and the promissory note and calculated the tax on a rental of $1,725 per month. McGilvery and Fisher defaulted on the payments on the note and the business was recaptured by Petitioner. Having no lien on the personal property sold to the buyers Petitioner was able to recover only a small portion of those items enumerated in Finding 9 above.
Findings Of Fact Petitioner Auto/Truck Plaza Specialists, Inc., a Florida Corporation, (formerly GHM, Inc. of Baldwin) operates a "truck stop" in Baldwin, Florida, which sells special fuel and motor fuel under a dealer's license issued by the respondent. The firm leases the buildings under an agreement with the Union Oil Company of California. Part of the rental for the leased premises consists of one cent per gallon on sales of special fuels based on monthly reports that reflect fuel inventory at the beginning of the month, gallons acquired during the month, and the amount sold during the month based on manual measurement of the storage tanks. In like manner, the required state monthly tax return is based upon gallons to be accounted for" and consists of basically the same method as used in accounting to Union Oil Company. However, in preparing bimonthly excise tax returns to the Internal Revenue Service, it is unnecessary to show the number of gallons sold, but just the dollar amount of sales. Petitioner used pump meter readings to arrive at federal tax figures computed from daily reports of station personnel who read the pump meters at the beginning and end of each of three eight-hour shifts. The daily reports are recapitulated by petitioner's bookkeepers into monthly reports that take certain adjustments into account, such as fuel that is pumped by mistake into trucks and then replaced in the tanks. The daily reports are subject to mathematical mistakes by station attendants and the meters themselves periodically become defective, thus necessitating repair or replacement. This type of report is used by petitioner also as a comparison of months to see how the business is progressing and to attempt to detect theft by employees. (Testimony of Hires, Morris, Petitioner's Exhibits 2-5) Although petitioner normally purchases all of its special fuel from Union Oil Company, there was a period from June, 1973, through February, 1974, when, due to a shortage of fuel, purchases of some 500,000 gallons were made from five other distributors. Petitioner was under the impression that it paid tax on these purchases because none of the firms asked for its license number and the price charged for the fuel appeared to be an amount sufficient to include the state tax. No taxes were separately stated on the invoices from these firms, but petitioner's license number appeared on some of them. All such purchases were made by checks drawn on petitioner's bank account. The state tax due on later resales of this special fuel was not collected or paid to the state by petitioner. Nevertheless, it is found that petitioner's explanation that it was unaware that tax had not been previously paid to distributors is credible and that there was no intent to purposely evade payment of state taxes. (Testimony of Hires) In the summer of 1976, respondent's tax examiner Heyward R. Steinhauser, learned that sales of special fuels had been made to petitioner without the payment of tax and had not been reported to his agency. Petitioner explained the situation concerning outside purchases to Steinhauser, and the latter thereafter conducted an audit of the firm's books covering the period June, 1973, through June, 1976. He examined petitioner's check register to determine how much excise tax had been paid to the federal government and determined that this amount corresponded substantially with the number of gallons sold as reflected on the monthly meter reading reports. During this audit, Steinhauser found no evidence of outside purchases except that reflected by checks issued by petitioner to the five firms during the latter half of 1973 and 1974. However, Steinhauser made no effort to verify the totals set forth on the monthly meter reports as far as accuracy of computation. Petitioner made all of its records available for the audit and offered the daily reports to Steinhauser which he declined to use due to their bulk. (Testimony of Hires, Steinhauser). An informal meeting was held between petitioner and representatives of respondent on September 28, 1976, based on a proposed assessment resulting from the audit. At this meeting, certain credits were allowed to petitioner. The meeting was followed by a formal Notice of Proposed Assessment, dated November 22, 1976, wherein respondent claimed tax due in the amount of $48,016.22, interest in the amount of $15,248.30, and penalties of $6,196.76, for a total of $69,461.01. After deducting a $10,000 payment made by petitioner on September 28, 1976, the total amount due as stated in the assessment letter was $60,316.07. This was followed by a subsequent meeting on February 2, 1977, whereby petitioner sought further adjustment of the proposed assessment. A letter of February 15, 1977, from respondent's audit supervisor of the Motor Fuel Tax Bureau reasserted the original assessment, plus additional interest making the total allegedly due, as of February 10, 1977, $61,582.00. In that letter, petitioner was advised that since the daily pump readings or reports had not been made available to reconcile any discrepancies in the monthly reports, no adjustment could be made as to the proposed assessment. The reason for the unavailability of the daily records was that they had been inadvertently destroyed by an employee of the petitioner several months after the audit. Another meeting was held on March 29, 1977, which apparently was unsuccessful because a further letter of respondent, dated March 31, 1977, again asserted the previous amount of tax due, plus additional interest, making a total due of $62,198.07. Thereafter, on April 28, 1977, petitioner filed its petition for an administrative hearing. (Testimony of Steinhauser, Hires, Morris, Petitioner's Exhibits 1, 9-10) At the hearing, petitioner submitted its own audit based on fuel purchases, its check register, and invoices from Union Oil Company and outside suppliers. After computing exempt purchases, collection fees, and taxes already paid to the state, petitioner admitted that taxes had been due in the total amount of $42,342, based on sales of 541,825 gallons of fuel. The state's figures had based tax due on 592,587 gallons sold. After deductions of the $10,000 payment made on September 28, 1976, and a further payment of $30,000 on August 11, 1977, plus penalties and interest, petitioner admits that a sum of $11,390 is still due and owing. A further audit presented by respondent at the hearing reflects a total due at the end of September, 1977, of $47,699.44. Petitioner pointed out at the hearing that various mistakes in addition had been made in the monthly meter reports utilized by respondent in arriving at its assessment. However, neither petitioner nor respondent had verified the accuracy of these figures. Accordingly, the Hearing Officer requested that this be accomplished subsequent to hearing and that a report be furnished as a late- filed exhibit. Petitioner submitted such a report on November 15, 1977, which shows that mathematical mistakes in the reports were made to the extent that they reflected 56,595.5 more gallons sold during the audit period than was actually the case. This figure corresponds favorably with petitioner's contention based on its audit that it had sold some 51,000 gallons less than that asserted by respondent. Respondent has not contested the late-filed exhibit of petitioner and it is found that the figures reflected therein are correct. (Testimony of Morris, Petitioner's Exhibits 6, 7, 11, Respondent's Exhibits 1, 2)
Recommendation That petitioner be held liable for special fuels tax, penalty and interest in the amount of $11,390. DONE and ENTERED this 29th day of November, 1977, in Tallahassee, Florida. THOMAS C. OLDHAM Hearing Officer Division of Administrative Hearings 530 Carlton Building Tallahassee, Florida 32304 COPIES FURNISHED: Linder Smith, Jr. Esquire 1320 Atlantic Bank Building Jacksonville, Florida 32202 Harold F.X. Purnell, Esquire Assistant Attorney General Department of Legal Affairs The Capital Tallahassee, Florida 32304
The Issue Whether the Department of Revenue's final assessment of sales and use tax plus interest against Petitioner Karsten Enterprises FL, Inc., is correct.
Findings Of Fact Petitioner is a corporation headquartered in Dothan, Alabama, doing business in Florida. The Department is an agency of the State of Florida that has been delegated the responsibility to collect sales and use tax imposed by Chapter 212, Florida Statutes. During the audit period in controversy, from October 1, 2004 through September 30, 2007, Petitioner was a dealer in manufactured or modular homes and did business at one or more Florida locations. During the pertinent period, Petitioner entered into various contracts to provide manufactured or modular homes to its customers for delivery at locations in Florida. At a Karsten Sales Center, models of residential factory-built buildings are displayed. These residential factory-built buildings are produced by manufacturers that Karsten uses for that purpose. In most of the transactions during the audit period, Petitioner's customers would contract with Petitioner for the sale and installation of a factory built building on property owned by the customer. In the remainder of the contracts during the audit period, Petitioner would either purchase the property or enter into a contract for the sale of the property to the customer, and Petitioner would install a home that Petitioner had purchased from a manufacturer and then sell the home and land package to the customer. The contract prices were a lump sum, which included not only the manufactured or modular home, but also installation of the home at a Florida location. Petitioner’s contracts with its customers did not itemize individual components of the modular or manufactured homes, such as individual nuts, bolts, and shingles, but instead agreed to deliver the entire modular or manufactured home on an installed basis. The contracts between Petitioner and its customers specify the type of home that the customer wanted to have erected or installed on the property. Upon selection of a floor plan, options, and other customization, the customer would agree to order a specific home from a manufacturer. Petitioner purchased the pre-fabricated manufactured or modular homes from various manufacturers. The manufacturer would produce the home upon receiving an order from Petitioner. The manufacturer shipped the completed home to Petitioner, delivering the home to the property where the home would ultimately be erected and installed. Once shipped to the site, the factory-built buildings were placed on a foundation constructed for that purpose. Petitioner would either directly, through the manufacturer, or through subcontractors, construct the foundations, place the homes on the foundations, and connect the homes to required utilities. All of these activities were done as part of Petitioner's contracts with its customers for real property improvement. In many instances, the manufacturer both delivered the homes to the sites and provided post-delivery services to the homes. Additional services provided by the manufacturer after it installed the homes on the foundations included trim work, repair work, and fit and finish work. Petitioner paid the manufactures directly for these post-delivery services. During the audit period at issue, Petitioner sold, erected and installed approximately 30 residential modular or factory-built buildings in the state of Florida. If the home was built by a Florida factory, the factory would include sales tax in its invoice to Petitioner, based upon the cost of materials, but not including labor, that the manufacturer used in the construction of the home prior to its delivery to the site. If an out-of-state manufacturer built the home, the manufacturer would not include a sales tax amount in its invoices to Petitioner. Rather, the out-of-state manufacturers indicated that the cost of materials for construction of the homes at the factory was approximately 60% of the purchase price Petitioner paid for the homes. When Petitioner closed its contracts with its customers, if the manufacturer was an out-of-state manufacturer that had not previously included a sales or use tax in its invoice to Petitioner, Petitioner would remit a use tax directly to the Department, based upon 60% of Petitioner’s purchase price of the manufactured or modular homes. In either case, whether paying sales tax directly to a Florida manufacturer based only on the Florida manufacturer's cost of materials, or remitting use tax on 60% of its purchase price of manufactured or modular homes from out-of-state manufacturers, rather than paying tax on 100% of the price it paid for the homes, Petitioner did not pay sales or use tax on the manufacturer’s labor or fabrication costs. In remitting use tax, or paying sales tax to the Florida manufacturers, Petitioner was seeking to pay tax only on the manufacturer’s cost of materials used in the manufacturing process. There is no dispute concerning the Department’s math calculations. Rather, Petitioner disputes that the labor costs were taxable. Petitioner has no proof that the Department has ever received payment of tax from any person on the manufacturer’s labor costs at issue in this proceeding. Drenea York, who testified for the Department, is an accountant and auditor with twenty years of experience, all in sales and use taxation. Tammy Miller, who testified for the Department, is an attorney who has worked with the Department for eight years within the Department's Technical Assistance and Dispute Resolution section (Department's Dispute Resolution Section). The Department's Dispute Resolution Section employs “Tax Conferees,” such as Ms. Miller, who hear informal taxpayer protests, issue the Department's notices of decisions regarding final assessments, and provide guidance to the public upon request. Her practice has focused principally upon sales and use taxation, and she has handled several cases involving taxation of modular home contractors. Tammy Miller signed the notice of decision regarding the Final Assessment at issue. She also wrote the article for the Florida Institute of Certified Public Accountants, which Petitioner introduced into evidence as P1. She testified as the Department’s corporate representative. Douglas Uhler testified as a former employee of Petitioner and also as an expert witness for the Petitioner. He is a CPA with some tax experience, who was not shown to be a specialist in taxation or in Florida sales and use taxation. He practices in Birmingham, Alabama, where he is licensed. He has knowledge and expertise in valuation and other areas, but was not qualified as an expert to testify as to the tax determinations at issue in this controversy. Neither Petitioner nor Mr. Uhler applied for a TAA. Mr. Uhler was permitted to testify, over the Department’s hearsay and relevancy objections, that he relied on an oral statement from an alleged Department employee, concerning how Florida sales and use tax law is applied in the manufactured and modular home industry. During his testimony, however, Mr. Uhler did not know the name of the person to whom he allegedly spoke and he was not sure that the person he spoke to was an employee of the Department of Revenue. Therefore, no weight was given to his testimony regarding his recollection of a conversation with an alleged Department employee on the issue of how Florida sales and use tax law is applied in the manufactured and modular home industry. During the audit period at issue, the Department made four revisions to its original audit report in response to additional information provided by the Petitioner. During this period, the Petitioner paid the uncontested portion of the Department's assessment, leaving only one issue in dispute: whether additional tax and interest is due on Petitioner’s purchase of the modular homes. The Department’s audit and resulting tax assessment considered Petitioner, and not the manufacturer, to be the “real property contractor” responsible for the payment of the tax, within the meaning of the aforementioned rule provisions. The Department’s determination that Petitioner was the responsible “real property contractor” is consistent with the fact that the real property improvement contracts at issue were entered directly between Petitioner and its customers, and not between the manufacturer and Petitioner’s customers. In its contracts with its customers, Petitioner directly arranged installation work, either providing the installation itself or through the manufacturer or a subcontractor on behalf of Petitioner's customers. The issue of whether Petitioner or the manufacturer performed the installation work, however, was not considered by the Department to be a determinative factor, in and of itself, in making the Final Assessment. According to the Department, it would not consider a manufacturer to be the responsible “real property contractor” unless the contracts for real property improvement were directly between the manufacturer and Petitioner’s customers. The evidence does not support a finding that Petitioner's customers had direct contracts for real property improvements with the manufacturers of the homes. The Department also considered Petitioner to be the “end user” under Chapter 212, Florida Statutes, and Florida Administrative Code Rule 12A-1.051(3) and (4), which, according to the Department, imposes tax on the “end user.” The Department considered Petitioner, as opposed to Petitioner's customers, to be the end user based upon the reasoning that Petitioner was the last party to purchase the modular units as “tangible personal property,” before the modular homes became affixed to real property. Ms. York and Ms. Miller explained that the Department did not consider Petitioner’s customers to be the “end users” because Petitioner's customers did not purchase resold items of “tangible personal property,” itemized in detail under Florida Administrative Code Rule 12A-1.051(3)(d). Rather, they explained that Petitioner’s customers, who purchased under lump- sum contracts, were considered to have purchased an improvement to real property, and improvements to real property fall outside the scope of the Florida sales and use tax chapter. In its audit, the Department examined Petitioner’s contracts with its customers solely to determine that the Petitioner was the end user or the “real property contractor.” The Department’s assessment did not seek to impose tax or interest liability on Petitioner’s transactions with its customers. Instead, the Department taxed Petitioner on Petitioner’s “cost price” of purchasing modular homes, giving Petitioner full credit for any partial tax that Petitioner had paid. As noted above, during the audit period, when it was dealing with a Florida manufacturer, Petitioner generally remitted sales or use tax directly to the manufacturer, at the time of purchase. More often, however, Petitioner paid sales or use tax on a monthly basis, by direct accrual or remittance to the Department on approximately 60% of the amount Petitioner paid for homes manufactured by out-of-state manufacturers. The invoices to Petitioner frequently included other itemized charges, which the Department did not consider part of Petitioner’s “cost price” of the purchased modular units. For example, if an invoice included sales or use tax, the Department excluded charges for tax when calculating Petitioner’s “cost price,” so as to avoid imposing tax on the itemized tax. Likewise, no charges for installation of the modular units onto real property were included in the Department’s calculation of “cost price.” The Department instead determined “cost price” by adding up the “Base Price” for purchasing the modular homes, together with itemized home “Options,” as they appeared on the manufacturer's invoices to Petitioner for the modular homes. Examples of several “Options” would be such things as better carpeting, a sliding glass door, or a plywood floor. The combined total of “Base Price” and “Options” were used by the Department in determining Petitioner’s “cost price” of purchasing the units as items of tangible personal property from the manufacturer’s factory. Petitioner's "cost price" as determined by the Department reflected the seller’s (in this case the manufacturer’s) material and labor costs. The Department's Final Assessment, however, did not include costs related to the installation of the modular homes onto real property, as those were considered by the Department as costs arising subsequent to the sale of the product as tangible personal property. The Final Assessment only sought tax on Petitioner’s purchase cost of the modular homes as tangible personal property leaving the factory. Because Petitioner had already paid tax on approximately 60% of its cost price, the Department’s assessment sought to capture the 40% of sales and use tax that Petitioner never paid. The Department's assessment determined that Petitioner owed tax on its own “cost price” as invoiced by the manufacturer. The Department determined that the Petitioner’s “cost price” was a different “cost price” than the manufacturer’s “cost price.” According to the Department, the manufacturer’s cost price excluded labor on its factory floor but Petitioner’s “cost price” included all materials and labor costs that were necessarily a component of Petitioner's actual purchase price. The Department’s auditor gave Petitioner full credit for all taxes paid, whether Petitioner had paid the tax by direct remittance or at the time that it paid an invoice, with one exception: credit was generally not given for payments made by Petitioner to a company named Cavalier because during the audit period at issue, Petitioner remitted certain amounts of sales tax to a manufacturer named Cavalier, but Cavalier refunded these amounts to Petitioner.3/ The Department’s audit and assessment did not treat Petitioner as a “manufacturer” nor give Petitioner the benefit of the special exemption, under Section 212.06(1)(b), Florida Statutes, which is available to manufacturers of a “factory- built building.” This is because the Department did not consider Petitioner to be a manufacturer. Although Petitioner argued that it qualified for the special exemption under Section 212.06(1)(b), Florida Statutes, under the theory that it was a "manufacturer," Petitioner failed to show that it is a “manufacturer” entitled to such exemption. In accordance with Petitioner's Application for Registration with the Department, Petitioner was registered as a “Manufactured (Mobile) Home Dealer” rather than as a manufacturer. In response to audit interview questions, Petitioner advised the auditor that it was in the business of “Retail Sale” of “Mobile and Modular Homes.” Petitioner made this same representation again in its response to a Pre-Audit Questionnaire and Request for Information. The first time that Petitioner ever asserted that it was a "manufacturer" was after Petitioner received the Department’s Notice of Intent to make Audit Changes, and became aware that, as a “real property contractor,” it would be assessed tax on 100% of its “cost price.” Petitioner then changed its self-description of its business model, asserting that it was a “manufacturer.” When Petitioner protested the Department’s assessment, however, it abandoned, at least at the informal protest stage, the argument that it was a manufacturer. Petitioner instead argued that it should be treated like a real property contractor engaged in the business of stick built homes. According to Tammy Miller, Petitioner's president, Mr. Copeland, told Ms. Miller during the informal protest process, that Petitioner was not a manufacturer. The Final Assessment corroborates Tammy Miller’s recollection because it addressed Petitioner’s various legal arguments but did not address Petitioner’s argument that it is a manufacturer, because that argument apparently was not made during the informal protest. The Amended Petition does not allege that Petitioner was a manufacturer or that it should be treated like one. Petitioner instead asserts that it is a modular home dealer who purchases from “the factory” and that it should be treated like a stick-built contractor. Petitioner stipulated that it is a modular home “dealer” and that it purchased the pre-fabricated manufactured or modular homes from various manufacturers. No evidence was introduced that Petitioner owns or operates factories or an assembly line. Rather, the evidence showed that Petitioner operated out of an office building in Alabama. No evidence was presented that Petitioner has been licensed or certified as a “manufacturer” by the Department of Community Affairs, which is the agency that regulates manufacturers of factory-built buildings. See Fla. Admin. Code R. 9B-1.002(15) and 1.007(1). Petitioner’s representative repeatedly referred to Petitioner, throughout opening statement, argument and testimony, as a dealer purchasing from the factory. The Department’s witnesses testified that the sales and use tax applies to “real property contractors” in a way that taxes all real property contractors (stick-built or modular) on their full “cost price” of purchased materials, regardless of whether the purchased materials are lumber, shingles, nails, finished kitchen cabinetry, or assembled modular home modules. The Department's witnesses explained that the cost price of each item purchased will vary because the item purchased in each instance is different and some items will include greater material and labor costs than others. The Final Assessment reflects the unpaid balance assessed, after all revisions and payments made, and provides a per diem amount so that accrued interest may be readily calculated. The Final Assessment determined that the unpaid balance of tax and interest for the audit period (after crediting Petitioner with all payments made) was as follows: $41,446.31 combined tax and interest through 1/26/09, with $7.57 per day for each day thereafter until the postmark date of payment. The Final Assessment waived all penalties.
Recommendation Based on the foregoing Findings of Facts and Conclusions of Law, it is RECOMMENDED that, consistent with the Final Assessment and this Recommended Order, the Department of Revenue enter a final order finding that Petitioner owes tax and interest due as of January 26, 2009, in the amount of $41,446.39, with interest thereafter accruing at $7.57 per day, without penalties. DONE AND ENTERED this 1st day of October, 2010, in Tallahassee, Leon County, Florida. S JAMES H. PETERSON, III 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 October, 2010.
The Issue The issue in this case is whether Respondent failed to pay tax surcharges, penalties, and interest owed on the sale of cigarettes, and, if so, the amount that is currently due and owing.
Findings Of Fact The Department is the state agency responsible for monitoring the sale of tobacco products and for assuring that all businesses selling such products pay the requisite surcharges on each pack of cigarettes sold. Respondent is a convenience store which is licensed to sell tobacco products. The store also sells alcoholic beverages, food items, and miscellaneous other products. The sales tax associated with the sale of tobacco products (only) is at issue in this proceeding. The 2009 Florida Legislature enacted legislation imposing a $1.00 per pack surcharge on each pack of cigarettes sold in this state beginning July 1, 2009. Retailers having a cigarette inventory and, as of that date, would be required to pay a "floor tax" of $1.00 per pack in their inventory. In February 2010, the Department received a letter from an anonymous source (who identified himself as "A Good Civilian (Business Owner) (Who always pays tax)[sic]." The letter had a flyer attached to it which had been distributed by Respondent. The flyer identified a number of products for which buyers could realize "[t]he lowest prices in Polk County." Included in the list of products were various tobacco items, including cigarettes. The anonymous source's letter suggested that anyone who could sell the tobacco products at those prices must be doing something illegal. Based on the allegations in the anonymous letter, the Department decided to investigate. A team was sent to one of Respondent's stores (hereinafter referred to as "Store 1") on February 18, 2010. The team did an inventory of tobacco products at Store 1. There were 2,855 packs of cigarettes at Store 1. Some of the cigarettes were in individual packs; some were still in cartons (which contain ten packs each). The cigarette packs had the requisite state stamp on them. However, most of the packs had a stamp which had been in existence prior to the change in law on July 1, 2009. The fact that most of Store 1's cigarette packs had the old stamp meant that the cigarettes had been around for a while. The inventory eventually formed the basis for an audit performed on Respondent's other store ("Store 2"). Store 2 had just recently opened and was stocked with cigarettes brought over from Store 1. There were, therefore, no invoices available at Store 2 as to the purchase of the cigarettes it had on hand. The audit process involved a determination of distributors from which Respondent purchased its cigarettes. The two primary distributors were Sam's Club and Dosal. The Department ascertained from those distributors how many packs of cigarettes Respondent had purchased over a given span of time. Sam's Club provided records seeming to indicate the purchase of 37,770 packs between February 1 and June 29, 2009; another 9,090 packs were purchased between July 4, 2009, and January 29, 2010. Dosal said 65,490 packs had been purchased between March 3 and June 23, 2009; another 17,800 were purchased between July and December 2009. An audit investigation was commenced at Store 2 on March 17, 2010. The auditors did not ascertain the actual number of packs of cigarettes on hand at the store on that date. The auditors talked with the owners of the stores (Salah Rabi and his brother, Mohammed Rabi) about their sales history. Pursuant to requests of the auditors, the owners also sent in some additional records reflecting their sale of cigarettes. In order to calculate the number of cigarette packs sold by Store 2 during a four-month period, the auditors determined how much business the store had done in all products (including non-tobacco products) for that period. Respondent gave the Department a list of daily sales on all products sold and the taxes paid on those products for the period February 2009 through January 2010. The average monthly sales amount for the store during the audit period was $25,000. However, the Department found the information provided by Respondent to be incomplete and, thus, unreliable. The auditors then assumed that 80 percent of the store's sales were for cigarettes1/ and that the average price per pack was $4.50. Using this formula, the auditors found that approximately 4,444 packs of cigarettes were sold each month, which the auditors rounded up to 4,500. Thus, for the audit period, the auditors estimated that 18,000 packs of cigarettes were sold. Neither of the auditors testified at final hearing as to the reasonableness of the formula or as to their alleged conversations with the owners. Based on their findings, the auditors concluded that Respondents owe a balance of $77,798.23. That figure was derived as follows: Total packs purchased 3/09 - 6/09 from Dosal 65,490 from Sam's 37,770 Total purchases prior to 7/1/09 103,260 Estimated monthly sales at 4,500 packs per month for four months 18,000 Total estimated inventory on 7/1/09 85,260 Floor tax due on estimated inventory $85,260 Floor tax paid $ 4,963,09 Unpaid floor tax $80,296.91 Overpayment on other tobacco product $(2,498.54) Total cigarette floor tax due $77,798.37 Missing from the evidence presented was any statement by the Department as to whether, on March 17, 2010, or any other date, there were 80,000-plus packs of cigarettes visible at the store. It seems plausible that so many packs, even if in cartons of 10 packs apiece, would be easy to identify. Respondent refutes the basic premise of the auditor's findings. Using cash register receipts (called Z Tapes) from March and May 2009 (two of the four months at issue), Respondent was able to establish a more accurate percentage of cigarette sales versus all products sold. The Z Tapes are printed out each day by way of turning a key on the cash register. The tapes print out a receipt showing the date, the number of packs of cigarettes sold, the number of food items sold, and the number of taxable items sold. According to the Z Tapes, close to 90 percent2/ of Store 2's total sales for those months were cigarette sales, i.e., a much higher percentage than used by the auditors. The evidence presented by the owners is credible and persuasive. Respondent also provided a calculation of its price per pack of cigarettes. The price depends, in part, on how much they pay the distributors for each pack or carton of cigarettes. Of its four best selling cigarettes, the following costs were determined for the period March through June 2009: Brand Cost Markup Markup% Price 305's 2.93 .06 2 2.99 Marlboro 4.66 .08 1.7 4.74 Romy 2.75 .21 7.0 2.96 Newport 4.45 .34 7.6 4.79 Then, using the inventory of products on hand, a weighted average markup percentage was calculated as follows: Brand Weighted Number Weighted Cost Weighted Price Markup 305's 5,900 17,287 $17,641 Marlboro 1,957 9,394 9,276 Romy 1,611 4,430 4,769 Newport 108 454 517 TOTAL 31,565 $32,203 2.02% Based on the foregoing calculation, the owners estimated an average price per pack of $3.00, i.e., much less than the $4.50 per pack figure utilized by the auditors. The unrefuted testimony of the owners is credible and seems reasonable based upon the facts. Inasmuch as neither of the auditors was available to provide further justification for their price-per-pack estimation, the owners' calculation is accepted for use in this proceeding. Respondent purchased 91,520 packs of cigarettes during the period of March 2009 through June 2009. Respondent sold 55,634 packs of cigarettes during that same period. The average price per pack sold was $3.00 (three dollars). Based on the foregoing, Respondent had a floor inventory of 35,886 packs of cigarettes on July 1, 2009. Respondent paid a cigarette surcharge floor tax of $4,963.09 on July 15, 2009. Respondent also overpaid its floor tax for other tobacco products by $2,948.54 for a total of $7,815.83 in payments to the Department. That amount should be credited against any tax liability determined in this proceeding. The Department provided bank statements for Store 1 and Store 2 showing much larger monthly transactions than evidenced by the stores' sale of products. That fact raised a red flag justifying further investigation into Respondent's business. However, the discrepancy was explained by the fact that Respondent does a large amount of check-cashing business at its stores. The large bank transactions are not relevant to the issue in this proceeding.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by Petitioner, Department of Business and Professional Regulation, Division of Alcoholic Beverages and Tobacco, imposing a cigarette surcharge in the amount of $35,886 (thirty-five thousand, eight hundred and eighty-six dollars) against Respondent, Discount Zone, Inc., d/b/a Lakeland Discount Beverage, Inc., minus $7,815.83 already paid. DONE AND ENTERED this 12th day of May, 2011, in Tallahassee, Leon County, Florida. S R. BRUCE MCKIBBEN 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 12th day of May, 2011.
The Issue The issue presented is whether Respondent is guilty of the allegations contained in the Administrative Complaint filed against her, and, if so, what disciplinary action should be taken, if any.
Findings Of Fact Respondent Anne E. Carr is and has been at all times material hereto a licensed real estate broker in the State of Florida, having been issued license number 0268356. In 1988 Helen B. Moser and her husband, John J. Moser, Jr., obtained their real estate salesman licenses. In 1989 they became real estate brokers. Upon becoming licensed brokers, they decided that they would like to open their own real estate office. They began contacting various real estate brokers seeking advice on how to open and operate a real estate business. Respondent was one of the brokers the Mosers contacted for advice. She and the Mosers already knew each other from previous professional activities. At the time, Respondent was the broker and sole stockholder of Carr Real Estate, Inc. She also was spending a substantial amount of time selling luxury condominiums for a particular developer, which required her to be on-site at the development. Respondent suggested to the Mosers that they join Carr Real Estate, Inc., and run the office for her rather than opening their own office, which would give them immediate access to her listings and many clients and allow her to devote her time to sales for the large real estate development. The Mosers agreed that was a good opportunity for all concerned and joined Carr Real Estate, Inc., as broker/salesmen in October of 1989. The Mosers began running the business for Respondent at her request, providing Respondent with monthly accountings. During 1990 the Mosers earned approximately $90,000 as a result of the listings they took over from Respondent and as a result of the listings Respondent referred to them. Throughout that year Carr Real Estate, Inc., remained a major presence in the Highland Beach area where Respondent was well known both for her flamboyant fashions and her ability to list and sell luxury ocean-front and water-front properties. During the first week of December 1990 Respondent advised the Mosers that due both to financial problems she was experiencing and pressure on her from the developer to devote full time to his sales she would be closing the business on December 31 unless the Mosers wanted to purchase the company from her. They advised Respondent they were interested in doing so and that they would draft the documents for Respondent's signature. Many discussions took place between Respondent and the Mosers over the next several weeks formulating the terms of the sale of the business, and the Mosers submitted to Respondent a number of drafts of documents. While the negotiations were on-going, Respondent filled out and executed on December 12, 1990, the documents necessary for her to file for personal bankruptcy. On December 15 she faxed written instructions to her attorney to not file the bankruptcy petition because she was selling her company. On December 20, 1990, Respondent and the Mosers executed a Purchase and Sale Agreement and a Bill of Sale. It is noted that those documents also involved the sale of Respondent's interest in two other corporations to the Mosers but that portion of the transaction raises no issues involved in this proceeding. The Purchase and Sale Agreement provided that its effective date would be January 1, 1991. The Agreement specifically represented that Carr Real Estate, Inc., was being sold free of any liabilities and encumbrances and that the corporation did not own any tangible assets. The Agreement further provided that Respondent would indemnify the Mosers from all obligations and liabilities incurred by Carr Real Estate, Inc., prior to January 1, 1991. The Agreement provided for no money to change hands as a result of the Mosers' purchase of Respondent's business; rather, the purchase price for the corporation was five percent of all sales commissions received by the corporation for a period of two years. On December 29, 1990, Respondent executed the Seller's Affidavit given to her by the Mosers. The portion of the Seller's Affidavit pertinent to this dispute is that Respondent attested that there were no actions or proceedings then pending in any state or federal court in which "the Affiant or Corporations" are parties, including bankruptcy. It was very clear in Respondent's mind that what she was selling under the Purchase and Sale Agreement and the Bill of Sale and what she was attesting to in the Seller's Affidavit was in regard to the corporation and not her personally. It never occurred to Respondent that she was representing to the Mosers that she personally had no bills and no assets. Respondent had no intention of defrauding the Mosers. Supporting this intent is the clear language contained in the Purchase and Sale Agreement, the Bill of Sale, and the Seller's Affidavit that she would personally indemnify and hold harmless the Mosers from any liabilities incurred by the corporation prior to the effective date of the sale. In mid-January 1991, approximately two weeks after the effective date of the sale, the Mosers discovered that a bankruptcy petition had been filed on behalf of Respondent as an individual. Although that petition did not involve the corporation, John Moser immediately contacted Respondent who did not know that her attorney had filed the petition contrary to Respondent's instructions. On January 23, 1991, Respondent wrote to Helen Moser apologizing for the erroneous filing of her bankruptcy petition and assuring her that it would be corrected. Respondent immediately contacted her attorney to ascertain how the petition could be dismissed. She was advised by her attorney that the only way she could dismiss the petition was to not attend the first meeting of creditors which would cause the petition to automatically be dismissed. Respondent did fail to attend the first meeting of creditors. Due to her failure to attend, her bankruptcy petition was dismissed. She immediately contacted Helen Moser to advise her of the dismissal. On February 1, 1991, John Moser called Respondent to inform her that a statement for a monthly automobile lease payment in the name of Carr Real Estate had been received. Respondent immediately sent the Mosers a note indicating that she had contacted G.M.A.C. but that company refused to allow her to transfer responsibility for her automobile lease payments from the corporation to herself. She acknowledged that she was responsible for any of the lease payments and requested that the Mosers acknowledge that the automobile was not an asset of the corporation. At the time Respondent knew that she was responsible for the lease payments because she signed the lease agreement as an individual. Respondent's contact with G.M.A.C. was unnecessary since her automobile had been leased to her as an individual in June of 1988, a date which preceded the existence of Carr Real Estate, Inc. The automobile was insured in Respondent's individual name and was registered in the name of G.M.A.C. at Respondent's address. The Bill of Sale executed by Respondent and the Mosers does not list the automobile as an asset of the corporation that was conveyed. The automobile leased by Respondent was not an asset of the corporation. The only relationship between Respondent's leased automobile and Carr Real Estate, Inc., concerns the deduction of automobile expenses as business expenses on the tax return for Carr Real Estate, Inc. On February 6, 1992, Helen Moser asked Respondent for a copy of the 1990 corporate tax return for Carr Real Estate, Inc., and Respondent provided a copy to her that same day. The return had been prepared in August or September of 1991 by Mary Dorak, a person enrolled with the Internal Revenue Service. It contained an entry entitled "loan from shareholder" in the sum of $107,060. Respondent had been the sole shareholder of the corporation. On February 26, 1992, the Mosers obtained an opinion letter from an attorney advising them that the corporation was not liable to Respondent for any debts. Neither the Mosers nor their accountant ever contacted Dorak or Respondent about the information contained in that tax return. Instead, the Mosers filed an amended corporate tax return for 1990 for Carr Real Estate, Inc. They removed the automobile as a corporate asset while leaving the shareholder's loan because it benefited them tax-wise. Instead of amending the return, the Mosers could have filed a 1991 return showing Respondent's stock exchange for the basis that was left of the stock in the corporation because the transaction took effect on January 1 of that year. Doing so would have caused no adverse tax consequences to the Mosers. Respondent typically provided Dorak with a listing of Respondent's income and expenses for the year and would then simply sign the return after Dorak had prepared it without reviewing the return first. Without any input from Respondent, Dorak had listed the automobile and some personal debts of Respondent on the 1990 corporate tax return because Respondent could take advantage of certain business deductions. That action had no adverse tax consequences for the Mosers. The Mosers never requested a tangible property tax return which would have reflected if there were any assets in the corporation. Had they made this request, they would have been told that there was none in existence because the corporation had no assets. At the time that Respondent and the Mosers executed the Purchase and Sale Agreement, the Bill of Sale, and the Seller's Affidavit in December, all three believed that the corporation had no assets or liabilities and that any assets and liabilities of Respondent were hers personally. As of January 1, 1991, the effective date of the sale, the corporation had no assets or liabilities. There were no tax consequences to the Mosers because of the listing of the shareholder loan in the 1990 corporate tax return because in that Subchapter S corporation the person ultimately adversely affected by the sale would be Respondent since she owned all of the shares in 1990. On the other hand, the filing of an amended 1990 corporate tax return by the Mosers without Respondent's knowledge and consent has resulted in adverse tax consequences to her, an unnecessary result. In November 1988 Respondent was involved in the sale of a condominium unit owned by Mr. and Mrs. Roy Heinz. Due to extended negotiations, the buyer's decision to not purchase the unit, and instructions from Heinz who was her client, Respondent delayed in placing the buyer's deposit check in her escrow account. Petitioner filed an Administrative Complaint against Respondent only and not also against Carr Real Estate, Inc., since that corporation was not yet in existence. After a formal evidentiary hearing, a Hearing Officer of the Division of Administrative Hearings specifically cleared Respondent of any intentional wrongdoing and of any culpable negligence. Respondent was found guilty, however, of what was specifically characterized to be a technical violation of failure to immediately place the deposit check into her escrow account. The minimum penalty permissible was assessed against Respondent. Respondent was also dismissed from the civil lawsuit filed by Roy Heinz which emanated out of the same circumstances for which the administrative action was brought. The Mosers knew about the disciplinary action and the civil lawsuit pending against Respondent individually prior to their execution of the December 1990 documents transferring Carr Real Estate, Inc., from Respondent's ownership to theirs effective January 1, 1991. The "Roy Heinz matter" was specifically raised by John Moser during the negotiations among the Mosers and Respondent. In April of 1991 Respondent sent Helen Moser a copy of the Recommended Order finding Respondent not guilty of any dishonest conduct or culpable negligence, and Helen Moser failed to even read the entire Order since she considered it unimportant and because she knew the transaction involved occurred prior to the formation of Carr Real Estate, Inc. The Mosers continue to operate Carr Real Estate, Inc. The business has been diminishing, however, since 1991 due to the reduction in the number of salespersons affiliated with the business, John Moser's inability to attract listings and retain clients, and the amount of time the Mosers have been devoting to John Moser's computer business. Respondent's actions and/or inactions have not been the cause of the decline in Carr Real Estate, Inc.'s, business. Moreover, the Mosers have not been harmed financially or in any other way due to any statements contained in the Purchase and Sale Agreement, Bill of Sale, or Seller's Affidavit executed by Respondent. The sale of Carr Real Estate, Inc., by Respondent to the Mosers benefited all three of them. In her negotiations surrounding that sale, Respondent agreed to the terms desired by the Mosers, acted honestly, and did not knowingly or intentionally misrepresent any material fact. Those misrepresentations alleged by the Mosers and Petitioner to be contained in the closing documents, such as any statement that Respondent personally had no assets or liabilities, were not material to the sale and purchase of the corporation.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is, RECOMMENDED that a Final Order be entered finding Respondent not guilty of the allegations contained in the Administrative Complaint filed against her and dismissing that Administrative Complaint. DONE and ENTERED this 16th day of December 1994, at Tallahassee, Florida. LINDA M. RIGOT 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 16th day of December 1994. APPENDIX TO RECOMMENDED ORDER Petitioner's proposed findings of fact numbered 1-4, 6-11, 13, 15, 18, and 19 have been adopted either verbatim or in substance in this Recommended Order. Petitioner's proposed findings of fact numbered 5, 16, and 17 have been rejected as not being supported by the weight of the credible evidence. Petitioner's proposed findings of fact numbered 12 and 14 have been rejected as being subordinate. Respondent's proposed findings of fact numbered 1-29, 31, and 33-36 have been adopted either verbatim or in substance in this Recommended Order. Respondent's proposed finding of fact numbered 30 has been rejected as not being supported by the weight of the credible evidence in this cause. Respondent's proposed findings of fact numbered 32 has been rejected as not constituting a finding of fact but rather as constituting argument of counsel. COPIES FURNISHED: Jack McRay, Esquire Acting General Counsel Department of Business and Professional Regulation Northwood Centre 1940 North Monroe Street Tallahassee, Florida 32399-0792 Theodore R. Gay, Senior Attorney Department of Business and Professional Regulation 401 Northwest 2nd Avenue, Suite N-607 Miami, Florida 33128 Harold M. Braxton, P.A. Suite 400, One Datran Center 9100 South Dadeland Boulevard Miami, Florida 33156-7815
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.
