Findings Of Fact In Exhibit 3 Petitioner disputed the overpayment of sales tax, penalties and interest in the amount of $62,035.63. At the hearing it was stipulated that the disputed sum is $62,000.00. Petitioner is owner and publisher of a weekly paper, The Tampa/Metro Neighbor (Neighbor), published in Tampa and distributed in the Tampa metropolitan area of Hillsborough County. The Neighbor is distributed to readers free of charge. Petitioner started rack sales September 27, 1980, and has sold approximately 125 per week since that time. Its total circulation is approximately 164,009. The Neighbor has not been entered or qualified to be admitted and entered as second class mail matter at a post office in the county where it is published. The Neighbor is delivered by approximately one thousand carriers to residences and apartments in Hillsborough County each Thursday. The papers are placed in plastic bags to protect them from the weather. Petitioner claims sales tax exemption for the purchase of newsprint, ink, and plastic bags used to print and distribute the Neighbor. Newspapers such as The Tampa Tribune are exempt from sales tax on these items. Only newspapers and other periodical publications are eligible for mailing at second class rates of postage. Publications primarily designed for free circulation and/or circulation at nominal rates may not qualify for the general publications category (Exhibit 24). General publications primarily designed for advertising purposes may not qualify for second class privileges. Those not qualifying include those publications which contain more than 75 Percent advertising in more than half of the issues published during any 12- month period (Exhibit 24). Second class mail privilege is a very valuable asset for newspapers and other qualifying publications. The editorial content of the Neighbor, which they define as everything except advertisement, is comprised of local news, sporting news, local investigative reporting, an opinion section, and an entertainment section. The advertising is split into classified ads and other. The Neighbor contains no national or international news, no wire service reports, no comics, no stock market reports, no sports statistics, no weather reports, no national syndicated columnists, no state capital news, no obituaries, no book review section, and no special section such as home design, gardening, etc. Neighbor considers its primary competitor to be The Tampa Tribune. However, this competition is limited to advertising as the Neighbor has none of the traditional newspaper features above noted which are normally carried in daily newspapers. Petitioner presented two expert witnesses who opined that the Neighbor met the requirements to be classified as a newspaper because it was published in newspaper format; that it had an editorial section which provided some news as contrasted to that provided in a shopping guide; that the 75 percent - 25 percent advertising-editorial content did not make the Neighbor primarily an advertising paper; that the requirements of the U.S. Post Office for a periodical to obtain second class mail privileges is not relevant to a determination that the Neighbor is not newspaper; that the requirements of the Department of Revenue Rules 12A-1.08(3)(d) and 12A-1.08(4) Florida Administrative Code, are not relevant in determining whether the Neighbor is a newspaper; and that in a journalistic concept the Neighbor is a newspaper. The Neighbor was purchased in 1979 by North American Publications, Inc., a wholly owned subsidiary of Morris Communications Corporation. Morris Communications Corporation owns several newspapers scattered from Florida to Alaska, both daily and weekly publications. Most of these publications are sold to paid subscribers. Petitioner's testimony that sales tax was not collected from Petitioner's predecessor owners was flatly contradicted by the testimony of Respondent's witness. Since the latter witness is in a much better position to know the facts respecting sales taxes levied on the former owner of the Neighbor, this testimony is the more credible. In any event, Petitioner did not claim estoppel.
Findings Of Fact Petitioner, Golfcrest Nursing Home (Golfcrest), is a properly licensed 67-bed nursing home located in Broward County, Florida. Respondent, the Department of Health and Rehabilitative Services (HRS), was the state agency responsible for administration and implementation of the Florida Medicaid Program. Those responsibilities have been transferred to the Agency For Health Care Administration. Golfcrest participates in the Florida Medicaid Program and provides inpatient nursing home services to Medicaid eligible persons. Golfcrest is entitled to reimbursement in accordance with the Florida Title XIX Long-Term Care Reimbursement Plan (Plan) which has been adopted and incorporated by reference in Rule 10C-7.0482, Florida Administrative Code. The Plan contains provisions which authorize a nursing home participating in the Medicaid Program to request an interim change in its Medicaid reimbursement rate when it incurs property related costs which would change its reimbursement rate by one percent (1 percent) or when it incurs costs resulting from patient care or operating changes made to comply with existing state regulations, and said costs are at least $5,000 or one percent (1 percent) of its reimbursement rate. In 1980 Americare Corporation (Americare) purchased Golfcrest. In 1983 or 1984, Americare did some cosmetic renovations at Golfcrest. Portions of the facility are 45 years old. Americare contracted with Diversicare Management Services to manage the operations of Golfcrest. In 1988-1989, Joann Verbanic, a regional vice- president for Diversicare Management Services, recommended to the Board of Directors of Americare that major renovations to the Golfcrest facility be done. On March 19, 1990, Americare sent a team to Golfcrest to survey the facility for needed renovations. Later a plan was presented to Americare's Board of Directors and permission was given to proceed with a major renovation. In May of 1990 and July of 1991, HRS conducted its annual licensure surveys at Golfcrest. As a result, HRS identified several licensure deficiencies. Correction of these deficiencies was mandated by HRS. Failure to correct these deficiencies would have resulted in sanctions against Golfcrest's nursing home license, including administrative fines, a reduction in licensure rating, other civil penalties, and a reduction in Medicaid reimbursement. In order to correct the licensure deficiencies, Golfcrest incurred substantial property costs and costs due to patient care and operating changes. By letter dated January 6, 1992, Golfcrest submitted to HRS a request for an interim rate increase for patient care costs, operating costs, and property costs incurred or to be incurred to comply with existing state regulations and to correct identified licensure deficiencies. By letter dated April 14, 1992, Golfcrest provided additional information which had been requested by HRS. Golfcrest requested that the following costs be included in the calculation of its interim rate: Operating Costs Office Furniture $ 896.45 3 Laundry Carts 696.31 Office Door 125.00 Light Fixtures 1,067.30 Laundry Table 482.00 Structural Repairs 100.00 Repairs for Boiler 390.00 42 Overhead Lights 11,861.07 Patient Care Costs 57 Hi-Lo Beds 19,301.40 Blinds 5,145.02 Dining Room Furniture 3,167.70 Lobby Furniture 2,500.00 Bedspreads 3,404.78 Valances 3,472.05 Cubicle Curtains, Tracks 9,579.51 Activity Furniture 1,000.00 Property Costs Bldg. Imp. Depreciation 16,356.00 HRS denied in part and granted in part, Golfcrest's interim rate request by letter dated June 15, 1992, as revised by letter dated July 1, 1992. HRS granted the patient care costs for the 57 Hi-Lo beds and for the cubicle curtain and tracks and the property costs for the building improvement depreciation. In its proposed recommended order, Golfcrest withdrew its request for costs of the boiler leak, the lobby furniture, folding table for the laundry, and structural repairs. Golfcrest incurred the costs for which the interim rate is requested. Golfcrest requested that the purchase of office furniture be accepted as an allowable cost. Golfcrest did not specify what office furniture was purchased nor did it adequately relate such a purchase to a cited deficiency in either the 1990 or the 1991 survey. Additionally, Golfcrest did not establish that the cost of the office furniture was what a prudent and cost-conscious buyer would pay for office furniture. In the 1990 survey report, Golfcrest was cited for having linen stored on dressers in residents' rooms. There was insufficient space to store the linen in the laundry area so Golfcrest purchased three laundry carts to store the linens in the hallways. The purchase of the laundry carts was necessary to correct the deficiency cited in the 1990 survey. However, no evidence was presented to establish that the amount paid for the laundry carts was what a prudent and cost-conscious buyer would pay for the item. In the 1991 survey, Golfcrest was cited for having exit doors with screens missing and broken jalousie slats; therefore, it did not meet the requirement that the facility must provide housekeeping and maintenance services necessary to maintain an orderly and comfortable interior. Golfcrest relies on this cited deficiency to support its claim for the cost of replacing a new office door. Golfcrest's reliance is misplaced. The deficiency is the failure to perform ordinary maintenance services. The replacement of the office door is not necessary to comply with the cited licensure requirements. Golfcrest stated in its plan of correction that it would repair the cited doors by replacing the screens. Additionally, Golfcrest did not establish that the cost of the door was what a prudent and cost-conscious buyer would pay for the door. Rule 10D-29.121(7)(d), Florida Administrative Code, required that renovations to restore a nonconforming building to its condition previous to deterioration must minimally meet standards for a new facility. The unrebutted testimony was that termites had damaged the wall studs and the walls had to be torn out and replaced. In order to meet the required NFPA standards and building code requirements for lumens and wiring, it was necessary to replace 42 overbed lights and 14 light fixtures for 3-bed wards. The purchase of this lighting was necessary to correct deficiencies that would result if the old lighting were retained after the renovations. However, no evidence was presented that would establish that the cost of the lighting fixtures was what a prudent and cost-conscious buyer would pay for the lighting. In the 1990 survey report, Golfcrest was cited for having broken venetian blinds in rooms 6 and 33. Golfcrest stated in its plan of correction that "broken blinds are repaired/replaced as needed." Golfcrest requested that in its interim rate request that $5,145.02 be considered an allowable cost for the replacement of blinds. Although there was a deficiency noted concerning broken venetian blinds, Golfcrest did not establish that the cost for the blinds was what a prudent and cost-conscious buyer would pay for the blinds. In the 1991 survey, Golfcrest was cited for not being adequately furnished in the dining areas and not having sufficient space to accommodate all activities. In order to provide more space in the dining areas, Golfcrest purchased ten collapsible dining tables which could be easily removed to provide more space for large group activities in the dining room. The purchase of the dining tables was necessary to correct the deficiency of inadequate space, however, Golfcrest did not establish that the cost of the dining tables did not exceed the level of what a prudent and cost-conscious buyer would pay for dining tables. Golfcrest purchased 67 dining room chairs. However, Golfcrest did not establish how the purchase of the dining room chairs corrected the cited deficiency and did not establish that the cost of the dining room chairs was what a prudent and cost-conscious buyer would pay for dining room chairs. In the 1991 survey report, Golfcrest was cited for not providing clean beds. As an example of this deficiency, the survey listed torn blankets, threadbare sheets, pillow cases and towels and sunrotted sheets. Golfcrest purchased 104 bedspreads to replace all the bedspreads in the facility and to maintain an inventory of bedspreads to be used while bedspreads was being laundered. The purchase of the bedspreads were related to a cited deficiency, but Golfcrest did not establish that the cost of the bedspreads was what a prudent and cost-conscious buyer would pay for the bedspreads. Golfcrest requested that the purchase of valances be considered an allowable cost in its interim rate request. In its proposed recommended order, Golfcrest relied on the deficiencies cited in the 1991 survey report relating to the life safety survey dealing with privacy curtains which did not have netting at the top for support of its request for the valances. Golfcrest did not establish that the valances purchased were part of the cited privacy curtains. Given the fact that Golfcrest's request for replacement of cubicle curtains and tracks, was a separate request from the valances, it is reasonable to infer that the valances did not relate to the licensure requirement relied upon by Golfcrest. Additionally, Golfcrest did not establish that the cost of the valances was what a prudent and cost-conscious buyer would pay for valances. Golfcrest requested that the purchase of furniture for the activities area be considered an allowable cost in the calculation of its interim rate. Golfcrest did not establish what furniture was purchased for the activity area; thus, it did not establish how the purchase of the furniture was necessary to correct the deficiency that Golfcrest did not provide sufficient space and equipment and did not adequately furnish recreation and program areas to enable staff to provide residents with needed services as required. Additionally, Golfcrest did not establish that the cost of the furnishings for the activity room was what a prudent and cost-conscious buyer would pay for the furnishings. In its January 6, 1992 letter requesting an interim rate request, Golfcrest used 22,676 patient days to calculate the per diem rate for property costs. This number was taken from the July 31, 1990 cost report. HRS used 23,010 patient days to calculate the per diem rate. This number was taken from the last cost report dated July 31, 1991 and is the appropriate number to use in calculating the interim rate. The total per diem reimbursement rate for Golfcrest which was in effect at the time of the interim rate request was $71.2565. The per diem reimbursement for the property component is not one percent or more of Golfcrest's total per diem reimbursement rate.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered by the Agency for Health Care Administration as successor in interest for the Department of Health and Rehabilitative Services determining the interim rate for Golfcrest to be $1.2551. DONE AND ENTERED this 3rd day of August, 1994, in Tallahassee, Leon County, Florida. SUSAN B. KIRKLAND Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 3rd day of August, 1994. APPENDIX TO RECOMMENDED ORDER, CASE NO. 93-847 To comply with the requirements of Section 120.59(2), Florida Statutes (1993), the following rulings are made on the parties' proposed findings of fact: Petitioner's Proposed Findings of Fact Paragraphs 1-6: Accepted. Paragraph 7-9: Accepted in substance. Paragraph 10: Rejected as unnecessary detail. Paragraph 11-16: Accepted in substance. Paragraphs 17-19: Rejected as subordinate to the facts actually found. Paragraph 20: Accepted in substance. Paragraph 21: Rejected as constituting a conclusion of law. Paragraph 22: Accepted in substance. HRS had allowed the cost of the Hi-Lo beds, thus, those costs were not in dispute. Paragraph 23: Accepted in substance as to the blinds but not as to the shades and shower curtains. The shades and shower curtains were not part of the interim rate request, thus whether they were necessary to correct a deficiency is not addressed in this Recommended Order. Paragraph 24: Accepted in substance as it relates to the dining tables but not as to the dining chairs. Paragraph 25: Accepted in substance. Paragraph 26: Accepted in substance as it relates to the cubicle curtains and tracks but not as it relates to the valances. The cubicle curtains and tracks were allowed by HRS as a cost and thus was not in dispute. Paragraphs 27-28: Accepted in substance. Paragraph 29: Rejected as not supported by the greater weight of the evidence. Paragraph 30: Accepted in substance. Paragraph 31: Rejected as not supported by the greater weight of the evidence. Paragraphs 32 and 33: Accepted in substance. Paragraph 34: The first two sentences are accepted in substance. The third, fifth, sixth and seventh sentences are rejected as constituting conclusions of law. The fourth sentence is accepted. Paragraphs 35-36: Rejected as not supported by the greater weight of the evidence. Paragraph 37: The first sentence is accepted. The second sentence is rejected as not supported by the greater weight of the evidence. Paragraph 38: Rejected as subordinate to the facts actually found. Paragraph 39: With exception of the last sentence the paragraph is rejected as unnecessary detail. The last sentence is rejected as constituting a conclusion of law. Respondent's Proposed Findings of Fact. Paragraph 1: Accepted in substance. Paragraphs 2-9: Accepted. Paragraph 10-11: Accepted in substance. Paragraph 12-22: Rejected as unnecessary detail. Paragraphs 23-28: Accepted in substance except in paragraph 24 the reference to floor coverings should be to light fixtures. Paragraph 29: Rejected as not supported by the greater weight of the evidence. Paragraph 30: Accepted in substance. Paragraph 31-33: Rejected as subordinate to the facts actually found. Paragraph 34: Accepted in substance. Paragraph 35: Rejected as subordinate to the facts actually found. Paragraphs 36-39: Accepted in substance. COPIES FURNISHED: Alfred W. Clark, Esquire 117 South Gadsden, Suite 201 Tallahassee, Florida 32301 Karel Baarslag, Esquire HRS Medicaid Office 1317 Winewood Boulevard Building Six, Room 233 Tallahassee, Florida 32399-0700 R. S. Power, Agency Clerk Agency for Health Care Administration Atrium Building, Suite 301 325 John Knox Road Tallahassee, Florida 32303 Harold D. Lewis, Esquire Agency For Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303
The Issue Whether Respondent Department of Revenue’s (Department) January 27, 2020, Notice of Proposed Assessment to Petitioner B Century 21, Inc. (B Century 21) is incorrect.
Findings Of Fact Parties The Department is the state agency responsible for administering Florida’s sales and use tax laws, pursuant to chapter 212, Florida Statutes. B Century 21 is a Florida S-Corporation that operates two liquor stores (Al’s Liquor and Arlington Liquor), as well as a bar (Overtime Sports Bar), in Jacksonville, Florida. Mr. Altheeb is the sole owner of B Century 21 and testified that he is solely responsible for the operation of it, including the two liquor stores and bar. With respect to the operation of B Century 21, Mr. Altheeb testified, “I do all the paperwork, all the books, all the taxes. I do all the orders.” Matters Deemed Admitted and Conclusively Established2 B Century 21 received correspondence from the Department, dated August 20, 2019. That correspondence, from Ms. Pitre, stated, in part, “I will be conducting an examination of your books and records as authorized under Section 213.34, Florida Statutes.” B Century 21 received the Department’s form DR840, Notice of Intent to Audit Books and Records, dated August 20, 2019, including the Sales and Use Tax Information Checklist. The form DR-840 indicated that the Department intended to audit B Century 21 for a tax compliance audit for the period of July 1, 2016, through June 30, 2019. The Sales and Use Tax Information Checklist listed a number of categories of documents the Department intended to review as part of this audit. B Century 21 (through its accountant, power of attorney, and qualified representative, Mr. Isaac) received the Department’s October 30, 2019, correspondence, which referenced the “Audit Scope and Audit Commencement,” and an attached Records Request list. B Century 21 (through Mr. Isaac) received an email, dated October 30, 2019, from Ms. Pitre. That email references an attached Audit Commencement Letter. B Century 21 (through Mr. Isaac) received an email, dated November 12, 2019, from Ms. Pitre, which inquired of “the status of the records requested during the meeting with you and Mr. Altheeb on October 29, 2019.” B Century 21 (through Mr. Isaac) received the Department’s Notice of Intent to Make Audit Changes, form DR-1215, dated December 16, 2019. The form DR-1215 reflects a total amount of tax of $170,232.93, a penalty of $42,558.24, and interest through December 16, 2019, of $25,461.86, for a total deficiency of $238,253.04. The form DR-1215 also reflects that if B Century 2 See Order Granting Motion Declaring Matters Admitted and Setting Discovery Deadline. Fla. R. Civ. P. 1.370(b). 21 did not agree with these audit changes, or only agreed with a portion, that it had until January 15, 2020, to request a conference or submit a written request for an extension. Further, the form DR-1215 attached a Notice of Taxpayer Rights, which included additional detail on the options available to B Century 21. B Century 21 (through Mr. Isaac) received correspondence from Ms. Pitre, dated December 16, 2019, which stated that as of the date of the correspondence, the Department had not received the information previously requested on October 13, 2019, which it needed to complete the audit. The correspondence stated that B Century 21 had 30 days to review the audit changes, provided contact information to B Century 21 if it wished to discuss the findings in the form DR-1215, and noted that if the Department did not hear from B Century 21 within 30 days, it would send the audit file to the Department’s headquarters in Tallahassee, Florida. B Century 21 (through Mr. Isaac) received the Department’s Notice of Proposed Assessment, form DR-831, dated January 27, 2020. The form DR- 831 reflects a total amount of tax of $170,232.93, a penalty of $42,558.24, and interest through January 27, 2020, of $27,224.82, for a total deficiency of $240,016.00. For the time period between August 20, 2019, and January 7, 2021, B Century 21 did not provide the Department with: (a) any sales records; (b) any purchase records; or (c) any federal tax returns. For the time period between August 20, 2019, and January 7, 2021, B Century 21 did not provide any records to the Department for examination in conducting the audit. Additional Facts In 2011, for the purpose of enforcing the collection of sales tax on retail sales, the Florida Legislature enacted section 212.133, Florida Statutes, which requires every wholesale seller (wholesaler) of alcoholic beverage and tobacco products (ABT) to annually file information reports of its product sales to any retailer in Florida. See § 212.133(1)(a) and (b), Fla. Stat. Once a year, ABT wholesalers report to the State of Florida their name, beverage license or tobacco permit number, along with each Florida retailer with which they do business, the Florida retailer’s name, retailer’s beverage license or tobacco permit number, retailer’s address, the general items sold, and sales per month. See § 212.133(3), Fla. Stat. The information collected captures the 12-month period between July 1 and June 30, and is due annually, on July 1, for the preceding 12-month period. Id. ABT wholesalers file these reports electronically through the Department’s efiling website and secure file transfer protocol established through the Department’s efiling provider. § 212.133(2)(a), Fla. Stat. Ms. Baker explained this statutory process further: [W]e annually, every year in the month of May, my unit reaches out to the Florida Department of Business and Professional Regulations. We compel them to give us a list of all of the active wholesalers who were licensed to sell to retailers in the state of Florida for the prior fiscal year. Once we receive that list, we then mail a notification to all those wholesalers and state the statute and the requirements and give them a user name and a password that will allow them to then log into that portal and submit their retail—their wholesale—or their wholesale sales to retailers in the state of Florida for the prior fiscal year. Those reports are due on July 1st of each year, but they are not considered late until September 30th of that year. So that gives the wholesaler population a couple of months to compile all of their sales for the prior year, fill out their reports and submit them to the Florida Department of Revenue by the end of September. Additionally, each month, and for each retail location, B Century 21 reports gross monthly sales to the Department, and remits sales tax, utilizing the Department’s form DR-15. Ms. Baker further described the process the Department utilizes in identifying an “audit lead,” utilizing the data that ABT wholesales provide: Specifically for ABT, we have a very, actually, kind of simple comparison that we do. . . . [A]s a taxpayer, as a retailer in the state of Florida, you may purchase from multiple wholesalers. So, part of our job is we compile all of the purchases that each beverage license or tobacco license has purchased, and once we compile all the purchases for the fiscal year, then to say, you know, what were the purchases for the fiscal year versus what were the reported sales for the fiscal year. And, again, a pretty simple comparison we really look to see, did you purchase, or . . . did you report enough sales to cover the amount of purchases that we know you made as a – as a retailer. And if the sales amount does not exceed the purchase amount, then we’ll create a lead on it. The Department’s efiling provider exports the ABT wholesalers’ information to SunVisn, the Department’s database. The Department’s analysts review the ABT wholesalers’ reported data, and taxpayer information, to identify audit leads. The Department then assigns these audit leads to its service centers to conduct an audit. A tax audit period is 36 months. In conducting ABT audits, the Department has 24 months of reported data (i.e., the first 24 months of the audit period) for review. This is because the timing of section 212.133(3) requires ABT wholesalers to report annually on July 1, for the preceding 12- month period of July 1 through June 30. For the ABT reporting data examination period of July 1, 2016, through June 30, 2018 (a period of 24 months), B Century 21’s gross sales for its two liquor stores was as follows: Liquor Store Reported Gross Sales Al’s Liquor $1,051,128.56 Arlington Liquor $902,195.49 For the same 24-month time period of July 1, 2016, to June 30, 2018, B Century 21’s wholesalers reported the following ABT inventory purchases to the State, as required under section 212.133: Liquor Store ABT Inventory Purchases Al’s Liquor $1,250,055.79 Arlington Liquor $1,174,877.98 As the ABT wholesalers’ reported ABT inventory purchases by B Century 21’s retail outlets were higher than B Century 21’s reported sales, the Department issued an audit lead, which led to the audit that is at issue in this proceeding. The Audit For the 36-month audit period of July 1, 2016, through June 30, 2019 (audit period), B Century 21’s reported gross sales for each of its locations was: Location Reported Gross Sales Al’s Liquor $1,557,569.74 Arlington Liquor $1,434,551.65 Overtime Sports Bar $968,476.08 On August 20, 2019, Ms. Pitre mailed to B Century 21 (and received by Mr. Altheeb), a Notice of Intent to Audit Books and Records for the audit period. Included with the Notice of Intent to Audit Books and Records was correspondence informing B Century 21 of the audit and requesting records. On August 26, 2019, Ms. Pitre received a telephone call from Mr. Altheeb. Ms. Pitre’s case activity notes for this call state: Received a call from Baligh Altheeb and he said he will be hiring Brett Isaac as his POA [power of attorney]. I informed him to complete the POA form and to give it to Mr. Isaac for signature and send to me. He knows about ABT Data assessments and asked that I note on the case activity that he contacted me regarding the audit. He was worried that his liquor license will be suspended if he does not respond right away. I informed him that once I receive the POA, I will contact Mr. Isaac and discuss the audit. On October 18, 2019, the Department received B Century 21’s executed power of attorney (POA) form naming Mr. Isaac as its POA for the audit. The executed POA form reflects that the Department’s notices and written communications should be sent solely to Mr. Isaac, and not B Century 21. The executed POA form further reflects that “[r]eceipt by either the representative or the taxpayer will be considered receipt by both.” On October 29, 2019, Ms. Pitre met with Mr. Altheeb and Mr. Isaac at Mr. Isaac’s office, for a pre-audit interview. Ms. Pitre’s case activity notes for this meeting state: Met with the taxpayer contact person, POA Brett Isaac and owner Baligh Thaleeb [sic], at the POA’s location to conduct the pre-audit interview. Discussed the scope of the audit, records needed to conduct the audit, availability of electronic records, business organization, nature of the business, internal controls, and the time line of the audit. Discussed sampling for purchases and POA signed sampling agreement. Made appointment to review records on November 12, 2019. Toured one of the location [sic] to observe business operations, Overtime Sports Bar. On October 30, 2019, Ms. Pitre emailed Mr. Isaac a copy of the Notice of Intent to Audit Books and Records, which included a “Sales and Use Tax Information Checklist,” which requested specific taxpayer records. After receiving no response from Mr. Isaac, Ms. Pitre, on November 12, 2019, emailed Mr. Isaac concerning “the status of the records requested during the meeting with you and Mr. Altheeb on October 29, 2019.” Section 212.12(5)(b) provides that when a taxpayer fails to provide records “so that no audit or examination has been made of the books and records of” the taxpayer: [I]t shall be the duty of the department to make an assessment from an estimate based upon the best information then available to it for the taxable period of retail sales of such dealer … or of the sales or cost price of all services the sale or use of which is taxable under this chapter, together with interest, plus penalty, if such have accrued, as the case may be. Then the department shall proceed to collect such taxes, interest, and penalty on the basis of such assessment which shall be considered prima facie correct, and the burden to show the contrary shall rest upon the [taxpayer]. Section 212.12(6)(b) further provides: [I]f a dealer does not have adequate records of his or her retail sales or purchases, the department may, upon the basis of a 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, determine the proportion that taxable retail sales bear to total retail sales or the proportion that taxable purchases bear to total purchases. Mr. Collier testified that, in the absence of adequate records, the Department “estimates using best available information, and for this industry … ABT sales are a higher percentage of their taxable sales.” Because B Century 21 did not provide adequate records to Ms. Pitre, she estimated the total taxable sales for the audit period. For each liquor store that B Century 21 operated, she multiplied its total ABT purchases by average markups to calculate total ABT sales. To derive these average markups, Mr. Collier explained that the Department receives data from wholesalers, and then: [W]e take that purchase information, apply average markup to the different ABT product categories, which include cigarettes, other tobacco, beer, wine, and liquor; and then that gets us to total ABT sales number. And then we derive what we call a percentage of ABT sales, percentage of that number represents. And in this particular model, 95.66 percent represents what we believe in a liquor store industry, that this type of business, that 95.66 percent of their sales are ABT products. We derive the markups, and the percentage of ABT sales from a number of liquor store audits that the Department had performed on liquor stores that provided records. The Department utilized markup data from other ABT audits. The Department applied the following markups to these ABT categories: 6.5 percent for cigarettes; 47.5 percent for other tobacco products; 17.33 percent for beer; 29.84 percent for wine; and 24.5 percent for liquor. Applying the Department’s markup for liquor stores to the wholesalers’ reported ABT data and percentage of taxable sales, Ms. Pitre estimated taxable sales for the ABT reporting data examination period and calculated the under-reported sales error ratio as follows: Location Estimated Taxable Sales Error Ratio Al’s Liquor $1,597.544.01 1.519837 Arlington Liquor $1,516,259.34 1.680633 The Department then divided B Century 21’s estimated taxable sales for the examination period, for each liquor store, by its self-reported tax sales in its DR-15s to arrive at the under-reported rate. The Department then multiplied the under-reported rate by the reported taxable monthly sales in the DR-15s to arrive at the estimated taxable sales for the 36-month audit period. The result of this calculation was: Location Estimated Taxable Sales Al’s Liquor $2,367,252.11 Arlington Liquor $2,410,954.82 The Department then multiplied the estimated taxable sales by an effective estimated tax rate which, after giving credit for B Century 21’s remitted sales tax, resulted in tax due for the Al’s Liquor and Arlington Liquor for the audit period, as follows: Location Sales Tax Owed Al’s Liquor $58,367.01 Arlington Liquor $70,068.44 For Overtime Sports Bar, the Department could not use ABT wholesalers’ data to estimate an assessment because the Department does not have audit data averages for bars and lounges. The Department used the “Tax Due Method” in estimating under-reported taxes and calculating under- reported taxable sales. Mr. Collier explained: The Department does not have average markup and percentage of sales for a bar. Though, you know, obviously, we all know that a bar, their main product that they sell and in most cases is ABT products. So, therefore, typically, an auditor would need to get information about that specific location. Bars can vary so much in their type of business that they do, they can be like nightclubs, or they can be like bar and grill that serves a lot of food. So there’s a lot of variances there for that particular type of industry, so we haven’t really come up with average markups, average percentage of sales for bars, per se. It’s a case-by- case situation, and in this case, the auditor decided that the fair, reasonable way to estimate the bar location would be to just average the error ratios that were derived from the Al’s Liquor and the other liquor store location and apply it to the taxable sales reported for the bar. And I think that’s a very fair and reasonable estimate based on what we all know in a bar situation; their markups are significantly higher. And of course, there can be plenty of other non-ABT taxable sales occurring in a bar setting, such as prepared food, you know, just your regular cokes and drinks. So it’s certainly a fair way to estimate in this particular audit and I believe only benefits the taxpayer. The undersigned credits the Department’s methodology for estimating an assessment for Overtime Sports Bar. Further, Mr. Altheeb testified that Overtime Sports Bar operates as both a sports bar and a liquor/package store, and stated: Most of it—it’s a liquor store. I don’t know if you know the area, it’s a liquor store on the Westside. So most of it—the sport bar doesn’t really do too much business in the Westside, mostly the liquor stores. People coming in and buy package, you know, buy bottles and leave. So, most of the business is the drive-through window. The Department’s decision to average the error ratios for the other two liquor stores to derive the additional tax due average for Overtime Sports Bar is reasonable, particularly in light of Mr. Altheeb’s testimony that Overtime Sports Bar operates primarily as a liquor (package) store. The Department calculated the additional tax due average error ratio for Overtime Sports Bar by averaging the error ratios of Al’s Liquor and Arlington Liquor, and then multiplied it by B Century 21’s reported gross sales to arrive at the additional tax due for Overtime Sports Bar of $41,797.49. Ms. Pitre testified that she determined that, for the audit period, B Century 21 owed additional sales tax of $170,232.93. In addition, the Department imposed a penalty and accrued interest. On December 16, 2019, Ms. Pitre sent correspondence, the preliminary assessment, and a copy of the audit work papers to B Century 21 (through Mr. Isaac), informing B Century 21 that it had 30 days to contact the Department’s tax audit supervisor to request an audit conference or submit a written request for an extension. After receiving no response from B Century 21, Ms. Pitre forwarded the audit workpapers to the Department’s headquarters in Tallahassee, Florida, to process the Notice of Proposed Assessment. B Century 21’s Position As mentioned previously, and after initially meeting with the Department, B Century 21 failed to provide requested financial records or respond to any of the numerous letters and notices received from the Department, despite being given adequate opportunity to do so. And, after filing its Amended Petition, it failed to timely respond to discovery requests from the Department which, inter alia, resulted in numerous matters being conclusively established. Mr. Isaac served as the POA for B Century 21 during the audit, and also appeared in this proceeding as a qualified representative. However, Mr. Isaac did not appear at the final hearing, did not testify as a witness at the final hearing, and does not appear to have done anything for B Century 21 in this proceeding, other than filing the Petition and Amended Petition. After Mr. Heekin appeared in this matter, and well after the time to respond to discovery, B Century 21 provided 127 pages of documents to the Department. These documents consist of: 18 pages of summaries of daily sales that Mr. Altheeb prepared for the hearing; 41 pages of sales and use tax returns from B Century 21 locations, covering 25 months (DR-15s); 2 pages of Harbortouch’s 2016 1099K, reporting credit card sales; 43 pages of unsigned federal tax returns from 2016, 2017, and 2018, prepared by Mr. Isaac; and 17 pages of B Century 21’s untimely responses to the Department’s discovery requests. Florida Administrative Code Rule 12-3.0012(3) defines “adequate records” to include: (3) “Adequate records” means books, accounts, and other records sufficient to permit a reliable determination of a tax deficiency or overpayment. Incomplete records can be determined to be inadequate. To be sufficient to make a reliable determination, adequate records, including supporting documentation, must be: Accurate, that is, the records must be free from material error; Inclusive, that is, the records must capture transactions that are needed to determine a tax deficiency or overpayment; Authentic, that is, the records must be worthy of acceptance as based on fact; and Systematic, that is, the records must organize transactions in an orderly manner. The nature of the taxpayer’s business, the nature of the industry, materiality, third-party confirmations and other corroborating evidence such as related supporting documentation, and the audit methods that are suitable for use in the audit, will be used to establish that the taxpayer has adequate records. The undersigned finds that the summaries of daily sales are not adequate records because Mr. Altheeb prepared them for use at the final hearing, rather than in the regular course of business. The undersigned finds that the DR-15s provided by Mr. Altheeb, covering 25 months, are not adequate records because they are incomplete and are not inclusive. The audit period encompassed 36 months, for B Century 21’s three retail locations; however, Mr. Altheeb only provided 25 months of DR-15s. The 2016, 2017, and 2018 federal tax returns that B Century 21 provided are not adequate records because they are not authentic. Mr. Altheeb was unable to verify if these tax returns were correct, and they were unsigned. B Century 21 did not provide any evidence that it had filed any of these federal tax returns with the Internal Revenue Service. Ms. Pitre reviewed the 127 pages of documents that B Century 21 provided and testified that the summaries of daily sales did not provide the “source documents” for verification. The unsigned federal tax returns reflect that B Century 21 reported a cost-of-goods-sold (COGS) of $518,606.00 for 2016; $1,246,839.00 for 2017; and $796,968.00 for 2018. Additionally, the unsigned federal tax returns reflect that B Century 21 reported a beginning inventory (BI) for 2016 of $95,847.00, and a year-end inventory (EI) for 2016 of $200,556.00, EI for 2017 of $280,235.00, and EI for 2018 of $295,628.00. When comparing the unsigned federal tax returns with the ABT wholesalers’ data, the federal tax returns reflect, for 2016, total inventory purchases of $623,315.00 (which is derived from $518,606.00 (COGS) + $200,556.00 (EI) - $95,847.00 (BI)). However, the ABT wholesalers’ data for 2016 reflects that B Century 21’s ABT purchases were $1,174,997.34 – a discrepancy of more than $500,000.00. For 2017, the federal tax returns reflect total inventory purchases of $1,326,518.00 (which is derived from $1,246,839.00 (COGS) + $280,235.00 (EI) for 2017 - $200,556.00 (EI) for 2016). However, the ABT wholesalers’ data for 2016 reflects that B Century 21’s ABT purchases were $1,422,854.79 – a discrepancy of over $96,000.00. And for 2018, the unsigned federal tax returns reflect total inventory purchases of $812,361.00 (which is derived from $796,968.00 (COGS) + $295,628.00 (EI) for 2018 - $280,235.00 (BI) for 2017). However, the ABT wholesalers’ data for 2018 reflects that B Century 21’s ABT purchases were $1,335,814.00 – a discrepancy of over $500,000.00. Mr. Altheeb testified that Arlington Liquor and Overtime Sports Bar opened in 2016 – after B Century 21 began ownership and operation of Al’s Liquor. He stated that he did not purchase inventory for the openings of the newer locations, but instead transferred excess inventory from Al’s Liquor, which resulted in lower total inventory purchases for 2016. Mr. Altheeb also testified that B Century 21’s three locations experienced spoiled inventory. However, B Century 21 should include spoiled inventory in COGS reported in its federal tax returns, and further, B Century 21 provided no additional evidence of the cost of spoilage for the audit period. The undersigned finds that the ABT wholesalers’ data for 2016 through 2018 reflects similar amounts for inventory purchases between 2016 through 2018. The undersigned credits the Department’s reliance on the ABT wholesalers’ data, which reflect fairly consistent purchases for each year. The undersigned does not find the unsigned federal tax returns that B Century 21 provided to be persuasive evidence that the Department’s assessment was incorrect. Mr. Altheeb testified that he believed Mr. Isaac, who B Century 21 designated as POA for the audit, and who appears as a qualified representative in this proceeding, was actively handling the audit. Mr. Altheeb stated that the audit, and the final hearing, “kind of came out of nowhere” and that once he learned of it, he retained Mr. Heekin and provided “everything” to him. However, it is conclusively established that the Department provided correspondence and notice to B Century 21 through its designated POA, and that B Century 21 failed to respond to record requests in a timely manner. Mr. Isaac neither testified nor appeared at the final hearing to corroborate Mr. Altheeb’s claims that Mr. Isaac did not keep Mr. Altheeb or B Century 21 apprised of the status of the audit, including the failure to provide requested records or to communicate with the Department. B Century 21 also attempted to challenge the Department’s use of markup data from other ABT audits, in an attempt to argue that the markups were inflated and not representative of B Century 21’s markups. However, and as previously found, B Century 21’s failure to timely provide records—or respond in any meaningful way to the audit—undermines this attempt. The undersigned credits the Department’s methodology in using the best information available to it for the audit period in calculating the assessment. Although it became apparent during the final hearing that Mr. Altheeb did not treat the audit of B Century 21 with appropriate seriousness, and deflected blame to Mr. Isaac, and that his approach resulted in a legally appropriate and sustainable audit and assessment based on the Department’s best information available, the undersigned does not find that B Century 21, Mr. Isaac, or Mr. Heekin knew that the allegations of the Amended Petition were not supported by the material facts necessary to establish the claim or defense, or would not be supported by the application of then-existing law to those material facts. The undersigned finds that the Department made its assessment based on the best information then available, and is thus prima facie correct, pursuant to section 212.12(5)(b). The undersigned further finds that B Century 21 did not prove, by a preponderance of the evidence, that the Department’s assessment is incorrect, pursuant to section 212.12(5)(b).
Conclusions For Petitioner: Robert Andrew Heekin, Esquire The Law Office of Rob Heekin, Jr., P.A. 2223 Atlantic Boulevard Jacksonville, Florida 32207 For Respondent: Randi Ellen Dincher, Esquire Franklin David Sandrea-Rivero, Esquire Office of the Attorney General Revenue Litigation Bureau Plaza Level 1, The Capitol Tallahassee, Florida 32399
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, the undersigned hereby RECOMMENDS that the Department enter a final order sustaining the January 27, 2020, Notice of Proposed Assessment to B Century 21, Inc. DONE AND ENTERED this 21st day of October, 2021, in Tallahassee, Leon County, Florida. S ROBERT J. TELFER III Administrative Law Judge 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 21st day of October, 2021. COPIES FURNISHED: Mark S. Hamilton, General Counsel Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668 Randi Ellen Dincher, Esquire Office of the Attorney General Revenue Litigation Bureau Plaza Level 1, The Capitol Tallahassee, Florida 32399 Robert Andrew Heekin, Esquire The Law Office of Rob Heekin, Jr., P.A. 2223 Atlantic Boulevard Jacksonville, Florida 32207 Franklin David Sandrea-Rivero, Esquire Office of the Attorney General Plaza Level 1, The Capitol Tallahassee, Florida 32399 Brett J. Isaac 2151 University Boulevard South Jacksonville, Florida 32216 James A Zingale, Executive Director Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668
The Issue The issue for determination is whether Petitioner should be assessed sales and use tax for the audit period May 1, 1997 through April 30, 2002, per the Notice of Proposed Assessment dated July 3, 2003.
Findings Of Fact Wales is a Florida S corporation. Its principal place of business is located at 2916 Southeast 6th Avenue, Fort Lauderdale, Florida. Wales' federal employee identification number is 59- 1703273. Wales' Florida sales and tax number is 16-03-095273- 26/1. By letter dated June 6, 2002, the Department issued to Wales a Notice of Intent to Audit Books and Records (Notice of Intent). The Notice of Intent identified the audit number as A0205310975. On July 10, 2002, the Department's auditor assigned to perform the audit conducted an initial interview with Wales. The auditor discussed, among other things, the audit and sample methods that would be employed during the audit. On August 13, 2002, the auditor began examining Wales' books and records at Wales' business location. Wales was cooperative during the audit. Wales provided all available books and records for the audit. The sole shareholders of Wales are Stewart Levy and Diane Levy. Wales leased its business location from Element Two Enterprises, Inc., ( Element Two) a related entity. Stewart Levy and Diane Levy are also the sole officers of Element Two, president and secretary, respectively. Element Two is the record owner of the improved real property located at 2916 Southeast 6th Avenue, Fort Lauderdale, Florida, (realty). The address for the realty is also the address for Wales' place of business. Element Two mortgaged the realty leased by Wales. Wales paid monthly monetary consideration to Element Two in lease payments, which directly correlated to the amount of the monthly mortgage payments. Ad valorem taxes and property insurance were included in the monthly mortgage payments. Wales paid the ad valorem taxes and property insurance on the leased property. The lease payments to Element Two by Wales included the amount of the ad valorem taxes, property insurance, and common areas of maintenance. Wales did not pay sales tax on any of the lease payments to Element Two. Element Two did not charge or remit sales tax to the Department on the lease payments by Wales. Element Two was not registered with the Department as a dealer. Only dealers that are registered can remit sales tax on lease payments. Consequently, Element Two could not remit sales tax on the lease payments by Wales. Wales did not utilize all of the property it leased. Wales sub-leased a portion of the leased property to an unrelated entity. A prior sales and use tax audit was conducted of the sub-lessee, which included the period May 1997 through December 1998. The Department examined the sublease audit to determine whether Wales owed additional sales tax. The Department's examination of that audit revealed that the sales and use tax on the rent paid by the sub-lessee for the period May 1997 through September 1998 was assessed and paid by the sub-lessee. For the period May 1997 through December 1998, Wales had neither charged or collected sales tax nor remitted sales tax to the Department on the sub-lessee's payments. No sales tax was charged or paid on the sublease payments for the period October 1998 through December 1998. From January 1999 through April 2002, Wales charged, collected, and remitted sales tax on the sublease payments. The Department credited Wales for sales tax already paid on the subleased portion for the period May 1997 through September 1998 and January 1999 through April 2002. On its general ledger, Wales posted the lease payments to Element Two as rent payments. Element Two posted the lease payments to its general ledger as rent income. On its federal income tax returns, Wales reported the lease payments to Element Two as rent expense. Element Two reported the lease payments on its federal income tax returns as rent income. On November 29, 2002, the Department issued to Wales a Notice of Intent to Make Audit Changes for audit number A0205310975. Wales requested and the Department agreed to hold an audit conference to discuss the audit findings. Wales claimed that rent payments made were not subject to sales tax because both Wales and Element Two signed the mortgage and promissory note on the realty leased by Wales. However, only Element Two was reflected as the borrower on the loan and only Element Two was the signatory on the mortgage even though both Wales and Element Two signed the promissory note. On January 10, 2003, Wales executed a Consent to Extend the Time to Issue an Assessment or to File a Claim for Refund (Consent). The Consent extended the statute of limitations for the period of time in which an assessment may be issued or a claim for refund may be filed to December 31, 2003. On July 3, 2003, the Department issued, by certified mail, the Notice and an Addendum to Proposed Assessment for audit number A0205310975. The Notice provided, among other things, for the assessment of sales and use tax in the amount of $17,481.73; penalty in the amount of $8,741.10; interest in the amount of $5,756.03, with additional daily interest being computed at the rate of $3.54 per day from July 3, 2003; and a total assessment in the amount $31,978.86. On September 1, 2003, the Notice became a Final Assessment for audit number A0205310975. Wales contested the Final Assessment and requested a hearing. Wales is not contesting that part of the audit which found that Wales failed to pay sales tax on certain fixed assets purchased for use in its business. At hearing, Wales contended that its federal income tax returns could be amended to reflect the payments to Element Two as mortgage payments instead of rent payments, which would, in turn, change the Department's audit to reflect the payments as mortgage not rent. To address this contention, the Department presented the testimony of an expert witness in the area of rental consideration and sales tax audits. The Department's expert testified that the consideration for rental or use of property is the payment between/to one who owns the real property and/from one who uses the property; and concluded that consideration, as rental, was provided to Wales by Element Two based on the Department's taxing statute, Section 212.031, Florida Statutes, and its rules and regulation, Florida Administrative Code Rule 12A-1.070. The expert opined that the mortgage payments were consideration for a lease or license to use the real property and that, therefore, the monthly lease payment, which equaled the monthly mortgage payment, paid by Wales to Element Two was consideration for the lease or license to use the realty. The expert's testimony is found to be credible. The evidence presented shows that the mathematical computations performed by the Department in its audit are correct. Further, the evidence shows that the mathematical computations as to tax, penalty, and interest assessed are correct.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue's assessment of sales tax, interest, and penalty against Wales Garage Corporation be sustained and that the Department of Revenue enter a final order assessing sales tax, interest, and penalty against Wales Garage Corporation for the period May 1, 1997 through April 30, 2002, consistent herewith. DONE AND ENTERED this 27th day of May, 2004, 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 27th day of May, 2004. COPIES FURNISHED: Gerald S. Schnitzer GSS Advisory Services, Inc. 2455 East Sunrise Boulevard, Suite 502 Fort Lauderdale, Florida 33304 Carrol Y. Cherry, Esquire Office of the Attorney General The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050 Bruce Hoffmann, General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 James Zingale, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100
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 Respondent DeBellonia is president of Respondent CGFS, Inc. At all times material to these proceedings, the Respondents were business consultants who assisted their clients with the preparation and presentation of information for private lenders who were interested in making business loans. Their business offices were located at North Rocky Point Drive, Suite 800, Tampa, Florida. In late July or early August 1989, Constance J. Jones responded by telephone to an advertisement placed by Respondents in the Tampa Tribune newspaper. The ad communicated to her that the Respondent CGFS, Inc. was interested in providing business financing to new and established businesses. Upon receipt of the telephone call, a secretary at CGFS, Inc. scheduled an appointment for Mrs. Jones with Respondent DeBellonia for August 7, 1989. Mrs. Jones was excited about the appointment because the seller of commercial real property purchased by her and her husband had recently filed a foreclosure action to recover the property. The suit occurred because she and her husband had been unable to make the final balloon payment on the property. The seller had agreed to forebear the possibility of such a suit the year before when Mrs. Jones gave him twenty thousand dollars ($20,000.00) and the promise that she would obtain financing within a year's time and pay the outstanding balance in full. At the close of the year, Mrs. Jones had not been successful in her attempts to acquire the money to pay for the property. This appointment renewed her hopes that she could minimize her losses, settle the suit, and preserve her interest in the property. Prior to arranging her appointment with Respondent DeBellonia, Mrs. Jones had made applications for a loan at several banks. Her requests had been turned down because the banks had determined that the present value of the property was insufficient to provide the collateral needed for the secured loan she was seeking. When Mrs. Jones attended her meeting with Respondent DeBellonia, she voluntarily presented him with a copy of her agreement for deed, a property appraisal, and her owner's title insurance policy. Having submitted herself to a number of loan requests at various banks prior to this appointment, she assumed he would want to see the same documents that had been requested during those loan reviews. Respondent DeBellonia allowed Mrs. Jones to present her situation and her documentation to him in her own manner. He made copies of all of the papers offered to him and returned the originals. At the close of Mrs. Jones' presentation, Respondent DeBellonia agreed to be her business consultant and to assist her in her search for funding. Although Mrs. Jones originally stated that she needed to acquire $94,000.00, this amount was reduced to $20,000.00 when she was informed that the Respondents charge a professional service fee of ten percent of the loan amount ultimately accepted by the clients. To begin work on the funding project, the Respondents requested a non-refundable professional service fee of $1,900.00. Although Mrs. Jones did sign the business consultant agreement, she did not have the money with her to pay the non-refundable fee. When she informed Respondent DeBellonia that she did not have the money, he told her he needed the money as soon as possible so that he could go ahead and work on the transaction. He indicated that he could accomplish a fast transaction for the $20,000.00 in about three days time. According to Mrs. Jones, the seller of the commercial property was willing to forebear on the foreclosure for a while if she could give him $20,000.00 now and if she was actively pursuing a loan which would pay off the balance due. This proposal was another reason she changed her request from $94,000.00 to the $20,000.00 amount. Later that evening, Mrs. Jones telephoned Respondent DeBellonia and told him she needed a new document so that her husband could be on the agreement as well. When the second document was sent, the secretary mistakenly sent out the original agreement with a funding goal of $94,000.00 instead of the reduced request for $20,000.00. Mr. Jones' name had been placed on the document in order to obtain his signature. Both agreements given to Mrs. Jones clearly state that Respondent CGFS, Inc. is not a mortgage broker. Before Mrs. Jones returned a fully executed agreement to the Respondents with the non-refundable fee, she decided to call the Comptroller's Office in Tallahassee to get a business rating to see if this was a good-rated business for her own protection. Although nothing negative was stated by the Comptroller's Office, Mrs. Jones did not get the assurances she was seeking. After that, she decided not to retain the Respondents to provide their business consultant services. Without Mrs. Jones' presumption that the Respondents would eventually seek a mortgage on the real property she intended to purchase, there is no reliable circumstantial evidence which demonstrates that the Respondents were seeking to act as a mortgage broker under the set of facts presented at hearing. Even if the circumstantial evidence and ill-conceived presumptions were considered reliable, the evidence is outweighed by the clear statement within the consultant agreement that Respondent CGFS, Inc. is not a mortgage broker. In addition, if the Respondents had intended to see a mortgage for Mrs. Jones, they would have required her to have her husband sign the agreement because she was an equitable owner of the property in a tenancy by the entirety. Instead, it was Mrs. Jones who later requested that her husband's name be included on the agreement. Respondent DeBellonia clearly manufactured Respondents' Exhibit number E. If this proceeding had turned on his credibility versus the credibility of others, he would not have prevailed in the factual determination. Based upon the facts presented at hearing, the Department initially had reason to believe that the Respondents were violating or about to violate the law by acting as a mortgage broker and mortgage broker business without a license. However, the formal hearing process revealed that Mrs. Jones' impressions of what occurred during her meeting with Respondent DeBellonia were faulty. Documentary evidence prepared during the interview and Mrs. Jones' admissions during the cross-examination resolved the case in Respondent's favor. The actions taken by the Department in filing the Cease and Desist Order were proper, and were not harassment of the Respondents.
Recommendation Accordingly, it is RECOMMENDED: That the cease and desist order issued by the Department on February 20, 1990, be dismissed. DONE and ENTERED this 31st day of September, 1990, in Tallahassee, Leon County, Florida. VERONICA E. DONNELLY 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 21st day of September, 1990. APPENDIX TO RECOMMENDED IN CASE NO. 90-1720 Petitioner's proposed findings of fact are addressed as follows: Accepted. See HO number 1. Accepted. Reject the date of the interview. The rest is accepted. See HO number 2-number 6. Accepted. Accepted. See HO number 5. Accepted. See HO number 9 and number 10. Accept the first two sentences. See HO number 9. Reject the third sentence. Contrary to fact. Reject the fourth sentence. Irrelevant. 8. Accepted. See HO number 11 and number 12. 9. Accepted. See HO number 15 and number 18. COPIES FURNISHED: Stephen M. Christian, Esquire Office of the Comptroller Regional Service Center 1313 North Tampa Street, Ste. 615 Tampa, Florida 33602-3394 Michael C. Mone, Esquire 111 Eighth Street Belleair Beach, Florida 33535 Honorable Gerald A. Lewis Comptroller, State of Florida The Capitol Tallahassee, Florida 32399-0350 William G. Reeves, Esquire General Counsel Department of Banking and Finance The Capitol, Room 1302 Tallahassee, Florida 32399-0350
Findings Of Fact During the times herein involved Respondent Kramer and Pankz were registered real estate brokers and Active Firm Member of Respondent, ILB, a registered corporate broker. Registered real estate salesmen were employed to obtain listings and WATS lines installed. Lists of out-of-state purchasers of Florida land were obtained and during the hours of 6 to 10 P.M. salesmen telephoned individuals from these lists provided them by ILB. Each salesman was provided with a script to follow in making his sales pitch. As one witness recalled the substance of the script was "if you felt you could make a profit on your property would you be interested in selling it?" Those indicating interest in selling at a profit were told that ILB was engaged in land sales on a large scale, that world wide investors were interested in acquiring Florida land, that they widely advertised the land that was listed with them in a catalog that went to brokers all over the world, that Florida land had greatly increased in price in recent years, that they would evaluate the owner's land and tell him what ILB thought the land would sell for. They inquired what the owner had paid for his land and obtained enough of the description to ascertain the size of the plot. For those interested in selling, a package was sent containing newspaper clippings about foreign investors being interested in Florida land, an "Important Facts" sheet containing much of the information passed to the owner on the first telephone call, a list indicating publications and newspapers in which ILB advertises, photocopies of what purports to be inquiries received from around the world as a result of ILB's advertising, and a copy of a Listing and Brokerage agreement. When the owner was again called about a week after the first call he was quoted a price for his property, nearly double what he had paid for it, and advised if he would list the property with ILB every effort would be made to quickly obtain a buyer. It was explained that because of the expense of advertising it was necessary for the owner to pay listing fee, which was fully refundable out of the 10 percent selling commission that ILB would earn when the property was sold. The advance listing fee which the owner forwarded when he executed the listing and brokerage agreement varied between $250 and $350. The listing agreement provided, inter alia, that owner "understand(s) that this agreement does guarantee the sale of my property but that it does guarantee that you will make an earnest effort pursuant to the aforementioned provisions." Out of this listing fee the salesman was paid approximately 1/3. No arrangement was made between ILB and the salesman regarding any additional commission to the salesman if the property was sold. No effort was made by the listing salesman to sell any property listed, although one witness testified that she did ask some of those she called if they wanted to purchase property. No evidence was presented that any of the property for which listing fees were received was sold by ILB. Several of the witnesses had been told by Respondents that sales had been made, but no corroboration of this hearsay was ever presented. The Respondent brokers Kramer and Pankz refused to answer any questions regarding the operation of the corporate broker ILB on grounds that such answers might tend to incriminate them. Accordingly no substantive evidence was presented that any sales or efforts to sell the properties listed was made prior to December, 1975. Exhibit 29, the Consent Order between the Division of Consumer Affairs and ILB, corporate officers and salesmen of ILB, was entered on July 2, 1976. The Complaint in that proceeding, was the basis for Respondent's collateral estoppel argument to dismiss the instant proceeding, was filed April 10, 1976, following extensive investigation of ILB. This is pointed out solely to accentuate the fact that practically all of the documents in Exhibit 27 and 28, which were offered into evidence by Respondents to show that they were making bona fide efforts to sell the properties listed, were prepared subsequent to the commencement of the investigation of ILB. Exhibits 8, 9, and 10 were admitted into evidence, were published by Respondent but no substantive evidence was presented that these listings are "advertisements" of the properties for which Respondent received a listing fee or that they were distributed to anyone other than those making inquiries about property. In the forwarding letter printed on the inside of the front cover of these exhibits the selling brokers were offered a 7 percent commission of any cash sales they arranged. As noted above, the total commission in the Listing and Brokerage agreement was 10 percent. The information contained in these catalogs was not legally sufficient to locate the properties therein listed. Many of the land development companies which originally sold the properties which Respondents herein were soliciting listing commissions, head many unsold lots in these developments which they were offering for sale at prices less than one-half the prices Respondent had advised the owners the property would bring. Independent brokers in some of the areas involved, i.e. Lee, Collier, and Hendry counties testified that many of the lots in these developments were for resale at one-half the prices being asked by the developers. Exhibit 22, the Federal Corporate Income Tax Return for ILB for 1974 shows Respondent Kramer owned all of the stock of ILB during that taxable year and that $12.00 was spent on advertising. Exhibit 23, the Corporate Federal Income Tax Return for ILB for 1975 shows that $348,305.68 in gross receipts and deductions of $344,976.96, but no schedule of such deductions was attached. No evidence was presented regarding advertising expenses for taxable year 1975.
Findings Of Fact Petitioner Eli Witt Company is a wholesale dealer in cigarettes in some eight states, including Florida. During the year 1976 and at the present time, Petitioner acts under the authorization of the Division of Alcoholic Beverages and Tobacco as an agent to buy or affix stamps pursuant to Section 210.05, Florida Statutes, and to collect and remit the cigarette tax to the Division after sale to various retailers in the State. Petitioner has some twenty-five branch offices located throughout the State who place orders for cigarettes with Petitioner on a daily basis. The cigarettes are invoiced by Petitioner to each branch and, upon arrival, the various branch offices affix the tax stamps upon the cigarette packages, primarily by means of a stamping machine. Each of Petitioner's stamping offices maintains its own records and files required reports, and is audited individually by employees of the Division. Each branch office is listed separately on a rider to the surety bond of Petitioner which is required under Chapter 210. Monthly checks are signed by each branch manager to remit tax collected to the Division. (Testimony of Hoyland) Since at least 1962, Petitioner had stamped cigarettes and collected cigarette taxes for the State of Florida. It had been allowed a discount as compensation for its services and expenses pursuant to Section 210.05 (3)(a), Florida Statutes, of 2.9 percent on the first two million cigarette packs stamped at each of its stamping locations. On March 1, 1976, the Division promulgated Rule 7A-10.25, Florida Administrative Code, which provided that a wholesaler who stamps cigarettes at more than one location would only be entitled to receive the maximum discount for a single agent doing business at a single location. Accordingly, although each of Petitioner's twenty-five stamping locations purchased more than two million stamps from the Division during the fiscal year July 1, 1976 through June 30, 1977, Petitioner retained the 2.9 percent discount as if it had done business at only one location. It filed a protest against the effect of the rule with the Division on July 1, 1976. A refund claim was filed with the State Comptroller on March 16, 1979, and denied on June 12, 1979. (Testimony of Hoyland, case pleadings, Exhibits 2- 3, 5) In 1977, the state legislature enacted Chapter 77-421, Laws of Florida, effective June 29, 1977, which provided in part in Section 8 thereof that: "Stamping locations approved by the division shall be responsible for computing the discount provided for each and every stamping location by ss. 210.05(3)(a), Florida Statutes . . ." The Division thereafter permitted discounts under the policy in effect prior to the promulgation of Rule 7A-10.25, but did not repeal the rule. On March 16, 1979, Petitioner requested the State Comptroller to refund the $64,800 paid under protest in fiscal year 1976-77 which represented the amount it could have retained as a discount if Rule 7A-10.25 had not been in effect. (Case pleadings, Exhibits 1, 4)
The Issue The issue is whether Petitioner is liable for tax, interest, and penalty, as claimed in the proposed assessment.
Findings Of Fact Gary J. Bell (Mr. Bell) and his father Sidney Bell formed Petitioner in 1992. Until Mr. Sidney Bell left the company in his son's sole control in 2001, they were the sole shareholders and officers of the company, which had two other employees. Mr. Bell and his father estimated and checked jobs. Not fabricating fences itself, Petitioner obtained finished fences from suppliers and installed them, primarily at private residences. The audit period in this case extends from May 1, 1995, through November 30, 1999 (Audit Period). By 1995, Petitioner had four employees: one in the office and three laborers. The nature of Petitioner's business had changed from entirely residential to about half commercial, mostly consisting of sales to the State of Florida. The size and nature of Petitioner's business did not change significantly during the remainder of the audit period, although the percentage of sales to the State of Florida increased somewhat. Without referring to any records, Mr. Bell estimates that Petitioner's gross sales during the 55-month audit period totaled $1.2 to $1.4 million. Jose Rouco, a tax auditor of Respondent, sent a notice in May 2000 to Mr. Bell informing him of Respondent's intention to examine Petitioner's records. Due to a change of address, Mr. Rouco sent the form a second time. When he received no response to the form, in September 2000, Mr. Rouco visited the address that he had found for the company. Speaking to someone at a nearby business, Mr. Rouco learned that the fencing business had recently moved from the second address. On November 22, 2000, Mr. Rouco spoke to Mr. Bell on the telephone and learned that the records required for the audit were at Petitioner's present business address. Mr. Rouco directed Mr. Bell to send him copies of these records. When Mr. Bell failed to do so, Mr. Rouco sent a demand letter on December 12, 2000, warning that the failure to provide the requested records by December 27 would result in the issuance of a Formal Notice of Demand to Produce Certain Records. On December 28, 2000, after Mr. Bell had failed to respond by the deadline stated in the December 12 letter, Mr. Rouco issued a Formal Notice of Demand to Produce Certain Records for the Audit Period by 10:00 a.m. on January 9, 2001. The form warns: "Failure to produce [the records] may result in the immediate issuance of a distress warrant or a jeopardy assessment in the amount of an estimated assessment of all taxes, interest, and penalties due and payable to the State of Florida." When Mr. Bell failed to produce the records by January 9, 2001, Mr. Rouco proceeded to estimate taxes that Petitioner owed. A couple of weeks later, he received as unclaimed the December 12 letter and December 28 notice, which he had sent certified mail, return receipt requested, to Petitioner's correct address. The record does not disclose why Mr. Bell never took delivery of this mail. Based on Mr. Rouco's work, Respondent issued on April 30, 2001, a Notice of Proposed Assessment, which claimed, for the Audit Period, taxes of $227,610, a penalty of $113,805, and interest of $98,583.19 through April 30, 2001, and $74.83 daily after April 30, for a total of $439,998.19. The notice warns that the proposed assessment would become a final assessment if Petitioner did not file an informal protest by June 29, 2001, and that Petitioner must commence a judicial action or administrative proceeding by August 28, 2001. By letter dated August 10, 2001, Willie Barnett, a certified public accountant, informed Respondent that he was Petitioner's accountant, and he was responding to Respondent's tax notice dated July 25, 2001. The record does not contain any documents from Respondent dated July 25, 2001. However, Mr. Barnett's letter states that Petitioner "is in the business of installing fences, not retail sale. In those instances where the company purchases the fencing materials, the sales taxes are paid at the point of purchase." The letter concludes that Petitioner is therefore not liable for sales taxes. Mr. Bell asserts that Petitioner has paid all taxes lawfully due, but that Petitioner is not required to collect any tax on its sales to consumers because these are sales pursuant to real property contracts. Respondent's file already contained the information that Mr. Barnett supplied. By Audit Assignment Request received January 11, 1999, by Respondent's Case Selection Division, L. David Mills, evidently an employee of Respondent, wrote: "Taxpayer sells and installs real property. Potential for recovery on purchases and fabrication labor and overhead. Taxpayer does not appear to be registered." By a file memorandum dated October 25, 2000, Joan C. Rietze, also evidently an employee of Respondent, wrote: "Talked to Gary Bell. . . . He also stated that he pays tax on all of the purchases he makes. He requested that his tax number be cancelled in December of last year. The sales tax number was cancelled in October, 2000." In estimating Petitioner's tax liability in January 2001, Mr. Rouco identified four areas: taxable sales, taxable purchases, taxable acquisition of fixed assets, and taxable rent. Mr. Rouco's estimates were $207,900 for uncollected taxes on sales, $6270 for unpaid taxes on purchases of items other than fixed assets, $6840 for unpaid taxes on fixed assets, and $6600 for unpaid taxes on warehouse rent. Without much explanation, Mr. Rouco selected a "small construction company" as the source of gross monthly sales of $63,000, as well as other relevant business activity. However, this choice produces $3.465 million of gross sales during the Audit Period, which is almost three times Mr. Bell's estimate. Factually, the record offers scant support for Mr. Rouco's selection of the "small construction company" as a comparable to Petitioner's business. Petitioner's business was not construction; it purchased already-fabricated fences and installed them. Coupled with the problem with the comparable, the record does not support Mr. Rouco's estimate of Petitioner's tax due on purchase amounts of fixed assets, and Petitioner has proved that it does not owe additional taxes on such purchases. Petitioner's labor-intensive services, coupled with its itinerant nature during the Audit Period, suggest strongly few, if any, such purchases. Coupled with the problem with the comparable, the record does not support Mr. Rouco's estimate of Petitioner's tax due on warehouse rent, and Petitioner has proved that it does not owe additional taxes on such rent payments. The estimate concerning unpaid warehouse rent sales tax requires the presumption that Petitioner's several lessor's found some reason not to collect and remit sales tax based on the lease payments. Any dealer-like activities by Petitioner involving sales for resales would not impact its liability to pay this tax, so misuse of a dealer registration is unlikely here. Nor has Respondent suggested such widespread noncompliance with this component of the sales tax as to justify a presumption of noncompliance among Petitioner's lessors, even assuming that Mr. Rouco generated a gross rent that is factually supported by the record. Notwithstanding the problem with the comparable, the factual record supports Mr. Rouco's estimate of Petitioner's tax due on purchases of items other than fixed assets, and Petitioner has failed to prove that it does not owe additional taxes on such purchases. For much, if not all, of the Audit Period, Petitioner appears to have been a registered dealer. Mr. Bell's unprofessional handling of this matter while Mr. Rouco attempted to perform a routine audit inspires little confidence that Mr. Bell would not misuse a dealer registration and resale certificate. Thus, although the use of the "small construction company" as a comparable is questionable, there is factual support for the assessment of $6270 in unpaid taxes on these purchases over the Audit Period. As noted below, the main problem with Mr. Rouco's estimate of Petitioner's tax due on sales to consumers is legal, not factual. As for the main factual aspect of this issue, the record offers no support that Petitioner sold to consumers using a retail sale plus installation contract, as opposed to a simple lump sum contract. Nothing in Petitioner's operation, as reflected on this record, suggests that it would be more inclined to use the more sophisticated contract.
Recommendation It is RECOMMENDED that Department enter a final order adjusting the assessment against Petitioner to reflect unpaid sales tax of $6270, a penalty of $3135, and interest at the lawful rate. DONE AND ENTERED this 26th day of February, 2002, 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 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 26th day of February, 2002. COPIES FURNISHED: James Zingale, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100 Bruce Hoffman, General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 Gary J. Bell, Qualified Representative Bell & Son Fence Company, Inc. 6600 Northwest 27th Avenue Miami, Florida 33147 John Mica, Assistant Attorney General Office of the Attorney General The Capitol, Tax Section Tallahassee, Florida 32399-1050
The Issue The issues for determination are whether Petitioner paid sales and use tax on rental income from transient housing in Osceola and Polk counties, and whether Petitioner paid sales and use tax on the purchase of fixed assets in accordance with the requirements of Sections 212.03 and 212.06, Florida Statutes (1995). (Statutory references are to Florida Statutes (1995) unless otherwise stated.)
Findings Of Fact Petitioner is a Florida corporation with its principal place of business located at 3501 West Vine Street, Suite 387, Kissimmee, Florida. Petitioner primarily engages in the business of renting and managing transient property in the Orlando-Disney World area for absentee owners. Respondent is the state agency responsible for the administration of the Florida sales and use tax pursuant to Section 213.05. Respondent selected Petitioner for audit because Petitioner filed several sales and use tax returns reporting no taxable income (zero returns). Zero returns are unusual for a tourist-based business in the Orlando-Disney area. Osceola County, Florida (Osceola), also audited Petitioner for the period December 1994 through December 1999. Osceola is a political subdivision of the state and is responsible for administering and assessing the Tourist Development Tax authorized in Section 212.03 and Section 13-16, Osceola County Code of Ordinances (Code). Osceola audited Petitioner because Petitioner failed to file any tax returns with Osceola. Osceola correctly assessed Petitioner $394,378.39 for tax, penalty, and interest. The mathematical computations in the Osceola audit are correct. Osceola conducted its audit in accordance with generally accepted auditing principals. The Osceola audit revealed that Petitioner began doing business on January 1, 1995, but reported that it began doing business on both November 16, 1999, and March 12, 1998. The Osceola audit revealed that Petitioner failed to maintain required tax records, including guest registration forms; cash receipts; a general ledger; and documents necessary to verify amounts reported in tax returns. Petitioner did not reconcile its bank statements and did not maintain records necessary to verify that all receipts from guest registrations were properly entered into Petitioner's computer system of record keeping. Respondent began its audit on January 8, 2001. However, Respondent was unable to examine most of Petitioner's books and records due to a lack of cooperation from Petitioner. Respondent made several attempts to obtain Petitioner's books and records, but Petitioner provided Respondent with only consumable purchase invoices. Respondent and Osceola have an agreement to share information. Respondent relied on information obtained by Osceola in the course of the Osceola audit. Osceola provided Respondent with copies of Osceola's work papers including a spreadsheet of undeclared revenue compiled from Petitioner's books and records. Osceola also provided Respondent with a list of 102 properties managed by Petitioner during the audit period. Approximately 61 properties are located in Osceola County and 41 are located in Polk County. Respondent bases its assessment on an estimate derived from the Osceola assessment, records, and work papers. Respondent conducted its audit in accordance with applicable law. The mathematical computations in Respondent's audit are correct. Petitioner owes sales and use tax in the respective amounts of $218,152.88 and $125,680.72, due on rentals derived from transient housing in Osceola and Polk counties. Petitioner also owes sales and use tax in the amount of $2,100 from the sale of fixed assets. Interest accrues at the daily rate of $98.13.
Recommendation Based upon the findings of fact and the conclusions of law, it is RECOMMENDED that Respondent enter a Final Order assessing Petitioner for tax, penalty, and accrued interest. DONE AND ENTERED this 11th day of July, 2003, 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 11th day of July, 2003. COPIES FURNISHED: Carrol Y. Cherry, Esquire Office of the Attorney General, Tax Section The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050 Martha F. Barrera, Esquire Office of the Attorney General, Tax Section The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050 A.C.E. Property Management of Orlando, Inc. 3501 West Vine Street, Suite 387 Kissimmee, Florida 34741 Bruce Hoffmann, General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 James Zingale, Executive Director Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100
