Findings Of Fact High-Tech Yacht & Ship, Inc. (Petitioner) is a Florida corporation engaged in the business of retail sales of marine vessels. Also, Petitioner is a registered retail dealer in the State of Florida. The President of Petitioner is its only corporate officer. On or about September 2, 1993, Petitioner, in the capacity of a broker, sold a motor yacht at retail to Regency Group, Inc. (purchaser), through its representative, for $78,000. The motor yacht is described as a 1988, 41' Amerosport Chris Craft, hull Number CCHEU075E788, and called the "Motivator". At the closing of the sale, on or about September 2, 1993, the purchaser refused to pay the sales tax on the purchase, which was $4,680. However, the purchaser agreed to pay the sales tax after being informed by Petitioner that, without the payment of the sales tax, there could be no closing. The purchaser's representative submitted, at closing, a personal check in the amount of $4,680 for the sales tax. All of the necessary documents were completed for ownership and registration to be transferred to the purchaser. Subsequently, Petitioner received notice from its bank that the check for the sales tax had been dishonored by the purchaser's bank. The purchaser's representative had stopped payment on the check. In October 1993, Petitioner submitted its sales and use tax return for the month of September 1993 to Respondent in which the sale of the yacht was reported. Respondent automatically reviews sales and use tax returns. Respondent's review of Petitioner's return revealed a shortage of sales tax collected in the amount of $4,680.. In January 1994, Respondent issued a notice of tax action for assessment of additional tax in the amount of $4,710, plus interest and penalty, to Petitioner. The $4,710 included the loss of Petitioner's collection allowance of $30, which loss resulted from Petitioner's failure to timely remit all taxes due. Having received the notice of tax action, by letter dated January 20, 1994, Petitioner generally informed Respondent of the circumstances regarding the sales tax shortage, including the dishonored check. Petitioner pointed out, among other things, that Respondent had the authority and the means to collect the tax, while it (Petitioner) had limited means, and suggested, among other things, that Respondent cancel the purchaser's Florida registration of the yacht. On or about January 31, 1994, approximately three months after the check for sales tax was dishonored, Petitioner issued a notice of dishonored check to the purchaser, in which Petitioner requested payment of the sales tax. The notice provided, among other things, that Petitioner could seek criminal prosecution and civil action if the monies were not paid to Petitioner. Having not received the $4,680, Petitioner contacted the local law enforcement agency. After investigation, the law enforcement agency informed Petitioner that a civil action would have to be instituted because the purchaser, through its representative, had indicated that it was not satisfied with the yacht. Although Petitioner engaged the services of an attorney for civil action, no civil action was commenced. Additionally, Petitioner did not engage the services of a collection agency for assistance in collecting the sales tax. Subsequent to its notice of tax action, on or about March 12, 1994, Respondent issued a notice of assessment to Petitioner. The notice of assessment provided, among other things, that Petitioner was being assessed taxes in the amount of $4,710, plus penalty and interest in the amount of $2,342.61, totalling $7,052.61. Petitioner protested the assessment. On February 8, 1995, Respondent issued its notice of reconsideration in which Respondent determined, among other things, that the assessment was appropriate and affirmed the assessment of $7,052.61, plus interest and penalty. The interest accrues at the rate of $1.55 per day. Petitioner has not remitted any of the assessed tax, including interest and penalty, to Respondent. Petitioner has not identified on its federal tax return the noncollection of the sales tax from the purchaser as a bad debt. Sales tax is part of the total sale price for an item. Respondent considers the sales tax as collectable by a seller in the same manner as any other debt owed by a purchaser to a seller. A retail dealer, who is also a seller, is considered to be an agent for the State in the collection of sales tax. The burden of collecting the sales tax is placed upon the retail dealer by Respondent. Some of Respondent's employees have been sympathetic to Petitioner's tax assessment matter. However, none of the employees indicated to or advised Petitioner that Respondent was or is in error.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order affirming the assessment of sales tax against High-Tech Yacht & Ship, Inc. in the amount of $7,052.61, plus interest and penalty. DONE AND ENTERED this 7th day of August 1996, in Tallahassee, Leon County, Florida. ERROL H. POWELL, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 7th day of August 1996.
Findings Of Fact Petitioner is a dealer in liquefied petroleum gas (LPG), duly licensed in Florida. Petitioner buys LPG in Florida and resells it to dealers who in turn sell most of it at retail, but use part of it as fuel for their trucks. During the period July 1, 1975, through February 28, 1977, neither petitioner nor any of its customers paid any tax on account of petitioner's sales of LPG, other than LPG used by its customers to propel trucks. Petitioner's customers kept records as to how much LPG was sold by them for home cooking or heating use by their customers, the ultimate consumers. Until the summer of 1977, petitioner's customers who used LPG as truck fuel kept records of how far the trucks so fueled were driven. Using the resulting mileage figure, they calculated the amount of LPG that had been used as truck fuel. Until the summer of 1977, petitioner collected from its customers a tax of eight cents ($.08) per gallon on LPG used as truck fuel. During the period from July 1, 1975, through February 28, 1977, none of petitioner's Florida customers held Florida dealer's licenses, except Gene Lewis Auto Brokers, which obtained a license as a special fuel dealer in August of 1976. Also in August of 1976, Gene Lewis Auto Brokers purchased 2,052 gallons of LPG from petitioner, on which no tax was paid. Thereafter, the same customer bought 41,011 gallons from petitioner in the period ending February, 1977, on which no tax was paid. Petitioner made tax returns monthly, using forms furnished by respondent. With respect to respondent's Form DR-115-F, styled "Special Fuel Sold . . . Within the State to Licensed Dealers Tax-Free," general instructions furnished to petitioner by respondent provided: To be used in support of claims for exemp- tion ... for sales ... to other licensed dealers. Signed resale certificates ... which bear the name and address of the pur- chaser and the number of his dealer's license are required to be retained in the seller's permanent file .... Petitioner's exhibit No. 2. (emphasis supplied) Monthly, petitioner listed on Form DR-115-F the amounts of LPG sold to its Florida customers, less amounts its Florida customers advised had been used to propel trucks. On another form furnished by respondent, Form DR-115-J, petitioner listed monthly, by county, the LPG used by its Florida customers to propel motor vehicles and on which petitioner had collected tax at the rate of eight cents ($.08) per gallon. At the time petitioner filed its monthly tax return, it forwarded to respondent the taxes it had collected from its Florida customers. The foregoing findings of fact should be read in conjunction with the statement required by Stuckey's of Eastman, Georgia v. Department of Transportation, 340 So.2d 119 (Fla. 1st DCA 1976), which appears as an appendix to the recommended order.
Recommendation Upon consideration of the foregoing, it is RECOMMENDED: That respondent's assessment be upheld with respect to petitioner's tax deficiency, except for the portion attributable to sales by petitioner to Gene Lewis Auto Brokers after August of 1976, being three thousand two hundred eighty and eighty-eight hundredths dollars ($3,280.88). That interest and penalty be adjusted accordingly. DONE and ENTERED this 8th day of March, 1978, in Tallahassee, Florida. ROBERT T. BENTON, II Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Mr. John Radey, Esquire Holland & Knight Post Office Drawer 810 Tallahassee, Florida 32302 Mr. Cecil L. Davis, Jr., Esquire Assistant Attorney General The Capitol, Room LL04 Tallahassee, Florida 32304 APPENDIX Paragraph one of petitioner's proposed findings of fact has been adopted, in substance, except that the evidence did not show that petitioner's customers used LPG for home heating or cooking, only that persons to whom petitioner's customers sold used the LPG in this fashion. Paragraph two of petitioner's proposed findings of fact has been adopted in substance. Paragraph three of petitioner's proposed findings of fact has been adopted in large part. The gist of the information supplied to petitioner by its dealers was that LPG not used by them would be resold to domestic users. Although respondent did not undertake to determine whether petitioner listed the same LPG as taxable and as tax-exempt on the same tax return, there is no reason to believe that petitioner did so. Paragraph four of petitioner's proposed findings of fact has been adopted, in substance, except that petitioner's tax returns were inaccurate as to its customers' status as dealers. The final three paragraphs of petitioner's proposed findings of fact accurately reflect evidence adduced at the hearing, but are not relevant to a decision of this controversy.
The Issue As to DOAH Case No. 18-4475RX, whether Florida Administrative Code Rule 12A-1.044(5)(a) is an invalid exercise of delegated legislative authority in violation of section 120.52(8), Florida Statutes.1/ As to DOAH Case No. 18-4992RU, whether the Department of Revenue's ("Department") Standard Audit Plan, Vending and Amusement Machines--Industry Specific, section 1.1.3.3 ("SAP") is an unadopted rule in violation of sections 120.54 and 120.56, Florida Statutes.
Findings Of Fact The Parties and Audit Period GBR is a Florida corporation with its principal place of business in Miami, Florida. Gilda Rosenberg is the owner of GBR and a related entity, Gilly Vending, Inc. ("Gilly"). GBR and Gilly are in the vending machine business. At all times material hereto, Amit Biegun served as the chief financial officer of the two entities. The Department is the state agency responsible for administering Florida's sales tax laws pursuant to chapter 212, Florida Statutes. This case concerns the audit period of January 1, 2012, to December 31, 2014. GBR's Provision of Vending Machine Services Prior to the audit period, the school boards of Broward and Palm Beach County issued written solicitations through invitations to bid ("ITB"), seeking vendors to furnish, install, stock, and maintain vending machines on school property. The bids required a "full turn-key operation." The stated objectives were to obtain the best vending service and percentage commission rates that will be most advantageous to the school boards, and to provide a contract that will be most profitable to the awarded vendor. The stated goal was that student choices from beverage and snack vending machines closely align with federal dietary guidelines. GBR operates approximately 700 snack and beverage vending machines situated at 65 schools in Broward, Palm Beach, and Miami-Dade Counties. Of these 65 schools, 43 are in Broward County, 21 are in Palm Beach County, and one is in Miami-Dade County. The snack vending machines are all owned by GBR. Beverage vending machines are owned by bottling companies, such as Coca-Cola and Pepsi. Of the 700 vending machines, approximately 60 percent of the machines are for beverages and the remaining 40 percent are for snacks. GBR has written vending agreements with some schools. In these agreements, GBR is designated as a licensee, the school is designated as the licensor, and GBR is granted a license to install vending machines on school property in exchange for a commission. Furthermore, GBR is solely responsible to pay all federal, state, and local taxes in connection with the operation of the vending machines. Ownership of the vending machines does not transfer to the schools. However, in some cases the schools have keys to the machines. In addition, designated school board employees have access to the inside of the machines in order to review the meter, monitor all transactions, and reconcile the revenue from the machines. GBR places the vending machines on school property. However, the schools control the locations of the vending machines. The schools also require timers on the machines so that the schools can control the times during the day when the machines are operational and accessible to students. The schools also control the types of products to be placed in the machines to ensure that the products closely align with the federal dietary guidelines. The schools also control pricing strategies. GBR stocks, maintains, and services the vending machines. However, Coca-Cola and Pepsi may repair the beverage machines they own. GBR is solely responsible for repairing the machines it owns. The schools require that any vendor service workers seeking access to the vending machines during school hours pass background checks. GBR route drivers collect the revenue from all of the vending machines and the revenues are deposited into GBR's bank accounts. In exchange for GBR's services, the schools receive from GBR, as a commission, a percentage of the gross receipts. However, neither GBR nor the schools are guaranteed any revenue unless sales occur from the machines. On its federal income tax returns, GBR reports all sales revenue from the vending machines. For the tax year 2012, GBR's federal income tax return reflects gross receipts or sales of $5,952,270. Of this amount, GBR paid the schools $1,363,207, a percentage of the gross receipts which GBR characterized on the tax return and its general ledger as a commission and equipment space fee and cost of goods sold. For the tax year 2013, GBR's federal income tax return reflects gross receipts or sales of $6,535,362. Of this amount, GBR paid directly to the schools $1,122,211, a percentage of the gross receipts which GBR characterized on the tax return and its general ledger as a commission and equipment space fee and cost of goods sold. For the tax year 2014, GBR's federal income tax return reflects gross receipts or sales of $6,076,255. Of this amount, GBR paid directly to the schools $1,279,682, a percentage of the gross receipts which GBR characterized on the tax return and its general ledger as a commission and equipment space fee and cost of goods sold. Thus, for the audit period, and according to the federal tax returns and general ledgers, GBR's gross receipts or sales were $18,563,887. Of this amount, GBR paid directly to the schools $3,765,100, as a commission and equipment space fee and cost of goods sold. The Department's Audit and Assessment On January 27, 2015, the Department, through its tax auditor, Mary Gray, sent written notice to GBR of its intent to conduct the audit. This was Ms. Gray's first audit involving vending machines at schools. Thereafter, GBR provided Ms. Gray with its general ledger, federal returns, and bid documents. On October 28, 2015, Ms. Gray issued a draft assessment to GBR. The email transmittal by Ms. Gray to GBR's representative states that "[t]he case is being forwarded for supervisory review." In the draft, Ms. Gray determined that GBR owed additional tax in the amount of $28,589.65, but there was no mention of any purported tax on the monies paid by GBR to the schools as a license fee to use real property. However, very close to the end of the audit, within one week after issuing the draft, and after Ms. Gray did further research and conferred with her supervisor, Ms. Gray's supervisor advised her to issue the B03 assessment pursuant to section 212.031 and rule 12A-1.044, and tax the monies paid by GBR to the schools as a license fee to use real property. Thus, according to the Department, GBR was now responsible for tax in the amount of $246,230.93, plus applicable interest. Of this alleged amount, $1,218.48 was for additional sales tax (A01); $4,181.41 was for purchase expenses (B02); $13,790 was for untaxed rent (B02); and $227.041.04 was for the purported license to use real property (B03). Ms. Gray then prepared a Standard Audit Report detailing her position of the audit and forwarded the report to the Department's dispute resolution division. On January 19, 2016, the Department issued the Notice of Proposed Assessment ("NOPA") against GBR for additional tax and interest due of $288,993.31. The Department does not seek a penalty against GBR. At hearing, Ms. Gray testified that the Department's SAP is an audit planning tool or checklist which she used in conducting GBR's audit. Employees of the Department are not bound to follow the SAP, and the SAP can be modified by the auditors on a word document. The SAP was utilized by Ms. Gray during the audit, but it was not relied on in the NOD.4/
The Issue The issue in this case is whether the Petitioner owes State of Florida use tax and local government infrastructure tax on the alleged use of three airplanes.
Findings Of Fact Charles and Dorothy Tolbert own and operate American Aircraft International, Inc. (American). American is in the business primarily of selling and brokering aircraft sales. Most of American's business involves brokering in which American earns a commission or fee for putting together a seller and buyer and bringing the transaction to a conclusion. On a much less frequent basis, American will purchase an airplane for resale. American advertises the availability of its airplanes, both brokered and American-owned, for either sale or lease. However, American has not had occasion to lease one of its own aircraft except as part of a lease-purchase agreement. American does not make any other use of airplanes it offers for sale or lease, except as necessary for maintenance and repairs and for demonstration to prospective purchasers or lessees. Such use would be cost-prohibitive. Fuel, crew, and insurance costs would be well in excess of the cost of a ticket on a commercial airline. American's insurance policy only covers the use of the planes for demonstration and maintenance purposes. On February 6, 1990, American traded for a King Air 200, N56GR, serial number 059, at an acquisition value of $650,000. The King Air 200 was delivered to American from Carlisle, Kentucky, and held by American for resale purposes only and was flown only for purposes of maintenance and repairs and for demonstration to prospective purchasers. When it was sold in 1991 to an English company, BC Aviation, Ltd., American had flown the aircraft only 7 hours. The aircraft was delivered out-of- state in May 1991. In July 1991, American bought a kit for a home-built aircraft called the Renegade, serial number 445. The kit was manufactured and sold by a company in British Columbia, Canada. American's intent in purchasing the kit was to build the airplane and decide whether to become a dealer. It took a year and a half to build, and by the time it was completed, American decided not to pursue the dealership. In September of 1991, American sold the Renegage to the Tolberts. The Tolberts registered the Renegade in September 1994, under N493CT. At first, the Tolberts did not pay sales tax on their purchase of the Renegade. They thought that, since they owned American, no sales tax was due. When the Department audited American and pointed out that sales tax was due, the Tolberts paid the tax in December 1994. In 1991, American also purchased a King Air B90, N988SL, serial number LJ438, for $175,000. The King Air B90 was held by American for resale purposes only and was flown only for purposes of maintenance and repairs and for demonstration to prospective purchasers. In July 1991, American sold the aircraft to Deal Aviation of Chicago, Illinois. However, Deal could not qualify for its own financing, so American agreed to lease-sell the aircraft to Deal. Under the lease-purchase agreement entered into on July 21, 1991, the purchase price was $269,000, payable $4,747.85 a month until paid in full. (The agreement actually said payments would be made for 84 months, but that would amount to total payments well in excess of the purchase price; the evidence did not explain this discrepancy.) American continued to hold title to the aircraft and continued to make payments due to the bank on American's financing for the aircraft. The lease- purchase agreement must have been modified, or payments accelerated, because American transferred title to the aircraft in April 1993. The Department asserted that a Dolphin Aviation ramp rental invoice on the King Air B90 issued in August for the month of September 1991 reflected that the aircraft was parked at the Sarasota-Bradenton Airport at the time of the invoice, which would have been inconsistent with American's testimony and evidence. But the invoice contained the handwritten notation of Dorothy Tolbert that the airplane was "gone," and her testimony was uncontradicted that she telephoned Dolphin when she got the invoice and to inform Dolphin that the invoice was in error since the plane had not been at the ramp since Deal removed it to Illinois on July 21, 1991. As a result, no ramp rent was paid after July 1991. Indeed, the Department's own audit schedules reflect that no ramp rent was paid on the King Air B90 after July 1991. The Department also presented an invoice dated September 16, 1991, in the amount of $3400 for engine repairs done on the King Air B90 by Hangar One Aviation in Tampa, Florida. The invoice reflects that the repairs were done for American and that they were paid in full on September 19, 1991, including Florida sales tax. The Department contended that the invoice was inconsistent with American's testimony and evidence. But although American paid for these repairs, together with Florida sales tax, Mrs. Tolbert explained that the repairs were made under warranty after the lease-purchase of the airplane by Deal. A minor engine problem arose soon after Deal removed the airplane to Illinois. Deal agreed to fly the plane to Hangar One for the repairs, and American agreed to pay for the repairs. After the repairs were made, Hangar One telephoned Mrs. Tolbert with the total, and she gave Hangar One American's credit card number in payment. She did not receive American's copy of the invoice until later. She does not recall if she: noticed the Florida sales tax and did not think to question it; noticed it and decided it was not enough money ($179) to be worth disputing; or just did not notice the Florida sales tax. When American's certified public accountant (CPA), Allan Shaw, prepared American's federal income tax return for 1990, he included the King Air 200 as a fixed capital asset on the company's book depreciation schedule and booked $26,146 of depreciation on the aircraft for 1990 on a cost basis of $650,000. For federal tax purposes, he took the maximum allowable depreciation deduction on the aircraft ($92,857) by attributing a seven-year life to the aircraft and using the double declining balance method of calculating depreciation. The next year, 1991, Shaw included the both the King Air B90 and the Renegade as fixed capital assets on the company's book depreciation schedule. He booked $9,378 of depreciation on the B90 on a cost basis of $175,000 and $1,872 on the Renegade on a cost basis of $25,922 for part of the year 1991. For federal tax purposes, he took the maximum allowable depreciation deduction on the B90 ($12,507) by attributing a seven-year life to the aircraft and using the double declining balance method of calculating depreciation. This depreciation was subtracted from the "gross income from other rental activities" on Schedule K of the return in the amount of $22,796, which represented the payments from Deal under the lease-purchase agreement. The Renegade was depreciated for the same amount as its book depreciation, and no income was recorded as having been generated from use of the Renegade. The next year, 1992, Shaw again included the both the King Air B90 and the Renegade as fixed capital assets on the company's book depreciation schedule. He booked $35,613 of depreciation on the B90 and $5,555 on the Renegade. For federal tax purposes, he took the maximum allowable depreciation deduction on the B90 ($25,014) by attributing a seven-year life to the aircraft and using the double declining balance method of calculating depreciation. This depreciation was subtracted from the "gross income from other rental activities" on Schedule K of the return in the amount of $51,737, which again represented the payments from Deal under the lease-purchase agreement. The Renegade was depreciated for the same amount as its book depreciation, and no income was recorded as having been generated from use of the Renegade. It is not clear from the evidence why American's CPA decided American was entitled to claim depreciation on the three aircraft in question. (Shaw also depreciated another airplane in 1989 which was before the period covered by the Department's audit.) Shaw's final hearing and deposition testimony was confusing as to whether he recalled discussing the question with the Tolberts. He may have; if he did, he probably discussed it with Mrs. Tolbert. Meanwhile, Mrs. Tolbert does not recall ever discussing the question of depreciation with Shaw. In all likelihood, Shaw probably made his own decision that American could depreciate the airplanes to minimize income taxes by claiming that they were fixed capital assets used in the business and not just inventory items being held for resale. For the King Air B90, there were lease payments Shaw could use to justify his decision; but there were no lease payments for the King Air 200 or the Renegade. The evidence was not clear whether there were lease payments for the airplane Shaw depreciated in 1989. For the next year, 1993, Shaw included the Renegade as a fixed capital asset on the company's book depreciation schedule and booked $7,712 of depreciation on the Renegade. For federal tax purposes, the Renegade was depreciated for the same amount as its book depreciation, and no income was recorded as having been generated from use of the Renegade. When the Department audited American starting in July 1994, tax auditor William Berger saw the depreciation schedules and tax returns, both of which indicated to him that the three airplanes in question were used by the company, but no sales or use tax was paid on them. (He also pointed out the Tolberts' failure to pay sales tax on the purchase of the Renegade from American, and the Tolberts later paid the tax, as previously mentioned.) As a result, on July 26, 1995, the Department issued two notices of intent. One was to make sales and use tax audit changes which sought to assess American $56,097.77 in use taxes, together with delinquent penalties of $14,657.36 and interest through July 26, 1995, in the amount of $31,752.61, for a total of $102,507.74, with subsequent interest accruing at the rate of $18.44 per day. The second was to make local government infrastructure surtax audit changes which sought to assess American $609.99 in the surtax, together with delinquent penalties of $163.14 and interest through July 26, 1995, in the amount of $256.33, for a total of $1,029.46, with subsequent interest accruing at the rate of $.20 per day. It is not clear from the record how the Department arrived at the use tax and surtax figures. The alleged use tax assessment should have been calculated as $51,061.32 (six percent of the acquisition costs of the airplanes), and the alleged surtax assessment should have been calculated at the statutory maximum of $50 per item, for a total of $150. On August 28, 1995, American made a partial payment of $5,496.44 on the Department's use tax and surtax audit change assessments, intending to leave a disputed assessed amount of $51,061.32 in use tax and $150 in surtax. It is not clear from the record what American intended the $5,496.44 to apply towards. American filed an Informal Protest of the use tax and surtax audit change assessments on February 26, 1996. The Informal Protest contended that the use tax and surtax were not due and that the federal income tax depreciation schedules were "not determinative." On October 6, 1996, the Department issued a Notice of Decision denying American's protest primarily on the ground that the depreciation of the aircraft for federal income tax purposes constituted using them for use tax purposes. After receiving the Notice of Decision, on November 4, 1996, American filed amended tax returns to remove the depreciation of the airplanes (together with the "gross income from other rental activities" on Schedule K of the 1991 return). (Although CPA Shaw refused to admit it, it is clear that American's federal income tax returns were amended in order to improve its defense against the Department's use tax and surtax assessments.) As a result of the amended returns, American had to pay an additional $15,878 in federal income tax on the 1990 return; there was no change in the tax owed on any of the other returns. On November 6, 1996, American filed a Petition for Reconsideration on the ground that the returns had been amended and the additional federal income tax paid. On January 10, 1997, the Department issued a Notice of Reconsideration denying American's Petition for Reconsideration on the ground that "subsequent modifications made to the federal income tax returns will have no affect [sic] upon" the use tax and surtax assessments.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order withdrawing the assessment of use tax and local government infrastructure surtax, delinquent penalties, and interest against American. RECOMMENDED this 3rd day of October, 1997, in Tallahassee, Leon County, Florida. J. LAWRENCE JOHNSTON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 SUNCOM 278-9675 Fax FILING (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 3rd day of October, 1997. COPIES FURNISHED: Harold F. X. Purnell, Esquire Rutledge, Ecenia, Underwood, Purnell & Hoffman, P.A. Post Office Box 551 Tallahassee, Florida 32302-0551 Albert J. Wollermann, Esquire Office of the Attorney General The Capitol, Tax Section Tallahassee, Florida 32399-1050 Linda Lettera, Esquire Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668 Larry Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100
The Issue The issue for determination is whether Petitioner should be assessed sales and use tax by Respondent, and if so, how much and what penalty, if any, should be assessed.
Findings Of Fact Aircraft Trading Center, Inc. (Petitioner), is a corporation organized and existing under the laws of the State of Florida, having its principal office at 17885 S.E. Federal Highway, Tequesta, Florida. Petitioner is engaged in the business of purchasing aircraft for resale. During all times material hereto, Petitioner was registered as an aircraft dealer with the United States Department of Transportation, Federal Aviation Administration (FAA) and registered as a retail dealer with the State of Florida, Department of Revenue (Respondent). The selling price of Petitioner's aircraft range from one million to twenty-five million dollars and helicopters from two hundred thousand to three million dollars. Normally, Petitioner purchases an aircraft, without having a confirmed buyer. Petitioner purchases an aircraft based upon in-house research which shows a likelihood that the aircraft can be resold at a profit. Petitioner's aircraft is demonstrated to potential buyers/customers. The customers require a demonstration to determine if the aircraft meets the particular needs of the customer. The demonstration could take one day or as long as two weeks. During the demonstration, the customer pays the expenses associated with flying the aircraft. Petitioner uses two methods to determine the costs of demonstration. In one method, the cost is determined from a reference source utilized in the industry to show the cost of operating a particular type of aircraft. In the other method, the customer pays Petitioner's actual out-of- pocket cost. No matter which method is used, the charges to the customers are listed as income on Petitioner's bookkeeping books and records, per the advice of Petitioner's certified public accounting (CPA) firm. Petitioner remains the owner of the aircraft during the demonstration and until the sale. Also, during demonstration, Petitioner maintains insurance coverage on the aircraft and is the loss payee. In an attempt to make sure "legitimate" customers are engaged in the demonstrations, Petitioner screens potential buyers to make sure that they have the resources to purchase one of Petitioner's aircraft. For sales to buyers/customers residing out-of-state, Petitioner utilizes a specific, but standard procedure. Such customers are provided a copy of the Florida Statute dealing with exempting the sale from Florida's sales tax if the aircraft is removed from the State of Florida within ten (10) days from the date of purchase. Florida sales tax is not collected from the buyer if the buyer executes an affidavit which states that the buyer has read the Florida Statute and that the buyer will remove the plane from Florida within ten (10) days after the sale or the completion of repairs and if the bill of sale shows an out-of-state address for the buyer. When an aircraft is sold, Petitioner's standard procedure is to prepare a purchase agreement and after receiving payment, Petitioner prepares a bill of sale. Petitioner sends the bill of sale to a title company in Oklahoma which handles all of Petitioner's title transfers. The title company records the bill of sale, registers the change of title with the FAA and sends Petitioner a copy of the title. For all sale transactions, Petitioner maintains a file which includes the affidavit, the bill of sale, and a copy of the title. Respondent conducted an audit of Petitioner for the period 2/1/87- 1/31/92 to determine if sales and use tax should be assessed against Petitioner. All records were provided by Petitioner. The audit resulted in an assessment of sales and use tax, penalty, and interest against Petitioner. Respondent assessed tax on the sale of a helicopter and on certain charges made by Petitioner to its customers as a result of demonstrations. Regarding the helicopter, Respondent assessed tax in the amount of $18,000.00 for the helicopter transaction. By invoice dated 7/10/89, Petitioner sold the helicopter to Outerscope, Inc., for $300,000.00. Outerscope was an out-of-state company. Petitioner used its standard procedure for the sale of aircraft and sales to nonresidents. Petitioner did not obtain proof that the helicopter was removed from the State of Florida, and Petitioner has no knowledge as to whether it was removed. As to the charges by Petitioner for demonstrations, Respondent assessed tax in the amount of $72,488.55. Respondent determined the tax by taking an amount equal to 1 percent of the listed value of the aircraft demonstrated and multiplying that number by 6 percent, the use tax rate. Respondent relied upon the records and representations provided by Petitioner's bookkeeper as to determining which aircraft were demonstrated, the value of the aircraft and the months in which the aircraft were demonstrated. Several transactions originally designated as demonstrations have been now determined by Petitioner's bookkeeper not to be demonstrations: The February 4, 1987 transaction with Ray Floyd. The July 10, 1988 transaction involving Trans Aircraft. The May 2 and 12, 1989 items for Stalupi/Bandit. The July 12, 1989 item involving Bond Corp. The July 18, 1989 item involving Seardel. The November 28, 1990 item involving J. P. Foods Service. Petitioner's CPA firm advises it regarding Florida's sales and use tax laws. At no time did the CPA firm advise Petitioner that its (Petitioner's) demonstrations were subject to sales and use tax and that it (Petitioner) was required to obtain proof that an aircraft had been removed from the State of Florida.
Recommendation Based upon the foregoing, Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order assessing sales and use tax for the period 2/1/87 - 1/31/92 against Aircraft Trading Center, Inc., consistent herewith. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 10th day of July 1995. ERROL H. POWELL Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 10th day of July 1995. APPENDIX The following rulings are made on the parties' proposed findings of fact: Petitioner Partially accepted in findings of fact 1 and 2. Partially accepted in findings of fact 2 and 3. Partially accepted in finding of fact 3. Partially accepted in finding of fact 4. Partially accepted in finding of fact 5. Rejected as subordinate. Partially accepted in finding of fact 14. Partially accepted in finding of fact 15. Partially accepted in findings of fact 5 and 14. Rejected as subordinate. Partially accepted in findings of fact 8 and 9. 12 and 13. Partially accepted in finding of fact 13. 14. Partially accepted in findings of fact 5 and 16. Respondent Partially accepted in findings of fact 11 and 12. Partially accepted in finding of fact 12. Partially accepted in finding of fact 13. Partially accepted in finding of fact 13. Also, see Conclusion of Law 20. Partially accepted in finding of fact 4. Partially accepted in finding of fact 5. 7 and 8. Partially accepted in finding of fact 6. 9. Partially accepted in finding of fact 7. 10 and 11. Partially accepted in finding of fact 14. 12. Partially accepted in finding of fact 5. 13-15. Partially accepted in finding of fact 9. NOTE: Where a proposed finding has been partially accepted, the remainder has been rejected as being irrelevant, unnecessary, subordinate, not supported by the more credible evidence, argument, or conclusion of law. COPIES FURNISHED: Robert O. Rogers, Esquire Rogers, Bowers, Dempsey & Paladeno 505 South Flagler Drive, Suite 1330 West Palm Beach, Florida 33401 Lealand L. McCharen Assistant Attorney General Office of the Attorney General The Capitol-Tax Section 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 104 Carlton Building Tallahassee, Florida 32399-0100
Findings Of Fact Tireless, Inc., was incorporated in the State of Delaware in October, 1981. On October 15, 1984, Tireless, Inc. purchased a 61 foot 1985 Hatteras motor yacht from Toledo Beach Marina in LaSalle, Michigan, for a purchase price of $771,339.00. Delivery was to be taken at New Bern, North Carolina. The above stated price was the factory invoice price of $746,330.00 plus a $25,000.00 profit to the dealer. The invoice for the sale, dated October 4, 1984, reflecting that the yacht was sold to Toledo Beach Marina, nonetheless reflects that the customer, who was to pay 100 per cent of the purchase price prior to delivery by customer pick up was Mr. Geiger. After purchase, the yacht was documented in Wilmington, Delaware and home-ported there. The name and home port appearing on the transom of the vessel reflected, "Tireless, Wilmington, Delaware." The vessel constituted the sole asset of its owning corporation. The vessel was purchased as an investment. It was anticipated that it would be used by company personnel for pleasure as well as business meetings and it could and would be chartered out on occasion. Though the vessel reportedly was to be used on the Great Lakes, because of the reported possibility of severe weather in that area at the time of pick up and of ice forming in one or more of the 38 locks of the canal across New York State to Lake Erie, a decision was made to take the boat to Florida for winter storage. Recognizing that dockage facilities are quite often difficult to come by, arrangements were made for the boat to be docked at the Bahia Mar Yacht Basin in Fort Lauderdale, arguably the premier, most active and most prestigious anchorage in South Florida. These arrangements were made well in advance of the arrival of the vessel. This was to be a winter dockage only. From the time of its arrival at the yacht basin in November, 1984 until it left to go north in April, 1985, it did not leave the basin although it was moved from one slip to another in the same marina. While at the Bahia Mar Yacht Basin, certain modifications were made to the vessel such as the installation of additional electronics and a custom interior was installed. From November 1, 1984 through April 5, 1985, Mr. Geiger visited the boat on six occasions staying overnight on it for one or more nights each time. The boat was not used for parties nor did any other person live aboard the boat during its stay at Bahia Mar. Though the Tireless was brought from North Carolina to Fort Lauderdale, there were other ports to the north where the boat could have been wintered including New Bern, itself, and various ports in South Carolina and Georgia, not even considering those Florida ports to the north. Mr. Geiger contends that corporate officials picked the Fort Lauderdale berth because of the availability of berthing facilities and the capability of electronics installation found in the immediate area. This argument is not persuasive, however. There was nothing shown to be particularly unique about the electronics installed or the interior customizing done which could not have been done in other marinas between New Bern and Fort Lauderdale such as Wilmington, North Carolina; Charleston, South Carolina; Savannah, Georgia; or Jacksonville, Florida. What is obvious, though no direct evidence of this was presented, is that in the wintertime, the climate of Fort Lauderdale is far superior and friendly than those other ports as are the social aspects. The boat was sailed from the factory to Fort Lauderdale by a crew made up of Mr. Geiger as captain and several other non- profession sailors who were friends or acquaintances of his. Upon arrival in Fort Lauderdale, Mr. Geiger put the boat into the marina immediately and stayed but one day prior to leaving to return up north. In addition to the six or so visits paid to the boat by Mr. Geiger referenced above, other unidentified individuals from up north did come down and onto the yacht at its berth for short periods. During the trip down from North Carolina, the boat utilized the Intracoastal Waterway and stopped at one or two Florida marinas over night on the way. On or about September 26, 1984, Mr. Geiger entered into a license agreement for dockage space with the Bahia Mar Hotel and Yachting Center for slip # E-251 for the Tireless at a rate of 90 per day to start on November 15, 1984. Thereafter, on November 2, he entered another agreement with the marina for a different slip, # H-359. The rate and estimated length of stay reflected on this second agreement is listed as "cond." No explanation of this notation was given. The bills for the dockage reflect numerous phone calls and other charges on an almost daily basis, the explanation for which is that they were calls made by workmen or others in reference to the work being done on the boat. When these bills came due they were paid and payment was authorized either by Mr. Geiger as President of Tireless, Inc., or by a yacht broker resident at the marina who was supervising the work being done on the vessel. In April, 1985, the boat was sailed from South Florida up to South Carolina where it stayed for a few weeks then on to North Carolina for a week and on to New York where it stayed for several weeks prior to going to the Great Lakes and its dockage in Ohio for the summer. While up north, it was, as intended, used for pleasure, business, and charter on several occasions. One of the individuals who showed a strong interest in chartering the vessel while it was in Ohio indicated also that he might be interested in chartering it in South Florida for the winter. As a result, Mr. Geiger had the boat brought back in the fall of 1985. However, the proposed charter fell through. While in Florida, however, the boat was sold to another individual who paid approximately $805,000.00 for it. The boat was sold in January, 1986. It was not until some four months later that the Department of Revenue filed its notice of delinquent tax. An informal hearing was held as a result of the assessment and on October 2, 1986, the Department, in a letter to Petitioner's counsel, stated as a notice of reconsideration and the final position of the Department that it affirmed the assessment and expected it to be paid in full. In essence, the Department concluded that the vessel was imported into the State of Florida and stored here initially for a period in excess of five months. While here, it was modified and improved and was available for use by the owner even though it may not have been taken out and that all of this was done prior to its being used elsewhere, in another state, for more than six months. The Department considered this to be co-mingling with the mass of property in the State of Florida rendering the yacht subject to use tax, and its position appears to be legally correct.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED that the Petitioner, Tireless, Inc., pay a use tax plus penalty and interest on the storage for use in Florida of the motor vessel, Tireless, and that such tax be based on a value assessment of $771,330.00. RECOMMENDED this 15th day of June, 1978 in Tallahassee, Florida. Arnold H. Pollock, Hearing Officer Division of Administrative Hearings The Oakland Building 2900 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 15th day of June. APPENDIX The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties hereto: By the Petitioner 1-8. Accepted and incorporated herein. Accepted as to the fact that prior arrangements were made due to concern over availability of winter dockage space. There was no evidence regarding any representations made by the Bahia Mar Club. Accepted. 11-12. Rejected. There was no evidence of actual weather conditions. In fact, the decision was made to go south reportedly due to possible weather conditions but no effort was made to make the trip to the Great Lakes at that time. 13. See 11-12. Accepted. Rejected while the vessel was not used for sailing, Mr. Geiger did live aboard on several visits down from Ohio. 16-17. No evidence was introduced by either party on the issue of intent. Evidence as to actual use or non-use is controlling in any event. 18-21. Rejected as irrelevant. 22. Accepted and incorporated herein. By the Respondent 1-5. Accepted and incorporated herein. 6-11. Accepted and incorporated herein. Rejected as contrary to the evidence. Accepted. 14-16. Accepted. 17-18. Accepted. 19-20. Accepted. COPIES FURNISHED: William D. Townsend, Esquire Department of Revenue 104 Carlton Building Tallahassee, FL 32399-0100 Debra A. Altizer, Esquire Post Office Box 14124 Fort Lauderdale, FL 33302 Kevin J. O'Donnell, Esquire Department of Legal Affairs Tax Section Capitol Building Tallahassee, FL 32399-1050 Randy Miller, Executive Director Department of Revenue 104 Carlton Building Tallahassee, FL 32399-0100
Findings Of Fact During the three year period from October 1, 1974 through September 30, 1977 Air Jamaica purchased prepared meals from Jerry's Caterers at Miami (Jerry's) in the total amount of $740,760.04 and Taca purchased prepared meals from Jerry's in the total amount of $161,379.72. Sales tax, penalty and interest through March 20, 1978 were assessed against Air Jamaica in the amount of $35,291.54 on the total paid for meals from Jerry's. Sales tax plus interest through November 20, 1977 were assessed against Taca in the amount of $9,359.86 on the total paid for meals from Jerry's. These figures are accepted as accurately representing 4 percent of the cost of meals purchased plus interest and penalties. The operations with respect to the meals were identical for both Air Jamaica and Taca. Prepared meals were delivered to the aircraft by Jerry's in trays holding 25 meals. These trays are supplied with heating elements and act as ovens in which the meals are heated. When placed aboard the aircraft by Jerry's' employees the trays holding meals intended to be served hot are plugged into electrical outlets on the plane. Prepared food delivered to the aircraft by Jerry's intended to be served cold obviously are not plugged into the electrical outlets. Air Jamaica departs from Miami and serves only Montego Bay and Jamaica. Taca departs from Miami and serves the cities of Belize, El Salvador, Nicaragua and Panama. Some 30 to 50 minutes after leaving Miami each company serves a meal for which no separate charge is made to the passenger. At the time these meals are served the aircraft is well outside the boundaries of Florida and either over Cuba or international waters. Although no separate charge is made for the meal served the cost of the meal, like every other operational and administrative cost, is considered in arriving at the air fare charged to the passenger for the transportation from Miami to destination. Jerry's bills the airlines for the number of meals delivered at a wholesale price of $3.48 per meal for meals served to first class passengers and $2.19 for meals served to economy passengers. Each airline provided Jerry's with tax resale certificates which relieved Jerry's from the collection of sales tax on meals delivered to the aircraft.
The Issue The issue is whether Florida Administrative Code Rule 61G14-22.012 is an invalid exercise of legislatively delegated authority in violation of section 120.52(8), Florida Statutes (2014).
Findings Of Fact Petitioner BBP is an association of harbor pilots that performs the pilotage services at PortMiami. BBP consists of pilots licensed by the State of Florida in accordance with chapter 310, Florida Statutes. Petitioner PEPA is an association of harbor pilots that performs the pilotage services at Port Everglades. PEPA consists of pilots licensed by the State of Florida in accordance with chapter 310. FHPA is a statewide organization representing the interests of Florida’s approximately 100 state-licensed harbor pilots, the membership of which is comprised of the eleven local pilot associations that serve each of Florida’s 14 deep-water ports. BBP and PEPA are members of FHPA. Chapter 310 governs pilots, piloting, and pilotage in the waters, harbors, and ports of Florida. Section 310.141, Florida Statutes, requires that, except in certain narrow circumstances, all vessels shall have a licensed state pilot or deputy pilot on board to direct the movements of the vessel when entering or leaving ports of the state or when underway on the navigable waters of the state’s bays, rivers, harbors, and ports. Section 310.011 creates the 10-member Board of Pilot Commissioners (“BOPC” or “Board”); each member is appointed by the Governor “to perform such duties and possess and exercise such powers relative to the protection of the waters, harbors, and ports of this state as are prescribed and conferred on it in this chapter.” In addition to other responsibilities, the Board determines the number of pilots in each port (section 310.061) and disciplines licensed pilots when appropriate (section 310.101). Although the BOPC has numerous statutory responsibilities, setting the rates of pilotage in each port is not one of them. Florida Administrative Code Rule 61G14-22.012 (“challenged rule” or “rule”) is entitled “Determination of Disputed Issues of Material Fact; Formal or Informal Hearings.” 5. Rule 61G14-22.012 cites section 310.151(1)(c) as specific authority. The challenged rule lists as “Law Implemented” sections 310.151 and 120.57. The former Pilotage Rate Review Board originally adopted the rule in 1995. When the Legislature amended chapter 310 in 2010, the former Pilotage Rate Review Board’s name was changed to the Pilotage Rate Review Committee (“PRRC” or “Committee”). The Committee consists of seven members, all of whom are also members of the BOPC. The PRRC is responsible for setting rates of pilotage in each port. On November 5, 2014, the BOPC/PRRC published a notice in the Florida Administrative Register announcing a telephone conference call meeting for consideration of “Rate Review Committee Rules.” PRRC members voted at that meeting to repeal rule 61G14-22.012, but determined they did not have enough information to know if a Statement of Estimated Regulatory Costs was required. On December 11, 2014, the BOPC/PRRC published a second notice in the Florida Administrative Register announcing a telephone conference call meeting for consideration of “Rate Review Committee Rules.” At that meeting, the PRRC voted to reconsider its original vote to repeal rule 61G14-22.012, but because the issue of potential reconsideration had not been properly noticed, no official vote on reconsideration was taken. On January 7, 2015, the BOPC/PRRC published a notice in the Florida Administrative Register announcing a meeting on January 22, 2015, and January 23, 2015. Among the subjects noticed for consideration was “Reconsideration of Repeal of Rule 61G14-22.012, F.A.C.” This matter was considered by the PRRC on January 23, 2015. By a 5-2 vote, the Committee voted against repealing rule 61G14-22.012. FCCA is a trade association representing cruise lines that are subject to pilotage fees pursuant to chapter 310, Florida Statutes. FCCA has filed petitions to reduce the rates of pilotage in both PortMiami and in Port Everglades.
Findings Of Fact Petitioner purchased a used car in Florida in May of 1983 and paid 5 percent sales tax. Petitioner did not title said car in the State of Florida. When Petitioner returned to Maryland, his state of residence, Maryland imposed a 5 percent tax on said car when Petitioner titled said car. Petitioner applied for a sales tax refund to the Department of Revenue in the amount of $225.00. Respondent issued a Notice of Intent to deny said refund application on December 1, 1983. From the exhibits to which the parties stipulated, additional facts are found by the Hearing Officer. A bill of sale indicates that Petitioner purchased a 1979 Buick Regal from Eddy Auto Sales on May 14, 1983. A temporary registration and receipt issued by the State of Maryland on June 17, 1983, shows that Petitioner paid a "title tax" of $222.50 to the State of Maryland. By letter dated January 27, 1984, Agnes Stoicos of the Maryland Department of Transportation indicates that the Maryland tax is a 5 percent excise tax upon the issuance of all original and subsequent certificates of title, and the tax is used primarily for the construction and the maintenance of the Maryland highway system.
