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
Findings Of Fact In the original corporate income tax report submitted by Florida Power Corporation for the 1973 tax year the tax was computed using the federal income tax base. This included various depreciation methods and schedules in which accelerated depreciation had been claimed for federal tax purposes by Petitioner in years prior to 1972 and the initiation of the Florida Corporate Income Tax Law. By using accelerated depreciation schedules authorized by the federal tax laws, higher depreciation is allowed in the early years of an asset's useful life, leaving a lesser amount of depreciation to be charged off for tax purposes in the latter years of an asset's life. Essentially, Petitioner here contends that depreciable assets acquired prior to the effective date of the Florida Corporate Income Tax law were depreciated on accelerated schedules for federal tax purposes, but upon the effective date of the Florida Corporate Income Tax Law had value in excess of that shown on the federal tax schedule. By requiring taxpayers to use the same depreciation schedules for Florida taxes that are required for federal taxes Petitioner contends it is being penalized for the accelerated depreciation taken before the Florida income tax became constitutional. As an example of Petitioner's position it may be assumed that a depreciable asset was acquired for $100,000 with a useful life of 10 years, three years before the Florida Income Tax Law was passed. Also assume that during this three-year period from acquisition a double declining balance depreciation was taken for computing federal income taxes. Depreciation taken for the first year would be $20,000, for the second year $16,000 and for the third year $12,800, leaving a basis for further depreciation of $41,200 for this asset with seven years useful life remaining. For federal tax purposes Petitioner takes depreciation each year based upon initial cost less accumulated depreciation. Because this value decreased rapidly for the first three years in the assumed example and the excess depreciation thereby generated was not usable in reducing Florida taxes, Petitioner contends it is discriminated against in being required to, in effect, use the book value for federal tax purposes in computing its Florida income tax. Petitioner presented additional examples of reported income for federal income tax purposes which it claims should be exempt from Florida Income Tax. The specific deductions from which the $619,697 refund was computed were not broken down to show how much resulted from the accelerated depreciation schedules which commences prior to January 1, 1972, and how much was derived from these additional examples, some of which were given simply as an example of deferring income for tax purposes. Prior to January 1, 1972, Petitioner purchased some of its bonds prior to maturity and at a discount. As an example if Petitioner purchases $1,000,000 face value of these bonds for $800,000, it has realized a $200,000 gain which it must report as income for federal income tax purposes. These same federal tax rules allow Petitioner to elect to pay the income tax in the year received or spread it equally over the succeeding ten year period. Petitioner elected to spread the income over the succeeding ten year period and each year add $20,000 to its reported income for federal income tax purposes. Since the income was realized before January 1, 1972, Petitioner contends this is not subject to federal tax purposes. With respect to overhead during construction of depreciable assets the taxpayer is allowed to charge these costs off as an expense in the year incurred or capitalize these expenses. If the taxpayer elects to capitalize these expenses they are added to the cost of the constructed asset and recovered as depreciation as the asset is used. Petitioner elected to charge these expenses in the year incurred rather than capitalize them. Had they been capitalized originally, Petitioner would, in 1973, have been entitled to recover these costs in its depreciation of the asset. In its amended return it seeks to treat these costs as if they had been capitalized rather than expenses prior to January 1, 1972. Although apparently not involved in the amended return, Petitioner also presented an example where changes in accounting procedures can result in a gain to the taxpayer which is treated as income to the taxpayer, which he may elect to spread over future years in equal increments until the total gain has been reported.
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.
The Issue Whether Petitioners are liable for sales and use tax, penalty, and interest as assessed by the Department of Revenue (the Department)?
Findings Of Fact Salma is a Florida corporation with its principal place of business at 2231 Del Prado Boulevard, Cape Coral, Florida, 33990. Gausia is a Florida corporation with its principal place of business at 11571 Gladiolus Drive, Fort Myers, Florida, 33908. Petitioners are in the business of operating gas stations with convenience stores. The Department is an agency of the State of Florida and is authorized to administer the tax laws of the State of Florida. Petitioners were selected for audit because their reported gross sales were less than the total cost of items purchased (inventory) for the audit period. The Department issued Salma and Gausia each a Notice of Intent to Conduct a Limited Scope Audit or Self-Audit, dated April 26, 2013, for sales and use tax, for the period February 1, 2010, through January 31, 2013 (collectively referred to as the Notices). The Notices requested that Petitioners provide the Department: (a) a list of all their vendors for alcohol, tobacco, soda, chips, candy, etc.; (b) their total purchases of alcohol and tobacco, by vendor, for the period July 2010 to June 2011; (c) copies of their federal tax returns for the examination period; (d) purchase receipts for all purchases for the last complete calendar month; and (e) daily register (Z tapes) for the last complete calendar month. The Notices gave Petitioners 60 days to gather the requested documents before the audit was to commence. The Notices also requested that Petitioners complete an attached Questionnaire and Self Analysis Worksheet. In response to the Notices, Petitioners requested a 30- day extension of time until July 18, 2013, to provide the requested documents and to designate a Power of Attorney. Petitioners did not provide the Department any books and records for inspection, nor did they complete and return the questionnaire and self analysis worksheets. As a result, the Department's auditor determined the sales tax due based upon the best information available. To calculate an estimated assessment of sales tax, the Department used the purchase data of Petitioners' wholesalers and distributors of alcoholic beverages and tobacco, for July 1, 2010, through June 30, 2011; the 2010 National Association of Convenience Stores average markups and in-store sales percentages of alcoholic beverage and tobacco products; and historical audit data. After reviewing the purchase data for July 1, 2010, through June 30, 2011, and for July 1, 2011, through June 30, 2012, the Department's auditor determined that the data was missing a few vendors. As a result, the Department's auditor estimated the amount of Petitioners' cigarette purchases, based on historical audit data that shows that cigarette sales are generally 4.31 times more than beer sales. The Department's auditor and audit supervisor testified that the estimated gross sales seemed reasonable and consistent with the national averages and the purchase data for July 1, 2011, through June 30, 2012. The Department estimated gross sales (i.e., the retail sale value of the goods sold) by marking up the taxable sales and exempt sales reported on the sales and use tax returns submitted to the Department by Petitioners. For example, for July 1, 2010, through June 30, 2011, Salma purchased beer from its wholesalers and distributors for $148,826.15, and the Department marked up the purchase price by 27 percent for a retail value of $189,009.21. For July 1, 2010, through June 30, 2011, Gausia purchased beer from its wholesalers and distributors for $132,138.65, and the Department marked up the purchase price by 27 percent for a retail value of $167,816.09. The Department's markup on the alcoholic beverage and tobacco products is reasonable because the Department's auditor testified that he used a combination of 2010 National Association of Convenience Stores average markups and the competitive pricing and information from audits of other convenience stores. The Department determined that the exemption ratio reported on the sales and use tax returns submitted to the Department by Petitioners was extremely high for their industry. The Department used an exemption ratio of 15 percent, based on historical audit data for the industry, to calculate Petitioners' estimated taxable sales. A review of Petitioners' sales and use tax returns revealed that they did not apply the tax bracket system to their taxable sales transactions, as required under sections 212.12(9) and (10), Florida Statutes. Instead, Petitioners remitted sales tax on their taxable sales based on their gross receipts at a flat tax rate. The Department's auditor testified that this method of reporting tax is inappropriate and does not accurately reflect the sales activity of the business. The Department calculated the average effective tax rate of 6.0856 percent, based on historical audit data for the industry. To calculate the estimated tax due, the Department multiplied the effective tax rate by the estimated taxable sales and gave Petitioners credit for any tax remitted with their tax returns. The Department issued Salma a Notice of Intent to Make Audit Changes, dated August 8, 2013, for audit number 200149872. The Department issued Gausia a Notice of Intent to Make Audit Changes, dated August 8, 2013, for audit number 200149749. The Department assessed Petitioners sales tax on their sales of alcoholic beverages and tobacco. The Notice of Intent to Make Audit Changes gave Petitioners 30 days to request a conference with the auditor or audit supervisor, to dispute the proposed changes. Petitioners did not make such a request. The Department issued a Notice of Proposed Assessment (NOPA) to Salma on March 6, 2014, for tax in the sum of $159,282.26; for penalty in the sum of $39,820.57; and interest as of March 6, 2013, in the sum of $27,772.36. The Department issued a NOPA to Gausia on March 6, 2014, for tax in the sum of $213,754.46; for penalty in the sum of $53,438.62; and interest as of March 6, 2013, in the sum of $36,921.79. Additional interest accrues at $30.55 per day until the tax is paid. The NOPAs became final assessments on May 5, 2014. After filing a request for an administrative hearing, Petitioners completed the Questionnaire and Self Analysis Worksheet and produced the following documents to the Department: (a) a list of all of their vendors for alcohol, tobacco, soda, chips, candy, etc.; (b) a list of vendors for alcohol and tobacco, for the examination period of July 2010 to June 2011; (c) a summary of their taxable sales, for the period February 2010 through December 2012; (d) copies of their federal tax returns, for the tax years 2010 through 2013; (e) copies of its purchase receipts for the months of July 2013; and (f) copies of their daily register (Z-tapes) for the month of July 2013. The Department's auditor testified that aside from being untimely, the records and information provided by Petitioners during these proceedings were not reliable because Petitioners did not provide any source documents that would allow the Department to reconcile the reported figures and confirm the supplied information. In addition, the purchase receipts and Z- tapes were not relevant because they were from outside of the audit period. The Z-tapes are also unreliable because the manager of the convenience store testified at the final hearing that employees purposely and routinely entered taxable sales into the cash registers as tax exempt sales. Petitioners argue that the Department did not use the best information available when estimating the taxes due. Petitioners claim that because their businesses are combination gas station/convenience stores, the national data for standalone convenience stores is inapplicable. However, notably absent from Petitioners' testimony or evidence was any alternative data upon which the Department could have relied for more accurate estimates.2/
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order denying Petitioners' requests for relief and assessing, in full, the Department's assessments of sales tax, penalty, and interest against both Salma and Gausia. DONE AND ENTERED this 9th day of January, 2015, in Tallahassee, Leon County, Florida. S MARY LI CREASY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 9th day of January, 2015.
Findings Of Fact At present Tony's Fish Market of Ft. Lauderdale, Inc. t/a Tony's Fish Market Restaurant is the holder of license no. 16-1320-SRX, series 4-COP held with the State of Florida, Division of Beverage. Prior to September 1, 1974, Armand Cerami owned 50 shares of stock in Tony's Fish Market, Inc., which represented a 50 percent interest in that corporation. In addition, Armand Cerami held 50 shares of stock in Tony's Fish Market of Ft. Lauderdale, Inc., representing a 50 percent interest in that corporation and was the holder of 50 shares of Tony's Sweet Enterprises, Inc., which represented a 50 percent interest in that corporation. During the time period of September 1, 1974, Armand Cerami had been charged with violation of the Internal Revenue Laws of the United States, under a federal indictment no. 74-407-CR-JE, in the United States District Court for the Southern District of Florida. This charge was placed against Cerami for Internal Revenue Law Violations which allegedly took place on tax returns on the tax year ,1968. In contemplation of a plea of guilty which Cerami intended to enter in the above cited case, he entered into a contract for purchase and sale of the corporate securities in the aforementioned corporations. Petitioner's Exhibit 2, admitted into evidence is a copy of the contract for purchase and sale of corporate securities, which was entered into between Armand Cerami and Pamela Ann Cerami, his wife, on September 1, 1974. The terms of the contract were that Pamela Ann Cerami would pay Armand Cerami $20,000 cash and would give to Armand Cerami a promissory note payable in the amount of $200,000, in ten equal installments of principal and interest at 6-1/2 percent payable on the anniversary date of the contract. On September 20, 1974, the Board of Directors of the three subject corporations accepted the resignation of Armand Cerami as the Secretary-Treasurer of those corporations, and elected Pamela Cerami as Secretary-Treasurer in Armand Cerami's stead. Those Board of Directors were Tony Sweet, Frank Sweet and Armand Cerami. Armand Cerami returned to federal court on October 18, 1974, and entered a plea of guilty to counts one and five of the aforementioned, indictment, for which he was sentenced to three year on each count to run concurrently, but was given a split sentence of 6 months time in confinement, thereafter to be placed on a probationary period for 2-1/2 years. A copy of the judgement and commitment is Petitioner's Exhibit number 1, admitted into evidence. They are felony offenses. Subsequent to his release from prison, Armand Cerami served as a co- manager and host of the licensed premises, Tony's Fish Market, located at 1900 N. Bay Causeway, North Bay Village, Florida, license no. 23-1624-SRX, series 4- COP and in the same capacity at Tony's Fish Market of Ft. Lauderdale, located at 1819 S.E. 17th Street, Ft. Lauderdale, Florida, license no. 16-1320-SRX, series 4-COP. He remained in this capacity until September 30, 1976, when a change in 562.13(3)(a), F.S. prohibited convicted felons from being managers of the licensed premises, licensed by the State of Florida, Division of Beverage. The change in the law took effect on October 1, 1976. At that point two separate individuals were hired as managers of the subject licensed premises. Armand Cerami remained in the position as host of those licensed premises, up to and including the date of the hearing. Although this title and this position was held by Armand Cerami, on December 16, 1976, while conducting a routine visit, beverage officer, William Valentine was told by Frank Sweet, a Director in the subject corporations, that Frank Sweet was in charge of the kitchen of the Tony's Fish Market of Ft. Lauderdale and that Armand Cerami was the real manager, ran the restaurant and was responsible for hiring and firing of employees. Pamela Ann Cerami was not shown to have any active interest in the management of the licensed premises. Pamela Ann Cerami as the Secretary-Treasurer in the three corporations which she purchased shares in, does not draw a salary from the operation of the two restaurants. Her background and financial involvement in the licensed premises, can be traced to certain trusts in her name and a certain gift from her husband, Armand Cerami. The joint composite exhibit number 1, admitted into evidence in the hearing, shows that Pamela Ann Cerami, at one time Pamela Crumly, was a beneficiary of the estates of Gail Crumly and Mildred Crumly, her grandparents. Certain distributions of money were made to Pamela Ann Cerami from those estates. On April 3, 1970, she received $6,093.94; on July 3, 1970, she received $121.88; on October 5, 1970, she received $182.82; and on December 31, 1970, she received $925.65,, which represented a partial distribution of her 1/2 interest in the Gail Crumly estate. As of April 1, 1970, she had been given $5,292.59 as a portion of the 1/3 distribution of her share in the estate of Mildred Crumly. The total value of her share in that estate being $16,157.02, and the conditions of her rights to the estate being set forth in the will of Mildred Crumly which is found in the joint composite exhibit number 1. Pamela Ann Cerami had worked as an airline stewardess prior to her marriage to Armand Cerami and had certain funds from her employment in that capacity. Other funds of the marriage include a certificate of deposit in the Bank of Nova Scotia in Nassau, Bahamas in the amount of $18,000., at 8-1/4 percent interest, as deposited May 20, 1970 with a maturity of November 20, 1970. This certificate of deposit was in the name of Armand D. Cerami and/or Pamela Crumly now Pamela Ann Cerami. The interest received on that certificate of deposit was redeposited along with the principal and a second certificate of deposit was purchased on May 23, 1974 in the amount of $23,480.74, to become mature on November 25, 1974. This certificate was withdrawn on October 18, 1974 and the receipt of 10-1/4 percent interest was paid. The amount of interest thereby being $975.89. Copies of the above mentioned certificates of deposit may be found as part of the joint composite exhibit number 1 admitted into evidence. Continuing an examination of the financial circumstances of Pamela Cerami and Armand Cerami, there is found a warranty deed from Willard H. Keland to Pamela Ann Cerami for certain real estate in Dade County, Florida, for which Pamela Ann Cerami paid Willard H. Keland the amount of $158,000. This deed is found as Petitioner's exhibit number 4 admitted into evidence and was recorded on January 11, 1974. On that same date a closing was held on the property. Petitioner's Exhibit number 5, admitted into evidence is a copy of the closing statement. Conditions of the closing was a cash deposit in the amount of $15,800 and $69,251.64 to close. A first mortgage in the amount of $67,500 and interest of $1,028.75 was given to the Miami Beach First National Bank. The $158,000 paid for this estate corresponds to a gift which was given by Armand Cerami to Pamela Ann Cerami in the amount of $158,000 as shown in the gift tax return, a copy of which is Petitioner's exhibit number 6, admitted into evidence. The effective date of the gift is established in the gift tax return as February, 1974. The federal income tax return filed by Armand Cerami for the year 1974, shows the sale of the stock of the three corporations. That income tax return would further show the $20,000 installment sale payment, a portion of which was treated as income to Armand Cerami. Finally, that return shows $13,000 of interest which was treated as income to Armand Cerami. On October 1, 1975, Pamela Anne Cerami gave a first mortgage on the property that she had paid $158,000 for this mortgage being given to Bob Erra, as trustee. A copy of the mortgage deed is found as Petitioner's Exhibit number 9, admitted into evidence. The amount of the mortgage was $40,000 and the proceeds of the mortgage amount were distributed as $7,000 to Pamela Cerami and $33,000 to Armand Cerami. These distributions were placed as time certificates of deposit with the Pan American Bank of West Dade, copies of which are found as Petitioner's composite exhibit number 8. The amount of interest returnable on the time certificate of deposit held by Armand Cerami is shown in his 1975 federal income tax return. Tony's Fish Market of Ft. Lauderdale, Inc. t/a Tony's Fish Market Restaurant made application with the State of Florida, Division of Beverage, to change Armand Cerami as Secretary-Treasurer of Tony's Fish Market of Ft. Lauderdale, Inc. and substitute Pamela Cerami as Secretary-Treasurer of that corporation and to transfer the stock ownership in the licensee corporation from Armand Cerami to Pamela Cerami. This change of officer and transfer of stock ownership involves the license no. 16-1320-SRX, series 4-COP. This application was denied by letter of April 9, 1975, from the Director of the Division of Beverage. In fact, Armand Cerami had been convicted of a felony, and is interested in an indirect way in the licensed premises.
Recommendation It is recommended that the applications to change the officer and transfer the stock ownership in license no. 16-1320-SRX, series 4-COP, set forth in this hearing be denied DONE AND ENTERED this 24th day of February, 1977, in Tallahassee, Florida. CHARLES C. ADAMS Hearing Officer Division of Administrative Hearings 530 Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: William Hatch, Esquire Division of Beverage The Johns Building Tallahassee, Florida 32304 Tobias Simon, Esquire 1492 S. Miami Avenue Suite 208 Miami, Florida 33130 Sy Chadroff, Esquire Suite 2806 120 Biscayne Boulevard North Miami, Florida 33132
The Issue The issue presented is whether Respondent is guilty of the allegations contained in the Administrative Complaint filed against her, and, if so, what disciplinary action should be taken, if any.
Findings Of Fact Respondent Anne E. Carr is and has been at all times material hereto a licensed real estate broker in the State of Florida, having been issued license number 0268356. In 1988 Helen B. Moser and her husband, John J. Moser, Jr., obtained their real estate salesman licenses. In 1989 they became real estate brokers. Upon becoming licensed brokers, they decided that they would like to open their own real estate office. They began contacting various real estate brokers seeking advice on how to open and operate a real estate business. Respondent was one of the brokers the Mosers contacted for advice. She and the Mosers already knew each other from previous professional activities. At the time, Respondent was the broker and sole stockholder of Carr Real Estate, Inc. She also was spending a substantial amount of time selling luxury condominiums for a particular developer, which required her to be on-site at the development. Respondent suggested to the Mosers that they join Carr Real Estate, Inc., and run the office for her rather than opening their own office, which would give them immediate access to her listings and many clients and allow her to devote her time to sales for the large real estate development. The Mosers agreed that was a good opportunity for all concerned and joined Carr Real Estate, Inc., as broker/salesmen in October of 1989. The Mosers began running the business for Respondent at her request, providing Respondent with monthly accountings. During 1990 the Mosers earned approximately $90,000 as a result of the listings they took over from Respondent and as a result of the listings Respondent referred to them. Throughout that year Carr Real Estate, Inc., remained a major presence in the Highland Beach area where Respondent was well known both for her flamboyant fashions and her ability to list and sell luxury ocean-front and water-front properties. During the first week of December 1990 Respondent advised the Mosers that due both to financial problems she was experiencing and pressure on her from the developer to devote full time to his sales she would be closing the business on December 31 unless the Mosers wanted to purchase the company from her. They advised Respondent they were interested in doing so and that they would draft the documents for Respondent's signature. Many discussions took place between Respondent and the Mosers over the next several weeks formulating the terms of the sale of the business, and the Mosers submitted to Respondent a number of drafts of documents. While the negotiations were on-going, Respondent filled out and executed on December 12, 1990, the documents necessary for her to file for personal bankruptcy. On December 15 she faxed written instructions to her attorney to not file the bankruptcy petition because she was selling her company. On December 20, 1990, Respondent and the Mosers executed a Purchase and Sale Agreement and a Bill of Sale. It is noted that those documents also involved the sale of Respondent's interest in two other corporations to the Mosers but that portion of the transaction raises no issues involved in this proceeding. The Purchase and Sale Agreement provided that its effective date would be January 1, 1991. The Agreement specifically represented that Carr Real Estate, Inc., was being sold free of any liabilities and encumbrances and that the corporation did not own any tangible assets. The Agreement further provided that Respondent would indemnify the Mosers from all obligations and liabilities incurred by Carr Real Estate, Inc., prior to January 1, 1991. The Agreement provided for no money to change hands as a result of the Mosers' purchase of Respondent's business; rather, the purchase price for the corporation was five percent of all sales commissions received by the corporation for a period of two years. On December 29, 1990, Respondent executed the Seller's Affidavit given to her by the Mosers. The portion of the Seller's Affidavit pertinent to this dispute is that Respondent attested that there were no actions or proceedings then pending in any state or federal court in which "the Affiant or Corporations" are parties, including bankruptcy. It was very clear in Respondent's mind that what she was selling under the Purchase and Sale Agreement and the Bill of Sale and what she was attesting to in the Seller's Affidavit was in regard to the corporation and not her personally. It never occurred to Respondent that she was representing to the Mosers that she personally had no bills and no assets. Respondent had no intention of defrauding the Mosers. Supporting this intent is the clear language contained in the Purchase and Sale Agreement, the Bill of Sale, and the Seller's Affidavit that she would personally indemnify and hold harmless the Mosers from any liabilities incurred by the corporation prior to the effective date of the sale. In mid-January 1991, approximately two weeks after the effective date of the sale, the Mosers discovered that a bankruptcy petition had been filed on behalf of Respondent as an individual. Although that petition did not involve the corporation, John Moser immediately contacted Respondent who did not know that her attorney had filed the petition contrary to Respondent's instructions. On January 23, 1991, Respondent wrote to Helen Moser apologizing for the erroneous filing of her bankruptcy petition and assuring her that it would be corrected. Respondent immediately contacted her attorney to ascertain how the petition could be dismissed. She was advised by her attorney that the only way she could dismiss the petition was to not attend the first meeting of creditors which would cause the petition to automatically be dismissed. Respondent did fail to attend the first meeting of creditors. Due to her failure to attend, her bankruptcy petition was dismissed. She immediately contacted Helen Moser to advise her of the dismissal. On February 1, 1991, John Moser called Respondent to inform her that a statement for a monthly automobile lease payment in the name of Carr Real Estate had been received. Respondent immediately sent the Mosers a note indicating that she had contacted G.M.A.C. but that company refused to allow her to transfer responsibility for her automobile lease payments from the corporation to herself. She acknowledged that she was responsible for any of the lease payments and requested that the Mosers acknowledge that the automobile was not an asset of the corporation. At the time Respondent knew that she was responsible for the lease payments because she signed the lease agreement as an individual. Respondent's contact with G.M.A.C. was unnecessary since her automobile had been leased to her as an individual in June of 1988, a date which preceded the existence of Carr Real Estate, Inc. The automobile was insured in Respondent's individual name and was registered in the name of G.M.A.C. at Respondent's address. The Bill of Sale executed by Respondent and the Mosers does not list the automobile as an asset of the corporation that was conveyed. The automobile leased by Respondent was not an asset of the corporation. The only relationship between Respondent's leased automobile and Carr Real Estate, Inc., concerns the deduction of automobile expenses as business expenses on the tax return for Carr Real Estate, Inc. On February 6, 1992, Helen Moser asked Respondent for a copy of the 1990 corporate tax return for Carr Real Estate, Inc., and Respondent provided a copy to her that same day. The return had been prepared in August or September of 1991 by Mary Dorak, a person enrolled with the Internal Revenue Service. It contained an entry entitled "loan from shareholder" in the sum of $107,060. Respondent had been the sole shareholder of the corporation. On February 26, 1992, the Mosers obtained an opinion letter from an attorney advising them that the corporation was not liable to Respondent for any debts. Neither the Mosers nor their accountant ever contacted Dorak or Respondent about the information contained in that tax return. Instead, the Mosers filed an amended corporate tax return for 1990 for Carr Real Estate, Inc. They removed the automobile as a corporate asset while leaving the shareholder's loan because it benefited them tax-wise. Instead of amending the return, the Mosers could have filed a 1991 return showing Respondent's stock exchange for the basis that was left of the stock in the corporation because the transaction took effect on January 1 of that year. Doing so would have caused no adverse tax consequences to the Mosers. Respondent typically provided Dorak with a listing of Respondent's income and expenses for the year and would then simply sign the return after Dorak had prepared it without reviewing the return first. Without any input from Respondent, Dorak had listed the automobile and some personal debts of Respondent on the 1990 corporate tax return because Respondent could take advantage of certain business deductions. That action had no adverse tax consequences for the Mosers. The Mosers never requested a tangible property tax return which would have reflected if there were any assets in the corporation. Had they made this request, they would have been told that there was none in existence because the corporation had no assets. At the time that Respondent and the Mosers executed the Purchase and Sale Agreement, the Bill of Sale, and the Seller's Affidavit in December, all three believed that the corporation had no assets or liabilities and that any assets and liabilities of Respondent were hers personally. As of January 1, 1991, the effective date of the sale, the corporation had no assets or liabilities. There were no tax consequences to the Mosers because of the listing of the shareholder loan in the 1990 corporate tax return because in that Subchapter S corporation the person ultimately adversely affected by the sale would be Respondent since she owned all of the shares in 1990. On the other hand, the filing of an amended 1990 corporate tax return by the Mosers without Respondent's knowledge and consent has resulted in adverse tax consequences to her, an unnecessary result. In November 1988 Respondent was involved in the sale of a condominium unit owned by Mr. and Mrs. Roy Heinz. Due to extended negotiations, the buyer's decision to not purchase the unit, and instructions from Heinz who was her client, Respondent delayed in placing the buyer's deposit check in her escrow account. Petitioner filed an Administrative Complaint against Respondent only and not also against Carr Real Estate, Inc., since that corporation was not yet in existence. After a formal evidentiary hearing, a Hearing Officer of the Division of Administrative Hearings specifically cleared Respondent of any intentional wrongdoing and of any culpable negligence. Respondent was found guilty, however, of what was specifically characterized to be a technical violation of failure to immediately place the deposit check into her escrow account. The minimum penalty permissible was assessed against Respondent. Respondent was also dismissed from the civil lawsuit filed by Roy Heinz which emanated out of the same circumstances for which the administrative action was brought. The Mosers knew about the disciplinary action and the civil lawsuit pending against Respondent individually prior to their execution of the December 1990 documents transferring Carr Real Estate, Inc., from Respondent's ownership to theirs effective January 1, 1991. The "Roy Heinz matter" was specifically raised by John Moser during the negotiations among the Mosers and Respondent. In April of 1991 Respondent sent Helen Moser a copy of the Recommended Order finding Respondent not guilty of any dishonest conduct or culpable negligence, and Helen Moser failed to even read the entire Order since she considered it unimportant and because she knew the transaction involved occurred prior to the formation of Carr Real Estate, Inc. The Mosers continue to operate Carr Real Estate, Inc. The business has been diminishing, however, since 1991 due to the reduction in the number of salespersons affiliated with the business, John Moser's inability to attract listings and retain clients, and the amount of time the Mosers have been devoting to John Moser's computer business. Respondent's actions and/or inactions have not been the cause of the decline in Carr Real Estate, Inc.'s, business. Moreover, the Mosers have not been harmed financially or in any other way due to any statements contained in the Purchase and Sale Agreement, Bill of Sale, or Seller's Affidavit executed by Respondent. The sale of Carr Real Estate, Inc., by Respondent to the Mosers benefited all three of them. In her negotiations surrounding that sale, Respondent agreed to the terms desired by the Mosers, acted honestly, and did not knowingly or intentionally misrepresent any material fact. Those misrepresentations alleged by the Mosers and Petitioner to be contained in the closing documents, such as any statement that Respondent personally had no assets or liabilities, were not material to the sale and purchase of the corporation.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is, RECOMMENDED that a Final Order be entered finding Respondent not guilty of the allegations contained in the Administrative Complaint filed against her and dismissing that Administrative Complaint. DONE and ENTERED this 16th day of December 1994, at Tallahassee, Florida. LINDA M. RIGOT Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 16th day of December 1994. APPENDIX TO RECOMMENDED ORDER Petitioner's proposed findings of fact numbered 1-4, 6-11, 13, 15, 18, and 19 have been adopted either verbatim or in substance in this Recommended Order. Petitioner's proposed findings of fact numbered 5, 16, and 17 have been rejected as not being supported by the weight of the credible evidence. Petitioner's proposed findings of fact numbered 12 and 14 have been rejected as being subordinate. Respondent's proposed findings of fact numbered 1-29, 31, and 33-36 have been adopted either verbatim or in substance in this Recommended Order. Respondent's proposed finding of fact numbered 30 has been rejected as not being supported by the weight of the credible evidence in this cause. Respondent's proposed findings of fact numbered 32 has been rejected as not constituting a finding of fact but rather as constituting argument of counsel. COPIES FURNISHED: Jack McRay, Esquire Acting General Counsel Department of Business and Professional Regulation Northwood Centre 1940 North Monroe Street Tallahassee, Florida 32399-0792 Theodore R. Gay, Senior Attorney Department of Business and Professional Regulation 401 Northwest 2nd Avenue, Suite N-607 Miami, Florida 33128 Harold M. Braxton, P.A. Suite 400, One Datran Center 9100 South Dadeland Boulevard Miami, Florida 33156-7815
The Issue Whether or not the Petitioner is required to pay taxes under the authority of Chapter 212, Florida Statutes, which are set forth in the assessment by the Respondent, State of Florida, Department of Revenue, dated May 18, 1977.
Findings Of Fact The Respondent, State of Florida, Department of Revenue, performed an audit of the business which is the Taj Apartments, for purposes of determining if sales and use taxes were owed by that operation. At the time of the initial contact by the Respondent, the Taj Apartments were owned by individuals other than the Petitioner, Robert Hartley. However, in the process of the audit, it was determined that Hartley would be responsible for paying some of the assessments which were being alleged against the operation located on the premises which constitutes the Taj Apartments. Further liability for the audit period was established when Robert Hartley foreclosed a mortgage which he held from the owners of record who were the owners when the tax audit was first commenced. By his action of foreclosure, he became responsible for any tax assessments under Chapter 212, Florida Statutes, which were mete and proper during the audit period, which dated from September 1, 1973, through May 31, 1975. Those dates include the time that Robert Hartley d/b/a Taj Apartments was still in control of the premises. The assessment of the property from September 1, 1973, through May 31, 1975, was made upon the basis of a consideration of the rents collected as reflected in Hartley's ledger cards and receipts. The taxation was based upon a consideration of the number of units, in contrast to a consideration of the number of tenants found in the apartment building. The distinction of taxation on units and not tenants is significant because Hartley, in his petition, challenges the right of the Respondent to tax on a formula which pertains to units and not tenants. The language of the applicable section of Chapter 212, Florida Statutes, specifically, Section (7)(c), Florida Statutes, states the following: The rental of facilities, including trailer lots, which are intended primarily for rental as a principal or permanent place of residence is exempt from the tax imposed by this chapter. The rental of facilities that primarily serve transient guests is not exempt by this subsection. In the application of this law, or in making any determination against the exemption, the department shall consider and be guided by, among other things: Whether or not a facility caters primarily to the traveling public; Whether less than half of its tenants have a continuous residence in excess of 3 months; and The nature of the advertising of the facility involved. It can be seen that the language of that provision clearly invisions that permanent residents are exempt from consideration of the tax, and transient guests are not exempt. Discussion of tenants is used only in describing some of the matters that the Respondent shall consider and be guided by, and is not the only determination which the Respondent must look to in determining whether an exemption from the provisions of this subsection has been established. Furthermore, the fact that Rule 12A-1.61, Florida Administrative Code, which implements Chapter 212, Florida Statutes, in this particular taxing theory speaks in terms of units and not tenants is not inconsistent or in violation of the above quoted statutory provision, because that statutory provision allows the Respondent to look at other things in making its determination of an exemption. The language of Rule 12A-1.61, Florida Administrative Code, spoken of, states the following: Rental of living quarters, sleeping or housekeeping accommodations. (1) Every person, except housing authorities which are specifically exempt from provisions hereof by Section 212.08(10), F.S., is exercising a taxable privilege when he engages in the business of renting, leasing or letting any living quarters, sleeping or housekeeping accommodations in connection with any hotel, motel, apartment house, duplex, rooming house, tourist or mobile home court subject to the provisions of Chapter 212, F.S. Notwithstanding the aforesaid provisions of this paragraph, effective March 1, 1972, the tax shall not apply to the rental of living accommodations which are rented primarily to persons as their principal or permanent place of residence but the tax shall apply to the rental of such facilities at hotels, motels, and seasonal lodging facilities that primarily serve transient guests. (See paragraph 9 of this rule.) When a lodging facility does not primarily cater or advertise that it primarily caters to seasonal or transient guests, or to the traveling public, and when fifty percent or more of its total units are rented to persons who have resided thereat continuously for the three months immediately preceding March 1, 1972, the facility shall have an exempt status until a redetermination has been made. Landlords beginning business after March 1, 1972 shall determine the taxable status of their lodging facility as of the commencing of business. In making their determination, the above guidelines will be applied except that the three months prior residence requirement will be waived in those instances where leases or other records of the facility clearly reflect that the facility does not primarily cater to or advertise that it caters to seasonal or transient guests or the traveling public. All landlords are required to make a redetermination of the taxable status of their businesses on July 1 of each year and in the event that his taxable status has changed, he shall notify the Department of such change. Therefore, the Petitioner's challenge to the Respondent's utilization of rental units, as opposed to tenants residing in the apartment building of the Petitioner during the pendancy of the audit period, to decide the issue whether less than half of the tenants (units) have a continuous residence in excess of three months must fail. Moreover, when an assessment is made under the theory of Section 212.03, Florida Statutes, it is incumbent on the taxpayer to establish an exemption and the petitioner offered no evidence to establish an exemption. In view of the fact that the information for the assessment was taken from the books and records of the Petitioner, and their being no testimony to establish an exemption from the tax imposed on the rentals of the Taj Apartments which was serving transient guests in the time period at issue; the tax together with penalties and interest as set forth in the assessment document (Respondent's Exhibit No. 1, admitted into evidence) should stand. The audit brought about a further assessment for use tax due and owing during the period of the audit. The use tax pertains to Robert Hartley's rental of television sets to the guests in his rental facility and the rental of parking spaces to the guests in the rental facility. The determination of taxes owed for those rentals was also premised upon an examination of Mr. Hartley's books and records. No reason was established for not using the figures found in the hooks and records, in assessing any tax that might be owed for the rental of television sets and parking spaces. Consequently, the portion of the assessment of May 18, 1977, pertaining to a use tax on the rentals of the television sets and parking spaces should be upheld. The imposition of the assessment of May 18, 1977, is a revision of a prior assessment which was rendered before Mr. Hartley provided his books and records. This revised assessment reduced the initial assessment, premised upon an examination of Mr. Hartley's books and records and certain credits for exemptions in the year 1974. The revised assessment reflects this in its provision entitled "Abatements:" The revised assessment then becomes an assessment of $15,960.92. This assessment is constituted of a tax on the transient rentals, parking spaces and television sets; together with penalties on that tax amount and interest through May 8, 1977. The facts show that the revised assessment of May 18, 1977, is correct.
Recommendation It is recommended that the assessment of May 18, 1977, which has been placed against the Petitioner, Robert F. Hartley, d/b/a Taj Apartments, be upheld. DONE AND ENTERED this 17th day of February, 1978, in Tallahassee, Florida. CHARLES C. ADAMS, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Mr. Robert F. Hartley Post Office Box 82 Middletown, California 95461 and Mr. Robert F. Hartley 33 Southwest 2nd Avenue Miami, Florida 33130 Edwin Stacker, Esquire Assistant Attorney General Department of Legal Affairs The Capitol Tallahassee, Florida 32304 John D. Moriarty, Esquire Department of Revenue Room 104 Carlton Building Tallahassee, Florida 32304
Findings Of Fact The Petitioner, Integra Corporation, had a dispute with the Florida Department of Revenue with respect to sales or use tax allegedly due in the amount of $605,305.70 on lease payments made on its rental of hotels from their owners. An assessment for taxes due was processed in the normal manner by the Department of Revenue. Integra Corporation filed a Protest of the assessment, and after the Department's Notice of Decision denied the Protest, Integra filed a timely Petition for Reconsideration. Ultimately the Department issued a Notice of Reconsideration which rejected the arguments of Integra Corporation. Integra Corporation agrees that the Notice of Reconsideration was transmitted on April 24, 1990, for it alleges that fact in paragraph 3 of its Petition. The Department's final rejection of the arguments made by Integra Corporation against the assessment of sales and use tax made in the Notice of Reconsideration dated April 24, 1990, prompted Integra Corporation to mail by certified mail, return receipt #P796 304 819, to the Division of Administrative Hearings on June 21, 1990, an original Petition challenging the Department's tax assessment. That petition was captioned Integra Corporation, Petitioner v. Department of Revenue, Respondent, and was filed by the Clerk of the Division of Administrative Hearings on June 25, 1990. No copy of the original Petition was served on the Department of Revenue, or its counsel. The opening paragraph states that Integra Corporation "hereby petitions the Department of Revenue for administrative proceedings. . ." The Clerk of the Division of Administrative Hearings realized that the Petition should not have been addressed to or filed with the Division of Administrative Hearings, and on that same day forwarded the Petition to the appropriate agency, the Department of Revenue, which received the Petition on June 27, 1990.
Recommendation It is RECOMMENDED that the petition filed by Integra Corporation be dismissed as untimely. DONE and ENTERED this 10th day of September, 1990, at Tallahassee, Florida. WILLIAM R. DORSEY, JR. 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 September, 1990.
Findings Of Fact Petitioner is employed as a Tax Auditor IV in Respondent's Property Tax Administration Program. He is assigned to work in Respondent's Regional Office in Jacksonville, Florida. The counties within the Jacksonville Region for Property Tax Administration are: Duval, Clay, Nassau, Putnam, St. John and Flagler. In January of 1996, Petitioner wrote to John Everton, Director of Respondent's Property Tax Administration Program requesting permission to run for Tax Collector of Clay County. In February of 1996, Petitioner talked to Mr. Everton's secretary. After making this call, Petitioner understood that Respondent's attorneys had his application to run for elective office and that he would soon receive an answer. Petitioner sent Mr. Everton an E Mail message on or about March 6, 1996. In this message, Petitioner asked Mr. Everton to check on his request to run for office and to expedite it immediately because time was of the essence. That same day, Mr. Everton responded to Petitioner's request with an E mail message. Expressing his apologies, Mr. Everton advised Petitioner that Respondent's attorneys had Petitioner's initial request. Mr. Everton stated that he would request that the attorneys respond immediately to Petitioner's inquiry. On or about March 13, 1996 Mr. Everton advised Petitioner that he would have to send his request for approval to run for local office directly to the agency head pursuant to the directive contained in Rule 60K-13.0031(1), Florida Administrative Code. By letter dated March 18, 1996 Petitioner requested that Larry Fuchs, Respondent's Executive Director, grant him permission to run for Tax Collector of Clay County. Mr. Fuchs received this letter on March 29, 1996. Mr. Fuchs responded to Petitioner's request by letter dated April 5, 1996. He reminded Petitioner that Rule 60K-13.0031(1), Florida Administrative Code, requires employees to apply directly to the agency head when requesting approval to become a candidate for local office. Mr. Fuchs then gave several reasons why he could not certify to the Department of Management Services that Petitioner's candidacy would involve no interest which conflicts or activity which interferes with his state employment. More specifically, Mr. Fuchs' April 5, 1996 letter stated in relevant part that: Under section 195.002, Florida Statutes, the Department of Revenue has supervision of the tax collection and all other aspects of the administration of such taxes. Your position with the Department may require you to review or audit the activities of the office you propose to seek. Also some of your duties in supervising other officials in the administration of property taxes may be affected by your proposed candidacy. Your job requires you to review appropriate tax returns, and other records to resolve complex issues related to taxing statutes administered by the Department of Revenue. It also requires you to identify and scrutinize transactions to ascertain whether taxpayers have escaped paying property taxes. In addition, it also requires you to review and audit procedures used by counties to identify and value tangible personal property and accomplish statutory compliance, to investigate taxpayer complaints, to conduct field review with county staff as appropriate, and to provide education an assistance to county taxing officials. Because of the Department's statutory super- vision of the office of tax collector, there cannot be a certification that your candidacy would involve "no interest which conflicts or activity which interferes " with your state employment within the definitions of section 110.233(4), Florida Statutes. The letter went on to say that: This letter is a specific instruction to you that you should not qualify or become a candidate for office while employed in your current position. If you wish to commence your campaign by performing the pre-filing requirements, the law requires that you first resign from the Department. Failure to do so shall result in disciplinary action to dismiss you from your position in accordance with the Department's disciplinary standards and procedures, and Rule 60K-4.010, F.A.C., the Department's Code of Conduct, Section 110.233, Florida Statutes, and Rule 60K-13.002(3), F.A.C. After receiving the above decision, Petitioner requested a formal hearing to challenge the denial of his request to run for Tax Collector of Clay County by letter dated April 10, 1996. Respondent received this letter on April 16, 1996. Respondent referred Petitioner's request for a formal hearing to the Division of Administrative Hearings on April 26, 1996. Petitioner responded to the Division of Administrative Hearings' Initial Order on May 7, 1996 advising the undersigned that he was unavailable for hearing May 28, 1996 through June 10, 1996 and July 5, 1996. He also included an initial pleading requesting, among other things, that Respondent immediately allow him to run for office and pay his filing fee because, in his opinion, it was too late for him to qualify using the alternative method of submitting petitions. On May 21, 1996 this matter was scheduled for hearing on July 9, 1996. Respondent filed a Unilateral Response to the Initial Order and a Prehearing Statement on May 30, 1996. On June 14, 1996 Petitioner filed a letter stating that it was impossible for him to be prepared for the hearing scheduled for July 9, 1996 for two reasons: (a) he had just returned to work after two weeks of vacation; and (b) he was overwhelmed by discovery associated with his upcoming hearing. Petitioner requested that this matter be continued until sometime after August 15, 1996. He represented that Respondent had no objection to his request. An order dated June 20, 1996 rescheduled the case for hearing on August 19, 1996. On July 18, 1996, Respondent sent Petitioner a letter granting him permission to qualify and file the necessary paperwork to become a candidate for Clay County Tax Collector. The letter also advised Petitioner of the conditions under which he could begin campaign activities while on Respondent's payroll. Respondent's change in position was due in part to the pending Final Order in Hendrick v. Department of Revenue, DOAH Case No. 96-2054. Respondent faxed its July 18, 1996 letter to Petitioner's office at 2:38 p.m. Petitioner's immediate supervisor contacted Petitioner at his home later that day at approximately 3:45 p.m. Petitioner did not request annual leave for the following day so that he could take whatever steps were necessary in order to qualify as a candidate for the office of Tax Collector. Instead, he opted to follow through with his previously arranged appointments for July 19, 1996. On July 22, 1996 Petitioner faxed a letter to Respondent indicating that Respondent had not given him sufficient time in which to meet all requirements to qualify as a candidate for elective office by noon on July 19, 1996. In order to qualify as a candidate for elective office in Clay County, Petitioner had to declare a bank depository for campaign purposes and designate a campaign treasurer. If Petitioner intended to use the alternative method of qualifying by filing petitions, he had to file an alternative affidavit and obtain petition forms from the Clay County Supervisor of Elections between January 3, 1996 and June 21, 1996. He had to submit the signed petitions (Democrats-688; Republicans-990, Independent-1,873) to the Supervisor of Elections on or before June 24, 1996. Regardless of whether Petitioner intended to qualify by paying a fee (Major Party-$5,876.40; Independent-$4,309.36) or by using the alternative petition method, he had to complete all paperwork on or before noon of July 19, 1996. Petitioner did not qualify by either method.
Recommendation Based on the Findings of Fact and Conclusions of Law set forth above, it is recommended that Respondent enter a Final Order dismissing Petitioner's request for certification to the Department of Management Services that his candidacy for the office of Clay County Tax Collector would involve no interest which conflicts, or activity which interferes, with his state employment. DONE AND ENTERED this 15th day of October, 1996 in Tallahassee, Leon County, Florida. SUZANNE F. HOOD 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 15th day of October, 1996. COPIES FURNISHED: Patrick A. Loebig, Esquire Peter S. Fleitman, Esquire Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668 Floyd L. Hylton 103 Century 21 Drive, Suite 213 Jacksonville, Florida 32216 Linda Lettera, Esquire Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 Larry Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100
Findings Of Fact Stipulated Facts Respondent conducted an audit of Petitioner's business records for the period July 1, 1985, through June 30, 1990. Respondent determined a deficiency in sales tax of $174,823.96, including penalty and interest through August 22, 1990. Petitioner objected to the deficiency. Respondent reviewed the audit, and made audit changes that are the subject of this proceeding. The audit changes determined a deficiency in use tax of $76,035.60, including tax ($47,910.10), penalty ($11,977.68), and interest through March 12, 1991 ($16,147.60). Interest accrues daily in the amount of $15.75. A First Revised Notice Of Intent To Make Sales Tax Changes, for the reduced assessment of $76,035.60, was issued on March 21, 1991. A Notice Of Proposed Assessment was issued on July 2, 1991. The Notice Of Proposed Assessment became a Final Assessment on August 31, 1991. Respondent made a prima facie showing of the factual and legal basis for the use tax assessment. Section 120.575(2), Florida Statutes. 1/ The audit and assessment are procedurally correct. Tax, interest, and penalty are correctly computed. Formation Petitioner was incorporated in Florida, in January, 1983, by Mr. B. Theodore Troy, president and sole shareholder. Petitioner's principal place of business is 101 Wymore Road, Suite 224, Altamonte Springs, Florida. Petitioner conducted business as American Advertising Distributors of Central Florida. Mr. Troy and his wife operated the business until liquidating Petitioner's assets in 1992. Operation Petitioner sold direct mail advertising to Florida businesses. Petitioner operated pursuant to a franchise agreement with American Advertising Distributors, Inc., of Mesa, Arizona ("AAD"). AAD was Petitioner's franchisor until AAD filed for bankruptcy in 1990. Petitioner solicited orders from Florida businesses 2/ for advertising coupons designed and printed by AAD in Arizona. AAD mailed the advertising coupons to addressees in Florida who were potential customers for Florida businesses. Florida businesses placed orders with Petitioner on written contracts, or sales agreements, labeled "advertising orders." AAD was not a party to advertising orders. Advertising orders identified "AAD" as American Advertising Distributors of Central Florida, and were imprinted with the name and address of "AAD" in Central Florida. Advertising orders specified the total charges, color and stock of paper, number of addressees, and areas of distribution. Petitioner assisted businesses with rough layout for art work. The rough layout was forwarded to AAD. AAD prepared finished art work and sent copies back to Petitioner for approval by Florida businesses. AAD then printed, collated, and mailed advertising coupons to addressees in Florida, without charge to addressees. Florida businesses paid non-refundable deposits when placing advertising orders. The remaining balance was paid upon approval of final art work. AAD did not submit invoices to Florida businesses. AAD submitted invoices to Petitioner for the amount due from Petitioner. 3/ Petitioner paid AAD 10 days before advertising coupons were mailed. Some advertising coupons were produced by Laberge Printers, Inc., in Orlando, Florida ("Laberge"). Coupons from Laberge were designed, printed, and distributed in the same manner as coupons from AAD. Two types of advertising coupons were provided by AAD and Laberge. The majority of coupons were distributed in coop mailings, or "bonus express" envelopes, containing coupons for up to 20 businesses. Bonus express envelopes were mailed approximately eight times a year. Advertising coupons were also distributed in "solo" mailings. A solo mailing was an individualized, custom printed coupon, or flyer, mailed to individual addressees. The total charges stated in advertising orders included the cost of services provided by Petitioner, AAD, and Laberge. Services included typesetting, art work, printing, inserting envelopes, and mailing. Florida imposed a tax on services, from July 1, 1987, through December 31, 1987. Petitioner collected and remitted tax imposed on the cost of services included in the total charges stated on advertising orders. Except for the services tax, neither Petitioner, AAD, nor Laberge collected and remitted sales or use tax to Florida or to Arizona. Petitioner never utilized resale certificates for any tax other than the tax on services. Collectibility Petitioner was financially able to pay the use tax assessment during 1990 and 1991. No later than August 22, 1990, Mr. Troy knew of the sales tax deficiency of $174,823.96. By March 21, 1991, Mr. Troy knew of the reduced use tax assessment of $76,035.60. During 1990 and 1991, Petitioner made discretionary payments to Mr. Troy of $110,389. Petitioner reported federal taxable income of $58,279 in 1990 and 1991. 4/ In arriving at taxable income, Petitioner deducted payments to Mr. Troy of $59,430 for compensation to officers, management fees, and salary. 5/ From taxable income of $58,279, Petitioner paid approximately $50,959 to Mr. Troy in nondeductible shareholder loans. 6/ Discretionary payments of $110,389, 7/ made to Mr. Troy in 1990 and 1991, were more than adequate to pay the use tax assessment of $76,036.60. At the end of 1991, Petitioner reported fixed assets with a book value of $14,933, a customer list valued at $104,447.72, and retained earnings of $102,605. The book value of intangible assets was $82,943, comprised primarily of the franchise, valued at $35,000, and goodwill of $45,000. Termination Of Operations But Continued Existence AAD petitioned for bankruptcy in 1990. Petitioner subsequently determined that its franchise and goodwill were worthless. In 1992, Petitioner reported a loss of $99,726 for federal tax purposes. All of Petitioner's assets, including its customer lists, were sold or transferred for $1,330 to Florida Mail, Inc. ("Florida Mail"). Florida Mail is a Florida corporation wholly owned by Mr. Troy. Florida Mail sells direct mail advertising; and shares Petitioner's principal place of business. Since 1992, Petitioner has been a shell corporation with $579 in assets.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent enter a Final Order upholding the assessment of tax and interest and waive all of the penalty included in the assessment. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 2nd day of June, 1994. DANIEL MANRY 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 2nd day of June, 1994.
