Findings Of Fact The following facts were stipulated to by both Petitioner and Respondent: The Petitioner is a Delaware corporation with its principal office at Toledo, Ohio. The Petitioner qualified to do business in Florida December 31, 1970, and was assigned #825570. The Petitioner did incur a net operating loss for the Fiscal Year ending December 31, 1974, which resulted in a carry forward to 1975 and 1976 for Florida purposes. The 1974 net operating loss for federal income tax purposes amounted to $5,432,905 (as adjusted). For Florida return purposes, net 1974 "Schedule I" additions to federal income were $27,817. Net 1974 "Schedule II" subtractions from federal income per the Florida return as filed were $1,451,951. The apportionment factor for 1974 was 1.5645 percent for Florida tax purposes. The 1975 federal taxable income was $1,295,459. For Florida purposes, net 1975 "Schedule I" additions to federal income were $26,276. Net 1975 "Schedule II" subtractions from federal income per the Florida return as filed were $2,313,813. The apportionment factor for 1975 was 1.5197 percent for Florida tax purposes. The assessment of additional income tax for Fiscal Year ending December 31, 1976, by the Department of Revenue, which is the subject of Petitioner's protest, totals $1,889 resulting from the interpretation of the Florida statutes concerning the amounts mentioned in items 4 through 10 preceding. Total disallowed operation loss carry forward to the year 1976 after apportionment was $37,792. The issue of law involved herein is the interpretation of Section 220.13, Florida Statutes, which section is deemed to control the assessment for Fiscal Year ending December 31, 1976.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered by the State of Florida, Department of Revenue, upholding the assessment made by the Department of Revenue, and denying the relief requested herein by Petitioner. DONE AND ENTERED this 14th day of September 1979 in Tallahassee, Florida. WILLIAM E. WILLIAMS Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 14th day of September 1979. COPIES FURNISHED: J. W. Neithercut, Vice President Questor Corporation Post Office Box 317 Toledo, Ohio 43691 William D. Townsend, Esquire Assistant Attorney General The Capitol, Room LL04 Tallahassee, Florida 32301 Shepard King, Esquire Steel, Hector & Davis 1400 S.E. First National Bank Building Miami, Florida 33131 Joseph Z. Fleming, Esquire 25 Southeast Second Avenue Ingraham Building, Suite 620 Miami, Florida 33131
Findings Of Fact Having listened to the testimony and considered the evidence presented in this cause, it is found as follows: Petitioner is a domestic corporation. Petitioner provided medicare services to patients in the 1969-70 fiscal year. An on-site audit by the medicare auditing team was concluded in December of 1971, and petitioner received $56,131.00 of medicare reimbursements in January of 1972, for the services provided in the 1969-70 fiscal year. The petitioner did not file an amended federal income tax return for the fiscal year ending September 30, 1979. The adjusted federal income reported on petitioner's federal income tax return for the fiscal year ending September 30, 1972, included the $56,131.00 of medicare reimbursements received by petitioner in January of 1972. On petitioner's Florida income tax return for its fiscal year ending September 30, 1972, petitioner did not include the $56,131.00 figure in its adjusted federal income. On March 31, 1975, the respondent notified petitioner of a proposed deficiency in the amount of $2,100.99 arising from the petitioner's omission of the medicare reimbursements from its adjusted federal income as shown on its Florida corporate income tax return for the fiscal year ending September 30, 1972. Further correspondence ensued between the petitioner and the Corporate Income Tax Bureau of the respondent and the petitioner filed the present petition requesting a hearing on the issue. The respondent requested the Division of Administrative Hearings to conduct the hearing.
Recommendation Based upon the above findings of fact and conclusions of law, it is my recommendation that there is no legal basis for affording the petitioner any relief from the proposed deficiency and that said deficiency in the amount of $2,100.00 be sustained. Respectfully submitted and entered this 17th day of September, 1975, in Tallahassee, Florida. DIANE D. TREMOR, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: E. Wilson Crump, II, Esquire Assistant Attorney General Department of Legal Affairs Tax Division, Northwood Mall Tallahassee, Florida 32303 Homer E. Ward, N.H.A. Administrator/President University Park Convalescent Center 1818 E. Fletcher Avenue Tampa, Florida 33612
Findings Of Fact The Petitioner, Florida Welding Services Corp., is a Florida corporation doing business in the State of Florida. The Respondent, Florida Department of Revenue, is the agency charged with enforcing the taxing statutes of this State, including the Florida Income Tax Code, Chapter 220, Florida Statutes. Pursuant to Chapter 220, Florida Statutes, the Petitioner is required to file a Florida Corporate Income Tax Return annually with the Respondent. The Return is due on the first day of the fourth month after the close of the tax year. The Petitioner's tax year for 1977 was April 1, 1976, through March 31, 1977. The Florida Corporation Income Tax Return for the 1977 tax year was due on July 1, 1977, and the Petitioner failed to file its Return by this date. The Petitioner's tax year for 1978 was April 1, 1977, through March 31, 1978. The Florida Corporation Income Tax Return for the 1978 tax year was due on July 1, 1978, and the Petitioner failed to file its Return by this date. In January 1977, all of the Petitioner's corporate records were seized, pursuant to a subpoena issued in the United States Federal District Court in and for the Southern District of Florida. (See Exhibit 1) The Petitioner's records were not returned to it for over a year. On September 15, 1978, the Petitioner filed a Tentative Income Tax Return and Application for Extension of Time to File Income Tax Return, wherein Petitioner requested an extension of time until November 15, 1978, in which to file its Florida income tax return for the 1977 and 1978 tax years. (See Exhibit 2) On October 5, 1978, the Department of Revenue denied the Petitioner's request for an extension of time on grounds that the request had been filed after the respective due dates of July 1, 1977, and July 1, 1978. (See Exhibit 2) On November 16, 1978, the Department of Revenue received Petitioner's Florida Corporation Income Tax Returns for the tax years 1977 and 1978. The Petitioner also remitted the tax it believed owing for each taxable year, $3,734.96 for 1977 and $6,803.56 for 1978. On February 2, 1979, the Department of Revenue, Corporate Income Tax Bureau, issued a Delinquent Notice of Tax Due to the Petitioner. The Notice indicated that the Petitioner had a balance due of $1,547.28 for the tax year ending March 31, 1977, which amount represented $933.74 penalty and $613.54 interest. (See Exhibit 3) On February 5, 1979, the Department of Revenue, Corporate Income Tax Bureau, issued a Delinquent Notice of Tax Due to the Petitioner. The Notice indicated that the Petitioner had a balance due of $1,986.43 for the tax year ending March 31, 1978, which amount represented $1,700.89 penalty and $285.54 interest. (See Exhibit 4) On March 15, 1979, Mr. Karl J. Leib, Jr., contacted the Department of Revenue on behalf of his client, the' Petitioner, requesting the Department to delay in issuing any tax warrants against the Petitioner until Mr. Leib had an opportunity to communicate with someone from the Department. (See Exhibit 5) A follow-up letter was sent by Mr. Leib to the Department on June 8, 1979. (See Exhibit 6) On April, 23, 1980, the Department of Revenue issued to the Petitioner a Final Notice and Demand for payment in the amount of $1,547.28. (See Exhibit 7) Although no Final Notice and Demand for payment in the amount of $1,986.43 was issued by the Department, the amount is still outstanding and the Department maintains that Petitioner owes this sum as well. It is the Petitioner's position that its inability to timely file its Florida Corporate Income Tax Returns was entirely due to factors beyond its control, i.e., the confiscation of its corporate records. The Petitioner maintains that it should not be assessed penalty and interest for late filing, as its failure to timely file was "due to reasonable cause and not willful neglect," as is provided for in Section 214.40(1), Florida Statutes. The Department's position is twofold. First, the Petitioner's failure to make a timely request for extension of time in which to file its return does constitute willful neglect. Second, that while Section 214.40(1), Florida Statutes, may provide the Department with some discretion in assessing penalties, there is no comparable provision for modifying interest payments and such amount is absolutely mandated by the statute for any late filed returns. In addition to the foregoing, along with the attached Exhibits, the undersigned hereby incorporate by reference and jointly offer as evidence those Exhibits attached to Petitioner's Request for Formal Proceedings. WHEREFORE, both parties respectfully request the Hearing Officer to consider the foregoing facts and exhibits, along with a Memoranda of Law to be filed by each party within 10 days of the filing of this Joint Stipulation, and to issue his Recommended Order, without the necessity of holding a formal hearing.
The Issue The issue to be resolved in this proceeding concerns whether the Petitioner is liable for sales tax, together with interest and penalties on the purported unpaid tax amount, as referenced in the assessment and the Respondent agency's notice of decision issued on October 18, 1994.
Findings Of Fact The Petitioner is the sole proprietor of a marina and restaurant business located in Pensacola Beach, Florida. The Respondent is an agency of the State of Florida charged with enforcing pertinent statutes and rules providing for the collection of sales and use taxes, as well as penalties and interest for tax amounts determined to be due and payable but not timely paid to the Department and the State of Florida. Included within the Department's regulatory authority over the assessment and collection of sales and use taxes is the authority to conduct audits of taxpayers to determine amounts of tax due and owing to the State, as well as whether such taxes have been timely and properly remitted and otherwise accounted for. The relevant audit period involved in this proceeding extended from October 1, 1987 through December 31, 1992. The Petitioner's marina and restaurant business operated during the audit period was operated on property owned by the Santa Rosa Island Authority (Authority) and the State of Florida Department of Natural Resources (now Department of Environmental Protection, DEP). The property was leased to the Petitioner for the purpose of operation of this business. The property leased by the Petitioner from the Authority consisted of certain land above the mean high water mark and five boat slips. These five boat slips will be referred to sometimes hereafter as the "Santa Rosa boat slips". During the audit period, the Petitioner operated the restaurant business on the property leased from the Authority and rented the five boat slips to various boating customers. The Petitioner also rented 70 other boat slips to customers during the audit period. These slips were built by the Petitioner in 1977 on submerged land which had been leased from the State of Florida, Department of Natural Resources, Bureau of Land Management. This property adjoined the property leased from the Authority. On November 16, 1992, the Department sent to the Petitioner a notice of intent to audit its books and records. As part of the audit, the Department requested that the Petitioner produce various records, including but not limited to, the Petitioner's federal tax returns, Florida corporation income tax returns, Florida sales and use tax returns, depreciation schedules, general ledgers, property records, cash receipts journals, cash disbursement journals, purchase journals, general journals, sales journals, sales invoices, shipping documents, purchase invoices, intangible property records, sales tax exemption certificates and lease agreements for the real or tangible property involved in the Petitioner's business. The Petitioner basically was able to provide few records to support his restaurant sales and boat slip rental receipts, except for Florida sales tax returns and federal income tax returns. There were no sales control documentation records, such as general ledgers and general journals provided to the Department's auditor for review, except for a cash register tape for the night of December 1, 1992, representing that night's restaurant gross receipts activity. The Petitioner's method of record keeping essentially consisted of his writing down the gross sales each evening from the cash register tapes, totaling those figures at the end of the month, and reporting this total on his Florida sales tax returns as the gross receipts from the restaurant business. However, the Petitioner did not keep the cash register tapes or maintain other documents to support the information reported to the Respondent on the monthly sales tax returns. The Petitioner reported as, "exempt income," the rental from the boat slips for the five Santa Rosa boat slips on the monthly sales tax returns filed with the Respondent. He did not report his monthly rental income from the remaining 70 boat slips on his sales tax returns filed with the Respondent. He did report a great deal more gross receipts on his federal income tax returns than on his Florida sales tax returns. The Department compared the Petitioner's federal income tax returns during the audit period with his Florida sales tax returns and determined that the gross receipts reported to the federal government were substantially larger than the gross receipts reported to the Department. It determined that the primary difference in the gross receipts was attributable to rental revenues from the boat slips, which were not accounted for by the Petitioner in his Florida monthly sales tax returns. The auditor determined that four percent of the recorded restaurant gross receipts were attributable to alcohol sales and 96 percent to food sales. The Department calculated the sales tax due on the undisclosed income through the audit, which represented gross receipts from the restaurant business and the boat-slip rental business, which was not reported by the Petitioner on his Florida sales tax returns. It calculated the sales tax due during the audit period on the rentals of the five boat slips, which were improperly listed as exempt sales on the Petitioner's monthly sales tax returns filed with the Respondent. It was also revealed that during the audit period, the Petitioner had sub-leased a portion of the Santa Rosa property to his former wife for $5,000.00 per year. The Department calculated that the Petitioner owed $300.00 in taxes based upon the sub-lease to his former wife. The Department additionally calculated that the Petitioner owed an additional $314.00 for use taxes, based upon non-exempt purchases of tangible personal property. The Department assessed the Petitioner's sales taxes based upon the estimated boat-slip rental receipts, although it did not assess the lease payments made by the Petitioner to the Authority or to the State of Florida, Department of Natural Resources. On February 12, 1993, the Department assessed the Petitioner a total of $71,308.30 for the audit period, representing $45,694.90 of sales tax due, $14,093.37 of interest due thereon, $11,041.36 of penalties, and $314.98 of use tax, together with $91.02 of interest due on use taxes unpaid, and $72.67 of penalties due thereon. Daily interest of $15.13 commencing on February 13, 1993 was also assessed. Additionally, on February 12, 1993, the Department assessed the Petitioner $1,060.97 for the audit period, including penalties and interest, for local government infrastructure surtax due. Daily interest of $.29, commencing on February 13, 1993, was assessed on that amount. The Petitioner, in essence, does not dispute the Department's calculation of the assessed amount. The Petitioner, rather, contends that he believes that he reported all income and paid all sales taxes which were due and that his certified public accountant failed to account properly for his gross receipts and income to the federal internal revenue service, without the Petitioner's knowledge, during the audit period. He maintains, therefore, that the method of calculation of the Department's tax assessment, based upon the difference between the gross receipts depicted on the federal income tax returns and on the sales tax returns filed with the Department, is inaccurate, apparently because of the CPA's errors. Additionally, the Petitioner maintains that he was of the belief that the boat-slip rentals were not taxable and reportable for sales tax purposes to the Department because he believes, citing Rule 12A-1.061(5)(a) and (b), Florida Administrative Code. He bases this view on his assertion that the persons residing in the boat slips were "95 percent" live-aboard-type tenants, residing on their boats and that, essentially, they treated their boats as beach homes or condominiums, etc., for purposes of that rule, by residing for longer periods than six months. He thus contends that the rental revenues from such residents were tax exempt. The Department, however, established through its auditor's testimony and the Department's Composite Exhibit 2, that the Petitioner's CPA, through information he generated, did not establish that the difference between the gross receipts reported to the internal revenue service on the federal tax returns and the gross receipts reported on the Florida sales tax returns was not taxable. The Petitioner's proof does not show the factual elements necessary to establish that the 75 boat slips meet the rule's standard for exempt revenues from non-taxable residences.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record and the candor and demeanor of the witnesses, it is, therefore RECOMMENDED that a Final Order be entered by the Respondent assessing the taxes, penalties, and accumulated interest in the above-found amounts. DONE AND ENTERED this 21st day of June, 1996, in Tallahassee, Florida. P. MICHAEL RUFF, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 21st day of June, 1996. APPENDIX TO RECOMMENDED ORDER CASE NO. 94-7256 Petitioner's Proposed Findings of Fact Accepted. Accepted, based upon the Petitioner's testimony in this regard, but immaterial. 3-4. Rejected, as not established by preponderant evidence. The Petitioner did not show that all or even most of the tenants are on annual rentals and, moreover, if they were, the rule cited by the Petitioner himself requires that such lease agreements or contracts be written. The Petitioner has simply failed to establish that the boat-slip rental arrangements were exempt transactions. Rejected, as incorrect as a matter of law and as immaterial and irrelevant. Rejected, as immaterial and irrelevant to the issues in this proceeding. Rejected, as subordinate to the Hearing Officer's findings of fact on this subject matter and as not probative by a preponderance of evidence that the assessment is incorrect. Rejected, as immaterial to the issues in this proceeding. The Department is not seeking to establish fraudulent intent. 9-27. These constitute argument and enunciation of the Petitioner's and the Respondent's perceived legal positions, and attempted equitable arguments concerning justification for the Petitioner's lack of relevant records, including a description of his financial difficulties related to destruction of his business by fire and by two hurricanes. While this is understandable and regrettable, these arguments and positions asserted by the Petitioner are immaterial and irrelevant to the issues in this case. Respondent's Proposed Findings of Fact 1-26. Accepted. COPIES FURNISHED: Richard E. Wells 715 Pensacola Beach Boulevard Post Office Box 505 Pensacola Beach, FL 32562-0505 Jarrell L. Murchison, Esquire Office of the Attorney General The Capitol - Tax Section Tallahassee, FL 32399-1050 Linda Lettera, General Counsel Department of Revenue 204 Carlton Building Tallahassee, FL 32399-0100 Larry Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, FL 32399-0100
The Issue Is Petitioner entitled to the repayment of funds paid to the State Treasury through overpayment or error, in relation to use taxes? The refund claim is $37,837.91. See Section 215.26, Florida Statutes.
Findings Of Fact Rathon Corporation, formerly known as Diversey Corporation, is a Delaware Corporation authorized to do business in Florida. It manufactures various detergents, cleaners, and soaps, and the equipment to dispense those products. The products are marketed in Florida and other states. The customers of the products include hotels, hospitals, factories, and restaurants. The devices that dispense the detergents, cleaners, and soaps are referred to as "feeders." Those feeders can range from simple hand soap dispensers to electronically regulated machines that inject soap into commercial dishwashers. The feeders are loaned to Petitioner's customers at no additional charge for the period of time that the customer continues to purchase the product(s) dispensed by the feeder. These circumstances existed in the period of July 1993 through March 1995. In the period of July 1993 through March 1995, Diversey Corporation, now Rathon Corporation, paid the State of Florida $58,969.22 in use tax associated with the feeders. During the period in question, the Petitioner manufactured the feeders at a facility in Santa Cruz, California. The feeders were not warehoused in the Santa Cruz facility for an extended period. They were prepared for shipment and shipped to customers in the various states, to include Florida and California customers, to be used in the places of business operated by the customers. The feeders being shipped were not packaged with other products. During the period July 1993 through March 1995, the Petitioner not only paid use tax to Florida for the feeders, it paid use tax in forty-four other states and the District of Columbia, based upon the costs of manufacturing the feeders. California was among the other forty-four states. During the period in question, Petitioner accrued and paid use taxes to Florida and California limited to the feeders used by customers in those states, based upon the product sales allocation method it used in relation to the forty-three other states and the District of Columbia. The feeders that were provided to Florida customers were shipped by common carrier. Upon their arrival in Florida no tax had been paid to California pertaining to those feeders. When the feeders arrived in Florida during the period at issue, use tax would be remitted to Florida. Subsequently, the Petitioner paid the State of California a use tax associated with the feeders that had been shipped to Florida customers and upon which a use tax had been imposed by the State of Florida and paid. The California payment is described in detail below. Petitioner had paid Florida use tax on the feeders shipped to Florida customers based on the total manufactured cost of the feeders to Petitioner, including materials, labor, and overhead. The additional use tax paid to California for those feeders was based only on the cost of materials. The overall costs of feeders allocated to Florida for the refund period was $982,803.00. Petitioner remitted a 6% use tax to Florida totaling $58,969.22 for the period in question. In 1996, Petitioner was audited for sales and use tax compliance by the State of California. That audit process included the refund period that is in question in this case, July 1993 through March 1995. Following the audit, the State of California issued a Notice of Determination asserting additional liability for tax and interest that totaled $355,753.95. Petitioner paid that assessment. The California auditor had arrived at the assessment by concluding that Petitioner owed California for 44.57% of all feeders manufactured at Petitioner's Santa Cruz facility. The 44.57% represented all newly manufactured feeders that had been loaned by Petitioner to its customers during the refund period over the entire United States. As a consequence, the assessment of use tax by the State of California included tax on feeders for which Petitioner had paid Florida $58,969.22 in use tax prior to the California assessment of $355,753.95. Petitioner did not apply for credit in California for the portion of the $355,753.95 that would relate to the feeders brought to Florida during the period in question. Petitioner took no action to obtain a credit on the amount paid to Florida as a means to reduce the California tax obligation pursuant to the 1996 audit, because Petitioner had been told that the use tax for the feeders used by Florida customers was legally due in California and not in Florida. In arriving at the determination that 44.57% of the feeders manufactured during the period in question had been loaned to customers within the continental United States, the California auditor took into account that 21.8% of the feeders and feeder parts were sold for export, leaving 78.2% to be used in the United States. Of the 78.2% remaining for the United States, 57% were complete feeders sent to customers within the United States, and 43% were repair parts that were sent to Petitioner's Cambridge Division in Maryland, where those repair parts were being stored for future use. The percentage of 44.57% was arrived at by multiplying 57% times 78.2%, representing the percent of total feeders manufactured for use in the United States that were sent to customers within the United States and not held in inventory as repair parts. Again, California based its use tax for tangible personal property manufactured in that state to include only the cost of materials. Consequently, when the California auditor computed use tax to be collected by California using the 44.57% of total feeders manufactured to be used in the United States by Petitioner's customers in the United States, the California auditor used a cost factor of 55% of overall costs which was attributable to the cost of materials only. The total cost of feeders manufactured by Petitioner in California during the period in question, as related in the California tax audit, was $19,028,714.00. The total cost manufactured for use in the United States was $8,481,098.00, representing 44.57% of the overall cost of manufacturing. When the $8,481.098.00 is multiplied by 55%, representing the cost of materials only, the total costs of the goods subject to the use tax for the period in question is $4,664,604.00. A use tax rate of 7% was applied against the amount of $4,664,604.00. To attribute the portion of use tax paid to California following the 1996 audit associated with feeders that had been sent to Florida during the period in question, the answer is derived by multiplying $982,803.00 by 55% for a total of $540,542.00, and in turn multiplying that amount by 7%, the rate of tax imposed by California. That total is $37,837.91 in use tax that was subsequently paid to California after $58,962.22 had been paid to Florida for use tax on the same feeders. Diversey Corporation sought a tax refund in the amount of $58,977.00, through an application dated August 8, 1996, in relation to the period July 1993 through March. Eventually through the decision by the Respondent in its Notice of Decision of Refund Denial dated July 16, 1997, Respondent refused to grant the refund of $58,977.00. At present, Petitioner requests that it be given a refund of $37,837.91, which represents the portion of use tax paid to Florida that has been duplicated in a payment of use tax to California. Respondent, in its Notice of Decision of Refund Denial entered on July 16, 1997, and based upon the facts adduced at the final hearing, premises its proposed agency action denying the refund request upon the language set for in Section 212.06(1)(a) and (7), Florida Statutes. The determination to deny the refund request was not based upon reliance on Rule 12A-1.091(3), Florida Administrative Code. The theory for denying the refund is premised upon Respondent's argument that use tax was due to Florida, "as of the moment" feeders arrived in Florida for use in Petitioner's business operations associated with its customers. Petitioner then paid the use tax to Florida at the time the feeders arrived in Florida. Having not paid California Use Tax prior to paying Florida Use Tax, Respondent concludes, through its proposed agency action, that it need not refund to Petitioner the use taxes it paid to California at a later date. Petitioner had referred to Rule 12A-1.091, Florida Administrative Code, following receipt of the Notice of Proposed Refund Denial issued on December 9, 1996, possibly creating the impression that Petitioner believed that Rule 12A-1.091, Florida Administrative Code, would support its claim for refund. It later developed that Petitioner did not have in mind reliance upon Rule 12A-1.091, Florida Administrative Code, to support its claim for refund. Instead, Petitioner made reference to that rule and specifically Rule 12A-1.091(3), Florida Administrative Code, as a means to perfect a challenge to Rule 12A-1.091(3), Florida Administrative Code, filed with the Division of Administrative Hearings on December 15, 1997, claiming that the challenged rule was an invalid exercise of authority. That challenge was assigned DOAH Case No. 97-5908RX. In summary, notwithstanding Petitioner's argument to the contrary, Respondent has never relied upon Rule 12A-1.091(3), Florida Administrative Code, or any other part of that rule in its proposed agency action denying the refund request. Absent Petitioner's affirmative reliance upon Rule 12A-1.091(3), Florida Administrative Code, the rule has no part to play in resolving this dispute.
Recommendation Based upon the findings of fact and the conclusions of law, reached, it is, RECOMMENDED: That Petitioner's request for repayment of funds paid to the State Treasury in the amount of $37,837.91, paid as use taxes for all years in question, be DENIED. DONE AND ENTERED this 20th day of April, 1998, in Tallahassee, Leon County, Florida. COPIES FURNISHED: H. Michael Madsen, Esquire Vickers, Madsen, and Goldman, LLP Suite 101 1705 Metropolitan Boulevard CHARLES C. ADAMS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 20th day of April, 1998. Tallahassee, Florida 32308-3765 John N. Upchurch, Esquire James McCauley, Esquire Department of Legal Affairs The Capitol, Tax Section Tallahassee, Florida 32399-1050 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 The parties have stipulated to all facts in this proceeding. Those facts found relevant to a determination of the issue are as follows: Petitioner, American Telephone and Telegraph Company, is a New York corporation and is functionally divided into two divisions: the Long Lines Department and the General Department. Through its Long Lines Department, petitioner is a federally regulated public utility and common carrier which furnishes interstate and international telecommunications services. Long Lines is responsible generally for the construction, operation and maintenance of a nationwide system of interstate telecommunications facilities and related equipment which serve to interconnect the facilities of over 1700 operating telecommunications companies in the United States as well as telecommunications systems abroad. Some of these facilities extend into and through the State of Florida. In performing this interstate business, Long Lines operates, and thus has property or employees or both in 49 states, including Florida. Through its General Department, petitioner is the parent corporation of 21 operating telecommunications companies (known as "Associated Companies"), Western Electric Company, Inc. ("Western") and Bell Telephone Laboratories, Inc. ("Bell Labs"). The General Department holds and manages the stock owned in these subsidiaries and two minority owned companies, and provides capital. advice and assistance to them. It conducts these activities principally in New York and New Jersey and conducts no business and has no property or employees in Florida. The only business activities in the State of Florida during 1972, 1973 and 1974 were conducted through petitioner's Long Lines Department in connection with the operation of the interstate and international long distance telecommunications network. None of the Associated Companies is organized under the laws of Florida or has its headquarters in Florida. The Only Associated Company which conducts business or has property or employees within Florida is the Southern Bell Telephone and Telegraph Company (hereinafter "Southern Bell"), a wholly owned subsidiary of petitioner. Southern Bell files its own separate Florida income tax returns and during the period 1972-1974 paid approximately $10 million in income tax to Florida. The respondent concurs that petitioner is entitled to deduct 100 percent of the dividends paid by Southern Bell to petitioner. Western, also a wholly owned subsidiary of petitioner, is a manufacturing corporation with its own Board of Directors and officers, doing business in all 50 states. During the period 1972-1974 Western paid approximately $1.7 million in income tax to Florida. The respondent concurs that petitioner is entitled to deduct 100 percent of the dividends paid by Western to petitioner. For each of the 1972, 1973 and 1974 tax years, petitioner has filed a federal consolidated income tax return, and has made a valid election under Section 243 of the Internal Revenue Code for each of those years. That provision of the federal tax law permits a domestic corporation to deduct 100 percent of the dividends received from its wholly-owned domestic subsidiaries. Petitioner's federal income tax returns were audited by the Internal Revenue Service and the respective tax liabilities were determined and paid for each of the years in question. The Internal Revenue Service did not tax dividends received by petitioner from its affiliates. Petitioner timely filed its Florida corporate income tax returns for the years ending December 31, 1972, December 31, 1973 and December 31, 1974. Petitioner did not elect and was not required to file a Florida consolidated income tax return under Section 220.131, Florida Statutes. For each of the years in question, petitioner reported on line 1--"federal taxable income (line 30, Form 1120 or corresponding line on related form 1120 series, 990C or 990T)"- -of its Florida corporation income tax return (Form F-1120) its taxable income for federal income tax purposes computed as if petitioner had filed a separate federal income tax return for each of the years in question and for each preceding taxable year for which it was a member of an affiliated group. These amounts were: 1972 $ 94,020,281 1973 $213,364,165 1974 $110,770,402 On its Florida corporation income tax return for each of the years in question, petitioner made the additions and subtractions required by the form of the return in computing "adjusted federal income" and apportioned this amount by the prescribed three-factor formula to obtain "Florida net income." The Department of Revenue adjusted the amount of "federal taxable income" and hence "Florida net income" of petitioner for each of the years in question by adding thereto 15 percent of the dividends received from subsidiaries which were deductible for federal income tax purposes under Section 243 of the Internal Revenue Code. On April 10, 1978, the Department issued a notice of proposed deficiency for petitioner's tax years ended December 31, 1972, December 31, 1973 and December 31, 1974. The total amount of the proposed deficiency was $1,131,158, computed as follows: YEAR AUDITED TAX TAX AS FILED DEFICIENCY 1972 $426,468 $122,365 $304,103 1973 668,597 281,168 387,429 1974 594,300 154,674 439,626 Total $1,689,365 $558,207 $1,131,158 After a timely protest to the proposed deficiencies was filed by the petitioner, correspondence and an informal conference between the parties was had. Finally, on April 16, 1981, the Department issued a letter denying the protest and petitioner petitioned for an administrative hearing. Through correspondence and discussions with the petitioner, the Department of Revenue has taken the position that it would allow only an 85 percent dividend deduction for the dividends received by petitioner from those affiliates which were not subject to the Florida corporate income tax code. Petitioner is seeking to take a 100 percent deduction of all dividends which it received from its subsidiaries, as it did on its federal income tax returns. The dividends received by petitioner which the Department is attempting to subject to Florida tax by its proposed deficiency assessment are derived from its equity investment in its subsidiaries and they represent to petitioner a return on such investment. Since the actual capital, however, for that investment is furnished primarily by public investors, the principal use of the dividends received by petitioner is to meet its obligation to its shareholders and bondholders for the payment of dividends and interest. For example, in 1974 petitioner received dividends from the Associated Companies, Western and other affiliates in the amount of $2,538,443,000 and paid dividends to shareholders in the amount of $2,039,800,000 and interest on its long and intermediate term debt of $475,670,000. Petitioner, therefore, serves as the investor interface between the investing public and its subsidiary companies, whereby the purchase of petitioner's stock or debt issues actually represents an investment in the earnings of the Bell System. Petitioner, acting through its General Department, thus provides the avenue by which the subsidiaries pass their net earnings to the investing public. The income which the Department seeks to tax is derived from dividends received by petitioner primarily from earnings generated by the property and employees of the Associated Companies which are devoted to furnishing intrastate and interstate telecommunications services in their operating territories in states other than the State of Florida. These earnings are subject to income taxes in all states in which the Associated Companies provide telecommunications services that impose income taxes on corporations. The dividends received by petitioner do not contribute to the funding of Long Lines since (1) the pervasive regulation under which petitioner's subsidiaries operate limits their earnings to that amount sufficient for the needs of their own operations and effectively prevents those earnings from being available for use in other businesses and (2) earnings paid out as dividends by petitioner's subsidiaries are principally required to be passed to the public investors in the Bell System, through petitioner's General Department, in order to meet dividend and interest obligations to these outside shareholders and bondholders. During the tax years in question, the Department of Revenue had not promulgated any rule with respect to the disallowance of a deduction for 100 percent of dividends received as provided for under Section 243 of the Internal Revenue Code, and the Florida corporate income tax return forms did not require any such add-back or adjustment. During the 1980 legislative session, an amendment to Chapter 220, Florida Statutes, was proposed which would have changed the definition of "affiliated group of corporations." Such proposed legislation was not passed and did not become law.
Recommendation Based upon the findings of fact and conclusions of law recited herein, it is RECOMMENDED that that portion of the Department's proposed assessment of deficiencies for the 1972, 1973 and 1974 tax years as is based upon dividends received by the petitioner from its affiliates be withdrawn as being contrary to law and invalid. Respectfully submitted and entered this 28th day of April, 1982. DIANE D. TREMOR, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 28th day of April, 1982.
Findings Of Fact The facets herein are undisputed. On May 31, 1973 Petitioner purchased Thomas Concrete Company, and on February 28, 1973 Petitioner purchased Kelly Builders, Inc. Both companies were forthwith liquidated and federal income tax returns were filed in which depreciation in excess of fair value of the properties was recaptured for federal tax purposes. In his state corporate income tax returns Petitioner claimed deduction for that portion of the recaptured depreciation which occured prior to November 2, 1971, the effective date of the Florida Corporate Income Tax Statute. These deductions were disallowed by the Department of Revenue, that portion of the tax relating to Thomas Concrete Company was paid under protest, the portion relating to Kelly Builders, Inc. was not paid, and this petition was filed. In 1974 Petitioner sold real property on which it made a substantial capital gain. In computing its federal income tax the full capital gain was reported. However, that portion of its capital gain accruing prior to November 2, 1971 was excluded from its Florida corporate income tax and the assessment of $50,494.75 was levied against Petitioner by Respondent, Department of Revenue for the full amount of the capital gain as income received in 1974. The two issues here involved are whether Petitioner is taxable under Chapter 220 F.S. on depreciation taken prior to the effective date of Chapter 220, and subsequently recaptured, and whether Petitioner is taxable under Chapter 220, F.S. for the full amount of capital gain realized on property held prior to the effective date of Chapter 220 where part of appreciation occurred prior to the effective date of the Florida Corporate Income Tax law.
Findings Of Fact Frank O. Sherrill is the sole stockholder of Oceania Charters, Inc. and is a resident of North Carolina from where he directs the operations of Oceania Charters, Inc. The principal, if not sole, asset of Oceania Charters, Inc. is the 101 foot motor yacht Captiva II. The Captiva II was built in Amsterdam, the Netherlands, pursuant to contract between the shipbuilder and Oceania Charters, Inc. and/or Frank Sherrill entered into in 1972. Sherrill purchased the vessel for the intended purpose that it be used as a charter vessel hired to various charterers for short or longer-term cruises. This is the fourth or fifth vessel that Respondent has owned and used in the charter business. The evidence was uncontradicted that the purpose of acquiring the Captiva II was to place it in charter service. The vessel was originally scheduled for completion in the summer of 1973 and it was intended to have the Captiva II proceed from Amsterdam to North Carolina under her own power. The vessel was not completed until late fall or early winter and the insurers would not insure the Captiva II if it proceeded across the North Atlantic under her own power at that time of year. Arrangements were made to ship the Captiva II from Amsterdam to Bermuda via freighter to off-load the Captiva II there and proceed under her own power to Wilmington, North Carolina for custom clearance and documentation. While loading the Captiva II damage was done to one stabilizer and to the hull. Upon arrival of the ship carrying the Captiva II at Bermuda, excess costs involved in off-loading and repairing there were weighed against the carrier's offer to off- load the Captiva II at the next port of call, Miami, and facilities at the latter port. It was then decided that the Captiva II should stay aboard for the voyage from Bermuda to Miami and there be off-loaded and repaired. This was done and upon arrival in Miami the Captiva II was off-loaded, repaired and fitted out for charter operations. Berthing arrangements were made and, except for charter trips, trips to Palm Beach soliciting charters, and sea trials the Captiva II has been moored at Miami. Mr. and Mrs. Sherrill stayed on board the Captiva II during the period she was being outfitted for charter operations and on several of the sea trials the vessel underwent. They were not on board during any of the charter trips and did not use the Captiva II for cruises themselves or make her available for use by their friends unless pursuant to a charter party. These facts were undisputed.
The Issue The issue in this case is whether the taxpayer owes use tax, penalty and interest on the purchase of tangible personal property under Chapter 212, Florida Statutes.
Findings Of Fact Iseaseal, LLC, a Delaware corporation, has its principal place of business at 695 East Main Street, Suite 103, Stamford, Connecticut. Its federal employer identification number is 06-1600000. On November 22, 2000, the taxpayer purchased a 1982, 72-foot, Hatteras CPMY yacht, named “Windcrest,” with hull number HATBN3270182 and 60 net tons of admeasurement. The purchase was made through a registered yacht broker. The yacht’s sales price was $725,000. On November 21, 2000, at the closing for the yacht, the taxpayer’s managing member, Paul Bakker, signed an Affidavit for Exemption of Boat Sold for Removal from the State of Florida by a Nonresident Purchaser. The yacht was also registered with the Coast Guard. However, to date, the yacht has not been registered or titled in Florida or any other U.S. state or territory. The taxpayer took possession of the yacht at Pier 66, in Fort Lauderdale, Florida, on November 22, 2000. Also, on November 22, 2000, the taxpayer was issued a 90-day decal known as a “cruising decal.” A cruising decal, with certain restrictions, exempts the purchase of a yacht from sales tax if the purchaser agrees to remove the yacht from Florida within 90 days after the date of purchase and does remove the purchased yacht. On December 28, 2000, the taxpayer removed the yacht from Florida to the Bahamas. The removal occurred within 90 days after the purchase date. As a result, the sale became exempt from Florida sales tax and the Petitioner did not pay Florida sales tax on the purchase of the yacht. On January 15, 2001, the taxpayer returned the yacht to Florida for repairs. A repair bill shows that the yacht remained at the repair facility for four and a half hours on January 16, 2001. The repair visit was within six months after the departure date of December 28, 2000. There was no evidence that the repair facility was registered with the Department of Revenue or how long the boat remained in Florida waters. The yacht also returned to Florida for repairs on May 21, 2001. Again there was no evidence that the repair facility was registered or how long the boat remained in Florida waters. The evidence did not establish that the tax exemption related to use of Florida waters for 20 days or repairing a boat in Florida apply. Since the purchase date, the Petitioner has leased mooring space in Florida. The Petitioner’s insurance policy also indicates that the yacht was moored in Florida and includes a Florida endorsement for such mooring. Additionally, the Petitioner reported to Connecticut’s Department of Revenue that the yacht was exempt from Connecticut sales tax because the yacht was purchased and berthed in the State of Florida. Based on copies of the bill of sale, closing statement, banking statements, credit card statements, mortgage documents, insurance agreements, mooring agreements, repair and parts receipts and a chronological listing of the yacht’s whereabouts since the date of purchase, the yacht has operated, and continues to operate, in Florida waters. Indeed, the yacht remained in Florida for more than 183 days from July 1, 2002 through December 31, 2002. Moreover, since September 11, 2002, the yacht has been moored or stored in Florida the majority of the time because the main users of the yacht lost interest in sailing the yacht and travel after the terrorist attack on the twin towers in New York City. The Department found that the Petitioner was liable for use tax on its use and storage of the yacht here in Florida. On May 5, 2004, the Department issued an enforcement billing to the Petitioner for use tax, penalty and interest, pursuant to Sections 212.05(1)(a)2 and 212.06(8), Florida Statutes. The Department assessed the Petitioner use tax and interest based on the sales price of the yacht. The Department also assessed the Petitioner a mandatory penalty equal to the tax because it returned the yacht to Florida within six months of the departure date. The Petitioner admitted that, through ignorance of Florida’s tax exemption law, he violated Chapter 212, but argues that the assessment of tax, interest and mandatory penalty is excessive. On May 24, 2004, the Department issued the Petitioner a Notice of Final Assessment for Sales and Use Tax, Penalty and Interest Due. The Notice set forth the basis for the assessment of tax, in the sum of $43,500, penalty, in the sum of $43,500, and interest, in the sum of $14,759.84, plus additional interest that accrues at the rate of $10.73 per day. The Department issued the Petitioner the Final Assessment because it returned the yacht to Florida within six months of the departure date and the yacht remained in Florida for more than 183 days in a calendar year. Since the Petitioner returned the yacht to Florida within 6 months of the purchase date and allowed the yacht to remain in Florida for more than 183 days in a calendar year, the Petitioner is liable for use tax, penalty and interest in the use and storage of the yacht in Florida.
Recommendation Based upon the Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the Department of Revenue enter a final order upholding the assessment of use tax, penalty and interest against the Petitioner. DONE AND ENTERED this 31st day of January, 2005, in Tallahassee, Leon County, Florida. S DIANE CLEAVINGER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 31st day of January, 2005. COPIES FURNISHED: Paul Bakker Iseaseal, LLC 695 East Main Street Stamford, Connecticut 06901 Carrol Y. Cherry, Esquire Assistant Attorney General Office of the Attorney General Revenue Litigation Section Plaza Level 01, The Capitol Tallahassee, Florida 32399-1050 Bruce Hoffman, General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 James Zingale, Executive Director Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100
Findings Of Fact Upon consideration of the pleadings, stipulations and oral representations of the parties, the following facts are found: During the years in question, petitioner was a corporation organized under the laws of the State of Delaware and was duly qualified and authorized to do business in the State of Florida. Petitioner is the parent corporation of a consolidated group of corporations, two of which (including petitioner) had Florida transactions or were otherwise separately subject to the Florida corporate income tax code. None of the other members of the consolidated group were subject to taxation in Florida. For the fiscal and calendar years 1972 through 1974, Petitioner filed federal and Florida income tax returns on behalf of the parent corporation, which included the returns for the consolidated group of corporations -- both the Florida and non- Florida members. Each member of the group consented to such consolidated filing and the component members of the Florida return group were identical to the members of the federal return group. Respondent issued its proposed deficiencies for the 1972 and 1973 tax years, ruling that for a parent corporation to include all of its subsidiary corporations for the purposes of consolidating its taxable income, it must be incorporated in Florida. For the years 1972, 1973 and 1974, respondent's Rule 12C-1.131(1), F.A.C., contained a definition of a "Florida parent company" as the term is used in the second sentence of Florida Statutes 220.131(1). This rule was amended on August 4, 1975, to delete said sentence defining the term "Florida parent company."
Recommendation Based upon the findings of fact and conclusions of law recited above, it is recommended that: petitioner pay the assessment of $3,786.33 for the year 1972, with interest, as stipulated by petitioner, the proposed assessment for the year 1973 in the amount of $112,281.06 be dismissed and set aside, and the petitioner's method of computing its corporate income tax for the year 1974 be upheld. Respectfully submitted and entered this 21st day of June, 1977, in Tallahassee, Florida. DIANE D. TREMOR Hearing Officer Division of Administrative Hearings Room 530 Carlton Building Tallahassee, Florida 32304 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 21st day of June, 1977. COPIES FURNISHED: M. Lewis Hall, Jr. Hall and Hedrick Greater Miami Federal Building 200 Southeast First Street Miami, Florida E. Wilson Crump, II Assistant Attorney General Department of Legal Affairs Tax Division, Northwood Mall Tallahassee, Florida 32303
