The Issue Does Petitioner owe Respondent sales tax for customer charges associated with the inspection/recertification of fire extinguishers, which activities were reported on invoices involving charges for parts, maintenance, recharge of fire extinguishers, provision of new fire extinguishers, pick-up and delivery, and maintenance, where the latter categories of activities included the payment of sales tax?
Findings Of Fact Petitioner does business in northeast Florida. Principally it inspects fire extinguishers at customer locations that must undergo inspection on an annual basis in accordance with Chapter 633, Florida Statutes. Petitioner also sells and services fire extinguishers to and for its customers. When performing an inspection, Petitioner's employee removes the fire extinguisher from its location, makes sure the powder in the fire extinguisher floats, checks the pressure gauge, makes sure that the pressure is acceptable in the extinguisher and examines the hose attached to the fire extinguisher; if these items are in good operating order the fire extinguisher is returned to its location and certified as operable for the upcoming period. The certification is evidenced by a tag placed on the fire extinguisher. That tag reflects a serial number, the name of the person who inspected and certified the extinguisher as acceptable, the permit number for the certifying person, and the kind of fire extinguisher that is under inspection. Beyond that point, if someone wishes to verify the status of the fire extinguisher that has been found acceptable, the tag evidences that acceptability. For the basic inspection, Petitioner charges its customers a fee depending on the number of fire extinguishers that are being inspected at a given location. If there is a problem with one of the fire extinguishers that has been inspected, Petitioner's employee will tell the customer the nature of the service that needs to be performed to assure that the fire extinguisher is in proper operating condition. In the event that a fire extinguisher has a problem which the customer wishes fixed, that fire extinguisher is removed from the customer's location and brought back to Petitioner's facility to be repaired. When the defective fire extinguisher is removed, an operable substitute fire extinguisher is provided to the customer pending repairs to the defective fire extinguisher. In effecting repairs, the customer is charged the cost of tangible items involved with the repair and for labor costs associated with the repair. The records which Petitioner maintained in the period in question in this case, reflect charges for the inspections of customer fire extinguishers and other activities and charges but not in the detail that has been set forth in the preceding paragraphs. The records are sales invoices. The invoices produced at the hearing are a fair representation of the experience associated with all invoices under question. In this case, Respondent intends to impose sales tax, penalties, and interest and an affiliated tax charge referred to as the Chartered Transit Systems Assessment, in relation to those items invoiced under the categories fire extinguisher inspected/fire extinguisher recertification/automatic fire extinguishing system inspected. These descriptions all refer to the process of fire extinguisher inspection. The invoices that are examples of this process show that sales tax and the associated charter tax have been collected for those other charges made by the Petitioner to its customers. Petitioner sought the advice of a CPA in establishing the manner in which its invoices reflect the collection of sales tax. This advice was sought through Mr. Schaefer. The audit period for which the Respondent has assessed additional tax, penalties, and interest is November 1, 1989 through October 31, 1994. The intent to impose tax penalties and interest resulted from an audit performed by the Respondent on Petitioner's business. An audit report was rendered on October 2, 1995; Petitioner objected to the findings in that audit report. Respondent affirmed the assessment in a Notice of Decision dated July 22, 1996. Petitioner sought reconsideration of that notice of decision. Respondent again upheld the assessment through its Notice of Reconsideration dated April 18, 1997. On June 19, 1997, Petitioner petitioned for formal hearing to contest the decision to impose the tax penalties and interest. The sample invoices by their terms state the following: FIRE DEFENSE CENTERS Invoice 3919 Morton Street 49217 JACKSONVILLE, FLORIDA 32217 (904) 731-0244 DATE ORDER NO 4/12/91 1613804 BR TO: Ramada Inn 6237 Arlington Expressway prices per contract Jacksonville, Fl 32211 Quantity Description Unit Price Total 24 Fire extinguisher inspected 65.00 2 5 lb. abc maintenance 20.00 3 Fire extinguisher inspected-unserviceable 9.00 3 5 lb. abc new fire extinguisher 114.00 2 10 lb. abc maintenance 28.00 2 Valve repair 10.40 1 Handle repair 3.95 1 Syphon tube 3.10 3 O rings 2.70 7 Pick up and delivery 8.00 After 15 days pay $282.09 264.15 QUADRUPLICATE Thank You Tax on 199.15 12.94 277.09 FIRE DEFENSE CENTERS Invoice 3919 Morton Street 49210 JACKSONVILLE, FLORIDA 32217 (904) 731-0244 DATE ORDER NO 4/12/91 1148265 JW TO: Clark Trailer Sales Serv. Mgr Linden Beane 5201 W. Beaver St prices per contract Jacksonville, Fl 32236 Quantity Description Unit Price Total 10 Fire extinguisher recertification 42.00 1 10 lb. abc hydrotest and recharge 38.00 1 Pick up and delivery 80.00 Tax on 38.00 2.47 82.47 After 15 days pay $87.47. QUADRUPLICATE Thank You FIRE DEFENSE CENTERS Invoice 3919 Morton Street JACKSONVILLE, FLORIDA (904) 731-0244 32217 49208 DATE ORDER NO TO: 4/12/91 1851144 JW Walmart 6767 103 rd St Jacksonville, Fl 32216 annual inspection prices per contract Quantity Description Unit Price Total 25 Fire extinguisher recertification 75.00 4 5 lb. abc maint 40.00 2 5 lb. abc recharge 20.00 2 Valve repair 8.90 3 Locking pin 6.00 1 Syphon tube 3.10 2 O ring 1.85 6 Pick up and delivery 8.00 After 15 days pay $173.56 162.85 Tax on 87.85 5.71 168.56 QUADRUPLICATE Thank You FIRE DEFENSE CENTERS Invoice 3919 Morton Street 49203 JACKSONVILLE, FLORIDA 32217 (904) 731-0244 DATE ORDER NO 4/12/91 1592203 EF TO: Poultry Health Service 5695 Stuart Ave prices per contract Jacksonville, Fl 32205 Quantity Description Unit Price Total 20 Fire extinguisher inspected 65.00 1 Fire extinguisher inspected-unserviceable 3.00 1 5 lb. abc maintenance 10.00 1 5 lb. abc recharge 10.00 1 2 3/4 lb. abc complete maintenance 8.00 New 10 lb. abc fire extinguisher 58.00 Valve repair 8.90 Syphon tube 3.10 O ring 2.45 4 Pick up and delivery 8.00 1 Fire extinguisher installed 7.50 183.95 Tax on 118.95 7.73 191.68 After 15 days pay $ 196.98 QUADRUPLICATE Thank you FIRE DEFENSE CENTERS Invoice 3919 Morton Street 49202 JACKSONVILLE, FLORIDA 32217 (904) 731-0244 DATE ORDER NO 4/12/91 1363891 PV TO: Holiday Inn 14670 Duval Rd (I 95 & Airport) Dan Zuhowski Jacksonville, Fl 32218 741-4404 Quantity Description Unit Price Total 4 30 lb. automatic fire extinguishing 225.00 system inspected 1 10 lb. automatic fire extinguishing system inspection 1-hood 1 10 lb. automatic fire extinguishing 50.00 system inspected 2-hood 11 Fusible links 93.50 2 10 lb. abc maintenance F/X's 24.00 418.40 Tax on 143.40 9.32 427.72 After 15 days pay $436.30 QUADRUPLICATE Thank You 10 lb. CO2 maintenance 12.00 O rings 1.90 Pick up and delivery 12.00 Standing alone, the invoices do not sufficiently distinguish which, if any, of the fire extinguishers being inspected are receiving other attention, or whether the invoices refer to an entirely different set of fire extinguishers than those that had been inspected. The distinctions described in prior paragraphs between the inspection process and other business pursuits have been based upon extrinsic evidence, outside the invoices, as offered by Louis Schaefer, Petitioner's owner. More specifically, Mr. Schaefer's description of invoice 49217 concerning the entries on that document is extrinsic evidence concerning the meaning of that invoice. Again without the extrinsic evidence one cannot reasonably ascertain the relationship, if any, between the fire extinguishers inspected and other activities involving fire extinguishers for which charges were made on the invoice. Moreover, without extrinsic evidence one cannot ascertain the number of fire extinguishers for which Petitioner has replaced or repaired parts, performed other forms of maintenance, etc., aside from the inspection. The invoice alone does not make clear which of the fire extinguishers described in the inspection line received no tangible personal property which was incorporated or attached to a repaired item, as opposed to those that may have had tangible personal property incorporated into or attached to a fire extinguisher that had been inspected. The same problem exists with other sample invoices. Related to invoice 49217, Mr. Schaefer points out that twenty-four fire extinguishers were inspected at a charge of $65.00. Two five-pound fire extinguishers needed maintenance. That maintenance was the recharge of the two five-pound fire extinguishers at the cost of $20.00. Three fire extinguishers were found to be unserviceable following the inspection. For the determination of the unservicability the customer was charged $9.00. The next line refers to the provision of three five-pound abc new fire extinguishers. The charge for the new fire extinguishers was $114.00. Mr. Schaefer explained that the new fire extinguishers were sold to the customer to replace the unserviceable fire extinguishers. Two fire extinguishers needed valve repairs. The invoice shows a $10.40 charge for the valve repairs. One of the fire extinguishers had a bent handle that had to be replaced. The charge on the invoice for the handle repair was $3.95. One fire extinguisher had a siphon tube repair. The invoice reflects that the charge for that repair was $3.10. Three O rings were replaced for a charge to the customer of $2.70. Mr. Schaefer explains that seven fire extinguishers were picked up and delivered for a cost of $8.00 that was in relation to removal, repairing, and returning fire extinguishers and hanging them back in place at the customer's business. Mr. Schaefer pointed out what can be ascertained by a mathematical exercise, that is, that all charges, with the exception of the $65.00 for inspecting twenty-four fire extinguishers, had sales tax imposed as part of the charges. That tax is in relation to the $199.15 for items other than inspection of the fire extinguishers. The total of the tax is $12.94. Mr. Schaefer explained that the inspection process itself involved an estimate of whether the fire extinguisher was serviceable and whether it met the date codes required. Further, in relation to invoice 49217, Mr. Schaefer explained the total number of fire extinguishers that received some service or were replaced. The two five-pound abc maintenance for $20.00 referred to two of the twenty-four inspected. The three fire extinguishers inspected unserviceable and the three five-pound abc new fire extinguishers refers to the removal of three fire extinguishers and replacement of those three fire extinguishers with new ones. The total of the two five-pound maintained and the three replaced brings the count to a subtotal of five fire extinguishers of the twenty-four inspected. The reference to two ten-pound abc maintenance brings the total to seven fire extinguishers repaired or replaced. The two valve repairs, the handle repair, and the O rings described in the invoice, according to Mr. Schaefer, were in relation to the two five-pound abc maintenance and the two ten-pound abc maintenance mentioned earlier in the invoice. The seven pick-up and delivery refers to three fire extinguishers that had to be replaced as unserviceable by the provision of new fire extinguishers and four fire extinguishers that could be repaired and returned to the customer by Mr. Schaefer's explanation. Therefore, seven of the twenty-four fire extinguishers inspected needed to be repaired or replaced. In summary, without Mr. Schaefer's explanation one can not reasonably discern the meaning of invoice 49217, whether the fire extinguishers inspected were part of the fire extinguishers repaired or replaced, and beyond that consideration how many fire extinguishers were repaired and replaced.
Recommendation Upon consideration of the facts found and the conclusions of law reached, it is, RECOMMENDED: That a final order be entered upholding of sales tax, penalty, and interest, and related Chartered Transit System Assessment of tax, penalty, and interest for the audit period November 1, 1989, through October 31, 1994. DONE AND ENTERED this 3rd day of August, 1998, in Tallahassee, Leon County, Florida. 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 3rd day of August, 1998. COPIES FURNISHED: Eric J. Taylor, Esquire Department of Legal Affairs The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050 William B. McMenamy, Esquire Donahoo, Donahoo, and Ball, P.A. 50 North Laura Street, Suite 2925 Jacksonville, Florida 32202 Marie A. Mattox, Esquire Mattox and Hood, P.A. 310 East Bradford Road Tallahassee, Florida 32303 Linda Lettera, General Counsel Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100 Larry Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100
