The Issue The issues are as follows: (a) whether Respondent failed to file surcharge tax reports and to remit surcharge tax in the amount of $55,478.84 for the audit period January 1, 1994, through July 28, 1999; (b) whether Respondent failed to file surcharge tax reports from August 1, 1999, and continuing to the present; (c) whether Respondent failed to pay penalties and interest in the amount of $29,325.62 for the period beginning August 1, 1999, through December 31, 1999; and, if so, (d) whether Petitioner should revoke Respondent's alcoholic beverage license.
Findings Of Fact Petitioner is the state agency charged with enforcing regulations related to alcoholic beverage licenses in Florida. At all times material to this proceeding, Respondent was licensed to sell alcoholic beverages for consumption on the premises of its establishment in Jacksonville, Florida. Respondent held License No. 26-0058. Alcoholic beverage licensees may elect one of two ways to calculate and pay the required surcharge tax on alcoholic beverages for consumption on the premises. First, the licensee may calculate, report, and pay the tax using the "sales method" based on retail sales records. Second, the licensee may calculate, report, and pay the tax using the "purchase method" based on wholesale records such as invoices from wholesale distributors. In this case, Respondent elected to calculate, report, and pay its surcharge tax using the "purchase method." Licensees who are authorized to sell alcoholic beverages for consumption on the premises are required to submit surcharge tax reports and to pay the tax for each month by the 15th day of the following month. Respondent submitted reports and paid the tax for the months of January and February 1999. The next time that Respondent submitted a report and paid the tax was for the month of November 1999. For a licensee who uses the "purchase method," Petitioner conducts an audit by comparing the licensee's sales history and payment history. The sales history is based on invoices for the purchase of alcoholic beverages from wholesale distributors who report their sales to each licensee every month. The payment history is based on the monthly surcharge tax reports filed by the licensee. Petitioner conducted a surcharge tax audit of Respondent's business for the period beginning January 1, 1994, and ending July 28, 1999. The audit began on August 1, 1999, and ended on August 17, 1999. The audit established that Respondent owed $31,809.72 in surcharge tax, penalties, and interest for the audit period. The Final Surcharge Audit Report established that Respondent would owe $55,478.84 in surcharge tax, penalties, and interest if Respondent did not pay the former amount within 30 days. Respondent did not make the required payment. Petitioner conducted a periodic surcharge tax audit for the period beginning on August 1, 1999, and ending on December 31, 2001. The audit was conducted on April 30, 2002, and ended on June 4, 2002. The second audit established that Respondent owed an additional statutory tax, penalties, and interest in the amount of $29,325.62. Respondent's corporate representative testified that Respondent stopped filing the surcharge tax reports after the initial audit because there was a discrepancy between Respondent's records (invoices for alcoholic beverages purchased and delivered) and the records that Petitioner relied upon to conduct the audit (wholesale distributors' invoices for alcoholic beverages sold to Respondent). Respondent did not present any documentation to support this testimony, which is not credited. Additionally, there is no competent evidence that Respondent's auditor advised Respondent to stop filing the reports until the discrepancy was resolved. Respondent's corporate representative also testified that Respondent gave away some alcoholic beverages to customers. According to the corporate representative, this occurred when Respondent charged the customers one fee at the door and allowed them to drink free of charge. Respondent did not present any documentation to support this testimony, which is not credited. Finally, the corporate representative agreed that Respondent owed the assessed surcharge tax. However, he objected to paying the statutorily assessed penalties and interest because they were more than Respondent would have owed if it had paid the tax when it was due. Respondent's argument in this regard is without merit.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That Petitioner enter a final order finding that Respondent owes $84,804.46 in tax, interest, and penalties and revoking its license to sell alcoholic beverages for consumption on the premises. DONE AND ENTERED this 20th day of November, 2002, in Tallahassee, Leon County, Florida. SUZANNE F. HOOD 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 20th day of November, 2002. COPIES FURNISHED: Sherrie Barnes, Esquire Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-2202 Captain Cynthia C. Britt Division of Alcoholic Beverages and Tobacco Department of Business and Professional Regulation 7960 Arlington Expressway Suite 600 Jacksonville, Florida 32211 Charles E. Scantling Corporate Representative Wackos, Inc., d/b/a Wackos 3484 Charmont Drive Jacksonville, Florida 32277 Peter Williams, Director Division of Alcoholic Beverages and Tobacco Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792 Hardy L. Roberts, III, General Counsel Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-2202
Findings Of Fact Modern Tool and Die, (MTD), is a privately held corporation engaged in manufacturing equipment. In 1965 they started the manufacture of bumper guards which required electroplating. They entered into agreements with MPC pursuant to which MTD erected two buildings adjacent to their plant which they leased to MPC in which to do the electroplating of the bumper guards. MPC is also a privately held corporation and there is no common ownership of these two companies. The two buildings built for MPC's occupancy were partitioned, compartmented and wired as desired by MPC and at its expense. Florida Power Corporation supplied electricity to the complex through the main transformer of MTD. In 1965 and to a lesser extent now, electricity rates per kilowatt-hour (kwh) were lowered with increased usage of electricity. Since both MTD and MPC are large users of electricity they obtain a cheaper rate if all electricity used is billed from the master meter serving MTD. Accordingly, and at the recommendation of the power company, additional transformers and meters were placed at the two buildings occupied by MPC and read monthly at or about the same time the master meter is read by the power company. The kw used at the two buildings is forwarded by MPC to MTD each month. The latter, upon receipt of the power company bill, computes the cost of the power per kwh and in turn bills MPC for its portion of the bill based upon the usage forwarded by MPC to MTD. Upon the commencement of this working agreement between these two companies in 1965 MPC, pursuant to an oral lease, has paid rent to MTD monthly at the rate of approximately $2,400 per month. It has also paid to MTD its pro rata cost for the electricity used each month. The rent is invoiced each month on the first of the month as in Exhibit 3 and paid by the 10th by MPC. Sales tax is added to the rent and remitted to DOR. Electricity usage is also invoiced by MTD to MPC on or about the 20th of the month and paid by MPC on or about the first of the following month. (Exhibit 4). Sales tax on the electricity used is paid by MTD to Florida Power Company who presumably remits this to DOR. During the 15 years these two companies have shared the cost of electric power they have been audited numerous times; the arrangement was made known to the auditors; and no auditor, prior to the present, suggested that the cost of electricity was part of the rent paid by MPC upon which sales tax was due. Notice of Proposed Assessment (Exhibit 1) in the amount of $9,747.34 is based upon the cost of electricity billed to MPC during the period of the audit December 1, 1976 through November 30, 1979 multiplied by 4 percent sales tax plus penalties and interest. The parties stipulated to the accuracy of this amount. They differ only as to whether the tax is owed.
Findings Of Fact The parties have agreed that there are no issues of fact to be determined in this matter, and that the relevant facts are set out in Paragraphs 3 and 4 of the Petition which was received in evidence at the hearing as Hearing Officer's Exhibit 1. This matter involves a determination for Florida corporate income tax purposes of the net income derived by the Petitioner in connection with the purchase, development, and sale of certain property in Dade County, Florida. Petitioner purchased the property prior to January 1, 1972, the date upon which the Florida Income Tax Code became effective. Petitioner expended, through a subsidiary corporation, $369,058 in developing the property. These expenditures also occurred prior to January 1, 1972. For Federal income tax purposes the Petitioner had deducted these expenditures as business expenses during the years that they were incurred. Petitioner sold the property during 1972. Because the Petitioner had deducted the expenditures as business expenses, the expenditures could not properly have been included in the base price of the property for Federal income tax purposes, and the net income for Federal tax purposes was computed by subtracting the original purchase price from the sale price. Since the Florida Income Tax Code was not in effect at the time the expenditures were made, the Petitioner received no Florida tax benefit for the expenditures. In computing the net income for Florida tax purposes derived from the sale, the Petitioner included the expenditures in the base price of the property, and calculated its net income by subtracting the sum of the purchase price of the property and the expenditures from the sale price. The Department, contending that the $369,058 should not have been included in the base price of the property, issued a deficiency assessment which reflected the net income from the sale of property as the difference between the sale price and the purchase price. Petitioner originally contended that it was entitled to add the amount that the property appreciated prior to January 1, 1972 to the base price of the property. Petitioner is no longer contesting the deficiency assessment based upon a disallowance of that addition to the base price of the property. The Department was originally contending that it was entitled to interest at 12 percent per annum calculated retrospectively from the due date of the alleged deficiency. The Department has agreed to abandon its effort to impose that rate of interest. The issue raised in this case is whether the development expenses incurred by the Petitioner and deducted for Federal income tax purposes as business expenses prior to 1972 can be subtracted from Federal taxable income for the purpose of determining taxable income derived from the sale for Florida tax purposes.
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
The Issue Whether the Department of Revenue should assess Heftler Construction Company ("Taxpayer") for Florida corporate income taxes on a claim that: Taxpayer realized a gain under the Florida Income Tax Code when an asset acquired in 1971 (on liquidation of a joint venture) was sold in 1975 in satisfaction of an outstanding debt; and Taxpayer's losses created by the subtraction of foreign source income cannot operate to create or increase the Florida portion of the net operating loss carryover.
Findings Of Fact Formation and Liquidation of Joint Venture; Subsequent Sale of Asset Taxpayer is a New Jersey corporation, authorized to transact business in Florida. Heftler Realty Company ("Realty") is a Florida corporation, and is a subsidiary of Taxpayer. Taxpayer, for all years material to these proceedings, filed consolidated income tax returns with the Internal Revenue Service of the United States ("IRS") . Pursuant to the applicable provisions of the Internal Revenue Code ("IRC"), Taxpayer included in the income and expenses of its consolidated income tax returns the income and expenses of its operations in Puerto Rico. Taxpayer, for all years material to these proceedings, timely filed with the Department consolidated income tax returns. In 1969, Realty formed a joint venture with a company known as GACL, Inc., for the purpose of developing real property Realty, in accordance with its Joint Venture Agreement with GACL, Inc., prior to 1971, contributed to the joint venture the following assets with the following cost basis to Taxpayer on the date of contribution: ASSET DATE CONTRIBUTED TO JOINT VENTURE COST BASIS TO TAXPAYER ON DATE CONTRIBUTED Cash 3-5-69 $250,000 Land 3-5-69 2,000,000 In 1971, prior to the effective date of the Florida Income Tax Code ("Florida Code"), Chapter 220, Florida Statutes, the joint venture between Realty and GACL, Inc., was liquidated effective as of January 1, 1971. Pursuant to the plan of liquidation, Realty received, in liquidation of the joint venture, the assets as described in the attached Appendix. These assets had a then cost basis to the joint venture as described in the Appendix. The assets acquired by Realty in liquidation of the joint venture were subject to the debts described in the Appendix. Pursuant to the plan of liquidation of the joint venture, Realty agreed to acquire the assets and assume the attendant debts (itemized in the Appendix) as of January 1, 1971. At the time of the liquidation of the joint venture, Realty had a cost basis for its interest in the joint venture of a negative $285,749. (Realty had a negative basis in the assets because it sustained joint venture losses in excess of its contributions to the joint venture.) The net gain to Realty as' reported upon the federal income tax return of Taxpayer, after adjustment for depreciation, as a result of the liquidation was $1,238,37l. In 1971, Realty reduced its tax basis in the assets acquired in the liquidation. This adjustment (reduction) in the tax basis of the assets acquired by Taxpayer occurred prior to the effective date of the Florida Code. An asset acquired by Realty in 1971, pursuant to the plan of liquidation of the joint venture, was conveyed by Realty in 1975 to a creditor of Realty in satisfaction of debt. After adjusting the tax basis of the asset, a comparison of its book basis (to the joint venture) with the tax basis to Taxpayer after liquidation, reflects the following: Adjusted Basis as of Jan. 1, Tax Basis to Tax- Book Basis to payer or After Joint Venture Liquidation Difference 1971 $4,466,764 $3,055,722 $1,411,042 Accumulated Depreciation to Date of Sale (587,212) (414,541) (172,671) Adjusted Basis $3,879,552 $2,641,181 $1,238,371 For purposes of its Federal Income Tax, Taxpayer reported the transaction as a sale and computed the gain thereon as follows: $3,951,708 Expense of Sale $2,713,337 3. Total Gain $1,238,371 Gross Sale Price Cost or Other Basis and (The difference between the gross sales price and the adjusted basis referred to in paragraph 13 of $72,156 is an increase to the price due to escrow funds deposited with a mortgagee and assigned to the purchaser of the asset by Realty without Realty receiving reimbursement.) In computing the Florida income tax, pursuant to the Florida Code, for the fiscal year ending July 31, 1976, Taxpayer took as a subtraction an adjustment on line 8, Schedule II, page 2 of its income tax return. The subtraction was in the amount of the capital gain received upon the sale of the asset received in liquidation in the amount of $1,238,371. Taxpayer subtracted the gain, contending that it was realized prior to the effective date of the Florida Code. When acquired, the asset received in liquidation had a cost basis to the joint venture Of approximately $4,500,000. When the asset was distributed to Taxpayer, after the reduction by Taxpayer to the tax basis referred to in paragraph 11, the basis to Taxpayer of the asset was approximately $3,000,000. The tax basis in the amount of $3,000,000 was evidenced by the debts assumed by Taxpayer upon the liquidation; such assumption of debt is referred to in paragraph 7. Department contends that the gain on the sale of the asset acquired in liquidation was both realized and recognized in 1975 when the property was sold in satisfaction of a debt; it has issued a proposed assessment on that basis. Taxpayer contends that the gain was realized by Taxpayer for federal income tax purposes prior to the effective date of the Florida Code and that only the recognition of the gain occurred after the effective date of the Florida Code. II. 1975 Loss Created by Subtraction of Foreign Source Income; Attempt to Carryover Loss to Subsequent Years Taxpayer, in addition to the adjustment referred to above, in reporting income for its fiscal years ending July 31, 1976, July 31, 1977, and July 31, 1978, deducted a net operating loss carry-forward which included an item of $335,037 from its 1975 return (fiscal year ending July 31, 1976) and an item of $916,030 for fiscal year ending July 31, 1978, represented by a subtraction resulting from income earned in Puerto Rico. The subtraction resulted in losses during each of such years, which losses were carried forward by Taxpayer to the next ensuing year. Department contends that the losses created by the subtraction of foreign source income cannot be carried over to subsequent years to determine income and has issued a proposed assessment on that basis. Taxpayer contends that it is not the intent of the Florida Legislature to tax income derived from sources outside the United States and that the effect of a denial of the subtraction will result in the taxation, by Florida, of foreign source income received by Taxpayer.
Recommendation Based on the foregoing, it is RECOMMENDED: That the Department's proposed assessment of Taxpayer for corporate income tax deficiencies be issued. DONE AND RECOMMENDED this 21st day of January, 1982, in Tallahassee, Florida. R. L. CALEEN, JR. 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 21st day of January, 1982.
The Issue The issue is whether Respondent's Certificate of Registration may lawfully be revoked.
Findings Of Fact The Department is an agency of the State of Florida pursuant to Section 20.21. The Department has the responsibility of administering the revenue laws of the state, including the laws relating to the imposition and collection of the state's sales and use tax, pursuant to Chapter 212. Spin and Marty is a Florida corporation doing business as Crabbit's Pub whose principal address is 10513 Spring Hill Drive, Spring Hill, Florida. Spin and Marty is a "dealer" as that term is defined in Chapter 212. It holds a certificate of registration issued by the Department that is numbered 37-8012056472-7. Spin and Marty initially registered with the Department on January 30, 1992. The sales and use tax collected by a registrant, such as Spin and Marty, become the property of the state at the moment they are collected. A registrant is an agent of the state when collecting the sales and use tax. Spin and Marty was required to remit the sales and use tax collected to the state on or before the 20th of each month. From November 1999 until December 2003, Spin and Marty filed no returns and paid no sales and use taxes to the Department. Also, Spin and Marty, in November 2005, did not file a return or pay sales and use taxes. In a letter dated November 20, 2001, Spin and Marty was notified that the Department was going to audit its records. The Department received no response. In a letter dated April 3, 2002, Spin and Marty was again asked to contact the Department's auditor so a mutually agreed date could be set to conduct the audit. The Department received no response to this letter. The Department thereafter conducted an audit. The result of the audit was a notice of proposed assessment which stated that Spin and Marty owed $146,044.74 in back taxes, penalties, and interest through September 4, 2002. Neither Spin and Marty, nor its principal, Mr. McNiff, contested the audit findings. A letter from the Department addressed to "Dear Taxpayer," dated August 5, 2002, was received by Spin and Marty. This letter stated that the Department wished to arrange a meeting in its office for the purpose of reviewing the Notice of Intent to Make Audit Changes dated June 18, 2002. Spin and Marty did not avail itself of this opportunity. Six tax warrants were filed with the Clerk of Court in Hernando County against Spin and Marty. These warrants indicate that as of the day of the hearing Spin and Marty owed $175,299.93 to the Department. This amount includes the actual tax due, or in the case of warrant 1000000029678, the estimated tax due, penalties, interest, and filing fees. Interest continues to accrue. Pursuant to notice from the Department, on July 31, 2006, Theodore Faugno, who works for Mr. McNiff's CPA, and Mr. McNiff met with Debra B. Smith, a Revenue Specialist III with the Department. Neither Mr. McNiff nor Mr. Faugno contacted Ms. Smith following the meeting. This resulted in the Administrative Complaint seeking to revoke Respondent's Certificate of Registration. Mr. McNiff related that during the period he failed to submit returns and remit the taxes then due, he experienced adverse health issues and the unplanned birth of a baby. However, he was able to operate Spin and Marty and make a profit. It is indubitably concluded that he could have also reported and remitted the tax due, had he been so inclined.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue revoke Certificate of Registration No. 37-8012056472-7, held by Spin and Marty, Inc., d/b/a Crabbit's Pub. DONE AND ENTERED this 7th day of February, 2007, in Tallahassee, Leon County, Florida. S HARRY L. HOOPER 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 7th day of February, 2007. COPIES FURNISHED: Warren J. Bird, Esquire Office of the Attorney General The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050 Jarrell L. Murchison, Esquire Office of the Attorney General The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050 J. Bruce Hoffmann, General Counsel Department of Revenue 204 Carlton Building Post Office Box 6668 Tallahassee, Florida 32314-6668 James McNiff Spin and Marty, Inc., d/b/a Crabbit's Pub 10050 Sleepy Willow Court Spring Hill, Florida 34608 James McNiff Crabbit's Pub 10513 Spring Hill Drive Spring Hill, Florida 34608-5047 James Zingale, Executive Director Department of Revenue The Carlton Building, Room 104 Tallahassee, Florida 32399-0100
The Issue The issue is whether Petitioner is liable for the sales and use tax assessment issued by Respondent on February 21, 1995.
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: In this proceeding, Respondent, Department of Revenue (DOR), has issued a proposed sales and use tax assessment in the amount of $24,546.54, plus $6,640.12 in penalties, plus interest from the date of the assessment, against Petitioner, Florida Truck Dock Company (Petitioner or taxpayer). As of March 20, 1997, the assessment totaled $55,195.27, and it continues to increase by $8.07 each day. The assessment constitutes taxes, penalties, and interest allegedly due from Petitioner for various materials and supplies purchased by Petitioner for use in the performance of real property contracts for Petitioner's customers. In its response to the assessment, Petitioner denied that it owed the money. Petitioner's business activities consisted primarily of purchasing truck loading dock equipment from suppliers, principally Kelly Company, Inc. (Kelly), and then installing such equipment as an improvement to real estate. Its records indicate that purchased equipment was generally brought into Florida and installed in real property in the state under a contract whereby parts and labor were furnished for one lump sum contract price. The foregoing contracts were Class A or lump sum contracts within the meaning of Rule 12A-1.051(2)(a), Florida Administrative Code. Class A contracts are considered contracts for the improvement of real estate, not contracts for the resale of tangible personal property. In addition, when the equipment was purchased, Petitioner had not issued resale certificates to its vendors. Under these circumstances, Petitioner was properly treated as an end-user of the equipment in question and owed use taxes on all such purchases of tangible personal property. This controversy began on March 30, 1992, when DOR issued a Notification of Intent to Audit Books and Records of the taxpayer in conjunction with a routine audit. The notice requested that Petitioner make available various corporate records pertaining to its sales and use tax and intangible tax liability. However, only the sales and use tax is in issue here. DOR later advised the taxpayer that the audit period would run from March 1, 1987, through February 29, 1992, and that instead of a detailed audit, only a three-month sampling of the full audit period would be necessary. An initial audit revealed that Petitioner was entitled to a refund. None was given, however, because of information supplied by an employee of the taxpayer regarding the possible destruction and alteration of certain records by the taxpayer, and the auditor's conclusion that a three-month sampling of the records was not representative for the full five-year audit period. In addition, the auditor concluded that the results of the sample period were not reasonable. For these reasons, the scope of the audit was expanded. The auditor then requested, among other things, that copies of all sales (summary) journals for the entire five-year period be produced. Although Petitioner has always contended that these journals were merely "commission" journals for transactions between its vendors and customers, the auditor's finding that they are records of cash transactions is consistent with the language on the face of the journals, referring to "deposits" and "total deposits." Further, a comparison of the journals with Petitioner's own bank statements confirms this finding. At least twelve months of the records were missing, and the taxpayer agreed to recreate the missing records. Once a copy of all journals (both original and recreated) was produced, the auditor tested their validity and then made various audit adjustments, which are reflected on Schedule A-2 of Exhibit 5. In those instances where inadequate cost price information concerning equipment purchases was provided by the taxpayer, the auditor properly used estimates in making his adjustments. The tax liability for each taxable transaction was recorded by the taxpayer under Account 367 on the sales journals. The auditor then examined the source documents (original invoices) to verify the accuracy of the recorded amounts. These numbers were then compared with the taxes paid by the taxpayer on its monthly tax returns filed with DOR. This comparison produced a deficiency which represents approximately 75 percent of the total assessment. However, in those instances where Petitioner collected sales tax from its customers, and remitted the same to DOR, Petitioner was not assessed with a tax for those same items. A sampling of the audit period established that Petitioner also had a number of lump-sum contracts with various governmental customers on which it neither paid taxes to the vendor when the equipment was purchased, nor did it collect taxes from the end-user when the equipment was resold. Thus, it was responsible for the use taxes on these transactions. The deficiency is detailed on Schedule B-3 of the final audit report (Exhibit 6), and it accounts for approximately 14 percent of the total assessment. The remaining part of the assessment is related to four miscellaneous transactions which are unrelated to the sales journals. Two of the transactions occurred during the short period of time when the service tax was in effect in 1987, while the remaining two relate to small purchases of equipment and supplies by the taxpayer for its own consumption. There was no evidence that the taxpayer paid the taxes due on these transactions. DOR met with the taxpayer, its accountant, and its original counsel on various occasions in an effort to obtain more documentation favorable to the taxpayer's position. In most cases, the taxpayer refused to provide more records. At one meeting, however, the taxpayer produced additional source documents (invoices) that appeared to be altered from the original invoices previously given to the auditor. These are shown in Exhibit 7 received in evidence. When asked by the auditor for copies of the same invoices sent to customers so that the discrepancy could be resolved, the taxpayer refused to comply with this request. During the audit process, the taxpayer contended that its primary supplier, Kelly, had already paid taxes on a number of the transactions. No documentation was produced, however, to support this contention. It also complained that there was bias on the part of DOR's auditor. As to this contention, the record shows that the auditor had no relationship with the taxpayer prior to this audit, and for the intangible personal property tax, the auditor's field work actually resulted in a refund for Petitioner. Finally, the taxpayer contended that rather than using the originally supplied records, the auditor should have used Petitioner's recreated or altered records in making the audit adjustments. This latter contention has been rejected.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department of Revenue enter a final order sustaining its original assessment against Petitioner. DONE AND ENTERED this 13th day of November, 1998, in Tallahassee, Leon County, Florida. DONALD R. ALEXANDER 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 13th day of November, 1998. COPIES FURNISHED: Linda Lettera, Esquire Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 Jeffrey M. Dikman, Esquire Department of Legal Affairs The Capitol, Tax Section Tallahassee, Florida 32399-1050 Benjamin K. Phipps, Esquire Post Office Box 1351 Tallahassee, Florida 32302 L. H. Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100
Findings Of Fact Petitioner, Associated Coca-Cola Bottling Company, Inc., is a Delaware corporation duly authorized to transact business in the State of Florida, having an office in Daytona, Florida, and doing business in Florida itself, or through its wholly owned subsidiaries. (Petition) Petitioner, on a consolidated basis with its subsidiaries, duly filed its Florida corporation income tax returns for the fiscal years ending December 31, 1977, and December 31, 1978. (Petition) The Florida Department of Revenue, after audit of these returns, alleged a deficiency in both years totaling $1,247.00. In both fiscal years in question and pursuant to Section 220.13(1)(b) 3, Florida Statutes, a "New Jobs Credit" of 100,000 was taken by Petitioner for each year. During each of such years the amount of wages and salaries paid or incurred by Petitioner within the State of Florida for each of the taxable years in question exceeded $100,000, but the maximum credit applicable pursuant to the U. S. Internal Revenue Code is $100,000, such limitation being adopted in Section 220.13(1)(b)3, Florida Statutes. (Petition, Exhibit 1) Respondent's audit of Petitioner's returns resulted in adjustments producing the alleged tax deficiency by reducing Petitioner's deductions for "New Jobs Credit" under Section 220.13(1)(b)3, Florida Statutes, to $92,396.00 in 1977 and $51,742.00 in 1978. The reduction of these deductions was based upon application of Respondent's Rule 12C-1.13(1)(b)3, Florida Administrative Code, which limits the deduction for salaries and wages paid in creating new jobs in Florida to a prorata amount of the total expended in all states for which credit is given under Section 280C of the Federal Internal Revenue Code. Since Petitioner expended $222,437.00 in such wages and salaries in Florida in 1977, with a total of $240,759.00 being expended by it everywhere, it was allowed only some ninety-two percent of the federal maximum of $100,000 for New Jobs Credit as a deduction on its tax return. Similarly, in 1978, it was allowed about fifty-one percent since its Florida expenditures amounted to $221,656.00 for new jobs, and a total everywhere, of $428,386.09. (Exhibit 1)
Recommendation That the petition herein be DISMISSED and that the tax deficiency against Petitioner be appropriately enforced. DONE AND ENTERED this 23rd day of March 1981, in Tallahassee, Florida. THOMAS C. OLDHAM Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 FILED with the Clerk of the Division of Administrative Hearings this 23rd day of March 1981. COPIES FURNISHED: E. Wilson Crump, II, Esquire Assistant Attorney General Department of Legal Affairs The Capitol Tallahassee, Florida 32301 David C. Latham, Esquire Post Office Box 17711 Orlando, Florida 32860 Randy Miller, Executive Director Department of Revenue 102 Carlton Building Tallahassee, Florida 32301
The Issue Whether this cause should be dismissed for Petitioner's failure to comply with Section 120.80(14)(b)3., Florida Statutes.
Findings Of Fact Petitioner is contesting an assessment of taxes, pursuant to an audit conducted by Respondent Department of Revenue. The total amount of the assessment was $32,312.24. Following the audit, in a letter to the Department's auditor dated April 17, 2006, Petitioner's counsel stated that taxes "in the amount of $5,744.80 is something [Petitioner] would be obligated to pay under the laws of the State of Florida, and as such, they are willing to do so. They would be willing to pay interest due on this money."1/ This statement constitutes a clear admission that Petitioner owes the stated amount of the tax, $5,744.80, plus interest that accrues daily. Petitioner's Memorandum makes the un-sworn statement that: At the time the parties met to discuss the assessment with the representative of the Department of Revenue, Martha Watkins, they offered to pay $5,744.80 of the taxes but were informed it was part of the $32,312.24, and they could either pay it all or contest it. At all times material hereto the petitioners have stood ready to pay the $5,744.80. On April 17, 2006, we wrote a letter to Martha Watkins making this offer for the second time. On August 17, 2006, we again wrote to the Department of Revenue attaching our letter of April 17, 2006, again making this offer. At no time was a response received to either letter. The August 17, 2006, letter alluded to in Petitioner's Memorandum is not of record and neither a copy of that letter, nor an affidavit of its contents, has been submitted by either party. At no time has Petitioner asserted that any amount of tax money was unequivocally tendered to Respondent. No affidavit to that effect has been filed in this case. The Second Affidavit of Martha Watkins, submitted with the Department of Revenue's timely Memorandum states, in pertinent part: I conducted the audit of C AND C MECHANICAL CONTRACTORS, INC., from which arose the challenged assessment and this controversy. During the course of the audit, and subsequent communication with C AND C MECHANICAL CONTRACTORS, INC., regarding the audit and assessment of taxes and interest, C AND C MECHANICAL CONTRACTORS, INC., made at least one settlement offer, that was unacceptable, and was rejected by the Department as such. At no time did C AND C MECHANICAL CONTRACTORS, INC., unequivocally tender to me, or unequivocally offer to tender to me, the uncontested tax and applicable interest, and at no time did I refuse to accept any payment of taxes. On September 21, 2006, a Request for Administrative Hearing was filed with the Department of Revenue. On September 28, 2006, the Executive Director of the Department of Revenue entered an Order Dismissing the Petition with Leave to Amend. That Order reads, in pertinent part: On September 21, 2006, the Florida Department of Revenue received a "Request for Administrative Hearing" from Petitioner, C & C Mechanical Contractors. While the document clearly is a request for hearing, the petition does not state what the Petitioner is disputing. A record search shows that at least one Notice of Proposed Assessment was issued by the Department on June 15, 2006 to this Petitioner. It is impossible to determine from the petition whether this proposed assessment is being challenged. However, because this request was sent within the applicable time frame to dispute the Notice of Proposed Assessment, the Department will treat it as such. As required by law, the notice stated that a formal protest for an administrative hearing had to be received in the Office of the General Counsel within sixty days after the assessment became final and had to be in compliance with chapter 120, Florida Statutes. The petition fails to meet the requirements contained in chapter 120, Florida Statutes and Uniform Rule 28- 106.201, Florida Administrative Code, the appropriate rule for use in filing a petition requesting a hearing involving disputed issues of material fact. A copy of the appropriate rule is provided with this order. Specifically, the petition does not contain: (1) a statement of when and how the Petitioner received notice of the agency decision; (2) all disputed issues of material fact. If there are none, the petition must so indicate; (3) a concise statement of the ultimate facts alleged, including the specific facts the Petitioner contends warrant reversal or modification of the agency's proposed action; (4) a statement of the specific rules or statutes the Petitioner contends require reversal or modification of the agency's proposed action, and (5) a statement of the relief sought by the Petitioner, stating precisely the action the petitioner wishes the agency to take with respect to the agency's proposed action. Because of these deficiencies, Petitioner's documentation must be dismissed. IT IS ORDERED: The petition for hearing filed by Petitioner is DISMISSED. Such dismissal is without prejudice to Petitioner to amend the petition to provide the information listed above. . . . On October 11, 2006, the Amended Petition for Administrative Hearing was filed with the Department of Revenue. That Amended Petition stated, in pertinent part: 1. The Petitioner received a certified letter dated June 15, 2006, stating taxes were due and owing in the amount of $32,312.24. This amount included $5,774.80 in fabrication cost taxes which the Petitioner does not object too [sic]. The balance of the $32,312.24 was for taxes on items sold to non-taxable entities. The Petitioner would object to these taxes and gives as grounds the following: Items sold to non-taxable entities are not subject to the Florida Tax Code. The department made a determination the items sold to the non-taxable entities were taxable stating the contractor, in this case the Petitioner, was the end user. Florida Tax Code states in part ". . . a determination whether a particular transaction is properly characterized as an exempt sale to a government entity or a taxable sale to a contractor shall be based on the substance of the transaction rather than the form in which the transaction is cast." The department "shall adopt rules that give special consideration to factors that govern the status of the tangible personal property before its affixation to real property." The Department of Revenue has adopted a rule which is in violation of the incident [sic] of legislature and contrary to Florida Statute 212.08.2/ (Emphasis supplied). The Amended Petition constitutes a clear admission that the $5,744.80 portion of the taxes due under the audit were both uncontested and owed, as of October 11, 2006. The first Affidavit of Martha Watkins, filed November 28, 2006, in support of the pending Motion to Dismiss, states, in pertinent part: I am a [sic] sui juris and otherwise competent to testify in this matter. I am employed by the Florida Department of Revenue in the position of Tax Auditor III. I am familiar with the accounts, accounting methods, and maintenance of records at the Florida Department of Revenue for sales tax, interest, and penalties. I am authorized by the Department of Revenue to make affidavit regarding the payment status of sales taxes, interest and penalties relative to registered Florida dealers. I have reviewed, and have personal knowledge of the accounts of the Florida Department of Revenue regarding tax payment of C&C MECHANICAL CONTRACTORS, INC., a Florida corporation that has in the past been issued a Certificate of Registration by the Department of Revenue. According to the records of the Department of Revenue, as of November 27, 2006, C&C MECHANICAL CONTRACTORS, INC., has not paid any sums to the Department of Revenue against the assessed outstanding balance of sales tax, interest or penalties, since prior to April 16, 2006.
Recommendation Based on the foregoing Findings of Facts and Conclusions of Law, it is RECOMMENDED that the Florida Department of Revenue enter a final order dismissing the Amended Petition. DONE AND ENTERED this 27th day of February, 2007, in Tallahassee, Leon County, Florida. S ELLA JANE P. DAVIS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 27th day of February, 2007.
