The Issue The issue is whether Petitioner is liable for sales and use taxes, penalties, and interest and, if so, how much.
Findings Of Fact Petitioner operated a bar and grill in Punta Gorda that served beer, wine, liquor, and food at retail. In the course of business, Petitioner collected tax from the customers. Petitioner reported to Respondent sales tax collections for May 1996, November 1996, March 1997, November 1997, and December 1997. In connection with these collections, Petitioner remitted to Respondent seven checks representing the net tax due Respondent. These checks totaled $6700.64. The bank on which the checks were drawn dishonored them. The remittance of net sales tax proceeds by payment through checks that are later dishonored implies a fraudulent, willful intent to evade the payment of these sums. Respondent has issued five warrants concerning the unremitted taxes, penalties, and interest. Warrant 953620064 shows that Petitioner owes $1171 in sales tax remittances for the five months from July through November 1995. With penalties and interest, the total due on this warrant, through June 5, 1998, is $1832.37. Interest accrues after June 5 at the daily rate of $0.35. Warrant 467049 shows that Petitioner owes $2940.25 in sales tax remittances for the following months: April 1996, October 1996, December 1996, and January 1997. Petitioner purportedly paid each of these remittances with five (two in January) checks that were later dishonored. With penalties, including the 100 percent penalty for fraud, and interest, the total due on this warrant, through June 5, 1998, is $7480.12. Interest accrues after June 5 at the daily rate of $0.95. Warrant 971680037 shows that Petitioner owes $1301.85 in sales tax remittances for the following months: December 1995, June 1996, July 1996, September 1996, November 1996, and February 1997. With penalties and interest, the total due on this warrant, through June 5, 1998, is $2669.69. Interest accrues after June 5 at the daily rate of $0.43. Warrant 471481 shows that Petitioner owes $2912.48 in sales tax remittances for October and November 1997, for which Petitioner made remittances with two dishonored checks. With penalties, including the 100 percent penalty, and interest, the total due on this warrant, through June 5, 1998, is $6751.49. Interest accrues after June 5 at the daily rate of $0.95. Warrant 989840034 shows that Petitioner owes $8077.76 in sales tax remittances for the following months: August 1997, September 1997, December 1997, January 1998, and February 1998. With interest, the total due on this warrant, through June 5, 1998, is $8285.21. Interest accrues after June 5 at the daily rate of $2.65. Totaling the five warrants, Petitioner owes a total of $27,018.88 in taxes, penalties, and interest through June 5, 1998, and $5.33 per day for each ensuing day until the amount is paid.
Recommendation It is RECOMMENDED that the Department of Revenue enter a final order determining that Petitioner owes $27,018.88 in taxes, penalties, and interest through June 5, 1998, and $5.33 per day for each ensuing day until the amount is paid. DONE AND ENTERED this 10th day of July, 1998, in Tallahassee, Leon County, Florida. ROBERT E. MEALE 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 10th day of July, 1998. COPIES FURNISHED: John N. Upchurch Nicholas Bykowsky Assistant Attorneys General Office of the Attorney General The Capitol, Tax Section Tallahassee, Florida 32399-1050 Judith Crown, President Tombstone, Inc. Suite P-50 1200 West Retta Esplanade Punta Gorda, Florida 33950 Linda Lettera, General Counsel Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668 Larry Fuchs, Executive Director Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668
Findings Of Fact At the time and place scheduled for final hearing, nobody appeared on behalf of petitioner and no evidence was adduced.
Recommendation It is, accordingly recommended that respondent dismiss petitioner's request for a formal administrative proceeding. RECOMMENDED this 19th day of November, 1991, in Tallahassee, Florida. ROBERT T. BENTON, II Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 19th day of November, 1991. COPIES FURNISHED: J. Thomas Herndon, Executive Director Department of Revenue 104 Carlton Building Tallahassee, FL 32399-0100 Vicki Weber, General Counsel Department of Revenue 204 Carlton Building Tallahassee, FL 32399-0100 Kevin J. O'Donnell, Esquire Department of Legal Affairs Tax Section, The Capitol Tallahassee, FL 32399-1050 Louise J. Allen, Esquire Stearns, Weaver, Miller, Weissler, Alhadeff & Sitterson, P.A. 150 W. Flagler Street, Suite 2200 Miami, FL 33130
The Issue As to DOAH Case No. 18-4475RX, whether Florida Administrative Code Rule 12A-1.044(5)(a) is an invalid exercise of delegated legislative authority in violation of section 120.52(8), Florida Statutes.1/ As to DOAH Case No. 18-4992RU, whether the Department of Revenue's ("Department") Standard Audit Plan, Vending and Amusement Machines--Industry Specific, section 1.1.3.3 ("SAP") is an unadopted rule in violation of sections 120.54 and 120.56, Florida Statutes.
Findings Of Fact The Parties and Audit Period GBR is a Florida corporation with its principal place of business in Miami, Florida. Gilda Rosenberg is the owner of GBR and a related entity, Gilly Vending, Inc. ("Gilly"). GBR and Gilly are in the vending machine business. At all times material hereto, Amit Biegun served as the chief financial officer of the two entities. The Department is the state agency responsible for administering Florida's sales tax laws pursuant to chapter 212, Florida Statutes. This case concerns the audit period of January 1, 2012, to December 31, 2014. GBR's Provision of Vending Machine Services Prior to the audit period, the school boards of Broward and Palm Beach County issued written solicitations through invitations to bid ("ITB"), seeking vendors to furnish, install, stock, and maintain vending machines on school property. The bids required a "full turn-key operation." The stated objectives were to obtain the best vending service and percentage commission rates that will be most advantageous to the school boards, and to provide a contract that will be most profitable to the awarded vendor. The stated goal was that student choices from beverage and snack vending machines closely align with federal dietary guidelines. GBR operates approximately 700 snack and beverage vending machines situated at 65 schools in Broward, Palm Beach, and Miami-Dade Counties. Of these 65 schools, 43 are in Broward County, 21 are in Palm Beach County, and one is in Miami-Dade County. The snack vending machines are all owned by GBR. Beverage vending machines are owned by bottling companies, such as Coca-Cola and Pepsi. Of the 700 vending machines, approximately 60 percent of the machines are for beverages and the remaining 40 percent are for snacks. GBR has written vending agreements with some schools. In these agreements, GBR is designated as a licensee, the school is designated as the licensor, and GBR is granted a license to install vending machines on school property in exchange for a commission. Furthermore, GBR is solely responsible to pay all federal, state, and local taxes in connection with the operation of the vending machines. Ownership of the vending machines does not transfer to the schools. However, in some cases the schools have keys to the machines. In addition, designated school board employees have access to the inside of the machines in order to review the meter, monitor all transactions, and reconcile the revenue from the machines. GBR places the vending machines on school property. However, the schools control the locations of the vending machines. The schools also require timers on the machines so that the schools can control the times during the day when the machines are operational and accessible to students. The schools also control the types of products to be placed in the machines to ensure that the products closely align with the federal dietary guidelines. The schools also control pricing strategies. GBR stocks, maintains, and services the vending machines. However, Coca-Cola and Pepsi may repair the beverage machines they own. GBR is solely responsible for repairing the machines it owns. The schools require that any vendor service workers seeking access to the vending machines during school hours pass background checks. GBR route drivers collect the revenue from all of the vending machines and the revenues are deposited into GBR's bank accounts. In exchange for GBR's services, the schools receive from GBR, as a commission, a percentage of the gross receipts. However, neither GBR nor the schools are guaranteed any revenue unless sales occur from the machines. On its federal income tax returns, GBR reports all sales revenue from the vending machines. For the tax year 2012, GBR's federal income tax return reflects gross receipts or sales of $5,952,270. Of this amount, GBR paid the schools $1,363,207, a percentage of the gross receipts which GBR characterized on the tax return and its general ledger as a commission and equipment space fee and cost of goods sold. For the tax year 2013, GBR's federal income tax return reflects gross receipts or sales of $6,535,362. Of this amount, GBR paid directly to the schools $1,122,211, a percentage of the gross receipts which GBR characterized on the tax return and its general ledger as a commission and equipment space fee and cost of goods sold. For the tax year 2014, GBR's federal income tax return reflects gross receipts or sales of $6,076,255. Of this amount, GBR paid directly to the schools $1,279,682, a percentage of the gross receipts which GBR characterized on the tax return and its general ledger as a commission and equipment space fee and cost of goods sold. Thus, for the audit period, and according to the federal tax returns and general ledgers, GBR's gross receipts or sales were $18,563,887. Of this amount, GBR paid directly to the schools $3,765,100, as a commission and equipment space fee and cost of goods sold. The Department's Audit and Assessment On January 27, 2015, the Department, through its tax auditor, Mary Gray, sent written notice to GBR of its intent to conduct the audit. This was Ms. Gray's first audit involving vending machines at schools. Thereafter, GBR provided Ms. Gray with its general ledger, federal returns, and bid documents. On October 28, 2015, Ms. Gray issued a draft assessment to GBR. The email transmittal by Ms. Gray to GBR's representative states that "[t]he case is being forwarded for supervisory review." In the draft, Ms. Gray determined that GBR owed additional tax in the amount of $28,589.65, but there was no mention of any purported tax on the monies paid by GBR to the schools as a license fee to use real property. However, very close to the end of the audit, within one week after issuing the draft, and after Ms. Gray did further research and conferred with her supervisor, Ms. Gray's supervisor advised her to issue the B03 assessment pursuant to section 212.031 and rule 12A-1.044, and tax the monies paid by GBR to the schools as a license fee to use real property. Thus, according to the Department, GBR was now responsible for tax in the amount of $246,230.93, plus applicable interest. Of this alleged amount, $1,218.48 was for additional sales tax (A01); $4,181.41 was for purchase expenses (B02); $13,790 was for untaxed rent (B02); and $227.041.04 was for the purported license to use real property (B03). Ms. Gray then prepared a Standard Audit Report detailing her position of the audit and forwarded the report to the Department's dispute resolution division. On January 19, 2016, the Department issued the Notice of Proposed Assessment ("NOPA") against GBR for additional tax and interest due of $288,993.31. The Department does not seek a penalty against GBR. At hearing, Ms. Gray testified that the Department's SAP is an audit planning tool or checklist which she used in conducting GBR's audit. Employees of the Department are not bound to follow the SAP, and the SAP can be modified by the auditors on a word document. The SAP was utilized by Ms. Gray during the audit, but it was not relied on in the NOD.4/
The Issue The issue for determination is whether Respondent should grant Petitioner's application for a sales tax exemption certificate as a charitable institution within the meaning of Section 212.08(7), Florida Statutes. 1/
Findings Of Fact Respondent is the governmental agency responsible for issuing sales tax exemption certificates in accordance with Section 212.08(7). Petitioner is a non-profit, Florida corporation and a charitable organization, within the meaning of Section 501(c)(3) of the Internal Revenue Code, for purposes of the federal income tax. On December 29, 1995, Petitioner applied for an exemption from state sales and use tax ("sales tax") as a charitable institution. On February 8, 1996, Respondent denied Petitioner's application. The parties stipulated that Petitioner is a non-profit corporation. The parties further stipulated that the only exemption under which Petitioner may qualify for a sales tax exemption is the exemption for a charitable institution. In order to qualify as a charitable institution, Petitioner must provide one or more of seven services listed in Section 212.08(7). The parties stipulated that the only service Petitioner arguably provides as a charitable institution is that of raising funds for medical research within the meaning of Section 212.08(7)(o)2b(V). It is uncontroverted that Petitioner does not provide medical research directly. Petitioner raises funds for its national organization. The national organization then disburses funds raised by local affiliates. Petitioner failed to submit any competent and substantial evidence showing the disposition of funds by its national organization. Petitioner failed to show that its national organization either provides direct medical research or raises funds for one or more organizations that provide medical research.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent enter a Final Order and therein DENY Petitioner's request for a sales tax exemption. RECOMMENDED this 4th day of June, 1996, in Tallahassee, Florida. DANIEL S. MANRY, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 4th day of June, 1996.
Findings Of Fact At all times pertinent to this cause, Robert W. Pope has been the holder of license no. 62-600, series 4-COP, SRX, held with the State of Florida, Division of Beverage to trade as The Wedgewood Inn, located at 1701, 4th Street, South, St. Petersburg, Pinellas County, Florida. When the Respondent, Pope, began to operate the licensed premises he was given a registration sales tax number by the State of Florida, Department of Revenue. This number was provided in accordance with 212, F.S. That law required the remittance of the collected sales tax on a month to month basis, the period beginning with the first day of the month and ending with the last day of the month. The remittance was due on the first day of the following month and payable by the 20th day of the following month. Failure to pay by the 20th would result in a 5 percent penalty and 1 percent interest per month. The sales tax remittance due from the licensed premises for December, 1975 through August, 1976 was not made, and a lien was filed to aid collection of the tax. In mid 1976, the Respondent, contacted the State of Florida, Department of Revenue to discuss term payments of the sales tax remittance. The Respondent in October, 1976 tried to effect a partial release of the tax claim by paying $2,900. In keeping with their policy the Department of Revenue rejected these efforts. Subsequently, in February, 1977, the Respondent made a $10,000 initial payment and three monthly installments to satisfy the lien on this licensed premises and another licensed premises which the Respondent owned. At present all taxes due and owing under 212, F.S. are current. The above facts establish that the Respondent failed to comply with the provisions of 212, F.S. pertaining to the remittance of sales tax from the Respondent to the State of Florida, Department of Revenue. This violation, thereby subjects the Respondent to the possible penalties of 561.29, F.S.
Recommendation It is recommended that the Respondent, Robert W. Pope, be required to pay a civil penalty in the amount of $250.00 or have the license no. 62-600, series 4- COP, SRX, suspended for a period of 10 days. DONE AND ENTERED this 28th day of July, 1977, in Tallahassee, Florida. CHARLES C. ADAMS Hearing Officer Division of Administrative Hearings 530 Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: William Hatch, Esquire Division of Beverage 725 South Bronough Street Tallahassee, Florida 32304 Robert W. Pope, Esquire 611 First Avenue, North St. Petersburg, Florida 33701
The Issue The issue is whether Respondent's Certificate of Registration 46-8015920490-4 should be revoked for the reasons stated in an Administrative Complaint for Revocation of Certificate of Registration (Administrative Complaint) issued by the Department of Revenue (Department) on July 17, 2015.
Findings Of Fact The Department is the state agency charged with administering and enforcing the state revenue laws, including the laws related to the imposition and collection of sales and use taxes pursuant to chapter 212. Respondent is an active for-profit Florida corporation and a licensed motor vehicle dealer located at 613 Southwest Pine Island Road, Suite 14, Cape Coral, Florida. For purposes of collecting and remitting taxes, Respondent is a dealer as defined in section 212.06(2) and is required to comply with chapter 212. Annais German is the president and agent of the corporation. Respondent holds Certificate of Registration number 46- 8015920490-4. A certificate of registration is required in order to do business in the state and requires its holder to collect and remit sales tax pursuant to chapter 212. See § 212.05(1), Fla. Stat. A dealer must file with the Department sales tax returns and remit the tax collected on a monthly basis. See § 212.15(1), Fla. Stat. The Department is authorized to revoke a dealer's certificate of registration for failure to comply with state tax laws. See § 212.18(3)(e), Fla. Stat. Before revoking a certificate of registration, the Department must convene an informal conference that the dealer is required to attend. See § 213.692(1)(a), Fla. Stat. At the conference, the dealer may either present evidence to refute the Department's allegations of noncompliance or enter into a compliance agreement with the Department to resolve the dealer's failure to comply with chapter 212. Id. After a compliance agreement is executed by the dealer, the Department may revoke the certificate of registration if the dealer fails to comply with its terms and conditions. If a breach occurs, the entire amount is due and payable immediately. After Respondent failed to remit taxes that were due, the Department issued tax warrants and rendered judgment liens against Respondent in March, April, and December 2014 and April 2015. An informal conference was conducted with the taxpayer on April 7, 2015. Respondent was represented at the conference by Orlando German, who was given power of attorney by Annais German to represent the corporation. He signed an agreement, which required the entire balance to be paid by the end of the month. Two weeks later, Annais German requested that a new agreement be executed which allowed her to pay the delinquent taxes over a longer period of time. The Department agreed with her request. On April 23, 2015, Ms. German executed an Agreement reflecting that her corporation owes $7,297.52. See Pet'r Ex. 2, p. 1. The Agreement required Respondent to make a down payment of $2,500.00 on or before April 28, 2015, followed by ten monthly payments of 375.00 on the 28th of each month, and a final payment of $671.52 on April 28, 2016. Id. at p. 3. The Agreement required these payments to be made at the Fort Myers Service Center. Id. Payments required under a compliance agreement are always remitted to the local district office, rather than Tallahassee, to allow the Department to track the payment and ensure that it is being made in a timely fashion. The Agreement also required Respondent to "timely remit payment in full for all types of taxes, returns, and reports due from the Taxpayer for the duration of this agreement (and any extensions hereof) or for the next 12 months following the date of this agreement, whichever is longer." Id. at p. 1. In other words, besides making payments for past due taxes, interest, penalties, and fees, Respondent was required to timely file returns and pay current obligations as they became due during the life of the Agreement. The Agreement specifically provides that if the taxpayer fails to comply with the Agreement, revocation proceedings will be initiated without further notice. Respondent paid the $2,500.00 down payment one day late, but as of the date of the hearing in this case, no other payments for past or current obligations have been made. Returns for April and May 2015 were not timely filed. Respondent admits that in April 2015, at least three vehicles were sold, but its April return, when eventually filed, reported that no sales were made. Since filing its June and July 2015 returns, Respondent has filed no other returns. By failing to pay the monthly obligations required by the Agreement or any current obligations, Respondent has violated the Agreement.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order revoking Respondent's Certificate of Registration 46- 8015920490-4. DONE AND ENTERED this 25th day of February, 2016 in Tallahassee, Leon County, Florida. S D. R. ALEXANDER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 25th day of February, 2016. COPIES FURNISHED: Stephen M. Masterson, Esquire Office of the Attorney General Revenue Litigation Bureau The Capitol, PL-01 Tallahassee, Florida 32399-1050 (eServed) Annais German World Champions Auto, Inc. 429 Northwest 38th Place Cape Coral, Florida 33993-5536 Annais German World Champions Auto, Inc. 613 Southwest Pine Island Road, Suite 14 Cape Coral, Florida 33991-1950 George C. Hamm, Acting General Counsel Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668 (eServed) Marshall C. Stranburg, Executive Director Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668 (eServed)
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: Petitioner, a corporation headquartered in Charlotte, North Carolina, is in the business of operating movie theatres both within and without the State of Florida. At these theatres Petitioner Operates concession stands which sell both candy items and drinks in various sizes at different prices to persons who frequent the theatres. For the period of time from September, 1985 through May, 1985, Petitioner remitted to the Department of Revenue sales tax on the total taxable value of all taxable items sold at its concession stands in all of its Florida theatres, in accordance with the presumptive effective rate of tax of 5.63 percent contained in Rule 12A-1.11(37), Florida Administrative Code. As a result of an audit for a previous period dated October 1, 1982, Petitioner remitted to the Department of Revenue the amount of $10,637.00 for sales tax on taxable items sold at its concession stands during this audit period in accordance with the presumptive effective tax rate of 4.5 percent as contained in Rule 12A-1.11(37), Florida Administrative Code during the audit period. On August 15, 1985, Petitioner filed with the Department of Revenue, as agent for Respondent, two (2) applications for sales tax refund in the amount of $16,876.52 and $10,637.00. The applications were dated August 13, 1985, and were timely filed. During the refund periods at issue in this matter, the Petitioner: (a) posted and charged flat prices for the various items offered for sale, which prices included sales tax (b) kept records of daily and weekly sales of taxable items at each of its Florida theatres (c) kept records of daily attendance at each movie shown by each Florida theatre and (d) kept records of weekly calculations, through inventory analysis, of sales of drinks and candy items, including the number, size and price of each item sold at each of its Florida theatre. During the refund periods at issue in this matter, the Petitioner did not maintain cash registers at its concession stands in its Florida theatres and did not maintain records made contemporaneously with the sale of taxable items from the concession stands which separately itemized the amounts of sales tax collected on each sale transaction occurring at the theatres' concession stands. Rather, Petitioner chose, for its own convenience, to operate a "cash box" operation at each of its concession stands in its Florida theatres and willingly remitted sales tax to the Department of Revenue pursuant to the presumptive effective tax rate contained in Rule 12-1.11(37), Florida Administrative Code for the relevant periods. In April, 1985, Petitioner placed computerized cash registers in each of its Florida theatre concession stands. These cash registers provided tapes of each individual transaction each day, specifically recording each taxable and nontaxable sale and the amount of sales tax due on each taxable sale with a daily summation on each tape at each theatre. Rule 12A-1.11(37), Florida Administrative Code, requires concessionaires such as Petitioner to remit sales tax at a rate of 5.63 percent of taxable sales under the present 5 percent statutory sales tax schedule and at 4.5 percent of taxable sales under the previous statutory sales tax schedule unless a concessionaire, through its records, shows another effective rate by "proof to the contrary". Petitioner produced an effective tax rate of 5.13 percent for the month of April 1985, for all its Florida theatres by dividing the total sales tax collected during April, 1985 by the total taxable sales during April, 1985, as evidenced by the cash register tapes from all of Petitioner's concession stands in Florida. Petitioner then used that tax rate as a base to retroactively reconstruct an effective tax rate for the refund periods by assuming that the product sales mix (product mix of products sold) and the transactional sales mix (the number of items purchased together in a single transaction by a customer) experienced during the refund periods were the same as that experienced during the month of April, 1985. There was no competent evidence that the product sales mix or the transactional sales mix experienced during the refund periods were the same as that experienced during the nonth of April, 1985. There is insufficient evidence in the record to support Petitioner's reconstructed effective tax rates that were used to calculate the refunds. Therefore, Petitioner has failed to show "proof to the contrary" that its reconstructed effective tax rates are correct or that the presumptive effective tax rate contained in Rule 12A-1.11(37), Florida Administrative Code were incorrect for the refund periods at issue in this matter.
Recommendation Based on the findings of fact and conclusions of law recited herein, it is RECOMMENDED that the Comptroller enter his final order DENYING Petitioner's refund applications. Respectfully submitted and entered this 25th day of September, 1986, in Tallahassee, Leon County, Florida. WILLIAM R. CAVE 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 25th day of September, 1986.
The Issue The issue is whether Petitioner, Christopher B. Scott, as the managing member of PNC, LLC (PNC), is personally liable for a penalty equal to twice the total amount of the sales and use tax owed by PNC to the State of Florida.1/
Findings Of Fact The Department is the state agency charged with administering and enforcing the laws related to the imposition and collection of sales and use taxes. PNC is a now-dissolved Florida limited liability company that did business under the name "CHEAP" at 309 South Howard Avenue, Tampa, Florida. PNC was registered as a business and filed its Articles of Organization with the Secretary of State on June 16, 2010. Until the company was dissolved by the Secretary of State in 2018 for failure to pay the 2017 annual filing fees, Mr. Scott served as its managing member and had administrative control over the collection and payment of taxes. Verna Bartlett was PNC's controller. PNC was registered with the Department as a dealer pursuant to section 212.18, Florida Statutes, and was issued Sales and Use Tax Certificate of Registration 39-8015401140-8. A certificate of registration requires the taxpayer to file sales and use tax returns and pay to the Department all taxes owed as they are received. After making numerous attempts to collect delinquent sales tax owed by PNC for tax reporting periods in 2013 and 2014, the Department filed this action seeking to impose a personal penalty assessment against Mr. Scott, the managing member of the company. Section 213.29, Florida Statutes, provides that any person who has administrative control over the collection and payment of taxes and who willfully fails to pay the tax or evades the payment of the tax shall be liable to a penalty equal to twice the amount of tax not paid. The penalty is based only on the taxes owed, and not the interest and fees that have accrued. The statute provides that if the business liability is fully paid, the personal liability assessment will be considered satisfied. On January 18, 2018, the Department issued a NAPL against Mr. Scott after PNC failed to pay the sales and use taxes owed the State for the reporting periods from February 2013 through October 2014. The outstanding taxes, exclusive of interest or penalties, total $79,325.75. The NAPL imposes a total penalty of $158,647.50, or twice the amount of sales tax owed by PNC. No payments have been made on the account since the issuance of the NAPL, and, PNC, now closed, currently has a total liability in excess of $200,000.00. During the relevant time period, Mr. Scott was personally responsible for collecting PNC's sales tax and remitting it to the Department; he had the authority to sign checks on behalf of PNC; he made financial decisions as to which creditors should be paid; he made the decision to use the sales tax collected for the business and for stipulation payments; and he made the decision not to remit the sales tax that was collected. This was confirmed by PNC's controller, Ms. Bartlett, who responded to the Department's Requests for Admissions. Mr. Scott also confirmed to a Department tax specialist that the admissions provided by Ms. Bartlett were accurate. Mr. Scott either never remitted payment or did not remit payment timely on behalf of PNC for the following reporting periods: February, April, and December 2013, and January through October 2014. Tax warrants were issued and judgment liens were recorded for the following reporting periods: February, April, and December 2013, and January, February, and April through October 2014. Resp. Ex. 5 and 6. All warrants and liens relate to reporting periods that fall within the personal liability assessment period. A Notice of Jeopardy Finding and Notice of Final Assessment (Notice of Jeopardy) dated June 18, 2014, was issued to PNC pertaining to the April 2014 reporting period. Resp. Ex. This notice was issued after Mr. Scott ceased making regular tax payments, the estimated deficiency was substantial, and the Department determined that collection of the tax would be jeopardized by further delay. A Notice of Jeopardy and Notice of Final Assessment dated August 7, 2014, also was issued to PNC pertaining to the April, May, and June 2014 reporting periods. Resp. Ex. 12. Because PNC reported more than $20,000.00 in sales tax each year, unless a waiver was obtained, Mr. Scott was required to file and pay PNC's sales tax electronically for all reporting periods within the personal liability period. See § 213.755(1), Fla. Stat.; Fla. Admin. Code R. 12-24.003. Despite having obtained no waiver, Mr. Scott never filed returns or paid PNC's sales tax electronically. And even though he never remitted a payment electronically, Mr. Scott indicated on at least six sales tax returns during the relevant time period that sales tax for the reporting period was remitted electronically. The only conclusion to draw from this action is that Mr. Scott filed or directed the filing of these returns knowing them to be false. The record shows that, dating back to 2011, Mr. Scott has a long-standing history of failing to abide by the tax laws of the state as it relates to PNC. For example, on September 15, 2011, Mr. Scott was referred for criminal investigation by the state attorney for his failure to pay taxes. Also, numerous returns were filed without a payment. This is prima facie evidence of conversion of the money due. § 212.14(3), Fla. Stat. Respondent's Exhibit 1 summarizes numerous contacts by the Department's Tampa District Office with Mr. Scott regarding collection notices, telephone calls, emails, assessment letters, warrant letters, and the like in an effort to secure compliance with tax laws. It is fair to find that Mr. Scott willfully attempted to evade or avoid paying sales and reemployment taxes during the relevant period. To prevent its Sales and Use Tax Certificate of Registration from being revoked, PNC entered into a compliance agreement on July 10, 2013, to pay past due sales tax and reemployment tax totaling $65,789.25. The agreement required PNC to: (a) accurately complete all past due tax returns and reports no later than July 10, 2013; (b) remit all past due payments in accordance with the attached schedule, which required 11 monthly payments of $4,000.00 beginning on August 10, 2013, and a final balloon payment on July 10, 2014; (c) accurately complete and file all required tax returns and reports for the next 12 months; and (d) timely remit all taxes due for the next 12 months. A $15,000.00 down payment also was required to be paid on or before July 10, 2013. An addendum to the agreement (added by Mr. Scott) provided that "[a]ll payments, including the $15,000.00 down payment, shall first be applied to Sales and Use Tax." Although the down payment was made timely, the agreement was breached the first month (August) because Mr. Scott did not make the payment electronically. However, the agreement was not voided by the Department until October 12, 2013. Therefore, any payments made on or after October 12, 2013, were not considered compliance payments and are not subject to the addendum in the agreement. A somewhat confusing aspect of this dispute concerns Mr. Scott's contention, by way of cross-examination, that contrary to the addendum, the Department incorrectly applied his $15,000.00 down payment and subsequent compliance payments to the reemployment tax account, rather than the sales tax account, and that his sales tax liability should be reduced by that amount. As noted above, the addendum governs only the payments that predate October 12, 2013, which are the down payment ($15,000.00) and the August and September payments -- $4,000.00 each month. This issue was not raised by Mr. Scott until the Department issued a NAPL on April 13, 2017. The NAPL issued on April 13, 2017, indicated that the outstanding tax owed by PNC through October 31, 2014, was $90,808.17, and the personal assessment was twice that amount. In response to Mr. Scott's request, the Department acknowledged that it incorrectly applied the down payment to the reemployment account. Also, it took a second look at the two payments made in August and September, which predate the voiding of the agreement. The August installment payment consisted of two separate checks: $3,390.00 for sales tax and $610.00 for reemployment tax, and these amounts were applied in that manner. The September payment, $4,000.00, submitted in one check, was applied in the same manner as the August payment, with $610.00 going to the reemployment tax and the remainder to sales tax. Therefore, only $1,220.00 was incorrectly applied to the reemployment tax during those two months. On July 3, 2017, the Department reapplied a total of $16,551.00 from the reemployment tax account to the sales tax account for the relevant reporting periods. Mr. Scott contends the reapplication of the $16,551.00 to sales tax should reduce the amount of sales tax due by that amount. However, section 213.75(2) dictates that if a lien or warrant has been filed against the taxpayer, as is true here, the payment shall be applied in a priority order spelled out in the statute. Thus, the Department applied that amount in the following order: against the costs to record the liens against PNC; against the administration collection processing fee, if any; against any accrued interest; against any accrued penalty; and against any tax due. Under this priority order, the penalty/interest/fees categories totaled $5,066.58, while the tax liability category totaled $11,484.42. A detailed breakdown of this allocation is found in Respondent's Exhibit 29. Therefore, the total tax liability on the 2017 NAPL ($90,808.17) is reduced by $11,484.42, resulting in a total tax liability of $79,323.75, as shown on the updated 2018 NAPL. In the same vein, in his PRO, Mr. Scott argues that he was not given credit for payments of $9,110.24, $2,688.53, $178.28, and $1,321.80, which reduce his sales tax liability to $66,024.90 and the personal assessment to $132,049.80. See Pet'r Ex. 10. However, all of these payments (some of which are bank levies) were made after the compliance agreement was voided and do not apply to the reporting periods in this case. By way of cross-examination, Mr. Scott also contends that he was never given an accounting of what PNC owes despite "multiple requests" for the same. The record shows otherwise. On April 13, 2017, the 2017 NAPL was mailed to Mr. Scott, along with a ZT09, a computer-generated form which lists, in detail, a taxpayer's outstanding taxes owed by reporting period. A second copy of a ZT09 was faxed to him the following day. In his May 3, 2017, letter protesting the 2017 NAPL, Mr. Scott alleges that payments were not applied properly. In response, the Department sent a fax to Mr. Scott on May 10, 2017, listing checks that were not honored by the bank and requesting information concerning which payments PNC contends were not applied properly. In his response on May 12, 2017, Mr. Scott did not provide the requested information. On January 17, 2018, the 2018 NAPL was mailed to Mr. Scott, along with a ZT09. Finally, on April 12, 2018, per Ms. Bartlett's request, the Department mailed a ZT09 with the outstanding amounts due. Finally, in its PRO, the Department points out that after the hearing ended, it discovered that it made an error, in Mr. Scott's favor, in calculating his sales tax liability for the relevant reporting periods. Had it correctly calculated the amount of payments made by PNC, the sales tax liability for the relevant period would be increased from $79,323.75 to $84,444.35, which in turn would increase the personal assessment. However, the Department consents to the lower tax and assessed penalty amount, as reflected on the 2018 NAPL.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order determining that Petitioner, Christopher B. Scott, is liable to the Department for a penalty of $158,647.50. DONE AND ENTERED this 22nd day of April, 2019, in Tallahassee, Leon County, Florida. S D. R. ALEXANDER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 22nd day of April, 2019.
The Issue Whether the contested and unpaid portions of the tax, penalty and interest assessment issued against Petitioners as a result of Audit No. 9317210175 should be withdrawn as Petitioners have requested?
Findings Of Fact Based upon the evidence adduced at hearing, and the record as a whole, the following Findings of Fact are made: Shuckers is an oceanfront restaurant and lounge located at 9800 South Ocean Drive in Jensen Beach, Florida. In November of 1992, Petitioner Mesa's brother, Robert Woods, Jr., telephoned Mesa and asked her if she wanted a job as Shuckers' bookkeeper. Woods had been the owner of Shuckers since 1986 through his ownership and control of the corporate entities (initially Shuckers Oyster Bar Too of Jensen Beach, Florida, Inc., and then NAT, Inc.) that owned the business. Mesa needed a job. She therefore accepted her brother's offer of employment, notwithstanding that she had no previous experience or training as a bookkeeper. When Mesa reported for her first day of work on November 19, 1992, she learned that Woods expected her to be not only the bookkeeper, but the general manager of the business as well. Mesa agreed to perform these additional responsibilities. She managed the day-to-day activities of the business under the general direction and supervision of Woods. After a couple of weeks, Woods told Mesa that it would be best if she discharged her managerial responsibilities through an incorporated management company. Woods had his accountant draft the documents necessary to form such a corporation. Among these documents were the corporation's Articles of Incorporation. Mesa executed the Articles of Incorporation and, on December 3, 1992, filed them with the Secretary of State of the State of Florida, thereby creating Petitioner TAN, Inc. TAN, Inc.'s Articles of Incorporation provided as follows: The undersigned subscribers to these Articles of Incorporation, natural persons competent to contract, hereby form a corporation under the laws of the State of Florida. ARTICLE I- CORPORATE NAME The name of the corporation is: TAN, INC. ARTICLE II- DURATION This corporation shall exist perpetually unless dissolved according to Florida law. ARTICLE III- PURPOSE The corporation is organized for the purpose of engaging in any activities or business permitted under the laws of the United States and the State of Florida. ARTICLE IV- CAPITAL STOCK The corporation is authorized to issue One Thousand (1000) shares of One Dollar ($1.00) par value Common Stock, which shall be designated "Common Shares." Article V- INITIAL REGISTERED OFFICE AND AGENT The principal office, if known, or the mailing address of this corporation is: TAN, INC. 9800 South Ocean Drive Jensen Beach, Florida 34957 The name and address of the Initial Registered Agent of the Corporation is: Linda A. W. Mesa 9800 South Ocean Drive Jensen Beach, Florida 34957 ARTICLE VI- INITIAL BOARD OF DIRECTORS This corporation shall have one (1) director initially. The number of directors may be either increased or diminished from time to time by the By-laws, but shall never be less than one (1). The names and addresses of the initial directors of the corporation are as follows: Linda A. W. Mesa 9800 South Ocean Drive Jensen Beach, Florida 34957 ARTICLE VII- INCORPORATORS The names and addresses of the incorporators signing these Articles of Incorporation are as follows: Linda A. W. Mesa 9800 South Ocean Drive Jensen Beach, Florida 34957 On the same day it was incorporated, December 3, 1992, TAN, Inc., entered into the following lease agreement with the trust (of which Woods was the sole beneficiary) that owned the premises where Shuckers was located: I, Michael Blake, Trustee, hereby lease to Tan, Inc. the premises known as C-1, C-2, C-3, C-4, 9800 South Ocean Drive, Jensen Beach, Florida for the sum of $3,000.00 per month. This is a month to month lease with Illinois Land Trust and Michael Blake, Trustee. Mesa signed the agreement in her capacity as TAN, Inc.'s President. She did so at Woods' direction and on his behalf. No lease payments were ever made under the agreement. 3/ The execution of the lease agreement had no impact upon Shuckers. Woods remained its owner and the person who maintained ultimate control over its operations. At no time did he relinquish any part of his ownership interest in the business to either Mesa or her management company, TAN, Inc. Mesa worked approximately 70 to 80 hours a week for her brother at Shuckers doing what he told her to do, in return for which she received a modest paycheck. Woods frequently subjected his sister to verbal abuse, but Mesa nonetheless continued working for him and following his directions because she needed the income the job provided. As part of her duties, Mesa maintained the business' financial records and paid its bills. She was also required to fill out, sign and submit to Respondent the business' monthly sales and use tax returns (hereinafter referred to as "DR- 15s"). She performed this task to the best of her ability without any intention to defraud or deceive Respondent regarding the business' tax liability. The DR-15s she prepared during the audit period bore NAT, Inc.'s Florida sales and use tax registration number. On the DR-15 for the month of December, 1992, Mesa signed her name on both the "dealer" and "preparer" signature lines. Other DR-15s were co-signed by Mesa and Woods. In April of 1993, Woods told Mesa that she needed to obtain a Florida sales and use tax registration number for TAN, Inc., to use instead of NAT, Inc.'s registration number on Shuckers' DR-15s. In accordance with her brother's desires, Mesa, on or about May 14, 1993, filed an application for a Florida sales and use tax registration number for TAN, Inc., which was subsequently granted. On the application form, Mesa indicated that TAN, Inc. was the "owner" of Shuckers and that the application was being filed because of a "change of ownership" of the business. In fact, TAN, Inc. was not the "owner" of the business and there had been no such "change of ownership." By letter dated June 22, 1993, addressed to "TAN INC d/b/a Shuckers," Respondent gave notice of its intention to audit the "books and records" of the business to determine if there had been any underpayment of sales and use taxes during the five year period commencing June 1, 1988, and ending May 31, 1993. The audit period was subsequently extended to cover the six year period from June 1, 1987 to May 31, 1993. Relying in part on estimates because of the business' inadequate records, auditors discovered that there had been a substantial underpayment of sales and use taxes during the audit period. The auditors were provided with complete cash register tapes for only the following months of the audit period: June, July, August and December of 1992, and January, February, March, April and May of 1993. A comparison of these tapes with the DR-15s submitted for June, July, August and December of 1992, and January, February, March, April and May of 1993 revealed that there had been an underreporting of sales for these months. Using the information that they had obtained regarding the three pre- December, 1992, months of the audit period for which they had complete cash register tapes (June, July and August of 1992), the auditors arrived at an estimate of the amount of sales that had been underreported for the pre- December, 1992, months of the audit period for which they did not have complete cash register tapes. The auditors also determined that Shuckers' tee-shirt and souvenir sales, 4/ Sunday brunch sales, cigarette vending sales, vending/amusement machine location rentals 5/ and tiki bar sales that should have been included in the sales reported on the DR-15s submitted during the audit period were not included in these figures nor were these sales reflected on the cash register tapes that were examined. According of the "Statement of Fact" prepared by the auditors, the amount of these unreported sales were determined as follows: TEE-SHIRT SALES: Sales were determined by estimate. This was determined to be $2,000/ month. No records were available and no tax remitted through May, 1993. SUNDAY BRUNCH SALES: Sales were determined by estimate. This was determined to be 100 customers per brunch per month (4.333 weeks). No audit trail to the sales journal was found and no records were available. CIGARETTE VENDING SALES: The estimate is based on a review of a sample of purchases for the 11 available weeks. The eleven weeks were averaged to determine monthly sales at $3/pack. VENDING MACHINE LOCATION RENTAL REVENUE: The revenue estimate is based on a review of a one month sample. TIKI BAR SALES: The sales estimate is based on a review of infrequent cash register tapes of February, 1993. The daily sales was determined by an average of the sample. The number of days of operation per month was determined by estimate. In addition, the auditors determined that TAN, Inc. had not paid any tax on the lease payments it was obligated to make under its lease agreement with Illinois Land Trust and Michael Blake, Trustee, nor had any tax been paid on any of the pre-December, 1992, lease payments that had been made in connection with the business during the audit period. According to the "Statement of Fact" prepared by the auditors, the amount of these lease payments were determined as follows: The estimate is based on 1990 1120 Corporate return deduction claimed. This return is on file in the Florida CIT computer database. The 1990 amount was extended through the 6/87 - 11/92 period. For the period 12/92 - 5/93 audit period, TAN's current lease agreement of $3,000/month was the basis. No documentation was produced during the audit supporting any the sales tax exemptions that the business had claimed during the audit period on its DR-15s. 6/ Accordingly, the auditors concluded that the sales reported as exempt on the business' DR-15s were in fact taxable. Using records of sales made on a date selected at random (February 1, 1993), the auditors calculated effective tax rates for the audit period. They then used these effective tax rates to determine the total amount of tax due. An initial determination was made that a total of $201,971.71 in taxes (not including penalties and interest) was due. The amount was subsequently lowered to $200,882.28. On or about December 22, 1993, TAN, Inc., entered into the following Termination of Lease Agreement with Ocean Enterprises, Inc.: TAN, Inc., a Florida corporation, hereby consents to termination of that certain lease of the premises known as C-1, C-2, C-3 and C-4 of ISLAND BEACH CLUB, located at 9800 South Ocean Drive, Jensen Beach, Florida, dated December 3, 1992, acknowledges a landlord's lien on all assets for unpaid rent; and transfers and sets over and assigns possession of the aforesaid units and all of its right, title and interest in and to all inventory, equipment, stock and supplies located on said premises 7/ in full satisfaction of said unpaid rent; all of the foregoing effective as of this 22nd day of December, 1993. FOR AND IN CONSIDERATION of the foregoing termin- ation of lease, OCEAN ENTERPRISES, Inc., a Florida corporation, hereby agrees to pay Linda Mesa, each month all of the net revenues of the operation of the bar and restaurant located on said premises, up to the sum of $15,000.00, for sales tax liability asserted against TAN, Inc. or Linda A. W. Mesa based upon possession or ownership of said premises or any of the assets located thereon, plus attorney's fees incurred in connection with defending or negotiating settlement of any such liability. Net revenue shall mean gross revenue, less operating expenses, includ- ing, but not limited to, rent, up to the amount of $5,000.00 per month, costs of goods sold, utilities, payroll and payroll expense and insurance. OCEAN ENTERPRISES, Inc. represents that it has entered into a lease of said premises for a term of five years commencing on or about December 22, 1993, pursuant to the terms and conditions of which OCEANFRONT [sic] ENTERPRISES, Inc. was granted the right to operate a restaurant and bar business on said premises. Ocean Enterprises, Inc., leases the property from Island Beach Enterprises, which obtained the property through foreclosure. TAN, Inc., has been administratively dissolved.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Department of Revenue enter a final order withdrawing the contested and unpaid portions of the assessment issued as a result of Audit No. 9317210175, as it relates to TAN, Inc., and Linda A. W. Mesa. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 27th day of June, 1995. STUART M. LERNER 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 27th day of June, 1995.
The Issue The issue is whether Petitioner collected and remitted to Respondent the correct amount of sales and use taxes during the audit period from October 1, 2004, through September 30, 2007, and, if not, what additional amount of tax plus penalty and interest is due.
Findings Of Fact Petitioner True Blue Pools (Petitioner, taxpayer, or TBP) is a domestic corporation headquartered in Miami-Dade County, Florida. TBP services, repairs, and renovates swimming pools and constructed some pools during the audit period. Respondent, Florida Department of Revenue (Respondent or DOR), is the agency of state government authorized to administer the tax laws of the State of Florida, pursuant to section 213.05, Florida Statutes.2 DOR is authorized to prescribe the records to be kept by all persons subject to taxes under chapter 212, Florida Statutes. Such persons have a duty to keep and preserve their records, and the records shall be open to examination by DOR or its authorized agents at all reasonable hours pursuant to section 212.12(6), Florida Statutes. DOR is authorized to conduct audits of taxpayers and to request information to ascertain their tax liability, if any, pursuant to section 213.34, Florida Statutes. On November 2, 2007, DOR initiated an audit of TBP to determine whether it was properly collecting and remitting sales and use taxes to DOR. The audit period was from October 1, 2004, through September 30, 2007. On December 15, 2008, DOR sent TBP its Notice of Intent to Make Audit Changes (NOI), with schedules, showing that TBP owed to DOR additional sales and use taxes in the amount of $113,632.17, penalty in the amount of $28,406.05, and interest through December 16, 2008, in the amount of $34,546.59, making a total assessment in the amount of $176,586.81. On October 26, 2009, DOR issued its Notice of Proposed Assessment. TBP timely challenged the Notice of Proposed Assessment, filing its petition with DOR and requesting an administrative hearing. Subsequent to the petition being filed, additional documentation was provided by TBP resulting in a revision to the tax, interest, and penalty amount due. DOR's revised work papers, dated May 27, 2010, claim Petitioner owes $64,430.83 in tax, $16,107.71 in penalty, and interest through May 27, 2010, in the amount of $27,071.99, with an assessment of $107,610.53. The assessed penalty, $16,107.71, was calculated after 25% of the penalty was waived, pursuant to subsection 213.21(3)(a), Florida Statutes, based on DOR's determination that there is no evidence of willful negligence, willful neglect, or fraud. The audit was conducted to determine liability in four categories: improper sales tax exemptions, unpaid sales taxes for taxable expenses, unpaid use taxes on fixed assets, and unpaid use taxes on taxable materials used to fulfill contracts to improve real property. Sales Tax Exemptions Due to the large volume of invoices and other records, the auditor conducted a random sampling of invoices for three months during the audit period, October 2004, January 2005, and September 2007.3 If no sales tax was collected and the Petitioner claimed that the transaction was exempt from the requirement to pay taxes, the auditor looked for proof that either the TBP customer was an exempt organization, for example, a school or a church, or that TBP had provided its suppliers with a DOR Form DR-13 to exempt from taxes products acquired for resale. In the absence proof of either type of exemption, DOR assumed taxes should have been paid. Using the difference between taxes collected and taxes due for the three months, the auditor determined that the percentage of error was .016521. When .016521 was applied to total sales of $1,485,890.79 for the 36-month audit period, the results showed that an additional $24,548.41 in sales taxes should have been collected from customers, and is due from TBP. Although a business is required to pay taxes for the materials it purchases to use in its business, it is not required to collect taxes from its customers when it enters into lump sum contracts to perform a service for customers. At least one invoice for $9,500.00 that the auditor treated as an improper exemption was, in fact, a partial payment on a lump-sum contract. The invoice referenced a "shotcrete draw," which represented the collection of funds after the concrete part of pool construction was completed. TBP is not required to collect taxes when it uses lump-sum contracts. Other invoices for pool repair and services were also mischaracterized as exempt by the TBP, but it is not clear that all were payments related to lump-sum contracts. DOR's auditor, nevertheless, testified as follows: With the knowledge that I have for True Blue Pools, being a lump-sum contractor, True Blue Pools should not charge their customer any sales tax. Transcript at pages 67-68. DOR concedes that some of TBP's transactions are also exempt from taxes as improvements to real property. In its Proposed Recommended Order, DOR asserted that TBP's use of the term "improvements to real property" is overbroad, but it did not specify how or why this is the case. During cross- examination of the owner of TBP, only one invoice for $500.00 for leak detection on the Delgado property was shown to have been for a service rather than for swimming pool construction. Taxable Expenses DOR audited TBP's purchases of tangible personal property used in the daily operation of its business. The products included chlorine and other chemicals, office supplies, and vehicle parts, expenses, and repairs. The ledger for a 12- month period, calendar year 2006, showed an average monthly additional tax due of $111.18, or a total of $4,002.48 in additional taxes for the 36-month audit period. As noted in Petitioner's Proposed Recommended Order, "[t]he representative of TBP did not dispute DOR's allegation that no tax may have been paid on the purchase of all of these items " Fixed Assets TBP's list of fixed assets was taken from the depreciation schedule on Internal Revenue Service Form 4562. The items listed are computer- and software-related. TBP provided no proof that it had paid a use tax. The additional tax due equals $419.94. Petitioner's Proposed Recommended Order includes the statement that "[a]gain, the representative of TBP did not dispute DOR's allegation that no tax may have been paid on the purchase of these items " Taxable Materials Taxable materials, those purchased to fulfill a contract to improve real property, included items used to build, renovate, and repair pools. The items included concrete, meters, drains, and valves. For the 12-month sample period, calendar year 2006, TBP failed to pay taxes on material purchases in the total amount of $168,310.05, or an average of $14,078.96 a month. For the 36-month audit period, the total of the purchases was $506,842.56. With a 6 percent tax due for the state and 1 percent for the county, the total additional tax due on materials is $35,460.00. TBP conceded that it improperly used a resale exemption to purchase taxable materials from suppliers without paying taxes. The materials were used to provide services and were not resold. Acknowledging again that TBP uses lump-sum contracts, this time to support the collection of additional taxes, the auditor testified as follows: And the law states that the taxpayer's [sic] an ultimate consumer of all materials purchased to fulfill a lump-sum contract, and that's what they told me they operate under, a lump-sum contract. Transcript at page 58. At the hearing, TBP used its actual profit and loss statement to show that the cost of goods it sold (general purchases and taxable materials) in the amounts of $18,360.77 in October 2004, $8,519.22 in January 2005, and $4,818.65 in September 2007. Corresponding taxes for each of those months should have been $1,285.25, $596.35, and $337.31, or an average of $739.63 a month, or a total of $26,626.68 for 36 months. The goods that it sold were not at issue in the audit of taxable materials, rather it was TBP's purchases from vendors that should have been taxed that resulted in DOR's audit results. Total Additional Sales and Use Taxes Due The three categories of additional taxes due, $4,002.48 for taxable expenses, $419.94 for fixed assets, and $35,460.00 for taxable materials, equal $39,882.42 in additional taxes due during the audit period. Taxes Paid TBP filed DOR Forms DR-15, monthly sales and use tax reporting forms, and paid sales and use taxes during the audit period. For the sample months used by DOR to examine sales tax exemptions, TBP paid $1,839.10 in taxes in October 2004, $1,672.73 in January 2005, and $1,418.13 in September 2007. Using the three months to calculate an average, extended to 36 months, it is likely that TBP paid $59,712 in taxes. TBP asserted that DOR was required to, but did not, offset the deficiency of $39,882.42, by what appears to be an overpayment of $59,712.00 in sales and use taxes. Other than pointing out that the amount reported on the DR-15s differed, being sometimes more and sometimes less than the amount shown on the profit and loss statements, DOR did not dispute TBP's claim that it had paid sales and use taxes. TBP's representative explained that end-of-the-year adjustments for additional collections or for bad debt could cause the amounts on the DR-15s and profit and loss statements to differ. With regard to the taxes paid, DOR took the following position in its Proposed Recommended Order: Petitioner's DR-15's [sic] for the collection periods October 2004, and January 2005, [and September 2007] (Petitioner's Composite Exhibit 1) do reflect sales tax being collected and remitted to DOR. DOR does not allege that Petitioner never paid tax on its purchases, or made bona fide exempt sales for which no tax was collected. DOR's audit findings identify just those which occurred within the sample period, scheduled in the auditor's workpapers, and applied over the entire audit period. The DR-15s are taken from the sample months selected by DOR within the audit period, and DOR does not address TBP's claim that a set off for taxes paid was mandatory, pursuant to subsection 213.34(4), Florida Statutes. Using the audit schedules, DOR showed credit for taxes paid in the amounts of $20.63 for taxable expenses, $0 for fixed assets, and $24.31 in state taxes and $1.03 for county taxes on taxable materials. The amounts are far less that the $59,712.00 in sales/use taxes TBP showed that it paid during the audit period.
Recommendation Based upon the forgoing findings of fact and conclusions of law, it is recommended that the Department of Revenue issue a final order dismissing the Notice of Intent to Make Audit Changes dated December 15, 2010. DONE AND ENTERED this 20th day of January, 2011, in Tallahassee, Leon County, Florida. S ELEANOR M. HUNTER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 20th day of January, 2011.
