Findings Of Fact Based upon the oral and documentary evidence adduced at the final hearing and the entire record in this proceeding, the following findings of fact are made. On September 15, 1960, Earman Oil Company, Inc., was granted License Number 1748 (the "Special Fuels Dealer's License") authorizing it to operate as a User-Dealer of special fuels in the State of Florida. On the face of that License was the following notation: This license is NOT TRANSFERRABLE but will continue in full force and effect until cancelled or revoked as provided by law. The Special Fuels Dealer's License also contained a notation that provided as follows: This license must be returned to RAY F. GREEN, Comptroller, when a licensee terminates his operation as a User-Dealer. On April 1, 1967, Earman Oil Company, Inc., was issued State License Number 375 (the "Motor Fuels Distributor's License") by the Florida Revenue Commission, authorizing Earman to engage in the business of distributing motor fuels in the State of Florida. On the face of that License was the following notation: This license is not transferrable or assignable, and must be displayed conspicuously at all times at the Distributor's office or principle place of business. A Special Fuels Dealer's License and a Motor Fuels Distributor's License entitle a holder to purchase diesel fuel and gasoline for distribution without paying local option taxes pursuant to Chapter 336, Florida Statutes, motor fuel retail sales tax pursuant to Chapter 212, Part II, Florida Statutes and motor fuels tax pursuant to Chapter 206, Part I, Florida Statutes. A holder of such licenses is obligated to collect the taxes upon resale to customers and to remit those taxes to the state. If the resale is to another distributor who holds a valid license, the sale can be made tax free provided the seller follows the procedures set forth in the statutes and applicable DOR rules. In order to obtain either of the licenses during all times pertinent to this case, a company was required to have been in operation for at least one year and had to meet certain other requirements, including the posting of a bond. Sometime in 1983, Barkett, a licensed dealer of special and motor fuels in the state of Florida, purchased Florida Coast Oil Company, Inc. ("Florida Coast"), another licensed dealer of special and motor fuels in the State of Florida. The evidence did not establish the specific terms and details of that acquisition. The licenses held by Florida Coast which enabled it to purchase motor fuels on a tax exempt basis were not cancelled or revoked following Barkett's acquisition of the company. Barkett apparently acquired all of the stock of Florida Coast and Florida Coast continued in operation under that same name. Many, if not all, of the officers and directors of Barkett at this time also became officers and directors in Florida Coast. The evidence was conflicting and confusing as to the status of Earman Oil during 1980-1984. After review of all the evidence, it is concluded that Florida Coast acquired Earman Oil Company in 1980. The evidence did not establish the specific terms and details of that transaction. Apparently, this acquisition was also a stock purchase arrangement and Earman Oil Company initially remained in existence following its acquistion by Florida Coast. However, on August 31, 1981, Earman Oil Company was officially merged into Florida Coast. Harry Barkett, the president of Barkett and Florida Coast (after its acquisition by Barkett in 1983,) testified that the Department was advised of Florida Coast's acquisition of Earman Oil Company and Florida Coast was told by DOR that it could continue to use the licenses issued to Earman Oil Company in order to purchase motor fuels on a tax exempt basis. However, it does not appear that Mr. Barkett had any interest in Florida Coast at the time of the acquisition of Earman and no explanation was provided as to how he learned of DOR's alleged approval of the continued use of Earman's licenses. This contention is discussed in more detail in Findings of Fact 24 below. On September 10, 1984, Florida Coast sold certain assets to Alfred Vittorino. Vittorino had previously worked as a manager for Barkett. The sales agreement provided that the assets being sold included ll rights to operate as Earman Oil Company including but not limited to all rights to the stock, licenses, permits or trademarks that are titled to Earman Oil Company that are required to operate the business. The parties have stipulated that on September 12, 1984, a Certificate of Incorporation for a new Earman Oil Company, Inc., was filed with the Office of the Secretary of State for Florida and that Alfred Vittorino was the president and sole stock holder for that company. The licenses issued to the original Earman Oil Company could not legally be transferred or assigned to the new company. Moreover, the new company could not qualify for new licenses on its own since it had not been in operation for at least one year. There is no dispute that at the time Vittorino acquired the assets from Florida Coast and began operating under the name Earman Oil Company, the Special Fuel Dealer's License and the Motor Fuel Distributor's License previously issued in the name of Earman Oil Company were delivered to Vittorino by Florida Coast. Harry Barkett, who was the president of both Barkett and Florida Coast at the time of the sale to Vittorino, testified that Vittorino told him that he would take whatever steps were necessary to get the licenses reissued and/or obtain new licenses so that Earman could continue to purchase fuel on a tax exempt basis. Earman Oil Company never applied for new licenses after its acquisition by Vittorino. Instead, the company merely obtained and used the old licenses. Since the Special Fuel Dealer's License and the Motor Fuel Distributor's Licenses issued to the original Earman Oil Company has never been cancelled, "Earman Oil Company" was still registered with DOR as a distributor of motor fuel and a dealer of special fuels and it remained registered during the entire period in question, September 1984 to April 1985. Although Harry Barkett testified that he believes DOR was notified of Florida Coast's sale of Earman's assets to Vittorino, DOR has no record of the sale and/or the transfer of the licenses of Earman Oil Company to Vittorino. No persuasive evidence was presented to establish that DOR was fully advised as to the terms of the sale and the status of the companies at the time of the sale. The contention that DOR approved the transfer of the licenses to the new company established by Vittorino is rejected. After Vittorino purchased the above described assets from Florida Coast, Earman Oil Company began engaging in the business of selling motor fuel and special fuels to its customers. During the period from September 1984 through April 1985, Earman Oil Company purchased gasoline and diesel fuel from Barkett and other companies and sold that fuel to, among others, Miami Petroleum Oil Company, Inc., an unlicensed distributor of gasoline and diesel fuel. During that period, the invoices for the sales by Barkett to Earman Oil Company indicated that the sales were tax exempt and there is no indication that taxes were being collected from Earman. Barkett did not obtain an affidavit or "resale" certificate from Earman Oil Co. prior to selling tax exempt. However, Barkett filed tax returns with DOR indicating that the sales were tax exempt. Barkett contends that its typical procedure for selling tax exempt to a customer is to obtain the customer's license number and verbally confirm the validity of that number with the Department. Petitioner contends that it followed this procedure prior to selling tax exempt to Earman Oil Company and that the Department confirmed that the license numbers provided by Earman Oil Company were valid. While Petitioner contends that it contacted the Respondent in order to verify that Earman Oil Company was in possession of a valid license, there is no written evidence of any such communication. The applicable statutes and regulations require a distributor to obtain an affidavit or a "resale certificate" in order to sell fuel tax exempt. There is no provision in the rules or the statutes for verbal confirmation of licensure status. From September 1984 through April 1985, Earman Oil collected motor fuel taxes under Chapters 206 and 212, Florida Statutes, from its customers, but never remitted those taxes to the state. There is no evidence that any of the taxes collected by Earman Oil were transferred to Barkett. Earman Oil Company filed tax returns with DOR indicating that it had not collected any taxes. Criminal charges were subsequently brought against Vittorino for failure to remit collected motor fuel taxes for the period September 1984 through April 1985. Vittorino was found guilty by a jury of failure to remit collected motor fuel taxes and was initially sentenced to nine years in prison, which was subsequently reduced to six years on appeal. As of the date of the hearing in this administrative proceeding, the state has not collected any of the outstanding taxes from Vittorino or Earman Oil. Petitioner contends that during the trial of Vittorino, the State of Florida maintained that Earman Oil Company held valid licenses as a distributor of motor fuel and as a dealer of special fuels during the period September 1984 through May 1985. The transcript of that criminal proceeding confirms that this was one theory advanced by the prosecution during that case. However, there was considerable confusion during that trial as to the licensure status of Earman. Ultimately, Vittorino was convicted of failure to remit collected motor fuel taxes. It was not an essential element of this offense for Earman to be a valid license holder. DOR conducted an audit of Barkett (Audit Number 86-17412886) for the period September 1984 through April 1985. The Department's audit indicated that Barkett sold 9,548,414 gallons of motor fuel on a tax free basis to Earman Oil Company during the period from September 1, 1984 through April 30, 1985. During the audit, the auditor requested Barkett to provide resale certificates or affidavits from Earman Oil Company to substantiate the basis for the tax exempt sales. Barkett was unable to produce any such resale certificates or affidavits. As a result, DOR concluded that Barkett was responsible for collecting and remitting to the state taxes on all the sales made during this period by Barkett to Earman. Barkett contested the results of the audit and the Department's Notice of Decision issued on August 4, 1988. Barkett timely petitioned for reconsideration of that decision on September 2, 1988. The Department issued its Notice of Reconsideration on January 19, 1989. In its Notice of Reconsideration, the Department determined that the balance due for the Local Option Tax pursuant to Chapter 336, Florida Statutes, was $540,173.68, which consisted of $381,936.56 tax, $95,484.14 penalty and $62,752.98 interest (with interest accruing at the rate of $125.50 per day from June 6, 1986, until date of payment.) The Department also determined that the balance due for motor fuel retail sales tax pursuant to Chapter 212, Part II, Florida Statutes, was $769,747.50, which consisted of $544,259.60 tax, $136,064.90 penalty and $89,423.00 interest (with interest accruing at the rate of $178.93 per day from June 6, 1988 until date of payment.) Finally, the Department determined that the balance due for motor fuels tax pursuant to Chapter 206, Part I, Florida Statutes, was $540,173.68, which consisted of $381,936.56 tax, $95,484.14 penalty, and $62,752.98 interest (with interest accruing at the rate of $125.57 per day from June 6, 1986 until date of payment.) 1/ As part of its reconsideration, the Department deleted the fraud penalties that had previously been assessed against Barkett. Barkett timely filed a challenge to the Department's conclusions in the Notice of Reconsideration. 2/ During the late 70's and early 1980's, Barkett Oil acquired a number of different oil companies (including Florida Coast, which had previously acquired Earman). Several of the companies that were acquired by Barkett held licenses from the Department that enabled them to purchase motor fuels on a tax exempt basis for resale. Barkett contends that it notified the Department of each of those acquisitions and was never instructed that it had to reapply for a license to purchase tax exempt. Barkett suggests that these prior experiences justified its conclusion that Earman Oil Company could continue to purchase tax exempt following the sale and transfer of licenses to Vittorino. However, the circumstances and terms of the prior acquisitions by Barkett were not established in this case. It is not clear whether those transactions were stock purchase agreements or simply the acquisition of assets. Furthermore, the evidence regarding the notification supposedly given to the Department was vague and unconvincing. Although Petitioner contends that it notified the Department that Earman Oil Company had been sold to Vittorino, there is no written evidence of any such communication. It is not clear who at the Department was notified of the sale nor is it clear what information was provided regarding the sale. In sum, Petitioner's contention that Respondent should be estopped from claiming that Earman Oil Company did not hold a valid Distributor's License and/or Special Fuel License is rejected. There was insufficient persuasive evidence to establish that an authorized representative of the Department who was provided with full disclosure of the facts surrounding the transfer to Vittorino advised Petitioner that it could sell tax exempt to Earman Oil Company.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is recommended that a Final Order be entered upholding the assessments set forth in the Notice of Reconsideration. RECOMMENDED this 10th day of February, 1992, at Tallahassee, Florida. J. STEPHEN MENTON Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 10th day of February, 1992.
Findings Of Fact On June 3, 1982, William Cate, an inspector for Petitioner Department of Agriculture and Consumer Services, obtained a sample of the product identified as 500 Ethohol from a pump at the United 500 station owned by Respondent in Brooksville, Florida. The sample was shipped to Petitioner's laboratory in Tallahassee where it was analyzed under the supervision of John Whitton, Chief Bureau of Petroleum Inspection, using standard methods, and found to be in violation of Petitioner's Rule 5F-2.01(c)2 in that the 50 percent evaporated temperature of the product was 1580F which did not comply with the rule's requirement that such temperature not be less than 1700F. On June 11, 1982, a stop sale notice was issued against Respondent directing it to immediately stop the sale of the product listed below pending further instructions from Petitioner. Inspector Cate sealed the pump in question, and Respondent elected to post a $1,000 cash bond in order that he could return the product for upgrading in lieu of confiscation and sale. The stop sale notice was directed to 2475 gallons of the product which had a value of over $1,000. "Ethohol" is a blend of regular leaded gasoline which contains a percentage of alcohol, and sometimes is known as "gasohol." (Testimony of Cate, Whitton, Petitioner's Composite Exhibit 1) On June 14, 1982, Curtis E. Hardee, an inspector for Petitioner, took samples of 500 Ethohol from a pump located at Respondent's United 500 station at 6815 Sheldon Road, Tampa, Florida. The samples were sealed and shipped to Petitioner's laboratory in Tallahassee where they were analyzed under the supervision of John Whitton, Chief Bureau of Petroleum Inspection, and found to be in violation of Rule 5F-2.01(-1)(c)2, Florida Administrative Code, in that the 50 percent evaporated temperature of the product was l520F, and therefore violated the rule's requirement that such temperature not be less than l700F. A stop sale notice was issued against sale of the product on June 17, 1982, and Respondent elected to post a cash bond in lieu of confiscation or sale of 3,449 gallons of the product. The amount of the bond was $625 which represented 481 gallons of the product that had been sold since the last time a load of gas had been delivered to the station. Under the provisions of the release notice, Respondent agreed to pump the remaining product out of its storage tank and return it to their bulk plant for upgrading. (Testimony of Hardee, Whitton, Petitioner's Composite Exhibit 2) Although Respondent's representative did not dispute the foregoing facts, he maintained that forfeiture of the entire amount of the cash bonds would be excessive. (Testimony of McRae)
Recommendation It is recommended that a Final Order be issued assessing Respondent the sum of $625 to be effected by forfeiture of the bond posted in the same amount pursuant to stop sale notice issued on June 17, 1982 at Tampa, Florida, and that the $1,000 bond posted by Respondent to gain release of the gasoline product which was the subject of the stop sale notice of June 11, 1902 at Brooksville, Florida also be forfeited. DONE and ENTERED this 24th day of September, 1982, in Tallahassee, Florida. THOMAS C. OLDHAM Hearing Officer Division of Administrative Hearings The Oakland Building 1230 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 27th day of September, 1982. COPIES FURNISHED: Robert A. Chastain, Esquire Department of Agriculture and Consumer Services Mayo Building Tallahassee, Florida 32301 T.D. McRae, President United Petroleum, Inc. 680 South May Avenue Brooksville, Florida 33512 Honorable Doyle Conner Commissioner of Agriculture The Capitol Tallahassee, Florida 32301
Findings Of Fact Sunshine Jr. Stores, Inc., #214 is a service station in the business of selling regular leaded, regular unleaded, and unleaded premium gasoline to the public. Store # 214's place of business is located at the intersection of East Avenue and U.S. Highway 98 in Panama City, Florida. On August 6, 1990, James Wood, the Department's inspector, visited the station to conduct an inspection of the gasoline Respondent was offering for sale to the consuming public from its tanks and related gasoline pumps. Mr. Wood took samples of all three types of gasoline offered for sale by Respondent. The samples were forwarded to the Department's laboratory in Tallahassee and were tested to determine whether they met departmental standards for each type of gasoline. The Departmental testing revealed that the regular-leaded gasoline did not contain any lead. The pumps had been mislabeled at the station and the station was in fact selling regular leaded gasoline as regular-unleaded gasoline. Since the leaded gasoline did not contain any lead, it fell below Departmental standards for leaded gasoline. The store had sold 2467 gallons of the mislabeled product. In light of the above facts, the Department elected to allow the Sunshine-Jr. Store, #214, to post a $1,000 bond in lieu of confiscation of the gasoline. The bond was posted on August 9, 1990. The Department assessed Sunshine-Jr. Stores, Inc., #214 the retail value of the product sold, which is equal to the posted bond. The assessment is reasonable and conforms to the amount of assessments imposed by the Department in similar cases.
Recommendation It is accordingly, RECOMMENDED: That the request of Sunshine Jr. Food Stores, #214 for refund of the bond posted be DENIED and that the assessment by the Department of Agriculture and Consumer Services in the amount of $1,000 be sustained. DONE and ORDERED this 16th day of March, 1991, in Tallahassee, Florida. DIANE CLEAVINGER 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 18th day of March, 1991. COPIES FURNISHED: Milton Lawrence P. O. Box 2498 Panama City, Florida 32402 Clinton H. Coulter, Jr., Esquire Department of Agriculture and Consumer Services Mayo Building Tallahassee, Florida 32399-0800 Honorable Bob Crawford Commissioner of Agriculture The Capitol, PL-10 Tallahassee, Florida 32399-0810 Richard Tritschler General Counsel 515 Mayo Building Tallahassee, Florida 32399-0800 =================================================================
The Issue The issue presented for decision in this case is whether state and local option taxes may be imposed upon Petitioner, Co-Op Oil Company, Inc. (“Co-Op Oil”), based upon the gallons of fuel sold at retail stations that were not owned or operated by Co-Op Oil, and to which Co-Op Oil did not consign fuel, but that were voluntarily “linked” to Co-Op Oil for reporting purposes via Department of Revenue (“DOR”) Form DR-120.
Findings Of Fact Based on the oral and documentary evidence adduced at the final hearing, and the entire record in this proceeding, the following findings of fact are made: During the audit period, Co-Op Oil was a domestic corporation engaged in the business of wholesale and retail petroleum distribution, and held Florida motor fuel tax license No. 09000447. Since the audit period, Co-Op Oil has exited the retail portion of the petroleum distribution business. DOR is an executive agency of the State of Florida. Among other duties, DOR is charged with administration and enforcement of Florida’s fuel tax laws, pursuant to Chapter 206, Florida Statutes. During the audit period, Co-Op Oil was a wholesale petroleum distributor to marinas, commercial fishermen, construction companies, and other businesses not served by retail facilities. Jim Smith, President of Co-Op Oil, testified that beginning in August, 1989, and continuing through December, 1994, Co-Op Oil requested that certain independent retailers to which Co-Op Oil supplied petroleum be “linked” to Co-Op Oil for retail tax reporting purposes. Mr. Smith testified that he made the decision to request linkage for those retail dealers that he believed incapable of correctly reporting the taxes on their own. His purpose was to ensure that all taxes owed to the state were actually reported and paid. Mr. Smith testified that he understood “linkage” to require Co-Op Oil to report and remit all the fuel taxes that Co-Op Oil actually collected on the gallons of fuel it sold to the linked dealers. Essentially, Co-Op Oil collected and remitted taxes on the net gallons of fuel it delivered to the dealers. DOR does not dispute that Co-Op Oil remitted all the taxes that it actually collected on the net gallons delivered to the linked dealers. However, in reporting taxes for the linked facilities, Co-Op Oil did not report “gains” for those facilities. The concept of “gains” is based on the principle that the volume of a volatile substance such as gasoline changes with the temperature. In the petroleum industry, a “net gallon” is based on the volume of a gallon of fuel at 60 degrees. The industry has developed a formula to account for the difference in volume caused by temperatures above or below 60 degrees. Under the adjustments made pursuant to the formula, a “gallon” of gasoline stored at a temperature below 60 degrees is worth more than a gallon stored at a temperature higher than 60 degrees because of its greater compression. The linked facilities in question were located in and around Pinellas County, where the year-round temperature in their underground tanks is significantly greater than 60 degrees, meaning that gasoline stored therein would reasonably be expected to expand after delivery by Co-Op Oil. This expansion would result in the retail facilities being able to sell marginally more gallons of fuel to the ultimate consumers than the net gallons purchased from Co-Op Oil at the wholesale level. This phenomenon of “gains” at the retail level, along with alleged abuses by dealers, led DOR to successfully persuade the Legislature in 1992 to adopt a statutory requirement that retailers who were not also wholesalers or refiners must collect and remit tax on the additional gallons of fuel sold at the retail level. Section 206.41(1)(b), Florida Statutes (1995), imposing the constitutional gas tax, contained the typical language: If any licensee owns or operates retail stations or has fuel on consignment at retail stations and has sold more fuel than was purchased tax-paid when the fuel was removed from the rack or than was reported to the state when first purchased or removed from storage tax-free, the licensee must report the additional gallons sold and pay the additional tax, due for the month, on his or her local option gasoline tax return or a return designated by the department. The “rack” is that part of a terminal facility by which petroleum products are loaded into tanker trucks or rail cars. Section 206.01(16), Florida Statutes (1995). In practice, the “rack” also refers to bulk plant facilities operated by wholesalers such as Co-Op Oil. Similar language requiring the reporting and payment of “gains” was included in Section 206.60(1)(b), Florida Statutes (1995)(county gas tax); Section 206.605(1)(b), Florida Statutes (1995)(municipal gas tax); Section 336.021(2)(b), Florida Statutes (1995)(county nine cent gas tax); Section 336.025(2)(b), Florida Statutes (1995)(local option gas tax); and 336.026(2)(a), Florida Statutes (1995)(State Comprehensive Enhanced Transportation System Tax). The cited sections from Chapter 336, Florida Statutes (1995) also provided that refiners, importers, wholesalers, and jobbers were to be considered as retail dealers when electing to remit the subject taxes on behalf of retail stations they owned or operated, or where they had fuel on consignment. Administratively, DOR accomplished the collection of the tax on “gains” by requiring dealers to base their tax returns on “metered gallons,” i.e., the reading of gallons at the gas pumps used by retail customers. Petitioner conceded at hearing that retail facilities, when filing their own tax returns, were required to calculate the taxes based on metered gallons. A Florida form DR-120 is the form upon which a motor fuel dealer reports the amount of motor fuel sold and the amount of local county option taxes due. On a monthly basis during the audit period, the Petitioner filed form DR-120 with the Respondent. All taxes reported by Co-Op Oil on these forms during the audit period were calculated based on net gallons sold by Co-Op Oil to the linked dealers. A Florida form DR-119 is the form upon which a motor fuel dealer reports the amount of fuel sold and the amount of state taxes due. On a monthly basis during the audit period, the Petitioner filed form DR-119 with the Respondent. All taxes reported by Co-Op Oil on these forms during the audit period were calculated based on net gallons sold by Co-Op Oil to the linked dealers. During the audit period, DOR had in place no formal mechanism by which a wholesaler such as Co-Op Oil could “link” its tax return to that of a retailer that it neither owned nor operated nor to which it consigned fuel. Mr. Smith credibly testified that in 1989 he was instructed by a DOR employee named Mary Ann Moye that such linkage could be accomplished by written notification to DOR and the actual reporting and collection of taxes by the wholesaler on behalf of the retailer. Peter Steffens, a 22-year DOR employee intimately familiar with the evolution and application of the fuel taxes at issue in this proceeding, testified that while “linkage” did not formally exist in statute or rule, DOR in fact treated “linked” retailers as consigned retailers. In other words, when a wholesaler such as Co-Op Oil linked a retailer’s return to its DR-120, the wholesaler would be treated as if it were consigning fuel to that retailer, whether it was collecting tax at the time of delivery or at the time of retail sale. DOR took the position that a wholesaler such as Co-Op Oil steps into the shoes of its linked retailers, and remains in those shoes after it delivers fuel to the retailers. To avoid the loss of taxes that are unquestionably owed, DOR places upon linked wholesalers a continuing responsibility to see that all taxes are reported and paid even after the fuel is physically delivered to the retailers. Given that DOR did not impose linkage on the wholesalers, but only allowed it at the written request of the wholesalers, this was a reasonable requirement. Because the statutes provided that a consignor must pay tax on “gains,” DOR took the position in its audit that Co-Op Oil was also required to pay “gains” for the stations it linked on its DR-119 and DR-120 tax returns for the audit period. Mr. Smith took the position that Co-Op Oil was required to pay tax only on those net gallons it sold to its retailers because, unlike a consignor, Co-Op Oil itself realized no profit from the “gains” of its retail dealer. Mr. Smith questioned the validity of the entire concept of “gains,” but was well aware of DOR’s position on the issue, having litigated an administrative tax assessment proceeding against DOR in 1993 in which “gains” was a central issue. See Co-Op Oil Company, Inc. v. Department of Revenue, Division of Administrative Hearings Case No. 93-2019 (Recommended Order, Sept. 22, 1993). Mr. Smith acknowledged that the tax on “gains” might be owed by the retail dealers, but took the position that DOR should seek payment of that tax directly from the retailers. Mr. Smith testified that he assumed that once the dealers were linked to Co-Op Oil, they would be treated as ultimate consumers for his reporting purposes. Mr. Smith admitted that his assumption was based on his reading of the statutes, not on any guidance he had received from DOR. DOR made initial inquiry to Mr. Smith as to the taxes being reported and paid by Co-Op Oil during telephone conversations in December, 1995. By follow-up letter dated January 4, 1996, Charles E. Pate, Senior Tax Specialist with DOR, wrote to Mr. Smith as follows, in pertinent part: It is not intended that the method of reporting you have chosen should reduce the tax liability that would result if each retail dealer were reporting individually on form DR-121. It is necessary that each dealer you are selling to reconstruct the difference between net and gross gallons for the period 7/92 through the present. All applicable state and local taxes will be assessed on the calculated adjustment. Mr. Pate testified that he made several subsequent requests to Mr. Smith for the information regarding the unreported “gains” of the retailers in question. Mr. Pate stated that, despite Mr. Smith's promises, the requested information was never provided by Co-Op Oil. It was undisputed that sales agreements with its retailers gave Co-Op Oil a contractual right to collect from the retailers any additional fuel tax that might become due. Mr. Smith acknowledged that he never supplied the “gains” information to Mr. Pate, but could not recall ever promising to do so, stating that his understanding of Mr. Pate’s letter was that DOR needed to require each dealer to reconstruct their sales for the audit period. Mr. Smith stated that all but three of the retailers in question were out of business, and that he did not attempt to obtain the information from the others. Mr. Smith’s testimony established that he is very knowledgeable as to fuel tax law. In addition to calculating and paying the taxes for his business since at least 1989, he has attended seminars on the subject, served on a task force made up of DOR and industry representatives that drafted changes to the fuel tax laws, and has acted as a legislative lobbyist on tax issues on behalf of his company and the Florida Petroleum Marketers Association. Given his knowledge, it was unreasonable for him to assume that a tax on “gains” otherwise owed by his retailers need not be paid simply because their tax returns were administratively linked with those of Co-Op Oil. DOR did not attempt directly to force the retailers to reconstruct their records. Mr. Pate did inform Mr. Smith that if Co-Op Oil would produce the records, then DOR would pursue the individual dealers. However, no dealer records were ever produced by Co-Op Oil. Mr. Pate was thus forced to assess the tax based on an estimate. He arrived at this estimate by assuming a one percent “gain” on the net gallons reported by Co-Op Oil for the linked retailers. This was a reasonable and conservative assumption, consistent with the industry standards for calculation of “gains.”
Recommendation Upon the foregoing findings of fact and conclusions of law, it is recommended that the Department of Revenue enter a final order sustaining the assessment of additional tax, penalties, and interest against Co-Op Oil. DONE AND ENTERED this 30th day of July, 1998, in Tallahassee, Leon County, Florida. LAWRENCE P. STEVENSON 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 30th day of July, 1998. COPIES FURNISHED: James E. Smith, President, Co-Op Oil Company, Inc. 4911 8th Avenue South Gulfport, Florida 33707 John N. Upchurch, Esquire Nicholas Bykowsky, Esquire Assistant Attorneys General Office of the Attorney General Tax Section The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050 Larry Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100 Linda Lettera, General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found. On January 15, 1980, Nick Pappas, a petroleum inspector with respondent's Division of Standards, took samples of regular and no lead gasoline from petitioner's station No. 582 located at 3130 Gulf to Bay Boulevard in Clearwater, Florida. An analysis of the samples was performed in the Tallahassee lab showing lead contents in the amount of 0.56 grams per gallon in the no lead gasoline sample. The standard for unleaded gasoline offered for sale in Florida is 0.05 gram of lead per gallon. A second sampling and analysis was performed approximately eleven days later because more gasoline had been dumped into the tank since the first sampling. Test results indicated essentially the same level of lead content in the unleaded gasoline. The respondent thereupon issued a "stop sale notice" on January 26, 1980, due to the high content of lead in the product. Tom Nestor, the station manager, was informed that he had several alternatives, including confiscation of the product, with the petitioner posting a bond in the amount of $1,000.00 for the release of the product to be sold as regular gasoline. Having elected this alternative, a "release notice or agreement" was entered into on January 28, 1980. Respondent received a bond in the amount of $1,000.00 from Petitioner, and this amount was deposited into the Gasoline Trust Fund. Tom Nestor admitted the truth of the above facts and admitted that he did not check the product after it was dumped into the tank. He stated that the driver of the delivery truck delivered the product to the wrong gasoline tank. According to Mr. Nestor, the tanks at his station were not properly marked at the time the delivery was made. The "premium" tank was being used to dispense "unleaded" gas, and the deliverer dumped "regular" gasoline into the "unleaded" tank.
Recommendation Based upon the findings of fact and conclusions of law recited herein, it is RECOMMENDED that the petitioner's request for a return of the cash bond be DENIED. Respectfully submitted and entered this 28th day of July, 1980, in Tallahassee, Florida. DIANE D. TREMOR Hearing Officer Division of Administrative Hearings 101 Collins Building Tallahassee, Florida 32301
Findings Of Fact Prior to July 10, 1984, Son-Mar Propane, Inc. (Son-Mar) was licensed by the Department as a dealer in liquefied petroleum gas, in appliances and in equipment for use of such gas and installation. Virgil Berdeaux was the president of Son-Mar and he and his wife were the sole stockholders. Virgil Berdeaux passed the competency exam which qualified Son-Mar for licensure. Sonny Wade Berdeaux Virgil Berdeaux's son, was the manager of Son-Mar. Son- Mar's business address and place of operation was 16034 U.S. Highway 19 North in Hudson, Florida. Virgil Berdeaux and his wife owned the property located at that address and leased it to Son-Mar. A propane pumping station and a building was located on the property at 16034 U.S. Highway 19. The building housed a pawn shop and supply store for mobile home and RV equipment. Son-Mar operated the pumping station and the stores. It also installed tanks and delivered gas to customers. 1/ On July 10, 1984, a final order was entered by the Department which ordered "[t]hat any and all of [Son-Mar's] licenses issued by the State Fire Marshal Division of Liquefied Petroleum Gas and eligibility to hold said licenses are hereby revoked." The revocation of Son-Mar's licenses was due to its violation of certain safety standards and rules. Specifically, it was found that an employee of Son-Mar, Mr. John Delham, filled a cylinder that had not been recertified, that he lay it horizontally in the customer's van, and that he failed to secure the tank in the van. While the van was still parked at Son-Mar an explosion occurred which destroyed the van and killed its occupant. On July 19, 1984, nine days after Son-Mar's licenses were revoked, Virgil Berdeaux submitted an application for licensure as a dealer in appliances and equipment for use of liquefied petroleum gas, listing the business address as 16034 U.S. Highway 19, Hudson, Florida, and listing the business name as Son- Mar Pawn Shop. On August 3, 1984, twenty-four days after the revocation of Son- Mar's licenses, Sonny Wade Berdeaux submitted an application for licensure as a dealer in liquefied petroleum gas, listing the business address as 16034 U.S. Highway 19, Hudson, Florida. The Department issues several different types of liquefied petroleum gas licenses. A Type 06, Class 02 license, known as a 602 license, is issued to a dealer in appliances and equipment for use of liquefied petroleum gas. The 602 license allows the holder to sell propane appliances and equipment, such as stoves, heaters, and gas grills but it does not permit the holder to install appliances or sell propane gas. A competency examination is not required for this type of license, and there is no inspection of the place of business prior to issuance of the license. Virgil Berdeaux applied for a 602 license. He completed the application and submitted the required fee. The application listed W. C. Johnson, Virgil Berdeaux's son-in-law, as the manager of the business. Bill Johnson had run the pawn shop for Son-Mar. Sonny Wade Berdeaux applied for a Type 06, Class 04 license known as 604 license, which is issued to a dealer in liquefied petroleum gas. This type of license permits the holder to pump liquefied petroleum gas for sale to the public. An applicant for this type of license must pass a competency test and file a surety bond or certificate of insurance. Further, if the licensee has a dispensing station, an inspection of the business location must be performed to ensure that it is in compliance with all safety regulations. Sonny Wade Berdeaux passed the competency examination, filed a certificate of insurance, and submitted the proper fee. Son-Mar held a Type 06, Class 01 license (a 601 license) as a dealer in liquefied petroleum gas, in appliances and in equipment for use of such gas and installation. A 601 license permits the holder to pump liquefied petroleum gas for sale to the public, to sell appliances and equipment for use of liquefied petroleum gas, and to install such appliances and equipment. In essence, it is a combination of a 602 license, a 604 license, and a license to install equipment. Both Sonny Wade Berdeaux and Virgil Berdeaux received letters dated October 8, 1984, which informed them that their applications for licensure had been denied. Both letters referred to the revocation of Son-Mar's licenses and pointed out that the applicants would be operating on the same premises and employing the same staff as Son-Mar. Both letters concluded as follows: Thus, it would appear that your application is seeking licensure for essentially the same entity that has only recently had its liquefied petroleum gas licenses revoked. Therefore, in the interest of public safety, this Bureau cannot permit an Order of Revocation to be obviated by a mere procedural reapplication in your name. The applications for licensure both list the business address as 16034 U.S. Highway 19 in Hudson, Florida. At the time of application Virgil Berdeaux owned that property and Sonny Wade Berdeaux had leased the pumping station. However, on July 1, 1985, the property at 16034 U.S. Highway 19 was sold. The pumping station was moved out along with the inventory that remained in the pawn shop. Neither Virgil Berdeaux or Sonny Wader Berdeaux retained any interest in the property, and at this time neither could operate a business at that location. Although there was testimony concerning the manner in which the business would have been operated and controlled had licensure been granted at the time of applications there was no testimony indicating where or how the business would now be operated. There was no attempt to amend either application to reflect a current business address, and the certificate of insurance entered into evidence lists 16034 U.S. Highway 19, Hudson, Florida, as the location covered. 2/
Recommendation Based on the foregoing findings of fact and conclusions of law; it is RECOMMENDED that a Final Order be entered denying petitioners' applications for licensure. DONE and ENTERED this 21st day of May, 1986, in Tallahassee, Florida. DIANE A. GRUBBS 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 May, 1986.
Findings Of Fact During a routine inspection on March 30, 1983, a sample diesel fuel taken from Respondent's place of business in Clearwater, Florida, was tested and was found to have a flash point of 660F. Normal flash point for diesel fuel is 1000F. A Stop Sale Notice was issued March 30, 1983, and sales from this tank were stopped. On March 31, 1983, Respondent posted a $1,000 bond in lieu of having the fuel confiscated. Before the Stop Sale Notice, 1,282 gallons of contaminated diesel fuel had been sold from this tank at a price of $1.099 per gallon.
The Issue Whether the Department of Revenue's denial of Petitioner's application for a Florida fuel license should be upheld.
Findings Of Fact Based on the oral and documentary evidence presented at the final hearing and on the entire record of this proceeding, the following findings of fact are made: On or about July 22, 2002, Armando B. Yzaguirre submitted to the Department a completed Florida Fuel Tax Application, Form DR-156, seeking licensure as a private carrier and wholesaler on behalf of My Oil (the "2002 Application"). The application listed Maria Yzaguirre as the president and chairman of the board of My Oil, and listed Armando B. Yzaguirre as the vice-president and chief executive officer of My Oil. This was the second Florida Fuel Tax Application filed by My Oil. On or about June 22, 2001, Maria Yzaguirre submitted to the Department a completed Florida Fuel Tax Application, Form DR-156, seeking licensure as a private carrier and wholesaler on behalf of My Oil (the "2001 Application"). The application listed Mrs. Yzaguirre as the president and sole stockholder of My Oil. The Department's rejection of the 2001 Application was at issue in DOAH Case No. 02-0469. The rejection was based on the fact that Armando Yzaguirre, a convicted felon whose civil rights had not been restored and who was the father of Armando B. Yzaguirre and the husband of Maria Yzaguirre, appeared to be in a position to exert control over the business of My Oil. Shortly before the 2001 Application was filed, Armando Yzaguirre had filed a Florida Fuel Tax Application for Yzaguirre Oil Company Inc. ("Yzaguirre Oil"). The application listed Armando Yzaguirre as the president and sole stockholder of Yzaguirre Oil. The coincidence of the applications, and the fact that they listed many of the same assets, led the Department to suspect that My Oil would operate as a "front" for Yzaguirre Oil, which was presumptively ineligible for licensure because it was owned and operated by a convicted felon. The relevant facts found in the Recommended Order for DOAH Case No. 02-0469 are as follows: In his review of the Yzaguirre Oil and My Oil applications, [Aaron Hood, the Department's revenue specialist] discovered that the companies claimed many of the same assets. Each company listed the same two tanker trucks to be used in transporting fuel. Each company listed 211 New Market Road, East, in Immolakee as its principal business address. Each company claimed exactly $1 million in accounts receivable. The timing of the filings and the common assets led Mr. Hood to suspect that the later My Oil application was submitted under Maria Yzaguirre's name to evade the possible disqualification of the Yzaguirre Oil application because of Mr. Yzaguirre's felony convictions. In short, Mr. Hood suspected that My Oil was a "front" corporation over which Mr. Yzaguirre would exercise control. The common assets also led Mr. Hood to suspect the truthfulness and accuracy of the financial affidavits filed by Maria Yzaguirre on behalf of My Oil. While it investigated the criminal history of Mr. Yzaguirre, the Department also investigated the extent of Mr. Yzaguirre's possible control over My Oil's business activities. Armando B. Yzaguirre is the 25-year- old son of Armando Yzaguirre and the stepson of Maria Yzaguirre. Testimony at the hearing established that Armando B. Yzaguirre completed both license applications and was the driving force behind the creation of both Yzaguirre Oil and My Oil. The elder Armando Yzaguirre's chief business is farming. His tomato and melon operation earns over $1 million per year. To save money on transporting the large amounts of fuel needed for his farming operations, Mr. Yzaguirre purchased two sizable tanker trucks in 2001, a new Peterbilt with a capacity of 9,200 gallons, and a 1998 Ford with a 2,500 gallon capacity. If these trucks were used only for Mr. Yzaguirre's farm, they would sit idle much of the time. This idle capacity gave Armando B. Yzaguirre the idea of going into the fuel transport business, using his father's tankers to deliver fuel to other farms and businesses in the area. Yzaguirre Oil was incorporated to operate as a fuel transport business. The business would be operated entirely by Armando B. Yzaguirre, who was the only member of the family licensed to drive the large tanker truck. The trucks were owned by and licensed to Yzaguirre Oil. Armando B. Yzaguirre was going through a divorce at the time Yzaguirre Oil was established. He was concerned that his wife would have a claim to half of any business he owned, and wished to ensure that ownership of Yzaguirre Oil would remain in his family. Thus, Armando B. Yzaguirre placed all ownership of Yzaguirre Oil in the name of his father, though his father would have no connection with the operation of the company's business. Subsequent to incorporating Yzaguirre Oil, Armando B. Yzaguirre discussed his prospective business with his stepmother, Maria Yzaguirre. Mrs. Yzaguirre was pleased that young Armando was establishing a business for himself. They discussed the future of the six younger Yzaguirre children and ideas for businesses that could be established to eventually be taken over by the children. Ultimately, the younger Armando and Maria Yzaguirre settled on the idea of a convenience store and filling station that could be established on part of a city block in Immolakee that the senior Mr. Yzaguirre already owned. This would be the type of business that the children could learn and work at while they were still in school, then take over after their graduation. This was the genesis of My Oil. Mrs. Yzaguirre contacted a lawyer to draft articles of incorporation and later transferred $100,000 from her personal money market account into a My Oil bank account to provide start-up money. The younger Armando Yzaguirre filled out the fuel license application, using his earlier application for Yzaguirre Oil as a model. As with the earlier application, the younger Armando Yzaguirre kept his name off the corporate documents and the fuel license application to avoid any claim by his soon- to-be ex-wife to the company's assets. He anticipated that My Oil would lease the two tanker trucks from Yzaguirre Oil, and thus listed them on the application as assets of My Oil. At the hearing, Mr. Yzaguirre conceded that he made mistakes on both applications. As noted above, he listed $1 million in accounts receivable for each of the companies. These were actually accounts receivable for his father’s farming operation, and should not have been included as assets for either Yzaguirre Oil or My Oil. * * * The Department pointed to several alleged discrepancies in the My Oil application as grounds for its suspicion that the company was a "front" for Yzaguirre Oil. First, the My Oil application, filed June 20, 2001, lists a corporate asset of $100,000 in cash on deposit at an unnamed bank, when in fact the cash was not deposited in a My Oil account at Florida Community Bank until September 10, 2001. Second, the My Oil application lists the two tanker trucks as corporate assets as of the date of application, when in fact the trucks were titled in the name of Yzaguirre Oil and the anticipated lease arrangement had yet to be consummated. Third, the My Oil application claimed the property at 211 New Market Road, East, as a corporate asset as of the date of application, when in fact the property was titled in the name of the elder Mr. Yzaguirre. Fourth, the My Oil application listed $1 million in accounts receivable as a corporate asset. As noted above, Armando B. Yzaguirre admitted at the hearing that these receivables were from his father's farming operation and should not have been listed on the application as assets of My Oil. Armando B. Yzaguirre plausibly explained that My Oil anticipated leasing the trucks, but that there was no reason to spend the money to finalize that arrangement until the fuel license was obtained and My Oil could actually commence operations. Similarly, Mrs. Yzaguirre clearly had on hand the $100,000 in cash claimed as a My Oil asset, and the timing of her actual transfer of that money into a My Oil account would not alone constitute cause for suspicion, given that My Oil had yet to commence operations when the application was filed. Armando B. Yzaguirre also convincingly explained that leasing the tanker trucks from his father's company would not give Yzaguirre Oil effective control over My Oil's business. The younger Mr. Yzaguirre contemplated that the lease agreement would be an arms-length arrangement between the two companies. If the companies could not arrive at a mutually satisfactory lease agreement, or if the lease agreement should later fall through, My Oil could lease trucks from another company and continue doing business. However, no witness for My Oil offered a satisfactory explanation as to how the elder Mr. Yzaguirre's ownership of the real property would not give him some degree of control over My Oil's business. At the time of the hearing, title to the property at 211 New Market Road, East, was in the name of Armando Yzaguirre. A warranty deed for at least a portion of the property, executed by the prior owners on July 16, 1998, was in the name of Armando Yzaguirre. The Yzaguirres did not explain whether My Oil would purchase or lease the property from the elder Mr. Yzaguirre. The structure of the arrangement is critical to the issue of the elder Mr. Yzaguirre's control over My Oil. Substitutes for the tanker trucks could be obtained in short order with little or no disruption of My Oil's business. However, the physical location of the convenience store and filling station could not be changed so readily, and the elder Mr. Yzaguirre's position as owner of that property could give him great leverage over the operation of the business. The Department also raised the issue of the undisclosed participation of Armando B. Yzaguirre in the business affairs of My Oil. The testimony of Maria Yzaguirre and of her stepson strongly indicated that the younger Mr. Yzaguirre would have substantial control over the business activities of My Oil. However, because Armando B. Yzaguirre's identity was not disclosed on My Oil's application, the Department had no opportunity to conduct a review of his background and character to determine whether he met the standard set by Section 206.026, Florida Statutes. In summary, there was no direct evidence that the Yzaguirres deliberately attempted to deceive the Department or that My Oil was established as a front to obtain licensure for the presumptively ineligible Yzaguirre Oil. The evidence did establish that Armando Yzaguirre has been convicted of at least one felony, and that his ownership of the real property on which My Oil would conduct business could provide him with control of My Oil's business activities. The evidence further established that Armando B. Yzaguirre will have control over My Oil's business, and that the Department should have had the opportunity to conduct a background review to determine his fitness under Section 206.026, Florida Statutes. The relevant conclusions of law set forth in the Recommended Order for DOAH Case No. 02-0469 are as follows: Section 206.026, Florida Statutes, provides in relevant part: (1) No corporation . . . shall hold a terminal supplier, importer, exporter, blender, carrier, terminal operator, or wholesaler license in this state if any one of the persons or entities specified in paragraph (a) has been determined by the department not to be of good moral character or has been convicted of any offense specified in paragraph (b): 1. The licenseholder. The sole proprietor of the licenseholder. A corporate officer or director of the licenseholder. A general or limited partner of the licenseholder. A trustee of the licenseholder. A member of an unincorporated association licenseholder. A joint venturer of the licenseholder. The owner of any equity interest in the licenseholder, whether as a common shareholder, general or limited partner, voting trustee, or trust beneficiary. An owner of any interest in the license or licenseholder, including any immediate family member of the owner, or holder of any debt, mortgage, contract, or concession from the licenseholder, who by virtue thereof is able to control the business of the licenseholder. 1. A felony in this state. Any felony in any other state which would be a felony if committed in this state under the laws of Florida. Any felony under the laws of the United States. (2)(a) If the applicant for a license as specified under subsection (1) or a licenseholder as specified in paragraph (1)(a) has received a full pardon or a restoration of civil rights with respect to the conviction specified in paragraph (1)(b), then the conviction shall not constitute an absolute bar to the issuance or renewal of a license or ground for the revocation or suspension of a license. . . . In December 1990, Armando Yzaguirre entered a no contest plea to a second-degree felony charge of possession of more than five but not more than 50 pounds of marijuana in a Texas court. At the time of Mr. Yzaguirre's Texas conviction, Florida law listed cannabis as a Schedule I substance. Section 893.03(1)(c)4, Florida Statutes (1990). Absent licensure or other authorization, bringing cannabis into the state was a third-degree felony in 1990. Section 893.13(1)(d)2, Florida Statutes (1990). Possession of more than 20 grams of cannabis was a third-degree felony in 1990. Section 893.13(1)(f) and (g), Florida Statutes (1990). There can be little question that Mr. Yzaguirre's felony in Texas would have constituted at least one felony under Florida law, and thus that Mr. Yzaguirre has been convicted of an offense specified in Section 206.026(1)(b), Florida Statutes. Mr. Yzaguirre has not received a full pardon or restoration of civil rights, thus mooting any potential application of Section 206.026(2)(a), Florida Statutes, to this case. Mr. Yzaguirre's ownership of the real property that would hold My Oil's principal place of business would give him the ability to control the business of the licenseholder. This conclusion might have been different had My Oil presented evidence of the business relationship under which it would operate the facility on Mr. Yzaguirre's property. The extent of Armando B. Yzaguirre's involvement in My Oil was not disclosed to the Department. Testimony at the hearing established that the younger Mr. Yzaguirre would be the principal operator of My Oil for the foreseeable future. Due diligence under Section 206.026, Florida Statutes, requires the Department to conduct a background investigation of Armando B. Yzaguirre prior to the issuance of a fuel license to My Oil. In conclusion, My Oil has failed to demonstrate its entitlement to a Florida fuel license on the merits of the application it filed on June 20, 2001. The Recommended Order in DOAH Case No. 02-0469 recommended that My Oil's 2001 Application be denied, but without prejudice to My Oil's ability to file a subsequent application curing the defects of its 2001 Application. In the 2002 Application, My Oil sought to cure those defects. First, the 2002 Application listed Armando B. Yzaguirre as a principal of My Oil, providing the Department an opportunity to conduct an investigation of his background and character. The Department's background check revealed no criminal convictions or other disqualifying factors related to Armando B. Yzaguirre. The Department's background check also revealed no criminal convictions or other disqualifying factors related to Maria Yzaguirre. The 2002 Application included an executed lease agreement, dated July 19, 2002, by which Armando Yzaguirre granted to My Oil a five-year lease on the premises at 211 New Market Road, East, in Immokalee. The lease specifies that My Oil will pay rent of $1,000 per month, and that the premises are to be used for the purpose of "a convenience store and retail gasoline sales to the general public, storage, and uses related to such use . . . and for no other purpose or purposes." The lease expressly states: "Landlord shall have no control over the use of the premises by the Tenant during the period of the lease." The 2002 Application continued to list the two tanker trucks as assets of My Oil, though they remain titled to Yzaguirre Oil. Armando B. Yzaguirre testified that My Oil does have a written lease with Yzaguirre Oil for the use of the tanker trucks. Armando Yzaguirre confirmed the existence of a lease on the trucks. However, the lease was not included in the 2002 Application and was not produced at the hearing. After receiving the 2002 Application, the Department contacted Armando B. Yzaguirre to request a current balance sheet for My Oil. The balance sheet submitted by Mr. Yzaguirre purported to show the assets and liabilities of My Oil as of July 22, 2002. The balance sheet indicated a negative total equity of $5,904.43. It indicated a "credit card" debt of $101,000 to Yzaguirre Farms, and other accounts payable of $36,852.79 to Yzaguirre Farms. At the hearing, the Department produced a canceled check from Armando Yzaguirre to My Oil in the amount of $101,000, with the notation, "My Oil Operating & Payroll." Armando Yzaguirre testified at the hearing that he has taken steps to have his civil rights restored, but that the process is not yet complete and his rights have not been restored. On August 22, 2002, the Department issued its Notice of Intent to Deny the 2002 Application, which stated, in relevant part: Your organization does not qualify for this license as there is a felony conviction of an owner of interest in the license and/or an immediate family member of the owner, as outlined in Chapter 206.026(1)(a)(9)&(b), Florida Statutes. The Department based its denial on several factors. First, the family relationship between My Oil's principals and Armando Yzaguirre itself raised the potential for Armando Yzaguirre to control My Oil. In particular, the Department noted the fact that Armando B. Yzaguirre resides in a mobile home owned by his father, and located a few hundred feet away from Armando Yzaguirre's main residence on the family property. Second, the balance sheet submitted by My Oil indicated a negative equity with large debts owed to Yzaguirre Farms, controlled by Armando Yzaguirre. Third, the Department concluded that the lease on the premises at 211 New Market Road, East, would not prevent Armando Yzaguirre from exerting control over My Oil, by breaking the lease, raising the rent, selling the property, or ejecting My Oil from the premises. Fourth, no proof was offered that My Oil had leased or purchased the tanker trucks from Yzaguirre Oil, meaning that My Oil's means of transporting fuel would be directly controlled by Armando Yzaguirre. Fifth, the $101,000 constituting the startup money for My Oil appears to have come directly from the bank account of Armando Yzaguirre. Sixth, My Oil was administratively dissolved by the Department of State on October 4, 2002, for failure to file an annual report. Finally, the Department stated that, regardless of the arms-length nature of any business dealings between My Oil and Armando Yzaguirre, My Oil would not be granted a license until Armando Yzaguirre's civil rights have been restored. The close family relationship coupled with the fact that Armando Yzaguirre is the source of My Oil's startup funds, its tanker trucks, and its business location, militate against granting My Oil a license so long as Armando Yzaguirre's civil rights have not been restored. In response, My Oil insisted that its 2002 Application cured every specific deficiency noted in the 2001 Application. First, it listed Armando B. Yzaguirre as a principal so that his background and criminal history could be investigated, and the Department's investigation revealed no disqualifying offenses. Armando B. Yzaguirre testified that the July 22, 2002, balance sheet submitted at the Department's request was not an accurate My Oil balance sheet. He stated that in setting up the computer program for My Oil's accounting, he attempted to shortcut the software's lengthy setup process for new businesses by simply copying an existing Yzaguirre Farms spreadsheet, then substituting the name "My Oil" for "Yzaguirre Farms." However, he quickly discovered that his "shortcut" would require him to delete manually every balance sheet entry for Yzaguirre Farms and re-enter the correct entries for My Oil. He abandoned this effort and began a My Oil spreadsheet from scratch, but he never deleted the partially converted Yzaguirre Farms spreadsheet from his computer. Mr. Yzaguirre testified the Department's phone call to request a current balance sheet came to him on his cellular phone while he was working on his father's farm. He relayed the message to his secretary, who printed a My Oil balance sheet and faxed it to the Department. Mr. Yzaguirre stated that, until the Department rejected the 2002 Application, he did not realize that his secretary had faxed a balance sheet generated by his aborted conversion of the Yzaguirre Farms spreadsheet, rather than the actual balance sheet for My Oil. A copy of what Armando B. Yzaguirre claimed was the actual My Oil balance sheet as of July 31, 2002, was introduced at the hearing. This balance sheet indicates an opening equity of $101,000, with $92,078.02 in retained earnings and operating and payroll accounts totaling $8,921.98. The July 31, 2002, balance sheet is accepted as the actual balance sheet for My Oil. While this balance sheet refutes the Department's conclusion that My Oil is starting business with a negative balance sheet indicating over $136,000 in debts to Yzaguirre Farms, it does not refute the evidence that the entire source of My Oil's cash accounts is $101,000, provided in the form of a check from an account in the name of Armando Yzaguirre. Armando B. Yzaguirre testified that the money came from a joint money market account in the name of Armando and Maria Yzaguirre, and that Maria was the source of the funds. This testimony is inconsistent with the fact that the check in question was signed by Armando Yzaguirre, and that his name alone appeared on the account name printed on the check. The elder Mr. Yzaguirre testified that he signed the check, but also testified that the account is in his name and that of his wife, and that they both consider the $101,000 to be her investment in My Oil. Neither of the Yzaguirres offered an explanation as to why Maria Yzaguirre's name did not appear on a check they claimed was drawn on a joint account. The Department's concerns about Armando Yzaguirre, a convicted felon, being the source of My Oil's startup funding were reasonable. My Oil failed to offer evidence sufficient to allay those concerns. Despite My Oil's claims to the contrary, the $101,000 check was plainly signed by Armando Yzaguirre and drawn from an account in his name. My Oil failed to explain the terms under which it accepted this startup funding from Armando Yzaguirre. The Department's explanation of its rejection of the lease submitted by My Oil for the premises at 211 New Market Road, East, was not reasonable. The lease document is a standard, arms-length agreement between My Oil and Armando Yzaguirre. The Department offered no evidence to support its assertions that Armando Yzaguirre would break the terms of the lease, that My Oil would not exercise its legal rights should Mr. Yzaguirre violate the lease's provisions, or that the lease should be considered invalid because a contract between relatives is inherently suspect. The other concerns raised by the Department-- that Mr. Yzaguirre might raise the rent, sell the property, or evict My Oil-- are answered by the terms of the lease itself and raise no issues beyond those that would arise in any lessor/lessee relationship. As to the lease on the tanker trucks, both Armando B. and Armando Yzaguirre testified that My Oil did have a lease on the trucks, to take effect if and when My Oil receives a fuel tax license from the Department. Their testimony is credited as to the existence of the lease, though they offered no testimony specifying the terms of the lease. The fact that My Oil was administratively dissolved for failure to file an annual report should have played no part in the Department's rejection of My Oil's application. Such dissolution is an administrative matter easily cured by the filing of the report. At most, the Department should have required My Oil to provide proof of reinstatement prior to issuance of any fuel tax license. In summary, several of the particular concerns on which the Department based its decision were overstated. However, the Department's overarching concern that Armando Yzaguirre was in a position to control the business of My Oil was reasonable. Armando Yzaguirre was clearly the source of the $101,000 in startup money for My Oil, and no evidence was offered to explain the terms under which this money was provided to My Oil. The lease arrangements for the premises and the tanker trucks may be unobjectionable in themselves, but when coupled with the fact that My Oil is heavily indebted to Armando Yzaguirre, they raise entirely reasonable suspicions regarding My Oil's independence from Mr. Yzaguirre's control. The Department's position that My Oil cannot be granted a license until Armando Yzaguirre's civil rights have been restored is supported by the evidence. Armando Yzaguirre is the source of My Oil's funds, its place of doing business, and its means of transporting fuel. My Oil failed to demonstrate that these facts do not give Armando Yzaguirre the ability to control its business.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order denying the application of My Oil Company, Inc., for a Florida fuel license, without prejudice to the ability of My Oil Company, Inc., to file a new application upon the restoration of Armando Yzaguirre's civil rights. DONE AND ENTERED this 28th day of May, 2003, in Tallahassee, Leon County, Florida. LAWRENCE P. STEVENSON 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 28th day of May, 2003. COPIES FURNISHED: J. Bruce Hoffmann, General Counsel Department of Revenue 204 Carlton Building Post Office Box 6668 Tallahassee, Florida 32314-6668 Robert F. Langford, Jr., Esquire Office of the Attorney General The Capitol-Tax Section Plaza Level 01 Tallahassee, Florida 32399-1050 E. Raymond Shope, II, Esquire 1404 Goodlette Road, North Naples, Florida 34102 R. Lynn Lovejoy, Esquire Office of the Attorney General The Capitol-Tax Section Tallahassee, Florida 32399-1050 James Zingale, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100
The Issue The issue is whether Petitioner is entitled to a refund of motor fuel taxes paid for motor fuel exported from Florida when Petitioner was not licensed as an exporter at the time of the transactions.
Findings Of Fact Petitioner is a Florida corporation engaged in the business of purchasing and reselling motor fuel. Petitioner, whose principle place of business is 1201 Oakfield Drive, Brandon, Florida 33509, does business within and without the State of Florida. Petitioner currently has a Florida Fuel Tax License, which is number 59-2150510. On April 5, 2004, and May 7, 12, and 13, 2004, upon Petitioner's orders, Kenan Transport loaded diesel fuel at the Marathon facility in Jacksonville, Florida, and delivered the fuel to Petitioner's Kingsland, Georgia, location. Daniel Way, the driver employed by Kenan Transport, delivered the April 5, 2004; May 7, 2004; May 12, 2004; and May 13, 2004, fuel loads to Petitioner's Kingsland, Georgia, location. 6. For the April 5, 2004; May 7, 2004; May 12, 2004; and May 13, 2004, fuel deliveries to Petitioner's Kingsland, Georgia, facility, Petitioner paid a total of $8,775.16 in Florida fuel taxes. The amount of Florida fuel taxes paid for each delivery was as follows: $2,192.99, for the April 5, 2004, delivery; $2,187.77, for the May 7, 2004, delivery; $2,187.20, for the May 12, 2004, delivery; and $2,187.20, for the May 13, 2004, delivery. At the time the four fuel deliveries noted in paragraphs 4 and 5 above were made to Petitioner's Kingsland, Georgia, facility, Petitioner did not have an exporter fuel license. Petitioner obtained an exporter fuel license that became effective December 1, 2004. The parties stipulated to the findings in paragraphs 1 through 9. Petitioner asserts that the Department should refund the fuel taxes it paid because, in the four transactions, Petitioner's account was mistakenly billed for the fuel. Gowan Oil Company (Gowan) is a distributor based in Folkston, Georgia, and has contracts with many fuel terminals in Jacksonville. Pursuant to an arrangement between Petitioner and Gowan, Petitioner did not usually buy fuel from any of the terminals in Jacksonville. Instead, Petitioner bought fuel for its truck stop in Georgia from Gowan, since Gowan could buy fuel at the Jacksonville terminals for less than Petitioner could. Depending on the price of fuel on a particular day, Petitioner would call Kenan Transport and tell the company to pick up fuel from a particular terminal in Jacksonville. The instructions relative to the above transactions were for the driver to pick up BP fuel and to put it on Gowan's account. Notwithstanding the specific instructions given to the driver, he made two mistakes with respect to the four fuel purchases. He not only mistakenly picked up the wrong fuel, Marathon fuel, but he also put the fuel he picked up on Petitioner's account, not on Gowan's account. The mistake made by the Kenan Transport driver is a common mistake made by transport drivers, who are "hauling out of multiple terminals every day." Drivers have loading cards for all of the accounts on which they pick up fuel. When picking up fuel, the driver should use the loading card which corresponds to the account for that particular load. In the four transactions that are at issue in this proceeding, the driver "loaded" the card for Petitioner's account, not the card for Gowan's account. Petitioner did not have an export license at the time of the transactions. Therefore, Marathon properly billed Petitioner for the Florida fuel taxes on the fuel that was picked up in Jacksonville, Florida, charged on Petitioner's account, and delivered to Petitioner's truck stop in Kingsland, Georgia. Petitioner tried unsuccessfully to have Marathon bill the subject fuel purchases to Gowan. If Gowan had been billed, it would not have been required to pay Florida fuel taxes on the four fuel purchases because it had an export license.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order denying Petitioner's application for a refund of fuel taxes. DONE AND ENTERED this 28th day of April, 2006, in Tallahassee, Leon County, Florida. S CAROLYN S. HOLIFIELD 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 28th day of April, 2006.
Findings Of Fact On February 27, 1980, Respondent converted one of its service station fuel tanks from gasoline to diesel. The tank was cleaned by Garrison Petroleum Equipment Company at Pinellas Park. Respondent paid $67.08 for this service. That same day, Respondent received 5,176 gallons of No. 2 diesel fuel from Jack Russell Oil Company, Inc., of Clearwater, a Union 76 dealer. On March 18, 1980, a standards inspector employed by Petitioner took samples from the Respondent's gasoline and diesel pumps. These samples were delivered to Petitioner's portable laboratory in Clearwater where they were analyzed. The gasoline was found to be satisfactory, but the diesel sample showed fuel contamination. The tests were conducted in accordance with the methods and standards established by Rule 5F-2.01(4)(b), Florida Administrative Code. Specifically, the "flash point" of the diesel sample was 88 degrees F, but must be 125 degrees F or above to meet the established standard. Petitioner's inspector then returned to the Pronto Car Wash station where he issued a stop-sale order to Respondent. Subsequently, the inspector accepted Respondent's cash bond in lieu of fuel confiscation. This procedure, agreed to by both parties, allowed Respondent to pay $865.36 to the State of Florida and retain the contaminated fuel. Respondent originally paid $5,286.25 for 5,176 gallons of diesel fuel. He had sold 736 gallons of this amount at the time of the stop-sale order on March 18, 1980. Total sales of this diesel fuel amounted to $865.36, which was the amount of bond demanded by Petitioner. Respondent paid $200 to Patriot Oil, Inc., to remove the contaminated fuel, but received a $3,225 credit for this fuel. Respondent does not deny that the fuel was contaminated, but seeks to establish that he acted in good faith. Respondent had the tank cleaned prior to the diesel changeover and dealt with established tank cleaning and fuel wholesaling companies. In addition, he kept the tank locked at all times after delivery of the fuel. Respondent does not contest forfeiture of his bond, but seeks refunds of state and federal taxes paid on the unsold fuel. However, Respondent was correctly informed that refund of tax payments will require him to communicate with agencies which are not parties to this proceeding.
Recommendation Upon consideration of the foregoing, it is RECOMMENDED: That Petitioner enter its order declaring forfeiture of Respondent's $865.36 bond posted in lieu of confiscation of contaminated diesel fuel. RECOMMENDED this 7th day of August, 1980, in Tallahassee, Florida. COPIES FURNISHED: Stephenson Anderson Pronto Car Wash 220 34th Street North St. Petersburg, Florida 33713 Robert A. Chastain, Esquire General Counsel Department of Agriculture and Consumer Services Mayo Building Tallahassee, Florida 32301 John Whitton, Chief Gasoline and Oil Section Department of Agriculture and Consumer Services Mayo Building Tallahassee, Florida 32301 R. T. CARPENTER Hearing Officer Division of Administrative Hearings 101 Collins Building Tallahassee, Florida 32301 (904) 488-8584
