Findings Of Fact On March 21, 1990, the School Board of Broward County issued an invitation to bid, No. 90-597T (ITB). The ITB sought to purchase a computerized fuel system, less trade-in. The general conditions of the ITB are common to all purchasing by the School Board and are contained on a single green cover sheet; the remainder of the ITB is made up of the special conditions applicable to the specific purchase. According to page 3, paragraph 1 of those special conditions, the School Board solicited bids on a "new on-line automated fuel dispensing and accounting system, less trade-in." The bidders were required to include in their proposals "all software, hardware (except an IBM Series/1 computer, if used), installation, labor, and training to complete the following objectives:" improve the efficiency and control of the Board's existing automated fuel system; improve fuel inventory management by intergrating in-tank monitoring and leak detection into the automated fuel dispensing system. Monitoring and leak detection devices were to be completely integrated using the same communication lines and computer hardware; record the acquisition, transfer and disposal of equipment; automate the collection and transfer of data to the Board's equipment management and financial accounting systems in the same format as the Board's current data and require no additional support or action by the Board; make appropriate reports available to user departments, and schedule and notify remote sites when preventive maintenance is due for a vehicle. Specifications for the system begin at page 10 of the ITB. Section I of the Specifications is a General System Description which fills pages 10-13 of the ITB. Section II at the bottom of page 13, describes a Fuel Dispensing Procedure. Section III, on page 14 describes Operating Procedures. Section IV on pages 15 and 16 specifies Hardware; the system is to include a computer, remote terminals, and actuator cards, installation criteria are also given for power and wiring. Section V, at pages 16-22 of the ITB, specifies Software and Programming. Its subsection I describes tank level monitors and says: The system will provide for in-tank level monitoring devices which are fully incorporated into the system. The tank level system will be as follows: The fuel island terminal will monitor the tank sensoring devices and generate and send a separate transaction each time it calls the Central Control Processor. This transaction will include fuel in inches and in gallons (gaged balance), water level in inches and temperature in degrees Fahrenheit. The most current readings will be stored in the system and will be available on the fuel inventory and receipts report. The calculated balance will continue to be the "primary balance." The Central Control Processor will generate a special transaction (unique transaction code) indicating sudden loss when the gauged balance drops more than the calculated balance by 1%. A special transaction or flag will be generated when more than 1/2 inch water exists in the tank (high water). Deliveries will be captured through the fuel monitor at sites so equipped. All/any manual delivery input will be recorded and flagged, but will not change the tank files. At sites without the monitor, manual readings will still be accepted. The PFR report will show water level, temperature, sudden loss and low inventory (re- order point). The fuel island terminal will also be equipped to monitor hydro-carbon wells. When hydro-carbon is detected the Fuel Infringement Circuit (FIR) will open and the pumps will be shut down. A FIR transaction will also be generated and sent to the Central Control Processor. Hydro-carbon probes will be included for all listed monitoring wells. The School Board received bids from three bidders which were open on April 26, 1990, at 2:00 p.m.. According to the bid tabulation, Tel-Star Systems bid $59,616, Cherokee group bid $882,924 and E. J. Ward, Inc. bid $106,816. Although Tel-Star was the low bidder, board staff believed that its bid did not meet the minimum advertised specifications. Staff intended to solicit bids for hardware for automatic in-tank fuel level monitoring and hydro-carbon well monitoring (i.e., leak monitoring) capabilities, and all software necessary to perform these functions. In reviewing the literature which accompanied Tel- Star's bid, staff had found no mention of hardware to automatically monitor the level of the fuel tanks or to monitor hydro-carbon wells. The marketing director for Tel-Star told staff that the necessary hardware for in-tank fuel level monitoring or hydro-carbon well monitoring was not included in the bid because Tel-Star did not interpret the ITB to require that hardware. Board staff determined the bid should be awarded to E. J. Ward, Inc., as the lowest bidder who met all advertised specifications. To companies dealing in computerized fuel systems, a computerized fuel dispensing and accounting system is separate from a system which provides in- tank monitoring and leak detection, although these two functions can be and are commonly integrated. No single manufacturer makes a system which will provide both computerized fuel dispensing, and in-tank monitoring and leak detection. Separate systems from different manufacturers can be combined to achieve both functions. The sales manager for Tel-Star Systems, Inc., who first reviewed the ITB noted the very brief reference to tank level monitors and hydro-carbon well monitors on page 22 of the ITB. He was unsure whether the bid called for that type of hardware. He discussed the matter with the president of Tel-Star, Mr. DeVoll. It was determined that because the reference to the in-tank monitoring and leak detection (hydro-carbon monitoring) was made only in the portion of the ITB dealing with Software and Programming (Part V), the School Board only wanted an automated fuel system which was capable of being integrated with fuel tank monitors and leak detection (hydro-carbon well) monitors. Based upon the structure of the ITB, this interpretation by Tel-Star and its officers was reasonable. It is also consistent with an objective reading of the bid made by one of Tel-Star's competitors, which also received the Board's invitation to bid and contemplated submitting a bid. According to Mr. Busbee, had he submitted a bid on behalf of his firm, based on the language of School Board's ITB, he would not have included hardware for in-tank level monitoring or leak detection (hydro-carbon well) monitoring. The bid from E. J. Ward, Inc., did include hardware for in-tank monitoring and leak detection, but this was not the result of the wording of the ITB. E. J. Ward, Inc., is the manufacturer of the present fuel dispensing system which the School Board of Broward County uses. Through servicing the account, representatives of E. J. Ward knew exactly what the School Board of Broward County had on site, and what it sought to acquire through its ITB. While E. J. Ward enjoyed no undue advantage by reason of its long association with the School Board, it was able to read the ITB with the gloss of its own experience, and knowledge of what staff intended to procure through the ITB. Its response to the ITB was not solely the product of a reading of the special conditions. The School Board believes that Tel-Star should have taken steps to determine whether the ITB was intended to include fuel level monitoring and leak detection monitoring, and points to page 7 of the Special Conditions, paragraph 30 which states: Any questions by prospective bidders concerning this Invitation to Bid should be addressed to Mr. George Toman, Buyer, Purchasing Department, (305) 765-6119, who is authorized only to direct the attention of prospective bidders to various portions of the Bid so they may read and interpret such for themselves. Neither Mr. Toman nor any employee of the School Board of Broward County is authorized to interpret any portion of the bid or give information as to the requirements of the Bid in addition to that contained in the written Bid Document. Interpretations of the Bid or additional information as to its requirements, where necessary, shall be communicated to bidders only by written addendum. Section 8 of the General Conditions states: Any questions concerning conditions and specifications should be submitted in writing and received by the Department of Purchasing no later than three (3) working days prior to the Bid opening. Tel-Star and its officers made no inquiry of Mr. Toman to attempt to determine whether the Board expected bids responding to the ITB to include hardware for in-tank monitoring and leak detection. Under the wording of paragraph 30, however, it is doubtful that any such inquiry would have been enlightening. Nothing in that paragraph states that if an inquiry is made, anyone at the School Board will attempt to interpret the bid or provide additional information which all bidders will receive through a written addendum. It merely advises potential bidders should any interpretation of the ITB be made by the School Board, it will be communicated through a written addendum. Paragraph 30 does not describe a procedure which Tel-Star should have followed in order to receive a clarification of what the School Board wished to purchase through its ITB. Paragraph 8 also fails to state that requests for interpretations will be answered, or that failure to submit a written question precludes a bidder from relying on the structure and language of an ITB. The references to hardware for monitoring are found only in the specifications for software. The interpretation made by Tel-Star, that its equipment would have to be capable of integration with monitoring hardware which would be separately procured was reasonable.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered by the School Board of Broward County upholding the protest of Tel-Star Systems, Inc., rejecting all bids for the computerized fuel system less trade-in, Bid No. 90-597T, ordering that the bid specifications be clarified, and that a new invitation to bid be circulated. DONE and ENTERED this 13th day of September, 1990, at Tallahassee, Florida. WILLIAM R. DORSEY, JR. 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 13th day of September, 1990. APPENDIX TO RECOMMENDED ORDER Rulings on the proposed findings by the School Board of Broward County: Adopted in Finding 1. Adopted in Finding 3. Implicit in Finding 4. 4.-5. Rejected as unnecessary. No party disputes that Tel-Star Systems, Inc., followed the appropriate protest procedures. Discussed in Findings 6 and 7. Rejected as recitation of testimony rather than a finding of fact. Adopted in Finding 9. Discussed in Finding 6. Generally adopted in Finding 10. Copies furnished: Norris J. DeVoll, President Tel-Star Systems, Inc. Post Office Box 791753 San Antonio, Texas 78279-1753 Edward J. Marko, Esquire Marko & Stephany Suite 201 Victoria Park Centre 1401 East Broward Boulevard Post Office Box 4369 Fort Lauderdale, Florida 33338 John K. Featherston Vice President E. J. Ward, Inc. 6410 Southwest Boulevard Suite 224 Fort Worth, Texas 76109 Virgil L. Morgan, Superintendent Broward County School Board 1320 Southwest 4th Street Fort Lauderdale, Florida 33312 Honorable Betty Castor Commissioner of Education The Capitol Tallahassee, Florida 32399-0400 Sydney H. McKenzie, General Counsel Department of Education The Capitol, PL-08 Tallahassee, Florida 32399-0400
The Issue The issues to be determined are whether Southeast Petro Distributors, Inc. (Petitioner or Southeast Petro), is entitled to a refund for taxes paid on its purchases of identified machinery and equipment based upon an exemption in section 212.08(5)(b), Florida Statutes; and, if so, whether Southeast Petro is entitled to statutory interest on the amount of any refund paid, pursuant to section 213.255, Florida Statutes.
Findings Of Fact Based on the testimony and documentary evidence presented, the demeanor of the witnesses, and the stipulations of the parties, the following facts are found: Southeast Petro is a fuel distributor that distributes fuel to customers in the Southeastern United States, concentrated mostly in Florida. Southeast Petro does not operate any of the locations to which it delivers fuel, but the operators of many of the locations, like Southeast Petro, are affiliate 1 Petitioner’s Exhibit 22 is for demonstrative purposes only. companies of M&R High Point Holdings, Inc. Summit Shah is the President of Southeast Petro and has been with the company for 22 years. He referred to these affiliate companies as “disregarded entities,” and testified that the companies are part of a family business, with all of the same officers and common ownership under a single federal tax return. Those other than Southeast Petro are referenced in this Recommended Order as affiliate sites. Southeast Petro also delivers fuel to locations in which it has no ownership interest. For these locations, which are referred to as dealer locations, Southeast Petro has entered into Dealer Supply Agreements. Under these agreements, Southeast Petro supplies not only the fuel to the dealers, but equipment to store and dispense the fuel, including gasoline tanks and dispensing pumps. While ownership of the fuel passes to the dealer when it is transferred to the storage tanks, the storage tanks, dispensing pumps, and related equipment remain the property of Southeast Petro. Southeast Petro is required to supply fuel to the dealer as necessary to meet customer demand. Southeast Petro purchases the underground tanks and dispensing pumps for both its affiliate sites and the dealer locations that buy its fuel. Fuel tanks generally last approximately 20 years, and have warranties for 10-20 years, while dispensing pumps last about 10 years, with most warranties lasting for four years. Both the dispensing pumps and the underground storage tanks have a depreciable life of over three years. As the pumps age, they become less efficient and the flow of the gasoline slows. This case involves the replacement of dispensing pumps and a few underground storage tanks at gas stations serviced by Southeast Petro. Most gas stations sell unleaded gasoline with three octane ratings: premium, with a 93 rating; mid-grade, with an 89 rating; and regular unleaded, with an 87 rating. Different vehicles require different fuel octane levels to maximize the performance of the vehicle. For example, a high performance sports car requires premium gas, while a typical sedan runs just fine on regular unleaded gasoline. At one time, an underground tank was required for each kind of fuel. However, within the last approximately 20 years, dispensing pumps have been manufactured with a blender mechanism that allows for the elimination of one storage tank and blends percentages of unleaded and premium fuel to create mid-grade fuel at the dispensing location. With the use of this type of dispensing pump, the need to transport and store mid-grade fuel is eliminated. Reducing the number of tanks required at each location reduces cost of insurance, as well as the cost related to supplying the tanks, and the risk of fuel leaks from the underground tanks. The Department contends that while Southeast Petro is purchasing these dispensing pumps with the blender capability, it is the customer, as opposed to Southeast Petro, that is “making” the mid-grade fuel through his or her selection of mid-grade when making the fuel purchase. However, unless the dispensing pump is equipped with the mechanism that blends the fuel, the customer cannot access mid-grade fuel. On or about May 22, 2017, Southeast Petro filed a DR-26S, Application for Refund – Sales and Use Tax form (application), with the Department, claiming that it was entitled to a refund of $146,846.47 in sales tax paid for dispensing pumps and underground storage tanks it purchased to replace the dispensing pumps and tanks at several locations. The purchases were for dispensing pumps for both affiliated entities and for dealer locations. The replacement of some underground storage tanks was also included in the claimed purchases. Dispensing pumps were purchased from Central Industries, Inc.; Guardian Fueling Technologies, LLC; and Sunoco, LLC, and underground storage tanks were purchased from Modern Welding Company of Florida, Inc. In addition to the application, Petitioner provided a power of attorney form, a spreadsheet listing job code, invoice date, invoice number, taxable amount, sales tax, sales tax percentage, and invoice totals for the purchases at issue; and several invoices for purchases of gasoline pumps, tanks, and related hardware necessary for installation. The invoices reflect the different sites to which pumps were installed. At least some portion of the address for the site was included on the invoices, such as the street address, although they did not always identify the cities where the sites were located. The refund period in the application is May 2014 through April 2017. On June 20, 2017, the Department issued a Notice of Intent to Make Tax Refund Changes. In an attachment to the Notice, the Department stated that the information provided in the request for refund was insufficient, and requested that Petitioner provide an assignment of rights to refund of sales tax form; a plant schematic of the manufacturing facility identifying the location of the equipment included in the refund request; citations to applicable Florida Statutes and administrative rules upon which Petitioner was relying for the request for exemption and refund, along with any documentation (not specified) required to support the exemption/refund request; and information related to the claimed pollution control exemption, which is no longer relevant to these proceedings. The Notice of Intent to Make Refund Changes stated, “If you do not agree with these findings, you may request an informal conference to discuss any factual, statutory, or regulatory issues related to the above refund denial. Your request for informal conference must be made, in writing, to the above referenced office within 30 days of the issuance of this Notice.” It also advised that if the taxpayer did not request an informal hearing within 30 days, a Notice of Proposed Refund Denial would be issued on or about July 20, 2017. The attachment requesting additional documents did not expressly state a deadline for the submission of the documents requested. On July 20, 2017, the Department issued a Notice of Proposed Refund Denial for the Refund Claim. The attachment to the Notice of Proposed Refund Denial stated that the request for refund was being denied because the documentation requested in the Notice of Intent to Make Tax Refund Changes had not been provided. Southeast Petro timely protested the Notice of Decision of Refund Denial pursuant to Florida Administrative Code Chapter 12-6. Southeast Petro’s Protest letter, dated August 2, 2017, included the documents previously provided to the Department. No plant schematic identifying the equipment included in the refund request was ever provided to the Department, or produced at hearing, because no plant is involved. Instead, Petitioner asserts that each gas station is a fixed site where “manufacturing, processing, compounding, or producing for sale” is taking place. On November 17, 2017, Alan Fulton, who at that time was a tax law specialist for the Department, issued a letter to counsel for Petitioner stating that the documentation to date was not sufficient to support the claim, and that the Department needed, for each transaction/refund amount requested, a properly executed assignment of rights form from each of the selling dealers to which Petitioner asserts was paid in error; the amount of tax requested for each transaction in the refund claim; a clear and concise reconciliation of the invoices/transactions for which Petitioner was seeking a refund; and proof of tax paid to the vendor that reconciles to the refund amount. Mr. Fulton also asked for production records or documents to support the claim that the machinery and equipment purchased is used in a manufacturing process to produce a new product; and a thorough description of the manufacturing process, including the specific machinery used. Mr. Fulton advised that this information, as well as any other documentation that may support the protest, needed to be provided to the Department no later than December 12, 2017. On February 28, 2018, the Department issued a Notice of Decision (NOD) of Refund Denial, in which the Department denied the refund in its entirety. In the NOD, the Department noted that it had requested additional documentation from Petitioner that it did not receive. With respect for the claim under the new or expanding business exemption, the NOD stated in part: By asserting its purchases qualify for tax exemption under s. 212.08(5)(b), F.S., Taxpayer implies its purchases are used to manufacture of process tangible personal property for sale. However, Taxpayer provides no arguments as to how its retail gasoline stations are engaged in manufacturing, processing, compounding, or producing for sale tangible personal property at fixed locations. Additionally, Taxpayer has failed to submit documentation specifically requested, such as properly executed Assignment of Rights to Refund of Sales Tax, an Application for Temporary tax Exemption Permit, form DR-1214; proof of tax paid to vendors; production records supporting Taxpayers contention that the machinery and equipment purchased is used in a manufacturing process to produce a new product; a description of the manufacturing process, including the specific machinery and equipment used; and documentation received from the Florida Department of Environmental Protection for the projects. Nonetheless, in considering Taxpayer’s assertions of tax exemption, it is reiterated, pursuant to Rule 12A-1.096(1)(d), F.A.C., promulgated to administer s. 212.08(5)(b), F.S., the phrase “manufacture, process, compound, or produce for sale” means the various industrial operations of a business where raw materials will be put through a series of steps to make an item of tangible personal property that will be sold. The gasoline was previously manufactured by a refinery from crude oil. Furthermore, it is the Taxpayer’s customers that operate the gasoline dispensing pumps at the retail stations, and not for the purpose of conducting industrial operations. As such, the Department does not find that Taxpayer is engaged in manufacturing operations at its retail gasoline stations with the dispensing pumps and underground tanks. Instead, it is the Department’s position, as indicated above, the dispensing pumps and underground storage tanks are more properly classified as storage and delivery systems utilized subsequent to the conclusion of the manufacturing process by a refinery. Therefore, these items would not qualify for the exemption from tax provided under s. 212.08(5)(b), F.S., and Rule 12S-1.096, F.A.C. (emphasis in original) On March 21, 2018, Southeast Petro filed a Petition for Reconsideration contesting the Notice of Decision of Refund Denial. With the Petition for Reconsideration, Petitioner provided, along with some other documentation, a schedule of the transactions at issue; the assignment of rights to refund from each of the selling dealers to which sales tax were paid; the corresponding invoices; the application for temporary exemption permit (DR-1214); and an explanation of how the refund amount was computed. On August 22, 2018, the Department issued its Notice of Reconsideration of Refund Denial, fully sustaining its denial of Southeast Petro’s refund claim. In its Notice of Reconsideration of Refund Denial, the Department reiterated its position stated in the NOD, and added the following statement: For both of the exemptions sought by Taxpayer, the Department acknowledges Taxpayer has submitted an Application for Temporary Tax Exemption Permit, form DR-1213, a reconciliation spreadsheet of the refund claimed, proper [sic] executed Assignment of Rights to Refund of Sales Tax, and various invoices for review and consideration. However, this information is not germane to the refund claim, because the dispensing pumps and underground storage tanks are not qualifying industrial machinery and equipment under the provisions of s. 212.051, F.S. and s. 212.08(5)(b), F.S. On October 19, 2018, Southeast Petro filed its Petition for Chapter 120 Hearing, contesting the Notice of Reconsideration. The case was referred to the Division of Administrative Hearings on November 6, 2019. Southeast Petro paid sales taxes on the purchases of underground storage tanks and dispensing pumps to the vendors supplying the equipment. Those vendors then provided to Southeast Petro Assignment of Rights to Refund of Sales Tax forms, identifying the amount of tax for which they assigned the rights to Southeast Petro. Central Industries, Inc., sold dispensing pumps to Southeast Petro, and on August 23, 2017, assigned the rights to Southeast Petro for refund of the taxes it collected. The amount assigned for transactions occurring from May 1, 2015, through April 30, 2017, is $52,592.92. Guardian Fueling Technologies, LLC, sold dispensing pumps to Southeast Petro, and on August 23, 2017, assigned the rights to Southeast Petro for refund of taxes it collected. The amount assigned for transactions occurring from May 1, 2015, to April 30, 2017, is $41,593.82. Guardian Fueling Technologies, LLC, also executed an assignment of rights for a purchase made in March 2015, where the tax paid was $36,269.31. Sunoco, LLC, sold dispensing pumps to Southeast Petro, and on September 14, 2017, assigned the rights to Southeast Petro for refund of taxes it collected. The amount assigned for transactions occurring from May 1, 2015, to April 30, 2017, is $8,953.41. Modern Welding Company of Florida, Inc., sold underground storage tanks to Southeast Petro, and on June 29, 2015, assigned the rights to Southeast Petro for refund of the taxes it collected. The amount assigned for transactions occurring from June 2012 to March 2015 was $16,646.00. It is noted that this assignment covers purchases that extend back past the refund period. When Southeast Petro originally filed its application for a refund, the requested amount was over $146,000. Over the course of the litigation, Southeast Petro withdrew its claim for refund with respect to some of its sites. The relevant information presented to substantiate the refund claim for each location for which a refund is still sought is listed below. With each transaction, the information presented is taken from the records provided, as opposed to the composite spread sheets. Fractions of a gallon have been discarded in the calculations, as they do not affect the percentages reached. Site 21 Site 21 is an affiliate site located at 5230 University Boulevard, Jacksonville, Florida. Guardian Fueling Technologies sold Southeast Petro four Gilbarco dispensing pumps. The invoice dated October 14, 2016, indicates that it was billed to “M&R Enterprises of Brevard/Southeast Petro.” The total amount invoiced was $58,747.76, and the tax paid for the purchase was $3,585.56. The invoice was paid by M&R United, Inc. The invoice includes references to ancillary features, such as a color screen and an HCR card reader for EMV, but the prices for those items are not listed separately. The dispensing pumps were installed by Petroleum Technicians, Inc., on or about December 22, 2016. In the 12 months prior to the installation of the new dispensing pumps, Site 21 sold approximately 675,257 gallons of fuel. In the 12-month period following the installation, from January 1, 2018, through December 31, 2018, Site 21 sold approximately 754,287 gallons of fuel, for an increase in sales of 11.7%. With respect to mid-grade blended fuel, in the 12 months prior to the installation, Site 21 sold 47,891 gallons, as opposed to 63,224 gallons for the identified 12-month period after installation, for an increase in sales of 32%. Site 99 Site 99 is an affiliate site located at 1600 Aurora Road, in Melbourne, Florida. Southeast Petro bought new Gilbarco dispensing pumps and related hardware for Site 99 as part of a bulk purchase from Guardian Fueling Technologies. The four dispensing pumps bought as part of the bulk purchase for Site 99, cost $56,574, with corresponding tax of $3,960.18. The invoice, dated March 24, 2015, is billed to M&R Enterprise of Brevard/Southeast Petro. The dispensing pumps were installed by Petroleum Technicians, Inc., on or about May 24, 2015. In the 12 months prior to installation, Site 99 sold approximately 656,820 gallons of fuel. In a 12-month period following the installation, from August 2015 through July 2016, Site 99 sold approximately 693,009 gallons of fuel, for an increase of 5.51%. With respect to mid-grade blended fuel, from September 2014, through May 2015, Site 99 sold 16,733 gallons. The records submitted in Petitioner’s Exhibit 33 identifies gasoline sold for the period comprising May through August 2014 on a single page. There is no legend for the types of gasoline sold on this page, and the gas code found in other records corresponding to mid- grade blended gasoline does not appear, so a total for mid-grade fuel sold during the 12-month period cannot be clearly identified. The records are not sufficient to show 12 contiguous months of production or sale of mid-grade fuel. Site 101 Site 101 is an affiliate site located at 6842 Wilson Boulevard, Jacksonville, Florida. Southeast Petro bought four new Gilbarco dispensing pumps from Central Industries. The invoice, dated January 4, 2017, is billed to Southeast Petro. The total amount invoiced is $55,813.49, and the tax paid is $3,157.84. The invoice includes charges for ancillary items not involved in the blending process, such as speakers, hybrid card readers, and image/ graphics. The dispensing pumps were installed by Petroleum Technicians, Inc., on February 9, 2017. In the 12 months prior to the installation of the new dispensing pumps, Site 101 sold approximately 659,658 gallons of fuel. In the selected 12-month period following the installation, from January through December 2018, Site 101 sold approximately 836,764 gallons of fuel, for an increase of 26.85%. With respect to mid-grade blended fuel, in the 12 months prior to the installation of the new dispensing pumps, Site 101 sold 72,575 gallons, as opposed to 86,312 gallons for the period selected, for an increase of 18.93%. Site 122 Site 122 is an affiliate site located at 700 Columbia Boulevard in Titusville, Florida. Central Industries, Inc., sold Southeast Petro five new Gilbarco dispensing pumps and related hardware. The invoice, dated January 5, 2017, is billed to Southeast Petro. The total amount invoiced is $70,806, and the sales tax paid is $4,006.49. Included in the invoice are charges for ancillary items not involved in the blending process, such as speakers, hybrid card readers, and image/graphics. The new dispensing pumps were installed by Petroleum Technicians, Inc., on January 19, 2017. In the 12 months prior to the installation of the new dispensing pumps, Site 122 sold approximately 1,208,313 gallons of fuel. In the selected 12-month period following the installation, from February 2017 through January 2018, Site 122 sold approximately 1,310,010 gallons of fuel, for an increase of 8.42%. With respect to mid-grade blended fuel, in the 12 months prior to installation of the new dispensing pumps, Site 122 sold 67,918 gallons, as opposed to 58,940 gallons for the identified 12-month period after installation. As sales of this grade of fuel actually went down, mid-grade fuel did not see an increase of 5%. Site 234 Site 234 is an affiliate site located at 3860 Highway A1A in Melbourne, Florida. Central Industries, Inc., sold Southeast Petro six new Gilbarco dispensing pumps and related hardware. The invoice, dated January 4, 2017, is billed to Southeast Petro. The total amount invoiced is $84,404.90 and the sales tax paid is $4,776.22. Included in the invoice are charges for ancillary items not involved in the blending process, such as speakers, hybrid card readers, and the Mobil image. Petroleum Technicians, Inc., installed the new dispensing pumps on January 13, 2017. In the 12 months prior to the installation of the new dispensing pumps, Site 234 sold 582,758 gallons of fuel. In the selected 12-month period following the installation, from January through December 2018, Site 234 sold 639,150 gallons of fuel, for an increase of 9.68%. With respect to mid-grade blended fuel, in the 12 months prior to the installation of the new dispensing pumps, Site 234 sold 37,702 gallons, as opposed to 43,842 gallons for the post-installation period selected, for an increase in sales of 16.29%. Site 320 Site 320 is an affiliate site located at 4353 West Main Street in Mims, Florida. Central Industries sold Southeast Petro four new dispensing pumps and related hardware for this site. The invoice, dated January 5, 2017, is billed to Southeast Petro. The total amount invoiced is $54,329.49, and the sales tax paid is $3,073.84. Additional hardware was invoiced for this site on January 20, 2017, for $1,484.00, and sales tax paid of $84.00. The total for the combined invoices is $55,813.49, with total sales tax of $3,157.84. Included in the invoice are charges for ancillary items not involved in the blending process, such as speakers, hybrid card readers, and the BP image. Petroleum Technicians, Inc., installed the new dispensing pumps on January 18, 2017. In the 12 months prior to the installation of the new dispensing pumps, Site 320 sold 1,135,378 gallons of fuel. In the selected 12-month period following the installation, from January through December 2018, Site 320 sold approximately 1,200,945 gallons of fuel, for an increase of 5.77%. With respect to mid-grade blended fuel, in the 12 months prior to the installation of the new dispensing pumps, Site 320 sold 33,106 gallons, as opposed to 36,235 gallons for the period selected, for an increase in sales of 9.45%. Site 343 Site 343 is an affiliate site located at 4090 West Midway Road in Fort Pierce, Florida. Central Industries, Inc., sold Southeast Petro six Gilbarco dispensing pumps and related hardware. The invoice, dated January 5, 2017, is billed to Southeast Petro. The total amount invoiced for the six dispensing pumps is $84,404.90, and the sales tax paid is $4,776.22. Included in the invoice are charges for ancillary items not involved in the blending process, such as speakers, hybrid card readers, and image/graphics. There is a second invoice for Site 343 from Central Industries, Inc., for the purchase of a Gilbarco diesel dispensing pump. However, this pump does not have the blending capability of the other pumps purchased, and Petitioner acknowledges it would not support the criteria for a new and expanding business exemption, so it is not included. Petroleum Technicians, Inc., installed the six dispensing pumps on February 23, 2017. In the 12 months prior to the installation of the new dispensing pumps, Site 343 sold 1,107,473 gallons of fuel. In the selected 12-month period following the installation, from January through December 2018, Site 343 sold 1,289,854 gallons of fuel, for an increase of 16.47%. With respect to the mid-grade blended fuel, in the 12 months prior to installation of the new dispensing pumps, Site 343 sold 47,811 gallons, as opposed to 57,614 gallons for the post-installation period selected, for an increase of 20.5%. Site 346 Site 346 is an affiliate site located at 1595 Island Lane in Orange Park, Florida. Guardian Fueling Technologies sold Southeast Petro eight Gilbarco dispending pumps and related hardware for Site 346. The invoice, dated November 25, 2016, is billed to M&R Enterprises of Brevard/Southeast Petro. The total amount invoiced for the eight dispensing pumps is $118,047.12, and the sales tax paid is $7,722.72. The invoice includes references to ancillary features, such as a color screen and an HCR card reader for EMV, but the prices for those items are not listed separately. Petroleum Technicians, Inc., installed the eight new dispensing pumps for Site 346 on December 29, 2016. In the 12 months prior to the installation of the new dispensing pumps, Site 346 sold 1,004,375 gallons of fuel. In the selected 12-month period following the installation, from January through December 2018, Site 346 sold approximately 1,084,628 gallons of fuel, for an increase of 7.99%. With respect to the mid-grade blended fuel, in the 12 months prior to installation of the new dispensing pumps, Site 346 sold 70,508 gallons, as opposed to 84,059 gallons for the selected post-installation period selected, for an increase of 19.22%. Site 349 Site 349 is an affiliate site located at 11555 Bonita Beach Road Southeast, in Bonita Springs, Florida. Guardian Fueling Technologies sold Southeast Petro four Gilbarco dispensing pumps and related hardware for Site 349. The invoice, dated October 14, 2016, is billed to M&R Enterprise of Brevard/Southeast Petro. The total amount invoiced for the four dispensing pumps is $56,928.61, and the sales tax paid is $3,474.53. The invoice includes references to ancillary features, such as a color screen and an HCR card reader for EMV, but the prices for those items are not listed separately. Guardian Fueling Technologies also installed these pumps on November 18, 2016. In the 12 months prior to the installation of the new dispensing pumps, Site 349 sold 702,975 gallons of fuel. In the selected 12-month period following the installation, from January through December 2018, Site 349 sold approximately 815,819 gallons of fuel, for an increase of 16.05%. With respect to mid-grade blended fuel, in the 12 months prior to installation of the new dispensing pumps, Site 349 sold 66,228 gallons, as compared to 85,116 gallons for the selected post-installation period, for an increase in sales of 28.52%. Site 355 Site 355 is an affiliate site located at 2653 Boggy Creek Road in Kissimmee, Florida. Southeast Petro bought six Gilbarco dispensing pumps and related hardware from Guardian Fueling Technologies as part of a bulk purchase. The invoice, dated March 24, 2015, is billed to M&R Enterprises of Brevard/Southeast Petro. For the pumps and equipment purchased for Site 355, the cost for the pumps (pretax) was $83,738.00, and the sales tax was $5,861.66. Petroleum Technicians, Inc., removed the old pumps and installed the new dispensing pumps on April 27, 2015. For the period from September 1, 2014, through March 31, 2015, Site 355 sold 646,383 gallons of fuel. Only seven months of data is included because Southeast Petro and its affiliated companies did not own the site for a full year before the new pumps were installed, and the gas station was closed before ownership was transferred. No evidence was submitted regarding how long the station was closed prior to purchase. The evidence presented does not provide 12 contiguous months of production or sales records prior to installation of the new equipment. Site 385 Site 385 is an affiliate site located at 420 United States Highway 1, in Vero Beach, Florida. Central Industries, Inc., sold Southeast Petro five new Gilbarco dispensing pumps and related hardware. The invoice, dated October 28, 2016, is billed to Southeast Petro. The total cost of the invoice, including tax, is $69,305.34, and the sales tax paid is $4,457.57. Included in the invoice are charges for ancillary items not involved in the blending process, such as speakers, hybrid card readers, and Exxon graphics. There is an additional invoice for this site dated October 27, 2016, for hanging hardware. The total of this invoice is $2,176.69, with sales tax paid of $127.00. Petroleum Technicians, Inc., installed the dispensing pumps on March 7, 2017. For the 12-month period prior to installation, Site 385 sold 599,935 gallons of fuel. For the selected 12-month period following the installation, January through December 2018, Site 385 sold 630,265 gallons, for an increase of 5.06%. With respect to the mid-grade blended fuel, for the 12 months prior to installation, Site 385 sold 39,588 gallons, as opposed to 45,098 gallons for the post-installation period selected, for an increase of 13.92%. Site 403 Site 403 is an affiliate site located at 5385 Timuquana Road in Jacksonville, Florida. Central Industries, Inc., sold Southeast Petro four Gilbarco dispensing pumps and related hardware for this location. The invoice, dated January 4, 2017, bills Southeast Petro for the purchase. The total billed is $55,813.49, with sales tax paid of $3,157. Included in the invoice are charges for ancillary items not involved in the blending process, such as speakers, hybrid card readers, and image/graphics. Petroleum Technicians, Inc., installed the dispensing pumps on March 28, 2017. Southeast Petro’s affiliate owned Site 403 for only nine months prior to the installation of the dispensing pumps by Petroleum Technicians, so Southeast only submitted sales data for the nine months prior to the installation that an affiliate owned the location. Unlike Site 355, it is not clear whether the site was closed prior to the installation of the new pumps or simply changed ownership. For the nine months provided, Site 403 sold a total of 139,319 gallons of fuel. Using an average of gallons sold for that period, it is estimated that a year’s worth of sales would be approximately 185,759 gallons. For the selected post-installation period, January through December 2018, Site 403 sold 395,300 gallons of fuel. However, Petitioner did not provide 12 contiguous months of production or sales records prior to the installation of the new dispensing pumps. With respect to the mid-grade blended fuel, for the nine months the affiliated entity owned Site 403 prior to installation, it sold 11,362 gallons. Twelve contiguous months of records related to mid-grade fuel were not provided. JQ Trading JQ Trading is not an affiliate entity. It is an independent dealer location owned by Mills Chevron, LLC, located at 900 Mills Avenue in Orlando, Florida, to whom Southeast Petro sells fuel and has a dealer supply agreement. Pursuant to that dealer supply agreement, Southeast Petro supplies the pumps and related equipment in addition to delivering fuel to the site. Central Industries, Inc., sold Southeast Petro two new Gilbarco dispensing pumps and related hardware for JQ Trading. The invoice, dated January 5, 2017, is billed to Southeast Petro. The total cost of the invoice is $28,616.41, and the sales tax paid is $1,618.38. Included in the invoice are charges for ancillary items not involved in the blending process, such as speakers, hybrid card readers, and image/graphics. Petroleum Technicians, Inc., installed the dispensing pumps on January 30, 2017. Southeast Petro’s records show no gasoline sales for January 2017. For the 12 months preceding January 2017, JQ Trading sold 270,977 gallons of fuel. For the selected 12-month period following the installation, March 2017 through February 2018, JQ Trading sold 291,177 gallons, for an increase of 7.45%. Petitioner did not submit adequate documentation to determine the amount of mid-grade gasoline sold or the percentage of change. Aahan/Citrus Aahan/Citrus is an independent dealer location owned by Aahan, Inc., and located at 9548 North Citrus Springs Boulevard in Citrus Springs, Florida. Sunoco, LLC, sold Southeast Petro one dispensing pump for this location. The invoice, dated July 15, 2016, is billed to Southeast Petro. The total billed is $12,041.60, and the sales tax paid is $681.60. Southeast Petro acknowledges that it did not submit the invoice for the installation of the dispensing pump, but Mr. Clark, the owner of Petroleum Technicians, testified credibly that he installed the pump. The invoice indicates that the ship date for the dispensing pump was July 15, 2016. Mr. Clark also testified that installation can take place immediately after dispensing pumps are shipped, or as much as six months later, so relying on the ship date as the installation date is unrealistic. In the end, it does not matter, because regardless of when the dispensing pumps were installed, the increase in sales compared to the selected 12-month post- installation period is more than five percent. More specifically, the selected post-installation period is January through December 2018, and during that period, Aahan/Citrus sold 334,546 gallons of fuel. Assuming that the installation occurred within six months of the invoice, consistent with Mr. Clark’s testimony, the pre-installation comparators and the percentage increases are as follows: August 2015 - July 2016: 203,669 gallons, for a 64.26% increase; September 2015 - August 2016: 203,675 gallons, for 64.24% increase; October 2015 - September 2016: 203,960 gallons, for a 64.03% increase; November 2015 - October 2016: 195,340 gallons, for a 71.26% increase; December 2015 - November 2016: 202,772 gallons, for 64.99% increase; or January 2016 -December 2016: 202,779 gallons, for a 64.98% increase. No records were submitted from which the sales of mid-grade blended fuel can be identified or the percentage of increase, if any, can be determined. Snappy Food Mart Snappy Food Mart is an independent dealer location located at 1716 Oceanshore Boulevard in Ormond Beach, Florida. Sunoco, Inc., sold Southeast Petro three Gilbarco dispensing pumps for this location. The invoice, dated November 30, 2015, with a ship date listed as the same day, is billed to Southeast Petro. The total cost of the invoice is $35,189.73, with sales tax paid of $2,147.73. Like Aahan/Citrus, the installation invoice could not be located, although Mr. Clark testified that his company installed the pumps. As noted above, since pumps are sometimes installed up to six months after purchase, using the ship date (or the day after) as the installation date is unrealistic. The total gallons of fuel sold for the selected post-installation period of January through December 2018 is 251,355 gallons. Using the scenarios outlined below, the percentage increase for each is still over five percent. December 2014 – November 2015: 205,142 gallons,, for a 22.53% increase; January 2015 – December 2015: 200,807 gallons, for a 25.17% increase; February 2015 - January 2016: 201,664 gallons, for a 24.64% increase; March 2015 – February 2016: 198,116 gallons, for a 26.87% increase; April 2015 – March 2016: 214,614 gallons, for a 17.12% increase; or May 2015 – April 2016: 212,416 gallons, for an 18.33% increase. No records were submitted from which the sales of mid-grade blended fuel can be identified or the percentage of increase, if any, can be determined. Zack’s Zack’s is an independent dealer location owned by Zack’s Oil Enterprises, LLC, and located at 4201 Southwest 64th Avenue, in Davie, Florida. Southeast Petro purchased four dispensing pumps and related hardware for Zack’s from Sunoco, LLC, at a total cost of $45,444.32, with tax paid of $2,572.32. The invoice, dated October 6, 2014, is billed to Southeast Petro. Unlike other vendors for dispensing pumps, Sunoco issues its invoices after it ships the pumps, so, according to Summit Shah, pumps purchased from Sunoco are sometimes installed prior to the date on the invoice. In this case, the invoice from Petroleum Technicians, Inc., indicates that the dispensing pumps were installed August 24, 2015. Petitioner submitted gasoline sales records from September 2014 forward. The Dealer Supply Agreement for this location was assigned to Southeast Petro in July 2015, shortly before the installation of the new dispensing pumps. For the period beginning September 1, 2014, through August 30, 2015 (with no sales in August 2015), Zack’s sold 697,198 gallons of fuel. For the selected 12-month post-installation period, January through December 2017, Zack’s sold 743,104 gallons of fuel, for an increase of 6.58%. No records were submitted from which the sales of mid-grade blended fuel can be identified or the percentage of increase, if any, can be determined. BAM BAM is also an independent dealer location to whom Southeast Petro supplies fuel, and is located at 500 Highway A1A, in Satellite Beach, Florida. Southeast Petro purchased three dispensing pumps and related hardware for BAM from Sunoco, Inc. The invoice, dated July 1, 2013, is billed to Southeast Petro and lists a total of $35,024.52, with sales tax paid of $1,982.52. However, the assignment of rights from Sunoco, LLC, only covers sales tax paid from May 1, 2015, to April 30, 2017. Without an assignment of rights for the time period when these dispensing pumps were purchased, they cannot form the basis for a refund of the taxes paid. All of the records regarding fuel sold at each location described above were submitted for the purpose of establishing “production.” However, the records do not reflect production of any product, but rather, the volume of sales experienced at each location prior to and after the installation of the new dispensing pumps. While it is clear that overall sales at each location increased more than 5%, sometimes markedly so, the records submitted do not establish changes in production. Moreover, inasmuch as Petitioner is not contending that it “manufactures, processes, compounds or produces” premium or regular unleaded gas, sales records related to these products that Southeast Petro distributes, as opposed to manufacturing, processing, compounding, or producing, cannot establish production increases. Based upon all of the evidence presented, the more persuasive and compelling evidence is that the dispensing pumps provide a valuable improvement in the delivery of fuel to the customer, but are not a part of the production of the fuel itself. Petro also purchased two storage tanks from Modern Welding, for which they paid a total of $95,529.50 and sales tax of $5,454.50. However, unlike the dispensing pumps, storage tanks do not contribute to the “making” of a different octane-rated fuel. The evidence presented indicates that the storage tanks’ primary purpose is to store the gasoline held at each fuel location until the fuel is purchased by a customer. The tanks, like the dispensing pumps, are part of the delivery system for fuel as opposed to its production. Both tanks were installed at locations that were new businesses at the time of installation. Therefore, no prior production records for these locations were submitted.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner’s Application for Refund as a new or expanding business be denied, and its Petition for Chapter 120 Hearing be dismissed. DONE AND ENTERED this 19th day of October, 2020, in Tallahassee, Leon County, Florida. S LISA SHEARER NELSON 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 19th day of October, 2020. COPIES FURNISHED: Gerald J. Donnini, II, Esquire Moffa, Sutton & Donnini, P.A. Trade Center South, Suite 930 100 West Cypress Creek Road Fort Lauderdale, Florida 33309 (eServed) Mark S. Hamilton, General Counsel Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668 (eServed) John Mika, Esquire Office of the Attorney General Plaza Level 01 The Capitol Tallahassee, Florida 32399-1050 (eServed) Rex D. Ware, Esquire Moffa, Sutton & Donnini, P.A. Suite 330 3500 Financial Plaza Tallahassee, Florida 32312 (eServed) Paula Antonovna Savchenko, Esquire Moffa Sutton & Donni, P.A. Suite 930 100 West Cypress Creek Road Fort Lauderdale, Florida 33309 (eServed) James A. Zingale, Executive Director Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668 (eServed)
The Issue The issue here presented concerns an alleged violation of Rule Subsection 5F-2.01(1)(c)1, Florida Administrative Code, related to the permissible ten percent (10 percent) evaporated temperature for which gasoline shall not exceed 140F, and penalties to be imposed for such violations, in keeping with Section 525.06, Florida Statutes (1980), and Rule Subsection 5F-2.01(1)(c)1, Florida Administrative Code.
Findings Of Fact Based upon my observation of the witnesses and their demeanor while testifying, the documentary evidence received and the entire record compiled herein, the following relevant facts are found. The Petitioner, State of Florida, Department of Agriculture and Consumer Services, is an agency of State government which has the obligation to inspect petroleum products in keeping with the provisions of Chapter 525, Florida Statutes (1980). The Respondent is a corporation which sells petroleum products in the State of Florida at an outlet located at 3411 U.S. 19 North, Pasco County, Tarpon Springs, Florida. On November 23, 1981, a sample of the petroleum product, super unleaded gasoline (which was offered for sale) was taken from the Respondent's facility as indicated above. A subsequent analysis of that product by Petitioner's mobile laboratory revealed that the ten percent (10 percent) evaporated temperature was 153F. This reading exceeded the ten percent (10 percent) evaporated temperature of 140F as set forth in Rule Subsection 5F-2.01(1)(c)1, Florida Administrative Code. Petitioner's inspector, Jamie Gillespie, advised Respondent's agent that the premium unleaded gasoline was illegal due to its "stale" condition and the Respondent was given an option of either confiscation of the product or posting of a bond. The product is presently under a Stop Sale Notice and is under seal. (Petitioner's Composite Exhibit No. 1.) A subsequent analysis by Petitioner's laboratory in Tallahassee revealed that the evaporation level of the product was found to be approximately 163F. Ben Bowen, Petitioner's Assistant Bureau Chief in charge of petroleum inspection, indicates that the discrepancy in the evaporation levels as analyzed by the two laboratories was most probably due to the seal which was on the product and the approximate seven (7) day delay in the transfer of the product from Tarpon Springs to the laboratory in Tallahassee. Respondent's supervisor, Mark Ordway, 1/ was shown how the product could possibly become stale due to a "venting" problem from the roof of the storage tank where the product was stored. Sam Puleo, a lab technologist employed in Petitioner's mobile laboratory, analyzed the sample of the product taken from Respondent's facility. According to Mr. Puleo, "stale" products such as that taken from Respondent's tanks would make it difficult to start an automobile engine.
Findings Of Fact Petitioner deals in fuel oil. It buys fuel oil from several wholesalers and sells it at retail, mainly to people who use fuel oil for heating purposes. Petitioner operates a low pressure pump on its premises for pumping fuel oil from a ten thousand gallon tank into five gallon cans and similar containers brought to the pump by its customers. At peak demand, the ten thousand gallon tank supplying this pump had to be refilled twice a week. In general, however, during the cold season, the tank was refilled only every other week or less often still. No fuel oil was ever pumped from the low pressure pump into any motor vehicle. Petitioner also maintained two big dispersing pumps for filling its tank trucks with fuel oil and a gasoline pump for fueling the truck engines. The trucks were equipped with pumps for emptying their fuel oil tanks, which pumped at the rate of forty gallons per minute. Petitioner advertised home delivery of fuel oil in the newspaper, and dispatched its trucks in response to the resulting telephone calls. In addition to delivering fuel oil for home heating purposes, petitioner occasionally sold larger quantities to fellow fuel oil dealers and to other commercial concerns. In February, March and April of 1974, petitioner sold particularly large quantities of fuel oil to Tampa Electric Company. During the period covered by the audit, petitioner sold from 50,000 to 70,000 gallons to other fuel oil dealers. Petitioner did not get resale certificates from its commercial customers, but Mr. Hayes, until recently petitioner's proprietor, required dealers to show him their dealer's licenses and he copied the dealers' license numbers onto the invoices. In March of 1976, Mr. Donald E. Snyder, a tax examiner in respondent's employ, began auditing petitioner's books. At this time most of petitioner's records were in Orlando in the custody of the Federal Energy Administration. Subsequently, some, but not all, of these records were returned to petitioner. In an effort to reconstruct records which were unavailable, Mr. Snyder contacted petitioner's suppliers and examined their records of sales to petitioner. On January 2, 1977, Mr. Hayes and Mr. Snyder took an inventory of petitioner's fuel oil. Mr. Snyder used this information as well as what records petitioner was able to furnish him, and concluded that petitioner had sold, during the audit period, two thousand four hundred seventy-nine (2,479) gallons of fuel oil to persons or concerns who were users of fuel oil for non-exempt purposes. Written on the invoices evidencing these sales, however, was the phrase "non-road use" or words to that effect. The limited materials with which he worked gave Mr. Snyder no indication as to the disposition of an additional two hundred fifty- eight thousand three hundred forty (258,340) gallons of fuel oil. Although Mr. Snyder approximated petitioner's sales month by month, these figures were unreliable because of certain erroneous assumptions, notably the assumption that petitioner never used additional storage facilities.
Recommendation Upon consideration of the foregoing, it is RECOMMENDED: That respondent abandon its notice of proposed assessment, as revised. DONE and ENTERED this 10th day of January, 1978, in Tallahassee, Florida. ROBERT T. BENTON, II Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Mr. James P. LaRussa, Esquire Flagship Bank Building, Suite 416 315 East Madison Street Tampa, Florida 33602 Mr. Cecil L. Davis, Jr., Esquire Assistant Attorney General The Capitol Tallahassee, Florida 32304
Findings Of Fact On Thursday April 19, 1979 an inspector for the Department of Agriculture and Consumer Services, Petitioner, took a sample of gasoline that had been supplied by Pay-Less Oil Company, Inc. from a no-lead pump at the Pick- Kwick station located at 9694 Ulmerton Road, Largo, Florida. This sample was shipped to Tallahassee for analysis on Friday, April 20, 1979 and on Tuesday, April 24, 1979 Respondent was notified that the product in the tank had an excess lead content and a Stop Sale Order was placed on this tank. To release the gas and free the tank for further use Respondent posted a $1,000 bond. The tank from which the sample was taken had been filled a short time before. By the following day (one day after the sample had been taken) 442 gallons of gasoline had been sold from this tank. By the time Respondent was notified on April 24, 1979, 1,780 gallons of gasoline with the excess lead content had been sold. Following notification from Petitioner that his gas was bad Respondent, after posting the bond and moving the gas to a leaded gas pump, investigated the incident. This investigation revealed that a new driver had some 250 gallons of leaded gas left in his tank wagon after filling the tank at another station and in dumping this gas at the Umberton Road Station, by mistake, dumped the gas in the no-lead tank. Because he was afraid of being fired he failed to disclose his mistake until after the sample had been taken, the lead content verified and the drivers confronted with explaining how it could have happened. Petitioner's policy in these contaminated gasoline cases is to allow the gasoline supplier to post a bond equal to the retail price of contaminated gasoline that had been sold from the tank but not to exceed $1,000, upon which if the gas can be sold as another grade the Stop Sale will be lifted. This is the amount forfeited by the supplier rather than have the gasoline confiscated.
Findings Of Fact Respondent, Big "S" Oil Company, operates a gasoline station at 4002 North Pace Boulevard, Pensacola, Florida. The station sells gasoline products to the general public. On or about December 9, 1981, a petroleum inspector of Petitioner, Department of Agriculture and Consumer Services, took a gasoline sample for analysis of regular gasoline from the Respondent's storage tanks during the course of a routine inspection. This sample was tested in Petitioner's mobile laboratory and was found to have an elevated End Point of 494 degrees Fahrenheit 1/ Department regulations provide that the End Point for leaded gasoline offered for sale in Florida shall not exceed 446 degrees Fahrenheit. A second test conducted in a private laboratory confirmed the initial testing results. On the basis of this information, a stop sale notice on the tank that dispensed the gasoline was issued on December 9, 1981. (Petitioner's Exhibit 2). Petitioner determined that prior to the issuance of the notice, approximately 1,900 gallons of contaminated gasoline had been sold to the public. A bond of $1,000 was paid by Respondent to Petitioner in lieu of confiscation of the remaining leaded or regular gasoline in the storage tanks (Petitioner's Exhibit 1). The hearing was requested to contest the forfeiture of the bond.
Recommendation Based upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that Respondent be required to forfeit the $1,000 bond posted with Petitioner. DONE and ENTERED this 24th day of February, 1982, in Tallahassee, Florida. DONALD R. ALEXANDER Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675
The Issue Are test results skewed by the use of sample bottles containing residue from earlier samples?
Findings Of Fact The Department of Agriculture and Consumer Services took unleaded gasoline samples from the Union Service Station No. 166191 located on US Highway 29 North in Century, Florida. The petroleum products provided this station were supplied by Northrop Oil Company, Inc., whose president is James W. Ash. The Department analyzed the samples taken in its mobile laboratory. The unleaded gasoline samples were found to have an elevated End Point, i.e. the maximum boiling point allowed by the rules of the Department for unleaded gasoline, which is 437 degrees Fahrenheit. Sample No. 1 had an End Point of 482 degrees Fahrenheit, and Sample No. 2 had an End Point of 464 degrees Fahrenheit. 4 The elevated End Point means that the samples contained contaminants in excess of the amounts permitted by the Department's rules. A Stop Sale Notice was issued by the Department. A bond of $1,000 was paid by Petitioner in lieu of confiscation of the remaining unleaded gasoline and as a precedent for the formal hearing. Petitioner requested and received a formal hearing. It was agreed that the contaminant did not contain lead and was most probably diesel fuel or kerosene. Mr. Ash testified concerning deliveries to the station in question and other deliveries made by the same truck. On the Monday the samples were taken, the gasoline transport delivered unleaded gasoline to Davis' Grocery, the Union Service Station, and Ross', in that order. The Department also tested the unleaded gasoline at Davis' and Ross' but found no contaminants in their unleaded gasoline tanks. On the preceding Friday, the truck delivered unleaded gasoline to the Union Service Station and two Alabama stations. The Alabama authorities checked the unleaded gasoline at those stations and found no contaminants; however, Mr. Ash did not know how much additional gasoline had been delivered to those stations before their testing. The Union Service Station in question keeps its unleaded gasoline tanks locked, and its diesel fuel tank is located on the opposite side of the station. Petitioner uses separate trucks to deliver diesel fuel and gasoline and does not mix loads. It would have been highly unlikely that the diesel truck driver and the station's operators would have permitted the introduction of diesel fuel into the unleaded gasoline storage tanks. The percentage of contaminant necessary to raise the End Point the amount it was raised in this instance would have been three to five percent of the total volume. The sample bottles used by the Department are approximately the size of a quart milk bottle. The inspector separates the bottles he uses to take diesel fuel samples from those he uses to take gasoline samples. He stores the bottles upside dawn. This was the procedure he followed in taking the samples involved in this case. Tests conducted by the Department to determine the effects of residue in sample bottles indicated that the residue from earlier samples is an insignificant factor in elevating the End Point test results. An inverted sample bottle could not retain the three-to-five percent of the bottle's total volume necessary to raise the test, results of the samples in question approximately 40 degrees Fahrenheit. The contaminant was not introduced into the samples from the bottles used to take the samples. The Department calculated that 570 gallons of contaminated unleaded gasoline were sold at $1.40 per gallon.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law the Hearing Officer recommends release of the contaminated fuel in question and return of the $1,000 bond by the Department of Agriculture and Consumer Services upon payment by Petitioner to the Department of $722.84. DONE and ORDERED this 30th day of July, 1981, in Tallahassee, Leon County, Florida. STEPHEN F. DEAN Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 30th day of July, 1981. COPIES FURNISHED: Mr. James W. Ash, President Northrop Oil Company, Inc. c/o Union Service Station US Highway 29 North Century, Florida 32535 Leslie McLeod, Jr., Esquire Department of Agriculture and Consumer Services Mayo Building, Room 513 Tallahassee, Florida 32301 Doyle Conner, Commissioner Department of Agriculture and consumer Services Mayo Building Tallahassee, Florida 32301
Findings Of Fact This case was presented for hearing based upon the request for formal Subsection 120.57(1), Florida Statutes, hearing, made by Arnold S. Rogers, President, One Stop Oil Company. The matters to be considered are as generally indicated in the Issues statement to this Recommended Order. The hearing was conducted on March 10, 1982. The Petitioner, State of Florida, Department of Agriculture and Consumer Services, is an agency of State government which has the obligation to inspect petroleum products in keeping with the provisions of Chapter 525, Florida Statutes (1980). The Respondent is a corporation which sells petroleum products in the State of Florida at an outlet located at 1238 Broward Road, Jacksonville, Florida. On November 25, 1981, a sample of the petroleum product kerosene was taken at the aforementioned location operated by the Respondent, which is known as Station No. 10. A subsequent analysis on December 3, 1981, revealed a "flash point" of 78F. This reading was below the 100F minimum "flash point" as set forth in Rule Subsection 5F-2.01(2)(b), Florida Administrative Code. The results of the analysis were made known to the Respondent on December 3, 1981. Prior to that date, the Respondent was unaware of this reading below standard related to the "flash point." (A second kerosene sample was taken on December 3, 1981. That sample continued to reveal a "flash point" below 100F.) In view of the results of the November 25, 1981, test related to the kerosene at the Respondent's station, a "Stop Sale Notice" was issued to the Respondent. This was issued in keeping with Section 525.06, Florida Statutes (1980). In lieu of confiscation, a bond was posted in an approximate amount, $4,900.00. This bond amount had been prescribed by an employee for the Petitioner by mistake and subsequent to that time, all of the bond amount, with the exception of $1,000.00 was refunded to the Respondent. It is the $1,000.00 amount that remains in dispute at this time. In excess of 1,800 gallons of the contaminated kerosene had been sold prior to the discovery of this problem. The kerosene in the sample tank in question had been contaminated with gasoline and this combination lowered the "flash point." Kerosene with a low "flash point" is a hazardous substance, particularly when burned in kerosene stoves. The Division of Administrative Hearings has jurisdiction over the subject matter and the parties to this action. Rule Subsection 5F-2.01(2)(b), Florida Administrative Code, makes it a violation to offer for sale kerosene which has a "flash point" of less than 100F. The Respondent offered and in fact did sell kerosene whose "flash point" was established to be 780F, and in the face of such action, violated the aforementioned Rule. This violation would subject the Respondent to the confiscation of the kerosene remaining in the tank in accordance with the penalty provisions set forth in Rule Subsection 5F-2.02 (2)(c) , Florida Administrative Code. In lieu of such confiscation, the Petitioner could accept a bond, not to exceed $1,000.00 which could be converted into a fine, in the face of a finding of a violation of the petroleum standards law. Respondent posted the $1,000.00 bond and that bond amount can be taken as a fine levied against the Respondent for the violation as found. The Petitioner being found in violation, the only matter to be determined is the proper amount of fine to be imposed. The Petitioner is of the persuasion that the full fine should be levied in view of the clear violation; the hazard posed by offering for sale and selling kerosene with a substandard "flash point," and the cost of prosecution to include appearances by consul and witnesses in Jacksonville, Florida, when counsel and those officials were required to travel from Tallahassee, Florida. Respondent, through its representative, detailed the steps that were taken to ensure against a violation of the "flash point" standards related to kerosene. The rendition of facts establishes that the tank in which the subject kerosene had been placed had immediately prior to that placement, contained unleaded premium gasoline. That gasoline had been pumped out; the tank tilted to allow the residue to collect in one confined area and the tank flushed out by water. The delivery tanker, which belonged to the Respondent and which delivered the kerosene, had been used to transport gasoline before that delivery; however, that tanker had been subjected to a purging to remove the gasoline. Respondent was unsure about the condition of the kerosene which had been sold to the Respondent by an outside source and transported by the Respondent's tanker, as this relates to a "flash point" violation prior to delivery. Notwithstanding the efforts by the Respondent to protect against such a violation of "flash point," Respondent concedes that as much as one quarter inch of gasoline residue could have remained in the storage tank at the time kerosene was offered for sale and sold. While Respondent recognizes that the violation established herein is one which does not require proof of "intent" in order to be found responsible for such violation, Respondent, nonetheless, asks that the fine be less than the full $1,000.00, particularly so in the face of the depressed market conditions related to its business. Finally, Respondent, in answering Petitioner's argument related to the cost of prosecution, states that it would have attended a hearing in Tallahassee, Florida, if necessary. Based upon a full consideration of the facts, conclusions of law and matters in aggravation and mitigation, it is RECOMMENDED: That a final order be entered finding the Respondent in violation of Rule Subsection 5F-2.01(2)(b), Florida Administrative Code, and subjecting Respondent to the penalties set forth in Section 525.06, Florida Statutes (1980), and imposing a fine of $750.00, with $250.00 of the bond amount to be refunded to the Respondent. DONE and ENTERED this 19th day of March, 1982, in Tallahassee, Florida. CHARLES C. ADAMS 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 19th March, 1982.
Findings Of Fact The following findings of fact are based upon the stipulation of the parties and the evidence presented: During a routine inspection on June 11, 1986 at Ron's Chevron #4, 1790 North Hercules, Clearwater, Florida, samples of all grades of gasoline were taken. A sample was taken from each side of a pump labeled "Chevron Unleaded". Using a field method for measuring lead content, it was determined that both samples contained more than 0.11 grams of lead per gallon, which exceeds the standard of 0.05 grams per gallon. The results of the field measurement were confirmed at the Department's main laboratory by Nancy Fischer on June 16, 1986. A stop sale notice was issued on June 12, 1986, and the contaminated product was withheld from sale to the public. On June 17, 1986, Petitioner was required to post a bond in the amount of $1,000 in lieu of the Department confiscating 5,850 gallons of fuel. The product was released for sale as Chevron Regular, a leaded fuel. New product was placed in the tank and proved lead free. Lead in gasoline is detrimental to a car designed to run on unleaded fuel. The lead can cause serious damage to the emission system and possibly the engine by stopping up the catalytic converter. The parties stipulated that the sole issue in this case is the amount of the bond. There is no evidence that Petitioner intentionally contaminated the fuel for financial gain. The cause appears to have been carelessness at some point between, or at, wholesale and retail. The Department accepted a bond of $1,000 and allowed Petitioner to retain the fuel for relabeling and sale as leaded fuel. The Department's penalty imposed in this case is consistent with its past practice in factually similar cases.
Recommendation Based upon the foregoing, it is recommended that the Department enter a Final Order requiring Petitioner to post a $1,000 refundable bond. DONE AND ENTERED this 23rd day of October 1986 in Tallahassee, Florida. DONALD D. CONN Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 FILED with the Clerk of the Division of Administrative Hearings this 23rd day of October 1986. COPIES FURNISHED: Ronald Trimm Ron's Chevron #4 1790 North Hercules Clearwater, Florida 33515 William C. Harris, Esquire Department of Agriculture and Consumer Services Mayo Building Tallahassee, Florida 32301 The Honorable Doyle Conner Commissioner of Agriculture The Capitol Tallahassee, Florida 32301
