Findings Of Fact The parties stipulated to findings of fact set forth in paragraphs 1-5, below. Zurich is an insurer domiciled in the State of New York. Zurich is authorized to do insurance business in the State of Florida. Zurich pays insurance premium taxes to the State of Florida. As a foreign insurer doing business in Florida, Zurich is subject to the provisions of Florida's retaliatory tax, Section 624.5091, Florida Statutes. Respondent Department of Revenue (Revenue) is the state agency charged with the duty to implement and enforce Section 624.5091, Florida Statutes. Zurich's interests are substantially affected by Revenue's Rule 12B- 8.016(3)(a)(4), Florida Administrative Code, by virtue of the tax assessment made against Zurich pursuant to the rule. OTHER FACTS Prior to 1989, the Department of Insurance administered insurance taxation. Now, Revenue has that responsibility. Section 213.05, Florida Statutes, directs Revenue to administer provisions of Sections 624.509 through 624.514, Florida Statutes. Section 213.06(1), Florida Statutes, authorizes Revenue to promulgate rules to implement those responsibilities. Rule 12B-8.016 was first promulgated by Revenue in December of 1989 to implement statutory authority of Section 624.429 (currently renumbered as 624.5091). This statute authorized retaliatory taxation against non-domiciled insurers in the amount by which their state of domicile would tax Florida insurers in excess of Florida's comparable tax. The statute provides in pertinent part: When by or pursuant to the laws of any other state or foreign country any taxes, licenses, and other fees, in the aggregate, and any fines, penalties, deposit requirements, or other material obligations, prohibitions, or restrictions are or would be imposed upon Florida insurers or upon the agents or representatives of such insurers, which are in excess of such taxes, licenses, and other fees, in the aggregate, or other obligations, prohibitions, or restrictions directly imposed upon similar insurers, or upon the agents or representatives of such insurers, of such other state or country under the statutes of this state, so long as such laws of such other state or country continue in force or are so applied, the same taxes, licenses, and other fees, in the aggregate, or fines, penalties, deposit requirements, or other material obligations, prohibitions, or restrictions of whatever kind shall be imposed by the department upon the insurers, or upon the agents or representatives of such insurers, of such other state or country doing business or seeking to do business in this state. As it existed in 1989 and currently, the statute contains an exclusionary provision expressly excluding from the retaliatory tax any special purpose assessments in connection with insurance other than property insurance. This exclusionary provision is part of Subsection 3 of the current statute, 624.5091, and reads as follows: (3)This section does not apply as to personal income taxes, nor as to sales or use taxes, nor as to ad valorem taxes on real or personal property, nor as to reimbursement premiums paid to the Florida Hurricane Catastrophe Fund, nor as to emergency assessments paid to the Florida Hurricane Catastrophe Fund, nor as to special purpose obligations or assessments imposed in connection with particular kinds of insurance other than property insurance, except that deductions, from premium taxes or other taxes otherwise payable, allowed on account of real estate or personal property taxes paid shall be taken into consideration by the department in determining the propriety and extent of retaliatory action under this section. The parties concede that Revenue's Rule 12B-8.016 accurately tracts the first part of the retaliatory taxation statute. But a subpart of the Rule, 12B- 8.016(3)(a)(4), is challenged by Zurich in this proceeding because that subpart provides for inclusion of the assessment for administration of workers compensation in Florida and comparable assessments in other states. The rule subpart states: (3)(a) Other items which shall be included in the retaliatory calculations are: * * * 4. The workers compensation administrative assessment imposed by s. 440.51, F.S., as well as comparable assessments in other states. The State of Florida imposes assessment on workers compensation carriers such as Zurich in accordance with authority contained in Section 440.51, Florida Statutes, which is entitled "Expenses of Administration." Section 440.51 provides for the pro-rata assessment of all insurers and self- insurers of workers compensation to cover expenses of administering the workers compensation program. The assessment is a "special fund" that does not involve appropriated funds or general state revenues. Zurich's home state of New York imposes a comparable assessment. In accordance with Rule 12B-8.016(3)(a)(4), Florida Administrative Code, Revenue includes calculations for the Worker's Compensation Board Administrative Fund in the state of New York in Zurich's retaliatory tax calculation. In drafting the rule in 1989, Revenue relied upon Attorney General Opinion 057-173, which advised that Florida's Worker's Compensation Administrative Assessment should be considered a "tax" for purposes of retaliatory tax calculation. On this basis, Revenue's rule requires that such assessments be considered as "taxes" and included in the retaliatory tax calculation. However, following the issuance of Attorney General Opinion 057-173, the Florida legislature in 1959 enacted the present Subsection 624.5091(3), Florida Statutes, specifically excluding the consideration of "special purpose obligations or assessments imposed in connection with particular kinds of insurance other than property insurance" in retaliatory tax calculations. Following the 1959 enactment of the exclusionary language contained in Subsection 624.5091(3), Florida Statutes, the Department of Insurance did not include comparable worker compensation assessments of other states. The Department of Insurance administered insurance taxation until 1989. Department of Insurance forms introduced into evidence for 1986 showed that the Florida assessment, pursuant to Section 440.51 Florida Statutes, was treated as a deduction against Florida's premium tax and added back in on the Florida side of the retaliatory tax calculation. But the assessment was not included in a manner to inflate the calculation of the domiciliary state's comparative tax base. When Revenue assumed administration of insurance taxation in 1989, a proposed rule and an emergency rule were promulgated. Neither provided for inclusion of foreign states' special purpose administrative assessments in retaliatory tax calculation. In the course of the promulgation process, the determination to treat the worker compensation administrative assessment as a tax became a part of the rule. The purpose of Florida's retaliatory statute is to influence other states' legislative discretion to lower the tax burden on Florida insurers doing business in those other states. The items to be compared for retaliatory purposes are determined by the legislature and not by Revenue, Revenue auditors, or other states.
Findings Of Fact This cause comes on for consideration based upon the Petitioner's challenge to the Notice of Proposed Assessment of Tax, Penalties and Interest under Chapter 212, Florida Statutes, that was filed by the Respondent March 13, 1978. A copy of the Notice of Proposed Assessment together with the attendant work papers may be found as the Respondent's composite Exhibit #3, admitted into evidence. (By stipulation of the parties, in view of certain evidence presented by the Petitioner in the course of the hearing a First Revised Notice of Proposed Assessment of Tax, Penalties and Interest under Chapter 212. Florida Statutes, has been filed and it is this First Revised Notice of Proposed Assessment of Tax, Penalties and Interest which is in dispute between the parties. A copy of the First Revised Notice of Proposed Assessment of Tax, Penalties and Interest, dated October 17, 1978 may be found as Hearing Officer's composite Exhibit #1, admitted Info evidence. That composite exhibit contains the First Revised Notice of Proposed Assessment, together with the applicable work sheets and Petitioner's Exhibits #1 through 3, admitted into evidence in the course of the hearing. These Petitioner's exhibits are those referred to as constituting the basis of the stipulation previously mentioned.) The Petitioner is registered with the State of Florida, Department of Revenue as a wholesale business, for purposes of Florida taxes. A copy of the certificate which shows this regis- tration may be found as Respondent's Exhibit #1 admitted into evidence. The Respondent, State of Florida, Department of Revenue is an agency of the State of Florida that audits business record, to include the Petitioner's records. Specifically, in this instance, an audit was conducted in accordance with Chapter 21, Florida Statutes, to ascertain whether or not the Petitioner was responsible for the payment of sales and use tax under the authority of Chapter 212, Florida Statutes. The tax examiner assigned to conduct the audit was carrying out that function as a follow-up to an audit performed on a business known as Quail Ridge located in Delray Beach, Florida. The audit of Quail Ridge led the Respondent to believe that the Petitioner had made certain retail sales to Quail Ridge without collecting sales tax. If this were true, then the Petitioner would become responsible for the payment of those sales taxes under the provision of Section 212.07(2), Florida Statutes. There ensued an audit of the Petitioner's books and records, which were constituted of certain bank statements and a ledger book together with invoices and signed resale certificates that were made available. In the course of this audit process, the Petitioner was allowed a period of two months within which time to collect certain invoices and signed resale certificates. The significance of the invoices and resale certificates was, assuming the sales had been made for purposes of resale; thereby constituting a wholesale transaction, no sales tax would be due because the collection of that sales tax would become the responsibility of the purchaser who had obtained the item from the Petitioner in a wholesale transaction. That purchaser would become the "dealer", within the meaning of Chapter 212, Florida Statutes, and therefore would be responsible for the collection of the sales tax upon a further sale to a third party in a retail transaction. After the Petitioner had been given time to establish those wholesale transactions in his flower business and given credit for certain months in which no business income was gained, the calculations were made by the tax examiner of the Respondent and the March 13, 1978, Notice of Proposed Assessment of Tax, Penalties and Interest under Chapter 212, Florida Statutes, was issued. This Notice of Proposed Assessment taxed the Petitioner for all business transactions arising from the sale of flowers which could not be established as exempt sales in the capacity of a wholesaler. (This requirement for the establishment of an exemption by the proof of the petitioner is found in Chapter 212, Florida Statute and in accordance with Rule 12A-1.38, Florida Administrative Code.) After the Notice of Proposed Assessment of March 13, 1978, had been served on the Petitioner, an informal conference was held between the tax examiner and the petitioner. This conference was held on April 26, 1978, and at that time the Petitioner offered to introduce further invoices and resale certificates. Brandjes claimed that these invoices and resale certificates established further exemptions. The invoices and resale certificates were not accepted at that time because the tax examiner felt that the case was to be submitted for formal hearing and he was not of the opinion that he could make further adjustments to the proposed assessment at that juncture. The same invoices and resale certificates which were of fered at the April 26, 1978 conference were produced in the course of the hearing before the undersigned. After such production, the Exhibits, 1 through 3, were submitted to the Respondent's tax examiner for review to establish possible further reduction of the proposed assessment, through the process of showing other exempt sales, or wholesale transaction. That review led to the First Revised Notice of Proposed Assessment of October 17, 1978, which reduces the amount of tax, penalties and interest claimed by the Respondent. The amount claimed, effective October 17, 1978, was $3,129.77. This included tax, penalties and interest computed to that date. The audit period is November 1, 1974 through October, 1978. The Petitioner in this cause has pled ignorance to the requirements of law in the question of collecting sales and use taxes under Chapter 212, Florida Statutes, and the necessity to establish exempt sales which were made as wholesale transactions. He makes his contention premised upon the belief that his registration as an inactive business relieved him of the necessity to collect the taxes and to establish an exemption from tax. Notwithstanding this belief on the part of the Petitioner, it is clear that Chapter 212, Florida Statutes through its provisions places an obligation on the Petitioner to collect sales and use taxes for a retail transaction and the failure to meet that obligation places the responsibility for that payment of sales and use taxes on business transactions entered into by the Petitioner, with the Petitioner. This carries with it the potentiality of the assessment of penalties and interest for the failure to collect and remit those taxes under Chapter 212, Florida Statutes. The only possibility to escape the payment of the sales and use taxes under Chapter 212, Florida Statutes exists with the ability of the Petitioner to establish that the sales were sales at wholesale and not taxable under Chapter 212, Florida Statutes. To the extent that the Petitioner has established the exemptions in keeping with Chapter 212, Florida Statutes and Rule 12A-1.38, Florida Administrative Code, the Petitioner has been given credit for those exemptions. The balance of the sales transactions in the audit period November 1, 1974 through October 1978, as reflected in the First Revised Notice of Proposed Assessment of Tax, Penalties and Interest, under Chapter 212, Florida Statutes, becomes the responsibility of the Petitioner for his failure to collect the taxes for the sales. Therefore, the Petitioner is responsible for the payment of tax, penalties and interest through October 17, 1978 in an aggregate amount of $3,129.77.
Recommendation It is recommended that the Petitioner, Jack Brandjes, d/b/a Jack's Flowers be required to pay the tax, penalties, add interest under Chapter 212, Florida Statutes in the amount of $3,129.77 as set forth in the October 17, 1978 First Revised Notice of Proposed Assessment of Tax, Penalties and Interest. DONE AND ENTERED this 31st day of October, 1978. CHARLES C. ADAMS Hearing Officer Division of Administrative Hearings 530 Carlton Building Tallahassee, Florida 32399-1550 (904) 488-9675 COPIES FURNISHED: Jack Brandjes c/o Jack's Flowers Ixora Market 4700 Canal 14 Road Lake Worth, Florida 33463 Cecil Davis, Esquire State of Florida Department of Legal Affairs The Capitol Tallahassee, Florida 32304 John D. Moriarty, Esquire Attorney, Division of Administration Department of Revenue Tallahassee, Florida 32304
The Issue Whether Celtic Management Concepts, LLC, d/b/a Connolly’s Pub (CMC), violated section 561.29(1)(a), Florida Statutes (2017),1/ when it failed to remit proper taxes to the Division of Revenue (DOR); and, if so, the penalty that should be imposed.
Findings Of Fact CMC is the holder of a series 2-COP beverage license, number BEV6910406 (License), issued by the Division in 2011. CMC was required by chapter 212, Florida Statutes, to remit to DOR the taxes associated with alcoholic beverages sold pursuant to its License. It failed to do so. On May 23, 2017, DOR issued a tax warrant against CMC in the amount of $15,279.45 for the amount of taxes owed by CMC, along with interest, penalties, and fees pursuant to chapter 212. CMC acknowledges the tax warrant and that it owes DOR outstanding taxes. The undersigned rejects the testimony by Leonard Nolan, CMC’s president and stockholder, that CMC was unaware it was delinquent in paying state taxes because all of the DOR and Division paperwork was handled by its accounting firm. Mr. Nolan knew or should have known as of May 23, 2017 (the date of the tax warrant) that it had an outstanding tax obligation. Moreover, the claim that Mr. Nolan did not receive any correspondence from the Division is also not credible. He responded to the Complaint and the same address was used for other correspondence. CMC’s conduct of ignoring the notices of past due taxes and failing to address the delinquency in a more timely manner was intentional. CMC established, however, it has recently taken steps to become fully compliant. It entered into a Stipulation Agreement, Form DR-68, with DOR on August 6, 2018. The Stipulation Agreement provides that CMC will make three payments beginning August 27, 2018, and ending October 25, 2018. In total, CMC will pay $35,721.35; this is more than the amount of the 2017 tax warrant. This is CMC’s first violation of chapter 212.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Business and Professional Regulation, Division of Alcoholic Beverages and Tobacco, enter a final order: Finding Respondent, Celtic Management Concepts, LLC d/b/a Connolly’s Pub, is subject to penalties pursuant to section 561.29 (1)(a), for violations of sections 212.14 and 212.15, related to delinquent taxes owed to the State Department of Revenue; and Requiring Respondent to comply with the terms of the Stipulation Agreement it entered into with the Department of Revenue dated August 6, 2018. DONE AND ENTERED this 25th day of September, 2018, in Tallahassee, Leon County, Florida. S HETAL DESAI Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 25th day of September, 2018.
Findings Of Fact In the original corporate income tax report submitted by Florida Power Corporation for the 1973 tax year the tax was computed using the federal income tax base. This included various depreciation methods and schedules in which accelerated depreciation had been claimed for federal tax purposes by Petitioner in years prior to 1972 and the initiation of the Florida Corporate Income Tax Law. By using accelerated depreciation schedules authorized by the federal tax laws, higher depreciation is allowed in the early years of an asset's useful life, leaving a lesser amount of depreciation to be charged off for tax purposes in the latter years of an asset's life. Essentially, Petitioner here contends that depreciable assets acquired prior to the effective date of the Florida Corporate Income Tax law were depreciated on accelerated schedules for federal tax purposes, but upon the effective date of the Florida Corporate Income Tax Law had value in excess of that shown on the federal tax schedule. By requiring taxpayers to use the same depreciation schedules for Florida taxes that are required for federal taxes Petitioner contends it is being penalized for the accelerated depreciation taken before the Florida income tax became constitutional. As an example of Petitioner's position it may be assumed that a depreciable asset was acquired for $100,000 with a useful life of 10 years, three years before the Florida Income Tax Law was passed. Also assume that during this three-year period from acquisition a double declining balance depreciation was taken for computing federal income taxes. Depreciation taken for the first year would be $20,000, for the second year $16,000 and for the third year $12,800, leaving a basis for further depreciation of $41,200 for this asset with seven years useful life remaining. For federal tax purposes Petitioner takes depreciation each year based upon initial cost less accumulated depreciation. Because this value decreased rapidly for the first three years in the assumed example and the excess depreciation thereby generated was not usable in reducing Florida taxes, Petitioner contends it is discriminated against in being required to, in effect, use the book value for federal tax purposes in computing its Florida income tax. Petitioner presented additional examples of reported income for federal income tax purposes which it claims should be exempt from Florida Income Tax. The specific deductions from which the $619,697 refund was computed were not broken down to show how much resulted from the accelerated depreciation schedules which commences prior to January 1, 1972, and how much was derived from these additional examples, some of which were given simply as an example of deferring income for tax purposes. Prior to January 1, 1972, Petitioner purchased some of its bonds prior to maturity and at a discount. As an example if Petitioner purchases $1,000,000 face value of these bonds for $800,000, it has realized a $200,000 gain which it must report as income for federal income tax purposes. These same federal tax rules allow Petitioner to elect to pay the income tax in the year received or spread it equally over the succeeding ten year period. Petitioner elected to spread the income over the succeeding ten year period and each year add $20,000 to its reported income for federal income tax purposes. Since the income was realized before January 1, 1972, Petitioner contends this is not subject to federal tax purposes. With respect to overhead during construction of depreciable assets the taxpayer is allowed to charge these costs off as an expense in the year incurred or capitalize these expenses. If the taxpayer elects to capitalize these expenses they are added to the cost of the constructed asset and recovered as depreciation as the asset is used. Petitioner elected to charge these expenses in the year incurred rather than capitalize them. Had they been capitalized originally, Petitioner would, in 1973, have been entitled to recover these costs in its depreciation of the asset. In its amended return it seeks to treat these costs as if they had been capitalized rather than expenses prior to January 1, 1972. Although apparently not involved in the amended return, Petitioner also presented an example where changes in accounting procedures can result in a gain to the taxpayer which is treated as income to the taxpayer, which he may elect to spread over future years in equal increments until the total gain has been reported.
Findings Of Fact Modern Tool and Die, (MTD), is a privately held corporation engaged in manufacturing equipment. In 1965 they started the manufacture of bumper guards which required electroplating. They entered into agreements with MPC pursuant to which MTD erected two buildings adjacent to their plant which they leased to MPC in which to do the electroplating of the bumper guards. MPC is also a privately held corporation and there is no common ownership of these two companies. The two buildings built for MPC's occupancy were partitioned, compartmented and wired as desired by MPC and at its expense. Florida Power Corporation supplied electricity to the complex through the main transformer of MTD. In 1965 and to a lesser extent now, electricity rates per kilowatt-hour (kwh) were lowered with increased usage of electricity. Since both MTD and MPC are large users of electricity they obtain a cheaper rate if all electricity used is billed from the master meter serving MTD. Accordingly, and at the recommendation of the power company, additional transformers and meters were placed at the two buildings occupied by MPC and read monthly at or about the same time the master meter is read by the power company. The kw used at the two buildings is forwarded by MPC to MTD each month. The latter, upon receipt of the power company bill, computes the cost of the power per kwh and in turn bills MPC for its portion of the bill based upon the usage forwarded by MPC to MTD. Upon the commencement of this working agreement between these two companies in 1965 MPC, pursuant to an oral lease, has paid rent to MTD monthly at the rate of approximately $2,400 per month. It has also paid to MTD its pro rata cost for the electricity used each month. The rent is invoiced each month on the first of the month as in Exhibit 3 and paid by the 10th by MPC. Sales tax is added to the rent and remitted to DOR. Electricity usage is also invoiced by MTD to MPC on or about the 20th of the month and paid by MPC on or about the first of the following month. (Exhibit 4). Sales tax on the electricity used is paid by MTD to Florida Power Company who presumably remits this to DOR. During the 15 years these two companies have shared the cost of electric power they have been audited numerous times; the arrangement was made known to the auditors; and no auditor, prior to the present, suggested that the cost of electricity was part of the rent paid by MPC upon which sales tax was due. Notice of Proposed Assessment (Exhibit 1) in the amount of $9,747.34 is based upon the cost of electricity billed to MPC during the period of the audit December 1, 1976 through November 30, 1979 multiplied by 4 percent sales tax plus penalties and interest. The parties stipulated to the accuracy of this amount. They differ only as to whether the tax is owed.
Findings Of Fact The facets herein are undisputed. On May 31, 1973 Petitioner purchased Thomas Concrete Company, and on February 28, 1973 Petitioner purchased Kelly Builders, Inc. Both companies were forthwith liquidated and federal income tax returns were filed in which depreciation in excess of fair value of the properties was recaptured for federal tax purposes. In his state corporate income tax returns Petitioner claimed deduction for that portion of the recaptured depreciation which occured prior to November 2, 1971, the effective date of the Florida Corporate Income Tax Statute. These deductions were disallowed by the Department of Revenue, that portion of the tax relating to Thomas Concrete Company was paid under protest, the portion relating to Kelly Builders, Inc. was not paid, and this petition was filed. In 1974 Petitioner sold real property on which it made a substantial capital gain. In computing its federal income tax the full capital gain was reported. However, that portion of its capital gain accruing prior to November 2, 1971 was excluded from its Florida corporate income tax and the assessment of $50,494.75 was levied against Petitioner by Respondent, Department of Revenue for the full amount of the capital gain as income received in 1974. The two issues here involved are whether Petitioner is taxable under Chapter 220 F.S. on depreciation taken prior to the effective date of Chapter 220, and subsequently recaptured, and whether Petitioner is taxable under Chapter 220, F.S. for the full amount of capital gain realized on property held prior to the effective date of Chapter 220 where part of appreciation occurred prior to the effective date of the Florida Corporate Income Tax law.
The Issue Whether or not the Petitioner is required to pay taxes under the authority of Chapter 212, Florida Statutes, which are set forth in the assessment by the Respondent, State of Florida, Department of Revenue, dated May 18, 1977.
Findings Of Fact The Respondent, State of Florida, Department of Revenue, performed an audit of the business which is the Taj Apartments, for purposes of determining if sales and use taxes were owed by that operation. At the time of the initial contact by the Respondent, the Taj Apartments were owned by individuals other than the Petitioner, Robert Hartley. However, in the process of the audit, it was determined that Hartley would be responsible for paying some of the assessments which were being alleged against the operation located on the premises which constitutes the Taj Apartments. Further liability for the audit period was established when Robert Hartley foreclosed a mortgage which he held from the owners of record who were the owners when the tax audit was first commenced. By his action of foreclosure, he became responsible for any tax assessments under Chapter 212, Florida Statutes, which were mete and proper during the audit period, which dated from September 1, 1973, through May 31, 1975. Those dates include the time that Robert Hartley d/b/a Taj Apartments was still in control of the premises. The assessment of the property from September 1, 1973, through May 31, 1975, was made upon the basis of a consideration of the rents collected as reflected in Hartley's ledger cards and receipts. The taxation was based upon a consideration of the number of units, in contrast to a consideration of the number of tenants found in the apartment building. The distinction of taxation on units and not tenants is significant because Hartley, in his petition, challenges the right of the Respondent to tax on a formula which pertains to units and not tenants. The language of the applicable section of Chapter 212, Florida Statutes, specifically, Section (7)(c), Florida Statutes, states the following: The rental of facilities, including trailer lots, which are intended primarily for rental as a principal or permanent place of residence is exempt from the tax imposed by this chapter. The rental of facilities that primarily serve transient guests is not exempt by this subsection. In the application of this law, or in making any determination against the exemption, the department shall consider and be guided by, among other things: Whether or not a facility caters primarily to the traveling public; Whether less than half of its tenants have a continuous residence in excess of 3 months; and The nature of the advertising of the facility involved. It can be seen that the language of that provision clearly invisions that permanent residents are exempt from consideration of the tax, and transient guests are not exempt. Discussion of tenants is used only in describing some of the matters that the Respondent shall consider and be guided by, and is not the only determination which the Respondent must look to in determining whether an exemption from the provisions of this subsection has been established. Furthermore, the fact that Rule 12A-1.61, Florida Administrative Code, which implements Chapter 212, Florida Statutes, in this particular taxing theory speaks in terms of units and not tenants is not inconsistent or in violation of the above quoted statutory provision, because that statutory provision allows the Respondent to look at other things in making its determination of an exemption. The language of Rule 12A-1.61, Florida Administrative Code, spoken of, states the following: Rental of living quarters, sleeping or housekeeping accommodations. (1) Every person, except housing authorities which are specifically exempt from provisions hereof by Section 212.08(10), F.S., is exercising a taxable privilege when he engages in the business of renting, leasing or letting any living quarters, sleeping or housekeeping accommodations in connection with any hotel, motel, apartment house, duplex, rooming house, tourist or mobile home court subject to the provisions of Chapter 212, F.S. Notwithstanding the aforesaid provisions of this paragraph, effective March 1, 1972, the tax shall not apply to the rental of living accommodations which are rented primarily to persons as their principal or permanent place of residence but the tax shall apply to the rental of such facilities at hotels, motels, and seasonal lodging facilities that primarily serve transient guests. (See paragraph 9 of this rule.) When a lodging facility does not primarily cater or advertise that it primarily caters to seasonal or transient guests, or to the traveling public, and when fifty percent or more of its total units are rented to persons who have resided thereat continuously for the three months immediately preceding March 1, 1972, the facility shall have an exempt status until a redetermination has been made. Landlords beginning business after March 1, 1972 shall determine the taxable status of their lodging facility as of the commencing of business. In making their determination, the above guidelines will be applied except that the three months prior residence requirement will be waived in those instances where leases or other records of the facility clearly reflect that the facility does not primarily cater to or advertise that it caters to seasonal or transient guests or the traveling public. All landlords are required to make a redetermination of the taxable status of their businesses on July 1 of each year and in the event that his taxable status has changed, he shall notify the Department of such change. Therefore, the Petitioner's challenge to the Respondent's utilization of rental units, as opposed to tenants residing in the apartment building of the Petitioner during the pendancy of the audit period, to decide the issue whether less than half of the tenants (units) have a continuous residence in excess of three months must fail. Moreover, when an assessment is made under the theory of Section 212.03, Florida Statutes, it is incumbent on the taxpayer to establish an exemption and the petitioner offered no evidence to establish an exemption. In view of the fact that the information for the assessment was taken from the books and records of the Petitioner, and their being no testimony to establish an exemption from the tax imposed on the rentals of the Taj Apartments which was serving transient guests in the time period at issue; the tax together with penalties and interest as set forth in the assessment document (Respondent's Exhibit No. 1, admitted into evidence) should stand. The audit brought about a further assessment for use tax due and owing during the period of the audit. The use tax pertains to Robert Hartley's rental of television sets to the guests in his rental facility and the rental of parking spaces to the guests in the rental facility. The determination of taxes owed for those rentals was also premised upon an examination of Mr. Hartley's books and records. No reason was established for not using the figures found in the hooks and records, in assessing any tax that might be owed for the rental of television sets and parking spaces. Consequently, the portion of the assessment of May 18, 1977, pertaining to a use tax on the rentals of the television sets and parking spaces should be upheld. The imposition of the assessment of May 18, 1977, is a revision of a prior assessment which was rendered before Mr. Hartley provided his books and records. This revised assessment reduced the initial assessment, premised upon an examination of Mr. Hartley's books and records and certain credits for exemptions in the year 1974. The revised assessment reflects this in its provision entitled "Abatements:" The revised assessment then becomes an assessment of $15,960.92. This assessment is constituted of a tax on the transient rentals, parking spaces and television sets; together with penalties on that tax amount and interest through May 8, 1977. The facts show that the revised assessment of May 18, 1977, is correct.
Recommendation It is recommended that the assessment of May 18, 1977, which has been placed against the Petitioner, Robert F. Hartley, d/b/a Taj Apartments, be upheld. DONE AND ENTERED this 17th day of February, 1978, in Tallahassee, Florida. CHARLES C. ADAMS, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Mr. Robert F. Hartley Post Office Box 82 Middletown, California 95461 and Mr. Robert F. Hartley 33 Southwest 2nd Avenue Miami, Florida 33130 Edwin Stacker, Esquire Assistant Attorney General Department of Legal Affairs The Capitol Tallahassee, Florida 32304 John D. Moriarty, Esquire Department of Revenue Room 104 Carlton Building Tallahassee, Florida 32304
The Issue As to DOAH Case No. 18-4475RX, whether Florida Administrative Code Rule 12A-1.044(5)(a) is an invalid exercise of delegated legislative authority in violation of section 120.52(8), Florida Statutes.1/ As to DOAH Case No. 18-4992RU, whether the Department of Revenue's ("Department") Standard Audit Plan, Vending and Amusement Machines--Industry Specific, section 1.1.3.3 ("SAP") is an unadopted rule in violation of sections 120.54 and 120.56, Florida Statutes.
Findings Of Fact The Parties and Audit Period GBR is a Florida corporation with its principal place of business in Miami, Florida. Gilda Rosenberg is the owner of GBR and a related entity, Gilly Vending, Inc. ("Gilly"). GBR and Gilly are in the vending machine business. At all times material hereto, Amit Biegun served as the chief financial officer of the two entities. The Department is the state agency responsible for administering Florida's sales tax laws pursuant to chapter 212, Florida Statutes. This case concerns the audit period of January 1, 2012, to December 31, 2014. GBR's Provision of Vending Machine Services Prior to the audit period, the school boards of Broward and Palm Beach County issued written solicitations through invitations to bid ("ITB"), seeking vendors to furnish, install, stock, and maintain vending machines on school property. The bids required a "full turn-key operation." The stated objectives were to obtain the best vending service and percentage commission rates that will be most advantageous to the school boards, and to provide a contract that will be most profitable to the awarded vendor. The stated goal was that student choices from beverage and snack vending machines closely align with federal dietary guidelines. GBR operates approximately 700 snack and beverage vending machines situated at 65 schools in Broward, Palm Beach, and Miami-Dade Counties. Of these 65 schools, 43 are in Broward County, 21 are in Palm Beach County, and one is in Miami-Dade County. The snack vending machines are all owned by GBR. Beverage vending machines are owned by bottling companies, such as Coca-Cola and Pepsi. Of the 700 vending machines, approximately 60 percent of the machines are for beverages and the remaining 40 percent are for snacks. GBR has written vending agreements with some schools. In these agreements, GBR is designated as a licensee, the school is designated as the licensor, and GBR is granted a license to install vending machines on school property in exchange for a commission. Furthermore, GBR is solely responsible to pay all federal, state, and local taxes in connection with the operation of the vending machines. Ownership of the vending machines does not transfer to the schools. However, in some cases the schools have keys to the machines. In addition, designated school board employees have access to the inside of the machines in order to review the meter, monitor all transactions, and reconcile the revenue from the machines. GBR places the vending machines on school property. However, the schools control the locations of the vending machines. The schools also require timers on the machines so that the schools can control the times during the day when the machines are operational and accessible to students. The schools also control the types of products to be placed in the machines to ensure that the products closely align with the federal dietary guidelines. The schools also control pricing strategies. GBR stocks, maintains, and services the vending machines. However, Coca-Cola and Pepsi may repair the beverage machines they own. GBR is solely responsible for repairing the machines it owns. The schools require that any vendor service workers seeking access to the vending machines during school hours pass background checks. GBR route drivers collect the revenue from all of the vending machines and the revenues are deposited into GBR's bank accounts. In exchange for GBR's services, the schools receive from GBR, as a commission, a percentage of the gross receipts. However, neither GBR nor the schools are guaranteed any revenue unless sales occur from the machines. On its federal income tax returns, GBR reports all sales revenue from the vending machines. For the tax year 2012, GBR's federal income tax return reflects gross receipts or sales of $5,952,270. Of this amount, GBR paid the schools $1,363,207, a percentage of the gross receipts which GBR characterized on the tax return and its general ledger as a commission and equipment space fee and cost of goods sold. For the tax year 2013, GBR's federal income tax return reflects gross receipts or sales of $6,535,362. Of this amount, GBR paid directly to the schools $1,122,211, a percentage of the gross receipts which GBR characterized on the tax return and its general ledger as a commission and equipment space fee and cost of goods sold. For the tax year 2014, GBR's federal income tax return reflects gross receipts or sales of $6,076,255. Of this amount, GBR paid directly to the schools $1,279,682, a percentage of the gross receipts which GBR characterized on the tax return and its general ledger as a commission and equipment space fee and cost of goods sold. Thus, for the audit period, and according to the federal tax returns and general ledgers, GBR's gross receipts or sales were $18,563,887. Of this amount, GBR paid directly to the schools $3,765,100, as a commission and equipment space fee and cost of goods sold. The Department's Audit and Assessment On January 27, 2015, the Department, through its tax auditor, Mary Gray, sent written notice to GBR of its intent to conduct the audit. This was Ms. Gray's first audit involving vending machines at schools. Thereafter, GBR provided Ms. Gray with its general ledger, federal returns, and bid documents. On October 28, 2015, Ms. Gray issued a draft assessment to GBR. The email transmittal by Ms. Gray to GBR's representative states that "[t]he case is being forwarded for supervisory review." In the draft, Ms. Gray determined that GBR owed additional tax in the amount of $28,589.65, but there was no mention of any purported tax on the monies paid by GBR to the schools as a license fee to use real property. However, very close to the end of the audit, within one week after issuing the draft, and after Ms. Gray did further research and conferred with her supervisor, Ms. Gray's supervisor advised her to issue the B03 assessment pursuant to section 212.031 and rule 12A-1.044, and tax the monies paid by GBR to the schools as a license fee to use real property. Thus, according to the Department, GBR was now responsible for tax in the amount of $246,230.93, plus applicable interest. Of this alleged amount, $1,218.48 was for additional sales tax (A01); $4,181.41 was for purchase expenses (B02); $13,790 was for untaxed rent (B02); and $227.041.04 was for the purported license to use real property (B03). Ms. Gray then prepared a Standard Audit Report detailing her position of the audit and forwarded the report to the Department's dispute resolution division. On January 19, 2016, the Department issued the Notice of Proposed Assessment ("NOPA") against GBR for additional tax and interest due of $288,993.31. The Department does not seek a penalty against GBR. At hearing, Ms. Gray testified that the Department's SAP is an audit planning tool or checklist which she used in conducting GBR's audit. Employees of the Department are not bound to follow the SAP, and the SAP can be modified by the auditors on a word document. The SAP was utilized by Ms. Gray during the audit, but it was not relied on in the NOD.4/
Findings Of Fact Harris Corporation is a large, multi-national corporation with headquarters in Melbourne, Florida. Harris Corporation conducts its business through several divisions, one of which is Harris Composition Systems Division ("the taxpayer"). The taxpayer is engaged in the business of manufacturing and selling computerized printing equipment. On January 28, 1977, the State of Florida, Department of Revenue ("the Department") mailed a letter to the taxpayer, advising that an audit of the taxpayer's books and records be made available. The audit was undertaken by agents of the Department and on June 25, 1979, two Notices of Proposed Assessment (the "notices") were mailed to the taxpayer by the Department. The period covered by the Notices is January 1, 1974 through June 30, 1978. No proposed or actual assessment of the sales and use taxes referred to in the Notices was made by the Department prior to the proposed assessment. After receipt of the Notices, the taxpayer's representatives attended an informal conference with representatives of the Department on September 25, 1979. As a result of that conference the Department issued two Revised Notices of Proposed Assessment. The Revised Notices eliminated January 1, 1974 through May 31, 1974 from the period covered by the Notices but retained the period June 1, 1974 through June 30, 1978. The portion of the sales and use tax assessment proposed in the Revised Notices that is in dispute in this case is the portion that is attributable to the June 1, 1974 through June 30, 1976 period. The tax in controversy is $49,934.01. The Department has developed a form to be signed by taxpayers in situations where the Department believes that the statute of limitations on assessment of sales and use taxes may expire before an assessent can be made. The Department did not request that the taxpayer in this case execute such a form, nor did the Department request in any other manner that the taxpayer waive or extend the statute of limitations applicable to sales and use tax assessments and the taxpayer did not do so. Neither the Department nor the taxpayer instituted any judicial or administrative proceedings for review of the assessment proposed in the Notices or in the Revised Notices prior to the filing of a petition by the taxpayer in this case on March 20, 1980. The Department contends that any delay in issuing the proposed notices of assessment was directly attributable to difficulties encountered in obtaining records in a timely fashion from the taxpayer's parent company, and that the taxpayer should, therefore, be estopped to raise the defense of violation of the statute of limitations. The record in this proceeding does not support such a conclusion. Although there appear to have been some delays in performing the tax audits, the taxpayer was by no means responsible for all of those delays. In fact, the longest such delay, from about December 1, 1977, through May 3, 1978, was occasioned by the Department's own budgetary problems relating to per diem and travel expenses for its auditing team. Although some delays were requested by the taxpayer, they were acquiesced in by the Department in the course of establishing its own priorities in conducting the audit of all of the divisions of Harris Corporation. The record is devoid of any indication that the Department at any point considered any failure of the taxpayer to furnish requested information of sufficient severity to invoke the remedies available to the Department under Section 212.13(1), Florida Statutes (mandatory injunction to require examination of books and records) or Section 212.14(1), Florida Statutes (issuance of estimated tax deficiency together with distress warrant for collection of such taxes).
Recommendation Based upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED: That a Final Order be entered by the State of Florida, Department of Revenue, assessing sales and use taxes against Respondent in the amount of $49,934.01, together with the applicable amount of interest through the date of entry of said Final Order. DONE AND ORDERED in Tallahassee, Leon County, Florida, this 14th day of January, 1981. WILLIAM E. WILLIAMS Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 14th day of January, 1981. COPIES FURNISHED: Linda C. Procta, Esquire Assistant Attorney General The Capitol, Room LL04 Tallahassee, Florida 32304 Brian C. Ellis, Esquire 620 Twiggs Street Tampa, Florida 33602 ================================================================= AGENCY FINAL ORDER =================================================================
Findings Of Fact Having listened to the testimony and considered the evidence presented in this cause, it is found as follows: Petitioner is a domestic corporation. Petitioner provided medicare services to patients in the 1969-70 fiscal year. An on-site audit by the medicare auditing team was concluded in December of 1971, and petitioner received $56,131.00 of medicare reimbursements in January of 1972, for the services provided in the 1969-70 fiscal year. The petitioner did not file an amended federal income tax return for the fiscal year ending September 30, 1979. The adjusted federal income reported on petitioner's federal income tax return for the fiscal year ending September 30, 1972, included the $56,131.00 of medicare reimbursements received by petitioner in January of 1972. On petitioner's Florida income tax return for its fiscal year ending September 30, 1972, petitioner did not include the $56,131.00 figure in its adjusted federal income. On March 31, 1975, the respondent notified petitioner of a proposed deficiency in the amount of $2,100.99 arising from the petitioner's omission of the medicare reimbursements from its adjusted federal income as shown on its Florida corporate income tax return for the fiscal year ending September 30, 1972. Further correspondence ensued between the petitioner and the Corporate Income Tax Bureau of the respondent and the petitioner filed the present petition requesting a hearing on the issue. The respondent requested the Division of Administrative Hearings to conduct the hearing.
Recommendation Based upon the above findings of fact and conclusions of law, it is my recommendation that there is no legal basis for affording the petitioner any relief from the proposed deficiency and that said deficiency in the amount of $2,100.00 be sustained. Respectfully submitted and entered this 17th day of September, 1975, in Tallahassee, Florida. DIANE D. TREMOR, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: E. Wilson Crump, II, Esquire Assistant Attorney General Department of Legal Affairs Tax Division, Northwood Mall Tallahassee, Florida 32303 Homer E. Ward, N.H.A. Administrator/President University Park Convalescent Center 1818 E. Fletcher Avenue Tampa, Florida 33612
