The Issue The issue is whether Petitioner, Christopher B. Scott, as the managing member of PNC, LLC (PNC), is personally liable for a penalty equal to twice the total amount of the sales and use tax owed by PNC to the State of Florida.1/
Findings Of Fact The Department is the state agency charged with administering and enforcing the laws related to the imposition and collection of sales and use taxes. PNC is a now-dissolved Florida limited liability company that did business under the name "CHEAP" at 309 South Howard Avenue, Tampa, Florida. PNC was registered as a business and filed its Articles of Organization with the Secretary of State on June 16, 2010. Until the company was dissolved by the Secretary of State in 2018 for failure to pay the 2017 annual filing fees, Mr. Scott served as its managing member and had administrative control over the collection and payment of taxes. Verna Bartlett was PNC's controller. PNC was registered with the Department as a dealer pursuant to section 212.18, Florida Statutes, and was issued Sales and Use Tax Certificate of Registration 39-8015401140-8. A certificate of registration requires the taxpayer to file sales and use tax returns and pay to the Department all taxes owed as they are received. After making numerous attempts to collect delinquent sales tax owed by PNC for tax reporting periods in 2013 and 2014, the Department filed this action seeking to impose a personal penalty assessment against Mr. Scott, the managing member of the company. Section 213.29, Florida Statutes, provides that any person who has administrative control over the collection and payment of taxes and who willfully fails to pay the tax or evades the payment of the tax shall be liable to a penalty equal to twice the amount of tax not paid. The penalty is based only on the taxes owed, and not the interest and fees that have accrued. The statute provides that if the business liability is fully paid, the personal liability assessment will be considered satisfied. On January 18, 2018, the Department issued a NAPL against Mr. Scott after PNC failed to pay the sales and use taxes owed the State for the reporting periods from February 2013 through October 2014. The outstanding taxes, exclusive of interest or penalties, total $79,325.75. The NAPL imposes a total penalty of $158,647.50, or twice the amount of sales tax owed by PNC. No payments have been made on the account since the issuance of the NAPL, and, PNC, now closed, currently has a total liability in excess of $200,000.00. During the relevant time period, Mr. Scott was personally responsible for collecting PNC's sales tax and remitting it to the Department; he had the authority to sign checks on behalf of PNC; he made financial decisions as to which creditors should be paid; he made the decision to use the sales tax collected for the business and for stipulation payments; and he made the decision not to remit the sales tax that was collected. This was confirmed by PNC's controller, Ms. Bartlett, who responded to the Department's Requests for Admissions. Mr. Scott also confirmed to a Department tax specialist that the admissions provided by Ms. Bartlett were accurate. Mr. Scott either never remitted payment or did not remit payment timely on behalf of PNC for the following reporting periods: February, April, and December 2013, and January through October 2014. Tax warrants were issued and judgment liens were recorded for the following reporting periods: February, April, and December 2013, and January, February, and April through October 2014. Resp. Ex. 5 and 6. All warrants and liens relate to reporting periods that fall within the personal liability assessment period. A Notice of Jeopardy Finding and Notice of Final Assessment (Notice of Jeopardy) dated June 18, 2014, was issued to PNC pertaining to the April 2014 reporting period. Resp. Ex. This notice was issued after Mr. Scott ceased making regular tax payments, the estimated deficiency was substantial, and the Department determined that collection of the tax would be jeopardized by further delay. A Notice of Jeopardy and Notice of Final Assessment dated August 7, 2014, also was issued to PNC pertaining to the April, May, and June 2014 reporting periods. Resp. Ex. 12. Because PNC reported more than $20,000.00 in sales tax each year, unless a waiver was obtained, Mr. Scott was required to file and pay PNC's sales tax electronically for all reporting periods within the personal liability period. See § 213.755(1), Fla. Stat.; Fla. Admin. Code R. 12-24.003. Despite having obtained no waiver, Mr. Scott never filed returns or paid PNC's sales tax electronically. And even though he never remitted a payment electronically, Mr. Scott indicated on at least six sales tax returns during the relevant time period that sales tax for the reporting period was remitted electronically. The only conclusion to draw from this action is that Mr. Scott filed or directed the filing of these returns knowing them to be false. The record shows that, dating back to 2011, Mr. Scott has a long-standing history of failing to abide by the tax laws of the state as it relates to PNC. For example, on September 15, 2011, Mr. Scott was referred for criminal investigation by the state attorney for his failure to pay taxes. Also, numerous returns were filed without a payment. This is prima facie evidence of conversion of the money due. § 212.14(3), Fla. Stat. Respondent's Exhibit 1 summarizes numerous contacts by the Department's Tampa District Office with Mr. Scott regarding collection notices, telephone calls, emails, assessment letters, warrant letters, and the like in an effort to secure compliance with tax laws. It is fair to find that Mr. Scott willfully attempted to evade or avoid paying sales and reemployment taxes during the relevant period. To prevent its Sales and Use Tax Certificate of Registration from being revoked, PNC entered into a compliance agreement on July 10, 2013, to pay past due sales tax and reemployment tax totaling $65,789.25. The agreement required PNC to: (a) accurately complete all past due tax returns and reports no later than July 10, 2013; (b) remit all past due payments in accordance with the attached schedule, which required 11 monthly payments of $4,000.00 beginning on August 10, 2013, and a final balloon payment on July 10, 2014; (c) accurately complete and file all required tax returns and reports for the next 12 months; and (d) timely remit all taxes due for the next 12 months. A $15,000.00 down payment also was required to be paid on or before July 10, 2013. An addendum to the agreement (added by Mr. Scott) provided that "[a]ll payments, including the $15,000.00 down payment, shall first be applied to Sales and Use Tax." Although the down payment was made timely, the agreement was breached the first month (August) because Mr. Scott did not make the payment electronically. However, the agreement was not voided by the Department until October 12, 2013. Therefore, any payments made on or after October 12, 2013, were not considered compliance payments and are not subject to the addendum in the agreement. A somewhat confusing aspect of this dispute concerns Mr. Scott's contention, by way of cross-examination, that contrary to the addendum, the Department incorrectly applied his $15,000.00 down payment and subsequent compliance payments to the reemployment tax account, rather than the sales tax account, and that his sales tax liability should be reduced by that amount. As noted above, the addendum governs only the payments that predate October 12, 2013, which are the down payment ($15,000.00) and the August and September payments -- $4,000.00 each month. This issue was not raised by Mr. Scott until the Department issued a NAPL on April 13, 2017. The NAPL issued on April 13, 2017, indicated that the outstanding tax owed by PNC through October 31, 2014, was $90,808.17, and the personal assessment was twice that amount. In response to Mr. Scott's request, the Department acknowledged that it incorrectly applied the down payment to the reemployment account. Also, it took a second look at the two payments made in August and September, which predate the voiding of the agreement. The August installment payment consisted of two separate checks: $3,390.00 for sales tax and $610.00 for reemployment tax, and these amounts were applied in that manner. The September payment, $4,000.00, submitted in one check, was applied in the same manner as the August payment, with $610.00 going to the reemployment tax and the remainder to sales tax. Therefore, only $1,220.00 was incorrectly applied to the reemployment tax during those two months. On July 3, 2017, the Department reapplied a total of $16,551.00 from the reemployment tax account to the sales tax account for the relevant reporting periods. Mr. Scott contends the reapplication of the $16,551.00 to sales tax should reduce the amount of sales tax due by that amount. However, section 213.75(2) dictates that if a lien or warrant has been filed against the taxpayer, as is true here, the payment shall be applied in a priority order spelled out in the statute. Thus, the Department applied that amount in the following order: against the costs to record the liens against PNC; against the administration collection processing fee, if any; against any accrued interest; against any accrued penalty; and against any tax due. Under this priority order, the penalty/interest/fees categories totaled $5,066.58, while the tax liability category totaled $11,484.42. A detailed breakdown of this allocation is found in Respondent's Exhibit 29. Therefore, the total tax liability on the 2017 NAPL ($90,808.17) is reduced by $11,484.42, resulting in a total tax liability of $79,323.75, as shown on the updated 2018 NAPL. In the same vein, in his PRO, Mr. Scott argues that he was not given credit for payments of $9,110.24, $2,688.53, $178.28, and $1,321.80, which reduce his sales tax liability to $66,024.90 and the personal assessment to $132,049.80. See Pet'r Ex. 10. However, all of these payments (some of which are bank levies) were made after the compliance agreement was voided and do not apply to the reporting periods in this case. By way of cross-examination, Mr. Scott also contends that he was never given an accounting of what PNC owes despite "multiple requests" for the same. The record shows otherwise. On April 13, 2017, the 2017 NAPL was mailed to Mr. Scott, along with a ZT09, a computer-generated form which lists, in detail, a taxpayer's outstanding taxes owed by reporting period. A second copy of a ZT09 was faxed to him the following day. In his May 3, 2017, letter protesting the 2017 NAPL, Mr. Scott alleges that payments were not applied properly. In response, the Department sent a fax to Mr. Scott on May 10, 2017, listing checks that were not honored by the bank and requesting information concerning which payments PNC contends were not applied properly. In his response on May 12, 2017, Mr. Scott did not provide the requested information. On January 17, 2018, the 2018 NAPL was mailed to Mr. Scott, along with a ZT09. Finally, on April 12, 2018, per Ms. Bartlett's request, the Department mailed a ZT09 with the outstanding amounts due. Finally, in its PRO, the Department points out that after the hearing ended, it discovered that it made an error, in Mr. Scott's favor, in calculating his sales tax liability for the relevant reporting periods. Had it correctly calculated the amount of payments made by PNC, the sales tax liability for the relevant period would be increased from $79,323.75 to $84,444.35, which in turn would increase the personal assessment. However, the Department consents to the lower tax and assessed penalty amount, as reflected on the 2018 NAPL.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order determining that Petitioner, Christopher B. Scott, is liable to the Department for a penalty of $158,647.50. DONE AND ENTERED this 22nd day of April, 2019, in Tallahassee, Leon County, Florida. S D. R. ALEXANDER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 22nd day of April, 2019.
The Issue The issue for determination is whether Petitioner is liable for the tax, penalty, and interest assessed.
Findings Of Fact Petitioner is a Florida corporation with its principal place of business located at 2836 North Tamiami Trial, Sarasota, Florida. Petitioner primarily engages in the business of selling classic, vintage automobiles. Petitioner sells automobiles for delivery in-state, interstate, and internationally. Petitioner also engages in the business of selling other collectible items, including jukeboxes. Respondent is the state agency responsible for the administration of the Florida sales and use tax pursuant to Sections 20.21 and 213.05, Florida Statutes (1991). (All references to Florida Statutes are to Florida Statutes 1991 unless otherwise stated.) In accordance with Section 212.34, Respondent audited Petitioner's business records for the period from May 1, 1991, through July 31, 1996 (audit period). Respondent determined a deficiency and assessed Petitioner for $114,878.68, including tax, penalty, and interest through January 26, 1999. Respondent assessed tax in the amount of $55,771.16, penalty in the amount of $26,528.02, and interest through January 26, 1999, in the amount of $32,579.50. Additional interest accrues at the daily rate of $20.97. The assessed tax is based on several alleged deficiencies. Some deficiencies involve alleged failures of Petitioner to comply with taxing provisions. Other deficiencies involve alleged failures of Petitioner to comply with the requirements of claimed exemptions. Taxing provisions are construed narrowly against the taxing authority while the provisions authorizing exemptions are construed narrowly against the person claiming the exemption. The assessment against Petitioner includes tax on $51,353.10 in under-reported retail sales for 1994. Respondent compared the gross income reported by Petitioner for the 1994 tax year with the state sales tax revenues reported by Petitioner for the same year and determined that Petitioner under-reported sales tax revenues in the amount of $51,353.10. Mr. Martin Godbey is a corporate officer for Petitioner and a controlling shareholder. Mr. Godbey testified at the hearing. Mr. Godbey testified that $45,000 of the $51,353.10 was not under-reported gross sales in 1994. According to Mr. Godbey, Petitioner's accountant over-reported gross income for purposes of the federal income tax. Petitioner derives some income from providing brokerage services as an liaison between a buyer and seller. Mr. Godbey testified that Petitioner earned $1,400 in 1994 as a broker for the sale of a 1956 Jaguar XJ140 roadster on behalf of an automobile dealership in Virginia. The testimony is that Petitioner introduced the seller and buyer but never possessed the vehicle or delivered the vehicle. The price of the vehicle was approximately $45,000. Mr. Godbey testified that Petitioner's accountant incorrectly reported $45,000 as gross income under the federal income tax law and reported the difference between $45,000 and $1,400 as the cost of goods sold. The testimony of Mr. Godbey was credible and persuasive. However, the testimony was not supported by documentary evidence of Petitioner's federal income tax return or by testimony of Petitioner's accountant. The unsupported testimony of Mr. Godbey does not rise to the level of a preponderance of the evidence. Petitioner failed to show by a preponderance of the evidence that Petitioner over-reported gross income for the purpose of the federal income tax rather than under-reported gross sales for the purpose of the state sales tax. The testimony of Mr. Godbey did not explain the difference between the $51,353.10 amount determined by Respondent and $45,000 amount testified to by Mr. Godbey. For the period from 1991 through 1993, Petitioner collected sales tax on retail sales but did not remit the tax to Respondent. Rather, Petitioner paid the tax to two automobile dealers identified in the record as International Antique Motors, Inc. (IAM) and Autohaus Kolar, Inc. (AK). Petitioner registered with Respondent as a dealer sometime in 1991. However, Petitioner did not obtain a retail dealer's license from the Department of Motor Vehicles (Department) until late in 1993. From 1991 through most of 1993, Petitioner was licensed by the Department as a wholesale dealer and was not authorized by the Department to engage in retail sales of motor vehicles. Section 320.27(2) prohibited Petitioner from selling motor vehicles at retail and made such sales unlawful. Petitioner asserts that it could not have engaged in retail sales, within the meaning of Section 212.06(2)(c) and (d), because Petitioner had no legal authority to do so. From 1991 through 1993, Petitioner engaged in retail sales within the meaning of Section 212.06(2)(c) and (d). Petitioner engaged in retail sales by selling automobiles at retail in violation of Section 320.27(2). Respondent does not dispute that Petitioner collected sales tax on each sale. Petitioner did not engage in retail sales and collect sales tax on each sale in the capacity of an agent for IAM or AK. Petitioner acted in his own behalf as a principal. IAM and AK had no actual or legal control over the sales conducted by Petitioner. IAM and AK merely processed the title work for each retail sale conducted by Petitioner. Even if Petitioner were an agent for IAM and AK, Petitioner engaged in retail sales as a dealer defined in Florida Administrative Code Rule 12A-1.0066. (All references to rules are to rules promulgated in the Florida Administrative Code during the audit period.) Petitioner registered the vehicles sold at retail from 1991 through 1993 by way of a business arrangement with IAM and AK. After Petitioner collected sales tax on each retail sale, Petitioner remitted the tax to IAM and AK. IAM and AK then registered the vehicles with the Department. Respondent does not dispute that Petitioner paid to IAM and AK the sales tax that Petitioner collected from each customer. Nor does Respondent dispute that the amount of tax Petitioner paid to IAM and AK was sufficient to pay the tax due. Section 212.06(10) requires IAM and AK to issue a receipt for sales tax with each application for title or registration. IAM obtained title or registration for 21 vehicles sold by Petitioner and at issue in this case. AK obtained title or registration for three vehicles at issue in this case. Section 212.06(10) does not operate to create a factual presumption that IAM and AK paid the sales tax due on the 24 vehicles at the time that IAM and AK applied for title or registration of each vehicle. In practice, the receipt issued by dealers with each application for title or registration contains a code indicating that the dealer has collected the tax and will pay the tax in the dealer's ensuing sales tax return. After IAM applied for title or registration for the vehicles evidenced in Petitioner's Exhibits 2, 4, 6, and 21, IAM remitted taxes to Respondent in an amount sufficient to pay the tax due on those sales by Petitioner. Respondent has no record of any tax deficiencies against IAM. Respondent's admitted policy is to avoid the collection of tax if the tax has already been paid. After IAM applied for title or registration for the vehicles evidenced in Petitioner's Exhibits 1, 3, 5, and 7 through 20, IAM remitted taxes to Respondent in an amount that was insufficient to pay the tax due on those sales. Petitioner failed to show by a preponderance of the evidence that IAM remitted to Respondent the taxes that Petitioner collected and paid to IAM in connection with the sales evidenced in Petitioner's Exhibits 1, 3, 5, and 7 through 20. Petitioner is not entitled to a set-off of the taxes remitted to Respondent by IAM after the sales evidenced in Petitioner's Exhibits 1, 3, 5, and 7 through 20. There is insufficient evidence to show that the taxes remitted by IAM were collected on the sales at issue in this case rather than other sales made by IAM. AK processed three vehicles for Petitioner that are at issue in this case. AK paid to Respondent the sales tax due on the three retail sales at issue. The relevant sales are evidenced in Petitioner's Exhibits 24 through 26. AK remitted taxes in an amount that was more than sufficient to pay the tax due on those sales by Petitioner. Respondent has no record of a tax deficiency against AK. Respondent's policy is to avoid the collection of tax if tax has already been paid. Several deficiencies are attributable to disallowed exemptions for 16 sales that include 14 vehicles and two jukeboxes. Statutory requirements for exemptions are strictly construed against the person claiming the exemption. Petitioner did not satisfy essential requirements for any of the disallowed exemptions. The exemptions asserted by Petitioner in its PRO are discussed in greater detail in the following paragraphs. During the audit period, Petitioner sold a 1972 Italia Spyder automobile, VIN: 50413414, to a Texas automobile dealership identified in the record as North American Classic Cars/Gene Ponder, of Marshall, Texas (North American). Petitioner claims that the sale to North American is exempt because it is a sale for resale to a non-resident dealer. The sale to North American is not exempt. Petitioner failed to obtain a non-resident dealer affidavit at the time of sale in violation of Section 212.08(10). During the audit, Petitioner obtained a Sales Tax Exemption Affidavit (DR-40) from North American. A DR-40 is not appropriate for a sale for resale to a non-resident dealer. The appropriate affidavit would have required the non-resident dealer to attest that "the motor vehicle will be transported outside of the State of Florida for resale and for no other purpose." Hand written notations on the bill of sale for the Italia Spyder indicate the North American representative took possession of the automobile in Florida. In addition, a hand- written letter to Petitioner indicates that the Italia Spyder was purchased for the private collection of the owner of North American rather than for resale. During the audit period, Petitioner sold a 1959 Mercedes Benz 190SL automobile, VIN: 12104-10-95012, to Mike Hiller, of Coral Springs, Florida (Hiller). Petitioner claimed, on the bill of sale, that the sale was exempt because it was a sale to a non-resident dealer for resale. The sale to Hiller is not exempt. At the time of the sale, Petitioner failed to obtain a non-resident dealer affidavit or a resale certificate. The bill of lading lists Hiller as an exporter and indicated that Hiller, as the exporter, took possession of the automobile in Florida. The bill of lading does not show unbroken, continuous transportation from the selling dealer to a common carrier or directly out of Florida as required in Section 212.06(5)(b)1. During the audit period, Petitioner sold a 1959 MGA Roadster, VIN: 54941, to Fabiana Valsecchi, of Rome, Italy. Petitioner claims the sale is exempt as a sale for export. The sale to Valsecchi is not exempt. At the time of the sale, Petitioner failed to obtain a bill of lading, or other shipping documentation that shows unbroken, continuous transportation from Petitioner to a common carrier or directly out of Florida. The bill of sale signed by the purchaser's agent shows that the agent took possession of the automobile in Florida. Petitioner failed to show that the sale was exempt because it was a sale for resale. Petitioner did not provide a resale certificate from the purchaser. During the audit period, Petitioner sold a 1961 Triumph TR3 automobile, VIN: TS753 38L, to Classic Automobile Investors, Inc., of Germany (Classic). Petitioner claims that the sale is exempt because it was a sale for export. The sale to Classic is not exempt. At the time of sale, Petitioner failed to obtain a bill of lading, or other shipping documentation which shows unbroken, continuous transportation from Petitioner to a common carrier or directly out of Florida. During the audit period, Petitioner sold a 1947 Bentley MKVI automobile, VIN: B137B, to Mr. Bob Erickson, of Palmetto, Florida. Petitioner failed to collect and remit Local Government Surtax on the sale and owes the uncollected tax. During the audit period, Petitioner sold two jukeboxes and other items of tangible personal property to Mr. C.P. Loontjens. Petitioner claims that the sales are exempt from sales tax because they were sales for export. At the time of the sale, Petitioner failed to obtain documentation from the buyer to show that items sold were delivered to a common carrier or directly delivered outside of Florida. During the audit period, Petitioner was engaged in the business of selling items of tangible personal property other than vehicles and jukeboxes. Petitioner failed to collect and remit sales tax on the sale of these items of tangible personal property. Respondent properly assessed Petitioner for sales tax due on tangible personal property other than vehicles and jukeboxes in the amount of $3,352.50. Vintage rented commercial real property for its business. Rental payments for such real property are subject to sales tax pursuant to Section 212.031. During the audit period, Petitioner failed to pay sales tax on two payments for the commercial rental of real property. Petitioner is liable for use tax on the use of real property during the audit period. Respondent properly assessed Petitioner for additional use tax in the amount of $108.00. Although Petitioner maintained some books and records of sales and purchases, Petitioner failed to maintain adequate records. Respondent properly conducted an audit by sampling Petitioner's available books and records in accordance with Section 212.12(6)(b) but limited the claimed penalty to a delinquent penalty. The trier of fact cannot determine the taxes, interest, and penalty that are due after eliminating the deficiencies found in paragraphs 21 and 24 not to exist in connection with the sales evidenced in Petitioner's Exhibits 2, 4, 6, 21, and 24 through 26. Only Respondent can make that calculation using the same sampling formula that Respondent used to calculate the tax, interest, and penalty in the assessment.
Recommendation Based upon the foregoing findings of fact and the conclusions of law, it is RECOMMENDED that Respondent enter a Final Order ordering Petitioner to pay the tax, interest, and penalty that is due after Respondent recalculates the assessment against Petitioner in accordance with the findings pertaining to Petitioner's Exhibits 2, 4, 6, 21, and 24 through 26. DONE AND ENTERED this 6th day of March, 2003, in Tallahassee, Leon County, Florida. ___________________________________ DANIEL MANRY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 6th day of March, 2003. COPIES FURNISHED: Carrol Y. Cherry, Esquire Office of the Attorney General Department of Legal Affairs The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050 Martha F. Barrera, Esquire Office of the Attorney General Department of Legal Affairs The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050 R. John Cole, II, Esquire Law Offices of R. John Cole, II 46 North Washington Boulevard, Suite 24 Sarasota, Florida 34236 Bruce Hoffmann, General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 James Zingale, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100
The Issue The issue herein is whether the Department of Revenue's sales tax assessment against West Broward Chamber of Commerce as a result of the purchase of promotional books by the Chamber from Creative Public Relations and Marketing, Inc., is valid.
Findings Of Fact The West Broward Chamber of Commerce (Petitioner) entered into an oral contract with Mr. Randy Avon, a representative of Creative Public Relations, to purchase a promotional booklet pertaining to the West Broward area for distribution to the public. (Petitioner's Exhibit #1). Creative Public Relations in turn contracted with International Graphics to print the booklet. Mr. Bernard Fox, the Department of Revenue's (Respondent Area Manager in the Fort Lauderdale office and Mr. James W. Darrow, who worked with International Graphics during the time the transaction in question took place, testified and established that Mr. Randy Avon secured a sales tax number for the purchase of the promotional books in issue and presented the sales tax number to International Graphics. International Graphics sold the books to Mr. Avon for resale, without tax. The Department of Revenue issued an assessment against Petitioner for sales tax, penalty and interest due on the purchase of the books in question by Petitioner in the total amount of $1,307.56. Evidence reveals that said assessment was due as of December 20, 1978, and that since that time interest is accruing at a daily rate of $.31. This assessment was based on a total purchase price of $24,214.10, which, according to Mr. Fox and the statements contained in Respondent's Exhibit #1, was the price that Mrs. Gail Duffy, Petitioner's Executive Director informed the Respondent that the Chamber paid for the promotional booklets. Petitioner's treasurer, Helen Kerns, also testified that the total purchase price paid by Petitioner for the books was $22,104 and that part of the purchase price was paid directly to Creative Public Relations due to a dispute with an officer of the contracting entity, International Graphics. Mrs. Kerns testified that commissions were, however, paid by the Petitioner to Creative Public Relations, which commissions were not included in the purchase price as testified to by Mrs. Kerns. James W. Darrow, a witness who was allegedly privy to the agreement and understanding between the Petitioner and the seller, Creative Public Relations, testified that the oral contract price specifically included sales taxes on the transaction. Additionally, Mrs. Duffy testified that in her opinion, the sales taxes due on the purchase by Petitioner had been paid because she under stood that the total purchase price paid to Creative Public Relations by Petitioner included the sales tax. No sales invoices, receipt, or other tangible evidence of sales were offered into evidence at the hearing herein. Petitioner contends that the sales tax in question was included in the total purchase price. Based thereon, Petitioner contends that Creative Public Relations is now liable for the tax. Respondent, on the other hand, takes the position that the taxes from the sales transaction can be imposed on either the seller or the purchaser.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department of Revenue's sales tax assessment against Petitioner be upheld. DONE AND ENTERED this 10th day of September 1979 in Tallahassee, Florida. JAMES E. BRADWELL Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 10th day of September 1979. COPIES FURNISHED: James T. Moore, Esquire 1265 Northwest 40th Avenue Lauderhill, Florida 33313 Cecil L. Davis, Jr., Esquire Assistant Attorney General The Capitol, Room LL04 Tallahassee, Florida 32301 Robert A. White, Esquire 5460 North State Road #7, Suite 220 Fort Lauderdale, Florida 33319
The Issue Whether the Petitioner owes sales and use tax (plus interest and penalties) for charges made to its catering customers for the labor of waiters serving complete meals before December 7, 1987.
Findings Of Fact During the period, May 1, 1984 through September 30, 1984, Gourmet To Go did not charge its customers sales tax for labor provided by waiters serving full meals that it catered. Gourmet To Go treated the waiters as subcontractors, and shows charges for waiters on its bill as "Sub Contract Services." During the period May 1, 1984 through December 7, 1987, Gourmet To Go collected sales tax on the services of waiters when the food served was canapes, sandwiches, hors d'oeuvres or party tidbits. Gourmet To Go commonly served both full meals and party tidbits as part of its catering business. The Department of Revenue audited the accounts of Gourmet To Go by reviewing gross receipts, and subtracting any exempt sales Gourmet To Go reported to the Department on form DR- 15. This is the audit method ordinarily used by the Department. The invoices of Gourmet To Go show that it did not charge its clients sales tax upon amounts shown on invoices for labor of waiters serving dinners. The agreed amount due for the period from May 1, 1984 through April 30, 1987, if Gourmet To Go is liable for the taxes is as follows: Tax $6,335.67 Penalty $1,583.92 Interest computed through the date of the hearing, June 23, 1989 - $2,733.50 TOTAL $10,650.09 For the period May 1, 1987 through April 30, 1987, the amount due if Gourmet To Go is liable for the sales tax is: Tax $1,214.70 Penalty $303.67 Interest the date computed through of the hearing, June 23, 1989 - $241.11 TOTAL $1,759.48 Interest would continue to accrue on any unpaid amounts due through the date payment is made.
Recommendation It is RECOMMENDED that a Final Order be entered by the Department of Revenue finding Gourmet To Go, Inc. liable for sales tax on charges to its customers for services of waiters at dinners it catered during the period May 1, 1984, through April 30, 1988, with penalties and interest through the date of payment. DONE and ENTERED this 5th day of September, 1989, 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 5th day of August, 1989. APPENDIX TO THE FINAL ORDER IN DOAH CASE NO. 88-6367 Rulings on Proposals Made By The Petitioner, Gourmet To Go, Inc. The substance of all facts proposed by Gourmet To Go, Inc. have been included in the Recommended Order. COPIES FURNISHED: Larry V. Bishins, Esquire 4548 North Federal Highway Ft. Lauderdale, FL 33308 Lealand L. McCharen, Esquire Assistant Attorney General The Capitol Building Tallahassee, FL 32399-1050 William D. Moore, General Counsel Department of Revenue 203 Carlton Building Tallahassee, FL 32399-0100 Katie D. Tucker, Executive Director Department of Revenue 104 Carlton Building Tallahassee, FL 32399-0100
Findings Of Fact On August 27, 1976, the Respondent, State of Florida Department of Revenue, notified the Petitioner of its intention to assess sales tax, penalties and interest against the Respondent for business transactions in the period August 1, 1973 through July 31, 1976. This Notice of Proposed Assessment was revised on May 27, 1977, and the Petitioner was notified of that revision. By his letter of June 19, 1977, the Petitioner has challenged the assessment, as revised. Upon receipt of the June 19, 1977 petition, the Respondent moved for a more definite statement and the Petitioner was afforded fifteen (15) days from the date of the Order within which time to amend his petition. Petitioner took advantage of that opportunity to amend and by an undated document did make such an amendment. The Respondent subsequently moved to strike certain portions of the amended petition and filed its answer to the petition. A pre-hearing conference was held to consider the Motion To Strike and after that pre-hearing conference was concluded an Order was issued which struck certain portions of the amended Petition and allowed copies of the proposed notices of assessments of August 27, 1976 and the revision of May 27, 1977 to be made a part of the complaint/petition as Exhibits 1 and 2, respectively. After the pre-hearing Order had been issued by the undersigned, the case was noticed for hearing for December 5, 1977. At the December 5, 1977 hearing date a Second Revised Notice of Proposed Assessment of Tax, Penalties and Interest Under Chapter 212, Florida Statutes was tendered. This revision dated from December 5, 1977, was allowed to be introduced as the final position of the Respondent on the question of the assessment. It was also allowed to be attached as Exhibit 3 to the amended petition. (Under cover of a separate correspondence the original petition, amended petition, exhibits to the amended petition, an Order which was entered after consideration of the Motion To Strike, are being submitted as a part of the record herein). In the ordinary course of his duties a tax examiner employed by the Respondent went to the business premises of the Petitioner to perform an audit to determine whether or not the Petitioner was collecting and remitting sales tax for the category of sales which the Petitioner was making, that required the payment of sales tax. These requirements spoken of are those set forth in Chapter 212, F.S. Mr. DeCico, the tax examiner, allowed Mr. Farhud to pick three (3) months in the year 1976 as being the period to be audited. DeCico then returned to Farhud's place of business and showed him the details of the three (3) month audit. Farhud was dissatisfied wish this audit and indicated that he preferred to have the audit sample expended for a full three (3) years. DeCico replied that he would be willing to expand the audit period. but cautioned Farhud that expansion of the audit period might promote an increased liability. Nonetheless, at Farhud's request, the audit period was expanded to one for thirty-six (36) months. The new audit period dated from August 1, 1973, through July 1, 1976. The work papers on that audit may be found as Respondent's Exhibit No. 1 admitted into evidence. This audit which is depicted in the Respondent's Exhibit No. 1, left out invoices pertaining to stamps, electric bills, wrapping paper, grocery bags, etc., since they were not retail items for sale. The audit was rendered on August 27, 1976. Before the Notice of Assessment was filed, Farhud had expressed his displeasure with the outcome of the second audit process because he felt that certain amounts depicted in the gross sales were not accurate; to wit, the inclusion of certain so-called "service fees", namely income tax preparation, notary fees, etc. DeCico tried to get a reasonable statement of the amounts of the categories which Farhud desired to have excluded. Farhud did not have records of the matters and was unable to provide an estimate as to the amount of income which had been derived from the aforementioned "service fees". The August 27, 1976, proposed assessment was computed on the basis of the proposition that the gross sales are equivalent to actual sales and are subject to sales tax in the taxable categories. As indicated before, this audit did not take into consideration any "service fees", nor did it grant any allowance for pilferage. No allowance was made for the latter category, because Farhud had not provided any estimate and/or police records to indicate the amount which would be lost to pilferage, and cause a reduction of the sales tax liability. Farhud formally challenged the audit of August 27, 1976, by his correspondence of September 8, 1976 in which he rejects the amount claimed and asks for a hearing. A copy of this correspondence may be found as Respondent's Exhibit No. 2 admitted into evidence. An informal conference was held between the parties on October 12, 1976 to see if a resolution of the dispute could be achieved. Mr. Farhud was represented at the informal conference by Michael J. Burman, Esquire, an attorney in Jacksonville, Florida. By a letter of October 14, 1976, Farhud's attorney requested the Respondent to utilize the figures for the three (3) month audit period, as opposed to the thirty-six (36) month period. The letter concluded by stating that Mr. Burman was unaware of any intention Mr. Farhud had to appeal the assessment of August 27, 1976. This letter was followed by a series of letters in which the various parties were indicating the desire to determine whether or not Mr. Farhud intended to accept the August 27, 1976 assessment or to appeal it. In the course of his correspondence Mr. Farhud continued to insist that he did not accept the amount of assessment as accurate. Mr. Farhud failed to indicate to Mr. Burman whether he was going to appeal the assessment or not and Mr. Burman withdrew as his attorney, as shown in the January 31, 1977 correspondence addressed to one of the employees of the Respondent. This correspondence is Respondent's Exhibit No. 7 admitted into evidence. On February 2, 1977, the audit supervisor in the Jacksonville district of the Respondent wrote Mr. Farhud indicating the intention of the Respondent to collect the taxes pursuant to the August 27, 1976 audit. A copy of this correspondence is Respondent's Exhibit No. 8 admitted into evidence. It should be indicated at this point, that the Respondent's representative had continued to request documentation from Farhud on the items requested for exemption which have been referred to as "service fee". The subject of pilferage had also been discussed at the October 12, 1976 informal conference and a request made for some form of records of police reports which would verify pilferage allowances. No documentation had been provided at the time the February 2, 1977 letter was written to Farhud. Subsequent to the February 2, 1977 letter another informal conference was held on April 4, 1977. As a result of that conference it was determined that certain items would be deleted from the audit assessment of August 27, 1976. This is evidenced in Respondents Exhibit No. 9 which is a copy of a letter dated May 27, 1977, from the audit supervisor, Mr. McCrone, to Mr. Farhud. At the April 4, 1977, discussion the subject of pilferage allowance as brought up in the deletion of 4 percent of the purchase price of taxable goods, as to soft drinks, paper and said products, pet foods and miscellaneous sundries were allowed. No allowance was given for beer, wine and tobacco products because these were felt to be out of reach of prospective pilferers. Again, this deletion is found in the Respondent's Exhibit No. 9. The 4 percent figure was arrived at as an industry estimate. Farhud still was not satisfied after the April 4, 1977, conference had been held and adjustments to the assessment had been mode. In view of this dissatisfaction, the Respondent elected to make a new type of audit, which was performed and was premised upon an analysis of the taxable purchases by the Petitioner for the three (3) year period. These purchases were divided into taxable categories and these categories were then marked up in price using an industry average to arrive at the actual taxable sales. The industry average was based upon an examination of the United Food Stores, Inc.'s sales catalog, which had suggested retail prices for low volume and high volume stores. The Respondent gave the Petitioner the benefit of the range of high volume stores, although the Petitioner's store was a neighborhood convenience store and therefore a low volume operation. The effect of allowing the average retail price for the high volume stores was that it made the differential between his purchase price and the retail price less than that for a low volume neighborhood store, causing lesser tax liability. As stated before, this alternative method was elected for the reason that the Respondent had objected that the gross sales figures reported in the monthly tax returns were incorrect, due to the fact that the Petitioner was unable to document his claim for entitlement to certain exemptions due to pilferage and "service fees", and due to the belief that the more correct approach to the audit was the second method. The work sheet on the alternative method may be found on Respondent's Exhibit No. 10 admitted into evidence. The utilization of this method led to the revised assessment of May 27, 1977, which is the subject of the appeal by petition, and amended petition of the Petitioner. This revision was superceded by the second revision of December 5, 1977, which was allowed to be entered without objection from the Petitioner. The second revision reduces the amount of tax liability claimed by the Respondent. An analysis of the documents offered in this cause and the testimony, leads to the conclusion that the Petitioner/taxpayer owed sales tax during the audit period August 1, 1973 through July 31, 1976. Furthermore, the more correct form of audit procedure under the circumstances, was the alternate method employed in arriving at the May 27, 1977 revised Notice of Assessment as further revised by the December 5, 1977 Second Revised Notice of Proposed Assessment. This conclusion is grounded on the requirements of Section 212.05(1), F.S., which requires persons in the Petitioner's category for the exercise of the privilege of doing business, to assist in levying a tax in the amount of 4 percent in the categories covered. Furthermore, Sections 212.06(3) and 212.07(2), F.S., places the duty on the Petitioner to collect this 4 percent sales tax. The Petitioner failed to act in accordance with the provision of Chapter 212, F.S. and the Second Revised Notice of Proposed Assessment is correct and in keeping with the authority of Section 212.12(6), F.S.
Recommendation Therefore, it is hereby RECOMMENDED: That the Second Revised Notice of Proposed Assessment of Tax, Penalties and Interest found as Exhibit 3 to the amended petition which total is $2,238.92 be allowed with such adjustments as may be necessary for a computation of interest prior to the rendition of a final order. DONE and ORDERED this 3rd day of January, 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: Nathan Weil, Esquire 203 Washington Street Jacksonville, Florida 32202 Patricia Turner, Esquire Assistant Attorney General Department of Legal Affairs The Capitol Tallahassee, Florida 32304 John D. Moriarty, Esquire Attorney, Division of Administration Department of Revenue Carlton Building Tallahassee, Florida 32304
Findings Of Fact In the fall of 1992, there were several Democratic candidates for the office of Tax Collector for Walton County. Among the Democratic candidates was Sue Carter who had been employed in the Walton County Tax Collector's Office prior to resigning to run for tax collector. The first Democratic primary was held in September, 1992, resulting in a runoff primary between Sue Carter and Sue Rushing in October, 1992. Ms. Carter defeated Ms. Rushing. In November, 1992, Sue Carter won the general election. Respondent, Teresa Gomillion (Gomillion), was employed in the Walton County Tax Collector's Office in 1992. Pat Pollard, Tammy Day, Patty Lynch, and Sylvia Rushing were also employed in the tax collector's office during the 1992 election campaign. Ms. Lynch and Gomillion supported Ms. Carter. Ms. Day did not support Ms. Carter. Ms. Rushing was related to Sue Rushing, Ms. Carter's opponent. Ms. Pollard did not support any candidate for the office of tax collector. Pat Pollard's work station was located about three feet away from Gomillion's work station. She overheard Gomillion ask a customer of the tax collector's office for whom he was going to vote. This was the only time that Ms. Pollard heard Gomillion talk to a customer concerning the race for tax collector. Gomillion and other employees in the tax collector's office did discuss the race for tax collector during office hours. Pam Dyess has been employed at a car dealership in DeFuniak Springs for 16 years. During 1992, her job responsibilities required her to go to the tax collector's office to handle the tag and title work for the dealership. After the first primary, Ms. Dyess went to the tax collector's office during working hours and while she was there the subject of the first primary was discussed. Ms. Dyess stated that she had voted for Harley Henderson. Ms. Gomillion joined the conversation and asked Ms. Dyess why she had voted for Harley Henderson and made some disparaging remarks about Mr. Henderson's qualifications. Rodney Ryals is now and was an employee of the City of DeFuniak Springs during the fall of 1992. During the election, Mr. Ryals spent a great deal of time at the tax collector's office taking care of city business and visiting with his friend Ms. Pollard. While Ryals was at the tax collector's office Gomillion told him, "You better vote for Sue Carter, she's the only qualified candidate." Ryals had told Gomillion and Ms. Lynch that they should not campaign on the job because it was illegal. Both women told him that if they did not politick that they might lose their jobs. Both Jack Little, the tax collector, and Ms. Carter had advised Gomillion not to politick in the tax collector's office. Having judged the credibility and demeanor of the witnesses, I find that Gomillion did not hand out campaign literature while she was on the job at the tax collector's office.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Commission on Ethics enter a final order finding that Teresa Gomillion violated Section 112.313(6), Florida Statutes, and recommending a civil penalty of $500 and a public censure and reprimand. DONE AND ENTERED this 19th day of August, 1994, in Tallahassee, Leon County, Florida. SUSAN B. KIRKLAND 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 day of August, 1994. APPENDIX TO RECOMMENDED ORDER, CASE NO. 94-2067EC To comply with the requirements of Section 120.59(2), Florida Statutes (1993), the following rulings are made on the parties' proposed findings of fact: Advocate's Proposed Findings of Fact. Paragraphs 1-10: Accepted in substance. Paragraph 11: Accepted to the extent that Ms. Gomillion had solicited Mr. Ryals' vote but rejected as far as Mr. Ryals observing Ms. Gomillion soliciting other customers. Paragraph 12: Having judged the credibility of the witnesses, I find that Mr. Ryals testimony that Ms. Gomillion handed out campaign literature not to be credible. Paragraph 13: Accepted in substance. Paragraph 14: Rejected as constituting recitation of testimony. Paragraphs 15-16: Rejected as subordinate to the facts actually found. Respondent's Proposed Findings of Fact. Paragraphs 1-2: Accepted in substance. Paragraph 3: The first sentence is rejected as unnecessary. The remainder of the paragraph is rejected as constituting recitation of testimony. Paragraph 4: The first sentence is accepted in substance. The second sentence is rejected as constituting both recitation of testimony and argument. Paragraph 5: The first sentence is accepted in substance. The remainder of the paragraph is rejected to the extent that it implies that Ms. Gomillion properly performed her duties. The greater weight of the evidence shows that Ms. Gomillion's actions were prohibited by the tax collector and were not part of her duties. Paragraphs 6-8: Rejected as constituting recitation of testimony. Paragraph 9: The first sentence is accepted in substance except as it relates to Ms. Gomillion's solicitation of Mr. Ryals. The remainder of the paragraph is rejected as unnecessary. Paragraph 10: Rejected as unnecessary. Paragraphs 11-12: Rejected as recitation of testimony. Paragraph 13: The first sentence is rejected as unnecessary. The remainder of the paragraph is rejected as constituting recitation of testimony. Paragraph 14: Rejected as subordinate to the facts actually found. Paragraphs 15-16: Rejected as constituting recitation of testimony. Paragraph 17: Rejected as unnecessary. Paragraphs 18-19: Rejected as constituting recitation of testimony. Paragraph 20: The first sentence is rejected as unnecessary. The remainder of the paragraph is rejected as constituting recitation of testimony. Paragraphs 21-22: Rejected as constituting recitation of testimony. Paragraph 23: The first sentence is rejected as constituting recitation of testimony. The remainder of the paragraph is rejected as subordinate to the facts actually found. Paragraph 24: The first sentence is rejected as unnecessary. The remainder of the paragraph is rejected as constituting recitation of testimony. Paragraph 25: The first sentence is rejected as constituting recitation of testimony. The remainder of the paragraph is accepted in substance. COPIES FURNISHED: Carrie Stillman Complaint Coordinator Commission on Ethics Post Office Box 15709 Tallahassee, Florida 32317-5709 Michael E. Ingram Assistant Attorney General Department of Legal Affairs, PL-01 The Capitol Tallahassee, Florida 32399 E. Allan Ramey, Esquire 13 Circle Drive Post Office Box 369 Defuniak Springs, Florida 32433-0369 Bonnie Williams Executive Director Florida Commission On Ethics Post Office Drawer 15709 Tallahassee, Florida 32317-5709 Phil Claypool, Esquire General Counsel Ethics Commission 2822 Remington Green Circle, Suite 101 Post Office Drawer 15709 Tallahassee, Florida 32317-5709
The Issue The issue is whether Petitioner collected and remitted to Respondent the correct amount of sales and use taxes during the audit period from October 1, 2004, through September 30, 2007, and, if not, what additional amount of tax plus penalty and interest is due.
Findings Of Fact Petitioner True Blue Pools (Petitioner, taxpayer, or TBP) is a domestic corporation headquartered in Miami-Dade County, Florida. TBP services, repairs, and renovates swimming pools and constructed some pools during the audit period. Respondent, Florida Department of Revenue (Respondent or DOR), is the agency of state government authorized to administer the tax laws of the State of Florida, pursuant to section 213.05, Florida Statutes.2 DOR is authorized to prescribe the records to be kept by all persons subject to taxes under chapter 212, Florida Statutes. Such persons have a duty to keep and preserve their records, and the records shall be open to examination by DOR or its authorized agents at all reasonable hours pursuant to section 212.12(6), Florida Statutes. DOR is authorized to conduct audits of taxpayers and to request information to ascertain their tax liability, if any, pursuant to section 213.34, Florida Statutes. On November 2, 2007, DOR initiated an audit of TBP to determine whether it was properly collecting and remitting sales and use taxes to DOR. The audit period was from October 1, 2004, through September 30, 2007. On December 15, 2008, DOR sent TBP its Notice of Intent to Make Audit Changes (NOI), with schedules, showing that TBP owed to DOR additional sales and use taxes in the amount of $113,632.17, penalty in the amount of $28,406.05, and interest through December 16, 2008, in the amount of $34,546.59, making a total assessment in the amount of $176,586.81. On October 26, 2009, DOR issued its Notice of Proposed Assessment. TBP timely challenged the Notice of Proposed Assessment, filing its petition with DOR and requesting an administrative hearing. Subsequent to the petition being filed, additional documentation was provided by TBP resulting in a revision to the tax, interest, and penalty amount due. DOR's revised work papers, dated May 27, 2010, claim Petitioner owes $64,430.83 in tax, $16,107.71 in penalty, and interest through May 27, 2010, in the amount of $27,071.99, with an assessment of $107,610.53. The assessed penalty, $16,107.71, was calculated after 25% of the penalty was waived, pursuant to subsection 213.21(3)(a), Florida Statutes, based on DOR's determination that there is no evidence of willful negligence, willful neglect, or fraud. The audit was conducted to determine liability in four categories: improper sales tax exemptions, unpaid sales taxes for taxable expenses, unpaid use taxes on fixed assets, and unpaid use taxes on taxable materials used to fulfill contracts to improve real property. Sales Tax Exemptions Due to the large volume of invoices and other records, the auditor conducted a random sampling of invoices for three months during the audit period, October 2004, January 2005, and September 2007.3 If no sales tax was collected and the Petitioner claimed that the transaction was exempt from the requirement to pay taxes, the auditor looked for proof that either the TBP customer was an exempt organization, for example, a school or a church, or that TBP had provided its suppliers with a DOR Form DR-13 to exempt from taxes products acquired for resale. In the absence proof of either type of exemption, DOR assumed taxes should have been paid. Using the difference between taxes collected and taxes due for the three months, the auditor determined that the percentage of error was .016521. When .016521 was applied to total sales of $1,485,890.79 for the 36-month audit period, the results showed that an additional $24,548.41 in sales taxes should have been collected from customers, and is due from TBP. Although a business is required to pay taxes for the materials it purchases to use in its business, it is not required to collect taxes from its customers when it enters into lump sum contracts to perform a service for customers. At least one invoice for $9,500.00 that the auditor treated as an improper exemption was, in fact, a partial payment on a lump-sum contract. The invoice referenced a "shotcrete draw," which represented the collection of funds after the concrete part of pool construction was completed. TBP is not required to collect taxes when it uses lump-sum contracts. Other invoices for pool repair and services were also mischaracterized as exempt by the TBP, but it is not clear that all were payments related to lump-sum contracts. DOR's auditor, nevertheless, testified as follows: With the knowledge that I have for True Blue Pools, being a lump-sum contractor, True Blue Pools should not charge their customer any sales tax. Transcript at pages 67-68. DOR concedes that some of TBP's transactions are also exempt from taxes as improvements to real property. In its Proposed Recommended Order, DOR asserted that TBP's use of the term "improvements to real property" is overbroad, but it did not specify how or why this is the case. During cross- examination of the owner of TBP, only one invoice for $500.00 for leak detection on the Delgado property was shown to have been for a service rather than for swimming pool construction. Taxable Expenses DOR audited TBP's purchases of tangible personal property used in the daily operation of its business. The products included chlorine and other chemicals, office supplies, and vehicle parts, expenses, and repairs. The ledger for a 12- month period, calendar year 2006, showed an average monthly additional tax due of $111.18, or a total of $4,002.48 in additional taxes for the 36-month audit period. As noted in Petitioner's Proposed Recommended Order, "[t]he representative of TBP did not dispute DOR's allegation that no tax may have been paid on the purchase of all of these items " Fixed Assets TBP's list of fixed assets was taken from the depreciation schedule on Internal Revenue Service Form 4562. The items listed are computer- and software-related. TBP provided no proof that it had paid a use tax. The additional tax due equals $419.94. Petitioner's Proposed Recommended Order includes the statement that "[a]gain, the representative of TBP did not dispute DOR's allegation that no tax may have been paid on the purchase of these items " Taxable Materials Taxable materials, those purchased to fulfill a contract to improve real property, included items used to build, renovate, and repair pools. The items included concrete, meters, drains, and valves. For the 12-month sample period, calendar year 2006, TBP failed to pay taxes on material purchases in the total amount of $168,310.05, or an average of $14,078.96 a month. For the 36-month audit period, the total of the purchases was $506,842.56. With a 6 percent tax due for the state and 1 percent for the county, the total additional tax due on materials is $35,460.00. TBP conceded that it improperly used a resale exemption to purchase taxable materials from suppliers without paying taxes. The materials were used to provide services and were not resold. Acknowledging again that TBP uses lump-sum contracts, this time to support the collection of additional taxes, the auditor testified as follows: And the law states that the taxpayer's [sic] an ultimate consumer of all materials purchased to fulfill a lump-sum contract, and that's what they told me they operate under, a lump-sum contract. Transcript at page 58. At the hearing, TBP used its actual profit and loss statement to show that the cost of goods it sold (general purchases and taxable materials) in the amounts of $18,360.77 in October 2004, $8,519.22 in January 2005, and $4,818.65 in September 2007. Corresponding taxes for each of those months should have been $1,285.25, $596.35, and $337.31, or an average of $739.63 a month, or a total of $26,626.68 for 36 months. The goods that it sold were not at issue in the audit of taxable materials, rather it was TBP's purchases from vendors that should have been taxed that resulted in DOR's audit results. Total Additional Sales and Use Taxes Due The three categories of additional taxes due, $4,002.48 for taxable expenses, $419.94 for fixed assets, and $35,460.00 for taxable materials, equal $39,882.42 in additional taxes due during the audit period. Taxes Paid TBP filed DOR Forms DR-15, monthly sales and use tax reporting forms, and paid sales and use taxes during the audit period. For the sample months used by DOR to examine sales tax exemptions, TBP paid $1,839.10 in taxes in October 2004, $1,672.73 in January 2005, and $1,418.13 in September 2007. Using the three months to calculate an average, extended to 36 months, it is likely that TBP paid $59,712 in taxes. TBP asserted that DOR was required to, but did not, offset the deficiency of $39,882.42, by what appears to be an overpayment of $59,712.00 in sales and use taxes. Other than pointing out that the amount reported on the DR-15s differed, being sometimes more and sometimes less than the amount shown on the profit and loss statements, DOR did not dispute TBP's claim that it had paid sales and use taxes. TBP's representative explained that end-of-the-year adjustments for additional collections or for bad debt could cause the amounts on the DR-15s and profit and loss statements to differ. With regard to the taxes paid, DOR took the following position in its Proposed Recommended Order: Petitioner's DR-15's [sic] for the collection periods October 2004, and January 2005, [and September 2007] (Petitioner's Composite Exhibit 1) do reflect sales tax being collected and remitted to DOR. DOR does not allege that Petitioner never paid tax on its purchases, or made bona fide exempt sales for which no tax was collected. DOR's audit findings identify just those which occurred within the sample period, scheduled in the auditor's workpapers, and applied over the entire audit period. The DR-15s are taken from the sample months selected by DOR within the audit period, and DOR does not address TBP's claim that a set off for taxes paid was mandatory, pursuant to subsection 213.34(4), Florida Statutes. Using the audit schedules, DOR showed credit for taxes paid in the amounts of $20.63 for taxable expenses, $0 for fixed assets, and $24.31 in state taxes and $1.03 for county taxes on taxable materials. The amounts are far less that the $59,712.00 in sales/use taxes TBP showed that it paid during the audit period.
Recommendation Based upon the forgoing findings of fact and conclusions of law, it is recommended that the Department of Revenue issue a final order dismissing the Notice of Intent to Make Audit Changes dated December 15, 2010. DONE AND ENTERED this 20th day of January, 2011, in Tallahassee, Leon County, Florida. S ELEANOR M. HUNTER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 20th day of January, 2011.
The Issue The issue for determination is whether Respondent should grant Petitioner's application for a sales tax exemption certificate as a charitable institution within the meaning of Section 212.08(7), Florida Statutes. 1/
Findings Of Fact Respondent is the governmental agency responsible for issuing sales tax exemption certificates in accordance with Section 212.08(7). Petitioner is a non-profit, Florida corporation and a charitable organization, within the meaning of Section 501(c)(3) of the Internal Revenue Code, for purposes of the federal income tax. On December 29, 1995, Petitioner applied for an exemption from state sales and use tax ("sales tax") as a charitable institution. On February 8, 1996, Respondent denied Petitioner's application. The parties stipulated that Petitioner is a non-profit corporation. The parties further stipulated that the only exemption under which Petitioner may qualify for a sales tax exemption is the exemption for a charitable institution. In order to qualify as a charitable institution, Petitioner must provide one or more of seven services listed in Section 212.08(7). The parties stipulated that the only service Petitioner arguably provides as a charitable institution is that of raising funds for medical research within the meaning of Section 212.08(7)(o)2b(V). It is uncontroverted that Petitioner does not provide medical research directly. Petitioner raises funds for its national organization. The national organization then disburses funds raised by local affiliates. Petitioner failed to submit any competent and substantial evidence showing the disposition of funds by its national organization. Petitioner failed to show that its national organization either provides direct medical research or raises funds for one or more organizations that provide medical research.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent enter a Final Order and therein DENY Petitioner's request for a sales tax exemption. RECOMMENDED this 4th day of June, 1996, in Tallahassee, Florida. DANIEL S. MANRY, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 4th day of June, 1996.
Findings Of Fact On October 14, 1985, Petitioner, Nicholas Cozzo, entered into a Stock Purchase Agreement for the sale of sixty (60) shares of the issued and outstanding capital stock of C & S Deli Sandwich and Fish, Inc., a Florida corporation, (the Company) to Robert A. Krueger and Joe Ellen Krueger (collectively, the Kruegers). As a result of the sale, Petitioner retained ownership of no further stock of the Company. (Exhibit A) On October 14, 1985, the Kruegers executed two (2) promissory notes in the amounts of $53,000.00 and $5,000.00, respectively, to Petitioner and a Security Agreement securing payment of the notes. (Composite Exhibit B and Exhibit C) On October 14, 1985, Petitioner tendered his resignation as Director, President and Treasurer of the Company. (Exhibit D) Petitioner's security interest to the furniture, furnishings, fixtures, equipment and inventory of the Company (the "collateral") was duly perfected by the filing of a Uniform Commercial Code Financing Statement with the Uniform Commercial Code Bureau, Florida Department of State, on October 21, 1985. (Exhibit E) A Uniform Commercial Code Financing Statement was recorded by the Petitioner in the Public Records of Pasco County, State of Florida, on October 15, 1985, in Official Records Book 1451, page 0493. (Exhibit F) In early 1987, the Kruegers defaulted under the terms of the promissory notes. Prior to April 24, 1987, Petitioner repossessed the furniture, furnishings, fixtures, equipment and inventory of the Company. No consideration was paid by Petitioner to the Company or the Kruegers upon his repossession of the foregoing described collateral. At no time did ownership of any of the capital stock of the Company revert back to Petitioner. On May 5, 1987, Petitioner by private sale disposed of the collateral to Vincent Lopez and Glen Delavega. (Exhibits G, H, and I) No surplus funds resulted from the sale of the repossessed collateral by Petitioner to Vincent Lopez and Glen Delavega. At no time material hereto did the Florida Department of Revenue issue a tax warrant against the Company respecting any unpaid sales tax. On or about May 6, 1987, Petitioner paid under protest to the Respondent Department of Revenue the delinquent unpaid sales tax of the Company in the amount of $1392.53. The Department is still attempting to verify that amount at this date. The Petitioner maintains he paid the amount in order for the Department to issue a sales tax certificate and number to Vincent Lopez and Glen Delavega. The Department maintains its procedure at the time was to issue a sales tax number to the new owners and then proceed against them under Section 212.10, Florida Statutes. It is the position of the Respondent that the Petitioner's repossession of the collateral constituted a sale within the purview of Section 212.10(1), Florida Statutes (1985), and Rule 12A-1.055, Florida Administrative Code, which places tax liability on the successor of a business whose previous owner has not satisfied outstanding sales tax obligations. Respondent further notes that the case Petitioner relies on, General Motors Acceptance Corporation v. Tom Norton Motor Corp., 366 So.2d 131 (Fla. 4th DCA 1979) was issued on January 10, 1979, while Section 679.105(5), Florida Statutes, which upholds tax laws when in conflict with security agreements, took effect January 1, 1980. Petitioner on the other hand claims that a lawful repossession of collateral under Florida's Uniform Commercial Code, Section 679.504, Florida Statutes (1985), does not constitute a "sale" of a business making him liable for the Company's unpaid sales tax. Petitioner continues to rely on GMAC, supra, and notes that it was cited by American Bank v. Con's Cycle Center, 466 So.2d 255 (Fla. 5th DCA 1985). A refund application was submitted by Petitioner to the Department of Revenue on June 10, 1987. This application was denied by the Department of Revenue by letter dated January 28, 1988. (Exhibit J)
The Issue The issue presented is whether Petitioner is liable for payment of sales and use taxes.
Findings Of Fact The Department conducted an audit of the business records of Petitioner, a Florida corporation operating a food catering business, covering the audit period of June 1, 1985 through May 31, 1990. As a result of that audit, the Department determined that Petitioner had failed to collect and remit sales taxes due to the Department and was liable for the payment of those unpaid sales taxes. The Department issued an assessment determining that Petitioner owed the amount of $213,683.87 in unpaid taxes, interest, and penalty for the audit period. On October 9, 1992, the Department issued its second revised audit assessment based upon its redetermination of Petitioner's tax liability. On that date, the Department reduced Petitioner's liability to the amount of $147,924.45, which sum includes the unpaid tax, the penalty therefor, and interest through that date. Based on its revised calculations, the Department also determined that interest would accrue at the rate of $27.06 per day until the date of payment. Through the date of the final hearing in this cause, Petitioner has made no payments to satisfy or reduce the amount of assessment.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered finding Petitioner liable for the payment of sales tax, penalty, and interest through October 9, 1992, in the amount of $147,924.45 together with the amount of $27.06 interest per day until the date of payment. DONE and ENTERED this 18th day of August, 1994, at Tallahassee, Florida. LINDA M. RIGOT 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 18th day of August, 1994. APPENDIX TO RECOMMENDED ORDER The Department's proposed findings of fact numbered 1 and 6-8 have been adopted in substance in this Recommended Order. The Department's proposed findings of fact numbered 2-5 and 9-16 have been rejected as not constituting findings of fact but rather as constituting conclusions of law or recitation of the procedural context of this case. COPIES FURNISHED: Eric J. Taylor, Esquire Assistant Attorney General Office of the Attorney General The Capitol, Tax Section Tallahassee, Florida 32399-1050 Richard J. Hays, Esquire 7100 West Commercial Boulevard Suite 109 Lauderhill, Florida 33319 Mark D. Cohen, Esquire 121 Southeast First Street Suite 600 Miami, Florida 33131 Linda Lettera, General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 Larry Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100
