The Issue Whether or not, on or about December 2, 1976, investigation revealed that Robert W. Pope, licensed under the Beverage Laws of the State of Florida, failed to file and pay his State Sales Tax for the licensed premises, known as Kitty's, located at 1020, 4th Street, South, St. Petersburg, Florida, in violation of 212, F.S., thereby violating 561.29, F.S.
Findings Of Fact Robert W. Pope is and at all times pertinent to this cause has been the holder of license no. 62-512, series 4-COP, held with the State of Florida, Division of Beverage to trade as Kitty's, located at 1020, 4th Street, South, St. Petersburg, Pinellas County, Florida. When the Respondent, Pope, began to operate the licensed premises he was given a registration sales tax number by the State of Florida, Department of Revenue. This number was provided in accordance with 212, F.S. That law required the remittance of the collected sales tax on a month to month basis, the period beginning with the first day of the month and ending with the last day of the month. The remittance was due on the first day of the following month and payable by the 20th day of the following month. Failure to pay by the 20th would result in a 5 percent penalty and 1 percent interest per month. The sales tax remittance due from the licensed premises for July, 1976 through November, 1976 was not made to the Department of Revenue. In December, 1976 the Department of Revenue filed a lien against the licensed premises to collect an amount due at that time of $2,200.66. As an aid to the collection of the account, the Department of Revenue levied the subject liquor license. Subsequently, in February, 1977 the Respondent made a $10,000 initial payment and three monthly installments to satisfy the lien on this licensed premises and another licensed premises which the Respondent owned. At present all taxes due and owing under 212, F.S. are current. The above facts establish that the Respondent failed to comply with the provisions of 212, F.S. pertaining to the remittance of sales tax from the Respondent to the State of Florida, Department of Revenue. This violation, thereby subjects the Respondent to the possible penalties of 561.29, F.S.
Recommendation It is recommended that the Respondent, Robert W. Pope, be required to pay a civil penalty in the amount of $750.00 or have the license no. 62-512, series 4- COP, suspended for a period of 20 days. DONE AND ENTERED this 28th day of July, 1977, in Tallahassee, Florida. CHARLES C. ADAMS Hearing Officer Division of Administrative Hearings 530 Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: William Hatch, Esquire Division of Beverage 725 South Bronough Street Tallahassee, Florida 32304 Robert W. Pope, Esquire 611 First Avenue, North St. Petersburg, Florida 33701
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Department enter a final order assessing petitioner A & K Feed Store $31,899.62, with interest on the $22,468.73 of tax at the rate of 12 percent per annum from October 23, 1981. RECOMMENDED this 14th day of June, 1984, in Tallahassee, Leon County, Florida. J. LAWRENCE JOHNTSON Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 14th day of June, 1984.
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.
Findings Of Fact Certain hospital equipment ("Equipment") was sold in 1973 and 1974 by Hospital Contract Consultants ("Vendor") to F & E Community Developers and Jackson Realty Builders (hereinafter referred to as "Purchasers") who simultaneously leased the Equipment to Petitioner. These companies are located in Indiana. At the time of purchase, Florida sales tax ("Tax") was paid by the Purchasers and on or about March 18, 1974, the tax was remitted to the State of Florida by the Vendor. However, the Tax was paid in the name of Medical Facilities Equipment Company, a subsidiary of Vendor. In 1976, the Department of Revenue audited Petitioner and on or about April 26, 1976 assessed a tax on purchases and rental of the Equipment. On or about April 26, 1976, petitioner agreed to pay the amount of the assessment on the purchases and rentals which included the Equipment, in monthly installments of approximately Ten Thousand and no/100 Dollars ($10,000.00) each and subsequently paid such amount of assessment with the last monthly installment paid on or about November 26, 1976. On or about December, 1976, the Department of Revenue, State of Florida, checked its records and could not find the Vendor registered to file and pay sales tax with the State of Florida. Petitioner then looked to the State of Indiana for a tax refund. On or about January 4, 1977, Petitioner filed for a refund of sales tax from the State of Florida in the amount of Thirty Five Thousand One Hundred Four and 02/100 Dollars ($35,104.02). This amount was the sales tax paid to and remitted by various vendors for certain other equipment purchased in 1973 and 1974 and simultaneously leased. The amount of this refund request was granted and paid. Relying upon the facts expressed in paragraph 4 heretofore, Petitioner on or about June 2, 1977 filed with the Department of Revenue of the State of Indiana for the refund of the Tax. On or about June 7, 1979, the Department of Revenue of Indiana determined that the Vendor was registered in the State of Florida as Medical Facilities Equipment Company and therefore Petitioner should obtain the refund of the Tax form the State of Florida. So advised, Petitioner then filed the request for amended refund, which is the subject of this lawsuit, on July 16, 1979 in the amount of Seventeen Thousand Two Hundred Sixteen and 28/100 Dollars ($17,216.28). This request for refund was denied by Respondent, Office of the Comptroller, on the basis of the three year statute of non-claim set forth in section 215.26, Florida Statutes. Purchasers have assigned all rights, title and interest in sales and use tax refunds to Petitioner. During the audit of Petitioner in 1976 the lease arrangement on the equipment apparently came to light and Petitioner was advised sales tax was due on the rentals paid for the equipment. This resulted in an assessment against Petitioner of some $80,000 which was paid at the rate of $10,000 per month, with the last installment in November, 1976. The auditor advised Petitioner that a refund of sales tax on the purchase of this equipment was payable and he checked the Department's records for those companies registered as dealers in Florida. These records disclosed that sales taxes on the sale of some of this rental equipment had been remitted by the sellers of the equipment but Hospital Contract Consultants was not registered. Petitioner was advised to claim a refund of this sales tax from Indiana, the State of domicile of Hospital Contract Consultants. By letter on March 18, 1974, Amedco Inc., the parent company of wholly owned Hospital Contract Consultants, Inc. had advised the Florida Department of Revenue that Medical Facilities Equipment Company, another subsidiary, would report under ID No. 78-23-20785-79 which had previously been assigned to Hospital Contract Consultants Inc. which had erroneously applied for this registration. (Exhibit 2) Not stated in that letter but contained in Indiana Department of Revenue letter of April 18, 1979 was the information that the name of Hospital Contract Consultants had been changed to Medical Facilities Equipment Company. The request for the refund of some $17,000 submitted to Indiana in 1976 was finally denied in 1979 after research by the Indiana Department of Revenue showed the sales tax had been paid to Florida and not to Indiana.
Findings Of Fact During the audit period in question, i.e., December 1, 1975, through March 31, 1979, Petitioner Ormond Hotel Corporation operated the Ormond Hotel, Ormond Beach, Florida. It was licensed during the audit period by the Division of Hotels and Restaurants, Department of Business Regulation, and classified as a retirement establishment. (Interrogatories) The Ormond Hotel is an old wooden structure containing 350 rooms with 258 rooms available for rental. The remaining rooms are not in proper condition for rental. Most of the hotel guests are over 65 years of age and reside there either permanently or on a seasonal basis, usually from December through March of each year. A few married couples have accommodations at the hotel, but most of the residents are single individuals occupying one room. Prior to 1978, Petitioner advertised the hotel in a national magazine called "Retirement Living" and conducted advertising on billboards, brochures, and in the classified section of the local telephone book under the heading "Retirement Homes". The latter advertisement states that the facility is "a residential hotel," but also includes the works "DAY-WK-MO-YR." Similarly, the hotel's brochure recites that accommodations are available by day, month, or year. All units are available for rental to permanent tenants, but short-term occupancy is accepted if there are available rooms. The hotel does not have a swimming pool, but does have restaurant facilities and recreation areas. The hotel does not primarily cater to transient guests. (Testimony of Salveson, interrogatories) Respondent's auditor conducted an audit of Petitioner's business operations for the period December 1, 1975, through March 31, 1979. In arriving at whether or not the Ormond Hotel was subject to tax imposed by Section 212.03, Florida Statutes, on its rentals, he examined the Petitioner's books to ascertain the number of total available rental units and the status of tenants at the hotel during the months of April, May, and June of each year. If he found that 50 percent or more of the total units had been rented to persons residing there continuously for the specific three-months period, those tenants were considered to be permanent rather than transient tenants and the hotel was deemed exempt from tax pursuant to Rule 12A-1.61(1), F.A.A. In arriving at this determination of exempt status, the auditor did not deduct unoccupied rooms from the total number of units in arriving at his "fifty percent" determination. Although the auditor analyzed the advertising brochures of Petitioner, and was aware that the hotel was listed in the telephone directory under retirement homes, and concluded that such advertising was directed primarily to the acquisition of permanent guests, he predicated his audit findings solely on the "fifty percent" test concerning occupancy of total units. In this manner, he determined that Petitioner was exempt from taxation in 1975 based on the fact that for the April through June period for that year, 135 of the 264 total units had been occupied continuously by "permanent" tenants. In a similar manner he found that the hotel did not qualify for exemption during the succeeding years of the audit period. In this respect, he found that for 1976, there were only 119 such guests during the three-months period out of the 263 total units, which was less than 50 percent. In 1977, there were 102 such tenants out of 261 total units which was less than 50 percent. In 1978 there were 98 such tenants and 259 total units, which was less than 50 percent. The auditor's worksheet reflects that there were 124 vacant rooms during the three-months period in 1975, 140 in 1976, 153 in 1977, and 153 in 1978. He concedes that if he had applied the "fifty percent" rule by comparing the number of three-month or "permanent" tenants with the number of occupied by "permanent" guests would have been over fifty percent for each year of the audit period. (Testimony of Boerner, Exhibits 1-2, 4) Based on the audit, Respondent issued two separate "Second Revised Notices of Proposed Assessment" on January 15, 1980. The first assessment covered the period December 1, 1975, through November 30, 1978. It asserted tax due on room rentals in the amount of $21,362.91 plus a delinquent penalty, and interest through January 15, 1980, for a total sum of $28,062.45. The assessment also asserted tax, penalty and interest for purchases unrelated to room rentals in the amount of $984.92, for a total assessment of $29,047.37. The assessment reflected that a partial payment had been made on October 2, 1979, in the amount of $2,590.62, leaving a balance due of $26,456.75. The other assessment showed tax on room rentals in the amount of $6,001.75, plus delinquent penalty of $300.10, and interest through January 15, 1980, in the amount of $611.76 for a total of $6,913.61. It also asserted tax, penalty, and interest on purchases in the amount of $23.39 for a total assessment of $6,937.00. This assessment also showed partial payment on October 2, 1979, in the amount of $132.08, leaving a balance due of $6,804.92. In a letter transmitting the assessments, dated January 16, 1980, Respondent advised Petitioner that the hotel did not qualify as an exempt facility under Rule 12A- 1.61(1)(a), F.A.C., during the audit period, because less than fifty percent of the facility's units were occupied by guests who had resided there three or more months as of July 1 each year. The letter further stated that "an analysis" of the rental of units submitted by Petitioner as to its exempt status did not conform to the requirements of the rule because the facility advertised to guests on a daily, weekly and monthly basis in addition to long-term leasing, the analysis used an annual rather than a three-month period prior to July as a basis, and the number of tenants at the facility rather than total units. (Exhibit 2) Petitioner's accountant prepared an analysis of the room status at the Ormond Hotel during the period July 1, 1977, to June 30, 1978. It reflects that 165 rooms, or 64.5 percent of the total of 256 units rented during the year, were occupied by tenants for a continuous period of over three months. On March 31 of that year, 157 rooms, or 61 percent of the total of 258 rooms available for occupancy, were occupied by guests for more than three months. Sixty-nine of the rooms were occupied by transient tenants or those with less than three- months occupancy (27 percent), and 32 rooms were unoccupied (12 percent). As of June 30, 1978, the hotel had 110 guests who had resided there for more than three months, and 18 guests with residency of less than three months. (Testimony of Salveson, Exhibit 3)
The Issue Does the taxpayer owe sales tax, penalty, and interest as assessed by the Department of Revenue.
Findings Of Fact Petitioner, Department of Revenue, is an agency of the State of Florida, lawfully created and organized pursuant to Section 20.21, Florida Statutes. By law, the Department is vested with the responsibility of regulating, controlling and administering the revenue laws of the State of Florida, including, specifically, the laws relating to the imposition and collection of the state's sales and use tax, pursuant to Chapter 212, Florida Statutes. Respondent, Worldwide Equipment Group, LLC, is a Florida limited liability company, whose principal address is Post Office Box 1050, Freeport, Florida 32439. Respondent sells and leases heavy equipment. In early 2006, Petitioner, Department of Revenue, conducted an audit of the books and records of Petitioner, pursuant to statutory notice. The period covered by the audit was March 1, 2002, through February 28, 2005. The audit was conducted by Department of Revenue auditor David Collins and addressed three issues. Issue A-01 addressed misclassified exempt sales, i.e. failure to collect appropriate sales and use tax or lack of documentation to prove tax exempt status of certain sales. Issue A-03 addressed discrepancies in sales for 2003 as reported for federal income tax returns and for state sales and use tax returns. Issue A-03 addressed interest owed due to a timing difference between actual transactions and the filing of state returns: basically a manipulation of the grace period for payment of sales and use taxes. Respondent was notified of the apparent discrepancies observed by the auditor. The original Notice of Intent To Make Audit Changes was issued February 17, 2006, and started at more than $75,000.00 in taxes, penalty, and interest due. Respondent then filed amended federal income tax returns, reflecting larger sales figures covering a portion of the audit period which reduced the discrepancy. The dispute was originally referred to the Division of Administrative Hearings (DOAH) on or about August 30, 2006. The original facts in dispute surrounded an addendum to the Notice of Proposed Assessment showing a balance due of $31,434.82. This was DOAH Case No. 06-3287. The request for a disputed-fact hearing was made by David R. Johnson CPA, who has a power of attorney on file with Petitioner Agency permitting him to represent Respondent. Throughout these proceedings, Worldwide has been served through Mr. Johnson by Petitioner and by DOAH. The parties filed a Joint Motion for Provisional Closing Order in DOAH Case No. 06-3287 on November 1, 2006. On November 2, 2006, DOAH Case No. 06-3287 was closed with leave to return if the parties' proposed settlement was not finalized. Mr. Johnson met once with counsel for Petitioner during the time the case was returned to the Agency. At some point, Respondent had produced certain accounting entries and supporting documents to the auditor. These were used to adjust the assessment levied by the Department. A Revised Notice Of Intent To Make Audit Changes dated March 13, 2007, was issued with a letter of the same date. The revised, and final Notice included an assessment of tax, penalty and interest totaling $15,065.24, as of the date of issue and information that the tax accrues interest at the rate of $3.10 per diem. On April 4, 2007, Petitioner filed before DOAH its Motion to Re-open Case and Notice for Trial. No timely response in opposition was filed by Respondent. By an Order to Re-open Case File, entered April 19, 2007, the case was re-opened as the instant DOAH Case No. 07-1710. Petitioner has established that the amount of $15,065.24 as tax, penalty, and interest was due as of March 13, 2007.
Recommendation Based on the foregoing Findings of Facts and Conclusions of Law, it is RECOMMENDED that the Department of Revenue sustain the March 13, 2007, assessment of the subject sales tax, penalties and interest to Petitioner. DONE AND ENTERED this 8th day of October, 2007, in Tallahassee, Leon County, Florida. S ELLA JANE P. DAVIS 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 8th day of October, 2007. COPIES FURNISHED: Warren J. Bird, Esquire Office of the Attorney General The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050 Bruce Hoffmann, General Counsel Department of Revenue The Carlton Building, Room 204 501 South Calhoun Street Tallahassee, Florida 32399-0100 Lisa Echeverri, Executive Director Department of Revenue The Carlton Building, Room 104 501 South Calhoun Street Tallahassee, Florida 32399-0100 David R. Johnson, CPA 1265 Highway 331 South Defuniak Springs, Florida 32435 Worldwide Equipment Group LLC Post Office Box 1050 Freeport, Florida 32439
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: Petitioner, Christian Television Corporation, is a not for profit Florida corporation formed in April of 1977. It is exempt from federal income taxation under Section 501(c)(3) of the Internal Revenue Code (1954). Its first application for a Florida Consumer's Certificate of Exemption was initially denied by the Department of Revenue in December of 1977. After petitioner was successful in a rule-challenge proceeding to a portion of the Department's rules defining a "church", the Department reversed its initial decision and issued the petitioner a Consumer's Certificate of Exemption. Based on that issuance, petitioner dismissed its request for a formal administrative hearing regarding the initial denial of exempt status. In 1983, the Legislature enacted Section 212.084, Florida Statutes, which required the Department of Revenue to review every sales tax exemption certificate issued before July 1, 1983, to ensure that the possessor of the certificate was actively engaged in an exempt endeavor. The Department was given the authority to revoke the certificates of those entities found to be no longer qualified for an exemption. Section 212.084(3), Florida Statutes. Pursuant to this statute, the respondent notified the petitioner that an application for renewal of its previously issued Certificate would be required. Petitioner submitted such an application and the respondent gave notice of its intent to revoke petitioner's Certificate effective January 29, 1986. According to its Articles of Incorporation, the petitioner was organized "to produce and broadcast to the general public religious television and radio programs and thereby educate and instruct the general public in religious matters, and make available guidance to promote the general public welfare..." In furtherance of this purpose, the petitioner operates a facility in Largo, Florida, in a 43,000 square foot building. The building contains two television broadcasting studios, control rooms, storage rooms, administrative offices, a counseling area and a chapel. The petitioner views its purpose as one of assisting churches of all denominations in presenting the gospel to the community. It produces many programs in its Largo studios and considers these programs to be ministries in themselves. Live audiences are often present in the studios, which can accommodate from 30 to 100 people, depending upon the program. For example, during the production of "Joy Junction", children from various Christian schools in the area attend the taping. Senior adults come to the Largo studios to attend the "Action Sixties" program, and single adults attend the taping of "Solo Act". In addition, the petitioner sells air time to local churches and ministries. The petitioner also conducts benevolence activities in cooperation with area churches and local agencies. These include fund-raisers for other ministries and raising money or collecting clothing and food for the needy. Petitioner provides on-air announcement services for area churches and ministerial associations and allows other ministries to utilize its broadcasting facilities. Petitioner's staff also attempts to work with "non-Christian people" within the community and "pass them through our ministry into other churches". The petitioner provides a telephone counseling service from its Largo facility. For this purpose, it utilizes 45 regular, and 100 substitute, volunteer counselors. These counselors are trained by petitioner's staff, and callers receive Biblical answers to their questions and problems. Many who call in want prayer for some particular need. Callers perceived to have a more severe problem are referred to a Christian counselor in the area. Approximately 32,000 calls per year are received on petitioner's "prayer lines". The petitioner's staff includes two ministers. One serves as the director of the benevolence ministry and the counseling department, and the other serves as director of community ministries and does the liaison work with other churches. Both were previously Pastors of their own churches, and feel that Christian Television is as much or more of a "church" as the more traditional churches they formerly pastored. They described the use of video technology as an advantage and an asset, rather than as a substitute for more traditional forms of religious training. Worship services are conducted in the petitioner's chapel by both the staff ministers and other volunteer or paid ministers. The chapel, containing 1200 square feet and having a seating capacity of about 150, has high ceilings and contains an organ, an altar, a pulpit and chairs. The estimated value of the assets within the chapel is ten or twenty thousand dollars. The chapel is actively utilized during the week for staff devotionals and communion services, and is open to the public for special services and advertised programs conducted by those using a Biblical approach. Other approved ministries are permitted to utilize the chapel without charge for Bible studies or special prayer times. The chapel is not used as a production or broadcasting studio. As of December 31, 1983, the value of petitioner's assets, including plant, property and equipment, was $2,185,564.00. During 1983, petitioner received contributions totalling $1,137,000.00, and realized slightly more than one million dollars in revenue by providing broadcast and production time to various religious organizations.
Recommendation Based upon the findings of fact and conclusions of law recited herein, it is RECOMMENDED that petitioner's Consumer Certificate of Exemption be reissued for a period of five (5) years. Respectfully submitted and entered this 6th day of October, 1986. DIANE D. TREMOR Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 6th day of October, 1986. APPENDIX TO RECOMMENDED ORDER, CASE NO. 86-0456 The proposed findings of fact submitted by the petitioner and the respondent have been carefully considered and are accepted and/or incorporated in this Recommended Order, except as noted below: Petitioner: 3 - 5. Recitations of testimony accepted as correct, but not included as factualfindings. 7. Partially rejected as argument as opposed to factual findings. COPIES FURNISHED: Jon H. Anderson, Esquire NCNB Bank Building 5001 South Florida Avenue Lakeland, Florida 33803 Edwin A. Bayo, Esquire Assistant Attorney General Department of Legal Affairs The Capitol Tallahassee, Florida 32301 Randy Miller Executive Director Department of Revenue 102 Carlton Building Tallahassee, Florida 32301 William D. Townsend General Counsel 104 Carlton Building Tallahassee, Florida 32301
The Issue The issue in this case is whether the Petitioner should be issued a sales tax exemption certificate either as a "church" or as a "religious organization."
Findings Of Fact The Petitioner, In His Service, is a not-for-profit organization formed to give structure to a Bible study and prayer group Shirley B. Cole leads. Cole is the Petitioner's "pastor," but she is not ordained, does not officiate at weddings or funerals, and has no formal religious training other than participation in similar study groups in the past. The Petitioner is affiliated with an organization called the Federation of Independent Churches, which has an office on East Bird Street in Tampa, Florida. (In a post-hearing submission, Cole asserted that the Petitioner's "outreach is from Greater Ministries International, basically functioning as a satellite church, but there was no evidence regarding Greater Ministries International.) Portions of the Petitioner's by-laws were admitted in evidence at the final hearing. The by-laws make reference to three officers--president, vice-president, and secretary-treasurer--but Cole testified that she was the secretary and that someone else was the treasurer, and she did not seem to know anything about a president or vice-president. In addition, while the by-laws refer to a board of directors and meetings of the board of directors, Cole does not know anything about either. The Petitioner is small (not more than 15 members). It consists primarily of Cole and her friends and neighbors and some others who hear about the meetings. The group has met in various locations, including Cole's home at 5155 20th Avenue North, St. Petersburg, Florida, and the homes of other members of the group. In addition to Bible study and prayer, the group discusses health issues and other topics of interest and shares reading materials and tapes on topics of interest. From time to time, the group collects items of donated personal property for the use of members of the group and others in need who could use the items. In late June 1998, the Petitioner applied for a sales tax exemption certificate as a church. In response to a question from a representative of the Respondent DOR Cole stated that the Petitioner held services in her home every Thursday from 7:30 to 9:30 or 10 p.m. A DOR representative attempted to confirm Cole's representation by attending a meeting in Cole's home on Thursday, October 8, 1998, but no services were being held there, and no one was home. If there was a meeting on that day, it was held somewhere else. On or about December 28, 1998, DOR issued a Notice of Intent to Deny the Petitioner's application because the Petitioner did not have "an established physical place of worship at which nonprofit religious services and activities are regularly conducted and carried on." In January 1999, Cole requested an administrative proceeding on the Petitioner's application, representing that she was holding the Petitioner's meetings at her home every Monday from 7:30 p.m. On Monday, April 5, 1999, a DOR representative visited Cole's home at 7:30 or 7:35 p.m., but no one was home. At final hearing, Cole testified that she went to pick someone up to attend the meeting and was late returning. Cole had an April 1999 newsletter admitted in evidence. It indicates that she holds weekly Bible study meetings on Mondays at her home. It also indicates: "The week of April 19th will be our maintenance [health] meeting." It also indicates that the Monday, April 26, 1999, meeting would be a "covered dish dinner with prayer and praise fellowship afterward." Cole also had a book/tape loan check-out list admitted in evidence. The list indicates that two items were checked out on January 21, one on February 8, two on February 14, one on February 15, one on March 8, one on March 21, two on March 22, one on April 4, one on April 5, and four on April 12, 1999. (Two entries dated April 13 precede two on April 12, so it is assumed that all were on April 12, 1999). Cole owns her home, pays the taxes, and pays the utility bills. Cole also claims a homestead exemption. There are no signs, no physical attributes, or anything else that would identify Cole's house as a church. No part of the home is set aside for the Petitioner's exclusive use. The Petitioner pays no rent to Cole and does not reimburse Cole for any of her expenses (such as taxes and utility bills) of home ownership. Under local City of St. Petersburg zoning ordinances, Cole would have to obtain a special exception from the Environmental Development Commission to use her home as a church. Cole has not attempted to do so. Had she tried, the special exception would be denied because her home does not meet the ordinance's minimum lot and yard size criteria for such a special exception. (It is not clear whether Cole's home would meet the ordinance's parking, maximum floor area ratio, and maximum surface ratio criteria for a special exception for a church.) In light of past discrepancies between the Petitioner's representations and the facts, it was not clear from the evidence presented in this case that meetings have taken place, are taking place, or will take place in Cole's home on a regular basis.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the DOR enter a final order denying the Petitioner's application for a tax exemption certificate. DONE AND ENTERED this 18th day of May, 1999, in Tallahassee, Leon County, Florida. J. LAWRENCE JOHNSTON 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 18th day of May, 1999. COPIES FURNISHED: Shirley Cole, Pastor In His Service 5155 20th Avenue, North St. Petersburg, Florida 33710 Kevin ODonnell, Assistant General Counsel Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668 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
The Issue Whether Respondent Department of Revenue’s (Department) January 27, 2020, Notice of Proposed Assessment to Petitioner B Century 21, Inc. (B Century 21) is incorrect.
Findings Of Fact Parties The Department is the state agency responsible for administering Florida’s sales and use tax laws, pursuant to chapter 212, Florida Statutes. B Century 21 is a Florida S-Corporation that operates two liquor stores (Al’s Liquor and Arlington Liquor), as well as a bar (Overtime Sports Bar), in Jacksonville, Florida. Mr. Altheeb is the sole owner of B Century 21 and testified that he is solely responsible for the operation of it, including the two liquor stores and bar. With respect to the operation of B Century 21, Mr. Altheeb testified, “I do all the paperwork, all the books, all the taxes. I do all the orders.” Matters Deemed Admitted and Conclusively Established2 B Century 21 received correspondence from the Department, dated August 20, 2019. That correspondence, from Ms. Pitre, stated, in part, “I will be conducting an examination of your books and records as authorized under Section 213.34, Florida Statutes.” B Century 21 received the Department’s form DR840, Notice of Intent to Audit Books and Records, dated August 20, 2019, including the Sales and Use Tax Information Checklist. The form DR-840 indicated that the Department intended to audit B Century 21 for a tax compliance audit for the period of July 1, 2016, through June 30, 2019. The Sales and Use Tax Information Checklist listed a number of categories of documents the Department intended to review as part of this audit. B Century 21 (through its accountant, power of attorney, and qualified representative, Mr. Isaac) received the Department’s October 30, 2019, correspondence, which referenced the “Audit Scope and Audit Commencement,” and an attached Records Request list. B Century 21 (through Mr. Isaac) received an email, dated October 30, 2019, from Ms. Pitre. That email references an attached Audit Commencement Letter. B Century 21 (through Mr. Isaac) received an email, dated November 12, 2019, from Ms. Pitre, which inquired of “the status of the records requested during the meeting with you and Mr. Altheeb on October 29, 2019.” B Century 21 (through Mr. Isaac) received the Department’s Notice of Intent to Make Audit Changes, form DR-1215, dated December 16, 2019. The form DR-1215 reflects a total amount of tax of $170,232.93, a penalty of $42,558.24, and interest through December 16, 2019, of $25,461.86, for a total deficiency of $238,253.04. The form DR-1215 also reflects that if B Century 2 See Order Granting Motion Declaring Matters Admitted and Setting Discovery Deadline. Fla. R. Civ. P. 1.370(b). 21 did not agree with these audit changes, or only agreed with a portion, that it had until January 15, 2020, to request a conference or submit a written request for an extension. Further, the form DR-1215 attached a Notice of Taxpayer Rights, which included additional detail on the options available to B Century 21. B Century 21 (through Mr. Isaac) received correspondence from Ms. Pitre, dated December 16, 2019, which stated that as of the date of the correspondence, the Department had not received the information previously requested on October 13, 2019, which it needed to complete the audit. The correspondence stated that B Century 21 had 30 days to review the audit changes, provided contact information to B Century 21 if it wished to discuss the findings in the form DR-1215, and noted that if the Department did not hear from B Century 21 within 30 days, it would send the audit file to the Department’s headquarters in Tallahassee, Florida. B Century 21 (through Mr. Isaac) received the Department’s Notice of Proposed Assessment, form DR-831, dated January 27, 2020. The form DR- 831 reflects a total amount of tax of $170,232.93, a penalty of $42,558.24, and interest through January 27, 2020, of $27,224.82, for a total deficiency of $240,016.00. For the time period between August 20, 2019, and January 7, 2021, B Century 21 did not provide the Department with: (a) any sales records; (b) any purchase records; or (c) any federal tax returns. For the time period between August 20, 2019, and January 7, 2021, B Century 21 did not provide any records to the Department for examination in conducting the audit. Additional Facts In 2011, for the purpose of enforcing the collection of sales tax on retail sales, the Florida Legislature enacted section 212.133, Florida Statutes, which requires every wholesale seller (wholesaler) of alcoholic beverage and tobacco products (ABT) to annually file information reports of its product sales to any retailer in Florida. See § 212.133(1)(a) and (b), Fla. Stat. Once a year, ABT wholesalers report to the State of Florida their name, beverage license or tobacco permit number, along with each Florida retailer with which they do business, the Florida retailer’s name, retailer’s beverage license or tobacco permit number, retailer’s address, the general items sold, and sales per month. See § 212.133(3), Fla. Stat. The information collected captures the 12-month period between July 1 and June 30, and is due annually, on July 1, for the preceding 12-month period. Id. ABT wholesalers file these reports electronically through the Department’s efiling website and secure file transfer protocol established through the Department’s efiling provider. § 212.133(2)(a), Fla. Stat. Ms. Baker explained this statutory process further: [W]e annually, every year in the month of May, my unit reaches out to the Florida Department of Business and Professional Regulations. We compel them to give us a list of all of the active wholesalers who were licensed to sell to retailers in the state of Florida for the prior fiscal year. Once we receive that list, we then mail a notification to all those wholesalers and state the statute and the requirements and give them a user name and a password that will allow them to then log into that portal and submit their retail—their wholesale—or their wholesale sales to retailers in the state of Florida for the prior fiscal year. Those reports are due on July 1st of each year, but they are not considered late until September 30th of that year. So that gives the wholesaler population a couple of months to compile all of their sales for the prior year, fill out their reports and submit them to the Florida Department of Revenue by the end of September. Additionally, each month, and for each retail location, B Century 21 reports gross monthly sales to the Department, and remits sales tax, utilizing the Department’s form DR-15. Ms. Baker further described the process the Department utilizes in identifying an “audit lead,” utilizing the data that ABT wholesales provide: Specifically for ABT, we have a very, actually, kind of simple comparison that we do. . . . [A]s a taxpayer, as a retailer in the state of Florida, you may purchase from multiple wholesalers. So, part of our job is we compile all of the purchases that each beverage license or tobacco license has purchased, and once we compile all the purchases for the fiscal year, then to say, you know, what were the purchases for the fiscal year versus what were the reported sales for the fiscal year. And, again, a pretty simple comparison we really look to see, did you purchase, or . . . did you report enough sales to cover the amount of purchases that we know you made as a – as a retailer. And if the sales amount does not exceed the purchase amount, then we’ll create a lead on it. The Department’s efiling provider exports the ABT wholesalers’ information to SunVisn, the Department’s database. The Department’s analysts review the ABT wholesalers’ reported data, and taxpayer information, to identify audit leads. The Department then assigns these audit leads to its service centers to conduct an audit. A tax audit period is 36 months. In conducting ABT audits, the Department has 24 months of reported data (i.e., the first 24 months of the audit period) for review. This is because the timing of section 212.133(3) requires ABT wholesalers to report annually on July 1, for the preceding 12- month period of July 1 through June 30. For the ABT reporting data examination period of July 1, 2016, through June 30, 2018 (a period of 24 months), B Century 21’s gross sales for its two liquor stores was as follows: Liquor Store Reported Gross Sales Al’s Liquor $1,051,128.56 Arlington Liquor $902,195.49 For the same 24-month time period of July 1, 2016, to June 30, 2018, B Century 21’s wholesalers reported the following ABT inventory purchases to the State, as required under section 212.133: Liquor Store ABT Inventory Purchases Al’s Liquor $1,250,055.79 Arlington Liquor $1,174,877.98 As the ABT wholesalers’ reported ABT inventory purchases by B Century 21’s retail outlets were higher than B Century 21’s reported sales, the Department issued an audit lead, which led to the audit that is at issue in this proceeding. The Audit For the 36-month audit period of July 1, 2016, through June 30, 2019 (audit period), B Century 21’s reported gross sales for each of its locations was: Location Reported Gross Sales Al’s Liquor $1,557,569.74 Arlington Liquor $1,434,551.65 Overtime Sports Bar $968,476.08 On August 20, 2019, Ms. Pitre mailed to B Century 21 (and received by Mr. Altheeb), a Notice of Intent to Audit Books and Records for the audit period. Included with the Notice of Intent to Audit Books and Records was correspondence informing B Century 21 of the audit and requesting records. On August 26, 2019, Ms. Pitre received a telephone call from Mr. Altheeb. Ms. Pitre’s case activity notes for this call state: Received a call from Baligh Altheeb and he said he will be hiring Brett Isaac as his POA [power of attorney]. I informed him to complete the POA form and to give it to Mr. Isaac for signature and send to me. He knows about ABT Data assessments and asked that I note on the case activity that he contacted me regarding the audit. He was worried that his liquor license will be suspended if he does not respond right away. I informed him that once I receive the POA, I will contact Mr. Isaac and discuss the audit. On October 18, 2019, the Department received B Century 21’s executed power of attorney (POA) form naming Mr. Isaac as its POA for the audit. The executed POA form reflects that the Department’s notices and written communications should be sent solely to Mr. Isaac, and not B Century 21. The executed POA form further reflects that “[r]eceipt by either the representative or the taxpayer will be considered receipt by both.” On October 29, 2019, Ms. Pitre met with Mr. Altheeb and Mr. Isaac at Mr. Isaac’s office, for a pre-audit interview. Ms. Pitre’s case activity notes for this meeting state: Met with the taxpayer contact person, POA Brett Isaac and owner Baligh Thaleeb [sic], at the POA’s location to conduct the pre-audit interview. Discussed the scope of the audit, records needed to conduct the audit, availability of electronic records, business organization, nature of the business, internal controls, and the time line of the audit. Discussed sampling for purchases and POA signed sampling agreement. Made appointment to review records on November 12, 2019. Toured one of the location [sic] to observe business operations, Overtime Sports Bar. On October 30, 2019, Ms. Pitre emailed Mr. Isaac a copy of the Notice of Intent to Audit Books and Records, which included a “Sales and Use Tax Information Checklist,” which requested specific taxpayer records. After receiving no response from Mr. Isaac, Ms. Pitre, on November 12, 2019, emailed Mr. Isaac concerning “the status of the records requested during the meeting with you and Mr. Altheeb on October 29, 2019.” Section 212.12(5)(b) provides that when a taxpayer fails to provide records “so that no audit or examination has been made of the books and records of” the taxpayer: [I]t shall be the duty of the department to make an assessment from an estimate based upon the best information then available to it for the taxable period of retail sales of such dealer … or of the sales or cost price of all services the sale or use of which is taxable under this chapter, together with interest, plus penalty, if such have accrued, as the case may be. Then the department shall proceed to collect such taxes, interest, and penalty on the basis of such assessment which shall be considered prima facie correct, and the burden to show the contrary shall rest upon the [taxpayer]. Section 212.12(6)(b) further provides: [I]f a dealer does not have adequate records of his or her retail sales or purchases, the department may, upon the basis of a test or sampling of the dealer’s available records or other information relating to the sales or purchases made by such dealer for a representative period, determine the proportion that taxable retail sales bear to total retail sales or the proportion that taxable purchases bear to total purchases. Mr. Collier testified that, in the absence of adequate records, the Department “estimates using best available information, and for this industry … ABT sales are a higher percentage of their taxable sales.” Because B Century 21 did not provide adequate records to Ms. Pitre, she estimated the total taxable sales for the audit period. For each liquor store that B Century 21 operated, she multiplied its total ABT purchases by average markups to calculate total ABT sales. To derive these average markups, Mr. Collier explained that the Department receives data from wholesalers, and then: [W]e take that purchase information, apply average markup to the different ABT product categories, which include cigarettes, other tobacco, beer, wine, and liquor; and then that gets us to total ABT sales number. And then we derive what we call a percentage of ABT sales, percentage of that number represents. And in this particular model, 95.66 percent represents what we believe in a liquor store industry, that this type of business, that 95.66 percent of their sales are ABT products. We derive the markups, and the percentage of ABT sales from a number of liquor store audits that the Department had performed on liquor stores that provided records. The Department utilized markup data from other ABT audits. The Department applied the following markups to these ABT categories: 6.5 percent for cigarettes; 47.5 percent for other tobacco products; 17.33 percent for beer; 29.84 percent for wine; and 24.5 percent for liquor. Applying the Department’s markup for liquor stores to the wholesalers’ reported ABT data and percentage of taxable sales, Ms. Pitre estimated taxable sales for the ABT reporting data examination period and calculated the under-reported sales error ratio as follows: Location Estimated Taxable Sales Error Ratio Al’s Liquor $1,597.544.01 1.519837 Arlington Liquor $1,516,259.34 1.680633 The Department then divided B Century 21’s estimated taxable sales for the examination period, for each liquor store, by its self-reported tax sales in its DR-15s to arrive at the under-reported rate. The Department then multiplied the under-reported rate by the reported taxable monthly sales in the DR-15s to arrive at the estimated taxable sales for the 36-month audit period. The result of this calculation was: Location Estimated Taxable Sales Al’s Liquor $2,367,252.11 Arlington Liquor $2,410,954.82 The Department then multiplied the estimated taxable sales by an effective estimated tax rate which, after giving credit for B Century 21’s remitted sales tax, resulted in tax due for the Al’s Liquor and Arlington Liquor for the audit period, as follows: Location Sales Tax Owed Al’s Liquor $58,367.01 Arlington Liquor $70,068.44 For Overtime Sports Bar, the Department could not use ABT wholesalers’ data to estimate an assessment because the Department does not have audit data averages for bars and lounges. The Department used the “Tax Due Method” in estimating under-reported taxes and calculating under- reported taxable sales. Mr. Collier explained: The Department does not have average markup and percentage of sales for a bar. Though, you know, obviously, we all know that a bar, their main product that they sell and in most cases is ABT products. So, therefore, typically, an auditor would need to get information about that specific location. Bars can vary so much in their type of business that they do, they can be like nightclubs, or they can be like bar and grill that serves a lot of food. So there’s a lot of variances there for that particular type of industry, so we haven’t really come up with average markups, average percentage of sales for bars, per se. It’s a case-by- case situation, and in this case, the auditor decided that the fair, reasonable way to estimate the bar location would be to just average the error ratios that were derived from the Al’s Liquor and the other liquor store location and apply it to the taxable sales reported for the bar. And I think that’s a very fair and reasonable estimate based on what we all know in a bar situation; their markups are significantly higher. And of course, there can be plenty of other non-ABT taxable sales occurring in a bar setting, such as prepared food, you know, just your regular cokes and drinks. So it’s certainly a fair way to estimate in this particular audit and I believe only benefits the taxpayer. The undersigned credits the Department’s methodology for estimating an assessment for Overtime Sports Bar. Further, Mr. Altheeb testified that Overtime Sports Bar operates as both a sports bar and a liquor/package store, and stated: Most of it—it’s a liquor store. I don’t know if you know the area, it’s a liquor store on the Westside. So most of it—the sport bar doesn’t really do too much business in the Westside, mostly the liquor stores. People coming in and buy package, you know, buy bottles and leave. So, most of the business is the drive-through window. The Department’s decision to average the error ratios for the other two liquor stores to derive the additional tax due average for Overtime Sports Bar is reasonable, particularly in light of Mr. Altheeb’s testimony that Overtime Sports Bar operates primarily as a liquor (package) store. The Department calculated the additional tax due average error ratio for Overtime Sports Bar by averaging the error ratios of Al’s Liquor and Arlington Liquor, and then multiplied it by B Century 21’s reported gross sales to arrive at the additional tax due for Overtime Sports Bar of $41,797.49. Ms. Pitre testified that she determined that, for the audit period, B Century 21 owed additional sales tax of $170,232.93. In addition, the Department imposed a penalty and accrued interest. On December 16, 2019, Ms. Pitre sent correspondence, the preliminary assessment, and a copy of the audit work papers to B Century 21 (through Mr. Isaac), informing B Century 21 that it had 30 days to contact the Department’s tax audit supervisor to request an audit conference or submit a written request for an extension. After receiving no response from B Century 21, Ms. Pitre forwarded the audit workpapers to the Department’s headquarters in Tallahassee, Florida, to process the Notice of Proposed Assessment. B Century 21’s Position As mentioned previously, and after initially meeting with the Department, B Century 21 failed to provide requested financial records or respond to any of the numerous letters and notices received from the Department, despite being given adequate opportunity to do so. And, after filing its Amended Petition, it failed to timely respond to discovery requests from the Department which, inter alia, resulted in numerous matters being conclusively established. Mr. Isaac served as the POA for B Century 21 during the audit, and also appeared in this proceeding as a qualified representative. However, Mr. Isaac did not appear at the final hearing, did not testify as a witness at the final hearing, and does not appear to have done anything for B Century 21 in this proceeding, other than filing the Petition and Amended Petition. After Mr. Heekin appeared in this matter, and well after the time to respond to discovery, B Century 21 provided 127 pages of documents to the Department. These documents consist of: 18 pages of summaries of daily sales that Mr. Altheeb prepared for the hearing; 41 pages of sales and use tax returns from B Century 21 locations, covering 25 months (DR-15s); 2 pages of Harbortouch’s 2016 1099K, reporting credit card sales; 43 pages of unsigned federal tax returns from 2016, 2017, and 2018, prepared by Mr. Isaac; and 17 pages of B Century 21’s untimely responses to the Department’s discovery requests. Florida Administrative Code Rule 12-3.0012(3) defines “adequate records” to include: (3) “Adequate records” means books, accounts, and other records sufficient to permit a reliable determination of a tax deficiency or overpayment. Incomplete records can be determined to be inadequate. To be sufficient to make a reliable determination, adequate records, including supporting documentation, must be: Accurate, that is, the records must be free from material error; Inclusive, that is, the records must capture transactions that are needed to determine a tax deficiency or overpayment; Authentic, that is, the records must be worthy of acceptance as based on fact; and Systematic, that is, the records must organize transactions in an orderly manner. The nature of the taxpayer’s business, the nature of the industry, materiality, third-party confirmations and other corroborating evidence such as related supporting documentation, and the audit methods that are suitable for use in the audit, will be used to establish that the taxpayer has adequate records. The undersigned finds that the summaries of daily sales are not adequate records because Mr. Altheeb prepared them for use at the final hearing, rather than in the regular course of business. The undersigned finds that the DR-15s provided by Mr. Altheeb, covering 25 months, are not adequate records because they are incomplete and are not inclusive. The audit period encompassed 36 months, for B Century 21’s three retail locations; however, Mr. Altheeb only provided 25 months of DR-15s. The 2016, 2017, and 2018 federal tax returns that B Century 21 provided are not adequate records because they are not authentic. Mr. Altheeb was unable to verify if these tax returns were correct, and they were unsigned. B Century 21 did not provide any evidence that it had filed any of these federal tax returns with the Internal Revenue Service. Ms. Pitre reviewed the 127 pages of documents that B Century 21 provided and testified that the summaries of daily sales did not provide the “source documents” for verification. The unsigned federal tax returns reflect that B Century 21 reported a cost-of-goods-sold (COGS) of $518,606.00 for 2016; $1,246,839.00 for 2017; and $796,968.00 for 2018. Additionally, the unsigned federal tax returns reflect that B Century 21 reported a beginning inventory (BI) for 2016 of $95,847.00, and a year-end inventory (EI) for 2016 of $200,556.00, EI for 2017 of $280,235.00, and EI for 2018 of $295,628.00. When comparing the unsigned federal tax returns with the ABT wholesalers’ data, the federal tax returns reflect, for 2016, total inventory purchases of $623,315.00 (which is derived from $518,606.00 (COGS) + $200,556.00 (EI) - $95,847.00 (BI)). However, the ABT wholesalers’ data for 2016 reflects that B Century 21’s ABT purchases were $1,174,997.34 – a discrepancy of more than $500,000.00. For 2017, the federal tax returns reflect total inventory purchases of $1,326,518.00 (which is derived from $1,246,839.00 (COGS) + $280,235.00 (EI) for 2017 - $200,556.00 (EI) for 2016). However, the ABT wholesalers’ data for 2016 reflects that B Century 21’s ABT purchases were $1,422,854.79 – a discrepancy of over $96,000.00. And for 2018, the unsigned federal tax returns reflect total inventory purchases of $812,361.00 (which is derived from $796,968.00 (COGS) + $295,628.00 (EI) for 2018 - $280,235.00 (BI) for 2017). However, the ABT wholesalers’ data for 2018 reflects that B Century 21’s ABT purchases were $1,335,814.00 – a discrepancy of over $500,000.00. Mr. Altheeb testified that Arlington Liquor and Overtime Sports Bar opened in 2016 – after B Century 21 began ownership and operation of Al’s Liquor. He stated that he did not purchase inventory for the openings of the newer locations, but instead transferred excess inventory from Al’s Liquor, which resulted in lower total inventory purchases for 2016. Mr. Altheeb also testified that B Century 21’s three locations experienced spoiled inventory. However, B Century 21 should include spoiled inventory in COGS reported in its federal tax returns, and further, B Century 21 provided no additional evidence of the cost of spoilage for the audit period. The undersigned finds that the ABT wholesalers’ data for 2016 through 2018 reflects similar amounts for inventory purchases between 2016 through 2018. The undersigned credits the Department’s reliance on the ABT wholesalers’ data, which reflect fairly consistent purchases for each year. The undersigned does not find the unsigned federal tax returns that B Century 21 provided to be persuasive evidence that the Department’s assessment was incorrect. Mr. Altheeb testified that he believed Mr. Isaac, who B Century 21 designated as POA for the audit, and who appears as a qualified representative in this proceeding, was actively handling the audit. Mr. Altheeb stated that the audit, and the final hearing, “kind of came out of nowhere” and that once he learned of it, he retained Mr. Heekin and provided “everything” to him. However, it is conclusively established that the Department provided correspondence and notice to B Century 21 through its designated POA, and that B Century 21 failed to respond to record requests in a timely manner. Mr. Isaac neither testified nor appeared at the final hearing to corroborate Mr. Altheeb’s claims that Mr. Isaac did not keep Mr. Altheeb or B Century 21 apprised of the status of the audit, including the failure to provide requested records or to communicate with the Department. B Century 21 also attempted to challenge the Department’s use of markup data from other ABT audits, in an attempt to argue that the markups were inflated and not representative of B Century 21’s markups. However, and as previously found, B Century 21’s failure to timely provide records—or respond in any meaningful way to the audit—undermines this attempt. The undersigned credits the Department’s methodology in using the best information available to it for the audit period in calculating the assessment. Although it became apparent during the final hearing that Mr. Altheeb did not treat the audit of B Century 21 with appropriate seriousness, and deflected blame to Mr. Isaac, and that his approach resulted in a legally appropriate and sustainable audit and assessment based on the Department’s best information available, the undersigned does not find that B Century 21, Mr. Isaac, or Mr. Heekin knew that the allegations of the Amended Petition were not supported by the material facts necessary to establish the claim or defense, or would not be supported by the application of then-existing law to those material facts. The undersigned finds that the Department made its assessment based on the best information then available, and is thus prima facie correct, pursuant to section 212.12(5)(b). The undersigned further finds that B Century 21 did not prove, by a preponderance of the evidence, that the Department’s assessment is incorrect, pursuant to section 212.12(5)(b).
Conclusions For Petitioner: Robert Andrew Heekin, Esquire The Law Office of Rob Heekin, Jr., P.A. 2223 Atlantic Boulevard Jacksonville, Florida 32207 For Respondent: Randi Ellen Dincher, Esquire Franklin David Sandrea-Rivero, Esquire Office of the Attorney General Revenue Litigation Bureau Plaza Level 1, The Capitol Tallahassee, Florida 32399
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, the undersigned hereby RECOMMENDS that the Department enter a final order sustaining the January 27, 2020, Notice of Proposed Assessment to B Century 21, Inc. DONE AND ENTERED this 21st day of October, 2021, in Tallahassee, Leon County, Florida. S ROBERT J. TELFER III Administrative Law Judge 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 21st day of October, 2021. COPIES FURNISHED: Mark S. Hamilton, General Counsel Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668 Randi Ellen Dincher, Esquire Office of the Attorney General Revenue Litigation Bureau Plaza Level 1, The Capitol Tallahassee, Florida 32399 Robert Andrew Heekin, Esquire The Law Office of Rob Heekin, Jr., P.A. 2223 Atlantic Boulevard Jacksonville, Florida 32207 Franklin David Sandrea-Rivero, Esquire Office of the Attorney General Plaza Level 1, The Capitol Tallahassee, Florida 32399 Brett J. Isaac 2151 University Boulevard South Jacksonville, Florida 32216 James A Zingale, Executive Director Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668
Findings Of Fact At all times pertinent to this cause, Robert W. Pope, has been the holder of license no. 62-600, series 4-COP, SRX, held with the State of Florida, Division of Beverage to trade as The Wedgewood Inn, located at 1701, 4th Street, South, St. Petersburg, Pinellas County, Florida. When the Respondent, Pope, began to operate the licensed premises he was given a registration sales tax number by the State of Florida, Department of Revenue. This number was provided in accordance with 212, F.S. That law required the remittance of the collected sales tax on a month to month basis, the period beginning with the first day of the month and ending with the last day of the month. The remittance was due on the first day of the following month and payable by the 20th day of the following month. Failure to pay by the 20th would result in a 5 percent penalty and 1 percent interest per month. The sales tax remittance due from the licensed premises for September, 1976 through December, 1976 was not made and a lien was recorded to aid collection of the tax. Payment of the amount of $4,500.00 was paid in February or March, 1977 to satisfy the Department of Revenue lien claims. At present all taxes due and owing under 212, F.S. are current. The above facts established that the Respondent failed to comply with the provisions of 212, F.S. pertaining to the remittance of sales tax from the Respondent to the State of Florida, Department of Revenue. This violation, thereby subjects the Respondent to the possible penalties of 561.29, F.S.
Recommendation It is recommended that the Respondent, Robert W. Pope, be required to pay a civil penalty in the amount of $500.00 or have the license no. 62-600, series 4- COP, SRX, suspended for a period of 20 days. DONE AND ENTERED this 28th day of July, 1977, in Tallahassee, Florida. CHARLES C. ADAMS Hearing Officer Division of Administrative Hearings 530 Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: William Hatch, Esquire Division of Beverage 725 South Bronough Street Tallahassee, Florida 32304 Robert W. Pope, Esquire 611 First Avenue, North St. Petersburg, Florida 33701
