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)
Findings Of Fact High-Tech Yacht & Ship, Inc. (Petitioner) is a Florida corporation engaged in the business of retail sales of marine vessels. Also, Petitioner is a registered retail dealer in the State of Florida. The President of Petitioner is its only corporate officer. On or about September 2, 1993, Petitioner, in the capacity of a broker, sold a motor yacht at retail to Regency Group, Inc. (purchaser), through its representative, for $78,000. The motor yacht is described as a 1988, 41' Amerosport Chris Craft, hull Number CCHEU075E788, and called the "Motivator". At the closing of the sale, on or about September 2, 1993, the purchaser refused to pay the sales tax on the purchase, which was $4,680. However, the purchaser agreed to pay the sales tax after being informed by Petitioner that, without the payment of the sales tax, there could be no closing. The purchaser's representative submitted, at closing, a personal check in the amount of $4,680 for the sales tax. All of the necessary documents were completed for ownership and registration to be transferred to the purchaser. Subsequently, Petitioner received notice from its bank that the check for the sales tax had been dishonored by the purchaser's bank. The purchaser's representative had stopped payment on the check. In October 1993, Petitioner submitted its sales and use tax return for the month of September 1993 to Respondent in which the sale of the yacht was reported. Respondent automatically reviews sales and use tax returns. Respondent's review of Petitioner's return revealed a shortage of sales tax collected in the amount of $4,680.. In January 1994, Respondent issued a notice of tax action for assessment of additional tax in the amount of $4,710, plus interest and penalty, to Petitioner. The $4,710 included the loss of Petitioner's collection allowance of $30, which loss resulted from Petitioner's failure to timely remit all taxes due. Having received the notice of tax action, by letter dated January 20, 1994, Petitioner generally informed Respondent of the circumstances regarding the sales tax shortage, including the dishonored check. Petitioner pointed out, among other things, that Respondent had the authority and the means to collect the tax, while it (Petitioner) had limited means, and suggested, among other things, that Respondent cancel the purchaser's Florida registration of the yacht. On or about January 31, 1994, approximately three months after the check for sales tax was dishonored, Petitioner issued a notice of dishonored check to the purchaser, in which Petitioner requested payment of the sales tax. The notice provided, among other things, that Petitioner could seek criminal prosecution and civil action if the monies were not paid to Petitioner. Having not received the $4,680, Petitioner contacted the local law enforcement agency. After investigation, the law enforcement agency informed Petitioner that a civil action would have to be instituted because the purchaser, through its representative, had indicated that it was not satisfied with the yacht. Although Petitioner engaged the services of an attorney for civil action, no civil action was commenced. Additionally, Petitioner did not engage the services of a collection agency for assistance in collecting the sales tax. Subsequent to its notice of tax action, on or about March 12, 1994, Respondent issued a notice of assessment to Petitioner. The notice of assessment provided, among other things, that Petitioner was being assessed taxes in the amount of $4,710, plus penalty and interest in the amount of $2,342.61, totalling $7,052.61. Petitioner protested the assessment. On February 8, 1995, Respondent issued its notice of reconsideration in which Respondent determined, among other things, that the assessment was appropriate and affirmed the assessment of $7,052.61, plus interest and penalty. The interest accrues at the rate of $1.55 per day. Petitioner has not remitted any of the assessed tax, including interest and penalty, to Respondent. Petitioner has not identified on its federal tax return the noncollection of the sales tax from the purchaser as a bad debt. Sales tax is part of the total sale price for an item. Respondent considers the sales tax as collectable by a seller in the same manner as any other debt owed by a purchaser to a seller. A retail dealer, who is also a seller, is considered to be an agent for the State in the collection of sales tax. The burden of collecting the sales tax is placed upon the retail dealer by Respondent. Some of Respondent's employees have been sympathetic to Petitioner's tax assessment matter. However, none of the employees indicated to or advised Petitioner that Respondent was or is in error.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order affirming the assessment of sales tax against High-Tech Yacht & Ship, Inc. in the amount of $7,052.61, plus interest and penalty. DONE AND ENTERED this 7th day of August 1996, in Tallahassee, Leon County, Florida. ERROL H. POWELL, 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 7th day of August 1996.
Findings Of Fact Arrowhead Country Club (Arrowhead) is a business entity owned by Can Am Company, Ltd., a limited partnership, which held at all times pertinent to this case a beverage license issued by the Division of Beverage. Can Am Company, Ltd. entered into a lease with EST Corporation (EST) to lease the restaurant and lounge at Arrowhead to EST. Subsequently, RST applied for its corporate charter but was unable to use the name RST. It amended its corporate name to Wilval Corporation (Wilval). RST/Wilval continued to operate the restaurant and lounge under the terms of its lease. EST/Wilval obtained a sales tax number, collected tax, and remitted taxes for several months, May through October, 1978. Thereafter, RST/Wilval failed to remit sales taxes to the Department of Revenue. RST/Wilval also began to fall behind on its payments to Arrowhead under its lease. This resulted in Arrowhead taking certain charges in payment for monies due under the lease and collecting them from club members. Arrowhead remitted the four percent lease tax but not the sales tax on these collections. Testimony was submitted by the Department's auditor that there was no evidence of collusion between RST/ Wilval and Arrowhead or indication that they did not deal at arm's length with one another. The Department audited RST/Wilval and determined that, although the first few months of records were complete, its total records were incomplete. An estimate of sales taxes due was based upon estimates of the sales based upon the records of Arrowhead on the restaurant and lounge operations for the preceding year adjusted for price increases. These estimates, when compared against the records which were maintained by RST/Wilval in its first months of operation, show a close correlation. Based upon these estimates, the sales taxes assessed against RST/Wilval were $7,965.14. This assessment was presented to Ralph Williams, the manager of the RST/Wilval operation. Williams, an officer of the corporation, advised that RST/Wilval was unable to pay the taxes. The Department of Revenue then filed a warrant for collection of delinquent taxes, and the Sheriff of Broward County attempted to levy on the warrant. Williams tendered to Arrowhead a Notice of Termination of the Lease and vacated the premises on March 26, 1979. When the Sheriff attempted to levy the warrant, he found that Williams had left the location and the property on the premises belonged to Arrowhead. On Nay 18, 1979, the Department presented a jeopardy assessment to Arrowhead, which led to the instant controversy.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law the Hearing Officer recommends that the sales taxes due not be assessed against Arrowhead Country Club. DONE and ORDERED this 30th day of April, 1980, in Tallahassee, Leon County, Florida. STEPHEN F. DEAN, Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: Linda C. Procta, Esquire Office of the Attorney General Department of Legal Affairs The Capitol Tallahassee, Florida 32301 Louis J. Pleeter, Esquire 6200 Stirling Road, Davie Post Office Box 8549 Hollywood, Florida 33024
The Issue The issue to be resolved in this proceeding concerns whether the Petitioner's application for licensure as a nonresident life, health and variable annuities insurance agent should be denied on the basis of his having pled guilty and been convicted of a felony. Embodied within that general issue are the issues of whether the felony involved is one of moral turpitude and whether the conviction, and the circumstances surrounding it, demonstrate that the Petitioner lacks fitness or trustworthiness to engage in the business of insurance.
Findings Of Fact The Petitioner, Preston Hursey, Jr., filed an application for qualification in Florida as a nonresident life, health and variable annuities agent. The application was filed on November 13, 1989. On April 9, 1990, the Department of Insurance issued a letter of denial with regard to that application based upon a felony conviction of the Petitioner in the past. The Respondent is an agency of the State of Florida charged, in pertinent part, with enforcing the licensure, admission and continuing practice standards for insurance agents of all types, embodied in Chapter 626, Florida Statutes, and with regulating the admission of persons to licensure as insurance agents in the State of Florida. On August 12, 1988, an Information was filed with the United States District Court for the District of Columbia, charging the Petitioner with three felony counts involving "aiding or assisting presentation of false income tax return". That is a felony violation of Title 26 U.S.C., Sections 7206(2). On November 15, 1989, the Petitioner was found guilty of three counts of aiding or assisting presentation of false income tax return in violation of that statutory section. The actual conduct for which he was convicted occurred prior to the charges. Prior to 1984, the Petitioner worked for some years as a medical examiner for insurance companies, taking medical histories, blood pressures, pulses and the like, for purposes of establishing insurance coverage for clients of the companies. Some time in early 1984, the Petitioner approached American Dynamics Corporation, as a client, with the intent of availing himself of the financial planning services of that company with the intent of saving on income taxes. The company was apparently counseling clients as to tax shelters in which they could invest or which they could claim, as a means of' avoidance of federal income tax. The Petitioner became very interested in that tax saving procedure and sometime in 1984 became involved with the firm as one of its financial counselor employees. The firm trained him in the service they offered to taxpayers, which involved financial planning by using trusts to defer taxes, as well as other means of sheltering income from tax liability. The company and the Petitioner counseled numerous clients and assisted them in taking advantage of alleged tax shelters, including the final act of preparing their tax returns. During the course of going to hearings with his clients, when their tax returns came under question by the Internal Revenue Service, the Petitioner became aware that apparently the service would not accept the tax shelter devices being used by his company and him as a legitimate means of avoiding taxes. He then sought legal advice from a tax attorney and received an opinion from him that the tax avoidance counseling methods, devices and tax return preparation the Petitioner and his employer were engaging in were not legal, and that the Petitioner should advise anyone he knew involved in such schemes to terminate their relationship. The Petitioner acted on that advice, terminated his relationship with the company and recommended to his clients that they terminate their relationship with the company and the tax avoidance devices being used. Through hindsight and learning more about relevant tax law in the last four to five years since the conduct occurred, the Petitioner realizes that the tax shelter schemes marketed by his employer at that time and, by himself, did not make financial or legal sense. The Petitioner at that time had very little training in financial counseling or advising and very little training in the Federal income tax laws arid regulations. In retrospect, after receiving much more such training as an agent of New York Life Insurance Company since that time, he realized the significance of the error he and his former employer committed. When the tax returns were prepared by the Petitioner and others employed with the firm involved, the tax return accurately reflected the gross income of he taxpayer, the "W2 forms", and all appropriate documentation. Then, the gross income of the taxpayer was shown as reduced by the amount of funds affected by the tax shelter system marketed by the Petitioner's former employer and the Petitioner. There was a statement on the tax return itself explaining the disparity in taxable income so that basically the Internal Revenue Service had the facts and circumstances of such situations disclosed to it. It, however, deemed anyone marketing such tax shelters as engaged in marketing "abusive tax shelters", in effect, in violation of the Internal Revenue Code. Ultimately, the Petitioner was prosecuted along with others involved in the transactions and suffered a felony conviction of three counts of violation of the statute referenced above. The Petitioner has steadfastly maintained both before and after his conviction that he had no intent to violate the tax laws of the United States, but rather believed, until he sought a legal opinion from a qualified attorney, that the service he was marketing was a legal one. After he came under prosecution by the Justice Department for the violation, the Petitioner cooperated fully with the Internal Revenue Service and the Justice Department. The felony violation of which he was convicted, by guilty plea, carried a sentence of three years imprisonment, one year for each tax return involved. That sentence was reduced by the court; however, in consideration of the circumstances of the Petitioner's offense and his cooperation with the prosecuting authorities, to one month of "work release", which he served by working during the day for senior citizens organizations and returning to a confinement facility in the evening. He also was required to render 200 hours of community service, which he has completed, and three years probation. Because of his excellent attitude and behavior and his demonstrated activities designed to further his education in the insurance and securities field, his successful pursuit of the insurance and securities marketing profession in other states and his obviously-positive motivation, his probation officer has recommended that his probation be terminated early, after only two years of it would have been completed in November, 1990. The sentence was reduced because of the Petitioner's positive record in his community, the fact that he had no prior criminal history and because of widespread support by responsible members of the community and by the probation officers who reviewed his case and situation. The judge, upon sentencing, also noted that he was impressed by the fact that the Petitioner wanted to continue to work in the insurance and securities field and was the sole support of a young son whom he was supporting and caring for as an active parent. He continues to do that. The record establishes that the Petitioner's conviction was the result of a guilty plea. That plea resulted from a negotiated "plea bargain" settlement with the prosecuting authorities. The Petitioner established with unrefuted testimony, that he never had any willful intent to commit a crime or defraud the Federal government and the Internal Revenue Service. While he had a general intent to offer the tax advice involved to clients and assist them in engaging in tax shelter arrangements and in preparing the related tax returns, he had no specific intent to commit acts which he knew to be illegal when he committed them, nor which he believed amounted to fraud or deceit of the Internal Revenue Service. Although he pled guilty to a crime involving, by the language of the above--cited statute, the element of falsity, which bespeaks of deceit or fraud, the evidence shows that the Petitioner harbored no such fraudulent or deceitful intent. This is corroborated by the fact that the Petitioner and his clients disclosed all income on the tax return and simply disclosed that a portion of it was sheltered, which procedure was determined by the Internal Revenue Service to be illegal. There was no evidence of record to indicate that the Petitioner sought to conceal income or otherwise commit a false or fraudulent act in the course of his financial and tax advice to these clients, nor in the preparation of their tax returns for submittal. While the statute he is convicted of violating appears to involve the element of moral turpitude because it refers to false or fraudulent tax returns, it is a very general type of charge which can cover many types of activities or conduct. Consequently, one should consider the specific conduct involved in a given instance, such as this one, to determine whether the crime committed factually involved moral turpitude. Based upon the unrefuted evidence of record culminating in the findings of fact made above, it is clear that the Petitioner committed no conduct involving moral turpitude at the time the activity in question was engaged in for the above reasons. The Petitioner has been in no legal altercation, criminal or otherwise, before or since the instance which occurred in 1984. He has become licensed in Washington DC, Maryland and Virginia as an insurance agent and as a broker agent. He represents numerous insurance companies, including, for approximately five years, the New York Life Insurance Company and other reputable companies. He has pursued his continuing education requirements and has earned more requirements than he needs for licensure in Florida and Maryland. He is actively seeking to improve his professional standing and competence in the insurance and securities field and is highly motivated to continue doing so. A great deal of his motivation comes from the fact that he is the sole support of his young 11-year-old son. He enjoys the insurance profession because it gives him time to participate in his son's many school-related and extracurricular activities, such as football. The Petitioner's testimony, and the proven circumstances of the situation, establish without question that he is an honest, forthright person who has candidly admitted a past mistake and who has worked actively, in the approximate six years which have elapsed since the conduct was committed, to rectify that blemish on his record. His efforts to rehabilitate himself personally and professionally involved his active participation as a parent for his son in his son's school life and otherwise, and participation in church and community activities. During the time period which has elapsed since the conduct in question occurred, he has sufficiently rehabilitated himself both personally and professionally so as to justify the finding that he has demonstrated trustworthiness and fitness to engage in the business of insurance. Indeed, three other states, after having the circumstances of his conviction fully disclosed to them, have licensed him or retained him as a licensee insurance agent. The Petitioner is a navy veteran of Vietnam, having served three tours in the Vietnam war, for which service he was decorated. He had a number of security clearances, including a top secret security clearance based upon his work in the field of communications and cryptology during that war. This honorable service, the efforts he has made to improve himself personally and professionally before and since the subject conduct occurred, the fact that it was an isolated incident on his record, the fact that it did not involve any established intent to defraud or deceive on his part, the fact that he is an active, positive parental role model, community member and church member, and his general demeanor at hearing of honesty and forthrightness convinces the Hearing Officer that the isolated incident of misconduct he committed did not involve a demonstrated lack of fitness and trustworthiness to engage in the business of insurance. Quite positively, the Petitioner has demonstrated his fitness and trustworthiness to engage in that business.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses, and the pleadings and arguments of the parties, it is therefore, RECOMMENDED that the Petitioner's application for licensure as a nonresident life, health and variable annuities insurance agent should be granted. DONE AND ENTERED this 7th day of February, 1991, in Tallahassee, Leon County, Florida. P. MICHAEL RUFF Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 7th day of February, 1991. APPENDIX TO RECOMMENDED ORDER IN CASE NO. 90-3069 Petitioner's Proposed Findings of Fact 1-4. Accepted. 5. Rejected, as not clearly established by the evidence of record. 6-14. Accepted. Respondent's Proposed Findings of Fact 1-4. Accepted. 5. Rejected, as not clearly established by the evidence of record. COPIES FURNISHED: Mr. Tom Gallagher State Treasurer and Insurance Commissioner Department of Insurance and Treasurer The Capitol, Plaza Level Tallahassee, FL 32399-0300 Don Dowdell, Esq. General Counsel Department of Insurance and Treasurer The Capitol, Plaza Level Tallahassee, FL 32399-0300 Preston Hursey, Jr., pro se Post Office Box 43643 Washington, DC 20010 Willis F. Melvin, Jr., Esq. Andrew Levine, Esq. Department of Insurance Division of Legal Services 412 Larson Building Tallahassee, FL 32399-0300
The Issue Whether Petitioner collected and remitted to the Florida Department of Revenue the correct amount of sales tax on Petitioner's retail sales; and Whether Petitioner remitted to the Florida Department of Revenue the proper amount of sales tax on Petitioner's general and fixed assets purchases and on its commercial lease.
Findings Of Fact Petitioning Taxpayer, Surface Preparation Group, Inc., is a "C" corporation, incorporated in the State of Texas. The Taxpayer's product or service is the sale, service, and rental of surface preparation equipment. The Taxpayer has been registered with the Department since October 7, 1999. By letter dated January 12, 2005, the Department notified the Taxpayer of its intent to audit the Taxpayer's books and records to verify the Taxpayer's compliance with Florida's sales and use tax statutes. The audit period in this case is from December 1, 2001, through November 30, 2004. When the audit started, the Taxpayer had a presence in LeGrange, Georgia. During the course of the audit and negotiations, the Taxpayer removed itself back to its Texas headquarters. Specific records were requested to be made available for the Department's auditor to review. Four subject areas were developed in the audit plan: (1) sales; (2) fixed expense; (3) general expense; and (4) commercial rent. Although the Taxpayer provided some sales data, the information contained therein did not correlate with other information the Department had concerning the Taxpayer's Florida sales. For instance, auditors had traced through general ledgers to Petitioner’s federal tax return and compared the return with the company’s Florida sales and use tax return, and the figures did not correlate. Despite repeated requests by the Department's auditor, the Taxpayer provided no information explaining the reasons for this discrepancy, nor was any information provided regarding the Taxpayer’s general purchases, fixed asset purchases, or its commercial lease expenses. Therefore, in order to complete the audit process, the Department had to use the best information available to estimate the additional tax due on fixed assets, general purchases, and commercial rent. That information in this case consisted of materials provided by the Taxpayer and industry averages and past audit assessments of businesses in similar industries. Because total sales reported by the Taxpayer on its DR-15 monthly sales returns were different than the amounts the Taxpayer reported in response to the audit request, there was no assurance that the reported taxable sales and exempt sales were correct. Accordingly, the Department's auditor disallowed all exempt sales as reported by the Taxpayer. Because the Taxpayer had a location in Polk County, Florida, during part of the audit period, it must have had fixed assets there. This meant that a use tax was due for all the Taxpayer’s purchases in Florida, without credit for sales tax paid to vendors who in many cases were located in Georgia. No information was provided by the Taxpayer for general expenses or rental expenses. Without any information from the Taxpayer for general expenses or rental location, the Department had to proceed differently than it would have normally proceeded. In anticipation of submitting more documents to be analyzed by the Department as part of the audit, Mr. Hillebrand, tax manager for Petitioner, signed, on October 24, 2005, a consent to extend the statute of limitations and time for completing the audit to July 31, 2006. (Exhibit R-2, page 000030). On March 15, 2006, Mr. Schnaible, one of the Taxpayer’s Controllers, signed a consent to extend until December 31, 2006. (Exhibit R-2, page 000029). On September 26, 2006, after analyzing all that had been received from the Taxpayer up to that date, the Department mailed a Notice of Intent to Make Audit Changes (NOI) to Petitioner, along with the work papers supporting the changes, and a letter from the auditor explaining the findings. The amount of tax assessed totaled $197,714.38, and comprised: Schedule A01: Disallowed Exempt Sales $169,994.38; Schedule B01: Estimated Fixed Asset Purchases $10,080.00; Estimated General Expenses: $5,040.00; and Estimated Commercial Rental $12,600.00. Interest accrued through September 26, 2006, totaled $57,353.50. The penalty at that date totaled $49,428.09, bringing the total assessment amount to $304,496.47. The Department’s September 26, 2006, letter offered the Taxpayer another opportunity to provide records if it disputed the auditor's findings, and another option to continue the audit process. (Exhibit R-2, pages 000044 through 000045). On October 25, 2006, Mr. Spomer, Taxpayer’s Controller who eventually signed the Petition and Amended Petition herein, wrote a letter (Exhibit R-2, page 000042) to the auditor stating that he requested to extend the audit and that he would mail back the signed, correct form. Normally, a DR-872e form to extend the statute and audit period must be signed within 30 days of the NOI. In this case, it was signed two months later. Apparently, one such form signed by Mr. Spomer was inadvertently filled-in by the Department with the extension date of "June 30, 2006," (copy attached to Amended Petition). Therefore, a second form was executed by Mr. Spomer on November 1, 2006. This form bears the correct extension date of June 30, 2007. (Exhibit R-2, page 000028). No additional information was provided by the Taxpayer which would change any of the tax amounts identified in the NOI. Therefore, on January 31, 2007, the Department issued it Notice of Proposed Assessment (NOPA). Therein, the amount of tax due remained unchanged. The amount of accrued interest through January 31, 2007, increased to $65,023.73, and the penalty was reduced to zero. The Department currently seeks $262,738.11, with interest accruing on the unpaid tax liability at the statutory rate.
Recommendation Based on the foregoing Findings of Facts and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order sustaining the Notice of Proposed Assessment dated January 31, 2007. DONE AND ENTERED this 6th day of December, 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 6th day of December, 2007. COPIES FURNISHED: 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 John Mika, Esquire Office of the Attorney General The Capital - Revenue Litigation Bureau Tallahassee, Florida 32399-1050 Dale Spomer International Surface Preparation Group (Texas), Inc. 6330 West Loop South, Suite 900 Houston, Texas 77401
Findings Of Fact At present Tony's Fish Market of Ft. Lauderdale, Inc. t/a Tony's Fish Market Restaurant is the holder of license no. 16-1320-SRX, series 4-COP held with the State of Florida, Division of Beverage. Prior to September 1, 1974, Armand Cerami owned 50 shares of stock in Tony's Fish Market, Inc., which represented a 50 percent interest in that corporation. In addition, Armand Cerami held 50 shares of stock in Tony's Fish Market of Ft. Lauderdale, Inc., representing a 50 percent interest in that corporation and was the holder of 50 shares of Tony's Sweet Enterprises, Inc., which represented a 50 percent interest in that corporation. During the time period of September 1, 1974, Armand Cerami had been charged with violation of the Internal Revenue Laws of the United States, under a federal indictment no. 74-407-CR-JE, in the United States District Court for the Southern District of Florida. This charge was placed against Cerami for Internal Revenue Law Violations which allegedly took place on tax returns on the tax year ,1968. In contemplation of a plea of guilty which Cerami intended to enter in the above cited case, he entered into a contract for purchase and sale of the corporate securities in the aforementioned corporations. Petitioner's Exhibit 2, admitted into evidence is a copy of the contract for purchase and sale of corporate securities, which was entered into between Armand Cerami and Pamela Ann Cerami, his wife, on September 1, 1974. The terms of the contract were that Pamela Ann Cerami would pay Armand Cerami $20,000 cash and would give to Armand Cerami a promissory note payable in the amount of $200,000, in ten equal installments of principal and interest at 6-1/2 percent payable on the anniversary date of the contract. On September 20, 1974, the Board of Directors of the three subject corporations accepted the resignation of Armand Cerami as the Secretary-Treasurer of those corporations, and elected Pamela Cerami as Secretary-Treasurer in Armand Cerami's stead. Those Board of Directors were Tony Sweet, Frank Sweet and Armand Cerami. Armand Cerami returned to federal court on October 18, 1974, and entered a plea of guilty to counts one and five of the aforementioned, indictment, for which he was sentenced to three year on each count to run concurrently, but was given a split sentence of 6 months time in confinement, thereafter to be placed on a probationary period for 2-1/2 years. A copy of the judgement and commitment is Petitioner's Exhibit number 1, admitted into evidence. They are felony offenses. Subsequent to his release from prison, Armand Cerami served as a co- manager and host of the licensed premises, Tony's Fish Market, located at 1900 N. Bay Causeway, North Bay Village, Florida, license no. 23-1624-SRX, series 4- COP and in the same capacity at Tony's Fish Market of Ft. Lauderdale, located at 1819 S.E. 17th Street, Ft. Lauderdale, Florida, license no. 16-1320-SRX, series 4-COP. He remained in this capacity until September 30, 1976, when a change in 562.13(3)(a), F.S. prohibited convicted felons from being managers of the licensed premises, licensed by the State of Florida, Division of Beverage. The change in the law took effect on October 1, 1976. At that point two separate individuals were hired as managers of the subject licensed premises. Armand Cerami remained in the position as host of those licensed premises, up to and including the date of the hearing. Although this title and this position was held by Armand Cerami, on December 16, 1976, while conducting a routine visit, beverage officer, William Valentine was told by Frank Sweet, a Director in the subject corporations, that Frank Sweet was in charge of the kitchen of the Tony's Fish Market of Ft. Lauderdale and that Armand Cerami was the real manager, ran the restaurant and was responsible for hiring and firing of employees. Pamela Ann Cerami was not shown to have any active interest in the management of the licensed premises. Pamela Ann Cerami as the Secretary-Treasurer in the three corporations which she purchased shares in, does not draw a salary from the operation of the two restaurants. Her background and financial involvement in the licensed premises, can be traced to certain trusts in her name and a certain gift from her husband, Armand Cerami. The joint composite exhibit number 1, admitted into evidence in the hearing, shows that Pamela Ann Cerami, at one time Pamela Crumly, was a beneficiary of the estates of Gail Crumly and Mildred Crumly, her grandparents. Certain distributions of money were made to Pamela Ann Cerami from those estates. On April 3, 1970, she received $6,093.94; on July 3, 1970, she received $121.88; on October 5, 1970, she received $182.82; and on December 31, 1970, she received $925.65,, which represented a partial distribution of her 1/2 interest in the Gail Crumly estate. As of April 1, 1970, she had been given $5,292.59 as a portion of the 1/3 distribution of her share in the estate of Mildred Crumly. The total value of her share in that estate being $16,157.02, and the conditions of her rights to the estate being set forth in the will of Mildred Crumly which is found in the joint composite exhibit number 1. Pamela Ann Cerami had worked as an airline stewardess prior to her marriage to Armand Cerami and had certain funds from her employment in that capacity. Other funds of the marriage include a certificate of deposit in the Bank of Nova Scotia in Nassau, Bahamas in the amount of $18,000., at 8-1/4 percent interest, as deposited May 20, 1970 with a maturity of November 20, 1970. This certificate of deposit was in the name of Armand D. Cerami and/or Pamela Crumly now Pamela Ann Cerami. The interest received on that certificate of deposit was redeposited along with the principal and a second certificate of deposit was purchased on May 23, 1974 in the amount of $23,480.74, to become mature on November 25, 1974. This certificate was withdrawn on October 18, 1974 and the receipt of 10-1/4 percent interest was paid. The amount of interest thereby being $975.89. Copies of the above mentioned certificates of deposit may be found as part of the joint composite exhibit number 1 admitted into evidence. Continuing an examination of the financial circumstances of Pamela Cerami and Armand Cerami, there is found a warranty deed from Willard H. Keland to Pamela Ann Cerami for certain real estate in Dade County, Florida, for which Pamela Ann Cerami paid Willard H. Keland the amount of $158,000. This deed is found as Petitioner's exhibit number 4 admitted into evidence and was recorded on January 11, 1974. On that same date a closing was held on the property. Petitioner's Exhibit number 5, admitted into evidence is a copy of the closing statement. Conditions of the closing was a cash deposit in the amount of $15,800 and $69,251.64 to close. A first mortgage in the amount of $67,500 and interest of $1,028.75 was given to the Miami Beach First National Bank. The $158,000 paid for this estate corresponds to a gift which was given by Armand Cerami to Pamela Ann Cerami in the amount of $158,000 as shown in the gift tax return, a copy of which is Petitioner's exhibit number 6, admitted into evidence. The effective date of the gift is established in the gift tax return as February, 1974. The federal income tax return filed by Armand Cerami for the year 1974, shows the sale of the stock of the three corporations. That income tax return would further show the $20,000 installment sale payment, a portion of which was treated as income to Armand Cerami. Finally, that return shows $13,000 of interest which was treated as income to Armand Cerami. On October 1, 1975, Pamela Anne Cerami gave a first mortgage on the property that she had paid $158,000 for this mortgage being given to Bob Erra, as trustee. A copy of the mortgage deed is found as Petitioner's Exhibit number 9, admitted into evidence. The amount of the mortgage was $40,000 and the proceeds of the mortgage amount were distributed as $7,000 to Pamela Cerami and $33,000 to Armand Cerami. These distributions were placed as time certificates of deposit with the Pan American Bank of West Dade, copies of which are found as Petitioner's composite exhibit number 8. The amount of interest returnable on the time certificate of deposit held by Armand Cerami is shown in his 1975 federal income tax return. Tony's Fish Market of Ft. Lauderdale, Inc. t/a Tony's Fish Market Restaurant made application with the State of Florida, Division of Beverage, to change Armand Cerami as Secretary-Treasurer of Tony's Fish Market of Ft. Lauderdale, Inc. and substitute Pamela Cerami as Secretary-Treasurer of that corporation and to transfer the stock ownership in the licensee corporation from Armand Cerami to Pamela Cerami. This change of officer and transfer of stock ownership involves the license no. 16-1320-SRX, series 4-COP. This application was denied by letter of April 9, 1975, from the Director of the Division of Beverage. In fact, Armand Cerami had been convicted of a felony, and is interested in an indirect way in the licensed premises.
Recommendation It is recommended that the applications to change the officer and transfer the stock ownership in license no. 16-1320-SRX, series 4-COP, set forth in this hearing be denied DONE AND ENTERED this 24th day of February, 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 The Johns Building Tallahassee, Florida 32304 Tobias Simon, Esquire 1492 S. Miami Avenue Suite 208 Miami, Florida 33130 Sy Chadroff, Esquire Suite 2806 120 Biscayne Boulevard North Miami, Florida 33132
The Issue The issue is whether Petitioner is liable for tax, interest, and penalty, as claimed in the proposed assessment.
Findings Of Fact Gary J. Bell (Mr. Bell) and his father Sidney Bell formed Petitioner in 1992. Until Mr. Sidney Bell left the company in his son's sole control in 2001, they were the sole shareholders and officers of the company, which had two other employees. Mr. Bell and his father estimated and checked jobs. Not fabricating fences itself, Petitioner obtained finished fences from suppliers and installed them, primarily at private residences. The audit period in this case extends from May 1, 1995, through November 30, 1999 (Audit Period). By 1995, Petitioner had four employees: one in the office and three laborers. The nature of Petitioner's business had changed from entirely residential to about half commercial, mostly consisting of sales to the State of Florida. The size and nature of Petitioner's business did not change significantly during the remainder of the audit period, although the percentage of sales to the State of Florida increased somewhat. Without referring to any records, Mr. Bell estimates that Petitioner's gross sales during the 55-month audit period totaled $1.2 to $1.4 million. Jose Rouco, a tax auditor of Respondent, sent a notice in May 2000 to Mr. Bell informing him of Respondent's intention to examine Petitioner's records. Due to a change of address, Mr. Rouco sent the form a second time. When he received no response to the form, in September 2000, Mr. Rouco visited the address that he had found for the company. Speaking to someone at a nearby business, Mr. Rouco learned that the fencing business had recently moved from the second address. On November 22, 2000, Mr. Rouco spoke to Mr. Bell on the telephone and learned that the records required for the audit were at Petitioner's present business address. Mr. Rouco directed Mr. Bell to send him copies of these records. When Mr. Bell failed to do so, Mr. Rouco sent a demand letter on December 12, 2000, warning that the failure to provide the requested records by December 27 would result in the issuance of a Formal Notice of Demand to Produce Certain Records. On December 28, 2000, after Mr. Bell had failed to respond by the deadline stated in the December 12 letter, Mr. Rouco issued a Formal Notice of Demand to Produce Certain Records for the Audit Period by 10:00 a.m. on January 9, 2001. The form warns: "Failure to produce [the records] may result in the immediate issuance of a distress warrant or a jeopardy assessment in the amount of an estimated assessment of all taxes, interest, and penalties due and payable to the State of Florida." When Mr. Bell failed to produce the records by January 9, 2001, Mr. Rouco proceeded to estimate taxes that Petitioner owed. A couple of weeks later, he received as unclaimed the December 12 letter and December 28 notice, which he had sent certified mail, return receipt requested, to Petitioner's correct address. The record does not disclose why Mr. Bell never took delivery of this mail. Based on Mr. Rouco's work, Respondent issued on April 30, 2001, a Notice of Proposed Assessment, which claimed, for the Audit Period, taxes of $227,610, a penalty of $113,805, and interest of $98,583.19 through April 30, 2001, and $74.83 daily after April 30, for a total of $439,998.19. The notice warns that the proposed assessment would become a final assessment if Petitioner did not file an informal protest by June 29, 2001, and that Petitioner must commence a judicial action or administrative proceeding by August 28, 2001. By letter dated August 10, 2001, Willie Barnett, a certified public accountant, informed Respondent that he was Petitioner's accountant, and he was responding to Respondent's tax notice dated July 25, 2001. The record does not contain any documents from Respondent dated July 25, 2001. However, Mr. Barnett's letter states that Petitioner "is in the business of installing fences, not retail sale. In those instances where the company purchases the fencing materials, the sales taxes are paid at the point of purchase." The letter concludes that Petitioner is therefore not liable for sales taxes. Mr. Bell asserts that Petitioner has paid all taxes lawfully due, but that Petitioner is not required to collect any tax on its sales to consumers because these are sales pursuant to real property contracts. Respondent's file already contained the information that Mr. Barnett supplied. By Audit Assignment Request received January 11, 1999, by Respondent's Case Selection Division, L. David Mills, evidently an employee of Respondent, wrote: "Taxpayer sells and installs real property. Potential for recovery on purchases and fabrication labor and overhead. Taxpayer does not appear to be registered." By a file memorandum dated October 25, 2000, Joan C. Rietze, also evidently an employee of Respondent, wrote: "Talked to Gary Bell. . . . He also stated that he pays tax on all of the purchases he makes. He requested that his tax number be cancelled in December of last year. The sales tax number was cancelled in October, 2000." In estimating Petitioner's tax liability in January 2001, Mr. Rouco identified four areas: taxable sales, taxable purchases, taxable acquisition of fixed assets, and taxable rent. Mr. Rouco's estimates were $207,900 for uncollected taxes on sales, $6270 for unpaid taxes on purchases of items other than fixed assets, $6840 for unpaid taxes on fixed assets, and $6600 for unpaid taxes on warehouse rent. Without much explanation, Mr. Rouco selected a "small construction company" as the source of gross monthly sales of $63,000, as well as other relevant business activity. However, this choice produces $3.465 million of gross sales during the Audit Period, which is almost three times Mr. Bell's estimate. Factually, the record offers scant support for Mr. Rouco's selection of the "small construction company" as a comparable to Petitioner's business. Petitioner's business was not construction; it purchased already-fabricated fences and installed them. Coupled with the problem with the comparable, the record does not support Mr. Rouco's estimate of Petitioner's tax due on purchase amounts of fixed assets, and Petitioner has proved that it does not owe additional taxes on such purchases. Petitioner's labor-intensive services, coupled with its itinerant nature during the Audit Period, suggest strongly few, if any, such purchases. Coupled with the problem with the comparable, the record does not support Mr. Rouco's estimate of Petitioner's tax due on warehouse rent, and Petitioner has proved that it does not owe additional taxes on such rent payments. The estimate concerning unpaid warehouse rent sales tax requires the presumption that Petitioner's several lessor's found some reason not to collect and remit sales tax based on the lease payments. Any dealer-like activities by Petitioner involving sales for resales would not impact its liability to pay this tax, so misuse of a dealer registration is unlikely here. Nor has Respondent suggested such widespread noncompliance with this component of the sales tax as to justify a presumption of noncompliance among Petitioner's lessors, even assuming that Mr. Rouco generated a gross rent that is factually supported by the record. Notwithstanding the problem with the comparable, the factual record supports Mr. Rouco's estimate of Petitioner's tax due on purchases of items other than fixed assets, and Petitioner has failed to prove that it does not owe additional taxes on such purchases. For much, if not all, of the Audit Period, Petitioner appears to have been a registered dealer. Mr. Bell's unprofessional handling of this matter while Mr. Rouco attempted to perform a routine audit inspires little confidence that Mr. Bell would not misuse a dealer registration and resale certificate. Thus, although the use of the "small construction company" as a comparable is questionable, there is factual support for the assessment of $6270 in unpaid taxes on these purchases over the Audit Period. As noted below, the main problem with Mr. Rouco's estimate of Petitioner's tax due on sales to consumers is legal, not factual. As for the main factual aspect of this issue, the record offers no support that Petitioner sold to consumers using a retail sale plus installation contract, as opposed to a simple lump sum contract. Nothing in Petitioner's operation, as reflected on this record, suggests that it would be more inclined to use the more sophisticated contract.
Recommendation It is RECOMMENDED that Department enter a final order adjusting the assessment against Petitioner to reflect unpaid sales tax of $6270, a penalty of $3135, and interest at the lawful rate. DONE AND ENTERED this 26th day of February, 2002, in Tallahassee, Leon County, Florida. ROBERT E. MEALE 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 26th day of February, 2002. COPIES FURNISHED: James Zingale, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100 Bruce Hoffman, General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 Gary J. Bell, Qualified Representative Bell & Son Fence Company, Inc. 6600 Northwest 27th Avenue Miami, Florida 33147 John Mica, Assistant Attorney General Office of the Attorney General The Capitol, Tax Section Tallahassee, Florida 32399-1050
The Issue The issue in this case is whether Petitioner is entitled to a waiver of the bond requirement set forth Section 559.927, Florida Statutes.
Findings Of Fact Based upon the oral and documentary evidence adduced at the final hearing and the entire record in this proceeding, the following findings of fact are made: Ladatco is a "seller of travel" as that term is defined in Section 559.927(1)(a), Florida Statutes. Ladatco deals exclusively in wholesale travel packages. Ladatco primarily packages and sells tours of Central and South America to retail travel agents. Until the last few years, the retail travel agents handled virtually all of the ticketing involved in the packages. Changes in the industry have resulted in Ladatco becoming more involved in the ticketing aspect as part of the services it provides in assembling the packages. However, Ladatco has very little direct contact with consumers. Ladatco originally began operations in 1967 as a subsidiary of another company. Ladatco has been conducting business in its current corporate form since 1976. Michelle Shelburne has been working for the company since 1969. She has been the president of Ladatco for at least the last ten years and she owns fifty percent (50 percent) of the outstanding stock. Annie Burke and Rosa Perez are the other officers of the company and they each own approximately twenty two and half percent (22 1/2 percent) of the stock. Both Burke and Perez have worked for Ladatco since approximately 1970. The remaining five percent of the outstanding stock is owned by an attorney who has represented Ladatco since 1967. Ladatco has seven other full time employees and operates out of an office building that is owned jointly by Shelburne, Perez and Burke. Under Section 559.927(10)(b), Florida Statutes, a seller of travel is obligated to post a performance bond or otherwise provide security to the Department to cover potential future claims made by travelers. The security required by this statute is for the benefit of consumers and may be waived by the Department in certain circumstances. On or about May 27, 1994, Ladatco submitted an Application for Security Waiver (the "Application") pursuant to Section 559.927(10)(b)5, Florida Statutes. In lieu of audited financial statements, Ladatco submitted a copy of its 1993 income tax return with the Application. Line 30 of that income tax return reflects a net loss for tax purposes of $100,722. In reviewing an application for a bond waiver, the Department looks at the taxable income on the income tax return. It is the Department's position that if a company shows a loss for tax purposes, it is lacking in financial responsibility and is ineligible for a bond waiver. Based on this policy, the Department denied Ladatco's Application by letter dated August 2, 1994. The certified public accountant who has handled all outside accounting services for Ladatco since 1977 testified at the hearing in this matter. He submitted a history of operations for the company from 1985 through 1993. The accountant explained that, in 1986, Ladatco acquired a very expensive computer system with customized software. The cost of this system was depreciated over a five year period. In addition, until 1991, the company operated out of a building that it owned. The building was sold to the individual principals of the company in 1991. During the years the company owned the building, a significant amount of depreciation was generated for tax purposes. The large depreciation expenses for the years 1986 through 1991 generated losses for tax purposes which have been carried over for future years. Thus, while the company's operations for 1993 generated a profit of $65,000, the loss carry over resulted in a net loss for income tax purposes. The current year forecast for the company, based upon existing bookings, projects a net income in excess of $64,000 for the year ending December 31, 1994. In sum, an isolated look at the taxable income loss reflected on the 1993 income tax return does not provide an accurate picture of the financial responsibility of this company. This closely owned company has been in business for approximately twenty eight (28) years. The three principals in the company have all been with the firm for more than twenty four (24) years. The company has demonstrated a great deal of stability and, while profitability has fluctuated from year to year, the company has continually met its obligations for more than a quarter century. There is every indication that it will continue to do so in the future. Ladatco has maintained a bond with the Airline Reporting Corporation ("ARC") for approximately two and a half years. The amount of the bond varies from year to year, but is generally in the vicinity of $35,000. The statute provides that a company which has successfully maintained a bond with the ARC for three years is entitled to a security waiver. While the ARC bond only protects the airlines and not the travelers, Ladatco will qualify for a waiver under this provision in approximately May of 1995. There is no indication of any unresolved complaints against Ladatco nor is there any evidence of civil, criminal or administrative action against the company.
Recommendation Based upon the forgoing findings of fact and conclusions of law, it is RECOMMENDED that the Department of Agriculture and Consumer Services enter a Final Order granting Ladatco's application for security waiver pursuant to Section 559.927(10)(b)5, Florida Statutes. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 16th day of December 1994. J. STEPHEN MENTON Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 16th day of December 1994. APPENDIX TO RECOMMENDED ORDER Only the Respondent has submitted proposed findings of fact. The following constitutes my ruling on those proposals. Adopted in pertinent part Finding of Fact 6 and also addressing the Preliminary Statement and in the Conclusions of Law. Adopted in substance in Finding of Fact 6. Adopted in substance in Finding of Fact 7. Adopted in substance in Finding of Fact 7. Adopted in substance in Finding of Fact 8. Adopted in substance in Finding of Facts 7 and 8. COPIES FURNISHED: Michelle D. Shelburne, President Ladatco, Inc. d/b/a Ladatco Tours 2220 Coral Way Miami, Florida 33145 Jay S. Levenstein, Senior Attorney Department of Agriculture and Consumer Services Room 515, Mayo Building Tallahassee, Florida 32399-0800 Honorable Bob Crawford Commissioner of Agriculture The Capitol, PL-10 Tallahassee, Florida 32399-0810 Richard Tritschler General Counsel Department of Agriculture and Consumer Services The Capitol, PL-10 Tallahassee, Florida 32399-0810
