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
The Issue Whether the Petitioner owes sales and use tax (plus interest and penalties) for charges made to its catering customers for the labor of waiters serving complete meals before December 7, 1987.
Findings Of Fact During the period, May 1, 1984 through September 30, 1984, Gourmet To Go did not charge its customers sales tax for labor provided by waiters serving full meals that it catered. Gourmet To Go treated the waiters as subcontractors, and shows charges for waiters on its bill as "Sub Contract Services." During the period May 1, 1984 through December 7, 1987, Gourmet To Go collected sales tax on the services of waiters when the food served was canapes, sandwiches, hors d'oeuvres or party tidbits. Gourmet To Go commonly served both full meals and party tidbits as part of its catering business. The Department of Revenue audited the accounts of Gourmet To Go by reviewing gross receipts, and subtracting any exempt sales Gourmet To Go reported to the Department on form DR- 15. This is the audit method ordinarily used by the Department. The invoices of Gourmet To Go show that it did not charge its clients sales tax upon amounts shown on invoices for labor of waiters serving dinners. The agreed amount due for the period from May 1, 1984 through April 30, 1987, if Gourmet To Go is liable for the taxes is as follows: Tax $6,335.67 Penalty $1,583.92 Interest computed through the date of the hearing, June 23, 1989 - $2,733.50 TOTAL $10,650.09 For the period May 1, 1987 through April 30, 1987, the amount due if Gourmet To Go is liable for the sales tax is: Tax $1,214.70 Penalty $303.67 Interest the date computed through of the hearing, June 23, 1989 - $241.11 TOTAL $1,759.48 Interest would continue to accrue on any unpaid amounts due through the date payment is made.
Recommendation It is RECOMMENDED that a Final Order be entered by the Department of Revenue finding Gourmet To Go, Inc. liable for sales tax on charges to its customers for services of waiters at dinners it catered during the period May 1, 1984, through April 30, 1988, with penalties and interest through the date of payment. DONE and ENTERED this 5th day of September, 1989, at Tallahassee, Florida. WILLIAM R. DORSEY, JR. Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 5th day of August, 1989. APPENDIX TO THE FINAL ORDER IN DOAH CASE NO. 88-6367 Rulings on Proposals Made By The Petitioner, Gourmet To Go, Inc. The substance of all facts proposed by Gourmet To Go, Inc. have been included in the Recommended Order. COPIES FURNISHED: Larry V. Bishins, Esquire 4548 North Federal Highway Ft. Lauderdale, FL 33308 Lealand L. McCharen, Esquire Assistant Attorney General The Capitol Building Tallahassee, FL 32399-1050 William D. Moore, General Counsel Department of Revenue 203 Carlton Building Tallahassee, FL 32399-0100 Katie D. Tucker, Executive Director Department of Revenue 104 Carlton Building Tallahassee, FL 32399-0100
The Issue At issue in this proceeding is whether the Respondent, The Gardner Group, Inc. (Gardner Group) failed to abide by the coverage requirements of the Workers' Compensation Law, Chapter 440, Florida Statutes, by not obtaining workers' compensation insurance for its employees; and whether the Petitioner properly assessed a penalty against the Respondent pursuant to Section 440.107, Florida Statutes.
Findings Of Fact Based on the oral and documentary evidence adduced at the final hearing, and the entire record in this proceeding, the following findings of fact are made: The Department is the state agency responsible for enforcing the requirement of the workers' compensation law that employers secure the payment of workers' compensation coverage for their employees and corporate officers. § 440.107, Fla. Stat. Gardner Group is an insurance broker located in Neptune Beach, Florida. The company has a total of six employees. Gardner Group stipulated that all persons listed in the Second Amended Order were its employees, and to the correctness of the calculation of payroll for which the penalty was assessed. On June 25, 2009, Lou Cabrera, the Department's investigator, visited Gardner Group's place of business at 810 Third Street in Neptune Beach, where he spoke with Gardner Group employee Corinne Carter. Mr. Cabrera later spoke with Beverly Carter, Gardner Group's Vice President for Administration. Ms. Gardner told Mr. Cabrera that Gardner Group had four employees in addition to her and Corrine Carter. The company's business records later verified that these persons, Kayla Hauk, Sandra Moore, Brian Cook, and Howard Dunlap, were employees of Gardner Group. Because Gardner Group had four or more employees, it appeared to meet the threshold for "employment" requiring workers' compensation coverage. § 440.02(17)(b)2., Fla. Stat. A corporate officer may elect to be exempt from the requirements and benefits of Chapter 440, Florida Statutes, by filing a notice and receiving a certificate of election to be exempt from the Department. See Florida Administrative Code Rule 69L-6.012 for details of the process employed to obtain an exemption. As of June 25, 2009, Howard Dunlap and Trace Milam were the only corporate officers of Gardner Group holding valid workers' compensation exemptions. Trace Milam was no longer working for Gardner Group on June 25, 2009. As of June 25, 2009, Gardner Group did not have workers' compensation insurance. Mr. Cabrera issued and personally served the SWO on Gardner Group. Mr. Cabrera also issued and personally served a request for production of business records for the purpose of accurately calculating a penalty assessment for Gardner Group. Gardner Group promptly complied with the Department's request for business records. Based on those records, the Department issued the Amended Order on July 13, 2009, ordering Gardner Group to pay a penalty of $15,595.93, pursuant to Subsection 440.107(7)(d), Florida Statutes. On July 17, 2009, the Department issued the Second Amended Order, ordering Gardner Group to pay a penalty in the amount of $15,264.24. The Second Amended Order is the basis of this proceeding. The SWO was conditionally released when Gardner Group entered into a periodic payment agreement and came into compliance with Section 440, Florida Statutes, by obtaining exemptions for three corporate officers (Mr. Dunlap, Mr. Cook, and Beverly Carter) and maintaining three employees. Sole proprietors and partners not engaged in the construction industry are not considered employees for purposes of workers' compensation coverage unless they affirmatively elect to be covered. § 440.02(15)(c)1., Fla. Stat. At the hearing, Beverly Carter testified that she is a partner in Gardner Group. She produced documents demonstrating that she owns 5 percent of the outstanding shares in Gardner Group. Mr. Dunlap owns 85 percent of the outstanding shares, and Mr. Milam owns 10 percent of the outstanding shares. The shares are not publicly traded, and a cross purchase agreement places restrictions on the manner in which the shareholders may dispose of their holdings. Section 440.02(21), Florida Statutes, defines "partner" to mean: any person who is a member of a partnership that is formed by two or more persons to carry on as co-owners of a business with the understanding that there will be a proportional sharing of the profits and losses between them. For the purposes of this chapter, a partner is a person who participates fully in the management of the partnership and who is personally liable for its debts. As Vice President for Administration, Ms. Carter does participate in the management of the business. However, Gardner Group is a C corporation, formed pursuant to Chapter 607, Florida Statutes, meaning that the shareholders are not personally liable for the debts of the business. Ms. Carter testified that she is paid a salary that constitutes her main compensation from Gardner Group. She testified that she may receive a dividend if the corporation shows a profit. Gardner Group is a corporation, not a partnership, and Ms. Carter therefore cannot meet the definition of "partner" set forth in Section 440.02(21), Florida Statutes. Ms. Carter credibly testified that Gardner Group was unaware that its corporate officers were required to file a notice of election in order to be exempt from workers' compensation coverage. She noted that it was a simple matter for the company to obtain those exemptions, and stated that it was unfair to penalize Gardner Group more than $15,000.00 for the "minor technicality" of failing to file exemption notices for its three corporate officers. The Department lacks discretion to overlook the requirements of Section 440.05, Florida Statutes, regarding the method by which a corporate officer must elect exemption from workers' compensation coverage, or the requirements of Section 440.107, Florida Statutes, regarding enforcement of workers' compensation coverage requirements. Therefore, Gardner Group's unawareness of the filing requirement does not excuse the payment of the amount set forth in the Second Amended Order.
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 a final order be entered by the Department of Financial Services, Division of Workers' Compensation, assessing a penalty of $15,264.24 against The Gardner Group, Inc. DONE AND ENTERED this 24th day of December, 2009, in Tallahassee, Leon County, Florida. S LAWRENCE P. STEVENSON 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 24th day of December, 2009. COPIES FURNISHED: Paige Billings Shoemaker, Esquire Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-4229 Howard Dunlap The Gardner Group, Inc. 810 Third Street Neptune Beach, Florida 32266 Tracey Beal, Agency Clerk Department of Financial Services 200 East Gaines Street Tallahassee, Florida 32399-0390 Benjamin Diamond, General Counsel Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0307 Honorable Alex Sink, Chief Financial Officer Department of Financial Services The Capitol, Plaza Level 11 Tallahassee, Florida 32399-0307
The Issue Whether Respondent's tax assessment against Petitioner should be sustained.
Findings Of Fact Petitioner, Mark Benson, was the owner of both B.I. Sub Shop and B.I. Auto Parts which were small business enterprises in Miami, Florida. B.I. Sub Shop was in the business of selling retail food, while B.I. Auto Parts sold retail automobile parts. Neither business is currently in operation. In December 1986, sales and use tax collections by the enterprises had not been received by Respondent. When Petitioner was notified in December 1986 by Respondent that he had not submitted the required sales tax collections, he contacted Respondent. An audit by Respondent ensued in the first quarter of 1987 resulting in the issuance of a Notice of Assessment against B.I. Auto Parts totalling $9,237.42 and a Notice of Assessment against B.I. Sub Shop totalling $1,421.33. To record sales for B.I. Auto Parts, Petitioner kept copies of sequentially numbered invoices of his sales, some of which were missing at the time of the audit, and of vendor receipts. For B.I. Sub Shop, Petitioner calculated sales by subtracting the amount of money in the cash drawer at the beginning of the day from the amount remaining at the end of the day. The amount was then entered in a daily log. Invoices of vendor sales were also maintained. Petitioner admitted that the records he kept did not meet acceptable business standards but contended that his records were adequate for his needs. Finding that the bookkeeping practices of both of Petitioner's enterprises were inadequate, Respondent made an estimate of the sales and use taxes owed. During the audit, Respondent requested certain records, including bank statements and certain income tax returns from Petitioner. Petitioner was given a date certain in which to provide the records but failed to timely comply with the request. To calculate the estimate for B.I. Auto Parts, Respondent calculated a gross taxable sales amount by adding an additional taxable sales amount to the gross sales amount noted on the invoices. The additional taxable sales amount was found by a calculation of an average monthly sales figure determined from the deposits noted on the available bank statement (10 months). The average monthly sales figure was then applied to the number of months covered in the estimate yielding an estimated gross sales amount. The gross sales taken from the invoices was subtracted from the estimated gross sales amount, resulting in additional taxable sales. To calculate the estimate for B.I. Sub Shop, Respondent took a sample (4 months) of the invoices of vendor sales. An average of the invoices was taken to obtain estimated purchases per month. The gross was calculated. Then, a 20% spoilage factor was deducted from the gross purchase and a 250% markup factor was applied, yielding an estimated gross sales. Certain other appropriate credits were given. In view of the inadequacy of Petitioner's records, Respondent's methodology to assess the monies owed was reasonable, and Petitioner has failed to demonstrate any error in such assessment.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that Respondent enter a Final Order sustaining the subject assessments. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 15th day of August 1989. JANE C. HAYMAN 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 15th day of August 1989. COPIES FURNISHED: Mark Benson, B.I. Sub Shop and B.I. Auto Parts, 8250 N.W. 58th Street Miami, Florida 33166 Linda G. Miklowitz, Esquire Department of Legal Affairs Tax Section, The Capitol Tallahassee, Florida 32399-1050 Katie D. Tucker, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100 William D. Moore, Esquire General Counsel Department of Revenue 203 Carlton Building Tallahassee, Florida 32399-0100
Findings Of Fact The Respondent, Oglesby Construction, Inc., (Oglesby) is a company with its ownership controlled by members of a protected minority. Its home office is in Norwalk, Ohio, and it also has an office in Sanford, Florida. It has been certified as a "disadvantaged business enterprise" (DBE) under pertinent regulations of the U.S. Department of Transportation, as well as State Transportation Departments in twelve or thirteen states, including Florida. Prior to 1986, the company was engaged in various types of concrete work and pavement marking jobs. Although Oglesby typically maintained several hundred contracts or ongoing jobs on its books, each job would be of relatively small dollar value and performance time. Recently, however, Oglesby has been working toward becoming a "prime" contractor, successfully bidding on larger jobs. It was successful bidding on four such projects in 1986 and 1987 which had been reserved for bidding on by minority controlled companies. Oglesby has been certified as a DBE in Florida since 1983. On January 26, 1987, Oglesby was advised by the Florida Department of Transportation that its certification "will expire" on February 18, 1987. Oglesby, in fact, because it was aware that certification had to be renewed or reapplied for annually, had already submitted its application on January 2, 1987. It included in that application indication of its gross receipts for the years 1983, 1984, and 1985. Those numbers, when averaged together, produced an average gross revenue figure of $10,491,778. Oglesby maintains that it did not know its 1986 gross revenue figure, for purposes of the three year average gross revenue, for the most recent three years, required to be shown on the application by the Department's rules, because its fiscal year ended January 31, 1987. On March 26, 1987, Oglesby's application for recertification was rejected by the Department because it did not meet the definition of a "specialty contractor" or "small business concern," for purposes of Rule 14- 78.05, Florida Administrative Code. A hearing was requested by Oglesby to contest this denial of certification. Then, on May 8, 1987, the Department circulated a memorandum to all DBE contractors stating generally that the effect of the Surface Transportation Act of 1987 (Sturra) required several changes to the Disadvantaged Business Enterprise program. Thus, contractors were asked to certify their firms' receipts for the last three years. Oglesby did so and showed receipts totaling $44,320,469 for the years 1984, 1985, and 1986. These gross receipts for the three years thus averaged $14,773,049. The Department, upon receiving this information, and after passage of the Sturra Act and a statute by the Florida Legislature incorporating those standards by reference, together with a related rule by the Department, moved to amend the basis for its denial to include, as a reason for decertification, or failure to certify, that the Respondent had exceeded the new $14,000,000 average revenue size standards incorporated in the more recent legislation. Prior to this legislative change and at the time Oglesby applied for recertification in January, 1987, the standard had been $17,000,000 average three year gross revenue receipts, instead of $14,000,000. The Department, by pleading dated August 24, 1987, had withdrawn its original grounds for denial and amended the grounds to the above-mentioned size issue of $14,000,000. Because the parties did not wish to go to hearing until January 1988, and ample time remained for Oglesby to conform its proof to the new allegations in the amended pleading, the Motion for Leave to Amend was granted. Thus the amended ground on which the Department maintains that Oglesby's application for recertification should be denied is that the company, for purposes of DBE certification, is no longer a small business concern, as defined by the Department's rule and state and federal law incorporated by reference. On April 2, 1987, when the size limit for DBE firms was lowered from $17,000,000 to $14,000,000, the new standard was immediately adopted by the Florida Legislature and, in turn, by the Department's rule. When Oglesby applied to the Department in early 1987, it did not include its 1986 gross receipts revenue figure of $18,516,598. Although Oglesby's fiscal records are computerized, Oglesby maintained that it did not yet, at the time of application in January 1987, have a complete 1986 revenue figure so instead listed the 1985 revenue receipt figure of $18,037,348. The 1984 receipts and 1983 receipts were $8,338,017 and $5,099,060 respectively. The inclusion of the significantly lower 1983 revenue receipts brought the three year average for Oglesby down to $10,491,778. In any event, although Oglesby may not have had the 1986 revenue figure immediately available upon application date, it was on notice that its revenue receipts for the year prior to that, 1985, exceeded even the $17,000,000 size limit for DBE contracting firms and thus was on notice that it might be approaching the end of its DBE status even had not the revenue size limits been lowered in the spring and summer of 1987. In any event, Oglesby's audited financial statements submitted indicate that Oglesby received $18,037,348 in construction revenue in 1985. The 1986 figures were supplied to the department due to a request made to all certified DBE's when the Department learned that the size limits were being revised downward by federal and state legislation in May of 1987. That audited financial statement figure for 1986 showed a gross revenue received of $18,399,844 in construction income, and $116,754 in equipment rental, totaling $18,516,598 gross revenues for 1986. When these amounts are averaged with the gross revenue figure listed in Oglesby's application for 1984 of $8,338,017, the average gross revenue receipts for the company for the preceding three fiscal years before application, is $14,963,987. Each year Oglesby was advised by the Department in the "certification notice," by which Oglesby was informed by the Department that its certification needed to be renewed, that its certification was "subject to continued eligibility" and further that its certification was "subject to actions of any other governmental agencies which may affect the minority status" of the company. Thus each year when Oglesby applied for and received DBE certification, it was on notice of these conditions on that certification, both by advisement of the Department's notices and by existing law. Oglesby is the only previously certified DBE which, at the time of hearing, exceeding the $14,000,000 average gross revenue size limit. Under the new federal law referenced above, incorporated by reference by the Florida Legislature and the State Department of Transportation rule at issue, an adjustment for inflation is allowed, to be made by the U.S. Secretary of Transportation. The Department, at the request of Oglesby, inquired of the federal government whether any such adjustment for inflation had been made. No such adjustments had been made by the U.S. Department of Transportation Secretary as of January 5, 1988. On November 4, 1987, a memorandum, (in evidence as Respondent's Exhibit 11) from the Federal Highway Administrator, affirmed that the inflation adjustment had not been defined as yet and would not apply until a method for arriving at an inflation adjustment is developed. The Department also contacted the Federal Highway Administration in order to determine whether an exception on the size limits required by the federal statute and pertinent regulation could be made in Oglesby's case. This was because Oglesby had made certain contractual obligations to buy out the white minority shareholders and purchase or lease a new facility supposedly based on, in part, its reliance on continued DBE status. The Department referenced these concerns of Oglesby in its request to the Federal Highway Administration for an interpretation regarding the applicability of the $14,000,000 revenue limit, but was advised, in effect, that the $14,000,000 limit was strictly interpreted because the response to the request merely amounted to a recitation of the statute and pertinent federal rule providing for that limit and how to calculate it. (See Respondent's Exhibits 9 and 10.) Additionally, Respondent's Exhibit 11, a memorandum of November 4, 1987, from the Federal Highway Administration signed by one R. A. Barnhart, in a like vein, merely indicated a strict interpretation of the federal rule cited below providing for the $14,000,000 average gross revenue limit on DBE status. This federal policy of strictly interpreting the $14,000,000 limit is somewhat borne out by the fact that the example in the federal rule itself, concerning how to apply that limit, with the result that the example firm is not entitled to DBE status, involved an average three year gross income of more than $14,000,000, but less than the three year average gross revenue of Oglesby, found above. The Department has a policy of strictly enforcing the certification requirements. The failure to comply with the federal regulations regarding DBE certification could subject the Department to withdrawal of federal funds from road building projects. Last year the Department received about $600,000,000 in federal funds and the federal government independently audits and reviews the Department's DBE certification decisions. The Department thus has not made any exception from the certification requirements for any firms. Indeed, in analogous circumstances, there have been Department-certified DBE specialty contractor firms who have outgrown their 2.5 million dollar revenue size standards which are applicable to firms in that category. These firms have not had their certifications renewed, that is, they have "graduated" from the Department's DBE program without exception and without dispute. It is the intent of the Disadvantaged Business Enterprise Program that firms participating in that program, will, as they acquire and perform contracting jobs for the Department, grow in size in terms of annual revenues and grow in expertise and competence in public contracting, eventually "graduate" in terms of revenue volume and contracting expertise to prime contractor status and will no longer be disadvantaged business enterprises. In this connection, Oglesby has recently entered into four prime contracts which are not affected by the result of these proceedings. In fact, no work already undertaken by Oglesby under contract will be affected. Even if it is not certified as a DBE, Oglesby may continue to contract with the Department as a subcontractor or a prime contractor. Mr. Mason P. Oglesby, the Petitioner's president, is a competent concrete construction contractor and has been in that business for some thirty years. He is also president of North Coast Eighty-Eight, Inc. Prior to any association with the DBE program, he managed the largest construction project his company has engaged in, which was a project involving construction at the Cincinnati, Ohio, Airport. His firm achieved DBE certification in Ohio in the early 1980's and has been so certified ever since. Oglesby has been certified in twelve or thirteen different states and has utilized 700 to 1000 part-time and full-time employees in a given year. The company does a high volume of work, including many large contracting jobs, and is large enough so that its president does not maintain personal familiarity with the nature of all its jobs contracted for in Ohio, Florida, and other states, but rather maintains a computerized listing of projects which describes the nature of work involved. The company currently has jobs in progress in Pennsylvania, Georgia, Ohio, North Carolina, South Carolina, and West Virginia and in twenty-four counties in Florida simultaneously. Mr. Oglesby closely monitors the dollar volume of work his company contracts for in an intentional effort to keep his firm within the gross revenue guidelines of the DBE program. One of the bases for Oglesby's seeking an exception to those size rules, through this proceeding, is based upon the fact that it entered into a contract to relocate its offices because, for several years, Oglesby has had problems with DBE certification with some states, related to Oglesby renting office space from the white minority owners of Oglesby. Thus the new offices are rented from North Coast Eighty-Eight, Inc., whose president is Mason Oglesby himself. The rental lease for those premises was executed on June 1, 1987, after Oglesby had already been advised by the Department that it no longer met the requirements for DBE certification. Thus, it has not been established that Oglesby underwent any additional expense or other form of detriment involved in the relocation of its offices in justifiable reliance on continued DBE certification. Oglesby also maintains that it made the related business decision to buy out the white minority shareholders in reliance on its continued DBE certification by the Florida DOT. Oglesby, however, made the business decision to undertake that buy-out and the relocation of its offices with full knowledge that its revenues for past two consecutive years were over $18,000,000 each year. Thus it was on notice that, due to a growth in its business, it would soon exceed even the former $17,000,000 gross revenue size standard and, with the advent of its 1986 gross revenues in excess of $18,000,000, was already in excess of the existing new $14,000,000 standard. Thus Oglesby Construction, Inc., entered into these arrangements with the knowledge that the company would soon be ineligible for the DBE program anyway. In fact, Oglesby currently is successful as a prime contractor in obtaining jobs which are not DBE related and has developed considerable concrete and construction expertise in operating its construction business as a public works contractor.
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 application of Oglesby Construction, Inc., for certification as a disadvantaged business enterprise by the Florida Department of Transportation be denied. DONE AND ENTERED this 3rd day of August, 1988, in Tallahassee, Leon County, Florida. P. MICHAEL RUFF, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 3rd day of August, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NO. 87-1956 Petitioners Proposed Findings of Fact Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Rejected; subordinate to Hearing Officer's findings. Accepted. Rejected, Immaterial. Accepted. Accepted. Rejected, immaterial. Accepted. Accepted. Rejected; subordinate to Hearing Officer's findings. Rejected, immaterial. Accepted. Rejected; subordinate to Hearing Officer's findings. Accepted. Accepted. Accented. Accepted. Accepted. Accepted. Accepted. Accepted. Respondent's Proposed Findings of Fact Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted. Accepted, but not dispositive. Rejected; subordinate to Hearing Officer's findings. Rejected; Irrelevant. COPIES FURNISHED: Kaye N. Henderson, P.E., Secretary Department of Transportation Haydon Burns Building 605 Suwannee Street Tallahassee, Florida 32399-0450 Judy Rice, Esquire Senior Attorney State of Florida Department of Transportation Haydon Burns Building, Mail Station 58 605 Suwannee Street Tallahassee, Florida 32399-0458 Robert L. Sabo, Esquire MILLISOR & NOBIL The Huntington Center 41 South High Street, Suite 2195 Columbus, Ohio 43215
The Issue Whether Respondent Employer is guilty of an unlawful employment practice by reason of racial discrimination.
Findings Of Fact The Amended Charge of Discrimination (Joint Exhibit A) was dated by Petitioner October 28, 2000. It was stamped-in as filed with the Commission on November 1, 2000. There is nothing of probative value in the record to show when the Charge of Discrimination, if any, was filed with the Commission.3 The Amended Charge of Discrimination alleges discrimination by Respondent due to Petitioner's race because: On or about September 16, 1999, [Petitioner] was constructively discharged (forced to resign) from my position with Respondent. During . . . employment I was denied raises and treated differently than similarly situated white employees. Therefore, the Amended Charge of Discrimination asserts racial discrimination by disparate treatment which allegedly occurred before September 16, 1999, and constructive discharge (termination) occurring on September 16, 1999. The Commission entered its "Determination: No Cause" on April 24, 2002. The Petition for Relief was filed with the Commission on May 31, 2002. The Petition describes alleged disparate treatment, but it makes no mention of any termination. Petitioner is an African-American male. Respondent conducts a furniture rental and rent-to-buy business and operates one of its stores in Palatka, Florida. Petitioner was first hired in the Palatka store in May 1998, when that store was first opened. When he was hired, it was as a Customer Accounts Manager (CAM), at $7.25 per hour. The function of a CAM is essentially that of a collection agent. As a CAM, Petitioner was responsible for collecting money from customers who had become delinquent in making their rental payments. This was accomplished by Petitioner's either telephoning or personally visiting the delinquent customers and working with them to get their payments current. Petitioner typically spent mornings making telephone calls and afternoons visiting delinquent account holders. Prior to coming to work for Respondent in May 1998, Petitioner had no experience working in the furniture rental and sales business. However, after he was hired in May 1998, Petitioner received two weeks of training as a CAM. In addition, Petitioner worked with the Palatka store's General Manager in trying to bring the store's delinquent accounts current. Respondent typically gives raises in June and December of each year based on employee performance and tenure with the company. In June 1998, after he had only worked for Respondent for one month, although he had not completed the usual six months required before being eligible for a raise, and despite his collection rate not meeting Respondent's standard (see infra.), Petitioner received a raise of 25 cents per hour. In September 1998, Petitioner voluntarily left Respondent's employ to work for a local restaurant, because he had been offered more money to work there. Petitioner admitted that nothing inappropriate happened while he worked for Respondent from May 1998 until September 1998. In March 1999, Petitioner was recruited and rehired by Respondent to work as the sole CAM at its Palatka store. Prior to being rehired, Petitioner was interviewed by Respondent's District Manager, Greg Bellof, a Caucasian male. Petitioner was rehired at the same $7.50 per hour that he had been making when he voluntarily quit in September 1998. One of the ways in which Respondent tracks the respective performance of its stores is to measure each store's delinquent account collections rate. In 1999, including the time that Petitioner worked there, the Palatka store had the worst collections rate of the six stores in Mr. Bellof's district. During the entire time that Petitioner worked as a CAM in that store, including both his 1998 and 1999 employment periods, the Palatka store never met Respondent's standard for collections. As of the date of hearing, the Palatka store was doing well in terms of collections and had been meeting or exceeding Respondent's standard. Petitioner contends that from his March 1999 rehire until July 1999, everything relating to his employment went fine. Three months post re-hire, Petitioner did not get a June 1999 raise because of a combination of his not having worked for Respondent a full six months and the below-standard collection rate. This was different than what had occurred in his previous employment with Respondent (see Finding of Fact 10 supra.), but it was not shown that any similarly situated employee was treated differently than Petitioner in June 1999. In July 1999, Petitioner overheard his store's General Manager's end of a telephone conversation with an unidentified individual. Petitioner contends that the Caucasian General Manager and this individual were discussing replacing Petitioner as the CAM. Petitioner assumed that the person on the other end of the phone was another manager, but he admitted that he did not know whether the individual with whom his General Manager was speaking was an employee of Respondent. Petitioner could not hear anything that the other individual was saying. When Petitioner confronted his General Manager about this telephone conversation, the General Manager denied that he had been discussing replacing Petitioner as the CAM during that telephone conversation. The General Manager told Petitioner that, "You did not hear what you thought you heard."4 Respondent did not, in fact, replace Petitioner until after he voluntarily quit the following September. (See Finding of Fact 35). The District Manager, Mr. Bellof, testified credibly that he never had any plans to replace Petitioner as the CAM. Petitioner contended that beginning in August 1999, Mr. Bellof, who typically spent only one or two days per week at the Palatka store, began spending more time standing over Petitioner as Petitioner made telephone calls, and frequently asked Petitioner what he was doing. Mr. Bellof admitted that when one of his stores is having trouble with accounts, he spends more time in the CAM's office, observing the CAM performing his or her job, so that he can look for ways to help the CAM improve the store's collections rate. In particular, Mr. Bellof listens to telephone calls the CAM is having with delinquent customers, to find out how the CAM is handling certain situations. In addition, when one of his stores has not met Respondent's collections rate standard, Mr. Bellof accompanies the CAM on visits to delinquent customers, in an effort to help identify areas for improvement. By observation and descriptive testimony, it is found that Mr. Bellof is what might be described in the common jargon as "a go-getter" and "wunderkind" in Respondent's rent-to-own industry. He is very intense. Despite Mr. Bellof's emphasizing his observation of Petitioner over his inquiry and correction of Petitioner, it is clear to the undersigned that there may have been some degree of micro-management involved in their relationship. However, Petitioner never complained to Mr. Bellof that he felt Mr. Bellof was hounding him or giving him a hard time, and Petitioner's witness, La Tonya Fuqua, testified that she did not notice any tension between Petitioner and Mr. Bellof. Ms. Fuqua was the only other African-American, besides Petitioner, working in the Palatka store. Petitioner contended that Mr. Bellof once referred to him as a "road dog," in the presence of other superiors. However, Petitioner admitted that as the CAM, he was required to, and did, spend quite a bit of time on the road for the purpose of visiting customers with delinquent accounts. Petitioner testified that he does not believe that the phrase "road dog" has any racial connotations. Instead, Petitioner simply felt that it was not proper language to be used to someone of his rank in Respondent's managerial hierarchy. Petitioner spoke to Mr. Bellof about the impropriety of his use of this term, and Mr. Bellof never used the term again. Petitioner demonstrated that Mr. Bellof spent a lot of time watching, listening, and urging Petitioner with regard to his duties as a CAM and that he sometimes rode with Petitioner on his calls, but Petitioner was the only CAM in the Palatka store, and he did not demonstrate that Mr. Bellof treated him any differently than any other CAM of any race. Petitioner simultaneously complained that Mr. Bellof and other managers did not adequately train him to do his job better as a CAM, train him as a CAM beyond his initial two weeks' training, or train him as a Sales Manager so he could move up to the General Manager position. Petitioner complained that, while he worked for Respondent in 1999, Respondent twice hired Caucasian Customer Accounts Advisors (CAAs), Randy Nobenger and Derrick Christian, at a pay rate of 20 to 25 cents more per hour than Petitioner was making. CAAs generally assist the CAM with collections, so Petitioner felt those CAAs hired in his store should have been paid less than he was, especially since he was required to train them. It is not unusual for Respondent to hire a CAA at a pay rate higher than that being paid to the CAM at the same store. On at least two other occasions, Mr. Bellof has hired CAAs for other stores at a rate of pay higher then the same store's CAM. On one of those occasions, the CAA was African- American and the CAM was Caucasian. A CAA may be hired at a rate above the rate paid the CAM for a number of reasons. During the interview process, desirable candidates are typically asked how much s/he would like to be paid. If the desired CAA candidate is making a higher rate of pay at his or her existing job or for any reason will not accept less-than-a certain amount in order to meet his or her ongoing financial obligations, then that rate of pay is offered by Respondent. If the CAA has more experience than the CAM, a competitive rate of pay is offered. In some instances, as was the case with both Mr. Nobenger and Mr. Christian, Respondent was unable to secure a desired CAA candidate at a rate of pay below the CAM's rate. Petitioner acknowledged that it was understandable that Respondent paid CAA Nobenger more than a CAM because Nobenger had 15 years of previous managerial experience. Petitioner did not feel that a higher pay rate was reasonable with regard to CAA Christian. Petitioner contended that he should not have been required to train people who were paid more than he was; that he could not have been such a poor employee if he were required to train other employees to do his job; that the requirement that he train Messrs. Nobenger and Christian detracted from his opportunity to do his job as CAM; and that training the CAAs was part of a management plot to have him train these employees and then fire him. However, Petitioner conceded that he worked directly with his store's General Manager, that the General Manager had other duties besides training and that Petitioner was the only employee, besides the General Manager, available in the Palatka store to train CAAs. Petitioner further contended that he was denied opportunities for advancement through training, which training was provided to CAA Christian. However, Petitioner's request for training appears to have been the equivalent of "Show me. Show me how to do a better job as CAM," which was fairly vague, and Mr. Bellof believed his involvement with Petitioner constituted training in the CAM position. Petitioner testified that Mr. Christian was being trained for a General Manager slot "within 4 to 6 months" of Mr. Christian's being hired. Petitioner only worked for Respondent during four months in 1998 and five months in 1999. Mr. Christian was trained in collections as a CAA by Petitioner and trained by someone else as a Sales Manager. He wound up being offered a General Manager position. Whether Mr. Christian was offered a General Managership before or after Petitioner left Respondent's employ in September 1999, is unclear, but since the Palatka store still had its General Manager when Petitioner quit in 1999, Mr. Christian clearly was not promoted in that store while Petitioner was still employed by Respondent. In September 1999, Petitioner was contacted by one of his former employers, Wal-Mart, which asked if he wanted to return to his previous position as a Loss Control Manager at $8.00 per hour, plus full health benefits. Petitioner accepted the Wal-Mart job and resigned his position with Respondent. There is no evidence that Petitioner was looking for another job in order to leave Respondent's employment before Wal-Mart initiated its offer to him. Respondent replaced Petitioner with a new employee (race not of record) after Petitioner resigned. Respondent did not promote one of the Caucasian CAAs into Petitioner's position of CAM. Every week during his employment with Respondent, Petitioner signed a timesheet verifying the number of hours that he worked. These timesheets also contained a statement Petitioner signed certifying that if he felt he had been discriminated against or harassed, he had telephoned Respondent's toll free number listed on the timesheet and reported the discrimination or harassment. During his employment with Respondent, Petitioner signed this certification on his timesheets. He also never called the toll free number and never complained about being harassed or discriminated against.
Recommendation Upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Commission enter a Final Order dismissing the Petition for Relief, the Amended Charge of Discrimination, and if applicable, the Charge of Discrimination thereto appertaining. DONE AND ENTERED this 31st day of December, 2002, in Tallahassee, Leon County, Florida. 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 31st day of December, 2002.
The Issue Petitioners' liability for corporate income tax deficiency under Chapter 220, Florida Statutes.
Findings Of Fact Petitioner is a Georgia Corporation doing business as a heavy electrical contractor in Georgia and eight other states including Florida. In 1972, Petitioner submitted a request to the Department of Revenue that it be allowed to use "separate accounting" as the method for determining the amount of its adjusted federal income that was subject to taxation by the State of Florida under Chapter 220,Florida Statutes. By letter of October 3, 1972, T.H. Swindal, Respondent's Chief of the Corporation Income Tax Bureau, denied Petitioner's request with the following language: "The economics of large scale interstate construction operations, as we understand them, necessitate maximum utilization of a company's resources. At particular times and in a particular locale or with respect to particular types of construction activity contracts may be initially or regularly bid upon and undertaken which, on an individual contract basis, will be minimally profitable, if at all. Nevertheless, because these contracts permit cost absorption, continuing use and charge for equipment, trained crews and know-how; permit maximum employment of the company's capital and credit accomo- dations; permit initial entry into a new field of construction activity or a new locale, these contracts indirectly but significantly add to the profitability of the enterprise as a whole. We recognize too, that separate accounting essentially serves management and that management must evaluate competitive tax implications. "Separate accounting" does not, in our view, measure the impact of these cir- cumstances. We are of the opinion that Florida's three factor formula does measure the impact of these circumstances upon profit and thus provides a fairer Florida tax base." (Complaint, Petitioner's Exhibit 1) Respondent however, pursuant to a request of Petitioner, permitted the latter to leave its 1972 return as filed, but instructed it to file in the future utilizing the "three-factor" formula. Accordingly, the Petitioner filed its 1973 and 1974 tax returns utilizing the "three-factor" formula" as directed by the Respondent, and paid the appropriate tax due. By letter, dated September 15, 1975, Mr. Swindal informed Petitioner that examination of its returns for the years 1972 thru 1974 had resulted in a net proposed deficiency of $12,417.60. An accompanying report showed that the primary basis for the deficiency was Respondent's determination that the Florida portion of adjusted federal income for the years 1973 and 1974 should have been increased by the amounts of $87,772.93 and $160,117.83, respectively, based on a "separate accounting" computation. The reason given for this determination was stated as follows in the report: "Florida Statute 214.73(1) says in part that if the apportionment methods of Florida Statute 214.71 and 214.72 do not fairly represent the extent of a taxpayer's base attributable to this state, the department may require separate accounting. The department has determined the taxpayer should use separate accounting in accordance with the above-mentioned, statute." (Complaint and exhibits thereto) Respondent had not notified Petitioner between 1972 and 1975 of its apparent change in position with respect to the required method of accounting. At a conference held on February 19, 1976, between Petitioner's representatives and Mr. William T. Lutschak who represented the Respondent, Petitioner protested the asserted deficiency and requested that the Respondent adhere to its former determination that the "three-factor method" be applied in computing the tax. Petitioner's protest was denied orally at the conference and such denial w-s confirmed by Mr. Swindal's letter of February 24, 1976, as follows in pertinent part: "Careful analysis of the taxpayer's Florida activity and the financial results of that activity clearly demonstrate that the amount of income set forth in the auditor's report for the years at issue are attributable to taxpayer's Florida business and that F.S. 214.73(1), rather than F.S. 214.71, fairly represents the extent of the taxpayer's tax base attributable to this state." (Comp. & Exh. thereto) Respondent's auditor of Petitioner's 1973 and 1974 tax returns found nothing unusual concerning the latter's business operations during the above tax periods and is of the opinion that based on formulary accounting Petitioner's returns "fulfill the letter of the law". He also acknowledged that Petitioner met the criteria of a "unitary business". He testified that he was unable to determine the amount of property used by Petitioner on its various jobs in and out of Florida while at the audit site at Petitioner's home office in Alabama and that without such information it would be impossible to determine Petitioner's tax liability under the "three-factor method" because property is one of the factors. The auditor, after making a request of Petitioner for such figures during his audit, which did not produce immediate results, did not pursue the matter because he "had to go back to Tallahassee". In fact, such information was available in Petitioner's records. Respondent changed its policy with respect to the method of accounting required of Petitioner after consideration of a textbook on the concept of separate accounting and a resulting determination that the contracting business in general is a unique industry warranting special tax treatment. (Testimony of Harnden, Puckett, Malone, Exhibit 1, Pleadings). The alleged deficiency of $12,417.60 is correctly computed and properly due and owing if "separate accounting" is validly required with respect to Petitioner's tax returns. (Stipulation).
Recommendation That Petitioner be relieved from payment of the proposed assessment based on any tax deficiency produced by the requirement of separate accounting under Section 214.73, Florida Statutes. DONE and ENTERED 21st day of July, 1976, in Tallahassee, Florida. THOMAS C. OLDHAM Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: E. Wilson Crump, II, Esquire Assistant Attorney General Department of Legal Affairs Tax Division Northwood Mall Tallahassee, Florida 32303 James R. English, Esquire HENRY & BUCHANAN, P.A. P.O. Drawer 1049 Tallahassee, Florida 32302
The Issue The issue is whether Petitioner collected and remitted to Respondent the correct amount of sales and use taxes during the audit period from October 1, 2004, through September 30, 2007, and, if not, what additional amount of tax plus penalty and interest is due.
Findings Of Fact Petitioner True Blue Pools (Petitioner, taxpayer, or TBP) is a domestic corporation headquartered in Miami-Dade County, Florida. TBP services, repairs, and renovates swimming pools and constructed some pools during the audit period. Respondent, Florida Department of Revenue (Respondent or DOR), is the agency of state government authorized to administer the tax laws of the State of Florida, pursuant to section 213.05, Florida Statutes.2 DOR is authorized to prescribe the records to be kept by all persons subject to taxes under chapter 212, Florida Statutes. Such persons have a duty to keep and preserve their records, and the records shall be open to examination by DOR or its authorized agents at all reasonable hours pursuant to section 212.12(6), Florida Statutes. DOR is authorized to conduct audits of taxpayers and to request information to ascertain their tax liability, if any, pursuant to section 213.34, Florida Statutes. On November 2, 2007, DOR initiated an audit of TBP to determine whether it was properly collecting and remitting sales and use taxes to DOR. The audit period was from October 1, 2004, through September 30, 2007. On December 15, 2008, DOR sent TBP its Notice of Intent to Make Audit Changes (NOI), with schedules, showing that TBP owed to DOR additional sales and use taxes in the amount of $113,632.17, penalty in the amount of $28,406.05, and interest through December 16, 2008, in the amount of $34,546.59, making a total assessment in the amount of $176,586.81. On October 26, 2009, DOR issued its Notice of Proposed Assessment. TBP timely challenged the Notice of Proposed Assessment, filing its petition with DOR and requesting an administrative hearing. Subsequent to the petition being filed, additional documentation was provided by TBP resulting in a revision to the tax, interest, and penalty amount due. DOR's revised work papers, dated May 27, 2010, claim Petitioner owes $64,430.83 in tax, $16,107.71 in penalty, and interest through May 27, 2010, in the amount of $27,071.99, with an assessment of $107,610.53. The assessed penalty, $16,107.71, was calculated after 25% of the penalty was waived, pursuant to subsection 213.21(3)(a), Florida Statutes, based on DOR's determination that there is no evidence of willful negligence, willful neglect, or fraud. The audit was conducted to determine liability in four categories: improper sales tax exemptions, unpaid sales taxes for taxable expenses, unpaid use taxes on fixed assets, and unpaid use taxes on taxable materials used to fulfill contracts to improve real property. Sales Tax Exemptions Due to the large volume of invoices and other records, the auditor conducted a random sampling of invoices for three months during the audit period, October 2004, January 2005, and September 2007.3 If no sales tax was collected and the Petitioner claimed that the transaction was exempt from the requirement to pay taxes, the auditor looked for proof that either the TBP customer was an exempt organization, for example, a school or a church, or that TBP had provided its suppliers with a DOR Form DR-13 to exempt from taxes products acquired for resale. In the absence proof of either type of exemption, DOR assumed taxes should have been paid. Using the difference between taxes collected and taxes due for the three months, the auditor determined that the percentage of error was .016521. When .016521 was applied to total sales of $1,485,890.79 for the 36-month audit period, the results showed that an additional $24,548.41 in sales taxes should have been collected from customers, and is due from TBP. Although a business is required to pay taxes for the materials it purchases to use in its business, it is not required to collect taxes from its customers when it enters into lump sum contracts to perform a service for customers. At least one invoice for $9,500.00 that the auditor treated as an improper exemption was, in fact, a partial payment on a lump-sum contract. The invoice referenced a "shotcrete draw," which represented the collection of funds after the concrete part of pool construction was completed. TBP is not required to collect taxes when it uses lump-sum contracts. Other invoices for pool repair and services were also mischaracterized as exempt by the TBP, but it is not clear that all were payments related to lump-sum contracts. DOR's auditor, nevertheless, testified as follows: With the knowledge that I have for True Blue Pools, being a lump-sum contractor, True Blue Pools should not charge their customer any sales tax. Transcript at pages 67-68. DOR concedes that some of TBP's transactions are also exempt from taxes as improvements to real property. In its Proposed Recommended Order, DOR asserted that TBP's use of the term "improvements to real property" is overbroad, but it did not specify how or why this is the case. During cross- examination of the owner of TBP, only one invoice for $500.00 for leak detection on the Delgado property was shown to have been for a service rather than for swimming pool construction. Taxable Expenses DOR audited TBP's purchases of tangible personal property used in the daily operation of its business. The products included chlorine and other chemicals, office supplies, and vehicle parts, expenses, and repairs. The ledger for a 12- month period, calendar year 2006, showed an average monthly additional tax due of $111.18, or a total of $4,002.48 in additional taxes for the 36-month audit period. As noted in Petitioner's Proposed Recommended Order, "[t]he representative of TBP did not dispute DOR's allegation that no tax may have been paid on the purchase of all of these items " Fixed Assets TBP's list of fixed assets was taken from the depreciation schedule on Internal Revenue Service Form 4562. The items listed are computer- and software-related. TBP provided no proof that it had paid a use tax. The additional tax due equals $419.94. Petitioner's Proposed Recommended Order includes the statement that "[a]gain, the representative of TBP did not dispute DOR's allegation that no tax may have been paid on the purchase of these items " Taxable Materials Taxable materials, those purchased to fulfill a contract to improve real property, included items used to build, renovate, and repair pools. The items included concrete, meters, drains, and valves. For the 12-month sample period, calendar year 2006, TBP failed to pay taxes on material purchases in the total amount of $168,310.05, or an average of $14,078.96 a month. For the 36-month audit period, the total of the purchases was $506,842.56. With a 6 percent tax due for the state and 1 percent for the county, the total additional tax due on materials is $35,460.00. TBP conceded that it improperly used a resale exemption to purchase taxable materials from suppliers without paying taxes. The materials were used to provide services and were not resold. Acknowledging again that TBP uses lump-sum contracts, this time to support the collection of additional taxes, the auditor testified as follows: And the law states that the taxpayer's [sic] an ultimate consumer of all materials purchased to fulfill a lump-sum contract, and that's what they told me they operate under, a lump-sum contract. Transcript at page 58. At the hearing, TBP used its actual profit and loss statement to show that the cost of goods it sold (general purchases and taxable materials) in the amounts of $18,360.77 in October 2004, $8,519.22 in January 2005, and $4,818.65 in September 2007. Corresponding taxes for each of those months should have been $1,285.25, $596.35, and $337.31, or an average of $739.63 a month, or a total of $26,626.68 for 36 months. The goods that it sold were not at issue in the audit of taxable materials, rather it was TBP's purchases from vendors that should have been taxed that resulted in DOR's audit results. Total Additional Sales and Use Taxes Due The three categories of additional taxes due, $4,002.48 for taxable expenses, $419.94 for fixed assets, and $35,460.00 for taxable materials, equal $39,882.42 in additional taxes due during the audit period. Taxes Paid TBP filed DOR Forms DR-15, monthly sales and use tax reporting forms, and paid sales and use taxes during the audit period. For the sample months used by DOR to examine sales tax exemptions, TBP paid $1,839.10 in taxes in October 2004, $1,672.73 in January 2005, and $1,418.13 in September 2007. Using the three months to calculate an average, extended to 36 months, it is likely that TBP paid $59,712 in taxes. TBP asserted that DOR was required to, but did not, offset the deficiency of $39,882.42, by what appears to be an overpayment of $59,712.00 in sales and use taxes. Other than pointing out that the amount reported on the DR-15s differed, being sometimes more and sometimes less than the amount shown on the profit and loss statements, DOR did not dispute TBP's claim that it had paid sales and use taxes. TBP's representative explained that end-of-the-year adjustments for additional collections or for bad debt could cause the amounts on the DR-15s and profit and loss statements to differ. With regard to the taxes paid, DOR took the following position in its Proposed Recommended Order: Petitioner's DR-15's [sic] for the collection periods October 2004, and January 2005, [and September 2007] (Petitioner's Composite Exhibit 1) do reflect sales tax being collected and remitted to DOR. DOR does not allege that Petitioner never paid tax on its purchases, or made bona fide exempt sales for which no tax was collected. DOR's audit findings identify just those which occurred within the sample period, scheduled in the auditor's workpapers, and applied over the entire audit period. The DR-15s are taken from the sample months selected by DOR within the audit period, and DOR does not address TBP's claim that a set off for taxes paid was mandatory, pursuant to subsection 213.34(4), Florida Statutes. Using the audit schedules, DOR showed credit for taxes paid in the amounts of $20.63 for taxable expenses, $0 for fixed assets, and $24.31 in state taxes and $1.03 for county taxes on taxable materials. The amounts are far less that the $59,712.00 in sales/use taxes TBP showed that it paid during the audit period.
Recommendation Based upon the forgoing findings of fact and conclusions of law, it is recommended that the Department of Revenue issue a final order dismissing the Notice of Intent to Make Audit Changes dated December 15, 2010. DONE AND ENTERED this 20th day of January, 2011, in Tallahassee, Leon County, Florida. S ELEANOR M. HUNTER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 20th day of January, 2011.
The Issue The issue is whether Petitioner owes the taxes, interest, and penalties assessed by the Department of Revenue based upon its audit of Petitioner for the period of August 1, 1996, through July 31, 2001.
Findings Of Fact Based upon the testimony and evidence received at the hearing, the following findings are made: Petitioner is a Florida corporation engaged in the business of selling and installing floor covering materials, such as carpet and tile. Petitioner's business is located in Hillsborough County, Tampa, Florida. Petitioner sales fall into two basic categories: "cash and carry sales" and "installation sales." The "cash and carry sales" are retail sales of floor covering materials to customers that come into Petitioner's store. These sales do not involve any installation work by Petitioner. The "installation sales" are sales in which Petitioner installs the floor covering material in the customer's home or business. These sales are performed pursuant to a lump-sum contract which incorporates the price of the installation and the price of the floor covering materials being installed. Petitioner purchases the floor covering materials from suppliers and distributors. Those purchases become part of the inventory from which Petitioner makes its "installation sales." Petitioner also makes general purchases of goods and services necessary for the day-to-day operation of its business. These purchases include items such as cleaning supplies and vehicle repairs. Petitioner made several fixed-assets purchases during the audit period for use in its business. It purchased a word processor in August 1996, and it purchased equipment and fixtures in December 1996. On those occasions that Petitioner collected sales tax from its customers on the "cash and carry sales" or paid sales tax on its inventory purchases and general purchases, it remitted or reported those amounts to the Department. However, as discussed below, Petitioner did not collect the full amount of sales tax due on each sale, nor did it pay the full amount of sales tax due on each purchase. The Department is the state agency responsible for administering Florida's sales tax laws. The Department is authorized to conduct audits of taxpayers to determine their compliance with the sales tax laws. By letter dated September 10, 2001, the Department notified Petitioner of its intent to conduct a sales tax audit of Petitioner's records for the period of August 1, 1996, through July 31, 2001. The audit was conducted by David Coleman, a tax auditor with seven years of experience with the Department. Petitioner designated its certified public accountant, P.J. Testa, as its representative for purposes of the Department's audit. That designation was memorialized through a power of attorney form executed by Petitioner on March 5, 2002. Mr. Coleman communicated with Mr. Testa throughout the course of the audit. Mr. Coleman conducted the audit using a sampling methodology agreed to by Mr. Testa on behalf of Petitioner. Pursuant to that methodology, Mr. Coleman conducted a comprehensive review of Petitioner's year-2000 purchase and sales invoices and extrapolated the results of that review to the other years in the audit period. The sampling methodology was used because of the volume of records and transactions during the audit period and because of the unavailability of all of the records for the audit period. The year 2000 was chosen as the sample period because Petitioner's records for the other years in the audit period were incomplete or unavailable. Mr. Coleman's audit of the year-2000 invoices focused on three broad types of transactions. First, he reviewed invoices of Petitioner's retail "cash and carry sales." Second, he reviewed the invoices through which Petitioner purchased the floor covering materials that it later sold as part of its "installation sales." Third, he reviewed the invoices through which Petitioner made general purchases of tangible personal property used in the day-to-day operation of its business. The sampling methodology was used for the audit of Petitioner's "cash and carry sales," the inventory purchases related to the "installation sales," and the general purchases. The methodology was not used for the audit of Petitioner's fixed-asset purchases; Mr. Coleman reviewed all of the available records for the fixed-asset purchases during each year of the audit period. Mr. Coleman's audit of Petitioner's retail "cash and carry sales" identified 29 invoices during year-2000 on which no sales tax or less than the full sales tax was paid by the customer. Those invoices amounted to $17,451.30, on which $1,178.11 in total sales tax was due, but only $552.97 was paid. As a result, Mr. Coleman's audit identified a sales tax deficiency of $625.14 for the retail sales during the sample period. Mr. Coleman's audit of Petitioner's purchases of floor covering that was later sold in the "installation sales" identified a considerable number of purchases during year-2000 on which no sales tax or less than the full sales tax was paid by Petitioner to the supplier or distributor of the materials. Those purchases amounted to $123,398.52, but only $123,397.80 of that amount was taxable. On the taxable amount, $8,330.07 in total sales tax was due, but only $6,810.68 was paid. As a result, Mr. Coleman's audit identified a sales tax deficiency of $1,519.41 for Petitioner's inventory purchases during the sample period. Mr. Coleman's audit of Petitioner's "general purchases" identified 10 sales during year-2000 on which sales tax was not paid. Those invoices amounted to $2,914.76, on which $196.77 in sales tax was due, but none of which was paid. As a result, Mr. Coleman's audit identified a sales tax deficiency of $196.77 for the general purchases during the sample period. Mr. Coleman's audit of Petitioner's fixed-asset purchases identified only two transactions during the entire audit period on which Petitioner did not pay the full sales tax. Those transactions amounted to $5,078.92, on which $330.14 in total sales tax was due, but none of which was paid. As a result, Mr. Coleman's audit identified a sales tax deficiency of $330.14 for the fixed-asset purchases during the audit period. The tax deficiencies calculated by Mr. Coleman for year-2000 for each category described above take into account any sales tax collected by Petitioner from its customers or paid by Petitioner to its vendors. After Mr. Coleman computed the tax deficiencies based upon his audit of the year-2000 records, he calculated a "percentage of error" for each category of sales/purchases. The percentage of error is the ratio used to extrapolate the results of the audit of the year-2000 records over the remainder of the audit period. No percentage of error was calculated for the fixed-asset purchases because Mr. Coleman reviewed the available records for those purchases over the entire audit period, not just year-2000. The percentage of error was calculated by dividing the sales tax deficiency identified in a particular category for the year-2000 by the total sales/purchases in that category for the year-2000. For the year-2000, Petitioner had retail sales of $1,143,182.45; general purchases of $21,254.88; and inventory purchases of $1,214,016.24. As a result, the applicable percentages of error were 0.000547 ($625.14 divided by $1,143,182.45) for the retail sales; 0.009258 ($196.77 divided by $21,254.88) for the general purchases; and 0.001252 ($1,519.41 divided by $1,214,016.24) for the inventory purchases. The percentages of error were then multiplied by the total sales in the applicable category for the entire audit period to calculate a total tax deficiency in each category. Petitioner's total retail sales over the audit period were $4,455,373.40. Therefore, the total tax deficiency calculated for that category was $2,437.12 (i.e., $4,455,373.40 multiplied by 0.000547). Petitioner's total general purchases over the audit period were $110,741.49. Therefore, the total tax deficiency calculated for that category was $1,025.25 (i.e., $110,741.49 multiplied by 0.009258). Petitioner's total inventory sales over the audit period were $3,130,882.10. Therefore, the total tax deficiency calculated for that category was $3,919.86 (i.e., $3,130,882.10 multiplied by 0.001252). Petitioner's total tax deficiency was computed by adding the deficiencies in each category, as follows: Retail Sales $2,437.12 General Purchases 1,025.25 Inventory Purchases 3,919.86 Fixed-asset purchases 330.14 TOTAL $7,712.37 Of that total, $6,863.02 reflects the state sales tax deficiency; $313.77 reflects the indigent care surtax deficiency; and $535.58 reflects the local government infrastructure surtax deficiency. The sales tax rate in effect in Hillsborough County during the audit period was 6.75 percent. The state sales tax was six percent; the remaining 0.75 percent was for county surtaxes, namely the local government infrastructure surtax and the indigent care surtax. That rate was used by Mr. Coleman in calculating the tax deficiencies described above. On October 4, 2002, Mr. Coleman hand-delivered the Notice of Intent to Make Audit Change (NOI) to Petitioner. The NOI is the end-product of Mr. Coleman's audit. The NOI identified the total tax deficiency set forth above, as well as a penalty of $3,856.26, which is the standard 50 percent of the tax deficiency amount, and interest of $2,561.63, which is calculated at a statutory rate. The NOI included copies of Mr. Coleman's audit work- papers which showed how the taxes, penalties, and interest were calculated. The NOI also included a copy of the "Taxpayers' Bill of Rights" which informed Petitioner of the procedure by which it could protest the audit results reflected on the NOI. On October 29, 2002, the Department issued three NOPAs to Petitioner. A separate NOPA was issued for each type of tax -- i.e., sales tax, indigent care surtax, and local government infrastructure surtax. The cumulative amounts reflected on the NOPAs were the same as that reflected on the NOI, except that the interest due had been updated through the date of the NOPAs. Interest continues to accrue on assessed deficiencies at a cumulative statutory rate of $1.81 per day. The NOPAs were sent to Petitioner by certified mail, and were received by Petitioner on November 1, 2002. By letter dated November 5, 2002, Petitioner protested the full amount of the taxes assessed on the NOPAs and requested a formal administrative hearing. The letter was signed by Mr. Testa on Petitioner's behalf. The protest letter does not allege that the methodology used by Mr. Coleman was improper or that the results of the audit were factually or legally erroneous. Instead, the protest letter states that Petitioner was disputing the results of the audit because it was "following procedures set forth by an agent from a previous audit who established the manner in which [Petitioner was] to compute sales tax on the items being questioned by the current auditor." Mr. Testa made similar comments to Mr. Coleman during the audit. When Mr. Coleman requested documentation from Mr. Testa to corroborate those comments about the procedures allegedly established by the prior auditor, Mr. Testa was unable to provide any such documentation. The record of this proceeding is similarly devoid of evidence to support Petitioner's allegation on this point. The record does not contain any evidence to suggest that Petitioner ever modified or revoked Mr. Testa's authority to represent it in connection with the audit or this protest, which Mr. Testa initiated on Petitioner's behalf. Petitioner, through Mr. Testa, had due notice of the date, time, and location of the final hearing in these cases. Neither Mr. Testa, nor anyone else on Petitioner's behalf, appeared at the final hearing.
Recommendation Based upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department of Revenue issue a final order imposing the taxes, interest, and penalties against Petitioner in the full amounts set forth in the three Notices of Proposed Assessment dated October 28, 2002. DONE AND ENTERED this 30th day of December, 2003, in Tallahassee, Leon County, Florida. S T. KENT WETHERELL, II 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 30th day of December, 2003.
The Issue The issue in this case is whether Petitioner was overpaid in the amount of $1,022.45 and should be required to repay that amount to the Department of Health.
Findings Of Fact Petitioner was a career-service employee of Respondent and was initially employed with the Department from October 14, 2005, until January 20, 2007. In February 2007 Petitioner received a cash payout for her annual leave balance of 3.25 hours in the amount of $67.18. In January 2007 when Petitioner terminated her employment with the Department, the state’s timekeeping system, People’s First, was not set up to automatically zero out leave balances for employees. The Department’s human resource office was responsible to manually adjust the leave balance to zero each time an employee left employment with the Department. The Department’s human resource office failed to zero out Petitioner’s leave when she left. On March 6, 2009, Petitioner became re-employed with the Department at a remote high school as a nurse. The People’s First system credited Petitioner leave balances she was not entitled to upon re-employment with the Department because her previous leave balances had not been adjusted to zero. Upon Petitioner’s re-employment, the People’s First system reflected incorrect leave balances in the amount of 3.25 hours accrued annual leave, and 107.75 hours of accrued sick leave. Petitioner noticed a leave balance when she returned to work for the Department and asked her supervisor about the hours. Petitioner’s supervisor provided her with incorrect information, which was, because she returned to the State within five years Petitioner was able to keep the time she had accumulated. Petitioner followed up with the Department’s personnel officer, Karen Cayson (“Cayson”), to see if the policy was true and Cayson confirmed that it was correct. During Petitioner’s last two pay periods prior to her second separation from employment with the Department, Petitioner took leave and used the unearned leave amount People’s First indicated she had. Petitioner was paid salary for 34.50 hours of leave for the May 30, 2014, warrant date and 37.50 hours of leave for the June 13, 2014, warrant date. When Petitioner took the 34.50 and 37.50 hours of leave, it should have been leave without pay had the Department’s Human Resource section properly accounted for her leave to ensure it was at a zero balance when she left the Department in 2007. Petitioner worked for the Department until May 30, 2014. After Petitioner left, the Department conducted a payroll and leave audit. Katie Williams (“Williams”) did an official attendance audit by pulling all of Petitioner’s leave and historical data. Williams completed the audit and discovered Petitioner had been overpaid $509.61 for the warrant date May 30, 2014, and overpaid $566.65 for the warrant date June 13, 2014. The Petitioner did not become aware of the overpayment until the Department requested repayment by letter. On July 3, 2014, the Department sent Petitioner a certified letter requesting the overpaid amount of $1,022.45, in which the Petitioner timely contested the letter. Petitioner did her best to determine and verify that she was entitled to the leave money and was assured the amount was correct by Department employees. Petitioner took leave relying upon the assurance that her leave balance credit was correct. Petitioner’s sole income is from her monthly $1,195.00 social security check. She does not have the money to pay the overpayment.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner repay $10.00 to the Department of Health monthly and continue each month thereafter until the $1,022.45 overpayment amount is repaid. DONE AND ENTERED this 14th day of November, 2014, in Tallahassee, Leon County, Florida. S JUNE C. MCKINNEY 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 14th day of November, 2014. COPIES FURNISHED: Mark John Henderson, Esquire Florida Department of Health 4052 Bald Cypress Way, Bin A-02 Tallahassee, Florida 32399 (eServed) Mary Jane Williams 1922 Northwest 113th Drive Gainesville, Florida 32606 (eServed) Jaime Briggs, Agency Clerk Department of Health 4052 Bald Cypress Way, Bin A02 Tallahassee, Florida 32399-1703 (eServed) Jennifer A. Tschetter, General Counsel Department of Health 4052 Bald Cypress Way, Bin A02 Tallahassee, Florida 32399-1701 (eServed) John H. Armstrong, M.D., F.A.C.S. State Surgeon General Department of Health 4052 Bald Cypress Way, Bin A00 Tallahassee, Florida 32399-1701 (eServed)
