The Issue The issue in this case is whether the Petitioner owes State of Florida use tax and local government infrastructure tax on the alleged use of three airplanes.
Findings Of Fact Charles and Dorothy Tolbert own and operate American Aircraft International, Inc. (American). American is in the business primarily of selling and brokering aircraft sales. Most of American's business involves brokering in which American earns a commission or fee for putting together a seller and buyer and bringing the transaction to a conclusion. On a much less frequent basis, American will purchase an airplane for resale. American advertises the availability of its airplanes, both brokered and American-owned, for either sale or lease. However, American has not had occasion to lease one of its own aircraft except as part of a lease-purchase agreement. American does not make any other use of airplanes it offers for sale or lease, except as necessary for maintenance and repairs and for demonstration to prospective purchasers or lessees. Such use would be cost-prohibitive. Fuel, crew, and insurance costs would be well in excess of the cost of a ticket on a commercial airline. American's insurance policy only covers the use of the planes for demonstration and maintenance purposes. On February 6, 1990, American traded for a King Air 200, N56GR, serial number 059, at an acquisition value of $650,000. The King Air 200 was delivered to American from Carlisle, Kentucky, and held by American for resale purposes only and was flown only for purposes of maintenance and repairs and for demonstration to prospective purchasers. When it was sold in 1991 to an English company, BC Aviation, Ltd., American had flown the aircraft only 7 hours. The aircraft was delivered out-of- state in May 1991. In July 1991, American bought a kit for a home-built aircraft called the Renegade, serial number 445. The kit was manufactured and sold by a company in British Columbia, Canada. American's intent in purchasing the kit was to build the airplane and decide whether to become a dealer. It took a year and a half to build, and by the time it was completed, American decided not to pursue the dealership. In September of 1991, American sold the Renegage to the Tolberts. The Tolberts registered the Renegade in September 1994, under N493CT. At first, the Tolberts did not pay sales tax on their purchase of the Renegade. They thought that, since they owned American, no sales tax was due. When the Department audited American and pointed out that sales tax was due, the Tolberts paid the tax in December 1994. In 1991, American also purchased a King Air B90, N988SL, serial number LJ438, for $175,000. The King Air B90 was held by American for resale purposes only and was flown only for purposes of maintenance and repairs and for demonstration to prospective purchasers. In July 1991, American sold the aircraft to Deal Aviation of Chicago, Illinois. However, Deal could not qualify for its own financing, so American agreed to lease-sell the aircraft to Deal. Under the lease-purchase agreement entered into on July 21, 1991, the purchase price was $269,000, payable $4,747.85 a month until paid in full. (The agreement actually said payments would be made for 84 months, but that would amount to total payments well in excess of the purchase price; the evidence did not explain this discrepancy.) American continued to hold title to the aircraft and continued to make payments due to the bank on American's financing for the aircraft. The lease- purchase agreement must have been modified, or payments accelerated, because American transferred title to the aircraft in April 1993. The Department asserted that a Dolphin Aviation ramp rental invoice on the King Air B90 issued in August for the month of September 1991 reflected that the aircraft was parked at the Sarasota-Bradenton Airport at the time of the invoice, which would have been inconsistent with American's testimony and evidence. But the invoice contained the handwritten notation of Dorothy Tolbert that the airplane was "gone," and her testimony was uncontradicted that she telephoned Dolphin when she got the invoice and to inform Dolphin that the invoice was in error since the plane had not been at the ramp since Deal removed it to Illinois on July 21, 1991. As a result, no ramp rent was paid after July 1991. Indeed, the Department's own audit schedules reflect that no ramp rent was paid on the King Air B90 after July 1991. The Department also presented an invoice dated September 16, 1991, in the amount of $3400 for engine repairs done on the King Air B90 by Hangar One Aviation in Tampa, Florida. The invoice reflects that the repairs were done for American and that they were paid in full on September 19, 1991, including Florida sales tax. The Department contended that the invoice was inconsistent with American's testimony and evidence. But although American paid for these repairs, together with Florida sales tax, Mrs. Tolbert explained that the repairs were made under warranty after the lease-purchase of the airplane by Deal. A minor engine problem arose soon after Deal removed the airplane to Illinois. Deal agreed to fly the plane to Hangar One for the repairs, and American agreed to pay for the repairs. After the repairs were made, Hangar One telephoned Mrs. Tolbert with the total, and she gave Hangar One American's credit card number in payment. She did not receive American's copy of the invoice until later. She does not recall if she: noticed the Florida sales tax and did not think to question it; noticed it and decided it was not enough money ($179) to be worth disputing; or just did not notice the Florida sales tax. When American's certified public accountant (CPA), Allan Shaw, prepared American's federal income tax return for 1990, he included the King Air 200 as a fixed capital asset on the company's book depreciation schedule and booked $26,146 of depreciation on the aircraft for 1990 on a cost basis of $650,000. For federal tax purposes, he took the maximum allowable depreciation deduction on the aircraft ($92,857) by attributing a seven-year life to the aircraft and using the double declining balance method of calculating depreciation. The next year, 1991, Shaw included the both the King Air B90 and the Renegade as fixed capital assets on the company's book depreciation schedule. He booked $9,378 of depreciation on the B90 on a cost basis of $175,000 and $1,872 on the Renegade on a cost basis of $25,922 for part of the year 1991. For federal tax purposes, he took the maximum allowable depreciation deduction on the B90 ($12,507) by attributing a seven-year life to the aircraft and using the double declining balance method of calculating depreciation. This depreciation was subtracted from the "gross income from other rental activities" on Schedule K of the return in the amount of $22,796, which represented the payments from Deal under the lease-purchase agreement. The Renegade was depreciated for the same amount as its book depreciation, and no income was recorded as having been generated from use of the Renegade. The next year, 1992, Shaw again included the both the King Air B90 and the Renegade as fixed capital assets on the company's book depreciation schedule. He booked $35,613 of depreciation on the B90 and $5,555 on the Renegade. For federal tax purposes, he took the maximum allowable depreciation deduction on the B90 ($25,014) by attributing a seven-year life to the aircraft and using the double declining balance method of calculating depreciation. This depreciation was subtracted from the "gross income from other rental activities" on Schedule K of the return in the amount of $51,737, which again represented the payments from Deal under the lease-purchase agreement. The Renegade was depreciated for the same amount as its book depreciation, and no income was recorded as having been generated from use of the Renegade. It is not clear from the evidence why American's CPA decided American was entitled to claim depreciation on the three aircraft in question. (Shaw also depreciated another airplane in 1989 which was before the period covered by the Department's audit.) Shaw's final hearing and deposition testimony was confusing as to whether he recalled discussing the question with the Tolberts. He may have; if he did, he probably discussed it with Mrs. Tolbert. Meanwhile, Mrs. Tolbert does not recall ever discussing the question of depreciation with Shaw. In all likelihood, Shaw probably made his own decision that American could depreciate the airplanes to minimize income taxes by claiming that they were fixed capital assets used in the business and not just inventory items being held for resale. For the King Air B90, there were lease payments Shaw could use to justify his decision; but there were no lease payments for the King Air 200 or the Renegade. The evidence was not clear whether there were lease payments for the airplane Shaw depreciated in 1989. For the next year, 1993, Shaw included the Renegade as a fixed capital asset on the company's book depreciation schedule and booked $7,712 of depreciation on the Renegade. For federal tax purposes, the Renegade was depreciated for the same amount as its book depreciation, and no income was recorded as having been generated from use of the Renegade. When the Department audited American starting in July 1994, tax auditor William Berger saw the depreciation schedules and tax returns, both of which indicated to him that the three airplanes in question were used by the company, but no sales or use tax was paid on them. (He also pointed out the Tolberts' failure to pay sales tax on the purchase of the Renegade from American, and the Tolberts later paid the tax, as previously mentioned.) As a result, on July 26, 1995, the Department issued two notices of intent. One was to make sales and use tax audit changes which sought to assess American $56,097.77 in use taxes, together with delinquent penalties of $14,657.36 and interest through July 26, 1995, in the amount of $31,752.61, for a total of $102,507.74, with subsequent interest accruing at the rate of $18.44 per day. The second was to make local government infrastructure surtax audit changes which sought to assess American $609.99 in the surtax, together with delinquent penalties of $163.14 and interest through July 26, 1995, in the amount of $256.33, for a total of $1,029.46, with subsequent interest accruing at the rate of $.20 per day. It is not clear from the record how the Department arrived at the use tax and surtax figures. The alleged use tax assessment should have been calculated as $51,061.32 (six percent of the acquisition costs of the airplanes), and the alleged surtax assessment should have been calculated at the statutory maximum of $50 per item, for a total of $150. On August 28, 1995, American made a partial payment of $5,496.44 on the Department's use tax and surtax audit change assessments, intending to leave a disputed assessed amount of $51,061.32 in use tax and $150 in surtax. It is not clear from the record what American intended the $5,496.44 to apply towards. American filed an Informal Protest of the use tax and surtax audit change assessments on February 26, 1996. The Informal Protest contended that the use tax and surtax were not due and that the federal income tax depreciation schedules were "not determinative." On October 6, 1996, the Department issued a Notice of Decision denying American's protest primarily on the ground that the depreciation of the aircraft for federal income tax purposes constituted using them for use tax purposes. After receiving the Notice of Decision, on November 4, 1996, American filed amended tax returns to remove the depreciation of the airplanes (together with the "gross income from other rental activities" on Schedule K of the 1991 return). (Although CPA Shaw refused to admit it, it is clear that American's federal income tax returns were amended in order to improve its defense against the Department's use tax and surtax assessments.) As a result of the amended returns, American had to pay an additional $15,878 in federal income tax on the 1990 return; there was no change in the tax owed on any of the other returns. On November 6, 1996, American filed a Petition for Reconsideration on the ground that the returns had been amended and the additional federal income tax paid. On January 10, 1997, the Department issued a Notice of Reconsideration denying American's Petition for Reconsideration on the ground that "subsequent modifications made to the federal income tax returns will have no affect [sic] upon" the use tax and surtax assessments.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order withdrawing the assessment of use tax and local government infrastructure surtax, delinquent penalties, and interest against American. RECOMMENDED this 3rd day of October, 1997, in Tallahassee, Leon County, Florida. J. LAWRENCE JOHNSTON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 SUNCOM 278-9675 Fax FILING (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 3rd day of October, 1997. COPIES FURNISHED: Harold F. X. Purnell, Esquire Rutledge, Ecenia, Underwood, Purnell & Hoffman, P.A. Post Office Box 551 Tallahassee, Florida 32302-0551 Albert J. Wollermann, Esquire Office of the Attorney General The Capitol, Tax Section Tallahassee, Florida 32399-1050 Linda Lettera, Esquire Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668 Larry Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100
The Issue The issue in the case is whether the allegations of the Administrative Complaint for Revocation of Certification of Registration are correct.
Findings Of Fact At all times material to this case, the Respondent operated a used car dealership at 1014 West Central Boulevard, Orlando, Florida, 32805. At all times material to this case, the Respondent's registered corporate agent was identified as Jennifer Hamilton, 3517 Domino Drive, Orlando, Florida, 32805. Florida law requires specified persons conducting business within the state to register with the Petitioner and to obtain a certificate of registration essentially for purposes of tax collection. As a dealer, the Respondent was required to register with the Petitioner and received Certificate of Registration No. 58-8011915294-5 from the Petitioner. As a dealer, the Respondent was required to collect sales and use taxes from purchasers and to submit monthly tax returns and collected taxes to the Petitioner. The Respondent filed proper tax returns, but failed to remit taxes received for the following months: September 2004, October 2004, December 2004, January 2005 through October 2005, December 2005, March 2007 through July 2007, and September 2007 through December 2007. The unremitted taxes totaled $21,194.32. Based on the Respondent's failure to remit the taxes, on July 22, 2008, the Petitioner assessed a penalty of $3,271.64 pursuant to Subsection 212.12(2), Florida Statutes. Based on the Respondent's failure to remit the taxes, the Petitioner assessed interest charges of $4,304.62 (as of July 22, 2008) pursuant to Subsection 212.12(3), Florida Statutes. The interest charges continue to accrue until they are paid. The Respondent failed to file tax returns for the months of January 2008 through July 2008. Pursuant to Subsection 212.12(5), Florida Statutes, the Petitioner assessed an estimated tax liability of $3,500.00 against the Respondent. Pursuant to Subsection 212.15(4), Florida Statutes, the Petitioner has recorded warrants in the public records of Orange County, Florida, for the unpaid taxes. Pursuant to Subsection 212.18(3)(d), Florida Statutes, the Petitioner issued a Notice of Conference of Revocation of Certificate of Registration dated July 30, 2008, and an informal conference was conducted on September 4, 2008. No one appeared at the conference on behalf of the Respondent. The Petitioner thereafter filed the Administrative Complaint underlying this proceeding.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Petitioner enter a final order revoking the certificate of registration held by the Respondent. DONE AND ENTERED this 3rd day of March, 2009, in Tallahassee, Leon County, Florida. S WILLIAM F. QUATTLEBAUM 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 3rd day of March, 2009.
The Issue The issue in this case is whether the Respondent's certificates of registration should be revoked for an alleged failure to file tax returns and to remit taxes to the Petitioner.
Findings Of Fact The Petitioner is the state agency responsible for collection of sales and use taxes in Florida, pursuant to chapter 212, Florida Statutes (2011).1/ The Respondent is a Florida company doing business at 7810 U.S. Highway 19, Port Richey, Florida, and is a "dealer" as defined at section 212.06(2). The Respondent holds two certificates of registration issued by the Petitioner (Certificate No. 61-8012297146-3 and Certificate No. 61-8012297147-0) and is statutorily required to file tax returns and remit taxes to the Petitioner. As set forth herein, the Respondent has failed to file tax returns or has filed returns that were not accompanied by the appropriate tax payments. During the time the Respondent has held the certificates, the Petitioner has filed 15 separate warrants against the Respondent related to unpaid taxes, fees, penalties, and interest. The Petitioner is authorized to cancel a dealer's certificate of registration for failure of a dealer to comply with state tax laws. Prior to such cancellation, the Petitioner is required by statute to convene a conference with a dealer. On June 24, 2011, the Petitioner issued a Notice of Conference on Revocation of Certificate of Registration (Notice). The conference was scheduled for July 27, 2011. The Respondent received the Notice and attended the conference. Certificate of Registration No. 61-8012297146-3 The Respondent failed to file tax returns related to Certificate No. 61-8012297146-3 for the period of August through December 2001. The Petitioner assessed estimated taxes of $587.50, fees of $110.95, and a penalty of $285.00. As of the date of the Notice, the accrued interest due was $633.79. Additionally, the Respondent failed to remit taxes of $5,623.63 related to Certificate No. 61-8012297146-3 that were due according to his filed tax returns. Based thereon, the Respondent assessed fees of $994.58 and a penalty of $2,478.26. As of the date of the Notice, the accrued interest due was $4,702.27. As of the date of the Notice, the Respondent's total unpaid obligation on Certificate No. 61-8012297146-3 was $15,415.98, including taxes of $6,211.13, fees of $1,105.53, penalties of $2,763.26, and accrued interest of $5,336.06. Certificate of Registration No. 61-8012297147-0 The Respondent failed to file tax returns related to Certificate No. 61-8012297147-0 for the months of June 2000, September 2000, May 2001, and August 2001. The Petitioner assessed estimated taxes of $619.00 and fees of $202.00. As of the date of the Notice, the accrued interest due was $782.56. Additionally, the Respondent failed to remit taxes related to Certificate No. 61-8012297147-0 of $4,332.48 that were due according to his filed tax returns. Based thereon, the Respondent assessed fees of $771.71 and a penalty of $1,576.87. As of the date of the Notice, the accrued interest due was $4,725.27. As of the date of the Notice, the Respondent's total unpaid obligation related to Certificate No. 61-8012297147-0 was $13,009.89, including taxes of $4,951.48, fees of $973.71, penalties of $1,576.87, and accrued interest of $5,507.83. The Audit A separate audit of the Respondent's business records for the period of February 2004 through January 2007 resulted in an additional assessment totaling $9,314.07, including taxes of $5,048.23, fees of $661.76, and a penalty of $252.42. As of the date of the Notice, the accrued interest due was $3,351.66. At the July 27, 2011, conference, the parties negotiated a compliance agreement under which the Respondent would have retained the certificates of registration. The agreement required the Respondent to make an initial deposit of $2,000.00 by August 15, 2011, and then to make periodic payments towards satisfying the unpaid obligation. The Respondent failed to pay the $2,000.00 deposit, and the Petitioner subsequently filed the Complaint at issue in this proceeding. As of the date that the Complaint was filed, the Respondent owed a total of $37,797.66 to the State of Florida, including taxes of $15,004.34, estimated taxes of $1,206.50, fees of $2,741.00, penalties of $4,592.55, and accrued interest of $14,253.27.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue issue a final order revoking the certificates of registration held by the Respondent. DONE AND ENTERED this 1st day of May, 2012, in Tallahassee, Leon County, Florida. S WILLIAM F. QUATTLEBAUM 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 1st day of May, 2012.
Findings Of Fact On October 21, 1988, DOR issued a notice of assessment and jeopardy findings against petitioners alleging that, pursuant to the provisions of Section 212.0505, Florida Statutes (1987), they owed $16,681,820.07 for having "engaged in the unlawful sale, use, consumption, distribution, manufacture, derivation, production, transportation, or storage of a medicinal drug, cannabis, or a controlled substance." The notice alleged further that petitioners made up a criminal enterprise which, among other things, had been engaged in the activity of laundering money derived from the sale and distribution of illegal drugs (cocaine). (Exhibit A of petition for formal hearing) On December 19, 1988, petitioners filed a complaint against DOR in the circuit court of the thirteenth judicial circuit in and for Hillsborough County, Florida. In that action, petitioners sought to have declared unconstitutional section 212.0505 and to contest DOR's jeopardy tax assessment. The complaint reflects that the contest of assessment was filed under Section 72.011, Florida Statutes (1987). (Exhibit A of amended motion for recommended order of dismissal) On December 19, 1988, petitioners filed a petition for formal hearing with the Division of Administrative Hearings (DOAH) seeking to contest DOR's jeopardy tax assessment. (Exhibit A of petitioners' response to DOR's motion for recommended order of dismissal) A copy of the petition for formal hearing was received by DOR on December 20, 1988, or one day after the circuit court action was filed. (Exhibit B of amended motion for recommended order of dismissal)
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that respondent's amended motion to dismiss the petition for formal hearing be GRANTED, and the petition be dismissed. DONE and ORDERED this 19th day of June, 1989, in Tallahassee, Leon County, Florida DONALD R. ALEXANDER 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 20th day of June, 1989. COPIES FURNISHED: B. Gray Gibbs, Esquire One Fourth Street North Suite 800 St. Petersburg, Florida 33701 Jeffrey M. Dikman, Esquire Department of Legal Affairs Tax Section, The Capitol Tallahassee, Florida 32399-1050 Katie D. Tucker, Executive Director Department of Revenue 102 Carlton Building Tallahassee, Florida 32399-0100 Office of the General Counsel Department of Revenue 203 Carlton Building Tallahassee, Florida 32399-0100
The Issue As to DOAH Case No. 18-4475RX, whether Florida Administrative Code Rule 12A-1.044(5)(a) is an invalid exercise of delegated legislative authority in violation of section 120.52(8), Florida Statutes.1/ As to DOAH Case No. 18-4992RU, whether the Department of Revenue's ("Department") Standard Audit Plan, Vending and Amusement Machines--Industry Specific, section 1.1.3.3 ("SAP") is an unadopted rule in violation of sections 120.54 and 120.56, Florida Statutes.
Findings Of Fact The Parties and Audit Period GBR is a Florida corporation with its principal place of business in Miami, Florida. Gilda Rosenberg is the owner of GBR and a related entity, Gilly Vending, Inc. ("Gilly"). GBR and Gilly are in the vending machine business. At all times material hereto, Amit Biegun served as the chief financial officer of the two entities. The Department is the state agency responsible for administering Florida's sales tax laws pursuant to chapter 212, Florida Statutes. This case concerns the audit period of January 1, 2012, to December 31, 2014. GBR's Provision of Vending Machine Services Prior to the audit period, the school boards of Broward and Palm Beach County issued written solicitations through invitations to bid ("ITB"), seeking vendors to furnish, install, stock, and maintain vending machines on school property. The bids required a "full turn-key operation." The stated objectives were to obtain the best vending service and percentage commission rates that will be most advantageous to the school boards, and to provide a contract that will be most profitable to the awarded vendor. The stated goal was that student choices from beverage and snack vending machines closely align with federal dietary guidelines. GBR operates approximately 700 snack and beverage vending machines situated at 65 schools in Broward, Palm Beach, and Miami-Dade Counties. Of these 65 schools, 43 are in Broward County, 21 are in Palm Beach County, and one is in Miami-Dade County. The snack vending machines are all owned by GBR. Beverage vending machines are owned by bottling companies, such as Coca-Cola and Pepsi. Of the 700 vending machines, approximately 60 percent of the machines are for beverages and the remaining 40 percent are for snacks. GBR has written vending agreements with some schools. In these agreements, GBR is designated as a licensee, the school is designated as the licensor, and GBR is granted a license to install vending machines on school property in exchange for a commission. Furthermore, GBR is solely responsible to pay all federal, state, and local taxes in connection with the operation of the vending machines. Ownership of the vending machines does not transfer to the schools. However, in some cases the schools have keys to the machines. In addition, designated school board employees have access to the inside of the machines in order to review the meter, monitor all transactions, and reconcile the revenue from the machines. GBR places the vending machines on school property. However, the schools control the locations of the vending machines. The schools also require timers on the machines so that the schools can control the times during the day when the machines are operational and accessible to students. The schools also control the types of products to be placed in the machines to ensure that the products closely align with the federal dietary guidelines. The schools also control pricing strategies. GBR stocks, maintains, and services the vending machines. However, Coca-Cola and Pepsi may repair the beverage machines they own. GBR is solely responsible for repairing the machines it owns. The schools require that any vendor service workers seeking access to the vending machines during school hours pass background checks. GBR route drivers collect the revenue from all of the vending machines and the revenues are deposited into GBR's bank accounts. In exchange for GBR's services, the schools receive from GBR, as a commission, a percentage of the gross receipts. However, neither GBR nor the schools are guaranteed any revenue unless sales occur from the machines. On its federal income tax returns, GBR reports all sales revenue from the vending machines. For the tax year 2012, GBR's federal income tax return reflects gross receipts or sales of $5,952,270. Of this amount, GBR paid the schools $1,363,207, a percentage of the gross receipts which GBR characterized on the tax return and its general ledger as a commission and equipment space fee and cost of goods sold. For the tax year 2013, GBR's federal income tax return reflects gross receipts or sales of $6,535,362. Of this amount, GBR paid directly to the schools $1,122,211, a percentage of the gross receipts which GBR characterized on the tax return and its general ledger as a commission and equipment space fee and cost of goods sold. For the tax year 2014, GBR's federal income tax return reflects gross receipts or sales of $6,076,255. Of this amount, GBR paid directly to the schools $1,279,682, a percentage of the gross receipts which GBR characterized on the tax return and its general ledger as a commission and equipment space fee and cost of goods sold. Thus, for the audit period, and according to the federal tax returns and general ledgers, GBR's gross receipts or sales were $18,563,887. Of this amount, GBR paid directly to the schools $3,765,100, as a commission and equipment space fee and cost of goods sold. The Department's Audit and Assessment On January 27, 2015, the Department, through its tax auditor, Mary Gray, sent written notice to GBR of its intent to conduct the audit. This was Ms. Gray's first audit involving vending machines at schools. Thereafter, GBR provided Ms. Gray with its general ledger, federal returns, and bid documents. On October 28, 2015, Ms. Gray issued a draft assessment to GBR. The email transmittal by Ms. Gray to GBR's representative states that "[t]he case is being forwarded for supervisory review." In the draft, Ms. Gray determined that GBR owed additional tax in the amount of $28,589.65, but there was no mention of any purported tax on the monies paid by GBR to the schools as a license fee to use real property. However, very close to the end of the audit, within one week after issuing the draft, and after Ms. Gray did further research and conferred with her supervisor, Ms. Gray's supervisor advised her to issue the B03 assessment pursuant to section 212.031 and rule 12A-1.044, and tax the monies paid by GBR to the schools as a license fee to use real property. Thus, according to the Department, GBR was now responsible for tax in the amount of $246,230.93, plus applicable interest. Of this alleged amount, $1,218.48 was for additional sales tax (A01); $4,181.41 was for purchase expenses (B02); $13,790 was for untaxed rent (B02); and $227.041.04 was for the purported license to use real property (B03). Ms. Gray then prepared a Standard Audit Report detailing her position of the audit and forwarded the report to the Department's dispute resolution division. On January 19, 2016, the Department issued the Notice of Proposed Assessment ("NOPA") against GBR for additional tax and interest due of $288,993.31. The Department does not seek a penalty against GBR. At hearing, Ms. Gray testified that the Department's SAP is an audit planning tool or checklist which she used in conducting GBR's audit. Employees of the Department are not bound to follow the SAP, and the SAP can be modified by the auditors on a word document. The SAP was utilized by Ms. Gray during the audit, but it was not relied on in the NOD.4/
The Issue The issue is whether the Department of Revenue (the "Department") may revoke the Certificate of Registration issued to Petitioner for failure to post a $10,000 cash deposit, surety bond, or irrevocable letter of credit.
Findings Of Fact The Department is the agency of the state of Florida charged with the duty to enforce the collection of taxes imposed pursuant to chapter 212, Florida Statutes, to issue warrants for the collection of taxes, interest, and penalties and, where necessary, to require a cash deposit, bond, or other security, as a condition to a person obtaining or retaining a dealer‘s certificate of registration under chapter 212. Petitioner is a Florida corporation with its principal and mailing address at 5800 Phillips Highway, Jacksonville, Florida 32216. Petitioner is a "dealer" as defined in section 212.06(2), Florida Statutes. Petitioner holds Dealer's Certificate of Registration No. 26-8015523525-2. As a dealer, Petitioner was required to collect sales and use taxes from customers and to submit monthly tax returns and collected taxes to the Department. Sales and use taxes for any given month are due on the first day of the succeeding month, and must be paid to the Department on or before the 20th day of that succeeding month. Petitioner failed to file the required sales and use tax returns for January through March 2011. In a delinquent tax warrant dated May 18, 2011, the Department assessed Petitioner estimated tax of $3,000 for the three months in question, along with $32.79 in interest, $300.00 in penalties, and fees in the amount of $20.00, for a total of $3,352.79. The Department estimated the tax due for the months of January through March 2011 based on historical data, i.e., Petitioner's previous sales and use tax returns. The Department issued the Notice on May 18, 2011. The Notice was served on Petitioner on May 20, 2011. The Notice required Petitioner to post a $10,000 cash deposit, surety bond, or irrevocable letter of credit as a condition to retaining its Certificate of Registration. The Notice further advised Petitioner of an informal conference, commonly referenced as a "bond hearing," to be conducted on June 21, 2011, for the purpose of affording the Petitioner an opportunity to resolve the delinquent tax issue. The Notice also stated as follows, in relevant part: This Notice of Intent to Revoke Registration will become final on the date of the informal conference if the required security has not been posted, or an agreement is not reached at the informal conference, or you fail to attend the informal conference.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order that declines to revoke Dealer's Certificate of Registration No. 26-8015523525-2 held by Jacksonville Entertainment Company, LLC, until such time as the Department fully complies with the requirements of subsection 212.18(3)(d), Florida Statutes by issuing an Administrative Complaint. DONE AND ENTERED this 19th day of March, 2012, 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 19th day of March, 2012. COPIES FURNISHED: Marshall Stranburg, Esquire Department of Revenue The Carlton Building, Room 204 501 South Calhoun Street Tallahassee, Florida 32314-6668 Carrol Y. Cherry, Esquire Office of the Attorney General The Capitol, PL-01 Revenue Litigation Bureau Tallahassee, Florida 32399 carrol.cherry@myfloridalegal.com Bechara Richa Jacksonville Entertainment Company, LLC 8474 Papelon Way Jacksonville, Florida 32217 Nancy Terrel, Acting General Counsel Department of Revenue The Carlton Building, Room 204 501 South Calhoun Street Post Office Box 6668 Tallahassee, Florida 32314-6668 Lisa Vickers, Executive Director Department of Revenue The Carlton Building, Room 104 501 South Calhoun Street Tallahassee, Florida 32314-6668
The Issue The issue is whether Petitioners are liable for the sales and use tax audit assessment and charter transit system surtax audit assessment, as reflected in Respondent's Notices of Reconsideration dated March 17, 1998.
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: From 1988 through 1993, Petitioner, Dane W. Lucas (Lucas), operated the Annabelle Lee, a cruise boat, under the name of River Entertainment. On January 1, 1994, Lucas incorporated his business under the name of River Cruises, Inc. (the corporation), which is also a Petitioner in this cause. In 1996, Respondent, Department of Revenue (DOR), conducted an audit of the records of both Petitioners to determine whether all sales and use taxes and charter transit system surtaxes had been properly reported and paid. As a result of the audit, DOR issued two proposed assessments dated January 28, 1997, against Lucas individually and two assessments dated July 22, 1997, against the corporation. However, the latter two assessments reflect the combined liability of both Lucas individually as well as the corporation and cover the five-year audit period from March 1, 1990, through February 28, 1995. After a protest letter was filed by Petitioners, DOR issued two Notices of Reconsideration on March 17, 1998. As to Lucas individually, the Notice of Reconsideration reflects that as of March 11, 1998, he owed $44,083.56 for sales and use taxes, with interest to accrue from that date at the rate of $7.26 per day. It further asserted that he owed $3,290.35 in charter transit system surtaxes as of the same date, with interest to accrue at the rate of $.058 per day. As to the corporation, the Notice of Reconsideration reflects that as of March 11, 1998, it was liable for $17,906.53, with interest to accrue as of March 11, 1998, at the rate of $2.97 per day. Also, it asserts that as of March 11, 1998, the corporation was liable for $5,839.94 for charter transit system surtaxes, with interest to accrue at the rate of $0.25 per day. On April 24, 1998, Petitioners remitted a check in the amount of $9,626.92, which represented what they believed was the proper tax assessment. As to the remaining portion, they deny that any moneys are owed; alternatively, they have requested that the amounts be compromised on the basis that they have no ability to pay the amount claimed by DOR.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department of Revenue enter a final order sustaining its original assessment against Petitioner. DONE AND ENTERED this 12th day of July, 1999, in Tallahassee, Leon County, Florida. DONALD R. ALEXANDER 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 Filed with the Clerk of the Division of Administrative Hearings this 12th day of July, 1999. COPIES FURNISHED: Linda Lettera, General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 Eric J. Taylor, Esquire Department of Legal Affairs 28 West Central Boulevard, Suite 310 Orlando, Florida 32801 Dane W. Lucas 1511 Montana Avenue Jacksonville, Florida 32207-8642 Larry Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100
The Issue The issue is whether Petitioner is liable for the sales and use tax assessment issued by Respondent on February 21, 1995.
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: In this proceeding, Respondent, Department of Revenue (DOR), has issued a proposed sales and use tax assessment in the amount of $24,546.54, plus $6,640.12 in penalties, plus interest from the date of the assessment, against Petitioner, Florida Truck Dock Company (Petitioner or taxpayer). As of March 20, 1997, the assessment totaled $55,195.27, and it continues to increase by $8.07 each day. The assessment constitutes taxes, penalties, and interest allegedly due from Petitioner for various materials and supplies purchased by Petitioner for use in the performance of real property contracts for Petitioner's customers. In its response to the assessment, Petitioner denied that it owed the money. Petitioner's business activities consisted primarily of purchasing truck loading dock equipment from suppliers, principally Kelly Company, Inc. (Kelly), and then installing such equipment as an improvement to real estate. Its records indicate that purchased equipment was generally brought into Florida and installed in real property in the state under a contract whereby parts and labor were furnished for one lump sum contract price. The foregoing contracts were Class A or lump sum contracts within the meaning of Rule 12A-1.051(2)(a), Florida Administrative Code. Class A contracts are considered contracts for the improvement of real estate, not contracts for the resale of tangible personal property. In addition, when the equipment was purchased, Petitioner had not issued resale certificates to its vendors. Under these circumstances, Petitioner was properly treated as an end-user of the equipment in question and owed use taxes on all such purchases of tangible personal property. This controversy began on March 30, 1992, when DOR issued a Notification of Intent to Audit Books and Records of the taxpayer in conjunction with a routine audit. The notice requested that Petitioner make available various corporate records pertaining to its sales and use tax and intangible tax liability. However, only the sales and use tax is in issue here. DOR later advised the taxpayer that the audit period would run from March 1, 1987, through February 29, 1992, and that instead of a detailed audit, only a three-month sampling of the full audit period would be necessary. An initial audit revealed that Petitioner was entitled to a refund. None was given, however, because of information supplied by an employee of the taxpayer regarding the possible destruction and alteration of certain records by the taxpayer, and the auditor's conclusion that a three-month sampling of the records was not representative for the full five-year audit period. In addition, the auditor concluded that the results of the sample period were not reasonable. For these reasons, the scope of the audit was expanded. The auditor then requested, among other things, that copies of all sales (summary) journals for the entire five-year period be produced. Although Petitioner has always contended that these journals were merely "commission" journals for transactions between its vendors and customers, the auditor's finding that they are records of cash transactions is consistent with the language on the face of the journals, referring to "deposits" and "total deposits." Further, a comparison of the journals with Petitioner's own bank statements confirms this finding. At least twelve months of the records were missing, and the taxpayer agreed to recreate the missing records. Once a copy of all journals (both original and recreated) was produced, the auditor tested their validity and then made various audit adjustments, which are reflected on Schedule A-2 of Exhibit 5. In those instances where inadequate cost price information concerning equipment purchases was provided by the taxpayer, the auditor properly used estimates in making his adjustments. The tax liability for each taxable transaction was recorded by the taxpayer under Account 367 on the sales journals. The auditor then examined the source documents (original invoices) to verify the accuracy of the recorded amounts. These numbers were then compared with the taxes paid by the taxpayer on its monthly tax returns filed with DOR. This comparison produced a deficiency which represents approximately 75 percent of the total assessment. However, in those instances where Petitioner collected sales tax from its customers, and remitted the same to DOR, Petitioner was not assessed with a tax for those same items. A sampling of the audit period established that Petitioner also had a number of lump-sum contracts with various governmental customers on which it neither paid taxes to the vendor when the equipment was purchased, nor did it collect taxes from the end-user when the equipment was resold. Thus, it was responsible for the use taxes on these transactions. The deficiency is detailed on Schedule B-3 of the final audit report (Exhibit 6), and it accounts for approximately 14 percent of the total assessment. The remaining part of the assessment is related to four miscellaneous transactions which are unrelated to the sales journals. Two of the transactions occurred during the short period of time when the service tax was in effect in 1987, while the remaining two relate to small purchases of equipment and supplies by the taxpayer for its own consumption. There was no evidence that the taxpayer paid the taxes due on these transactions. DOR met with the taxpayer, its accountant, and its original counsel on various occasions in an effort to obtain more documentation favorable to the taxpayer's position. In most cases, the taxpayer refused to provide more records. At one meeting, however, the taxpayer produced additional source documents (invoices) that appeared to be altered from the original invoices previously given to the auditor. These are shown in Exhibit 7 received in evidence. When asked by the auditor for copies of the same invoices sent to customers so that the discrepancy could be resolved, the taxpayer refused to comply with this request. During the audit process, the taxpayer contended that its primary supplier, Kelly, had already paid taxes on a number of the transactions. No documentation was produced, however, to support this contention. It also complained that there was bias on the part of DOR's auditor. As to this contention, the record shows that the auditor had no relationship with the taxpayer prior to this audit, and for the intangible personal property tax, the auditor's field work actually resulted in a refund for Petitioner. Finally, the taxpayer contended that rather than using the originally supplied records, the auditor should have used Petitioner's recreated or altered records in making the audit adjustments. This latter contention has been rejected.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department of Revenue enter a final order sustaining its original assessment against Petitioner. DONE AND ENTERED this 13th day of November, 1998, in Tallahassee, Leon County, Florida. DONALD R. ALEXANDER 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 Filed with the Clerk of the Division of Administrative Hearings this 13th day of November, 1998. COPIES FURNISHED: Linda Lettera, Esquire Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 Jeffrey M. Dikman, Esquire Department of Legal Affairs The Capitol, Tax Section Tallahassee, Florida 32399-1050 Benjamin K. Phipps, Esquire Post Office Box 1351 Tallahassee, Florida 32302 L. H. Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100
The Issue Whether or not the Petitioner is required to pay taxes under the authority of Chapter 212, Florida Statutes, which are set forth in the assessment by the Respondent, State of Florida, Department of Revenue, dated May 18, 1977.
Findings Of Fact The Respondent, State of Florida, Department of Revenue, performed an audit of the business which is the Taj Apartments, for purposes of determining if sales and use taxes were owed by that operation. At the time of the initial contact by the Respondent, the Taj Apartments were owned by individuals other than the Petitioner, Robert Hartley. However, in the process of the audit, it was determined that Hartley would be responsible for paying some of the assessments which were being alleged against the operation located on the premises which constitutes the Taj Apartments. Further liability for the audit period was established when Robert Hartley foreclosed a mortgage which he held from the owners of record who were the owners when the tax audit was first commenced. By his action of foreclosure, he became responsible for any tax assessments under Chapter 212, Florida Statutes, which were mete and proper during the audit period, which dated from September 1, 1973, through May 31, 1975. Those dates include the time that Robert Hartley d/b/a Taj Apartments was still in control of the premises. The assessment of the property from September 1, 1973, through May 31, 1975, was made upon the basis of a consideration of the rents collected as reflected in Hartley's ledger cards and receipts. The taxation was based upon a consideration of the number of units, in contrast to a consideration of the number of tenants found in the apartment building. The distinction of taxation on units and not tenants is significant because Hartley, in his petition, challenges the right of the Respondent to tax on a formula which pertains to units and not tenants. The language of the applicable section of Chapter 212, Florida Statutes, specifically, Section (7)(c), Florida Statutes, states the following: The rental of facilities, including trailer lots, which are intended primarily for rental as a principal or permanent place of residence is exempt from the tax imposed by this chapter. The rental of facilities that primarily serve transient guests is not exempt by this subsection. In the application of this law, or in making any determination against the exemption, the department shall consider and be guided by, among other things: Whether or not a facility caters primarily to the traveling public; Whether less than half of its tenants have a continuous residence in excess of 3 months; and The nature of the advertising of the facility involved. It can be seen that the language of that provision clearly invisions that permanent residents are exempt from consideration of the tax, and transient guests are not exempt. Discussion of tenants is used only in describing some of the matters that the Respondent shall consider and be guided by, and is not the only determination which the Respondent must look to in determining whether an exemption from the provisions of this subsection has been established. Furthermore, the fact that Rule 12A-1.61, Florida Administrative Code, which implements Chapter 212, Florida Statutes, in this particular taxing theory speaks in terms of units and not tenants is not inconsistent or in violation of the above quoted statutory provision, because that statutory provision allows the Respondent to look at other things in making its determination of an exemption. The language of Rule 12A-1.61, Florida Administrative Code, spoken of, states the following: Rental of living quarters, sleeping or housekeeping accommodations. (1) Every person, except housing authorities which are specifically exempt from provisions hereof by Section 212.08(10), F.S., is exercising a taxable privilege when he engages in the business of renting, leasing or letting any living quarters, sleeping or housekeeping accommodations in connection with any hotel, motel, apartment house, duplex, rooming house, tourist or mobile home court subject to the provisions of Chapter 212, F.S. Notwithstanding the aforesaid provisions of this paragraph, effective March 1, 1972, the tax shall not apply to the rental of living accommodations which are rented primarily to persons as their principal or permanent place of residence but the tax shall apply to the rental of such facilities at hotels, motels, and seasonal lodging facilities that primarily serve transient guests. (See paragraph 9 of this rule.) When a lodging facility does not primarily cater or advertise that it primarily caters to seasonal or transient guests, or to the traveling public, and when fifty percent or more of its total units are rented to persons who have resided thereat continuously for the three months immediately preceding March 1, 1972, the facility shall have an exempt status until a redetermination has been made. Landlords beginning business after March 1, 1972 shall determine the taxable status of their lodging facility as of the commencing of business. In making their determination, the above guidelines will be applied except that the three months prior residence requirement will be waived in those instances where leases or other records of the facility clearly reflect that the facility does not primarily cater to or advertise that it caters to seasonal or transient guests or the traveling public. All landlords are required to make a redetermination of the taxable status of their businesses on July 1 of each year and in the event that his taxable status has changed, he shall notify the Department of such change. Therefore, the Petitioner's challenge to the Respondent's utilization of rental units, as opposed to tenants residing in the apartment building of the Petitioner during the pendancy of the audit period, to decide the issue whether less than half of the tenants (units) have a continuous residence in excess of three months must fail. Moreover, when an assessment is made under the theory of Section 212.03, Florida Statutes, it is incumbent on the taxpayer to establish an exemption and the petitioner offered no evidence to establish an exemption. In view of the fact that the information for the assessment was taken from the books and records of the Petitioner, and their being no testimony to establish an exemption from the tax imposed on the rentals of the Taj Apartments which was serving transient guests in the time period at issue; the tax together with penalties and interest as set forth in the assessment document (Respondent's Exhibit No. 1, admitted into evidence) should stand. The audit brought about a further assessment for use tax due and owing during the period of the audit. The use tax pertains to Robert Hartley's rental of television sets to the guests in his rental facility and the rental of parking spaces to the guests in the rental facility. The determination of taxes owed for those rentals was also premised upon an examination of Mr. Hartley's books and records. No reason was established for not using the figures found in the hooks and records, in assessing any tax that might be owed for the rental of television sets and parking spaces. Consequently, the portion of the assessment of May 18, 1977, pertaining to a use tax on the rentals of the television sets and parking spaces should be upheld. The imposition of the assessment of May 18, 1977, is a revision of a prior assessment which was rendered before Mr. Hartley provided his books and records. This revised assessment reduced the initial assessment, premised upon an examination of Mr. Hartley's books and records and certain credits for exemptions in the year 1974. The revised assessment reflects this in its provision entitled "Abatements:" The revised assessment then becomes an assessment of $15,960.92. This assessment is constituted of a tax on the transient rentals, parking spaces and television sets; together with penalties on that tax amount and interest through May 8, 1977. The facts show that the revised assessment of May 18, 1977, is correct.
Recommendation It is recommended that the assessment of May 18, 1977, which has been placed against the Petitioner, Robert F. Hartley, d/b/a Taj Apartments, be upheld. DONE AND ENTERED this 17th day of February, 1978, in Tallahassee, Florida. CHARLES C. ADAMS, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Mr. Robert F. Hartley Post Office Box 82 Middletown, California 95461 and Mr. Robert F. Hartley 33 Southwest 2nd Avenue Miami, Florida 33130 Edwin Stacker, Esquire Assistant Attorney General Department of Legal Affairs The Capitol Tallahassee, Florida 32304 John D. Moriarty, Esquire Department of Revenue Room 104 Carlton Building Tallahassee, Florida 32304
