Findings Of Fact In 1962, the Corporation decided to relocate its corporate offices from Newark, New Jersey, to the State of Florida. Implementing this decision, the Corporation secured a twenty year leasehold interest of an entire floor in the Universal Marion Building in Jacksonville, Florida, under which it was obligated to pay an annual rental of $52,000.00. Within a few months during the year 1962, the decision to relocate was rescinded. During the tax year in question, the Corporation retained a part-time employee in Florida for the sole purpose of attempting to either locate a purchaser of the leasehold interest or to avoid further obligations under the lease by negotiations and settlement with the landlord. This part-time employee received his directions from the corporate offices in Newark, New Jersey. Other than these efforts to relieve the burden of the unused leased premises, the Corporation conducted no commercial activities in the State of Florida during the tax year 1973. Although the Corporation's headquarters were ultimately moved to Jacksonville, in January 1976, the Corporation has never occupied the leased premises in question. In fact, in 1974, the Corporation entered into a sublease with the State of Florida for the duration of the lease. Pursuant to audit, DOR assessed the Corporation an additional $12,616.89 in income tax for the year ended December 31, 1973, using the three-factor formula method of apportionment.
The Issue The issue is whether Respondent properly assessed a civil penalty against Petitioner, pursuant to Section 213.29, Florida Statutes (2007),1 after Respondent was adjudicated and sentenced in a criminal proceeding for the offense of theft of state funds.
Findings Of Fact Integrated Copy Systems failed to file sales tax returns or failed to remit sales tax, or both, to the Department during the periods July 2003 through April 2005. In an attempt to secure compliance, on May 12, 2005, the Department recorded a tax warrant with the clerk of court for Hillsborough County in the amount of $24,060.95. The amount of tax due listed on the warrant was $18,400.29, an amount which included, in part, an estimate of tax liability. This estimate was appropriate since Integrated Copy Systems had not filed sales tax returns for certain periods, and Respondent had no information as to the amount of taxable sales made for those periods. Petitioner was subsequently arrested and charged with the offense of theft of state funds, a third-degree felony, in State of Florida v. Michael Maynard, Case No. 05-22960, in the Thirteenth Judicial Circuit in and for Hillsborough County, Florida. On December 13, 2007, Petitioner entered a plea to the criminal charge and was sentenced to probation, with conditions which included the payment of restitution,3 and adjudication was withheld. Petitioner testified that as part of an agreement in his criminal case, he paid the outstanding taxes and that "zero" taxes were due. Petitioner also testified that pursuant to an agreement with the prosecuting attorney, he was assessed and paid a civil fine $1,000.00. Petitioner made some payments to the Department for the sales taxes which he failed to remit for the periods of July 2003 through April 2005. However, Petitioner has not paid all the outstanding sales taxes owed for the subject time period, despite his belief to the contrary. The records generated and/or produced by Petitioner, which purport to reflect the payments made to the Department, do not take into account the accrual of interest and other penalties. The Department properly applied Petitioner's payments to the outstanding sales taxes owed by Integrated Copy Systems. To calculate the amount of sales and use tax owed by Integrated Copy Systems, the Department applied all payments made towards the tax liability of the company. The Department also removed the estimated amount of tax from the total amount of taxes due upon receipt of the company's sale tax returns for the missing periods. The Department accurately determined that as of December 21, 2007, Integrated Copy Systems still owed $7,075.48 in sales tax. On March 19, 2008, the Department issued a Notice of Final Assessment Sales or Use Tax, Penalty and Interest. The amount of the penalty assessed against Petitioner, in his capacity as corporate officer or responsible party, is $14,150.96, which is 200 percent of Integrated Copy Systems' tax liability.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent, Department of Revenue, enter a final order sustaining the sales tax assessment of $7,075.48; and the penalty assessment of $14,150.96 45. DONE AND ENTERED this 31st day of March, 2010, in Tallahassee, Leon County, Florida. S CAROLYN S. HOLIFIELD 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 31st day of March, 2010.
The Issue The issue is whether Respondent's Certificate of Registration 39-8011930243-9 should be revoked for the reasons stated in an Administrative Complaint for Revocation of Certificate of Registration (Administrative Complaint) issued by the Department of Revenue (Department) on June 5, 2014.
Findings Of Fact The Department is the state agency charged with administering and enforcing the state revenue laws, including the laws related to the imposition and collection of sales and use taxes pursuant to chapter 212. Respondent is a Florida limited liability corporation doing business as The Hyde Park Cafe at 1806 West Platt Street, Tampa, Florida. For purposes of collecting and remitting sales and use taxes, it is a dealer as defined in section 212.06(2) and is required to comply with chapter 212. Respondent holds Certificate of Registration number 39- 8011930243-9, which became effective on July 27, 2000. A certificate of registration is required in order to do business in the state and requires its holder to collect and remit sales tax pursuant to chapter 212. See § 212.05(1), Fla. Stat. Respondent is also an employing unit as defined in section 443.036(20) and is subject to the unemployment compensation tax (UCT) provisions of chapter 443, as provided in section 443.1215. Through an interagency agreement with the Department of Economic Opportunity, the Department provides collection services for UCTs. See § 443.1316(1), Fla. Stat. In doing so, the Department is considered to be administering a revenue law of the state. See § 443.1316(2), Fla. Stat. A dealer must file with the Department sales tax returns and remit the tax collected on a monthly basis. See § 212.15(1), Fla. Stat. Also, an employment unit must remit payment to the Department for UCTs due and owing on a quarterly basis. The Department is authorized to revoke a dealer's certificate of registration for failure to comply with state tax laws. See § 212.18(3)(e), Fla. Stat. If the Department files a warrant, notice of lien, or judgment lien certificate against the property of a dealer, it may also revoke a certificate of registration. See § 213.692(1), Fla. Stat. Before revoking a certificate of registration, the Department must convene an informal conference that the dealer is required to attend. See § 213.692(1)(a), Fla. Stat. At the conference, the dealer may either present evidence to refute the Department's allegations of noncompliance or enter into a compliance agreement with the Department to resolve the dealer's failure to comply with chapter 212. Id. After a compliance agreement is executed by the dealer, the Department may revoke the certificate of registration if the dealer fails to comply with its terms and conditions. See Pet'r Ex. 6, p. 2, ¶ E. If a breach occurs, the entire amount is due and payable immediately. Id. at ¶ G. An informal conference can be characterized as the Department's last administrative remedy to collect delinquent taxes before beginning revocation proceedings. A dealer can also enter into a diversion program with the State Attorney's Office to resolve liabilities, but the record shows that Respondent defaulted on that arrangement. According to the Department, collection problems with this dealer first began in 2003. Department records show that Respondent failed to remit required sales taxes for the months of January 2012, August through December 2012, January through December 2013, and January and February 2014. In addition, Respondent failed to remit UCTs for the calendar quarters ending September 2010, December 2010, March 2011, June 2011, September 2011, December 2011, March 2012, June 2012, September 2012, December 2012, and March 2013. Respondent does not dispute that it failed to timely remit and pay the foregoing taxes for the time periods listed above. For the purpose of collecting the delinquent taxes, the Department issued and filed against Respondent delinquent tax warrants, notices of lien, or judgment lien certificates in the Hillsborough County public records. See Pet'r Ex. 3. Before seeking revocation of Respondent's certificate of registration, on February 5, 2014, the Department's Tampa Service Center served on Respondent a Notice of Conference on Revocation of Certificate of Registration (Notice). See Pet'r Ex. 4. The Notice scheduled an informal conference on March 21, 2014. It listed 16 periods of sales and use tax noncompliance and 11 periods of re-employment tax noncompliance and provided the total tax liability as of that date. This number was necessarily fluid, as the taxes owed were accruing interest, penalties, and/or fees on a daily basis. The purpose of the informal conference was to give Respondent a final opportunity to make full payment of all delinquent taxes, or to demonstrate why the Department should not revoke its Certificate of Registration. As pointed out by the Department, an informal conference allows a dealer to bring up "any concerns" that it has regarding its obligations. Respondent's manager and registered agent, Christopher Scott, appeared at the conference on behalf of Respondent.1/ At the meeting, he acknowledged that the dealer had not timely paid the taxes listed in the Notice and that the money was used instead to keep the business afloat. However, Mr. Scott presented paperwork representing that sales and use tax returns and payments for the months of November 2013 through February 2014 had just been filed online, and checks in the amount of $8,101.41 and $9,493.99 were recently sent to Tallahassee. It takes 24 hours for online payments to show up in the system, and even more time for checks to be processed in Tallahassee. Accordingly, the Department agreed that Mr. Scott could have a few more days before signing a compliance agreement. This would allow the Department to verify that the payments were posted and recalculate the amount of taxes still owed. Also, before entering a compliance agreement, Respondent was required to make a down payment of around $20,000.00. Mr. Scott had insufficient cash, and a delay of a few days would hopefully allow him to secure the necessary money for a down payment. When none of the payments had posted by March 25, 2014, the Department calculated a total liability of $113,448.13, consisting of sales and use taxes and UCTs, penalties, interest, and fees. As of that date, none of the taxes listed in Finding of Fact 9 had been paid. On March 25, 2014, Respondent's controller, who did not attend the informal conference, sent an email to the Department requesting a breakdown on the new tax liability. In response to her request, the Department faxed a copy of the requested information. See Resp. Ex. 4. After getting this information, the controller continued to take the position that the Department's calculations overstate Respondent's tax liability. On March 31, 2014, Mr. Scott signed the compliance agreement. See Pet'r Ex. 6. Despite the controller testifying that she did not agree with the numbers, no question was raised by Mr. Scott when he signed the agreement. By then, the check in the amount of $8,101.41 had cleared and been credited to Respondent's account. Along with other funds, it was used towards the down payment of $20,000.00. The record does not show the status of the other payments that Mr. Scott claimed were mailed or filed online prior to the informal conference; however, on March 31, 2014, except for the one check, none had yet posted. The compliance agreement required scheduled payments for 12 months, with the final payment, a balloon payment in an undisclosed amount, being subject to renegotiation in the last month. Payments one and two were $1,500.00, while payments three through 11 were $2,900.00. The compliance agreement reflected a balance owed of $95,887.36, consisting of $60,504.34 in sales taxes and $35,347.02 in UCTs.2/ In return for the Department refraining from pursuing revocation proceedings, the compliance agreement required Respondent to "remit all past due amounts to the Department as stated in the attached payment agreement," "accurately complete and timely file all required tax returns and reports for the next 12 months," and "timely remit all taxes due for the next 12 months." Pet'r Ex. 1, p. 1. In other words, the compliance agreement addressed both delinquent taxes and current taxes that would be due during the following 12-month period, and it required that both categories of taxes be timely paid in the manner prescribed by the agreement. To summarize the salient points of the agreement, all taxes were to be timely paid; delinquent taxes were to be paid by certified check, money order, or cash and were to be mailed or hand delivered to the Tampa Service Center and not Tallahassee; and while not specifically addressed in the agreement, the dealer was instructed to pay all current obligations electronically, as required by law. Otherwise, Respondent was in violation of the compliance agreement. A Payment Agreement Schedule for past due taxes was incorporated into the compliance agreement and provided that the first payment was due April 30, 2014, payable to: Florida Department of Revenue, Tampa Service Center, 6302 East Dr. Martin Luther King, Jr. Boulevard, Suite 100, Tampa, Florida 33619. Payments 2 through 12 were to be mailed or hand delivered to the same address. This meant, with no ambiguity, that money should not be sent to Tallahassee. There is no credible evidence that these instructions were misunderstood. Unless a waiver is granted, Respondent is required by statute and rule to electronically file sales and use tax returns and UCT reports. See § 213.755, Fla. Stat.; Fla. Admin. Code R. 12-24.009 (where a taxpayer has paid its taxes in the prior state fiscal year in an amount of $20,000.00 or more, subsequent payments shall be made electronically). No waivers have been approved. In 2003, the Department notified Respondent of these requirements and Respondent complied with this directive until 2009. For reasons not disclosed, in 2009 Respondent voluntarily quit filing electronically. The record is silent on why this was allowed.3/ In any event, at the informal conference, Mr. Scott was specifically told that all current returns, reports, and taxes must be filed electronically, and not by mail, and that no money should be sent to Tallahassee. There is no credible evidence that he misunderstood these instructions. In its PRO, Respondent correctly points out that the requirement to file current returns electronically was not specifically addressed in the compliance agreement. This is because the compliance agreement does not set forth every statutory and rule requirement that applies to a dealer. If this amount of detail were required, a dealer could ignore any otherwise applicable rule or statute not found in the compliance agreement. This contention has no merit. Respondent failed to electronically file the current sales and use tax return and payment for the month of March 2014, due no later than April 21, 2014. Instead, it sent a paper check, which was returned by the bank for insufficient funds. This constituted a breach of the compliance agreement. Despite repeated instructions on how and where to pay the delinquent taxes, payment 1, due on April 30, 2014, was paid by regular check and sent to Tallahassee, rather than the Tampa office. This contravened the compliance agreement. When payment was not timely received by the Tampa Service Center, Respondent was told that a check must be delivered to the Tampa office by May 9. Respondent hand delivered a second check, this one certified, to the Tampa Service Center on May 9, 2014, or after the April 30 due date. The second check was treated as payment 1. Respondent points out that on May 7 the Tampa Service Center granted its request for an extension of time until May 9 in which to deliver the certified check. While this is true, the extension was allowed in an effort to "work with" the Respondent on the condition that the account would be brought current by that date; otherwise, revocation proceedings would begin. Even if the extra ten days is construed as a grace period for payment 1, there were other violations of the compliance agreement set forth below. Payment 2 for delinquent taxes, due on May 30, 2014, was paid by regular check and sent by mail to Tallahassee rather than the Tampa Service Center.4/ This contravened the compliance agreement. After the May 30, 2014 payment, Respondent made no further payments pursuant to the Payment Agreement Schedule. This constituted a violation of the compliance agreement. Respondent did not remit payment with its current sales and use return for the month of August 2014. This contravened the compliance agreement. Respondent did not file any current sales and use tax returns or remit payment for the months of July 2014 or September through January 2015. This contravened the compliance agreement. Beginning in March 2014, Respondent filed current reemployment tax returns and payments using the incorrect tax rate on every return. This delayed their processing and resulted in penalties being imposed. In addition, even though Respondent was repeatedly told that such returns must be filed electronically, none were filed in that manner, as required by statute and rule. This contravened the compliance agreement. In its PRO, Respondent contends the compliance agreement cannot be enforced because there was no "meeting of the minds" by the parties on all essential terms of the agreement. Specifically, it argues that the total amount of taxes owed was still in dispute -- the dealer contended that it owed $23,000.00 less than was shown in the agreement; the Payment Schedule Agreement did not specify the amount of the final balloon payment; the compliance agreement failed to state when payments are due if the due date falls on a weekend or holiday; the compliance agreement did not specify how the dealer's payments would be allocated between UCTs and sales and use taxes; and the compliance agreement failed to address the issue of filing electronically. Although some of these issues were not raised in the parties' Joint Pre-hearing Stipulation, or even addressed by testimony at hearing, they are all found to be without merit for the reasons expressed below. First, Mr. Scott did not dispute the amount of taxes owed when he signed the agreement, and he brought no evidence to the conference to support a different amount. Second, as explained to Mr. Scott at the informal conference, the precise amount of the balloon payment can only be established in the 12th month. This is because the exact amount depends on the dealer's compliance with the agreement over the preceding 11 months, and the amount of interest, penalties, and/or other fees that may have accrued during the preceding year. Third, there is no evidence that the dealer was confused when a due date for a payment fell on a weekend or holiday. Even if it was confused, reference to section 212.11(1)(e) and (f) would answer this question. Fourth, there is no statute or rule that requires the Department to specify how the delinquent payments are allocated. Moreover, neither Mr. Scott nor the controller requested that such an allocation be incorporated into the agreement before it was signed. Finally, the issue of filing electronically already has been addressed in Finding of Fact 22 and Endnote 3. At hearing, Respondent's controller testified that she was out of town when the conference was held, suggesting that Mr. Scott, who is not an accountant, was at a disadvantage when he attended the informal conference. However, Respondent had six weeks' notice before the conference, and there is no evidence that Respondent requested that the meeting be rescheduled to a more convenient day. Also, Respondent does not dispute that Mr. Scott was authorized to represent its interests at the conference, or that he could have been briefed by the controller before attending the informal conference or signing the compliance agreement. See also Endnote 1. Notably, at hearing, the controller testified that she "was involved in actually negotiating the agreement both before and after it was actually signed" even though she did not attend the conference. Tr. at 89. Respondent also contends that after the Department considered the compliance agreement to be breached, the dealer had no further obligation to make payments pursuant to the agreement or state law until the parties negotiated a new agreement. Aside from Respondent's failure to cite any authority to support this proposition, nothing in the compliance agreement comports with this assertion. To the contrary, the compliance agreement specifically provides that if a breach occurs, the entire tax liability becomes due immediately. See Pet'r Ex. 6, p. 2, ¶ G. Thus, Respondent is obligated to pay the entire tax liability, which now exceeds $200,000.00. All other arguments raised by Respondent have been carefully considered and are rejected as being without merit.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order revoking Respondent's Certificate of Registration 39- 8011930243-9. DONE AND ENTERED this 11th day of June, 2015, in Tallahassee, Leon County, Florida. S D. R. ALEXANDER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 11th day of June, 2015.
The Issue The parties stipulated that the following legal issues were presented on the facts: When the taxpayer fails to claim the tax credit for sales tax on bad debts charged off during the month for which the return is filed as permitted by Section 212.17(8) Florida Statutes, may the taxpayer claim a refund of the overpayment pursuant to Section 215.26, Florida Statutes? Does claiming a bad debt credit on a return for a month later than the month in which the charge-offs were made constitute an "application for refund" within the meaning of Section 215.26(2), Florida Statutes? STIPULATIONS The parties entered into a written stipulation of the issues, of the facts, and stipulated to the introduction into evidence of the attachments to the written stipulation of facts and the Exhibits 1 through 6. The following are the pertinent findings of fact in this case.
Findings Of Fact Causeway Lumber Company, Inc., (Causeway) is a Florida corporation engaged in the sale of lumber and building materials. During the years 1973- 1977 it operated two yards; one at 2701 South Andrews Avenue, Fort Lauderdale, Broward County, and one and 400 Northwest 2nd Avenue, Boca Raton, Palm Beach County. Because it operated in two counties, separate tax returns were filed for the Fort Lauderdale yard and the Boca Raton yard. Causeway uses the accrual method of accounting, the specific charge-off method of writing off bad debts, and its fiscal year ends March 31. Causeway did not collect the sales tax on credit sales at the time such sales were made, but billed sales tax to its customers as part of the credit sales. Although the sales taxes were not received by Causeway at the time the credit sales were made, Causeway reported and paid the sales tax on credit sales on the return for the month in which the sale was made as required in Section 212.06, Florida Statutes. In March of 1974, 1975, and 1976 the accounts receivable were reviewed and the account deemed worthless were written off as uncollectable and so reported on the corporation's income tax returns for those years. Causeway attempted to take as a credit in September of 1976 all of the bad debts written off in March of 1974, 1975 and 1976. The taking of this credit was questioned by the Comptroller, and Causeway paid the taxes due on the September 1976 sales tax remittance and then filed an application for refund on January 20, 1978, pursuant to provisions of Section 215.26, Florida Statutes. The Comptroller denied the application for refund stating as the grounds that there was no authority in Section 212.17, Florida Statutes, for a refund. Causeway's two outlets overpaid sales taxes in the following amounts in the years indicated: 1974 1975 1976 Boca Raton $ 1,072.51 $ 9,208.17 $ 30,477.11 Ft. Lauderdale 3,323.15 10,237.33 10,004.22 $ 4,395.66 $ 19,445.50 $ 40,481.33
Recommendation Based upon the foregoing findings of fact and conclusions of law, the Hearing Officer recommends to the Comptroller that the taxpayer be refunded the taxes overpaid in 1975, and 1976, in the total amount of $59,926.83. DONE and ORDERED this 9th day of October, 1978, in Tallahassee, Florida. STEPHEN F. DEAN Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 9th day of October, 1978. COPIES FURNISHED: Richard W. Roe 2900 East Oakland Park Boulevard Fort Lauderdale, Florida 33306 Harold F. X. Purnell Assistant Attorney General The Capitol, Room LL04 Tallahassee, Florida 32304 Eugene J. Cella General Counsel Office of the Comptroller The Capitol Tallahassee, Florida 32304 =================================================================
The Issue The issue to be determined is whether Petitioner is liable for the sales and use tax, penalties, and interest assessed by the Department of Revenue and if so, what amount?
Findings Of Fact Petitioner, Rowe's Supermarkets, LLC ("Petitioner" or "Rowe's"), is a Florida limited liability company. Robert Rowe was the president and primary shareholder in Rowe's. Respondent, Department of Revenue ("DOR" or "Respondent"), is an agency of the State of Florida authorized to administer the tax laws of the State of Florida. §§ 20.21 and 213.51, Fla. Stat. (2011) During the audit giving rise to this proceeding, Rowe's had its principal address at 5435 Blanding Boulevard, Jacksonville, Florida. Currently, Rowe's is located at 1431 Riverplace Boulevard, Jacksonville, Florida. Rowe's organized in Florida on May 4, 2005. Rowe's was a sales and use tax dealer registered with the Department to conduct business in this state. It was in business approximately four years. Rowe's acquired several former Albertson's grocery retail stores, including the adjacent liquor stores, in Jacksonville, St. Augustine, and Orange Park, Florida. During the audit period, Rowe's sold five stores with the adjacent liquor stores. Soon after beginning operation, Rowe's experienced significant financial difficulties which ultimately led to its demise. Its secured lender forced Rowe's to liquidate assets whenever possible, and all proceeds from the sale of the stores were paid directly into a locked account to Rowe's lender, Textron Financial. On October 29, 2008, the Department issued to Rowe's a Notification to Audit Books and Records, Form DR-840, bearing audit number 200048409, for sales and use tax, for the audit period beginning October 1, 2005, and ending September 30, 2008. On August 14, 2009, the Department issued to Rowe's a Notice of Intent to Make Audit Changes, form DR-1215, for sales and use taxes, penalties and interest totaling $321,191.45, with additional interest accruing at $53.71 per day. On August 20, 2009, Rowe's canceled its sales and use tax Certificate of Registration. In a letter dated September 11, 2009, Rowe's requested an audit conference. The requested audit conference was held November 19, 2009. On January 8, 2010, the Department issued the taxpayer a Notice of Intent to Make Audit Changes, form DR-1215, Revision #1, for sales and use tax, penalty and interest totaling $180,435.61, with additional interest accruing at $25.32 per day. On March 10, 2010, the Department issued a NOPA, which indicated Rowe's owed $137,225.27 in sales and use tax; $44,755.99 in interest through March 10, 2010; and $59.70 in penalties, with additional interest accruing at $26.32 per day. Prior to issuance of the NOPA, the Department compromised $34,246.663 in penalties, based upon reasonable cause. By letter dated May 6, 2010, Rowe's filed a protest to dispute the proposed assessment. The letter stated: I am submitting this informal protest on behalf of Rowe's Supermarkets, LLC (RS) as its past President. RS is no longer in business and has not assets. Before this audit began RS was unable to pay its bills. Also, its line of credit, which was secured by all of RS's assets, was in default and had been called by the lender. RS was unable to refinance the loan because of its poor financial condition. As a result, it sold all of its assets to a new company which was able to obtain financing and used the proceeds of that sale to repay its secured loan. RS not only has no assets but also is subject to an unsatisfied judgment lien against it in the amount of $324,936.33, which has been accruing interest at 8% per year from August 25, 2009, the date the judgment was entered by the Circuit Court here in Jacksonville. Even if Supermarkets was still in business and could pay its bills, we don't think it should be assessed with these taxes on the basis of the audit that was conducted. The auditor's lack of communication skills made it difficult for us to understand what information she needed. To the extent we understood her requests, we made every effort to provide her with the relevant information. But because most of the stores RS operated had already been closed, the only repository for obtaining accurate information was RS's general ledger, which she declined to review. She never explained why she made the proposed adjustments. We still don't know. We did our best when RS was operating to properly collect all sales taxes, we reflected all of the sale tax collections in the general ledger and we timely turned over all of the those taxes to the department of revenue, as is clear in the general ledger. We request that the proposed assessment be dropped. The Department issued a Notice of Decision on October 14, 2010, which sustained the assessment in full. In issuing its Notice of Decision, the Department did not review any issues related to the assessment other than doubt as to collectability. With respect to this issue, the Department stated, "[b]ased on our evaluation of all the factors of this case, including the financial information, we have concluded that it is not in the best interest of the State to accept your offer." Petitioner's challenge to the assessment presents five issues: 1) whether it was entitled to an exemption in section 212.12(14) for those additional taxes assessed for "rounding" up to the whole cent as opposed to using the bracket system in section 212.12(9); 2) whether the Department's assessment of additional taxes for expenses was erroneous where it was based on a sampling plan not presented to or agreed to by the taxpayer; 3) whether the additional tax on liquor sales was based on an incorrect application of Florida Administrative Code Rule 12A- 1.057(3)(a); 4) whether the Department violated the Taxpayer's Bill of Rights; and whether the Department was correct in determining that compromise of the assessment based on collectability was not in the best interest of the state. Each issue is treated separately below. The Exemption pursuant to section 212.12(14) Section 212.12(9) and (10), Florida Statutes, requires that sales taxes be paid on a "bracket system," and prescribes the amount of tax due for each portion of a dollar. Subsection (9) provides the tax brackets for those counties, such as St. Johns, which do not have a discretionary sales surtax and for which the tax rate is 6 percent. Subsection (10) provides the brackets for those counties, such as Duval and Clay, where a discretionary sales surtax of one percent has been adopted, making the sales-tax rate 7 percent. Section 212.12(14) provides a "safe harbor" from additional assessment of taxes for those dealers who fail to apply the tax brackets required by section 212.12. The taxpayer is not assessed additional taxes, penalty, and interest based on the failure to apply the bracket system if it meets three requirements: that it acted in a good faith belief that rounding was the proper method of determining the amount of tax due; if it timely reported and remitted all taxes collected on each taxable transaction; and if the taxpayer agrees in writing to future compliance with the law and rules concerning brackets applicable to the dealer's transactions. It is undisputed that Rowe's was not using the bracket system to calculate and collect sales taxes. The point-of-sale cash register system Rowe's purchased when opening its business was represented to Petitioner as compliant with Florida requirements when in fact it was not. The Department's auditor, Delaine Arrington, determined that assessment of additional taxes was appropriate because she believed that Rowe's had not timely reported and remitted all taxes collected on each taxable transaction, and that Rowe's had not agreed in writing to future compliance with respect to the bracketing system. The sales tax records for Rowe's were based upon the meshing of three different computer systems. First, there was a point-of-sale system at each cash register which collected the data, such as sales amounts, taxable sales, and sales tax collected, for each individual transaction. A software system called BR Data would then "pull" the sales data from the individual cash registers to create the cumulative sales register reports for each store. The cumulative data from BR Data was then automatically imported into Petitioner's accounting software, MAS 90, to populate the figures in Rowe's general ledger. Taxes collected were recorded in the general ledger under the credit column. The data in this column was transmitted from BR Data. It could not be adjusted manually, although other columns in the general ledger could be. There were sometimes problems with the transmission of information from BR Data, which generally occurred where there was a power surge or a thunderstorm that would affect the communication of information. As a result of these communication problems, there were times that the sales figure transmitted would be double or triple the actual sales for that day. When such an error was discovered, Rowe's staff would contact BR Data and have the report rebuilt, and the general ledger entry would be corrected. Rowe's informed Ms. Arrington that there had been numerous problems with the exporting process and the resulting need to correct journal entries. Ms. Arrington acknowledged at hearing that she had been advised that due to these problems, the sales figures were sometimes doubled or tripled. Ms. Arrington reviewed the general sales ledger, the cumulative sales register reports, and the sales and use tax returns for the audit period. According to her review, there were three days in August 2006 where the amount of collected tax reflected in the cumulative sales register was higher than what was reflected in the general ledger. Based upon this review, she assessed $1,193.98 in additional sales taxes. For August 1, 2006, the general ledger indicated that $263.48 in sales tax was collected. The cumulative sales report reflected that $790.44 in sales tax was collected. This second number in the cumulative sales report is exactly three times the amount reflected in the general ledger. The difference between the cumulative sales report amount and the general ledger amount is $526.96. For August 2, 2006, the general ledger indicated that $277.04 was collected. The cumulative sales report reflected that $554.08 in sales tax was collected, an amount exactly twice the amount recorded in the general ledger. The difference between the two documents is $277.04. For August 11, 2006, the general ledger indicated that $389.98 in sales tax was collected. The cumulative sales report reflected that $779.96 was collected, an amount exactly twice the amount recorded in the general ledger. The difference between the two documents is $389.98. The difference in the amounts reflected in the general ledger (which Rowe's claims is the more accurate document), and the cumulative sales register (which Ms. Arrington relied upon), is $1,193.98, the amount of additional tax assessed for this item. Ms. Arrington acknowledged at hearing that she credited the cumulative sales register numbers over Rowe's general ledger documents, and that she knew during the audit that there were issues relating to BR Data that occurred during the audit period. The only document upon which she relied was the cumulative sales register. Given the credible testimony by Robert Rowe and Neil Newman regarding the process and the problems encountered with the interface of data, and the fact that in each instance, the difference was an exact multiple of the amount reflected in the general ledger, the greater weight of the evidence presented at hearing supports the finding that the general ledger represents the amount of sales tax actually collected and paid by Rowe's. This finding means that not only is the assessment of additional sales tax for August 2006, in error, but also that means that Rowe's met the second requirement for avoiding the assessment of additional taxes under section 212.12(14) for failing to use the bracket system. Ms. Arrington also found that Rowe's had not agreed in writing to future compliance with the bracket system. On or about November 19, 2009, in conjunction with the Audit Conference, Ms. Arrington prepared an Agreement for Future Compliance (Agreement) and provided it to Mr. Rowe for signature. The text of the Agreement, which is on DOR letterhead and specifically references the Sales and Use Tax Audit number for Rowe's, states: The following dealer had demonstrated the proper actions required by Section 212.12(14),(a) and (b), F.S. (see attachment), and agree [sic] to sign the following suggested form to compliance with the laws concerning brackets applicable to the dealer's transactions in the future. Rowe's Supermarkets, LLC - BP#2134130, succeeded by Rowe's IGA, LLC - 3082649 agrees to future compliance with the laws and rules concerning the proper application of the tax bracket system to the dealer's transactions. Mr. Rowe did not sign the Agreement at the Audit Conference because he wanted to be able to confirm that the point of sale system his store operated could be properly programmed to comply with the bracket system before signing a document stating he would comply. After discussions with both the vendor and Ms. Arrington, and making sure the system was in fact operating in compliance with the requirement, Mr. Rowe signed the Agreement on December 7, 2009, and returned it to the Department. Ms. Arrington did not recall receiving the Agreement, but also admitted she had no specific memory as to whether she received it. Her Case Activity Record indicates that on December 3, 2009, she spoke with Mr. Rowe about whether he was able to input the brackets in his point-of-sale system, and that he indicated he was able to do so. The greater weight of the evidence supports the finding that Mr. Rowe executed and returned the Agreement, and it is so found. The Use Tax Assessment Based on a Sampling Plan Section 212.12 allows the Department to use a sample from the taxpayer's records and project audit findings from the sample to the entire audit period where the records of the taxpayer are "adequate but voluminous in nature and substance." The statute, which is discussed in more detail in the Conclusions of Law, contemplates the use of a sampling plan agreed to by the taxpayer, and in the absence of an agreement, the taxpayer's right to have a review by the Department's Executive Director. The work papers to the Notice of Intent to Make Audit Changes dated January 8, 2010, include a sampling plan that runs from January 1, 2006, to December 31, 2006 for the calculation of use tax for purchases by Rowe's where sales tax was not collected by the vendor. Ms. Arrington reviewed Rowe's' records for expense purchases for 2006 to determine the total amount of additional tax due for that period. She then took the total additional tax on expenses for that period, i.e., $14,981.26, and divided it by 12 to obtain a monthly average additional tax of $1,248.44. She then applied that number to the entire 36-month audit period to determine a total assessment of additional tax for expense purchases of $44,943.84. Ms. Arrington testified that at the initial audit conference, she discussed different audit techniques in terms of sampling. However, a specific sampling plan was not discussed with Mr. Rowe and no Sampling Agreement was presented to him. No sampling plan was reviewed by the Executive Director. Ms. Arrington did not tell Mr. Rowe that 2006 would be the year used as the sample. Mr. Rowe never would have agreed to the use of 2006 as a sampling plan, because it would not be representative of the expenses incurred during the audit period. Using 2006 as a sampling period did not take into account the store closures during the audit period, and the concomitant reduction in expenses. Rowe's closed two grocery stores by March 2006, and operated only four stores for the remaining three quarters of the year. A third store was closed in January 2007, a fourth in May 2007 and a fifth in 2008, leaving only one store open for the entire audit period. All of the liquor stores were also closed during the audit period, the last one being sold in May 2008. Ms. Arrington knew that Rowe's had closed almost all of its stores during the audit period, and included information regarding the closings in her Standard Audit Report. She acknowledged at hearing that as the stores decreased, the expenses related to those stores would also most likely decrease. For the 12 months of 2006, the Department determined that an additional tax of $14,981.26 would be due, based on purchases of $253,637.22. There has been no evidence presented to rebut the accuracy of the tax assessment for these 2006 purchases. Petitioner presented evidence establishing that, for the 21 months of the audit period following 2006, Rowe's made purchases from the same vendors reflected in the 2006 sample of only $51,073.72, which would result in additional taxes of $3,575.16. No evidence was presented by either party as to whether there were any other purchases from other vendors for which taxes had not been paid. The difference between the use tax assessed against Rowe's by using the sampling plan and taxes due based on the actual purchases demonstrated at hearing is $22,642.08. In addition, there was one vendor, Advo, Inc. (Advo), which accounted for a significant percentage of the tax due based on the sampling plan. While the audit sample period was for twelve months, payments to Advo for a seven-month period accounted for approximately 58% of the total additional taxes due for expenses. There were no purchases from Advo after July 2006 because of Rowe's shrinking assets and inability to pay for direct advertising. Further, 15 of the 23 vendors reflected in the sample period from whom purchases were made had no sales to Rowe's from January 2007 through September 2008. The Department's work papers indicate that, within the sample year, the purchases tapered off significantly as the year progressed. Given the known closure of five grocery stores and six liquor stores during the audit period, using a time period where the most stores were open is not representative of the expenses experienced by Petitioner, and use of the sampling plan to which the taxpayer had not agreed was inappropriate, and led to an inflated assessment of additional taxes. The Effective Tax Rate at the Liquor Stores During the audit period, Rowe's operated package liquor stores adjacent to the grocery stores. By the time the audit commenced, Rowe's no longer owned any of the liquor stores, and no longer had the cash register tapes from the liquor stores. Because of the lack of cash register tapes, the auditor was unable to determine the effective tax rate Rowe's was collecting. She did not, however, ask Rowe's what rate was collected. A review of the sales tax returns indicates that it remitted a flat rate of 6 or 7 percent, depending on the county. These rates were consistent with what Rowe's was collecting for the grocery store sales, and cash register tapes were available from the grocery store. Ms. Arrington applied the tax rates identified in Florida Administrative Code Rules 12A-1.057(3)(a) and 12A- 15.012(2)(a), both of which identify the rate that should be collected where the dealer sells package goods but does not sell mixed drinks; does not separately itemize the sales price and the tax; and does not put the public on notice that tax is included in the total charge. The work papers paraphrase but do not quote the rules. With respect to the liquor store in St. Johns County, the work papers state: "[a]ccording to Rule 12A-1.057(3)(a), F.A.C., when the dealer is located in a county with no surtax and the public has not been put on notice through the posting of price lists or signs prominently displayed throughout the establishment that the tax is included in the total charge, package stores which sell no mixed drinks shall remit tax at the effective rate of .0635." With respect to the liquor stores in Clay and Duval Counties, the work papers state: "[a]ccording to Rule 12A- 15.012(2)(a)1., F.A.C., when a dealer, located in a county imposing a 1% surtax, sells package goods but does not sell mixed drinks and does not put the public on notice that tax is included in the total charge, the dealer is required to remit tax at the effective tax rate of .0730." The Department's auditor made the assumption that tax was not separately itemized for package store sales and assessed the additional tax accordingly. She did not ask the taxpayer whether this was the case and did not ask about signage in the package stores that were no longer owned by Rowe's. Mr. Rowe testified that the same point-of-sale program was used for the liquor stores as were used for the adjacent grocery stores. That program separately identified the tax due. His testimony is unrebutted and is credited. The Taxpayer's Bill of Rights At hearing, Petitioner took the position that the Department violated the Taxpayer's Bill of Rights as stated in section 213.015(5), by its failure to provide Petitioner with a "narrative description which explains the basis of audit changes, proposed assessments, assessments." In its Proposed Recommended Order, however, Petitioner candidly acknowledged that the evidence did not support a finding consistent with Petitioner's position. In light of this concession, no further findings of fact are necessary with respect to this issue. Collectibility Rowe's asserted in its challenge that it was unable to pay any taxes assessed because it was no longer in business and no longer had any assets. The Department declined to exercise its discretion to compromise the tax assessment based on collectability. While not specifically stated in its Notice of Decision, this position was apparently based upon the belief that the taxes could be paid by Rowe's IGA, LLC, to whom the assets of Rowe's was sold, and which shares the same managing member, Robert Rowe. The two companies share a managing member and one common location, which Rowe's sold to Rowe's IGA. However, no evidence was presented regarding the specifics of the assets sold to Rowe's IGA, and the only evidence presented indicates that any proceeds from the sale went to pay the secured lender for Rowe's, Textron Financial. Other than the involvement of Robert Rowe, no connection between the companies was established. Rowe's provided to the Department the copy of a judgment against it for $324,963.33, which bears interest at a rate of 8% annually. The Department did not identify any assets from which either the assessment or the judgment could be paid.
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: Reduces the Department's assessment for additional taxes, penalties, and interest by any amounts attributable to the failure to comply with the sales bracket system at Petitioner's grocery stores; Reduces the Department's assessment for additional use taxes, penalties, and interest by any amounts attributable to the failure to remit all taxes due for the month of August 2006; Reduces the Department's assessment for additional use taxes, penalties, and interest by any amounts attributable to expense purchases for the period January 2007 through September 2008; Sustains the assessment for additional use tax, penalties, and interest for expense purchases in calendar year 2006; Reduces the Department's assessment for additional use taxes, penalties, and interest by any amounts attributable to the asserted basis that Petitioner should have collected tax at a higher effective tax rate at its liquor stores based upon the application of rules 12A-1.057(3)(a) or 12A-15.012(2)(a); Sustains the Department's assessment for additional sales tax, penalties, and interest against Petitioner for failure to pay tax on certain capital asset purchases identified in the audit; Sustains the Department's assessment for additional sales tax, penalties, and interest against Petitioner for failure to pay sales tax on commercial rent payments under certain of Petitioner's store leases identified in the audit; and Sustains the Department's assessment for additional sales tax, penalties, and interest against Petitioner for failure to pay sales tax on Petitioner's payment of ad valorem taxes under certain of Petitioner's store leases identified in the audit. In addition, it is Recommended that the Department reconsider its decision as to whether the remaining assessment is collectible, and whether it is in the best interest of the state to compromise the assessment, based on the record contained in this proceeding. DONE AND ENTERED this 31st day of July, 2012, in Tallahassee, Leon County, Florida. S LISA SHEARER NELSON 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 31st day of July, 2012.
The Issue Whether Petitioner, as President of Bella Donna Couture, Inc., is liable for a penalty equal to twice the total amount of the sales and use tax owed by that entity to the State of Florida.
Findings Of Fact The Parties Respondent is the agency charged with administering the revenue laws of the State of Florida, including chapter 212, which imposes and authorizes the collection of sales and use tax in Florida. Petitioner was President of Bella Donna Couture, Inc. ("Taxpayer"), a women's clothing store formerly located at 5819 Sunset Drive, South Miami, Florida. Taxpayer is registered with Respondent as a dealer pursuant to section 212.18 and was issued Sales and Use Tax Certificate of Registration Number 23-8012167329-8. Events Giving Rise to the Notice of Assessment Taxpayer did not remit sales tax for November 2003, January 2004, June 2005, September 2005, January 2006, July 2006, September 2006, and November 2006, and so was delinquent in its statutory obligation to remit sales tax for these reporting periods. To collect these outstanding tax liabilities, on January 17, 2007, Respondent issued Warrant No. 40490. The warrant stated that Taxpayer owed $11,471.59 in taxes, $2,060.00 in penalties, $1,623.22 in interest, and a filing fee of $20.00, for a total liability of $15,174.81. The warrant was recorded in the public records of Miami-Dade County on January 24, 2007. In an effort to compromise and resolve Taxpayer's outstanding tax liabilities, on April 25, 2008, Respondent entered into a Stipulated Time Payment Agreement ("STPA") with Taxpayer. The STPA was executed by Petitioner, as Taxpayer's President.3/ Under the STPA, Taxpayer committed to pay $13,526.72, consisting of $9,078.36 in taxes, $1,220.70 in penalties, $3,187.66 in interest, and $40.00 in fees. The STPA established an amortization schedule under which Taxpayer would pay a specified amount per month for a 13-month period. Pursuant to the STPA's terms, Taxpayer, by entering into the STPA, waived any and all rights to challenge the taxes and other liabilities assessed under the warrant giving rise to the STPA. Other key terms were that interest accrued at a rate of 12% per annum until the tax liability was paid; that Taxpayer agreed to meet each payment term on the amortization schedule; and that the STPA would become void if Taxpayer failed to follow the payment terms, file all tax returns that became due, or remit all taxes that became due and payable. The STPA further provided that Respondent was authorized to assess the responsible corporate officer a 200% penalty for failure to pay the taxes due. In accordance with the STPA's terms, Taxpayer made a $2,000 downpayment and three $450 monthly payments, for a total payment of $3,350.00. However, Taxpayer failed to make the stipulated monthly payment due on August 25, 2008. Thus, pursuant to the STPA's terms, it became void, and all taxes, penalties, interest, and fees owed under Warrant No. 40490 became due and payable as of that date. Section 213.75(2) establishes the order of priority for applying payments toward outstanding tax and other liabilities when a warrant has been filed and recorded. Specifically, payments are applied in the following order, with any remaining amounts applied to the subsequent obligation: (1) costs of recording the warrant; (2) administrative collection processing fee; (3) accrued interest; (4) accrued penalty; and (5) taxes due. Once Taxpayer breached the STPA, all payments made under the STPA were applied as payments on Warrant No. 40490 in accordance with section 213.75(2). After the $3,350.00 paid under the STPA was applied toward Warrant No. 40490, and $434.44 was paid on the warrant from a bank levy, Taxpayer continued to owe $9,172.57 in taxes, as well as interest and penalties from its outstanding obligations for November 2003, January 2004, June 2005, September 2005, January 2006, July 2006, September 2006, and November 2006. Pursuant to the terms of the warrant, interest on the amount of taxes due continued to accrue at a rate of 12% per annum. Taxpayer subsequently failed to remit its sales tax for December 2008. In response, Respondent levied Taxpayer's MetroBank account in the amount of $4,000.00 on February 18, 2009. Portions of this levy were applied toward previously- issued Warrant No. 110461 and toward Notices of Liability for outstanding taxes due for the December 2008 and September 2008 sales tax collection periods. In early 2009, Taxpayer and Respondent attempted to negotiate another STPA to again compromise the amount of taxes, interest, penalties, and fees that Taxpayer owed for the November 2003, January 2004, September 2005, January 2006, July 2006, September 2006, and November 2006 sales tax collection periods. However, the parties were unable to reach agreement, so Respondent continued its collection efforts. In March 2011, Respondent again attempted to work with Taxpayer to resolve its outstanding tax and other liabilities. To that end, Barbara Chin, a revenue specialist with Respondent, attempted to contact Petitioner by telephone. Her telephone messages went unanswered, so on March 22, 2011, Ms. Chin sent Petitioner a Demand to Appear, informing Petitioner that an appointment had been set with Respondent for April 4, 2011, for her to discuss Taxpayer's outstanding liabilities. The Demand to Appear specifically informed Petitioner that failure to comply with the letter would result in issuance of a tax warrant and any other legal action Respondent deemed necessary to collect the outstanding taxes. Petitioner failed to appear, so Ms. Chin made a follow-up telephone call to Petitioner, which also went unanswered. Taxpayer failed to remit its sales tax or file a return for April 2011. In response, Respondent issued Warrant No. 219580, for the amount of $1,500.00 due in taxes. The warrant was recorded in the Miami-Dade County public records on June 14, 2011. Petitioner subsequently contacted Ms. Chin to discuss Taxpayer's outstanding liabilities. At this time, Petitioner informed Ms. Chin that she was going to file for bankruptcy of Taxpayer. In response, Ms. Chin sent a letter to the NAFH Bank, with which Taxpayer had an account, freezing the transfer of Taxpayer's credits, debts, and personal property in the bank's control. On June 6, 2011, Petitioner sent Respondent a completed Closing or Sale of Business form, dated May 30, 2011, indicating that Taxpayer's business had been closed. Ms. Chin made two site visits to Taxpayer's location in or about May 2011. On her first visit, Ms. Chin discovered that a business bearing the name "Alexis Nicolette Design Studio and Boutique" was operating at this location, and that Petitioner was working there. Ms. Chin informed Petitioner that this entity needed to obtain its own sales tax number. On Ms. Chin's second visit, Petitioner showed her a certificate of registration for Alexis Nicolette Design Studio and Boutique having the same sales tax number but showing a different business location.4/ Ms. Chin again informed Petitioner that the owner of this entity needed to obtain a new sales tax number for the entity for the new location. Ms. Chin reviewed the Articles of Incorporation for Alexis Nicolette Design Studio and Boutique; this document showed this entity's business address as being the same as Taxpayer's address. Ms. Chin surmised that Petitioner was attempting to avoid Taxpayer's sales tax liabilities and obligations by operating Taxpayer's business under a new name. Respondent sent Petitioner a Notice of Assessment ("NOA") dated June 20, 2011, setting forth Taxpayer's outstanding tax liabilities and notifying her that Respondent was personally assessing a penalty against her for double the amount of tax owed by the Taxpayer. The NOA included the taxes owed under Warrant Nos. 40490 and 219580, and specifically stated that the penalty being assessed was for the period from November 2003 through April 2011. It is undisputed that between November 2003 and April 2011, Petitioner was the President of Taxpayer, and thus was the person having administrative control over the collection and payment of sales tax by Taxpayer for purposes of section 213.29. Petitioner's Defenses Against the Notice of Assessment The parties disagree on the amount of taxes that Taxpayer owes. Petitioner claims that Taxpayer owes approximately $194.00 in taxes, while Respondent claims that Taxpayer owes $9,182.60 in taxes. Petitioner claims that pursuant to section 213.29(1), Respondent incorrectly applied Taxpayer's payments made under the STPA, and that all payments Taxpayer made should have been applied first toward outstanding taxes, then interest, then penalties, then toward any applicable fees. This argument is the linchpin of Petitioner's position that the assessments in the June 20, 2011, NOA are incorrect. Petitioner also asserts that the April 2008 STPA is defective because it does not contain a detailed amortization schedule. Petitioner further claims that subsections 95.091(2) and (3)(a)1.a. time-bar Respondent from bringing an action to collect taxes that were due before June 21, 2006. Finally, Petitioner argues that under any circumstances, Respondent did not establish that she sought to willfully evade or defeat Taxpayer's tax liabilities, so she cannot be held personally liable for the penalty assessed under the NOA. Findings of Ultimate Fact In this proceeding, Respondent has the initial burden under section 120.80(14)(b)2., to establish a prima facie case showing that an assessment was made against Taxpayer, and that the assessment was factually and legally correct. Once Respondent meets this burden, the ultimate burden of persuasion shifts to Petitioner to prove, by a preponderance of the evidence, that Respondent's assessment is incorrect, departs from the requirements of law, or is not supported by any reasonable hypothesis of legality. Upon consideration of the credible and persuasive evidence in the record, it is determined that Respondent met its prima facie burden and that Petitioner failed to meet its ultimate burden of persuasion in this proceeding. Petitioner's position that all payments made by Taxpayer under the STPA, as well as payments made toward other warrants, should first have been applied toward its tax liability lacks merit. That argument may have had force if warrants against Taxpayer had not been filed and recorded. However, in this case, by the time Taxpayer began making payments toward its outstanding tax liabilities, those liabilities were the subject of Warrant No. 40490 and other warrants. Once Taxpayer breached the STPA, it became void and all liabilities under Warrant No. 40490 became immediately due. The payments under the STPA were applied to Warrant No. 40490, and other payments toward liabilities not addressed in the STPA made were applied to Warrant No. 40490 and other outstanding warrants, all in accordance with section 213.75(2). Thus, the payments were allocated first toward fees, then penalties, then interest, and, finally, taxes. Respondent established the correctness of amounts assessed, and Petitioner did not show that Respondent incorrectly applied the payments pursuant to section 213.75(2) or that the taxes and other liabilities set forth in the June 20, 2011, NOA were inaccurate. Petitioner's argument that the STPA was "defective" as lacking a detailed amortization schedule also lacks merit. The STPA contained a "Stipulation Amortization Table" that established a detailed 13-month repayment schedule specifying the date on which each payment was due and the specific amount due for each payment.5/ The NOA is not time-barred by section 95.091(2). That statute imposes a five-year limitation period for filing an action to collect taxes if a lien to secure the payment is not provided by law. However, this proceeding was brought against Petitioner to impose penalties for willful nonpayment of Taxpayer's tax liabilities; it is not an action against Taxpayer to collect taxes. Thus, by its plain terms, section 95.091(2) does not apply to this proceeding. Section 95.091(3)(a)1.a. also does not time-bar the NOA. That statute authorizes Respondent to determine and assess the amount of tax, penalty, or interest with respect to sales tax within three years after the date that the tax is due, any return with respect to such tax is due, or such return is filed. Here, Respondent filed warrants and assessments as far back as January 2003 to collect taxes owed by Taxpayer; all were filed well within any applicable three-year limitation period. The greater weight of the evidence also supports the determination that Petitioner, as the corporate officer required to collect and pay sales tax on behalf of Taxpayer, willfully attempted to evade or defeat payment of Taxpayer's tax obligations. Of particular significance is Petitioner's lack of responsiveness to Ms. Chin's multiple attempts to communicate with her to resolve Taxpayer's obligations, and her evasiveness regarding the relationship between Taxpayer and the business entity operating under a new name at Taxpayer's business address and using Taxpayer's sales tax collection number. The evidence gives rise to the inference that Petitioner was attempting to operate the same business under a new name to evade or defeat Taxpayer's outstanding tax liabilities.6/
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that Respondent, the Department of Revenue, enter a Final Order determining that Petitioner, Astrid Sarmentero, is liable for to Respondent for a penalty of $18,345.14. DONE AND ENTERED this 27th day of November, 2012, in Tallahassee, Leon County, Florida. S CATHY M. SELLERS 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 27th day of November, 2012.
The Issue The issue is whether Respondent's Certificate of Registration 46-8015920490-4 should be revoked for the reasons stated in an Administrative Complaint for Revocation of Certificate of Registration (Administrative Complaint) issued by the Department of Revenue (Department) on July 17, 2015.
Findings Of Fact The Department is the state agency charged with administering and enforcing the state revenue laws, including the laws related to the imposition and collection of sales and use taxes pursuant to chapter 212. Respondent is an active for-profit Florida corporation and a licensed motor vehicle dealer located at 613 Southwest Pine Island Road, Suite 14, Cape Coral, Florida. For purposes of collecting and remitting taxes, Respondent is a dealer as defined in section 212.06(2) and is required to comply with chapter 212. Annais German is the president and agent of the corporation. Respondent holds Certificate of Registration number 46- 8015920490-4. A certificate of registration is required in order to do business in the state and requires its holder to collect and remit sales tax pursuant to chapter 212. See § 212.05(1), Fla. Stat. A dealer must file with the Department sales tax returns and remit the tax collected on a monthly basis. See § 212.15(1), Fla. Stat. The Department is authorized to revoke a dealer's certificate of registration for failure to comply with state tax laws. See § 212.18(3)(e), Fla. Stat. Before revoking a certificate of registration, the Department must convene an informal conference that the dealer is required to attend. See § 213.692(1)(a), Fla. Stat. At the conference, the dealer may either present evidence to refute the Department's allegations of noncompliance or enter into a compliance agreement with the Department to resolve the dealer's failure to comply with chapter 212. Id. After a compliance agreement is executed by the dealer, the Department may revoke the certificate of registration if the dealer fails to comply with its terms and conditions. If a breach occurs, the entire amount is due and payable immediately. After Respondent failed to remit taxes that were due, the Department issued tax warrants and rendered judgment liens against Respondent in March, April, and December 2014 and April 2015. An informal conference was conducted with the taxpayer on April 7, 2015. Respondent was represented at the conference by Orlando German, who was given power of attorney by Annais German to represent the corporation. He signed an agreement, which required the entire balance to be paid by the end of the month. Two weeks later, Annais German requested that a new agreement be executed which allowed her to pay the delinquent taxes over a longer period of time. The Department agreed with her request. On April 23, 2015, Ms. German executed an Agreement reflecting that her corporation owes $7,297.52. See Pet'r Ex. 2, p. 1. The Agreement required Respondent to make a down payment of $2,500.00 on or before April 28, 2015, followed by ten monthly payments of 375.00 on the 28th of each month, and a final payment of $671.52 on April 28, 2016. Id. at p. 3. The Agreement required these payments to be made at the Fort Myers Service Center. Id. Payments required under a compliance agreement are always remitted to the local district office, rather than Tallahassee, to allow the Department to track the payment and ensure that it is being made in a timely fashion. The Agreement also required Respondent to "timely remit payment in full for all types of taxes, returns, and reports due from the Taxpayer for the duration of this agreement (and any extensions hereof) or for the next 12 months following the date of this agreement, whichever is longer." Id. at p. 1. In other words, besides making payments for past due taxes, interest, penalties, and fees, Respondent was required to timely file returns and pay current obligations as they became due during the life of the Agreement. The Agreement specifically provides that if the taxpayer fails to comply with the Agreement, revocation proceedings will be initiated without further notice. Respondent paid the $2,500.00 down payment one day late, but as of the date of the hearing in this case, no other payments for past or current obligations have been made. Returns for April and May 2015 were not timely filed. Respondent admits that in April 2015, at least three vehicles were sold, but its April return, when eventually filed, reported that no sales were made. Since filing its June and July 2015 returns, Respondent has filed no other returns. By failing to pay the monthly obligations required by the Agreement or any current obligations, Respondent has violated the Agreement.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order revoking Respondent's Certificate of Registration 46- 8015920490-4. DONE AND ENTERED this 25th day of February, 2016 in Tallahassee, Leon County, Florida. S D. R. ALEXANDER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 25th day of February, 2016. COPIES FURNISHED: Stephen M. Masterson, Esquire Office of the Attorney General Revenue Litigation Bureau The Capitol, PL-01 Tallahassee, Florida 32399-1050 (eServed) Annais German World Champions Auto, Inc. 429 Northwest 38th Place Cape Coral, Florida 33993-5536 Annais German World Champions Auto, Inc. 613 Southwest Pine Island Road, Suite 14 Cape Coral, Florida 33991-1950 George C. Hamm, Acting General Counsel Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668 (eServed) Marshall C. Stranburg, Executive Director Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668 (eServed)
The Issue Whether Petitioners are liable for sales and use tax, penalty, and interest as assessed by the Department of Revenue (the Department)?
Findings Of Fact Salma is a Florida corporation with its principal place of business at 2231 Del Prado Boulevard, Cape Coral, Florida, 33990. Gausia is a Florida corporation with its principal place of business at 11571 Gladiolus Drive, Fort Myers, Florida, 33908. Petitioners are in the business of operating gas stations with convenience stores. The Department is an agency of the State of Florida and is authorized to administer the tax laws of the State of Florida. Petitioners were selected for audit because their reported gross sales were less than the total cost of items purchased (inventory) for the audit period. The Department issued Salma and Gausia each a Notice of Intent to Conduct a Limited Scope Audit or Self-Audit, dated April 26, 2013, for sales and use tax, for the period February 1, 2010, through January 31, 2013 (collectively referred to as the Notices). The Notices requested that Petitioners provide the Department: (a) a list of all their vendors for alcohol, tobacco, soda, chips, candy, etc.; (b) their total purchases of alcohol and tobacco, by vendor, for the period July 2010 to June 2011; (c) copies of their federal tax returns for the examination period; (d) purchase receipts for all purchases for the last complete calendar month; and (e) daily register (Z tapes) for the last complete calendar month. The Notices gave Petitioners 60 days to gather the requested documents before the audit was to commence. The Notices also requested that Petitioners complete an attached Questionnaire and Self Analysis Worksheet. In response to the Notices, Petitioners requested a 30- day extension of time until July 18, 2013, to provide the requested documents and to designate a Power of Attorney. Petitioners did not provide the Department any books and records for inspection, nor did they complete and return the questionnaire and self analysis worksheets. As a result, the Department's auditor determined the sales tax due based upon the best information available. To calculate an estimated assessment of sales tax, the Department used the purchase data of Petitioners' wholesalers and distributors of alcoholic beverages and tobacco, for July 1, 2010, through June 30, 2011; the 2010 National Association of Convenience Stores average markups and in-store sales percentages of alcoholic beverage and tobacco products; and historical audit data. After reviewing the purchase data for July 1, 2010, through June 30, 2011, and for July 1, 2011, through June 30, 2012, the Department's auditor determined that the data was missing a few vendors. As a result, the Department's auditor estimated the amount of Petitioners' cigarette purchases, based on historical audit data that shows that cigarette sales are generally 4.31 times more than beer sales. The Department's auditor and audit supervisor testified that the estimated gross sales seemed reasonable and consistent with the national averages and the purchase data for July 1, 2011, through June 30, 2012. The Department estimated gross sales (i.e., the retail sale value of the goods sold) by marking up the taxable sales and exempt sales reported on the sales and use tax returns submitted to the Department by Petitioners. For example, for July 1, 2010, through June 30, 2011, Salma purchased beer from its wholesalers and distributors for $148,826.15, and the Department marked up the purchase price by 27 percent for a retail value of $189,009.21. For July 1, 2010, through June 30, 2011, Gausia purchased beer from its wholesalers and distributors for $132,138.65, and the Department marked up the purchase price by 27 percent for a retail value of $167,816.09. The Department's markup on the alcoholic beverage and tobacco products is reasonable because the Department's auditor testified that he used a combination of 2010 National Association of Convenience Stores average markups and the competitive pricing and information from audits of other convenience stores. The Department determined that the exemption ratio reported on the sales and use tax returns submitted to the Department by Petitioners was extremely high for their industry. The Department used an exemption ratio of 15 percent, based on historical audit data for the industry, to calculate Petitioners' estimated taxable sales. A review of Petitioners' sales and use tax returns revealed that they did not apply the tax bracket system to their taxable sales transactions, as required under sections 212.12(9) and (10), Florida Statutes. Instead, Petitioners remitted sales tax on their taxable sales based on their gross receipts at a flat tax rate. The Department's auditor testified that this method of reporting tax is inappropriate and does not accurately reflect the sales activity of the business. The Department calculated the average effective tax rate of 6.0856 percent, based on historical audit data for the industry. To calculate the estimated tax due, the Department multiplied the effective tax rate by the estimated taxable sales and gave Petitioners credit for any tax remitted with their tax returns. The Department issued Salma a Notice of Intent to Make Audit Changes, dated August 8, 2013, for audit number 200149872. The Department issued Gausia a Notice of Intent to Make Audit Changes, dated August 8, 2013, for audit number 200149749. The Department assessed Petitioners sales tax on their sales of alcoholic beverages and tobacco. The Notice of Intent to Make Audit Changes gave Petitioners 30 days to request a conference with the auditor or audit supervisor, to dispute the proposed changes. Petitioners did not make such a request. The Department issued a Notice of Proposed Assessment (NOPA) to Salma on March 6, 2014, for tax in the sum of $159,282.26; for penalty in the sum of $39,820.57; and interest as of March 6, 2013, in the sum of $27,772.36. The Department issued a NOPA to Gausia on March 6, 2014, for tax in the sum of $213,754.46; for penalty in the sum of $53,438.62; and interest as of March 6, 2013, in the sum of $36,921.79. Additional interest accrues at $30.55 per day until the tax is paid. The NOPAs became final assessments on May 5, 2014. After filing a request for an administrative hearing, Petitioners completed the Questionnaire and Self Analysis Worksheet and produced the following documents to the Department: (a) a list of all of their vendors for alcohol, tobacco, soda, chips, candy, etc.; (b) a list of vendors for alcohol and tobacco, for the examination period of July 2010 to June 2011; (c) a summary of their taxable sales, for the period February 2010 through December 2012; (d) copies of their federal tax returns, for the tax years 2010 through 2013; (e) copies of its purchase receipts for the months of July 2013; and (f) copies of their daily register (Z-tapes) for the month of July 2013. The Department's auditor testified that aside from being untimely, the records and information provided by Petitioners during these proceedings were not reliable because Petitioners did not provide any source documents that would allow the Department to reconcile the reported figures and confirm the supplied information. In addition, the purchase receipts and Z- tapes were not relevant because they were from outside of the audit period. The Z-tapes are also unreliable because the manager of the convenience store testified at the final hearing that employees purposely and routinely entered taxable sales into the cash registers as tax exempt sales. Petitioners argue that the Department did not use the best information available when estimating the taxes due. Petitioners claim that because their businesses are combination gas station/convenience stores, the national data for standalone convenience stores is inapplicable. However, notably absent from Petitioners' testimony or evidence was any alternative data upon which the Department could have relied for more accurate estimates.2/
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order denying Petitioners' requests for relief and assessing, in full, the Department's assessments of sales tax, penalty, and interest against both Salma and Gausia. DONE AND ENTERED this 9th day of January, 2015, in Tallahassee, Leon County, Florida. S MARY LI CREASY 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 9th day of January, 2015.
The Issue Whether the Department of Revenue's ("Department") assessment of tax, penalty, and interest against American Import Car Sales, Inc., is valid and correct.
Findings Of Fact The Department is the agency responsible for administering the revenue laws of the State of Florida, including the imposition and collection of the state's sales and use taxes. Petitioner, American Import Car Sales, Inc., is a Florida S-corporation with its principle place of business and mailing address in Hollywood, Florida. Petitioner, during the period of June 1, 2007, through May 31, 2010 ("assessment period"), was in the business of selling and financing new and used motor vehicles. On June 29, 2010, the Department issued to Petitioner a Notice of Intent to Audit Books and Records (form DR-840) for sales and use tax for the assessment period. Said notice informed Petitioner that the audit would begin on or around 60 days from the date of the notice and included an attachment identifying the records and information that would be reviewed and should be available when the audit commenced. Specifically, the Sales and Use Tax Information Checklist attachment requested the following: chart of accounts, general ledgers, cash receipts journals, cash disbursement journals, federal income tax returns, county tangible property returns, Florida Sales and Use Tax returns, sales journals, sales tax exemption certificates (resale certificates), sales invoices, purchase invoices, purchase journals, lease agreements for real or tangible property, depreciation schedules, bank and financial statements, detail of fixed asset purchases, and other documents as needed. On the same date, in addition to the Notice of Intent, the Department issued to Petitioner, inter alia, an Electronic Audit Survey, and a Pre-Audit Questionnaire and Request for Information. On September 17, 2010, the auditor requested the following records to review by October 4, 2010: (1) general ledger for the assessment period; (2) federal returns for 2007, 2008, and 2009; (3) lease agreement for the business location; (4) deal folders for the assessment period; (5) all expense purchase invoices for the assessment period; (6) all purchase invoices relating to assets added to the Depreciation Schedule during the assessment period; (7) resale/exemption certificates, shipping documents, and any other exempt sales documentation to support exempt sales during the assessment period; (8) bank statements for the assessment periods; and (9) all worksheets used to prepare monthly sales tax returns for the assessment period. On October 5, 2010, the auditor met with Petitioner's President Joe Levy, Petitioner's Secretary Joanne Clements, and Petitioner's Certified Public Accountant, Steve Levy. At that time, Petitioner provided a hard copy of the 2007 and 2008 general ledger and profit and loss statements. At that time, the auditor again advised Petitioner that the Department needed the federal returns, as well as the completed electronic audit survey and pre-audit questionnaire. On October 5, 2010, the Department and Petitioner signed a Consent to Extend the Time to Issue an Assessment or to File a Claim for Refund (form DR-872). The consent provided that assessments or claims for refunds may be filed at any time on or before the extended statute of limitations, December 31, 2011. On October 18, 2010, Petitioner provided the Department with the completed electronic audit survey and pre-audit questionnaire. Thereafter, Petitioner provided the Department with the following books and records: (1) 2009 "deal folders;" Petitioner's general ledger in Excel format for June 1, 2007, through December 31, 2010; (3) January 2009 through May 2010 bank statements; (4) a listing of exempt sales; and (5) lease agreements with attendant invoices. On August 25, 2011, the Department issued its assessment, entitled a Notice of Intent to Make Audit Changes (form DR-1215)("NOI"). Said notice provided that Respondent owed $2,324,298.42 in tax, $581,074.61 in penalties, and $515,117.04 in interest through August 25, 2011. The NOI addressed Petitioner's alleged failure to collect and remit tax on: (1) certain vehicle sales (audit Exhibit A01-Sales Tax Collected and Not Remitted)1/; (2) vehicle sales with no documentation regarding its exempt status (audit Exhibit A02-Disallowed Exempt Sales)2/; (3) motor vehicle sales where no discretionary tax was assessed (audit Exhibit A03- Discretionary Surtax)3/; and (4) unreported sales (audit Exhibit A04-Unreported Sales). The assessment also related to Petitioner's alleged failure to pay/accrue tax on: (1) taxable purchases (audit Exhibit B01-Taxable Purchases); (2) fixed assets (audit Exhibit B02-Fixed Assets); and (3) commercial rent (Exhibit B03-Commercial Realty). At hearing, Petitioner stipulated that the only component of the NOI remaining at issue pertains to audit Exhibit A04-Unreported Sales, as Petitioner has conceded A01, A02, A03, and all fee schedules. An understanding of audit Exhibit A04, and the assessment methodology employed by the auditor, is articulated in the Department's Exhibit MM, entitled Explanation of Items, which is set forth, in pertinent part, as follows: Reason for Exhibit: The records received for the audit were inadequate. The taxpayer provided bank statements for the period of January 2009 through May 2010. This period was deemed the test period for unreported sales. A review of the bank statements for the test period revealed that sales were underreported. This exhibit was created to assess for sales tax on unreported sales. Source of Information: Sales tax returns and Bank of America bank statements for the test period of January 2009 through May 2010; The Department of Motor Vehicles (DMV) [sic] was acquired for the period of June 2007 through May 2010. Description of Mathematical Adjustments: The bank statements were reviewed for the period of January 2009 through May 2010. Taxable Sales on sales tax returns, sales tax on sales tax returns, taxable sales on Exhibit on [sic] Exhibit A01, sales tax Exhibit A01 and Exempt Sales on Exhibit A02 was subtracted from Bank Deposits to arrive at unreported sales. See calculations on page 53. Unreported sales for the period of January 2009 through May 2010 were scheduled into this exhibit. A rate analysis of the DMV database resulted in an effective tax rate of 6.2689. Scheduled transactions were multiplied by the effective tax rate of 6.2689 to determine the tax due on the test period. A percentage of error was calculated by dividing the tax due by the taxable sales for each test period. The percentage of error was applied to taxable sales for each month of the audit period which resulted in additional tax due. The auditor's analysis of the test period, applied to the entire assessment period, resulted in a determination that Petitioner owed $1,599,056.23 in tax for unreported sales. On August 25, 2011, the auditor met with Joe and Steve Levy to discuss and present the NOI. At that time, Joe and Steve Levy were advised that Petitioner had 30 days to provide additional documents to revise the NOI. On September 28, 2011, the Department issued correspondence to Petitioner advising that since a response to the NOI had not been received, the case was being forwarded to Tallahassee for issuance of the Notice of Proposed Assessment ("NOPA")(form DR-831). On October 7, 2011, the Department issued the NOPA, which identified the deficiency resulting from an audit of Petitioner's books and records for the assessment period. Pursuant to the NOPA, Petitioner was assessed $2,324,298.42 in tax, $31,332.46 in penalty, and $534,284.54 in interest through October 7, 2011. The NOPA provided Petitioner with its rights to an informal written protest, an administrative hearing, or a judicial proceeding. On December 5, 2011, Petitioner filed its Informal Written Protest to the October 7, 2011, NOPA. The protest noted that the NOPA was "not correct and substantially overstated." The protest raised several issues: (1) that the calculation was primarily based upon bank statement deposits; (2) not all deposits are sales and sources of income; and (3) a substantial amount of the deposits were exempt sales and loans. The protest further requested a personal conference with a Department specialist. On January 10, 2013, Martha Gregory, a tax law specialist and technical assistance dispute resolution employee of the Department, issued correspondence to Petitioner. The documented purpose of the correspondence was to request additional information regarding Petitioner's protest of the NOPA. Among other items, Ms. Gregory requested Petitioner provide the following: [D]ocumentation and explanations regarding the source of income—vehicle sales, loan payments, etc.—for each deposit. For vehicle sales deposits, provide the customer name, vehicle identification number and amount; for loan payments, provide proof of an existing loan and the amount received from the borrower; and for any other deposits, provide documentation of the source of this income. A conference was held with Petitioner on February 7, 2013. At the conference, Ms. Gregory discussed the January 10, 2013, correspondence including the request for information. The Department did not receive the requested information. Following the conference, the Department provided the Petitioner an additional 105 days to provide documentation to support the protest. Again, Petitioner failed to provide the information requested. On June 14, 2013, the Department issued its Notice of Decision ("NOD"). The NOD concluded that Petitioner had failed to demonstrate that it was not liable for the tax, plus penalty and interest, on unreported sales as scheduled in audit Exhibit A04, Unreported Sales, as assessed within the compliance audit for the assessment period. Accordingly, the protested assessment was sustained. On July 15, 2013, Petitioner filed a Petition for Reconsideration to appeal the Notice of Decision ("POR"). The POR advanced the following issues: (1) the records examined were not the books and records of Petitioner; (2) the audit should be reduced because the auditor's methodology was incorrect; and the Petitioner should be allowed a credit for bad debts taken during the audit period. At Petitioner's request, on October 22, 2013, Petitioner and Ms. Gregory participated in a conference regarding the POR. At the conference, Petitioner requested a 30-day extension to provide documentation in support of Petitioner's POR. No additional documentation was subsequently provided by Petitioner. On April 29, 2014, the Department issued its Notice of Reconsideration ("NOR"). The NOR sustained the protested assessment. Petitioner, on June 30, 2014, filed its Petition for Chapter 120 Hearing to contest the NOR. Petitioner did not file its federal tax returns for the years 2008, 2009, and 2010 until after the Department issued the NOR. Indeed, the federal returns were not filed until June 3, 2014.4/ Ms. Kruse conceded that the auditor's assessment utilized Petitioner's bank statements to determine unreported sales; however, the auditor did not make any adjustments for "unusual items that would have been on the face of the bank statements." Ms. Kruse further acknowledged that the auditor's assessment does not reference Petitioner's general ledger information. Ms. Kruse acknowledged that, for several representative months, the general ledger accurately reported the deposits for the bank statements provided. When presented with a limited comparison of the bank statement and the general ledger, Ms. Kruse further agreed that, on several occasions, deposits noted on the bank statements were probably not taxable transactions; however, the same were included as taxable sales in the auditor's analysis. Ms. Kruse credibly testified that the same appeared to be transfers of funds from one account into another; however, because the Department only possessed the bank statements from one account, and never received the requested "back up information" concerning the other account, the Department could not discern the original source of the funds.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that The Department conduct a new assessment of Petitioner's sales and use tax based on a test or sampling of Petitioner's available records or other information relating to the sales or purchases made by Petitioner for a representative period, giving due consideration to Petitioner's available records, including Petitioner's general ledger, to determine the proportion that taxable retail sales bear to total retail sales. DONE AND ENTERED this 17th day of April, 2015, in Tallahassee, Leon County, Florida. S TODD P. RESAVAGE 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 17th day of April, 2015.
Findings Of Fact The parties stipulated to certain facts, legal issues, and their respective contentions, as follow: "1. At all times pertinent to this action, Petitioner Lawrence Nali Construction Company, Inc., was a Florida Corporation licensed and doing business in the State of Florida. At all times pertinent to this action, Respondent Department of Revenue, State of Florida, was an agency of the State of Florida exercising duties relating to the assessment and collection of sales and use taxes pursuant to Chapter 212, Florida Statutes. Respondent conducted an audit of tran- sactions involving Petitioner for the period November 1, 1972, through October 31, 1975. As a result of that audit, Respondent claims that as of September 17, 1976, the Petitioner had a balance due to the Depart- ment of Revenue of $17,383.58 in taxes, interest and penalties. The assessment indicating the above amount is attached as Exhibit A. Petitioner is in agreement that if the assessment is upheld, Petitioner owes to the Respondent the amount of $17,383.58 plus interest calculated to date of payment to Respondent. The tax assessment in this case is based upon two factual situations: Petitioner, manufactured and installed asphaltic concrete from raw material at a rate certain per ton determined by bid, as an improvement to the real property of political entities consisting of cities, towns, municipalities, counties, school boards, junior colleges and others. Petitioner also hauled the asphalt to the job cite (sic) at a fixed ton/mile rate determined by bid. Petitioner, as a subcontractor, manu- factured and installed asphaltic concrete from raw material at a rate certain per ton determined by bid, as an improvement to the real property of political entities above described. The general contractor contracted with the political entities in various fashions but the Petitioner's duties were always the same and included manufacture, installation and hauling of asphaltic concrete based on a rate certain per ton and per ton mile. The issue in this case is whether the Respondent is correct in contending that the Petitioner must pay a sales and use tax on the produced asphalt which it uses in the performance of the construction contract jobs described in paragraph 6. It is agreed by the parties that no sales or use tax was remitted, by the Petitioner on the produced asphalt. It is agreed by the parties that no sales or use tax was paid by the instant customers to the Petitioner. It is Respondent's contention that, pursuant to the above-cited rules, the Peti- tioner is required to pay sales or use tax on the produced asphalt which is used to construct real property pursuant to a con- tract described in Rule 12A-1.51(2)(a), F.A.C. It is Petitioner's contention that the above-cited rules do not apply in the instant case since the customers involved in the instant fact situations are political subdivision or because the transaction was of the type described by Rule 12A-1.51(2)(d), F.A.C. Petitioner is entitled to rely on the earlier 1967 audit by Respondent because neither Petitioner's method of doing business, nor the law, has changed materially since 1967. Respondent agrees that this is an issue but fails to agree that Petitioner is so entitled to rely." All purchase orders or invitations for bid received by petitioner from political subdivisions stated that the entity was exempt from federal and state sales taxes and that such taxes should not be included in the bid. Typical bid forms entitled "Specifications for Asphaltic Concrete" called for a lump-sum price per ton for delivery and placement of the material by the vendor plus a sum per ton per mile for transportation costs. No breakdown of amounts for the cost of materials and cost of installation is reflected in the bid documents. (Testimony of Cowan, Cook, Exhibits 3, 7 (late filed)) Respondent audited petitioner's operations in 1967 and, although it had had previous transactions with governmental entities prior to that date, no assessment for back taxes was issued for failure to pay sales tax on such transactions nor was petitioner advised to do so in the future by state officials. After 1967, petitioner did not seek information from respondent concerning the subject of sales tax. As a consequence of the 1967 audit, petitioner believed that it was unnecessary to charge or pay sales tax on such transactions with political subdivisions. (Testimony of Cowan, Cook) As of April 1, 1977, Brevard County had a population of over 250,000. Although it is a large county in terms of size, respondent has only two auditors in the sales tax division to cover the entire county. (Testimony of Alberto, Cowan, Exhibit 4)
Recommendation That the petitioner Lawrence Nali Construction Company, Inc. be held liable for sales tax, penalty, and interest under Chapter 212, Florida Statutes, as set forth in respondent's proposed assessment. DONE and ENTERED this 9th day of September, 1977, in Tallahassee, Florida. THOMAS C. OLDHAM Hearing Officer Division of Administrative Hearings 530 Carlton Building Tallahassee, Florida 32304 COPIES FURNISHED: Daniel Brown, Esquire Department of Legal Affairs The Capitol Tallahassee, Florida 32304 Andrew A. Graham, Esquire Post Office Box 1657 Cocoa, Florida 32922
