The Issue The issue is whether Petitioner owes the taxes, interest, and penalties assessed by the Department of Revenue based upon its audit of Petitioner for the period of August 1, 1996, through July 31, 2001.
Findings Of Fact Based upon the testimony and evidence received at the hearing, the following findings are made: Petitioner is a Florida corporation engaged in the business of selling and installing floor covering materials, such as carpet and tile. Petitioner's business is located in Hillsborough County, Tampa, Florida. Petitioner sales fall into two basic categories: "cash and carry sales" and "installation sales." The "cash and carry sales" are retail sales of floor covering materials to customers that come into Petitioner's store. These sales do not involve any installation work by Petitioner. The "installation sales" are sales in which Petitioner installs the floor covering material in the customer's home or business. These sales are performed pursuant to a lump-sum contract which incorporates the price of the installation and the price of the floor covering materials being installed. Petitioner purchases the floor covering materials from suppliers and distributors. Those purchases become part of the inventory from which Petitioner makes its "installation sales." Petitioner also makes general purchases of goods and services necessary for the day-to-day operation of its business. These purchases include items such as cleaning supplies and vehicle repairs. Petitioner made several fixed-assets purchases during the audit period for use in its business. It purchased a word processor in August 1996, and it purchased equipment and fixtures in December 1996. On those occasions that Petitioner collected sales tax from its customers on the "cash and carry sales" or paid sales tax on its inventory purchases and general purchases, it remitted or reported those amounts to the Department. However, as discussed below, Petitioner did not collect the full amount of sales tax due on each sale, nor did it pay the full amount of sales tax due on each purchase. The Department is the state agency responsible for administering Florida's sales tax laws. The Department is authorized to conduct audits of taxpayers to determine their compliance with the sales tax laws. By letter dated September 10, 2001, the Department notified Petitioner of its intent to conduct a sales tax audit of Petitioner's records for the period of August 1, 1996, through July 31, 2001. The audit was conducted by David Coleman, a tax auditor with seven years of experience with the Department. Petitioner designated its certified public accountant, P.J. Testa, as its representative for purposes of the Department's audit. That designation was memorialized through a power of attorney form executed by Petitioner on March 5, 2002. Mr. Coleman communicated with Mr. Testa throughout the course of the audit. Mr. Coleman conducted the audit using a sampling methodology agreed to by Mr. Testa on behalf of Petitioner. Pursuant to that methodology, Mr. Coleman conducted a comprehensive review of Petitioner's year-2000 purchase and sales invoices and extrapolated the results of that review to the other years in the audit period. The sampling methodology was used because of the volume of records and transactions during the audit period and because of the unavailability of all of the records for the audit period. The year 2000 was chosen as the sample period because Petitioner's records for the other years in the audit period were incomplete or unavailable. Mr. Coleman's audit of the year-2000 invoices focused on three broad types of transactions. First, he reviewed invoices of Petitioner's retail "cash and carry sales." Second, he reviewed the invoices through which Petitioner purchased the floor covering materials that it later sold as part of its "installation sales." Third, he reviewed the invoices through which Petitioner made general purchases of tangible personal property used in the day-to-day operation of its business. The sampling methodology was used for the audit of Petitioner's "cash and carry sales," the inventory purchases related to the "installation sales," and the general purchases. The methodology was not used for the audit of Petitioner's fixed-asset purchases; Mr. Coleman reviewed all of the available records for the fixed-asset purchases during each year of the audit period. Mr. Coleman's audit of Petitioner's retail "cash and carry sales" identified 29 invoices during year-2000 on which no sales tax or less than the full sales tax was paid by the customer. Those invoices amounted to $17,451.30, on which $1,178.11 in total sales tax was due, but only $552.97 was paid. As a result, Mr. Coleman's audit identified a sales tax deficiency of $625.14 for the retail sales during the sample period. Mr. Coleman's audit of Petitioner's purchases of floor covering that was later sold in the "installation sales" identified a considerable number of purchases during year-2000 on which no sales tax or less than the full sales tax was paid by Petitioner to the supplier or distributor of the materials. Those purchases amounted to $123,398.52, but only $123,397.80 of that amount was taxable. On the taxable amount, $8,330.07 in total sales tax was due, but only $6,810.68 was paid. As a result, Mr. Coleman's audit identified a sales tax deficiency of $1,519.41 for Petitioner's inventory purchases during the sample period. Mr. Coleman's audit of Petitioner's "general purchases" identified 10 sales during year-2000 on which sales tax was not paid. Those invoices amounted to $2,914.76, on which $196.77 in sales tax was due, but none of which was paid. As a result, Mr. Coleman's audit identified a sales tax deficiency of $196.77 for the general purchases during the sample period. Mr. Coleman's audit of Petitioner's fixed-asset purchases identified only two transactions during the entire audit period on which Petitioner did not pay the full sales tax. Those transactions amounted to $5,078.92, on which $330.14 in total sales tax was due, but none of which was paid. As a result, Mr. Coleman's audit identified a sales tax deficiency of $330.14 for the fixed-asset purchases during the audit period. The tax deficiencies calculated by Mr. Coleman for year-2000 for each category described above take into account any sales tax collected by Petitioner from its customers or paid by Petitioner to its vendors. After Mr. Coleman computed the tax deficiencies based upon his audit of the year-2000 records, he calculated a "percentage of error" for each category of sales/purchases. The percentage of error is the ratio used to extrapolate the results of the audit of the year-2000 records over the remainder of the audit period. No percentage of error was calculated for the fixed-asset purchases because Mr. Coleman reviewed the available records for those purchases over the entire audit period, not just year-2000. The percentage of error was calculated by dividing the sales tax deficiency identified in a particular category for the year-2000 by the total sales/purchases in that category for the year-2000. For the year-2000, Petitioner had retail sales of $1,143,182.45; general purchases of $21,254.88; and inventory purchases of $1,214,016.24. As a result, the applicable percentages of error were 0.000547 ($625.14 divided by $1,143,182.45) for the retail sales; 0.009258 ($196.77 divided by $21,254.88) for the general purchases; and 0.001252 ($1,519.41 divided by $1,214,016.24) for the inventory purchases. The percentages of error were then multiplied by the total sales in the applicable category for the entire audit period to calculate a total tax deficiency in each category. Petitioner's total retail sales over the audit period were $4,455,373.40. Therefore, the total tax deficiency calculated for that category was $2,437.12 (i.e., $4,455,373.40 multiplied by 0.000547). Petitioner's total general purchases over the audit period were $110,741.49. Therefore, the total tax deficiency calculated for that category was $1,025.25 (i.e., $110,741.49 multiplied by 0.009258). Petitioner's total inventory sales over the audit period were $3,130,882.10. Therefore, the total tax deficiency calculated for that category was $3,919.86 (i.e., $3,130,882.10 multiplied by 0.001252). Petitioner's total tax deficiency was computed by adding the deficiencies in each category, as follows: Retail Sales $2,437.12 General Purchases 1,025.25 Inventory Purchases 3,919.86 Fixed-asset purchases 330.14 TOTAL $7,712.37 Of that total, $6,863.02 reflects the state sales tax deficiency; $313.77 reflects the indigent care surtax deficiency; and $535.58 reflects the local government infrastructure surtax deficiency. The sales tax rate in effect in Hillsborough County during the audit period was 6.75 percent. The state sales tax was six percent; the remaining 0.75 percent was for county surtaxes, namely the local government infrastructure surtax and the indigent care surtax. That rate was used by Mr. Coleman in calculating the tax deficiencies described above. On October 4, 2002, Mr. Coleman hand-delivered the Notice of Intent to Make Audit Change (NOI) to Petitioner. The NOI is the end-product of Mr. Coleman's audit. The NOI identified the total tax deficiency set forth above, as well as a penalty of $3,856.26, which is the standard 50 percent of the tax deficiency amount, and interest of $2,561.63, which is calculated at a statutory rate. The NOI included copies of Mr. Coleman's audit work- papers which showed how the taxes, penalties, and interest were calculated. The NOI also included a copy of the "Taxpayers' Bill of Rights" which informed Petitioner of the procedure by which it could protest the audit results reflected on the NOI. On October 29, 2002, the Department issued three NOPAs to Petitioner. A separate NOPA was issued for each type of tax -- i.e., sales tax, indigent care surtax, and local government infrastructure surtax. The cumulative amounts reflected on the NOPAs were the same as that reflected on the NOI, except that the interest due had been updated through the date of the NOPAs. Interest continues to accrue on assessed deficiencies at a cumulative statutory rate of $1.81 per day. The NOPAs were sent to Petitioner by certified mail, and were received by Petitioner on November 1, 2002. By letter dated November 5, 2002, Petitioner protested the full amount of the taxes assessed on the NOPAs and requested a formal administrative hearing. The letter was signed by Mr. Testa on Petitioner's behalf. The protest letter does not allege that the methodology used by Mr. Coleman was improper or that the results of the audit were factually or legally erroneous. Instead, the protest letter states that Petitioner was disputing the results of the audit because it was "following procedures set forth by an agent from a previous audit who established the manner in which [Petitioner was] to compute sales tax on the items being questioned by the current auditor." Mr. Testa made similar comments to Mr. Coleman during the audit. When Mr. Coleman requested documentation from Mr. Testa to corroborate those comments about the procedures allegedly established by the prior auditor, Mr. Testa was unable to provide any such documentation. The record of this proceeding is similarly devoid of evidence to support Petitioner's allegation on this point. The record does not contain any evidence to suggest that Petitioner ever modified or revoked Mr. Testa's authority to represent it in connection with the audit or this protest, which Mr. Testa initiated on Petitioner's behalf. Petitioner, through Mr. Testa, had due notice of the date, time, and location of the final hearing in these cases. Neither Mr. Testa, nor anyone else on Petitioner's behalf, appeared at the final hearing.
Recommendation Based upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department of Revenue issue a final order imposing the taxes, interest, and penalties against Petitioner in the full amounts set forth in the three Notices of Proposed Assessment dated October 28, 2002. DONE AND ENTERED this 30th day of December, 2003, in Tallahassee, Leon County, Florida. S T. KENT WETHERELL, II Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 30th day of December, 2003.
Findings Of Fact At all times pertinent to this cause, Robert W. Pope, has been the holder of license no. 62-600, series 4-COP, SRX, held with the State of Florida, Division of Beverage to trade as The Wedgewood Inn, located at 1701, 4th Street, South, St. Petersburg, Pinellas County, Florida. When the Respondent, Pope, began to operate the licensed premises he was given a registration sales tax number by the State of Florida, Department of Revenue. This number was provided in accordance with 212, F.S. That law required the remittance of the collected sales tax on a month to month basis, the period beginning with the first day of the month and ending with the last day of the month. The remittance was due on the first day of the following month and payable by the 20th day of the following month. Failure to pay by the 20th would result in a 5 percent penalty and 1 percent interest per month. The sales tax remittance due from the licensed premises for September, 1976 through December, 1976 was not made and a lien was recorded to aid collection of the tax. Payment of the amount of $4,500.00 was paid in February or March, 1977 to satisfy the Department of Revenue lien claims. At present all taxes due and owing under 212, F.S. are current. The above facts established that the Respondent failed to comply with the provisions of 212, F.S. pertaining to the remittance of sales tax from the Respondent to the State of Florida, Department of Revenue. This violation, thereby subjects the Respondent to the possible penalties of 561.29, F.S.
Recommendation It is recommended that the Respondent, Robert W. Pope, be required to pay a civil penalty in the amount of $500.00 or have the license no. 62-600, series 4- COP, SRX, suspended for a period of 20 days. DONE AND ENTERED this 28th day of July, 1977, in Tallahassee, Florida. CHARLES C. ADAMS Hearing Officer Division of Administrative Hearings 530 Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: William Hatch, Esquire Division of Beverage 725 South Bronough Street Tallahassee, Florida 32304 Robert W. Pope, Esquire 611 First Avenue, North St. Petersburg, Florida 33701
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: Petitioner, a corporation headquartered in Charlotte, North Carolina, is in the business of operating movie theatres both within and without the State of Florida. At these theatres Petitioner Operates concession stands which sell both candy items and drinks in various sizes at different prices to persons who frequent the theatres. For the period of time from September, 1985 through May, 1985, Petitioner remitted to the Department of Revenue sales tax on the total taxable value of all taxable items sold at its concession stands in all of its Florida theatres, in accordance with the presumptive effective rate of tax of 5.63 percent contained in Rule 12A-1.11(37), Florida Administrative Code. As a result of an audit for a previous period dated October 1, 1982, Petitioner remitted to the Department of Revenue the amount of $10,637.00 for sales tax on taxable items sold at its concession stands during this audit period in accordance with the presumptive effective tax rate of 4.5 percent as contained in Rule 12A-1.11(37), Florida Administrative Code during the audit period. On August 15, 1985, Petitioner filed with the Department of Revenue, as agent for Respondent, two (2) applications for sales tax refund in the amount of $16,876.52 and $10,637.00. The applications were dated August 13, 1985, and were timely filed. During the refund periods at issue in this matter, the Petitioner: (a) posted and charged flat prices for the various items offered for sale, which prices included sales tax (b) kept records of daily and weekly sales of taxable items at each of its Florida theatres (c) kept records of daily attendance at each movie shown by each Florida theatre and (d) kept records of weekly calculations, through inventory analysis, of sales of drinks and candy items, including the number, size and price of each item sold at each of its Florida theatre. During the refund periods at issue in this matter, the Petitioner did not maintain cash registers at its concession stands in its Florida theatres and did not maintain records made contemporaneously with the sale of taxable items from the concession stands which separately itemized the amounts of sales tax collected on each sale transaction occurring at the theatres' concession stands. Rather, Petitioner chose, for its own convenience, to operate a "cash box" operation at each of its concession stands in its Florida theatres and willingly remitted sales tax to the Department of Revenue pursuant to the presumptive effective tax rate contained in Rule 12-1.11(37), Florida Administrative Code for the relevant periods. In April, 1985, Petitioner placed computerized cash registers in each of its Florida theatre concession stands. These cash registers provided tapes of each individual transaction each day, specifically recording each taxable and nontaxable sale and the amount of sales tax due on each taxable sale with a daily summation on each tape at each theatre. Rule 12A-1.11(37), Florida Administrative Code, requires concessionaires such as Petitioner to remit sales tax at a rate of 5.63 percent of taxable sales under the present 5 percent statutory sales tax schedule and at 4.5 percent of taxable sales under the previous statutory sales tax schedule unless a concessionaire, through its records, shows another effective rate by "proof to the contrary". Petitioner produced an effective tax rate of 5.13 percent for the month of April 1985, for all its Florida theatres by dividing the total sales tax collected during April, 1985 by the total taxable sales during April, 1985, as evidenced by the cash register tapes from all of Petitioner's concession stands in Florida. Petitioner then used that tax rate as a base to retroactively reconstruct an effective tax rate for the refund periods by assuming that the product sales mix (product mix of products sold) and the transactional sales mix (the number of items purchased together in a single transaction by a customer) experienced during the refund periods were the same as that experienced during the month of April, 1985. There was no competent evidence that the product sales mix or the transactional sales mix experienced during the refund periods were the same as that experienced during the nonth of April, 1985. There is insufficient evidence in the record to support Petitioner's reconstructed effective tax rates that were used to calculate the refunds. Therefore, Petitioner has failed to show "proof to the contrary" that its reconstructed effective tax rates are correct or that the presumptive effective tax rate contained in Rule 12A-1.11(37), Florida Administrative Code were incorrect for the refund periods at issue in this matter.
Recommendation Based on the findings of fact and conclusions of law recited herein, it is RECOMMENDED that the Comptroller enter his final order DENYING Petitioner's refund applications. Respectfully submitted and entered this 25th day of September, 1986, in Tallahassee, Leon County, Florida. WILLIAM R. CAVE Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 25th day of September, 1986.
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 contested and unpaid portions of the tax, penalty and interest assessment issued against Petitioners as a result of Audit No. 9317210175 should be withdrawn as Petitioners have requested?
Findings Of Fact Based upon the evidence adduced at hearing, and the record as a whole, the following Findings of Fact are made: Shuckers is an oceanfront restaurant and lounge located at 9800 South Ocean Drive in Jensen Beach, Florida. In November of 1992, Petitioner Mesa's brother, Robert Woods, Jr., telephoned Mesa and asked her if she wanted a job as Shuckers' bookkeeper. Woods had been the owner of Shuckers since 1986 through his ownership and control of the corporate entities (initially Shuckers Oyster Bar Too of Jensen Beach, Florida, Inc., and then NAT, Inc.) that owned the business. Mesa needed a job. She therefore accepted her brother's offer of employment, notwithstanding that she had no previous experience or training as a bookkeeper. When Mesa reported for her first day of work on November 19, 1992, she learned that Woods expected her to be not only the bookkeeper, but the general manager of the business as well. Mesa agreed to perform these additional responsibilities. She managed the day-to-day activities of the business under the general direction and supervision of Woods. After a couple of weeks, Woods told Mesa that it would be best if she discharged her managerial responsibilities through an incorporated management company. Woods had his accountant draft the documents necessary to form such a corporation. Among these documents were the corporation's Articles of Incorporation. Mesa executed the Articles of Incorporation and, on December 3, 1992, filed them with the Secretary of State of the State of Florida, thereby creating Petitioner TAN, Inc. TAN, Inc.'s Articles of Incorporation provided as follows: The undersigned subscribers to these Articles of Incorporation, natural persons competent to contract, hereby form a corporation under the laws of the State of Florida. ARTICLE I- CORPORATE NAME The name of the corporation is: TAN, INC. ARTICLE II- DURATION This corporation shall exist perpetually unless dissolved according to Florida law. ARTICLE III- PURPOSE The corporation is organized for the purpose of engaging in any activities or business permitted under the laws of the United States and the State of Florida. ARTICLE IV- CAPITAL STOCK The corporation is authorized to issue One Thousand (1000) shares of One Dollar ($1.00) par value Common Stock, which shall be designated "Common Shares." Article V- INITIAL REGISTERED OFFICE AND AGENT The principal office, if known, or the mailing address of this corporation is: TAN, INC. 9800 South Ocean Drive Jensen Beach, Florida 34957 The name and address of the Initial Registered Agent of the Corporation is: Linda A. W. Mesa 9800 South Ocean Drive Jensen Beach, Florida 34957 ARTICLE VI- INITIAL BOARD OF DIRECTORS This corporation shall have one (1) director initially. The number of directors may be either increased or diminished from time to time by the By-laws, but shall never be less than one (1). The names and addresses of the initial directors of the corporation are as follows: Linda A. W. Mesa 9800 South Ocean Drive Jensen Beach, Florida 34957 ARTICLE VII- INCORPORATORS The names and addresses of the incorporators signing these Articles of Incorporation are as follows: Linda A. W. Mesa 9800 South Ocean Drive Jensen Beach, Florida 34957 On the same day it was incorporated, December 3, 1992, TAN, Inc., entered into the following lease agreement with the trust (of which Woods was the sole beneficiary) that owned the premises where Shuckers was located: I, Michael Blake, Trustee, hereby lease to Tan, Inc. the premises known as C-1, C-2, C-3, C-4, 9800 South Ocean Drive, Jensen Beach, Florida for the sum of $3,000.00 per month. This is a month to month lease with Illinois Land Trust and Michael Blake, Trustee. Mesa signed the agreement in her capacity as TAN, Inc.'s President. She did so at Woods' direction and on his behalf. No lease payments were ever made under the agreement. 3/ The execution of the lease agreement had no impact upon Shuckers. Woods remained its owner and the person who maintained ultimate control over its operations. At no time did he relinquish any part of his ownership interest in the business to either Mesa or her management company, TAN, Inc. Mesa worked approximately 70 to 80 hours a week for her brother at Shuckers doing what he told her to do, in return for which she received a modest paycheck. Woods frequently subjected his sister to verbal abuse, but Mesa nonetheless continued working for him and following his directions because she needed the income the job provided. As part of her duties, Mesa maintained the business' financial records and paid its bills. She was also required to fill out, sign and submit to Respondent the business' monthly sales and use tax returns (hereinafter referred to as "DR- 15s"). She performed this task to the best of her ability without any intention to defraud or deceive Respondent regarding the business' tax liability. The DR-15s she prepared during the audit period bore NAT, Inc.'s Florida sales and use tax registration number. On the DR-15 for the month of December, 1992, Mesa signed her name on both the "dealer" and "preparer" signature lines. Other DR-15s were co-signed by Mesa and Woods. In April of 1993, Woods told Mesa that she needed to obtain a Florida sales and use tax registration number for TAN, Inc., to use instead of NAT, Inc.'s registration number on Shuckers' DR-15s. In accordance with her brother's desires, Mesa, on or about May 14, 1993, filed an application for a Florida sales and use tax registration number for TAN, Inc., which was subsequently granted. On the application form, Mesa indicated that TAN, Inc. was the "owner" of Shuckers and that the application was being filed because of a "change of ownership" of the business. In fact, TAN, Inc. was not the "owner" of the business and there had been no such "change of ownership." By letter dated June 22, 1993, addressed to "TAN INC d/b/a Shuckers," Respondent gave notice of its intention to audit the "books and records" of the business to determine if there had been any underpayment of sales and use taxes during the five year period commencing June 1, 1988, and ending May 31, 1993. The audit period was subsequently extended to cover the six year period from June 1, 1987 to May 31, 1993. Relying in part on estimates because of the business' inadequate records, auditors discovered that there had been a substantial underpayment of sales and use taxes during the audit period. The auditors were provided with complete cash register tapes for only the following months of the audit period: June, July, August and December of 1992, and January, February, March, April and May of 1993. A comparison of these tapes with the DR-15s submitted for June, July, August and December of 1992, and January, February, March, April and May of 1993 revealed that there had been an underreporting of sales for these months. Using the information that they had obtained regarding the three pre- December, 1992, months of the audit period for which they had complete cash register tapes (June, July and August of 1992), the auditors arrived at an estimate of the amount of sales that had been underreported for the pre- December, 1992, months of the audit period for which they did not have complete cash register tapes. The auditors also determined that Shuckers' tee-shirt and souvenir sales, 4/ Sunday brunch sales, cigarette vending sales, vending/amusement machine location rentals 5/ and tiki bar sales that should have been included in the sales reported on the DR-15s submitted during the audit period were not included in these figures nor were these sales reflected on the cash register tapes that were examined. According of the "Statement of Fact" prepared by the auditors, the amount of these unreported sales were determined as follows: TEE-SHIRT SALES: Sales were determined by estimate. This was determined to be $2,000/ month. No records were available and no tax remitted through May, 1993. SUNDAY BRUNCH SALES: Sales were determined by estimate. This was determined to be 100 customers per brunch per month (4.333 weeks). No audit trail to the sales journal was found and no records were available. CIGARETTE VENDING SALES: The estimate is based on a review of a sample of purchases for the 11 available weeks. The eleven weeks were averaged to determine monthly sales at $3/pack. VENDING MACHINE LOCATION RENTAL REVENUE: The revenue estimate is based on a review of a one month sample. TIKI BAR SALES: The sales estimate is based on a review of infrequent cash register tapes of February, 1993. The daily sales was determined by an average of the sample. The number of days of operation per month was determined by estimate. In addition, the auditors determined that TAN, Inc. had not paid any tax on the lease payments it was obligated to make under its lease agreement with Illinois Land Trust and Michael Blake, Trustee, nor had any tax been paid on any of the pre-December, 1992, lease payments that had been made in connection with the business during the audit period. According to the "Statement of Fact" prepared by the auditors, the amount of these lease payments were determined as follows: The estimate is based on 1990 1120 Corporate return deduction claimed. This return is on file in the Florida CIT computer database. The 1990 amount was extended through the 6/87 - 11/92 period. For the period 12/92 - 5/93 audit period, TAN's current lease agreement of $3,000/month was the basis. No documentation was produced during the audit supporting any the sales tax exemptions that the business had claimed during the audit period on its DR-15s. 6/ Accordingly, the auditors concluded that the sales reported as exempt on the business' DR-15s were in fact taxable. Using records of sales made on a date selected at random (February 1, 1993), the auditors calculated effective tax rates for the audit period. They then used these effective tax rates to determine the total amount of tax due. An initial determination was made that a total of $201,971.71 in taxes (not including penalties and interest) was due. The amount was subsequently lowered to $200,882.28. On or about December 22, 1993, TAN, Inc., entered into the following Termination of Lease Agreement with Ocean Enterprises, Inc.: TAN, Inc., a Florida corporation, hereby consents to termination of that certain lease of the premises known as C-1, C-2, C-3 and C-4 of ISLAND BEACH CLUB, located at 9800 South Ocean Drive, Jensen Beach, Florida, dated December 3, 1992, acknowledges a landlord's lien on all assets for unpaid rent; and transfers and sets over and assigns possession of the aforesaid units and all of its right, title and interest in and to all inventory, equipment, stock and supplies located on said premises 7/ in full satisfaction of said unpaid rent; all of the foregoing effective as of this 22nd day of December, 1993. FOR AND IN CONSIDERATION of the foregoing termin- ation of lease, OCEAN ENTERPRISES, Inc., a Florida corporation, hereby agrees to pay Linda Mesa, each month all of the net revenues of the operation of the bar and restaurant located on said premises, up to the sum of $15,000.00, for sales tax liability asserted against TAN, Inc. or Linda A. W. Mesa based upon possession or ownership of said premises or any of the assets located thereon, plus attorney's fees incurred in connection with defending or negotiating settlement of any such liability. Net revenue shall mean gross revenue, less operating expenses, includ- ing, but not limited to, rent, up to the amount of $5,000.00 per month, costs of goods sold, utilities, payroll and payroll expense and insurance. OCEAN ENTERPRISES, Inc. represents that it has entered into a lease of said premises for a term of five years commencing on or about December 22, 1993, pursuant to the terms and conditions of which OCEANFRONT [sic] ENTERPRISES, Inc. was granted the right to operate a restaurant and bar business on said premises. Ocean Enterprises, Inc., leases the property from Island Beach Enterprises, which obtained the property through foreclosure. TAN, Inc., has been administratively dissolved.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Department of Revenue enter a final order withdrawing the contested and unpaid portions of the assessment issued as a result of Audit No. 9317210175, as it relates to TAN, Inc., and Linda A. W. Mesa. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 27th day of June, 1995. STUART M. LERNER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 27th day of June, 1995.
The Issue The issue herein is whether the Department of Revenue's sales tax assessment against West Broward Chamber of Commerce as a result of the purchase of promotional books by the Chamber from Creative Public Relations and Marketing, Inc., is valid.
Findings Of Fact The West Broward Chamber of Commerce (Petitioner) entered into an oral contract with Mr. Randy Avon, a representative of Creative Public Relations, to purchase a promotional booklet pertaining to the West Broward area for distribution to the public. (Petitioner's Exhibit #1). Creative Public Relations in turn contracted with International Graphics to print the booklet. Mr. Bernard Fox, the Department of Revenue's (Respondent Area Manager in the Fort Lauderdale office and Mr. James W. Darrow, who worked with International Graphics during the time the transaction in question took place, testified and established that Mr. Randy Avon secured a sales tax number for the purchase of the promotional books in issue and presented the sales tax number to International Graphics. International Graphics sold the books to Mr. Avon for resale, without tax. The Department of Revenue issued an assessment against Petitioner for sales tax, penalty and interest due on the purchase of the books in question by Petitioner in the total amount of $1,307.56. Evidence reveals that said assessment was due as of December 20, 1978, and that since that time interest is accruing at a daily rate of $.31. This assessment was based on a total purchase price of $24,214.10, which, according to Mr. Fox and the statements contained in Respondent's Exhibit #1, was the price that Mrs. Gail Duffy, Petitioner's Executive Director informed the Respondent that the Chamber paid for the promotional booklets. Petitioner's treasurer, Helen Kerns, also testified that the total purchase price paid by Petitioner for the books was $22,104 and that part of the purchase price was paid directly to Creative Public Relations due to a dispute with an officer of the contracting entity, International Graphics. Mrs. Kerns testified that commissions were, however, paid by the Petitioner to Creative Public Relations, which commissions were not included in the purchase price as testified to by Mrs. Kerns. James W. Darrow, a witness who was allegedly privy to the agreement and understanding between the Petitioner and the seller, Creative Public Relations, testified that the oral contract price specifically included sales taxes on the transaction. Additionally, Mrs. Duffy testified that in her opinion, the sales taxes due on the purchase by Petitioner had been paid because she under stood that the total purchase price paid to Creative Public Relations by Petitioner included the sales tax. No sales invoices, receipt, or other tangible evidence of sales were offered into evidence at the hearing herein. Petitioner contends that the sales tax in question was included in the total purchase price. Based thereon, Petitioner contends that Creative Public Relations is now liable for the tax. Respondent, on the other hand, takes the position that the taxes from the sales transaction can be imposed on either the seller or the purchaser.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department of Revenue's sales tax assessment against Petitioner be upheld. DONE AND ENTERED this 10th day of September 1979 in Tallahassee, Florida. JAMES E. BRADWELL Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 10th day of September 1979. COPIES FURNISHED: James T. Moore, Esquire 1265 Northwest 40th Avenue Lauderhill, Florida 33313 Cecil L. Davis, Jr., Esquire Assistant Attorney General The Capitol, Room LL04 Tallahassee, Florida 32301 Robert A. White, Esquire 5460 North State Road #7, Suite 220 Fort Lauderdale, Florida 33319
The Issue Whether Petitioner, Eight Hundred, Inc. (Petitioner), collected and remitted the proper amount of sales tax on its retail sales activities, and either paid or accrued use tax on its purchases.
Findings Of Fact Petitioner is a Florida corporation. Petitioner's revenues are derived, in part, through the operation of vending machine businesses throughout the State of Florida. Petitioner placed coin-operated cigarette, food and beverage, candy, and amusement vending machines in various bingo halls located throughout the state. These locations included: Pondella Hall for Hire, Inc.; Avon Plaza Bingo; Bingo Trail; Causeway Plaza Bingo; Dunnellon Bingo; Fountains Plaza Bingo; Lamirada Plaza Bingo; Northtowne Bingo; Orlando Bingo; Pondella Bingo; Sanford Bingo; Sarasota Crossings Bingo; South Belcher Bingo; and Towne Centre Bingo. Respondent is the state agency charged with the responsibility of enforcing the Florida Revenue Act of 1949 (Chapter 212, Florida Statutes (2003)), as amended. Among other things, Respondent performs audits on taxpayers to ensure that all taxes due have been correctly paid. In 1994, an audit was conducted on Petitioner covering the audit period from August 1, 1989, through July 31, 1994. After the results of the audit were obtained on June 23, 1995, Petitioner issued a NOI wherein it proposed to assess Petitioner $48,026.75 in unpaid sales tax, $18,520.05 in delinquent penalties, and $15,836.40 in accrued interest on the unpaid tax; and $4,383.13 in unpaid discretionary sales surtax, $1,875.80 in delinquent penalties, and $1,088.58 in accrued interest on the unpaid discretionary sales surtax through the date of the notice for a total of $89,730.71. By letter dated July 18, 1995, Petitioner protested the NOI and stated that (a) Petitioner was not willful in any of the errors discovered during the audit; (b) Petitioner filed and paid the tax it believed to be accurate; and (c) Petitioner has taken steps to correct the problems identified in the audit and is now filing timely in accordance with the applicable rules pertaining to the transactions in which it was engaged. Petitioner requested that the penalties and interest be abated and requested an informal conference if the letter inquiry could not be honored. For reasons unknown, the requested conference was not provided by Respondent. On November 7, 1995, under a search warrant issued at the request of the Florida statewide prosecutor, all business and banking records of Petitioner, then known as Ponderosa-for- Hire, Inc., were seized. Respondent issued its NOPA sustaining the assessment in full, which with accrued interest, then totaled $92,126.52. On March 15, 2000, Petitioner filed a letter of protest of the audit findings. On June 11, 2001, Respondent issued its NOD rejecting Petitioner's position. On July 9, 2001, a Petition for Reconsideration was filed by Petitioner. Additional letters were sent to the Respondent subsequent to the July 9, 2001, petition. Respondent issued its NOR on November 16, 2001, denying the petition. On January 15, 2002, Petitioner filed its petition with Respondent seeking an administrative hearing with DOAH. The private accounting firm of Crawford and Jones conducted a state sales and use tax audit of Petitioner under the authority of Respondent's contract audit program. The audit began on September 8, 1994, upon issuance of Respondent's Form DR-804 (DR-804). The DR-840 included a list of records which were to be produced, including federal tax returns, state sales and use tax returns, sales journals, invoices, and purchase invoices. The authorized representatives of Respondent for the audit was David L. Schultz of the accounting firm Schultz, Chaipel and Company. Representation began upon presentation to Respondent of Form DR-843, Power of Attorney and Declaration of Representation, dated January 9, 1995. Included among the records provided to Respondent's auditor were ledgers, journals, taxpayer copies of DR-15 (sales and use tax return), bank statements, tax returns, financial statements. A schedule of income earned by Petitioner, by location and category of income, was provided to Respondent by Mr. Schultz's office. This schedule of income had been created by Philip Furtney, president of Petitioner, from records he kept on his home computer. The categories of income listed on the schedules were, for each hall location: canteen, cigarette, soft drink machines, crane machines, and telephones. Beginning in fiscal year 1992, a new category titled "miscellaneous" was added; and in fiscal year 1993, the category "rent" was added. Respondent's auditor compared the data contained in these schedules, for each tax year, with other reported items, such as tax returns and financial statements, to ascertain if the figures reported were a reasonable representation of income and that reliance could be placed on the data. After determining the schedules to be reasonable, Respondent's auditor used this data to calculate the amount of sales tax due based on the income reported. The effective state sales tax rate, when sales are made through coin-operated amusement and vending machines and other devices, is found in Florida Administrative Code Rules 12A-1.044 and 12A-15.001. The effective state sales tax rate for sales involving fractions of a dollar is found in Florida Administrative Code Rules 12A-1.004 and 12A-15.002. Respondent's auditor's work papers break out the different effective tax rates for each of Petitioner's revenue activities, including the different surtax rates. Credit for taxes remitted by Petitioner was calculated from the Form DR-15 downloads. Adjustments were made to this data where the total amount reported was illogical, duplicative, or otherwise appeared incorrect. The total amount of sales tax due, as reported in the Schedule "A" sales, was determined by subtracting sales tax remitted to Respondent from the amount calculated on total retail sales made. This amount was $33,269.75 in sales tax and $3,912.95 in surtax. "Use" tax liability was calculated on two activities: First, items of tangible personal property purchased by Petitioner during the audit period for which the invoices did not affirmatively show that sales tax was paid; and secondly, on the stuffed animals contained in the crane machines which are considered concession prizes. The method for calculating the use tax on concession prizes is described in Florida Administrative Code Rule 12A-1.080. Because the operator of game concessions award tangible personal property as prizes to those who pay to play the machine, the operator is the ultimate consumer of the property (prize). The basis for determining tax liability is computed by multiplying six percent times 25 percent of the gross receipts from all such games, in this instance, the crane machines. The total amount of use tax due, as reported in the Schedule "B" purchases, was $14,757 in tax and $470.18 surtax. After the NOI was issued, the audit file was forwarded to Respondent's Tallahassee office. The preponderance of the evidence supports the conclusion that the sales activity of Petitioner included revenue received from vending and amusement machines and snack bar operations. Federal tax return for the fiscal year 1992 does not list any amount of income as being derived from rental activity. The federal returns for years 1991 and 1993 list rental income; however, no information was given to Respondent's auditor during the audit to explain what this income was and from where it was derived. Applications for Registration were filed by Petitioner when each hall location began operations. Of the 23 registration applications filed, nine of them listed the major business activity as vending-food and amusement; eight of them listed the major business activity as restaurant, snack bar or canteen service; five listed the major business activity as rental; and one gave no activity.
Recommendation Based on the foregoing Findings of Facts and Conclusions of Law, it is RECOMMENDED that a final order be entered by Respondent, Department of Revenue, upholding its assessments in the NOR dated November 16, 2001, for sales and use tax, the applicable surtax, plus applicable penalty and interest against Petitioner. DONE AND ENTERED this 26th day of April, 2005, in Tallahassee, Leon County, Florida. S DANIEL M. KILBRIDE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us COPIES FURNISHED: John Mika, Esquire Filed with the Clerk of the Division of Administrative Hearings this 26th day of April, 2005. Office of the Attorney General The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050 Thomas F. Egan, Esquire Law Office of Thomas F. Egan, P.A. 204 Park Lake Street Orlando, Florida 32803 Bruce Hoffmann, General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 James Zingale, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100
The Issue Whether sales tax and local government infrastructure surtax is due on the lingerie modeling session fees received by Petitioner, and, if so, whether the Department of Revenue should compromise any portion of the tax, interest, or penalty assessed against Petitioner.
Findings Of Fact Based upon the testimony and evidence received at the hearing, the following findings are made: Petitioner was established as a Florida corporation in November 1992. At the time of its incorporation, Petitioner's name was Ultimate Fantasy of Pinellas, Inc. Subsequently, the name was changed to U.F., Inc. Petitioner is an "S Corporation," having filed the required election pursuant to Section 1362 of the Internal Revenue Code in June 1994. Steve Smith was the sole shareholder and president of Petitioner during the audit period. Mr. Smith sold his interest in Petitioner in January 2002. Starting on October 1, 1994, Petitioner leased space for its business in a small shopping center at 8248 Ulmerton Road, in unincorporated Pinellas County. Petitioner's store was less than 1,000 square feet in size. Petitioner's lease included the following schedule of lease payments due from Petitioner to the lessor:1 Period Rent Sales Tax (7%) Total 10/1/94 - $585.00 $40.95 $625.95 9/30/96 10/1/96 - $605.00 $42.35 $647.35 9/30/98 10/1/98 - $630.00 $44.10 $674.10 9/30/99 4/1/00 - $670.00 $46.90 $716.90 3/31/02 The record does not include receipts showing that Petitioner actually made those lease payments. However, Mr. Smith testified that Petitioner made those payments, and the weight of the evidence clearly supports the inference that the payments were made. Specifically, Petitioner claimed a deduction for rent expenses on its federal income tax returns in amounts comparable to that set forth above, and Petitioner was actually operating its business at the location specified in the lease during the audit period. Petitioner made payments of $2,288.65 in sales tax to the lessor during the course of the audit period, computed as follows: Period Sales Tax Amount Months Total 5/1/95 - $40.95 17 $ 695.15 9/30/96 10/1/96 - $42.35 24 $1,016.40 9/30/98 10/1/98 - $44.10 12 $ 529.20 9/30/99 4/1/00 - $46.90 1 $ 46.90 4/30/00 8. Petitioner's lease stated that Petitioner would use the premises "as a retail store and for no other uses whatsoever." That limitation was apparently waived by the landlord because the lingerie modeling conducted in Petitioner's store required an adult entertainment permit from Pinellas County and the landlord's consent was required for Petitioner to obtain a permit. Petitioner's business includes the retail sale of lingerie as well as charging patrons a fee to watch lingerie modeling sessions which occur in Petitioner's store. Patrons are not charged to come into Petitioner's store. They are free to come in, look at merchandise, purchase merchandise, and/or leave. However, a patron who comes into Petitioner's store and wants to see a piece of lingerie modeled pays a fee to Petitioner. The fee is $30.00 per session, with a session lasting no more than a half hour. With a discount coupon, the fee was $20.00 per session. No sales tax was collected or remitted on those amounts. After the patron pays the fee to Petitioner, he then identifies the lingerie to be modeled and a model does so. The patron compensates the model for the session through tips. Neither Petitioner, nor any of its employees are involved in that transaction. The patron is not required to purchase the lingerie that is modeled and, as evidenced by the small amount of sales on which Petitioner paid tax during the audit period, such purchases rarely occurred. If the lingerie is purchased, Petitioner collects sales tax from the purchaser and remits it to the Department. If the lingerie is not purchased, it goes back into Petitioner's inventory. Almost all of Petitioner's income over the course of the audit period was derived from the lingerie modeling sessions. On the quarterly sales tax reports filed with the Department, Petitioner reported gross sales of $556,733.83 between May 1995 and December 1999. Of that amount, $554,829.88, or 99.65 percent, was from the fees for the lingerie modeling sessions and was reported as exempt sales. Only $1,978.57, or 0.35 percent, was reported as taxable lingerie sales. The women who model the lingerie are not employees of Petitioner. They are not paid anything by Petitioner, nor do they pay Petitioner anything. Petitioner did provide security for the models. The modeling sessions occurred in "segregated areas" of the store. They did not occur behind closed doors, behind a curtain, or in separate rooms, as that is prohibited by the Pinellas County Code.2 The "segregated areas" accounted for approximately 85 percent of the store's floor space. Thus, it is possible that a session could be observed from a distance by persons other than the patron who paid a fee to Petitioner. However, only the patron who pays the fee can view the modeling session in the "segregated areas" where the model performs. Before Petitioner opened for business, Mr. Smith contacted an accountant, Peter Ristorcelli, to provide accounting and tax services to Petitioner. Those services included compliance with Florida's sales tax laws. Mr. Ristorcelli had never worked for a client whose business was similar to that of Petitioner. Accordingly, Mr. Ristorcelli advised Petitioner to obtain guidance from the Department when he registered as a dealer and obtained a sales tax number. Mr. Smith went to the Department's Clearwater office pursuant to Mr. Ristorcelli's advice. While there, he explained the type and operation of Petitioner's business and asked whether sales tax was due on the receipts from the modeling sessions. Mr. Smith was told by an unknown Department employee that the receipts from the modeling sessions were not subject to the sales tax, but that they should be reported as exempt sales. Mr. Smith was also told that receipts from the sale of lingerie should be reported as taxable sales, and that sales tax should be collected on those sales. Mr. Smith conveyed this information to Mr. Ristorcelli who then confirmed it with Bonnie Steffes, an employee in the Department's sales tax collection division in the Clearwater office with whom Mr. Ristorcelli had prior dealings. In their conversations with the Department employees, both Mr. Smith and Mr. Ristorcelli fully explained the nature and manner of operation of Petitioner's business. Those explanations were not made in writing, nor were the Department's responses. Ms. Steffes is no longer employed by the Department, and she was not called as a witness at the hearing because she could not be located. Thus, the record does not contain any corroboration of the self-serving testimony of Mr. Smith and Mr. Ristorcelli on these events. Nevertheless, the undersigned finds their testimony to be credible. Petitioner followed the advice Mr. Smith and Mr. Ristorcelli received from the Department. Petitioner reported the receipts from the modeling sessions as exempt sales and did not collect or remit sales tax on those receipts. As stated above, Petitioner reported $554,829.88 in receipts from the modeling sessions for the period of May 1995 through December 1999. Petitioner reported the receipts from the sales of lingerie as taxable sales and collected and remitted sales tax on those receipts. As stated above, Petitioner reported taxable sales of $1,978.57, and it collected and remitted sales tax in the amount of $138.58 for the period of May 1995 through December 1999. Had Mr. Smith been told that the lingerie modeling sessions were taxable, he would have collected sales tax from the patron and remitted it to the Department. The Department's Audit On June 1, 2000, the Department gave Petitioner notice of its intent to conduct a sales tax audit on Petitioner's books and records for the audit period of May 1, 1995, to April 30, 2000. The audit was conducted by Jose Bautista, a tax auditor in the Department's Clearwater office. Mr. Bautista reviewed Petitioner's books and records and spoke with Mr. Ristorcelli and Mr. Smith on several occasions. In conducting the audit, Mr. Buatista utilized standard methods of assessment and followed the Department's rules and practices. He relied on the facts presented to him by Mr. Smith and Mr. Ristorcelli regarding the operation of Petitioner's business and, more specifically, the form and nature of the lingerie modeling transactions. The audit did not identify any underreporting of taxable lingerie sales, nor did it find any underreporting of the receipts from the modeling sessions. In this regard, the proposed assessment (discussed below) was simply based upon the Department's determination that the receipts from the lingerie modeling sessions were taxable, not exempt from taxation. The audit working papers indicate receipts of $573,642.89 upon which sales tax was not paid over the course of the audit period. That amount is solely attributable to the receipts from the modeling sessions over the audit period, as identified in the Department's audit. That amount does not correspond with the receipts for the modeling sessions reported to the Department by Petitioner on its periodic sales tax returns. As stated above, Petitioner reported exempt sales from the modeling sessions in the amount of $554,829.88 for the period of May 1995 through December 1999. For that same period, the audit working papers show receipts from the modeling sessions as being only $540,460.32, calculated as follows: Grand Total for Audit Period (5/95 - 4/00) Less: April 2000 ($7,177.49) $ 573,642.89 March 2000 ( 8,208.15) February 2000 ( 8,872.59) January 2000 ( 8,924.34) Total for Period ( 33,182.57) Of 5/95 - 12/99 $ 540,460.32 This discrepancy works in Petitioner's favor. Had the Department simply based its assessment on the amount reported by Petitioner as exempt sales between May 1995 and December 1999 ($554,829.88), and then added the receipts for the period of January 2000 through April 2000 ($33,182.57), the amount upon which Petitioner would have owed sales tax would have been $588,012.45 rather than $573,642.89 as found in the Department's audit. Based upon the audit conducted by Mr. Bautista, the Department issued a Notice of Intent to Make Audit Changes (Notice of Intent) on August 16, 2000. The Notice of Intent assessed a total tax deficiency of $40,155.29, which included a sales tax deficiency of $34,418.81 and a local government infrastructure surtax deficiency of $5,736.78. Those amounts were calculated in accordance with the standardized, statutory methods of calculation. Petitioner does not contest the calculation of the tax deficiency. The Notice of Intent also assessed interest and penalty. The interest and penalty were calculated on the amount of the tax deficiency pursuant to standardized, statutory methods of calculation. Petitioner does not contest the calculation of the interest or penalty. Petitioner, through Mr. Ristorcelli, sought administrative review of the Notice of Intent. That review is conducted at the district office level, which in this case was Clearwater. George Watson supervised the review. No changes were made based upon the review, and on October 26, 2000, the Department issued a Notice of Proposed Assessment which formally assessed the tax deficiency, interest, and penalty described above against Petitioner. Petitioner, through Mr. Ristorcelli, protested the Notice of Proposed Assessment, and on July 5, 2001, the Department issued its Notice of Decision rejecting the protest. The review which resulted in the Notice of Decision was conducted in Tallahassee by Charles Wallace. The Notice of Decision upheld the tax deficiency, interest, and penalty in full. Petitioner, through Mr. Ristorcelli, sought reconsideration of the Notice of Decision. On December 17, 2001, the Department issued its Notice of Reconsideration which again upheld the proposed assessment in full and refused to compromise any portion of the tax, interest, or penalty. The legal basis for the assessments asserted by the Department in the Notice of Intent and Notice of Proposed Assessment was that the fee paid to Petitioner by a patron to view a lingerie modeling session was an admission charge. Based upon additional facts and clarifying information presented to the Department by Petitioner through the protest process, the Department concluded that the fee charged by Petitioner was more akin to a license to use real property and therefore taxable as such. That is the legal position asserted by the Department in its Notice of Decision and its Notice of Reconsideration. That legal position was also argued by the Department at the hearing and in its Proposed Recommended Order.3 Despite the change in the legal basis of the assessment, the amount of the assessment set forth in the Notice of Reconsideration is the same as the amount set forth in the Notice of Intent and Notice of Proposed Assessment. It was still based upon the full amount of the receipts from the lingerie modeling sessions (as determined by the audit) which had been reported as exempt sales.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue issue a final order that assesses tax, interest, and penalties, against Petitioner in the amounts set forth in the Notice of Reconsideration dated December 17, 2001; and, if the tax assessed in the final order is based upon Section 212.031 (license to use) rather than Section 212.04 (admissions), the Department should grant Petitioner a credit in the amount of $1,945.35, for the sales tax paid by Petitioner to its landlord on that portion of Petitioner's store where the lingerie modeling sessions occurred. DONE AND ENTERED this 14th day of June, 2002, in Tallahassee, Leon County, Florida. T. KENT WETHERELL, II Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 14th day of June, 2002.
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)
