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 Does Petitioner have standing to challenge Rule 12A- 1.091(3), Florida Administrative Code? If Petitioner has standing, is Rule 12A-1.091(3), Florida Administrative Code, an invalid exercise of delegated legislative authority? See Section 120.56, Florida Statutes.
Findings Of Fact Rathon Corporation, formerly known as Diversey Corporation, is a Delaware Corporation authorized to do business in Florida. It manufactures various detergents, cleaners, and soaps, and the equipment to dispense those products. The products are marketed in Florida and other states. The customers of the products include hotels, hospitals, factories, and restaurants. The devices that dispense the detergents, cleaners, and soaps are referred to as "feeders." Those feeders can range from simple hand soap dispensers to electronically regulated machines that inject soap into commercial dishwashers. The feeders are loaned to Petitioner's customers at no additional charge for the period of time that the customer continues to purchase the product(s) dispensed by the feeder. These circumstances existed in the period of July 1993 through March 1995. In the period of July 1993 through March 1995, Diversey Corporation, now Rathon Corporation, paid the State of Florida $58,969.22 in use tax associated with the feeders. During the period in question, the Petitioner manufactured the feeders at a facility in Santa Cruz, California. The feeders were not warehoused in the Santa Cruz facility for an extended period. They were prepared for shipment and shipped to customers in the various states, to include Florida and California customers, to be used in the places of business operated by the customers. The feeders being shipped were not packaged with other products. During the period July 1993 through March 1995, the Petitioner not only paid use tax to Florida for the feeders, it paid use tax in forty-four other states and the District of Columbia, based upon the costs of manufacturing the feeders. California was among the other forty-four states. During the period in question, Petitioner accrued and paid use taxes to Florida and California limited to the feeders used by customers in those states, based upon the product sales allocation method it used in relation to the forty-three other states and the District of Columbia. The feeders that were provided to Florida customers were shipped by common carrier. Upon their arrival in Florida no tax had been paid to California pertaining to those feeders. When the feeders arrived in Florida during the period at issue, use tax would be remitted to Florida. Subsequently, the Petitioner paid the State of California a use tax associated with the feeders that had been shipped to Florida customers and upon which a use tax had been imposed by the State of Florida and paid. The California payment is described in detail below. Petitioner had paid Florida use tax on the feeders shipped to Florida customers based on the total manufactured cost of the feeders to Petitioner, including materials, labor, and overhead. The additional use tax paid to California for those feeders was based only on the cost of materials. The overall costs of feeders allocated to Florida for the refund period was $982,803.00. Petitioner remitted a 6% use tax to Florida totaling $58,969.22 for the period in question. In 1996, Petitioner was audited for sales and use tax compliance by the State of California. That audit process included the refund period that is in question in this case, July 1993 through March 1995. Following the audit, the State of California issued a Notice of Determination asserting additional liability for tax and interest that totaled $355,753.95. Petitioner paid that assessment. The California auditor had arrived at the assessment by concluding that Petitioner owed California for 44.57% of all feeders manufactured at Petitioner's Santa Cruz facility. The 44.57% represented all newly manufactured feeders that had been loaned by Petitioner to its customers during the refund period over the entire United States. As a consequence, the assessment of use tax by the State of California included tax on feeders for which Petitioner had paid Florida $58,969.22 in use tax prior to the California assessment of $355,753.95. Petitioner did not apply for credit in California for the portion of the $355,753.95 that would relate to the feeders brought to Florida during the period in question. Petitioner took no action to obtain a credit on the amount paid to Florida as a means to reduce the California tax obligation pursuant to the 1996 audit, because Petitioner had been told that the use tax for the feeders used by Florida customers was legally due in California and not in Florida. In arriving at the determination that 44.57% of the feeders manufactured during the period in question had been loaned to customers within the continental United States, the California auditor took into account that 21.8% of the feeders and feeder parts were sold for export, leaving 78.2% to be used in the United States. Of the 78.2% remaining for the United States, 57% were complete feeders sent to customers within the United States, and 43% were repair parts that were sent to Petitioner's Cambridge Division in Maryland, where those repair parts were being stored for future use. The percentage of 44.57% was arrived at by multiplying 57% times 78.2%, representing the percent of total feeders manufactured for use in the United States that were sent to customers within the United States and not held in inventory as repair parts. Again, California based its use tax for tangible personal property manufactured in that state to include only the cost of materials. Consequently, when the California auditor computed use tax to be collected by California using the 44.57% of total feeders manufactured to be used in the United States by Petitioner's customers in the United States, the California auditor used a cost factor of 55% of overall costs which was attributable to the cost of materials only. The total cost of feeders manufactured by Petitioner in California during the period in question, as related in the California tax audit, was $19,028,714.00. The total cost manufactured for use in the United States was $8,481,098.00, representing 44.57% of the overall cost of manufacturing. When the $8,481.098.00 is multiplied by 55%, representing the cost of materials only, the total costs of the goods subject to the use tax for the period in question is $4,664,604.00. A use tax rate of 7% was applied against the amount of $4,664,604.00. To attribute the portion of use tax paid to California following the 1996 audit associated with feeders that had been sent to Florida during the period in question, the answer is derived by multiplying $982,803.00 by 55% for a total of $540,542.00, and in turn multiplying that amount by 7%, the rate of tax imposed by California. That total is $37,837.91 in use tax that was subsequently paid to California after $58,962.22 had been paid to Florida for use tax on the same feeders. Diversey Corporation sought a tax refund in the amount of $58,977.00, through an application dated August 8, 1996, in relation to the period July 1993 through March. Eventually through the decision by the Respondent in its Notice of Decision of Refund Denial dated July 16, 1997, Respondent refused to grant the refund of $58,977.00. At present, Petitioner requests that it be given a refund of $37,837.91, which represents the portion of use tax paid to Florida that has been duplicated in a payment of use tax to California. Respondent, in its Notice of Decision of Refund Denial entered on July 16, 1997, and based upon the facts adduced at the final hearing, premises its proposed agency action denying the refund request upon the language set for in Section 212.06(1)(a) and (7), Florida Statutes. The determination to deny the refund request was not based upon reliance on Rule 12A-1.091(3), Florida Administrative Code. The theory for denying the refund is premised upon Respondent's argument that use tax was due to Florida, "as of the moment" feeders arrived in Florida for use in Petitioner's business operations associated with its customers. Petitioner then paid the use tax to Florida at the time the feeders arrived in Florida. Having not paid California Use Tax prior to paying Florida Use Tax, Respondent concludes, through its proposed agency action, that it need not refund to Petitioner the use taxes it paid to California at a later date. Petitioner had referred to Rule 12A-1.091, Florida Administrative Code, following receipt of the Notice of Proposed Refund Denial issued on December 9, 1996, possibly creating the impression that Petitioner believed that Rule 12A-1.091, Florida Administrative Code, would support its claim for refund. It later developed that Petitioner did not have in mind reliance upon Rule 12A-1.091, Florida Administrative Code, to support its claim for refund. Instead, Petitioner made reference to that rule and specifically Rule 12A-1.091(3), Florida Administrative Code, as a means to perfect a challenge to Rule 12A-1.091(3), Florida Administrative Code, filed with the Division of Administrative Hearings on December 15, 1997, claiming that the challenged rule was an invalid exercise of authority. That challenge was assigned DOAH Case No. 97-5908RX. In summary, notwithstanding Petitioner's argument to the contrary, Respondent has never relied upon Rule 12A-1.091(3), Florida Administrative Code, or any other part of that rule in its proposed agency action denying the refund request. Absent Petitioner's affirmative reliance upon Rule 12A-1.091(3), Florida Administrative Code, the rule has no part to play in resolving this dispute. CONCLUSIONS OF LAW The Division of Administrative Hearings has jurisdiction of the subject matter and the parties to this action in accordance with Sections 120.56, 120.569(1), and 120.57(1), Florida Statutes. Petitioner sought repayment of funds paid into the State Treasury for use taxes for the period of July 1993 through March 1995. See Section 215.26(1), Florida Statutes. Respondent, in defending its decision to deny the repayment, has consistently relied upon provisions within Chapter 212, Florida Statutes, as well as the language within Section 215.26(1), Florida Statutes. In particular, Respondent has relied upon the language at Section 212.06(7), Florida Statutes, in defending its proposed agency action. Petitioner did not look to the provisions of Rule 12A-1.091(3), Florida Administrative Code, to assist the Petitioner in its refund claim. Instead, Petitioner claims that an inference has been created that Respondent utilized Rule 12A-1.091(3), Florida Administrative Code, to determine the refund question adverse to the interest of Petitioner. Petitioner believes this creates the opportunity to challenge the rule. Given that Respondent did not rely upon Rule 12A-1.091(3), Florida Administrative Code, to defend against the Request for Repayment of Funds, Petitioner is not substantially affected by the rule and is not entitled to seek an administrative determination of the invalidity of the rule. Upon consideration, it is ORDERED: That Petitioner's challenge to the validity of Rule 12A-1.091(3), Florida Administrative Code, is DISMISSED.1 DONE AND ORDERED this 20th day of April, 1998, in Tallahassee, Leon County, Florida. CHARLES C. ADAMS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 20th day of April, 1998.
The Issue Whether Respondent Office of the Comptroller should refund to Petitioner taxes paid pursuant to Chapter 199 and 201, Florida Statutes.
Findings Of Fact The parties stipulated to the facts set forth in paragraphs 1 through 9 of the Petition herein, as follows: The agencies affected in this action are the Department of Revenue, Tallahassee, Florida, and the Office of the Comptroller, Tallahassee, Florida. The Petitioner is Zimmer Homes Corporation, 777 Southwest 12th Avenue, Pompano Beach, Florida. Zimmer Homes Corporation, on or about December 12, 1974, conveyed a piece of property described as follows: All of that part of the Southeast quarter of Section 10, Township 44 South, Range 42 East, of Palm Beach County, Florida, lying North of the North right-of-way (r/w) line of Forest Hill Boulevard, less the West 40 feet thereof for road right-of-way and less the East 40 feet thereof. The sellers paid the necessary excise tax on documents and intangible tax as follows: a. $11,250.00 total consideration $3,750,000.00 of Section Florida 201.02(1) Statutes b. 3,900.00 based upon note of $2,600,000.00 Section Florida 201.07 Statutes c. 1,542.00 based upon note of $1,027,906.00 Section Florida 201.07 Statutes d. 4,125.00 based upon total consider- ation of $3,750,000.00 Section Florida 201.021(1) Statutes e. 5,200.00 based upon mortgage secur- ing note of $2,600,000.00 Section Florida 199.032(2) Statutes f. 2,055.81 based upon mortgage secur- ing note of $1,027,906.00 Section Florida 199.032(2) Statutes A lawsuit was commenced for reasons not relevant to this Petition and the Circuit Court of the Fifteenth Judicial Circuit of Florida entered a Final Judgment on July 12, 1978, a copy of which is attached hereto as Exhibit "A". In the Final Judgment the Court determined that the Purchasers had a right to rescind the transaction. The Court ordered that all obligations of the parties arising out of the Purchase and Sale Agreement were cancelled and that the Purchasers were entitled to a sum of money in order to restore the parties to their original positions. (Petitioner's Exhibit 1). On March 22, 1979, pursuant to Section 215.26, Florida Statutes, Zimmer Homes Corporation applied for a refund of the excise tax on the documents in an amount as specified in Paragraphs 4(a), 4(b), 4(c) and 4(d), above. (Petitioner's Exhibit 4). On April 3, 1979, pursuant to Section 199.252, Florida Statutes, and Section 215.26, Florida Statutes, Zimmer Homes Corporation applied for a refund of the intangible tax paid in an amount as specified in Paragraphs 4(e) and 4(f) above. (Petitioner's Exhibit 4). According to a letter from the Office of the Comptroller dated April 23, 1979, a copy of which is attached hereto as Exhibit "B", the Office of the Comptroller indicated that they concurred with the findings and conclusions of the Department of Revenue in denying the refund request on the excise tax on documents as specified in paragraph 6 above. As grounds therefore, it was indicated that the refund requests were denied because the statute of limitations under Section 215.26, Florida Statutes, barred the request for refund. (Petitioner's Exhibit 3). By letter dated April 26, 1979, a copy of which is attached hereto as Exhibit "C", the Office of the Comptroller indicated that they concurred with the findings of the Department of Revenue on denying the refund for intangible taxes which had been paid as specified above. As grounds therefore it was indicated that the request was denied because the applicable statute of limitations had run. (Petitioner's Exhibit 2).
Recommendation That Petitioner's application for refund of tax paid under Chapters 199 and 201, Florida Statutes, be approved. DONE AND ENTERED this 6th day of September 1979 in Tallahassee, Florida. THOMAS C. OLDHAM Hearing Officer Division of Administrative Hearings 101 Collins Building Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 6th day of September 1979. COPIES FURNISHED: Richard B. Burk, Esquire Scott, Burk, Royce and Harris 450 Royal Palm Way Palm Beach, Florida 33480 Barbara Harmon, Esquire Assistant Attorney General The Capitol, Room LL04 Tallahassee, Florida 32301 John D. Moriarty, Esquire Department of Revenue Room 104, Carlton Building Tallahassee, Florida 32301 Honorable Gerald A. Lewis Comptroller, State of Florida The Capitol Tallahassee, Florida 32301
The Issue As to DOAH Case No. 18-4475RX, whether Florida Administrative Code Rule 12A-1.044(5)(a) is an invalid exercise of delegated legislative authority in violation of section 120.52(8), Florida Statutes.1/ As to DOAH Case No. 18-4992RU, whether the Department of Revenue's ("Department") Standard Audit Plan, Vending and Amusement Machines--Industry Specific, section 1.1.3.3 ("SAP") is an unadopted rule in violation of sections 120.54 and 120.56, Florida Statutes.
Findings Of Fact The Parties and Audit Period GBR is a Florida corporation with its principal place of business in Miami, Florida. Gilda Rosenberg is the owner of GBR and a related entity, Gilly Vending, Inc. ("Gilly"). GBR and Gilly are in the vending machine business. At all times material hereto, Amit Biegun served as the chief financial officer of the two entities. The Department is the state agency responsible for administering Florida's sales tax laws pursuant to chapter 212, Florida Statutes. This case concerns the audit period of January 1, 2012, to December 31, 2014. GBR's Provision of Vending Machine Services Prior to the audit period, the school boards of Broward and Palm Beach County issued written solicitations through invitations to bid ("ITB"), seeking vendors to furnish, install, stock, and maintain vending machines on school property. The bids required a "full turn-key operation." The stated objectives were to obtain the best vending service and percentage commission rates that will be most advantageous to the school boards, and to provide a contract that will be most profitable to the awarded vendor. The stated goal was that student choices from beverage and snack vending machines closely align with federal dietary guidelines. GBR operates approximately 700 snack and beverage vending machines situated at 65 schools in Broward, Palm Beach, and Miami-Dade Counties. Of these 65 schools, 43 are in Broward County, 21 are in Palm Beach County, and one is in Miami-Dade County. The snack vending machines are all owned by GBR. Beverage vending machines are owned by bottling companies, such as Coca-Cola and Pepsi. Of the 700 vending machines, approximately 60 percent of the machines are for beverages and the remaining 40 percent are for snacks. GBR has written vending agreements with some schools. In these agreements, GBR is designated as a licensee, the school is designated as the licensor, and GBR is granted a license to install vending machines on school property in exchange for a commission. Furthermore, GBR is solely responsible to pay all federal, state, and local taxes in connection with the operation of the vending machines. Ownership of the vending machines does not transfer to the schools. However, in some cases the schools have keys to the machines. In addition, designated school board employees have access to the inside of the machines in order to review the meter, monitor all transactions, and reconcile the revenue from the machines. GBR places the vending machines on school property. However, the schools control the locations of the vending machines. The schools also require timers on the machines so that the schools can control the times during the day when the machines are operational and accessible to students. The schools also control the types of products to be placed in the machines to ensure that the products closely align with the federal dietary guidelines. The schools also control pricing strategies. GBR stocks, maintains, and services the vending machines. However, Coca-Cola and Pepsi may repair the beverage machines they own. GBR is solely responsible for repairing the machines it owns. The schools require that any vendor service workers seeking access to the vending machines during school hours pass background checks. GBR route drivers collect the revenue from all of the vending machines and the revenues are deposited into GBR's bank accounts. In exchange for GBR's services, the schools receive from GBR, as a commission, a percentage of the gross receipts. However, neither GBR nor the schools are guaranteed any revenue unless sales occur from the machines. On its federal income tax returns, GBR reports all sales revenue from the vending machines. For the tax year 2012, GBR's federal income tax return reflects gross receipts or sales of $5,952,270. Of this amount, GBR paid the schools $1,363,207, a percentage of the gross receipts which GBR characterized on the tax return and its general ledger as a commission and equipment space fee and cost of goods sold. For the tax year 2013, GBR's federal income tax return reflects gross receipts or sales of $6,535,362. Of this amount, GBR paid directly to the schools $1,122,211, a percentage of the gross receipts which GBR characterized on the tax return and its general ledger as a commission and equipment space fee and cost of goods sold. For the tax year 2014, GBR's federal income tax return reflects gross receipts or sales of $6,076,255. Of this amount, GBR paid directly to the schools $1,279,682, a percentage of the gross receipts which GBR characterized on the tax return and its general ledger as a commission and equipment space fee and cost of goods sold. Thus, for the audit period, and according to the federal tax returns and general ledgers, GBR's gross receipts or sales were $18,563,887. Of this amount, GBR paid directly to the schools $3,765,100, as a commission and equipment space fee and cost of goods sold. The Department's Audit and Assessment On January 27, 2015, the Department, through its tax auditor, Mary Gray, sent written notice to GBR of its intent to conduct the audit. This was Ms. Gray's first audit involving vending machines at schools. Thereafter, GBR provided Ms. Gray with its general ledger, federal returns, and bid documents. On October 28, 2015, Ms. Gray issued a draft assessment to GBR. The email transmittal by Ms. Gray to GBR's representative states that "[t]he case is being forwarded for supervisory review." In the draft, Ms. Gray determined that GBR owed additional tax in the amount of $28,589.65, but there was no mention of any purported tax on the monies paid by GBR to the schools as a license fee to use real property. However, very close to the end of the audit, within one week after issuing the draft, and after Ms. Gray did further research and conferred with her supervisor, Ms. Gray's supervisor advised her to issue the B03 assessment pursuant to section 212.031 and rule 12A-1.044, and tax the monies paid by GBR to the schools as a license fee to use real property. Thus, according to the Department, GBR was now responsible for tax in the amount of $246,230.93, plus applicable interest. Of this alleged amount, $1,218.48 was for additional sales tax (A01); $4,181.41 was for purchase expenses (B02); $13,790 was for untaxed rent (B02); and $227.041.04 was for the purported license to use real property (B03). Ms. Gray then prepared a Standard Audit Report detailing her position of the audit and forwarded the report to the Department's dispute resolution division. On January 19, 2016, the Department issued the Notice of Proposed Assessment ("NOPA") against GBR for additional tax and interest due of $288,993.31. The Department does not seek a penalty against GBR. At hearing, Ms. Gray testified that the Department's SAP is an audit planning tool or checklist which she used in conducting GBR's audit. Employees of the Department are not bound to follow the SAP, and the SAP can be modified by the auditors on a word document. The SAP was utilized by Ms. Gray during the audit, but it was not relied on in the NOD.4/
The Issue The issue in this case is whether the Petitioner should be issued a sales tax exemption certificate either as a "church" or as a "religious organization."
Findings Of Fact The Petitioner, In His Service, is a not-for-profit organization formed to give structure to a Bible study and prayer group Shirley B. Cole leads. Cole is the Petitioner's "pastor," but she is not ordained, does not officiate at weddings or funerals, and has no formal religious training other than participation in similar study groups in the past. The Petitioner is affiliated with an organization called the Federation of Independent Churches, which has an office on East Bird Street in Tampa, Florida. (In a post-hearing submission, Cole asserted that the Petitioner's "outreach is from Greater Ministries International, basically functioning as a satellite church, but there was no evidence regarding Greater Ministries International.) Portions of the Petitioner's by-laws were admitted in evidence at the final hearing. The by-laws make reference to three officers--president, vice-president, and secretary-treasurer--but Cole testified that she was the secretary and that someone else was the treasurer, and she did not seem to know anything about a president or vice-president. In addition, while the by-laws refer to a board of directors and meetings of the board of directors, Cole does not know anything about either. The Petitioner is small (not more than 15 members). It consists primarily of Cole and her friends and neighbors and some others who hear about the meetings. The group has met in various locations, including Cole's home at 5155 20th Avenue North, St. Petersburg, Florida, and the homes of other members of the group. In addition to Bible study and prayer, the group discusses health issues and other topics of interest and shares reading materials and tapes on topics of interest. From time to time, the group collects items of donated personal property for the use of members of the group and others in need who could use the items. In late June 1998, the Petitioner applied for a sales tax exemption certificate as a church. In response to a question from a representative of the Respondent DOR Cole stated that the Petitioner held services in her home every Thursday from 7:30 to 9:30 or 10 p.m. A DOR representative attempted to confirm Cole's representation by attending a meeting in Cole's home on Thursday, October 8, 1998, but no services were being held there, and no one was home. If there was a meeting on that day, it was held somewhere else. On or about December 28, 1998, DOR issued a Notice of Intent to Deny the Petitioner's application because the Petitioner did not have "an established physical place of worship at which nonprofit religious services and activities are regularly conducted and carried on." In January 1999, Cole requested an administrative proceeding on the Petitioner's application, representing that she was holding the Petitioner's meetings at her home every Monday from 7:30 p.m. On Monday, April 5, 1999, a DOR representative visited Cole's home at 7:30 or 7:35 p.m., but no one was home. At final hearing, Cole testified that she went to pick someone up to attend the meeting and was late returning. Cole had an April 1999 newsletter admitted in evidence. It indicates that she holds weekly Bible study meetings on Mondays at her home. It also indicates: "The week of April 19th will be our maintenance [health] meeting." It also indicates that the Monday, April 26, 1999, meeting would be a "covered dish dinner with prayer and praise fellowship afterward." Cole also had a book/tape loan check-out list admitted in evidence. The list indicates that two items were checked out on January 21, one on February 8, two on February 14, one on February 15, one on March 8, one on March 21, two on March 22, one on April 4, one on April 5, and four on April 12, 1999. (Two entries dated April 13 precede two on April 12, so it is assumed that all were on April 12, 1999). Cole owns her home, pays the taxes, and pays the utility bills. Cole also claims a homestead exemption. There are no signs, no physical attributes, or anything else that would identify Cole's house as a church. No part of the home is set aside for the Petitioner's exclusive use. The Petitioner pays no rent to Cole and does not reimburse Cole for any of her expenses (such as taxes and utility bills) of home ownership. Under local City of St. Petersburg zoning ordinances, Cole would have to obtain a special exception from the Environmental Development Commission to use her home as a church. Cole has not attempted to do so. Had she tried, the special exception would be denied because her home does not meet the ordinance's minimum lot and yard size criteria for such a special exception. (It is not clear whether Cole's home would meet the ordinance's parking, maximum floor area ratio, and maximum surface ratio criteria for a special exception for a church.) In light of past discrepancies between the Petitioner's representations and the facts, it was not clear from the evidence presented in this case that meetings have taken place, are taking place, or will take place in Cole's home on a regular basis.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the DOR enter a final order denying the Petitioner's application for a tax exemption certificate. DONE AND ENTERED this 18th day of May, 1999, in Tallahassee, Leon County, Florida. J. LAWRENCE JOHNSTON 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 18th day of May, 1999. COPIES FURNISHED: Shirley Cole, Pastor In His Service 5155 20th Avenue, North St. Petersburg, Florida 33710 Kevin ODonnell, Assistant General Counsel Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668 Linda Lettera, General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 Larry Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100
Findings Of Fact During the period covered by the tax audit, Petitioner published and distributed free of charge two Jacksonville area editions of a weekly magazine entitled TV Facts. This magazine contains substantial advertising which provides all revenues. In addition to the advertising, television schedules and feature stories are included to interest the general public in the publication. Petitioner obtained a second class postal permit for the magazine, but has never used the mails for distribution. During the period at issue, the magazine was prepared in a three step process. The rough layout without television schedules was prepared by Petitioner and forwarded to Composition Compound, Inc., a Miami company. This company obtained the television schedules and prepared the final layout. Composition Compound then photographed this layout and sent the negatives to Sun 'N' Fun Printing, a Clearwater company. Sun 'N' Fun then printed the magazine and delivered it to Petitioner. Petitioner paid Composition Compound for all services provided by that company and Sun 'N' Fun. Thus, there was no direct business relationship between Petitioner and Sun 'N' Fun. Petitioner believed it qualified for the newspaper exemption and was neither charged nor paid any sales taxes until it learned through Respondent's audit of Composition Compound that such taxes were due. Respondent seeks to assess Petitioner sales taxes in the amount of $5,830.56 with penalty of $1,457.64 plus 12 percent interest to the date of payment for the audit period December 1, 1977, through November 30, 1980. Petitioner does not contest these computations, but believes the tax due, if any, should be reduced by the amounts it paid to Composition Compound to cover the sales tax billed by Sun 'N' Fun. Petitioner submitted Sun 'N' Fun invoice (Exhibit 7) to demonstrate that Composition Compound was billed for about $2,700.00 in sales taxes by Sun 'N' Fun for printing Petitioner's magazine between December 29, 1978, and December 29, 1979. Composition Compound separately computed its costs and profits which it billed to Petitioner (Exhibit 6). However, there was no separate brochure of the sales tax shown on the Composition Compound invoices, nor was any additional tax charged on the value added by that company.
Recommendation From the foregoing, it is RECOMMENDED: That Respondent enter a final order holding Petitioner liable for $5,830.56 in taxes assessed on December 11, 1980, and for interest computed at the rate of 1 percent per month thereafter until said tax is paid to Respondent. DONE AND ENTERED this 9th day of November, 1981, in Tallahassee, Florida. R. T. CARPENTER, 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 9th day of November, 1981.
Findings Of Fact Wet 'N Wild operates a water-oriented recreational amusement park known by the same name. The park is situated on about twelve acres of land, including a portion of a small lake, in Orange County, Florida. The park consists primarily of several in-ground pools and waterslides, as well as a beach on the lake. By a Purchase and Lease Agreement dated March 15, 1976, Wet 'N Wild agreed to sell to Mark IV Properties, Inc. (hereafter Mark IV), a California corporation, the subject twelve acres of land, including all buildings, improvements and fixtures attached to that land. Mark IV simultaneously agreed to lease the improved land back to Wet 'N Wild for a period of twenty years with an option to renew the lease for an additional ten years. The conveyance subsequently took place, pursuant to the terms of the Purchase and Lease Agreement. By a Lease Agreement dated February 28, 1977, Mark IV then leased the park to Wet 'N Wild, as had been agreed. The Lease Agreement requires that Wet 'N Wild pay rent in accordance with a monthly rental schedule incorporated as an exhibit to the Lease Agreement. Additionally, the Lease Agreement requires Wet 'N Wild to pay the ad valorem taxes on the land. Wet 'N Wild leases the park from Mark IV on a turnkey basis. All of the pools and the waterslides now present on the land were conveyed by Wet 'N Wild to Mark IV pursuant to the Purchase and Lease Agreement. The only significant addition to the park since that conveyance is the so-called Kamikaze Slide. This waterslide was separately conveyed to Mark IV upon its completion in November 1978. Two provisions in the Lease Agreement at least implicitly acknowledge Mark IV's ownership interest in the pools and waterslides. First, the lease requires Wet 'N Wild to maintain fire and extended hazard insurance on the improvements. Second, Mark IV is obligated to replace or repair the improvements in the event of their partial or total destruction, and, pending completion of the repairs or replacements, the rent is proportionately reduced. All of the pools and waterslides are fixed to the land in such a fashion that their removal would cause substantial injury to the premises. For example, the Kamikaze Slide is a six-story high waterslide emptying into a concrete pool of water built into the ground. The slide is supported by large steel beams and poles anchored deeply into the ground. The other pools and waterslides, all of similar physical dimensions, are equally affixed to the property. Wet 'N Wild derives its primary source of income from entrance fees which guests pay to enter, use and occupy the park. Once having paid this fee, a guest is entitled to the use and occupancy of the park without further charge. The sole exception is a rental fee paid for the use of small boats on the lake, for which rental of tangible personal property Wet 'N Wild collects and remits to the DOR a separate tax. The guest is denied access to incidental areas of the park, such as those reserved for operating machinery or maintenance. From its inception, Wet 'N Wild has duly collected and remitted to the Department an excise tax on entrance fees. The revised proposed assessment is computed exclusively on the basis of the lease payments, including ad valorem tax payments, made by Wet 'N Wild under the Lease Agreement.
Recommendation DONE AND ENTERED this 31st day of October 1979 in Tallahassee, Florida. MICHAEL R. N. McDONNELL 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 31st day of October 1979. COPIES FURNISHED: W. Kelly Smith, Esquire Robert E. Meale, Esquire Suite 1444, CNA Tower 255 South Orange Avenue Orlando, Florida 32801 Barbara Staros Harmon, Esquire Assistant Attorney General Room LL04, The Capitol Tallahassee, Florida 32301
The Issue Whether petitioner taxpayer is liable for delinquent sales tax, penalties, and interest under Chapter 212, Florida Stat utes, as alleged by respondent Department in its notice of proposed assessment.
Findings Of Fact The Taxpayer Taxpayer is a family-operated Florida corporation which has engaged in retail sales at the Tampa Port Authority since 1975 or 1976; it is a licensed dealer registered with the Department. (Testimony of Roberts, Marylis.) Taxpayer's Sales During Audit Period From June 1, 1977, through July 31, 1980 (the audit period covered by the Department's proposed assessment), Taxpayer had gross sales in the approximate amount of $691,013.46. (Testimony of Roberts; Exhibit 2.) During that period, Taxpayer filed the required DR-15 monthly sales tax reports and paid taxes on all retail sales transactions which took place on the premises of its store located at 804 Robinson Street, (Tampa Port Authority) Tampa, Florida. (Testimony of Roberts.) During the same audit period -- in addition to sales on its store premises -- Taxpayer sold goods to merchant seamen on board foreign vessels temporarily docked at the Port of Tampa. These vessels operated in foreign commerce, entering the port from and returning to international waters outside the territorial limits of the United States. Taxpayer did not report these sales on its monthly sales tax reports; neither did it charge or collect sales tax from the on-board purchasers. (Testimony of Marylis.) Taxpayer failed to charge or collect sales tax in connection with its on-board sales because it relied on what it had been told by Department representatives. Prior to forming Taxpayer's corporation Thomas Marylis went to the local Department office to obtain a dealer's certificate. While there, he asked Manuel Alvarez, Jr., then the Department's regional audit supervisor, whether he was required to collect sales tax on ship-board sales. Alvarez replied that he didn't have to collect sales taxes on sales made to seamen when he delivered the goods to the ship. 1/ (Testimony of Marylis.) The on-board sales transactions took place in the following manner: Taxpayer (through its owner, Thomas Marylis) would board the foreign vessel and accept orders from the captain, chief mate, or chief steward. (Earlier, one of these persons would have taken orders from the rest of the crew.) If individual crewmen tried to place orders, Marylis would refer them to the captain, chief mate, or chief steward. After receiving orders from one of these three persons, Marylis would return to Taxpayer's store, fill the order, and transport the goods back to the vessel. Whoever placed the order would then examine the goods and give Marylis the money /2 collected from the crew. (Testimony of Roberts, Marylis.) The goods sold in this manner were ordinarily for the personal use of individual crew members; typical items were: shoes, underwear, working clothes, small radios, watches, suitcases, soap, paper towels, and other personal care products. (Testimony of Marylis.) Department Audit of Taxpayer In 1980, the Department audited Taxpayer's corporate books to determine if sales tax had been properly collected and paid. Taxpayer could produce no dock or warehouse receipts, bills of lading, resale certificates from other licensed dealers, or affidavits verifying that its on-board sales were made to out-of-state purchasers for transportation outside of Florida. (Testimony of Roberts, Marylis.) Due to Taxpayer's failure to supply documentation demonstrating that its ship-board sales from June 1, 1977, to July 31, 1980, were exempt from sales tax imposed by Chapter 212, Florida Statutes, the Department issued a proposed assessment on September 23, 1980. Through that assessment, the Department seeks to collect $21,201.01 in delinquent sales tax, $5,131.39 in penalties, and $3,892.18 in interest (in addition to interest at 12 percent per annum, or $6.97 per day, accruing until date of payment). (Exhibit 5.) Informal Conference with Department; Alvarez's Representations to Taxpayer In October 1980 -- after the audit -- Taxpayer (through Marylis) informally met with Manuel Alvarez, the Department's regional audit supervisor, to discuss the tax status of the shipboard sales. Specifically, they discussed the Department auditor's inability to confirm that Taxpayer delivered the items to the ships, as opposed to the buyers picking up the goods at the store. Alvarez told him: [I]f the buyers would come and just pick them up and take them. And I [Alvarez] think I told him that, if that was the case, it was taxable. But, if they just placed their orders there -- like we have had other ship supplies -- and they them- selves, or one of their employees, would take the items aboard ships, that would be an exempt sale. I did make that state ment. If we had any type of confirmation to that effect, when it comes to that. (Tr. 61.) 3/ (Testimony of Alvarez.) Alvarez then told Marylis to obtain documentation or verification that the sales were made on foreign vessels, i.e., proof that Taxpayer delivered the goods to the vessels. He assured Marylis that if he could bring such verification back, such sales "would come off the audit." (Tr. 62.)(Testimony of Alvarez.) Alvarez was an experienced Department employee: he retired in 1980, after 30 years of service. It was Alvarez's standard practice -- when dealing with sales tax exemption questions -- to reiterate the importance of documentation. He would always give the taxpayer an opportunity -- 30 days or more -- to obtain documentation that a sale was exempt from taxation. (Testimony of Alvarez.) Taxpayer's Verification In response to the opportunity provided by Alvarez, Taxpayer (through Marylis) obtained affidavits from numerous captains of foreign vessels and shipping agents. Those affidavits read, in pertinent part: I, [name inserted] , am the Captain aboard the vessel [name inserted] from [place of origin]. I am personally aware that Speros International Ship Supply Co., Inc. sells various commodities, supplies, clothing, and various sundry items to for eign ship personnel by delivering the said items to the ships docked at various termi- nals inside the Tampa Port Authority and other locations in Tampa, Florida from [date] to the present. (Testimony of Marylis; Exhibit 8.) Moreover, in an attempt to comply with the tax law and avoid similar problems in the future, Taxpayer printed receipt books to be used in all future on-board sales. The receipts reflect the type of goods sold, the date of delivery to the vessel, the foreign vessel's destination, and the total purchase price. Also included is a signature line for the individual who delivers and receives the goods. (Testimony of Marylis; Exhibit 7.)
Recommendation Based on the foregoing, it is RECOMMENDED: That Department's proposed assessment of Taxpayer for delinquent sales tax, penalties, and interest, be issued as final agency action. DONE AND RECOMMENDED this 17th day of February, 1982, in Tallahassee, Florida. R. L. CALEEN, JR. 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 17th day of February, 1982.
The Issue 1. Whether the Emergency Rules on Sales and Use Tax on Services and Other Transactions adopted by the Respondent effective July 1, 1987, were adopted pursuant to Section 33, Chapter 87-6, l987 Laws of Florida, and Section 120.54(9), Florida Statutes (1987)? 2. Whether Rules 12AER87-31(1)(c), (5), (7)(i)(7)(k), (10), (12) and (13), Florida Administrative Code, constitute an invalid exercise of delegated legislative authority?
Findings Of Fact The Respondent is an agency of the State of Florida. It is charged with the responsibility to implement, enforce and collect the taxes levied by the State of Florida, including Chapter 212, Florida Statutes (1987). During the 1987 Legislative Session the Legislature enacted Committee Substitute for Senate Bill 777, which is codified as Chapter 87-6, 1987 Laws of Florida (hereinafter referred to as "Chapter 87-6"). This act, which amended Chapter 212, Florida Statutes, was signed into law by the Governor on April 23, 1987. Section 5 of Chapter 87-6, created Section 212.0594, Florida Statutes. This new Section of Chapter 212 imposed a sales tax on construction services performed on or after July 1, 1987. Section 33 of Chapter 87-6, authorized the Respondent to adopt emergency rules pursuant to Section 120.54(9), Florida Statutes, to implement the new law. In authorizing the adoption of emergency rules, the Legislature determined that the failure to promptly implement the provisions of Chapter 87-6 would present an immediate threat to the welfare of the State because revenues needed for the operation of the State would not be collected. On June 6, 1987, the Legislature enacted Committee Substitute for House Bill 1506, which is codified as Chapter 87-101, 1987 Laws of Florida (hereinafter referred to as "Chapter 87-101"). Chapter 87-101 is commonly known as the Sales Tax Glitch Bill. Chapter 87-101 was passed by the Legislature on June 6, 1987, signed into law by the Governor on June 30, 1987, and was effective beginning July 1, 1987. Section 5 of Chapter 87-101 repealed Section 5 of Chapter 87-6. Section 6 of Chapter 87-101, created a new Section 212.0594, Florida Statutes, taxing construction services, in replace of the Section 212.0594, Florida - Statutes, previously created by Section 5 of Chapter 87-6. Thus the Legislature substantially changed the manner in which sales tax was to be imposed upon construction services. Section 20 of Chapter 87-101 amended Section 33 of Chapter 87-6 but continued the authorization to adopt emergency rules and the justification for doing so. On May 8, 1987, the Respondent published notice in the Florida Administrative Weekly of its intent to hold public meetings and workshops on May 19 and 26, 1987, and June 6, 1987. Proposed rules relating to Chapter 87-6 were to be considered at these meetings and workshops. On May 22, 1987, the Respondent published notice in the Florida Administrative Weekly of its intent to hold public meetings and workshops on May 26, 1987, and June 26, 1987. Proposed rules relating to Chapter 87-6 were to be considered at these meetings and workshops. On May 29, 1987, the Respondent published notice in the Florida Administrative Weekly of its intent to hold a public meeting and workshop on June 6, 1987, to consider proposed rules relating to Chapter 87-6. On June 5, 1987, the Respondent published notice in the Florida Administrative Weekly of its intent to hold a public meeting and workshop on June 12, 1987, to consider proposed rules relating to Chapter 87-6. Ultimately, the Respondent held four workshops concerning the emergency rules: May 19 and 26, 1987, and June 6 and 12, 1987. The workshop conducted on June 12, 1987, was conducted to consider Rules 12AER87-31, Florida Administrative Code. The rules considered at the June 12, 1987, workshop had been redrafted to implement Chapter 87-101. The rules considered at the workshop were available for a short period of time before the workshop and during the workshop. Comments were received by the Department at the June 12, 1987, workshop from the public, including representatives of the construction industry. As a result of these comments, changes in the Emergency Rules were made following the workshop. The Emergency Rules took into account the method of taxing construction services provided for in Chapter 87-101 rather than the method previously provided for in Chapter 87-6. The Respondent's emergency rules, including Rule 12AER87-31, Florida Administrative Code, were certified by the Executive Director of the Respondent and delivered to the Secretary of State for publication on June 18, 1987. The Respondent delivered the full text of the emergency rules, a statement of the specific reasons for finding an immediate danger, a statement of the reasons for concluding that the procedure followed to adopt the rules was fair under the circumstances and a summary of the purpose of the rules for publication in the first available issue of the Florida Administrative Weekly. The emergency rules had to be filed with the Secretary of State no later than June 18, 1987, in order to be published in the Florida Administrative Weekly by July 1, 1987, the effective date of Chapters 87-6 and 87-101 and the emergency rules. The full text of the emergency rules was published in the Florida Administrative Weekly on June 26, 1987. The text of this notice, which was accepted into evidence as Petitioner's exhibit 4, is hereby incorporated into this Final Order. The Emergency Rules had an effective date of July 1, 1987. Initially the Emergency Rules were to expire January 1, 1988, six months after their effective date, as specified in Chapter 87-101. Pursuant to Section 1, Chapter 87-539, 1987 Laws of Florida, the Emergency Rules are effective through June 30, 1988. Representatives of the Respondent and the Petitioner met between the passage of Chapter 87-101 by the Legislature and June 18, 1987, and discussed the act. The Respondent expended a great deal of time and effort in adopting the emergency rules implementing Chapters 87-6 and 87-101, and in providing information to the public. The method of taxation to be implemented was unique and, therefore, the Respondent was unable to look to other jurisdictions for guidance concerning implementation of the tax. The taxation of construction services was one of a multitude of services taxed. Chapter 87-101, required substantial redrafting of the emergency rules, including Rule 12AER87-31, Florida Administrative Code, within a relatively short period of time. The new tax necessitated the registration of 100,000 to 150,000 new sales tax "dealers" by July 1, 1987. Prior to July 1, 1987, the Respondent received thousands of telephone calls and thousands of written requests seeking information concerning the sales tax on services. The Respondent was extensively involved with the Legislature during the period of time when Chapters 87-6 and 87-101 were adopted. Representatives of the Respondent discussed the acts with Legislative members and staff. Dr. James Francis acted as a liaison between the Respondent and the Legislature. Dr. Francis also served on the Revenue Estimating Conference. In his capacity with the Revenue Estimating Conference, Dr. Francis prepared estimates of tax revenues from the services tax. A revenue impact analysis of the services tax was also provided by the Respondent to the Legislature based upon each amendment and proposed amendment to Chapters 87-6 and 87-101. Representatives of the petitioner expressed dissatisfaction with the method of taxation of construction services contained in Chapter 87-6 because of the required itemization of building material costs on each contract. The Respondent prepared a revenue neutral (no loss of tax revenue previously estimated to be generated by Chapter 87-6) method of imposing the services tax on construction services without requiring itemization of building material costs. Pursuant to this method, a set percentage, generally equal to the average percentage of building material costs, is backed out of "contract price" or "cost price." The remainder is treated as the amount of the "contract price" or "cost price" attributable to the construction services. The revenue estimated by the Respondent and provided to the Legislature, based upon the elimination of an average percentage of building material costs, was based upon the inclusion in "contract price" and "cost price" of all expenditures associated with the construction industry, including the total expenditures for building materials supplied by owners to contractors. The Legislature was aware of this fact before it adopted Chapter 87-101. Fiscal notes for Chapter 87-101, which the Respondent had available prior to the adoption of the Emergency Rules, numerically quantified the estimated revenue to be generated by Chapter 87-101. The Respondent also knew what amounts were included in the estimate of revenue contained in the fiscal notes. These amounts were consistent with the revenue estimates provided by the Respondent to the Legislature. The Emergency Rules represent a contemporaneous administrative construction of Chapters 87-6 and 87-101 by an agency charged with responsibility to administer the acts and which was intimately involved in the adoption of the acts. The Petitioner has challenged the validity of Rules 12AER87-31(1)(c), (5), (7)(i), (7)(k), (10), (12) and (13) Florida Administrative Code. The Petitioner withdrew its challenge of other portions of the Emergency Rules. Rule 12AER87-31(7)(i), Florida Administrative Code, defines the terms "contract price" which determines the amount of tax due on construction work performed pursuant to a contract and any speculative construction which is sold within six months of completion. The Petitioner has challenged Rule 12AER87-31(7)(i), Florida Administrative Code, to the extent that contract price is defined to include the fair market value of materials used by a contractor if the value of those materials is not otherwise included in the contract price. The Petitioner's contractor witnesses' understanding of Rule 12AER87- 31(7)(i), Florida Administrative Code, that the fair market value of materials supplied by the owner are to be included in the computation of contract price, is consistent with the Respondent's interpretation of the Rule. Prime contractors often estimate the cost of building materials in their daily business activities. The Respondent's interpretation of Rule 12AER87-31(1)(c), Florida Administrative Code, does not require a contractor or subcontractor who uses building materials which are purchased tax free to remit a tax. The rule simply makes it clear that there is not necessarily any link between the question of whether the purchase of building materials and the provision of construction services are tax exempt.
Findings Of Fact Based upon the record evidence adduced as well as the factual stipulation filed by the parties, the following facts are found. The Petitioner, International Cruise Shops (ICS), is a subsidiary company of the Greyhound Corporation. ICS, as pertinent hereto, operates gift shops, bars, beauty salons and exercise rooms and like "passenger amenity" type facilities ("shops") on board cruise ships operating out of the Port of Miami. The particular cruise ships of concern in this case are owned by Norwegian Caribbean Lines (NCL). The parties have stipulated that the vessels owned by NCL, to which this proceeding relates, operate exclusively in foreign commerce and that none of their operating mileage involved herein is in intrastate commerce. Because of this, ICS maintains that the transactions or purchases which are the subject of this proceeding are exempt from taxation under Section 212.08(8), Florida Statutes. The parties have stipulated that the sales tax at issue was not collected by the vendors involved and was not paid on the Items in question. The parties have also stipulated that all of the items in question, purchased in port, were used or consumed on board the NCL vessels involved and that the vessels were operating at the time in foreign commerce. It is also stipulated that ICS recognized at the time of the purchases that they were exempt ones and provided the vendors involved with its export exemption registration number. ICS takes the position that it is exempt from sales and use tax as to these items because the items purchased are "parts of a vessel" within the meaning of the exemption statute set forth at Section 212.08(8), Florida Statutes. It is also stipulated that during the relevant audit period ICS did not furnish the vendors involved in these purchases with the "partial exemption affidavit" described in Section 212.08(8)(b), Florida Statutes, the "partial exemption" statute. The Department in turn argues that ICS is not entitled to the exemption because it is not an "owner, operator or agent of a vessel." ICS maintains, contrarily, that its status as owner, operator or agent of a vessel is not determinative of its entitlement to the exemption, but rather the nature of the goods involved and their use is what is determinative. Be that as it may, the Petitioner maintains that it qualifies as an operator or agent of the vessels involved anyway. The Department also contends that even if ICS is an owner, operator, or agent, it failed to sign the affidavit mentioned above, stating that "the item or items to be partially exempted are [parts of a vessel] and setting forth the extent of such partial exemption." (emphasis supplied) See Section 212.08(8)(b), Florida Statutes. The Department originally served the Petitioner a Notice of Intent (to make sales and use tax audit changes) and a Notice of Proposed Assessment of tax, penalty and interest for the audit period from January 1, 1980, through December 31, 1982. The Department also issued a Notice of Intent to make sales and use tax audit changes, as well as a Notice of Proposed Assessment of Tax Penalty and Interest for the supplemental audit period of January 1, 1983, through April 30, 1983. Additionally, it is stipulated that the documents attached to the stipulation, as exhibits C and D respectively, are true and correct copies of an original shop agreement and bar agreement made and entered into as of January 1, 1980, between NCL and ICS. The parties have stipulated that those two documents represent the contractual agreements between NCL and ICS during the relevant audit periods at issue in this proceeding, and fairly reflect the relationship of the parties, although they do not agree that the language in the agreements to the effect that "ICS shall not be considered the agent" of NCL means that ICS is not the agent of NCL for any purpose at all. Those two agreements, as well as the unrefuted evidence of record, reveal that the services of bar operator and concessionaire, gift shop operator, as well as beauty shops and sauna operator, duty-free shop operator, and operations involving the purchasing for and operating of a shipboard duty-free and non-duty free shop for passengers and crew, are regular facets of cruise ship operations. It is the peculiar purpose of cruise ships to transport passengers, but provide all sorts of amenities and shopping services for passengers and crew of the type mentioned above and elsewhere in these agreements. There is no question that the duties ICS personnel were performing aboard NCL ships are integral functions of the operation of a cruise ship, as that relates to the exempt status claimed herein by ICS. The parties have additionally stipulated that exhibit F, attached to the stipulation, in evidence, is a random list of some of the supplies purchased by ICS during the audit period in question, far which no sales tax were paid. This listing is stipulated to be a representative sampling of the kinds of items for which the Department assessed tax under Schedule B of the assessment at issue. Exhibit G is a true and correct copy of a petition for reassessment of sales and use tax by ICS dated December 21, 1983. On February 9, 1984, ICS representatives attended a conference with the Department's disposition section personnel in Tallahassee. A Notice of Decision was entered September 30, 1985, by the tax conferee of the Department in response to the December 21, 1983 petition by ICS and as a result of that February 9, 1984 informal conference with the Department. A Petition for Reconsideration was filed by ICS dated October 28, 1985, concerning that notice of decision. On November 20, 1985, ICS representatives attended another informal conference with the Department's disposition section of its Office of General Counsel in Tallahassee. A supplemental petition was then filed by ICS dated February 12, 1986. Thereafter, a Notice of Reconsideration dated July 28, 1986, was executed by the tax conferee, Mark A. Zych, in response to the November 20, 1985 petition and informal conference. Thereafter, ICS filed the petition initiating this proceeding on September 19, 1986. The parties have additionally stipulated to, and the evidence of record reveals, that the items involved in this case were purchased by ICS from vendors for use in its shops and bars in the regular course of operation and business aboard the cruise ships. Those items at issue were stipulated to be used or consumed by ICS on Board NCL'S vessels. The shop and bar employees of ICS were paid on NCL's payroll and ICS would then reimburse NCL. Additionally, NCL negotiated a labor contract which covered the shop and bar employees of ICS, as well as its own employees. While they were on duty on board ship, the ICS personnel wore name tags indicating that they were NCL crew members, bearing the NCL logo. ICS personnel also participated in all safety drills and lifeboat drills like any other crew members. Each had specific stations and passenger safety duties assigned them, including lifeboat stations, just as any NCL employee crew members. ICS personnels' living quarters were in the same location as NCL employees' living quarters and ICS personnel were subject to the same duties, obligations and restrictions as NCL employees while on board the NCL ships, including restricted access to passenger areas and restrictions on mingling with passengers. The shop agreement (exhibit C to the stipulation in evidence) reveals that ICS performance of its shop, bar and other operations on board the cruise vessels was subject to the control of NCL. Numerous references in the shop agreement establish that NCL had pervasive control over ICS employees' performance of their duties on board NCL's cruise ships, as set forth at length in Appendix A, attached hereto and incorporated by reference in these findings of fact. One particularly revealing provision of the agreement is worth quoting. Section 16 of the Agreement requires ICS to designate a specific employee to act as supervisor of ICS employees on board the ships. This supervisor must agree to take orders from the master and ship's officers: ... and such qualified NCL personnel as shall be designated by the masters at all times and shall be under the control and direction and report directly to whomever the masters designate on board the vessels. ICS' supervisory personnel are to give prompt obedience to the instructions and orders of the NCL designee in regard to the operation of the shop concession. (emphasis supplied) The bar agreement, in evidence as exhibit D to the stipulation, contains a virtually identical provision. That bar agreement, for purposes of this proceeding, is essentially equivalent to the shop agreement. Additionally, the policy and procedures manual, in evidence as exhibit to the Stipulation, depicts numerous provisions which establish that, for all practical purposes, except for the reimbursement of NCL by ICS for salary for its employees, that ICS employees were considered as a part of the regular crew of the NCL cruise ships and subject to the direction and control of the ships' officers the same as any other crew member. This extended even to direction and control concerning how displays in the shops were set up, and how the shops and bars, were operated. In summary, that policy and procedures manual further demonstrates the pervasive control of NCL over the ICS employees and operations aboard the cruise ships, even to the extent of regulating vacation of ICS employees when they were ashore between cruises, etc. The testimony of ICS witnesses at the hearing confirms the existence of NCL's authority over ICS and its employees and demonstrates clearly that NCL fully exercised that right of control in the normal day to day operations of its cruise vessels. Sonia Jensen, district manager for ICS, has worked for ICS continuously since 1975. She established that NCL personnel supervise, direct and control ICS employees as to safety procedures, lifeboat drills and lifeboat station assignments, and as to all rules and regulations applying to crew members and their behavior. ICS employees on the ships are considered crew members. The testimony of Linda Loddo, district manager for ICS since 1973, corroborated that of Ms. Jensen in establishing that the authority of the NCL ships' officers extends to ICS employees as crew members, whether they are actually aboard ship or on land. Additionally, Ms. Jensen established that, based upon her considerable experience working in the cruise ship industry, that the shops and bars operated by ICS aboard the NCL cruise ships are an integral functioning part of, and appropriate to the operation of, a cruise vessel and a cruise line, in the normal course of its business and operations. Thus, ICS contends that it fits within the Department's interpretation of the relevant exemption statute, Section 212.08(8), Florida Statutes, because ICS is clearly both an "agent" of NCL and an "operator" of cruise ships. Its operations aboard the cruise ships are an integral and necessary function and part of the cruise ships operations in providing for the comfort and recreation of the passengers. ICS contends however, that the exemption, and entitlement to it, is determined by the nature of the items purchased, as that relates to what are considered "parts of vessels" for purposes of the exemption provision and that the exemption is not directly applicable to a particular class of people. The Petitioner argues that the sentence containing the phrase "owner, operator or agent" merely creates a presumption with regard to which items will constitute "parts of a vessel," but that the scope of the exemption, is not limited to purchases by only those three classes of persons.
Recommendation Having considered the foregoing findings of fact, stipulations and unrefuted evidence of record, the candor and demeanor of the witnesses, and the pleadings and arguments of the parties, it is, therefore RECOMMENDED that the State of Florida, Department of Revenue enter a final order withdrawing and abating the assessment of sales and use taxes, interest and penalties against International Cruise Shops, Inc., in the particulars, and for the reasons, found and discussed above. It is further, Recommended, that the penalty sought to be imposed against International Cruise Shops by the Respondent, concerning the "bar sales assessment," be abated for the reasons delineated above. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 8th day of December, 1988. P. MICHAEL RUFF Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 8th day of December, 1988. APPENDIX TO RECOMMENDED ORDER, CASE NO. 86-3769 Petitioner's proposed findings of fact Accepted. Accepted. Accepted. Accepted. Rejected, as subordinate to the Hearing Officer's findings of fact on this subject matter. Rejected, as subordinate to the Hearing Officer's findings of fact on this subject matter. Accepted, but subordinate to the Hearing Officer's findings of fact on the subject matter. Rejected as constituting, in large part, a conclusion of law and not a proposed finding of fact and as subordinate to the Hearing Officer's findings of fact on this subject matter. Rejected as subordinate to the Hearing Officer's findings of fact on this subject matter. Accepted. Accepted, but subordinate to the Hearing Officer's findings of fact on this subject matter. Accepted. Accepted. Accepted. Respondent's proposed findings of fact The Respondent incorporates by reference the factual stipulation as its proposed findings of fact. Those findings of fact stipulated to have been accepted, of course, by the Hearing Officer, although not necessarily for the material import Respondent asserts they should be accorded through it's proposed recommended order. COPIES FURNISHED: Robert W. Hanula, Esquire The Greyhound Tower, Station 1701 Phoenix, Arizona 85077 Linda G. Miklowitz, Esquire Assistant Attorney General Department of Legal Affairs The Capitol Tallahassee, Florida 32399-1050 Katie D. Tucker, Esquire Executive Director Department of Revenue 102 Carlton Building Tallahassee, Florida 32399-0100 William D. Townsend, Esquire Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100
