The Issue Is Petitioner entitled to the repayment of funds paid to the State Treasury through overpayment or error, in relation to use taxes? The refund claim is $37,837.91. See Section 215.26, 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.
Recommendation Based upon the findings of fact and the conclusions of law, reached, it is, RECOMMENDED: That Petitioner's request for repayment of funds paid to the State Treasury in the amount of $37,837.91, paid as use taxes for all years in question, be DENIED. DONE AND ENTERED this 20th day of April, 1998, in Tallahassee, Leon County, Florida. COPIES FURNISHED: H. Michael Madsen, Esquire Vickers, Madsen, and Goldman, LLP Suite 101 1705 Metropolitan Boulevard 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. Tallahassee, Florida 32308-3765 John N. Upchurch, Esquire James McCauley, Esquire Department of Legal Affairs The Capitol, Tax Section Tallahassee, Florida 32399-1050 Linda Lettera, Esquire Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 Larry Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100
The Issue The issue for determination is whether Petitioner is liable for the tax, penalty, and interest assessed.
Findings Of Fact Petitioner is a Florida corporation with its principal place of business located at 2836 North Tamiami Trial, Sarasota, Florida. Petitioner primarily engages in the business of selling classic, vintage automobiles. Petitioner sells automobiles for delivery in-state, interstate, and internationally. Petitioner also engages in the business of selling other collectible items, including jukeboxes. Respondent is the state agency responsible for the administration of the Florida sales and use tax pursuant to Sections 20.21 and 213.05, Florida Statutes (1991). (All references to Florida Statutes are to Florida Statutes 1991 unless otherwise stated.) In accordance with Section 212.34, Respondent audited Petitioner's business records for the period from May 1, 1991, through July 31, 1996 (audit period). Respondent determined a deficiency and assessed Petitioner for $114,878.68, including tax, penalty, and interest through January 26, 1999. Respondent assessed tax in the amount of $55,771.16, penalty in the amount of $26,528.02, and interest through January 26, 1999, in the amount of $32,579.50. Additional interest accrues at the daily rate of $20.97. The assessed tax is based on several alleged deficiencies. Some deficiencies involve alleged failures of Petitioner to comply with taxing provisions. Other deficiencies involve alleged failures of Petitioner to comply with the requirements of claimed exemptions. Taxing provisions are construed narrowly against the taxing authority while the provisions authorizing exemptions are construed narrowly against the person claiming the exemption. The assessment against Petitioner includes tax on $51,353.10 in under-reported retail sales for 1994. Respondent compared the gross income reported by Petitioner for the 1994 tax year with the state sales tax revenues reported by Petitioner for the same year and determined that Petitioner under-reported sales tax revenues in the amount of $51,353.10. Mr. Martin Godbey is a corporate officer for Petitioner and a controlling shareholder. Mr. Godbey testified at the hearing. Mr. Godbey testified that $45,000 of the $51,353.10 was not under-reported gross sales in 1994. According to Mr. Godbey, Petitioner's accountant over-reported gross income for purposes of the federal income tax. Petitioner derives some income from providing brokerage services as an liaison between a buyer and seller. Mr. Godbey testified that Petitioner earned $1,400 in 1994 as a broker for the sale of a 1956 Jaguar XJ140 roadster on behalf of an automobile dealership in Virginia. The testimony is that Petitioner introduced the seller and buyer but never possessed the vehicle or delivered the vehicle. The price of the vehicle was approximately $45,000. Mr. Godbey testified that Petitioner's accountant incorrectly reported $45,000 as gross income under the federal income tax law and reported the difference between $45,000 and $1,400 as the cost of goods sold. The testimony of Mr. Godbey was credible and persuasive. However, the testimony was not supported by documentary evidence of Petitioner's federal income tax return or by testimony of Petitioner's accountant. The unsupported testimony of Mr. Godbey does not rise to the level of a preponderance of the evidence. Petitioner failed to show by a preponderance of the evidence that Petitioner over-reported gross income for the purpose of the federal income tax rather than under-reported gross sales for the purpose of the state sales tax. The testimony of Mr. Godbey did not explain the difference between the $51,353.10 amount determined by Respondent and $45,000 amount testified to by Mr. Godbey. For the period from 1991 through 1993, Petitioner collected sales tax on retail sales but did not remit the tax to Respondent. Rather, Petitioner paid the tax to two automobile dealers identified in the record as International Antique Motors, Inc. (IAM) and Autohaus Kolar, Inc. (AK). Petitioner registered with Respondent as a dealer sometime in 1991. However, Petitioner did not obtain a retail dealer's license from the Department of Motor Vehicles (Department) until late in 1993. From 1991 through most of 1993, Petitioner was licensed by the Department as a wholesale dealer and was not authorized by the Department to engage in retail sales of motor vehicles. Section 320.27(2) prohibited Petitioner from selling motor vehicles at retail and made such sales unlawful. Petitioner asserts that it could not have engaged in retail sales, within the meaning of Section 212.06(2)(c) and (d), because Petitioner had no legal authority to do so. From 1991 through 1993, Petitioner engaged in retail sales within the meaning of Section 212.06(2)(c) and (d). Petitioner engaged in retail sales by selling automobiles at retail in violation of Section 320.27(2). Respondent does not dispute that Petitioner collected sales tax on each sale. Petitioner did not engage in retail sales and collect sales tax on each sale in the capacity of an agent for IAM or AK. Petitioner acted in his own behalf as a principal. IAM and AK had no actual or legal control over the sales conducted by Petitioner. IAM and AK merely processed the title work for each retail sale conducted by Petitioner. Even if Petitioner were an agent for IAM and AK, Petitioner engaged in retail sales as a dealer defined in Florida Administrative Code Rule 12A-1.0066. (All references to rules are to rules promulgated in the Florida Administrative Code during the audit period.) Petitioner registered the vehicles sold at retail from 1991 through 1993 by way of a business arrangement with IAM and AK. After Petitioner collected sales tax on each retail sale, Petitioner remitted the tax to IAM and AK. IAM and AK then registered the vehicles with the Department. Respondent does not dispute that Petitioner paid to IAM and AK the sales tax that Petitioner collected from each customer. Nor does Respondent dispute that the amount of tax Petitioner paid to IAM and AK was sufficient to pay the tax due. Section 212.06(10) requires IAM and AK to issue a receipt for sales tax with each application for title or registration. IAM obtained title or registration for 21 vehicles sold by Petitioner and at issue in this case. AK obtained title or registration for three vehicles at issue in this case. Section 212.06(10) does not operate to create a factual presumption that IAM and AK paid the sales tax due on the 24 vehicles at the time that IAM and AK applied for title or registration of each vehicle. In practice, the receipt issued by dealers with each application for title or registration contains a code indicating that the dealer has collected the tax and will pay the tax in the dealer's ensuing sales tax return. After IAM applied for title or registration for the vehicles evidenced in Petitioner's Exhibits 2, 4, 6, and 21, IAM remitted taxes to Respondent in an amount sufficient to pay the tax due on those sales by Petitioner. Respondent has no record of any tax deficiencies against IAM. Respondent's admitted policy is to avoid the collection of tax if the tax has already been paid. After IAM applied for title or registration for the vehicles evidenced in Petitioner's Exhibits 1, 3, 5, and 7 through 20, IAM remitted taxes to Respondent in an amount that was insufficient to pay the tax due on those sales. Petitioner failed to show by a preponderance of the evidence that IAM remitted to Respondent the taxes that Petitioner collected and paid to IAM in connection with the sales evidenced in Petitioner's Exhibits 1, 3, 5, and 7 through 20. Petitioner is not entitled to a set-off of the taxes remitted to Respondent by IAM after the sales evidenced in Petitioner's Exhibits 1, 3, 5, and 7 through 20. There is insufficient evidence to show that the taxes remitted by IAM were collected on the sales at issue in this case rather than other sales made by IAM. AK processed three vehicles for Petitioner that are at issue in this case. AK paid to Respondent the sales tax due on the three retail sales at issue. The relevant sales are evidenced in Petitioner's Exhibits 24 through 26. AK remitted taxes in an amount that was more than sufficient to pay the tax due on those sales by Petitioner. Respondent has no record of a tax deficiency against AK. Respondent's policy is to avoid the collection of tax if tax has already been paid. Several deficiencies are attributable to disallowed exemptions for 16 sales that include 14 vehicles and two jukeboxes. Statutory requirements for exemptions are strictly construed against the person claiming the exemption. Petitioner did not satisfy essential requirements for any of the disallowed exemptions. The exemptions asserted by Petitioner in its PRO are discussed in greater detail in the following paragraphs. During the audit period, Petitioner sold a 1972 Italia Spyder automobile, VIN: 50413414, to a Texas automobile dealership identified in the record as North American Classic Cars/Gene Ponder, of Marshall, Texas (North American). Petitioner claims that the sale to North American is exempt because it is a sale for resale to a non-resident dealer. The sale to North American is not exempt. Petitioner failed to obtain a non-resident dealer affidavit at the time of sale in violation of Section 212.08(10). During the audit, Petitioner obtained a Sales Tax Exemption Affidavit (DR-40) from North American. A DR-40 is not appropriate for a sale for resale to a non-resident dealer. The appropriate affidavit would have required the non-resident dealer to attest that "the motor vehicle will be transported outside of the State of Florida for resale and for no other purpose." Hand written notations on the bill of sale for the Italia Spyder indicate the North American representative took possession of the automobile in Florida. In addition, a hand- written letter to Petitioner indicates that the Italia Spyder was purchased for the private collection of the owner of North American rather than for resale. During the audit period, Petitioner sold a 1959 Mercedes Benz 190SL automobile, VIN: 12104-10-95012, to Mike Hiller, of Coral Springs, Florida (Hiller). Petitioner claimed, on the bill of sale, that the sale was exempt because it was a sale to a non-resident dealer for resale. The sale to Hiller is not exempt. At the time of the sale, Petitioner failed to obtain a non-resident dealer affidavit or a resale certificate. The bill of lading lists Hiller as an exporter and indicated that Hiller, as the exporter, took possession of the automobile in Florida. The bill of lading does not show unbroken, continuous transportation from the selling dealer to a common carrier or directly out of Florida as required in Section 212.06(5)(b)1. During the audit period, Petitioner sold a 1959 MGA Roadster, VIN: 54941, to Fabiana Valsecchi, of Rome, Italy. Petitioner claims the sale is exempt as a sale for export. The sale to Valsecchi is not exempt. At the time of the sale, Petitioner failed to obtain a bill of lading, or other shipping documentation that shows unbroken, continuous transportation from Petitioner to a common carrier or directly out of Florida. The bill of sale signed by the purchaser's agent shows that the agent took possession of the automobile in Florida. Petitioner failed to show that the sale was exempt because it was a sale for resale. Petitioner did not provide a resale certificate from the purchaser. During the audit period, Petitioner sold a 1961 Triumph TR3 automobile, VIN: TS753 38L, to Classic Automobile Investors, Inc., of Germany (Classic). Petitioner claims that the sale is exempt because it was a sale for export. The sale to Classic is not exempt. At the time of sale, Petitioner failed to obtain a bill of lading, or other shipping documentation which shows unbroken, continuous transportation from Petitioner to a common carrier or directly out of Florida. During the audit period, Petitioner sold a 1947 Bentley MKVI automobile, VIN: B137B, to Mr. Bob Erickson, of Palmetto, Florida. Petitioner failed to collect and remit Local Government Surtax on the sale and owes the uncollected tax. During the audit period, Petitioner sold two jukeboxes and other items of tangible personal property to Mr. C.P. Loontjens. Petitioner claims that the sales are exempt from sales tax because they were sales for export. At the time of the sale, Petitioner failed to obtain documentation from the buyer to show that items sold were delivered to a common carrier or directly delivered outside of Florida. During the audit period, Petitioner was engaged in the business of selling items of tangible personal property other than vehicles and jukeboxes. Petitioner failed to collect and remit sales tax on the sale of these items of tangible personal property. Respondent properly assessed Petitioner for sales tax due on tangible personal property other than vehicles and jukeboxes in the amount of $3,352.50. Vintage rented commercial real property for its business. Rental payments for such real property are subject to sales tax pursuant to Section 212.031. During the audit period, Petitioner failed to pay sales tax on two payments for the commercial rental of real property. Petitioner is liable for use tax on the use of real property during the audit period. Respondent properly assessed Petitioner for additional use tax in the amount of $108.00. Although Petitioner maintained some books and records of sales and purchases, Petitioner failed to maintain adequate records. Respondent properly conducted an audit by sampling Petitioner's available books and records in accordance with Section 212.12(6)(b) but limited the claimed penalty to a delinquent penalty. The trier of fact cannot determine the taxes, interest, and penalty that are due after eliminating the deficiencies found in paragraphs 21 and 24 not to exist in connection with the sales evidenced in Petitioner's Exhibits 2, 4, 6, 21, and 24 through 26. Only Respondent can make that calculation using the same sampling formula that Respondent used to calculate the tax, interest, and penalty in the assessment.
Recommendation Based upon the foregoing findings of fact and the conclusions of law, it is RECOMMENDED that Respondent enter a Final Order ordering Petitioner to pay the tax, interest, and penalty that is due after Respondent recalculates the assessment against Petitioner in accordance with the findings pertaining to Petitioner's Exhibits 2, 4, 6, 21, and 24 through 26. DONE AND ENTERED this 6th day of March, 2003, in Tallahassee, Leon County, Florida. ___________________________________ DANIEL MANRY 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 6th day of March, 2003. COPIES FURNISHED: Carrol Y. Cherry, Esquire Office of the Attorney General Department of Legal Affairs The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050 Martha F. Barrera, Esquire Office of the Attorney General Department of Legal Affairs The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050 R. John Cole, II, Esquire Law Offices of R. John Cole, II 46 North Washington Boulevard, Suite 24 Sarasota, Florida 34236 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
Findings Of Fact Petitioner purchased a used car in Florida in May of 1983 and paid 5 percent sales tax. Petitioner did not title said car in the State of Florida. When Petitioner returned to Maryland, his state of residence, Maryland imposed a 5 percent tax on said car when Petitioner titled said car. Petitioner applied for a sales tax refund to the Department of Revenue in the amount of $225.00. Respondent issued a Notice of Intent to deny said refund application on December 1, 1983. From the exhibits to which the parties stipulated, additional facts are found by the Hearing Officer. A bill of sale indicates that Petitioner purchased a 1979 Buick Regal from Eddy Auto Sales on May 14, 1983. A temporary registration and receipt issued by the State of Maryland on June 17, 1983, shows that Petitioner paid a "title tax" of $222.50 to the State of Maryland. By letter dated January 27, 1984, Agnes Stoicos of the Maryland Department of Transportation indicates that the Maryland tax is a 5 percent excise tax upon the issuance of all original and subsequent certificates of title, and the tax is used primarily for the construction and the maintenance of the Maryland highway system.
Findings Of Fact The parties stipulated to findings of fact set forth in paragraphs 1-5, below. Zurich is an insurer domiciled in the State of New York. Zurich is authorized to do insurance business in the State of Florida. Zurich pays insurance premium taxes to the State of Florida. As a foreign insurer doing business in Florida, Zurich is subject to the provisions of Florida's retaliatory tax, Section 624.5091, Florida Statutes. Respondent Department of Revenue (Revenue) is the state agency charged with the duty to implement and enforce Section 624.5091, Florida Statutes. Zurich's interests are substantially affected by Revenue's Rule 12B- 8.016(3)(a)(4), Florida Administrative Code, by virtue of the tax assessment made against Zurich pursuant to the rule. OTHER FACTS Prior to 1989, the Department of Insurance administered insurance taxation. Now, Revenue has that responsibility. Section 213.05, Florida Statutes, directs Revenue to administer provisions of Sections 624.509 through 624.514, Florida Statutes. Section 213.06(1), Florida Statutes, authorizes Revenue to promulgate rules to implement those responsibilities. Rule 12B-8.016 was first promulgated by Revenue in December of 1989 to implement statutory authority of Section 624.429 (currently renumbered as 624.5091). This statute authorized retaliatory taxation against non-domiciled insurers in the amount by which their state of domicile would tax Florida insurers in excess of Florida's comparable tax. The statute provides in pertinent part: When by or pursuant to the laws of any other state or foreign country any taxes, licenses, and other fees, in the aggregate, and any fines, penalties, deposit requirements, or other material obligations, prohibitions, or restrictions are or would be imposed upon Florida insurers or upon the agents or representatives of such insurers, which are in excess of such taxes, licenses, and other fees, in the aggregate, or other obligations, prohibitions, or restrictions directly imposed upon similar insurers, or upon the agents or representatives of such insurers, of such other state or country under the statutes of this state, so long as such laws of such other state or country continue in force or are so applied, the same taxes, licenses, and other fees, in the aggregate, or fines, penalties, deposit requirements, or other material obligations, prohibitions, or restrictions of whatever kind shall be imposed by the department upon the insurers, or upon the agents or representatives of such insurers, of such other state or country doing business or seeking to do business in this state. As it existed in 1989 and currently, the statute contains an exclusionary provision expressly excluding from the retaliatory tax any special purpose assessments in connection with insurance other than property insurance. This exclusionary provision is part of Subsection 3 of the current statute, 624.5091, and reads as follows: (3)This section does not apply as to personal income taxes, nor as to sales or use taxes, nor as to ad valorem taxes on real or personal property, nor as to reimbursement premiums paid to the Florida Hurricane Catastrophe Fund, nor as to emergency assessments paid to the Florida Hurricane Catastrophe Fund, nor as to special purpose obligations or assessments imposed in connection with particular kinds of insurance other than property insurance, except that deductions, from premium taxes or other taxes otherwise payable, allowed on account of real estate or personal property taxes paid shall be taken into consideration by the department in determining the propriety and extent of retaliatory action under this section. The parties concede that Revenue's Rule 12B-8.016 accurately tracts the first part of the retaliatory taxation statute. But a subpart of the Rule, 12B- 8.016(3)(a)(4), is challenged by Zurich in this proceeding because that subpart provides for inclusion of the assessment for administration of workers compensation in Florida and comparable assessments in other states. The rule subpart states: (3)(a) Other items which shall be included in the retaliatory calculations are: * * * 4. The workers compensation administrative assessment imposed by s. 440.51, F.S., as well as comparable assessments in other states. The State of Florida imposes assessment on workers compensation carriers such as Zurich in accordance with authority contained in Section 440.51, Florida Statutes, which is entitled "Expenses of Administration." Section 440.51 provides for the pro-rata assessment of all insurers and self- insurers of workers compensation to cover expenses of administering the workers compensation program. The assessment is a "special fund" that does not involve appropriated funds or general state revenues. Zurich's home state of New York imposes a comparable assessment. In accordance with Rule 12B-8.016(3)(a)(4), Florida Administrative Code, Revenue includes calculations for the Worker's Compensation Board Administrative Fund in the state of New York in Zurich's retaliatory tax calculation. In drafting the rule in 1989, Revenue relied upon Attorney General Opinion 057-173, which advised that Florida's Worker's Compensation Administrative Assessment should be considered a "tax" for purposes of retaliatory tax calculation. On this basis, Revenue's rule requires that such assessments be considered as "taxes" and included in the retaliatory tax calculation. However, following the issuance of Attorney General Opinion 057-173, the Florida legislature in 1959 enacted the present Subsection 624.5091(3), Florida Statutes, specifically excluding the consideration of "special purpose obligations or assessments imposed in connection with particular kinds of insurance other than property insurance" in retaliatory tax calculations. Following the 1959 enactment of the exclusionary language contained in Subsection 624.5091(3), Florida Statutes, the Department of Insurance did not include comparable worker compensation assessments of other states. The Department of Insurance administered insurance taxation until 1989. Department of Insurance forms introduced into evidence for 1986 showed that the Florida assessment, pursuant to Section 440.51 Florida Statutes, was treated as a deduction against Florida's premium tax and added back in on the Florida side of the retaliatory tax calculation. But the assessment was not included in a manner to inflate the calculation of the domiciliary state's comparative tax base. When Revenue assumed administration of insurance taxation in 1989, a proposed rule and an emergency rule were promulgated. Neither provided for inclusion of foreign states' special purpose administrative assessments in retaliatory tax calculation. In the course of the promulgation process, the determination to treat the worker compensation administrative assessment as a tax became a part of the rule. The purpose of Florida's retaliatory statute is to influence other states' legislative discretion to lower the tax burden on Florida insurers doing business in those other states. The items to be compared for retaliatory purposes are determined by the legislature and not by Revenue, Revenue auditors, or other states.
The Issue The issue for determination is whether Respondent should grant Petitioner's application for a sales tax exemption certificate as a charitable institution within the meaning of Section 212.08(7), Florida Statutes. 1/
Findings Of Fact Respondent is the governmental agency responsible for issuing sales tax exemption certificates in accordance with Section 212.08(7). Petitioner is a non-profit, Florida corporation and a charitable organization, within the meaning of Section 501(c)(3) of the Internal Revenue Code, for purposes of the federal income tax. On December 29, 1995, Petitioner applied for an exemption from state sales and use tax ("sales tax") as a charitable institution. On February 8, 1996, Respondent denied Petitioner's application. The parties stipulated that Petitioner is a non-profit corporation. The parties further stipulated that the only exemption under which Petitioner may qualify for a sales tax exemption is the exemption for a charitable institution. In order to qualify as a charitable institution, Petitioner must provide one or more of seven services listed in Section 212.08(7). The parties stipulated that the only service Petitioner arguably provides as a charitable institution is that of raising funds for medical research within the meaning of Section 212.08(7)(o)2b(V). It is uncontroverted that Petitioner does not provide medical research directly. Petitioner raises funds for its national organization. The national organization then disburses funds raised by local affiliates. Petitioner failed to submit any competent and substantial evidence showing the disposition of funds by its national organization. Petitioner failed to show that its national organization either provides direct medical research or raises funds for one or more organizations that provide medical research.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent enter a Final Order and therein DENY Petitioner's request for a sales tax exemption. RECOMMENDED this 4th day of June, 1996, in Tallahassee, Florida. DANIEL S. MANRY, 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 4th day of June, 1996.
The Issue The factual issue in this case is whether Respondent failed to disclose certain information, of which he had knowledge, which would have adversely impacted the consideration by the Board of his financial responsibility. The legal issue raised by the Administrative Complaint is whether the failure to disclose such information constitutes a violation of Section 489.127(1)(d) , and thereby a violation of Section 489.129(1)(j), Florida Statutes (1979). However, neither allegation alleges fraud on an application. The case should be dismissed.
Findings Of Fact On or about March 26, 1980, the Respondent filed for a change of status as a certified general contractor from a company to operating as an individual. On his application, Respondent answered in the negative the following questions: Question 16 (b): Are there now any unpaid past-due bills or claims for labor, materials, or services, as a result of a construction operation of any person named in `(i) below' or any organizations in which any such person was a member of the personnel? Question 16(c): "Are there now any liens, suits, or judgments of record or pending as a result of a construction operation of any person named in `(i) below' or any organiation in which any such person was a member of the personnel?' Question 16(d): Are there now any liens of record by the U.S. Internal Revenue Service or the State of Florida Corporate Tax Division against any person named in `(i) below' or any organization in which any person was a member of the personnel? Evidence was received that a number of judgments and liens had been obtained against t Donald B. Richards personally or as a member or qualifier of a registered or certified company, specifically Acme Aluminum Sales and Service. There is no credible or substantial evidence that the judgment of Nu-Vue Industries, Inc. (Petitioner's Exhibit 7), arose from contracting operations in which Respondent was involved. There is no substantial and competent evidence that the notes upon which the judgment of Commercial National Bank (Petitioner's Exhibit 7) was obtained related to contracting operations. (Tr. 17, 19.) Tax liens for nonpayment of unemployment compensation were introduced. These liens were mailed to 2120 West Parker Street, Lakeland, Florida. Question 16(d) on the subject application limits tax liens to those of the U.S. Internal Revenue Service and the Corporate Tax Division of the State of Florida. See Petitioner's Exhibit 9 (Composite).] The custodian of the records for Florida Industries, Inc., could not recall what Respondent purchased from that company or why Respondent purchased it. The records custodian could only say that the items were probably building materials, and could not way whether the company's judgment had been satisfied. (See Deposition of Saul Rachelson; pages 5, 7.) The records of the judgment reflect that it was sent to 446 North Wabash, Lakeland, Florida. (See Petitioner's Exhibit 10.) The records of the Board do not reflect that Respondent ever resided or worked at 446 North Wabash, Lakeland, Florida. Said address is also listed within the judgment as the address of John Stinson, who was Respondent's business partner at the time. There is no substantial evidence that this judgment was related to contracting, that Respondent was aware of this judgment, or that the judgment was outstanding at the time Respondent made his application on March 26, 1980. The judgment obtained by Wells Carmel Aluminum, Inc., on May 4, 1977, was a default judgment. The attorney for Wells Carmel Aluminum did not know whether the items purchased, from which the default judgment arose, were construction materials and did not know why Respondent had purchased them. (Tr. 28.) There is no substantial and competent evidence that these materials were related to contracting. The judgment obtained by State Farm Fire and Casualty Company dated June 4, 1978, was related to Respondent's business. The business of Acme Aluminum Sales and Service was contracting. However, the judgment reflects on its face that it was sent to 2120 West Park Street, Lakeland, Florida 33001, on or about the date that it was entered. By said time, the business was no longer operating at that address, and said property had returned to the possession of the original owner, Arley Propes. The evidence indicates that Respondent had no knowledge of State Farm's judgment. The judgment obtained by the Pope Shopper Shopping News, Inc., on February 7, 1970, was related to Respondent's contracting business. A copy of the judgment was sent to Respondent's home address at 630 Candyce Avenue, Lakeland, Florida 33801. The Respondent had knowledge of this judgment and that it was related to his contracting activities. On November 3, 1977, Richard Allen obtained a judgment against Respondent arising from Respondent's failure to correct certain conditions on a contracting job which he had done for Allen. A copy of this judgment was sent to 2120 West Parker Street, Lakeland, Florida 33801. By that time, Respondent was no longer doing business at that address. The evidence indicates that Respondent had no knowledge of the judgment obtained by Allen.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Board take no action against Respondent. DONE and RECOMMENDED this 3rd day of August, 1984, in Tallahassee, Leon County, Florida. STEPHEN F. DEAN Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 3rd day of August, 1984. COPIES FURNISHED: Charles F. Tunnicliff, Esquire Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32301 Donald B. Richards 630 Candyce Avenue Lakeland, Florida 33801 Frederick Roche, Secretary Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32301 James Linnan, Executive Director Construction Industry Licensing Board Post Office Box 2 Jacksonville, Florida 32202
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 The issue is whether Petitioner collected and remitted to Respondent the correct amount of sales and use taxes during the audit period from October 1, 2004, through September 30, 2007, and, if not, what additional amount of tax plus penalty and interest is due.
Findings Of Fact Petitioner True Blue Pools (Petitioner, taxpayer, or TBP) is a domestic corporation headquartered in Miami-Dade County, Florida. TBP services, repairs, and renovates swimming pools and constructed some pools during the audit period. Respondent, Florida Department of Revenue (Respondent or DOR), is the agency of state government authorized to administer the tax laws of the State of Florida, pursuant to section 213.05, Florida Statutes.2 DOR is authorized to prescribe the records to be kept by all persons subject to taxes under chapter 212, Florida Statutes. Such persons have a duty to keep and preserve their records, and the records shall be open to examination by DOR or its authorized agents at all reasonable hours pursuant to section 212.12(6), Florida Statutes. DOR is authorized to conduct audits of taxpayers and to request information to ascertain their tax liability, if any, pursuant to section 213.34, Florida Statutes. On November 2, 2007, DOR initiated an audit of TBP to determine whether it was properly collecting and remitting sales and use taxes to DOR. The audit period was from October 1, 2004, through September 30, 2007. On December 15, 2008, DOR sent TBP its Notice of Intent to Make Audit Changes (NOI), with schedules, showing that TBP owed to DOR additional sales and use taxes in the amount of $113,632.17, penalty in the amount of $28,406.05, and interest through December 16, 2008, in the amount of $34,546.59, making a total assessment in the amount of $176,586.81. On October 26, 2009, DOR issued its Notice of Proposed Assessment. TBP timely challenged the Notice of Proposed Assessment, filing its petition with DOR and requesting an administrative hearing. Subsequent to the petition being filed, additional documentation was provided by TBP resulting in a revision to the tax, interest, and penalty amount due. DOR's revised work papers, dated May 27, 2010, claim Petitioner owes $64,430.83 in tax, $16,107.71 in penalty, and interest through May 27, 2010, in the amount of $27,071.99, with an assessment of $107,610.53. The assessed penalty, $16,107.71, was calculated after 25% of the penalty was waived, pursuant to subsection 213.21(3)(a), Florida Statutes, based on DOR's determination that there is no evidence of willful negligence, willful neglect, or fraud. The audit was conducted to determine liability in four categories: improper sales tax exemptions, unpaid sales taxes for taxable expenses, unpaid use taxes on fixed assets, and unpaid use taxes on taxable materials used to fulfill contracts to improve real property. Sales Tax Exemptions Due to the large volume of invoices and other records, the auditor conducted a random sampling of invoices for three months during the audit period, October 2004, January 2005, and September 2007.3 If no sales tax was collected and the Petitioner claimed that the transaction was exempt from the requirement to pay taxes, the auditor looked for proof that either the TBP customer was an exempt organization, for example, a school or a church, or that TBP had provided its suppliers with a DOR Form DR-13 to exempt from taxes products acquired for resale. In the absence proof of either type of exemption, DOR assumed taxes should have been paid. Using the difference between taxes collected and taxes due for the three months, the auditor determined that the percentage of error was .016521. When .016521 was applied to total sales of $1,485,890.79 for the 36-month audit period, the results showed that an additional $24,548.41 in sales taxes should have been collected from customers, and is due from TBP. Although a business is required to pay taxes for the materials it purchases to use in its business, it is not required to collect taxes from its customers when it enters into lump sum contracts to perform a service for customers. At least one invoice for $9,500.00 that the auditor treated as an improper exemption was, in fact, a partial payment on a lump-sum contract. The invoice referenced a "shotcrete draw," which represented the collection of funds after the concrete part of pool construction was completed. TBP is not required to collect taxes when it uses lump-sum contracts. Other invoices for pool repair and services were also mischaracterized as exempt by the TBP, but it is not clear that all were payments related to lump-sum contracts. DOR's auditor, nevertheless, testified as follows: With the knowledge that I have for True Blue Pools, being a lump-sum contractor, True Blue Pools should not charge their customer any sales tax. Transcript at pages 67-68. DOR concedes that some of TBP's transactions are also exempt from taxes as improvements to real property. In its Proposed Recommended Order, DOR asserted that TBP's use of the term "improvements to real property" is overbroad, but it did not specify how or why this is the case. During cross- examination of the owner of TBP, only one invoice for $500.00 for leak detection on the Delgado property was shown to have been for a service rather than for swimming pool construction. Taxable Expenses DOR audited TBP's purchases of tangible personal property used in the daily operation of its business. The products included chlorine and other chemicals, office supplies, and vehicle parts, expenses, and repairs. The ledger for a 12- month period, calendar year 2006, showed an average monthly additional tax due of $111.18, or a total of $4,002.48 in additional taxes for the 36-month audit period. As noted in Petitioner's Proposed Recommended Order, "[t]he representative of TBP did not dispute DOR's allegation that no tax may have been paid on the purchase of all of these items " Fixed Assets TBP's list of fixed assets was taken from the depreciation schedule on Internal Revenue Service Form 4562. The items listed are computer- and software-related. TBP provided no proof that it had paid a use tax. The additional tax due equals $419.94. Petitioner's Proposed Recommended Order includes the statement that "[a]gain, the representative of TBP did not dispute DOR's allegation that no tax may have been paid on the purchase of these items " Taxable Materials Taxable materials, those purchased to fulfill a contract to improve real property, included items used to build, renovate, and repair pools. The items included concrete, meters, drains, and valves. For the 12-month sample period, calendar year 2006, TBP failed to pay taxes on material purchases in the total amount of $168,310.05, or an average of $14,078.96 a month. For the 36-month audit period, the total of the purchases was $506,842.56. With a 6 percent tax due for the state and 1 percent for the county, the total additional tax due on materials is $35,460.00. TBP conceded that it improperly used a resale exemption to purchase taxable materials from suppliers without paying taxes. The materials were used to provide services and were not resold. Acknowledging again that TBP uses lump-sum contracts, this time to support the collection of additional taxes, the auditor testified as follows: And the law states that the taxpayer's [sic] an ultimate consumer of all materials purchased to fulfill a lump-sum contract, and that's what they told me they operate under, a lump-sum contract. Transcript at page 58. At the hearing, TBP used its actual profit and loss statement to show that the cost of goods it sold (general purchases and taxable materials) in the amounts of $18,360.77 in October 2004, $8,519.22 in January 2005, and $4,818.65 in September 2007. Corresponding taxes for each of those months should have been $1,285.25, $596.35, and $337.31, or an average of $739.63 a month, or a total of $26,626.68 for 36 months. The goods that it sold were not at issue in the audit of taxable materials, rather it was TBP's purchases from vendors that should have been taxed that resulted in DOR's audit results. Total Additional Sales and Use Taxes Due The three categories of additional taxes due, $4,002.48 for taxable expenses, $419.94 for fixed assets, and $35,460.00 for taxable materials, equal $39,882.42 in additional taxes due during the audit period. Taxes Paid TBP filed DOR Forms DR-15, monthly sales and use tax reporting forms, and paid sales and use taxes during the audit period. For the sample months used by DOR to examine sales tax exemptions, TBP paid $1,839.10 in taxes in October 2004, $1,672.73 in January 2005, and $1,418.13 in September 2007. Using the three months to calculate an average, extended to 36 months, it is likely that TBP paid $59,712 in taxes. TBP asserted that DOR was required to, but did not, offset the deficiency of $39,882.42, by what appears to be an overpayment of $59,712.00 in sales and use taxes. Other than pointing out that the amount reported on the DR-15s differed, being sometimes more and sometimes less than the amount shown on the profit and loss statements, DOR did not dispute TBP's claim that it had paid sales and use taxes. TBP's representative explained that end-of-the-year adjustments for additional collections or for bad debt could cause the amounts on the DR-15s and profit and loss statements to differ. With regard to the taxes paid, DOR took the following position in its Proposed Recommended Order: Petitioner's DR-15's [sic] for the collection periods October 2004, and January 2005, [and September 2007] (Petitioner's Composite Exhibit 1) do reflect sales tax being collected and remitted to DOR. DOR does not allege that Petitioner never paid tax on its purchases, or made bona fide exempt sales for which no tax was collected. DOR's audit findings identify just those which occurred within the sample period, scheduled in the auditor's workpapers, and applied over the entire audit period. The DR-15s are taken from the sample months selected by DOR within the audit period, and DOR does not address TBP's claim that a set off for taxes paid was mandatory, pursuant to subsection 213.34(4), Florida Statutes. Using the audit schedules, DOR showed credit for taxes paid in the amounts of $20.63 for taxable expenses, $0 for fixed assets, and $24.31 in state taxes and $1.03 for county taxes on taxable materials. The amounts are far less that the $59,712.00 in sales/use taxes TBP showed that it paid during the audit period.
Recommendation Based upon the forgoing findings of fact and conclusions of law, it is recommended that the Department of Revenue issue a final order dismissing the Notice of Intent to Make Audit Changes dated December 15, 2010. DONE AND ENTERED this 20th day of January, 2011, in Tallahassee, Leon County, Florida. S ELEANOR M. HUNTER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 20th day of January, 2011.
The Issue 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/
