The Issue The issue for determination is whether Respondent's alcoholic beverage license should be disciplined for violation of Chapter 561, Florida Statutes. Resolution of this issue requires a determination of whether Respondent correctly reported and remitted alcoholic beverage surcharges.
Findings Of Fact Respondent is Betty Schmidt. At all times pertinent to these proceedings, she held alcoholic beverage license no. 74-00275, Series 2-COP, for a licensed premises located at 1161 North U.S. 1, Ormond Beach, Florida. Petitioner's auditor, Muriel Johnson, performs audits on vendors monthly surcharge reports in order to confirm the accuracy of those reports and ensure compliance with statutory and administrative rule requirements. The audit in the instant case covered the reporting period of Respondent from September 1, 1994 through August 31, 1997. Alcoholic beverage licensees are afforded an opportunity to elect to report and pay the surcharge by either the purchase method or the sales method. Under the purchase method, a licensee pays the surcharge on alcoholic beverages purchased from authorized distributors. Under the sales method, licensees pay the surcharge on alcoholic beverages sold for consumption on the premises. Respondent elected to report via the sales method. A licensee's reporting under the sales method is audited by the Sales Depletion Method. Under this methodology, a beginning inventory is ascertained. Second, purchases made by the licensee for the audit period are computed. Third, an ending inventory for the audit period is ascertained. Fourth, Gross Gallonage Available For Sale is computed by adding the beginning inventory to the purchases made during the audit period and then subtracting the ending inventory. Fifth, the Net Gallonage Available For Sale during the audit period is calculated by subtracting from the Gross Gallonage an allowance for spillage and a cooking adjustment. The end result is termed the Adjusted Sales Gallonage from which amount the amount of surcharge owed for the audit period is determined. Because Respondent did not keep inventory figures, and based upon her assertion that her inventory was generally the same, Respondent and the auditor agreed upon zero as the starting inventory. Second, purchases of alcoholic beverages by Respondent during the audit period were computed based upon purchase figures provided by Respondent and verified independently through records obtained from distributors. Third, the ending inventory was agreed to be zero. Fourth, The gross gallonage available for sale was determined by adding the beginning inventory (zero) to the purchases made during the audit period and subtracting the ending inventory (also zero). Fifth, adjustments to net gallonage for sale included allowances for spillage and package sales. Notably, the audit revealed that Respondent was treating liquor mixers as wine coolers and paying a lower tax on that basis when in fact wine coolers are taxed at the rate of one ounce of liquor per container at a higher rate. Adjustments for this practice were also made. Finally, the total surcharge due for the audit period was calculated and compared to the amount already reported in order to determine the amount of under- reported or over-reported tax. Respondent sets up various disbursement stations for beer on her property during “bike week” in Daytona Beach. With only one cash register, the sales at the various stations are maintained by hand on clipboards. Additional staff is employed at this time and Respondent is not personally present at each station to monitor sales reporting. Frequent sources of alcoholic beverage sales that are not captured by a license’s cash register include theft, breakage, leakage, spillage, overpouring of drinks, and free drinks. The amounts of alcoholic beverage that are lost to a cash register in these ways are captured by Petitioner’s sales audit method. While Respondent keeps good records, no cash register method can ever capture all of the alcoholic beverages available for consumption on premises and consequently there will always be some discrepancy as the result of a sales method audit. As established by results of Petitioner's audit, Respondent underpaid surcharges for the audit period in the amount of $890. Additionally, it is established that Respondent owes $557.66 in penalties and $193.33 in interest on the payment deficiency.
Recommendation Based on the foregoing, it is hereby RECOMMENDED that a Final Order be entered requiring payment by Respondent in the amount of $1641.10, the amount of total tax and liabilities claimed by Petitioner to be due. DONE AND ENTERED this 23rd day of November, 1998, in Tallahassee, Leon County, Florida. DON W. DAVIS 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 23rd day of November, 1998. COPIES FURNISHED: Elsa Lopez Whitehurst, Esquire Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-1007 Betty Schmidt Smiley's Tap 1161 North U.S. 1 Ormond Beach, Florida 32174 Richard Boyd, Director Division of Alcoholic Beverages and Tobacco Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792 Lynda L. Goodgame, General Counsel Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792
The Issue Whether proposed Rules 61A-7.003, 61A-7.007, 61A-7.008, and 61A-7.009 constitute invalid exercises of delegated legislative authority, pursuant to Section 120.52(8), Florida Statutes,1/ for the reasons described by Petitioner in its Petition.
Findings Of Fact Petitioner and Intervenor are companies whose substantial interests will be affected by the proposed rules and they have standing to bring this rule challenge. The State of Florida, Department of Business and Professional Regulation (the Department), is the state agency responsible for adopting the proposed rules which are the subject matter of this proceeding. The Division of Alcoholic Beverages and Tobacco (the Division) is vested with general regulatory authority over the alcoholic beverage industry within the state. The Division issues both general and special alcoholic beverage licenses. See Chapters 561-565, Fla. Stat. The general licenses which permit consumption on the premises are: 1COP licenses which permit consumption of beer and certain wine and distilled spirit products; 2COP licenses which permit consumption of beer, wine, and certain distilled spirit products; and 4COP licenses which permit the consumption of beer, wine, and all distilled spirits. See §§ 563.02(1)(b)-(f), 564.06(5)(b), and 561.20(1), Fla. Stat. The 4COP licenses are known as quota licenses, are issued based on the population of the county, and are limited in number. § 561.20(1), Fla. Stat. Quota liquor licenses range in value, depending on the county involved, from a low of approximately $20,000, to a high of approximately $300,000. (stipulation of parties) The SBX or special bowling license is issued by the Division pursuant to Section 561.20(2)(c), Florida Statutes. The owner or lessee of a bowling establishment having 12 or more lanes and necessary equipment to operate them may obtain this special license which permits consumption of beer, wine, and distilled spirits. Alcohol can only be sold for consumption on the licensed premises. Another special alcoholic beverage license listed in proposed Rule 61A-7.003 is the 12RT license. The holder of such a license must be a caterer at a dog track, horse track, or jai alai fronton. In this context, Section 565.02(5), Florida Statutes, reads in pertinent part as follows: (5) A caterer at a horse or dog racetrack or jai alai fronton may obtain a license upon the payment of an annual state license tax of $675. Such caterer’s license shall permit sales only within the enclosure in which such races or jai alai games are conducted, and such licensee shall be permitted to sell only during the period beginning 10 days before and ending 10 days after racing or jai alai under the authority of the Division of Pari- mutual Wagering of the Department of Business and Professional Regulation is conducted at such racetrack or jai alai fronton. . . . Petitioner participated, to some degree, in the rule development process. The extent of that participation is unclear from the record. The text of the proposed rules as published in their final form in the Florida Administrative Weekly on October 10, 2003, is as follows: 61A-7.003 Premises Not Eligible For Smoking Designation. Licensed premises shall not be designated as a stand-alone bar if the qualifications for licensure require the premises be devoted predominantly to activities other than the service of alcohol. The following licenses are not eligible for a stand-alone bar designation: S = Special Hotel SH = Special Hotel in counties with population of 50,000 or less SR = Special Restaurant issued on or after January 1, 1958 SRX = Special Restaurant SBX = Special Bowling SAL = Special Airport SCX = Special Civic Center SCC = Special County Commission SPX = Pleasure, Excursion, Sightseeing, or Charter boats X = Airplanes, Buses, and Steamships IX = Railroad Cars XL = Passenger Waiting Lounge operated by an airline PVP = Passenger Vessels engaged in foreign commerce FEX = Special Public Fairs/Expositions HBX = Special Horse Breeders HBX = Special County Commission 11AL = American Legion Post permitted to sell to general public 11C = Social, Tennis, Racquetball, Beach, or Cabana Club 11CE = Licensed vendors exempt from payment of surcharge tax 11CS = Special Act Club License 11CT = John and Mable Ringling Museum 11GC = Golf Club 11PA = Symphony, Live Performance Theatre, Performing Arts Center 12RT = Dog or Horse Track or Jai Alai Fronton 13CT = Catering Specific Authority 386.2125, 561.695(9) FS. Law Implemented 386.203(11), 561.695 FS. History--New 61A-7.007 Formula For Compliance With Required Percentage of Gross Food Sales Revenues. In order to determine compliance, the division shall use the formula of gross food sales revenue, including but not limited to non-alcoholic beverages, divided by gross total sales revenue, in any consecutive six- month period. The results of the formula will represent the percentage of food sales revenues as defined herein and in s. 561.695, Florida Statutes. Specific Authority 386.2125, 561.695(9) FS. Law Implemented 386.203(11), 561.695(6) FS. History--New 61A-7.008 For Percentage of Gross Alcohol Sales Revenue Formula. In order to determine compliance, the division shall use the formula of gross alcohol sales revenue divided by gross total sales revenue, in any consecutive six-month period. Specific Authority 386.2125, 561.695(9) FS. Law Implemented 386.203(11), 561.695(6) FS. History--New 61A-7.009 Method Used to Determine Whether an Establishment is Predominantly Dedicated to the Serving of Alcoholic Beverages. In order to determine whether an establishment, other than one holding a specialty license designated in Rule 61A- 7.003, F.A.C., is predominantly dedicated to the serving of alcoholic beverages, the division shall compare the percentage of gross food sales revenue with the percentage of gross alcohol sales revenue. If the percentage of gross alcohol sales revenue is greater than that of the gross food sales revenue, an establishment is deemed predominantly dedicated to the serving of alcoholic beverages. Specific Authority 386.2125, 561.695(9) FS. Law Implemented 386.203(11), 561.695(1)(9) FS. History--New Article X, Section 20, Florida Constitution, was adopted by the electorate in 2002, and generally prohibits smoking in enclosed indoor workplaces. This constitutional provision includes certain exceptions from this general prohibition including the "stand-alone bar" exception. Section 20(d) instructs the Florida Legislature to adopt legislation to implement its provisions and specifies that the Legislature is not precluded from enacting any law constituting or allowing a more restrictive regulation of tobacco smoking than is provided in Section 20. The legislature implemented the constitutional amendment by amending Part II, Chapter 386, Florida Statutes. Section 386.204 prohibits smoking in enclosed indoor workplaces, except as provided in Section 386.2045. Section 386.2045 enumerates exceptions to the general prohibition, including the exception of a stand-alone bar. Section 386.2045(4), Florida Statutes, reads as follows: (4) STAND-ALONE BAR- A business that meets the definition of a stand-alone bar as defined in s. 386.203(11) and that otherwise complies with all applicable provisions of the Beverage Law and this part. A stand-alone bar is defined in Section 386.203(11) as follows: (11) 'Stand-alone bar' means any licensed premises devoted during any time of operation predominately or totally to serving alcoholic beverages, intoxicating beverages, or intoxicating liquors, or any combination thereof, for consumption on the licensed premises; in which the serving of food, if any, is merely incidental to the consumption of any such beverage; and the licensed premises is not located within, and does not share any common entryway or common indoor area with, any other enclosed indoor workplace, including any business for which the sale of food or any other product or service is more than an incidental source of gross revenue. A place of business constitutes a stand-alone bar in which the service of food is merely incidental in accordance with this subsection if the licensed premises derives no more than 10 percent of its gross revenue from the sale of food consumed on the licensed premises. Deborah Pender is the chief of licensing for the Division. According to Ms. Pender, the Division included the SBX or special bowling license in the list of special licenses that cannot qualify for stand alone bar status in proposed Rule 61A- 7.003 because its predominant business is a bowling alley. Similarly, the 12RT license was included because its predominant business is a racetrack: "Because that’s a specialty license that is issued at race tracks, and if it wasn’t a race track business, the caterer . . . couldn’t have a license anywhere else." Marie Carpenter is the chief of the Bureau of Auditing of the Division. According to Ms. Carpenter, the provision regarding the six consecutive months in proposed rules 61A-7.007 and 61A-7.008 was intended to give the Division enough of a period of time to get a good picture of whether the business met the criteria for compliance and to give licensees an opportunity to build up business records that were not previously required to be kept.2/ The licensee would be required to keep daily records. Ms. Carpenter acknowledged that in using the six month auditing period in the proposed rule, a licensee could exceed the 10 percent requirement on one or more occasions during the audit period. Sandy Finkelstein is President of Petitioner and is the operating partner of Shore Lanes Bowling Center in Merritt Island, Florida. According to Mr. Finkelstein, there is at least one bowling facility in Florida that was issued a 4COP license. A bowling facility with a 4COP license is not automatically excluded from the stand-alone bar designation, whereas a bowling facility with an SBX license is automatically excluded from the stand-alone bar designation by virtue of proposed rule 61A-7.003.
The Issue The issue in this case is whether the Respondent, Lauderdale Copa, Inc., d/b/a The Copa (Respondent or The Copa) should pay an alcoholic beverage surcharge in the amount of $18,960.48 as alleged by the Administrative Complaint dated March 27, 2006. The Petitioner, Department of Business and Professional Regulation, Division of Alcoholic Beverages and Tobacco (Petitioner or Department) claims that the surcharge is owed and due pursuant to Sections 561.502(2) and 561.29, Florida Statutes (2005).
Findings Of Fact The Petitioner is the state agency charged with the responsibility of regulating the alcoholic beverage industry within Florida. § 561.501 Fla. Stat. (2005). At all times material to the allegations of this case, the Respondent was a licensed entity authorized to sell alcoholic beverages pursuant to its license number 16-00516, Series 4-COP. The Copa was authorized to sell liquor, wine, and beer at its licensed premises for on-site consumption. Alcoholic beverage sales are subject to a surcharge. § 561.501 Fla. Stat. (2005). In addition to other sales taxes that may be imposed on the sale of the product, an alcoholic beverages licensee (such as the Respondent) must also collect and remit to the Department a surcharge on the sale of the alcoholic beverage. The amount of the surcharge remittance is computed pursuant to the guidelines set forth in the laws and regulations. To confirm accurate reporting and remittance of the surcharge, the Department conducts after-the-fact audits of licensees. In this case, the Department audited The Copa’s alcoholic beverage sales for period from November 1, 2002, through October 31, 2005 (the audit period). There are two methods to review or audit the sales of alcoholic beverages. The inventory method directs the Department to take the beginning inventory plus purchases for the period and subtract the ending inventory (and a spillage allowance) to calculate the sales for the period. The calculated sales volume is then used to derive the surcharge obligation. The second method is based on the actual sales incurred during the audit period. The sales method requires that the licensee keep records to verify the volume of actual sales. The surcharge is due based on the on-premise consumer’s purchase of the alcoholic beverage at the licensed site. Both of the methods described require that the licensee keep and maintain records. The inventory method is verifiable since licensees purchase their stock from vendors also regulated by the Department. On or about October 24, 2005, Hurricane Wilma struck Florida and crossed to the Atlantic Ocean from the west coast. The storm caused extensive damage to the Respondent's property. The Respondent claims that its beverage records were lost in the storm. The audit in this case used the inventory method to compute the surcharge. By using the distributors’ sales reports the Department calculated a surcharge owed in the amount of $11,257.52. To that amount the Petitioner seeks interest and penalties. The Respondent does not acknowledge that any surcharge is owed. The Respondent maintains that its inventory, records, and package sales information (alcoholic beverages not consumed on the premises) were lost in the storm. The Department gave the Petitioner over five months to obtain records from other sources to refute the audit findings. As of the date of the formal hearing in this case, the Respondent did not have any records to refute the audit findings.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Business and Professional Regulation, Division of Alcoholic Beverages and Tobacco, enter a Final Order sustaining the surcharge liability in the amount of $18,960.48. DONE AND ENTERED this 6th day of December, 2006, in Tallahassee, Leon County, Florida. S J. D. Parrish 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 December, 2006. COPIES FURNISHED: Gregg Bernard Lauderdale Copa, Inc., d/b/a The Copa Post Office Box 22961 Fort Lauderdale, Florida 33335 Michael J. Wheeler, Esquire Department of Business and Professional Regulation Northwood Centre, Suite 6 1940 North Monroe Street Tallahassee, Florida 32399-2202 Steven M. Hougland, Ph.D., Director Division of Alcoholic Beverages And Tobacco Department of Business and Professional Regulation Northwood Centre 1940 North Monroe Street Tallahassee, Florida 32399-0792 Josefina Tamayo, General Counsel Department of Business and Professional Regulation Northwood Centre 1940 North Monroe Street Tallahassee, Florida 32399-0792
The Issue The issue in the case is whether the allegations set forth in the Department's Administrative Action dated January 21, 1999, are correct.
Findings Of Fact At all times material to this case, Respondent DePaul, Inc. operated the Copper Penny Pub, 10553 Spring Hill Drive, Spring Hill, Florida (the "licensed premises"). The Respondent held license number 37-00584, Series COP4. In or before September 1998, the Petitioner selected the Respondent for audit based on the Respondent's failure to file required monthly sales reports. By letter dated September 2, 1998, the Petitioner notified the Respondent of the audit. According to the letter, the audit would occur on September 24, 1998, at the licensed premises. The letter stated that the following items would be reviewed: All alcoholic beverage purchase invoices. Petty cash records. Business checkbooks or check stubs. Records of alcoholic beverages used in cooking (if any). Any worksheets you might use to prepare the report. The enclosed Pre-Audit Questionnaire completely filled out. The Pre-Audit Questionnaire allows a licensee to identify package sales. Package sales are those in which alcoholic beverages are sold in the original sealed containers for consumption off the licensed premises. A COP4 series licensee can sell packaged alcoholic beverages for consumption off premises. Package alcohol sales are deducted from total sales during the audit, and are not included in the surcharge tax liability. The Pre-Audit Questionnaire directs the licensee to identify documents that will be used to support the package sales deduction. The Respondent did not complete or submit the Pre-Audit Questionnaire. A licensee must establish entitlement to a package sales deduction. Generally a licensee is required to maintain a log of package purchases, and support the logged transactions with daily cash register tapes, identified as "Z" tapes. The Respondent produced no package sales records to the Petitioner during the audit. Even though the Respondent did not provide records supporting a package sales deduction, the auditor allowed a two-percent credit for package sales. There are two audit methodologies used in conducting the tax audit, the "sales" method, and the "purchase" method. The choice of audit methodology is left to the licensee. The Respondent selected the purchase method audit. In a purchase method audit, the licensee is required to pay surcharge taxes based on the gallons of alcoholic beverages purchased monthly. Division Tax Auditor Maggie Herrera conducted the audit. According to Ms. Herrera, the licensed premises is a bar located in a strip shopping center. The "package store" is located outside and about thirty feet away from the bar. The "package store" is about the size of a one-car garage. In order to make a package sale, the bartender must leave the bar, walk to the package store, unlock it, retrieve the packaged goods, re-lock the door, and return to the bar. According to Ms. Herrera, the package store contained one-liter bottles of liquor on shelves with prices marked with masking tape on the bottles. The store also contained two cases of "hip flask" 375-ml size bottles, one case of 50-ml bottles, "a lot" of brandy and dust-covered bottles of mixers. During the several hours Ms. Herrera's was present at the licensed premises, only one package sale (a flask size bottle) was made. Ms. Herrera traveled to the licensed premises on two occasions to meet the Respondent. On the date of the first scheduled meeting, the Respondent did not appear. On the date of the second scheduled meeting, the Respondent presented approximately thirty distributor invoices to Ms. Herrera and told her he was leaving for his home to retrieve the remainder of the records. He left the licensed premises. She waited for several hours. The Respondent did not return and did not contact Ms. Herrera to explain his failure to return. Ms. Herrera preformed an audit of the Respondent, using standard audit procedures. Ms. Herrera utilized monthly surcharge reports filed by the Respondent for the period between January 1995 and December 1997, the distributor sales records for the Respondent's purchases, and records of tax payments made by the Respondent. According the audit, the Respondent owes remaining tax surcharge payments of $47,695.85, a penalty of $17,545.74 and interest of $5,514.60, for a total liability of $70,756.19. There is no evidence that the audit was done inappropriately, or that the audited tax liability is incorrect. The Respondent was notified of the tax liability by certified letter.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Department of Business and Professional Responsibility, Division of Alcoholic Beverages and Tobacco, enter a final order imposing a total liability of $70,756.19, including unpaid tax liability, penalties, and interest. DONE AND ENTERED this 26th day of October, 1999, in Tallahassee, Leon County, Florida. WILLIAM F. QUATTLEBAUM 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 26th day of October, 1999. COPIES FURNISHED: Miriam S. Wilkinson, Esquire Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792 William T. Charnock, President 10154 Dunkirk Road Spring Hill, Florida 34608 Joseph Martelli, Director Division of Alcoholic Beverages and Tobacco Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792 Barbara D. Auger, General Counsel Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792
The Issue At issue in this proceeding is whether Respondent committed the offense set forth in the Administrative Action and, if so, what penalty should be imposed.
Findings Of Fact At all times material hereto, Respondent, M & W Enterprises of Key West, Inc., held license number 54-00200, series 5COP, authorizing the sale of alcoholic beverages for consumption on and off the premises known as Stick N Stein, located at 1126 C & D Key Plaza, Key West, Florida (hereinafter "the licensed premises"). In October 1996, the Department undertook a beverage surcharge audit of the licensed premises for the period of September 1, 1992, through October 29, 1996.1 At the time, the premises had elected the "sales method"2 of reporting, and the Department proposed to determine whether the monthly reports submitted by the vendor were accurate by application of the "sales depletion method," as prescribed by Rule 61A-4.063(9), Florida Administrative Code. This formula uses beginning inventory, plus purchases for the period, less ending inventory, less spillage allowance, prescribed by Rule 61A-4.063(6), Florida Administrative Code, to ascertain sales for the period. Application of the formula to this vendor was complicated by a number of factors, including the nature of the vendor's business, the vendor's inventory practices, and the vendor's failure to maintain appropriate records. In this regard, the proof demonstrates that the licensed premises includes a liquor store, where alcoholic beverages are sold for consumption off-premises, and a bar area, where alcoholic beverages are sold for consumption on-premises. Alcoholic beverages are purchased for the premises in bulk, and stored in the liquor store or the storeroom (also referred to as the beer room or cooler). As need dictates, alcoholic beverages are transferred from the liquor store or the storeroom to replenish the bar's stock; however, no record is made to reflect this transfer or addition to the bar's inventory. Consequently, there are no records from which one can derive the data needed to drive the Department's formula or, stated otherwise, there are no records from which the quantities of alcoholic beverages sold for consumption on or off the premises may be reliably calculated. Notwithstanding the vendor's failure to maintain appropriate records, the Department agreed to accept the vendor's estimate of the percentage of each class of alcoholic beverage purchased during the audit period that it would attribute to NON-COP (non-consumption on premises) sales, and subtract those volumes from the volumes purchased during the audit period to derive the total gallons available for sale under the formula. Here, the deduction (credit) accorded the vendor for NON-COP sales as a percentage of purchases was, as follows: draft beer, 10 percent; bottle/can beer, 15 percent; wine coolers, 50 percent; wine, 90 percent; and liquor, 70 percent.3 To further drive the formula, the Department did an audit on October 29, 1996, to calculate the vendor's ending inventory. Notably, that audit (Petitioner's Exhibit 4) encompassed only the alcoholic beverages in the bar area, and failed to include an inventory of the alcoholic beverages in the liquor store and storeroom. By letter of June 24, 1997, Respondent was advised of the results of the audit, and the Department's conclusion that it owed $14,960.82, as beverage surcharge, penalties, and interest. Respondent, because the audit did not include the liquor store and storeroom inventory as part of the ending inventory calculation, disputed the results of the audit.4 Given the failing of the first audit, the Department performed an additional audit of Respondent's inventory on August 1, 1997. (Petitioner's Exhibit 3). That audit was restricted to the inventory in the liquor store and the storeroom, and did not include an inventory of the bar area. On August 8, 1997, the Department issued a new retail beverage surcharge audit report for the licensed premises. (Petitioner's Exhibit 2). That report reflected a total tax liability (beverage surcharge, penalties, and interest) of $12,279.76. Notably, the report was based on the August 1, 1997, inventory and not the vendor's inventory at the end of the audit period (October 29, 1996). Moreover, the audit that was used considered only liquor store and storeroom inventory, and omitted bar inventory. Respondent again disputed the results of the audit. Since the report did not apply the vendor's inventory at the end of the audit period (October 29, 1996) to drive the formula, the result reached could not be an accurate reflection of sales or surcharge liability for the audit period. Moreover, by omitting bar inventory as a component of ending inventory, the report overstated sales, and, therefore, overstated surcharge liability. Consequently, as Respondent argues, the audit does not provide a reliable indication of what, if any, surcharge is due.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered dismissing the Administrative Action. DONE AND ENTERED this 26th day of May, 1998, in Tallahassee, Leon County, Florida. WILLIAM J. KENDRICK 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 26th day of May, 1998.
The Issue The issue in this case is whether Petitioner should revoke Respondent's alcohol beverage license, pursuant to Section 561.501, Florida Statutes (1995), 1/ and Florida Administrative Rule 61A-2.02 2/ because Respondent failed to pay tax, interest, and penalties of $179,146.56.
Findings Of Fact Petitioner is the state agency responsible for regulating alcohol beverage licenses. Respondent holds alcoholic beverage license number 69-00735, series 4-COP, for Lake Monroe Inn, 2485 North Highway 17-92, Sanford, Florida. Until sometime after December 1996, Respondent sold alcoholic beverages for consumption on the licensed premises. Respondent was required by Section 561.501 to pay a surcharge tax on such alcoholic beverages. In October, 1996, Petitioner audited Respondent's books and records to determine Respondent's compliance with the surcharge tax. The audit period was January 1, 1996, through August 31, 1996. Petitioner's auditors conducted the audit in accordance with generally accepted audit procedures. Petitioner determined the following surcharge tax liability: Surcharge Tax $ 47,472.98 Interest $ 7,961.66 Penalty $123,711.92 Total Liability $179,146.56 On October 10, 1996, Petitioner presented an audit report to Respondent, and the auditors discussed the audit findings with Respondent. Respondent does not contest the audit report and concedes the total liability. Respondent admits that the failure to collect and remit the tax was willful. Subsequent to the filing of the Administrative Action, Respondent went out of business. A lienholder foreclosed on Respondent's license. Another business now operates at Respondent's location.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Petitioner enter a Final Order revoking Respondent's alcohol and tobacco license. DONE AND ENTERED this 21st day of August, 1997, in Tallahassee, Leon County, Florida. DANIEL MANRY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 21st day of August, 1997.
Findings Of Fact Respondent is Fraternal Order of Eagles #4033, whose address is 615 Ridgewood Ave., Holly Hill, Fl. 32117 and holds license number 74-01574, Series 11C from the Division. The Division of Alcoholic Beverages and Tobacco had adopted rules which allow licensees to submit monthly surcharge reports based on either a "sales method" or a "purchase method," both of which are defined in Rule 61A-4.063(4), F.A.C. The purchase method is described as taxing the alcoholic beverages as they come in the door, and the sales method as taxing them as they go out the door. The only significant difference between the two is that current inventory is not subject to tax under the sales method until it is actually sold. Otherwise, the sales depletion method of auditing is applied similarly under either method of reporting. On or about January, 1994, the Division conducted an audit of Respondent's records to determine alcoholic beverage surcharge payment compliance during the period July 1, 1990 through October 31, 1993. The audit method used is commonly referred to a "inventory depletion," or "sales depletion." Respondent selected the sales method of reporting surcharges due, and timely submitted a surcharge report and payment during each month of the audit period. Respondent's reports are based on cash register records which indicate the number of units of each type of beverage sold, i.e., mixed drink, beer or wine by the glass. Respondent's surcharge reports calculated gallonage of liquor based upon a factor of one ounce per drink. Respondent did not maintain records of any "complimentary" drinks served. Respondent did not file any police or casualty reports regarding alcoholic beverages which it contends are attributable to theft during the audit period. The Eagles' well ordered weekly sales records understate the amount of alcoholic beverages sold, due primarily to the existence of overpouring, wherein the actual amount of liquor sold exceeds the one ounce per drink estimate relied upon by Respondent in compiling its monthly reports. Respondent did not conduct an internal audit to determine whether its sales records were accurate, or take some other significant action over the 39 months of the audit period to attempt to determine whether its primary assumption of one ounce per drink was accurately reflecting actual sales. Respondent's cash register tapes comprise an estimate of the amount of gallonage actually sold. The Division made no representations to Respondent which it might reasonably have relied in expecting that the accuracy of its monthly estimates of gallonage used, based on a one ounce per drink assumption, would not be subject to confirmation by audit. Respondent presented only anecdotal evidence to attempt to explain the admitted discrepancy between the actual gallonage used and the estimates contained in its sales tapes. The contention that some portion of the gallonage deficiency was attributable to pilferage by Eagles members or others, and an unspecified quantity of complimentary drinks for members or others, was not supported by any competent records or other evidence. The deficiency for Respondent Holly Hill Eagles represents thirty nine and eight tenths percent (39.8 percent) of the total surcharge paid during the audit period, which was $36,861.97. Since the completion of this audit and filing of the administrative action, Respondent has adjusted its assumption to reflect an administrative sale of one and a quarter (1.25) ounces per drink served. Respondent did not, however, present any evidence as to whether that assumption is any more accurate than the previous assumption. Based on this audit methodology, a surcharge liability of $14,691.83 exists. Respondent was aware of the Division's rule providing that surcharges are calculated based upon gallonage of alcoholic beverages sold, which states: If the vendor chooses the sales method, the vendor will bear the burden of proof that the method used accurately reflects actual sales. The surcharge deficiency determined by the Division to be owed in this case includes consideration of all applicable allowances, including spillage allowance of ten percent (10 percent) for draft beer and liquor, and five percent (5 percent) for all other alcoholic beverage products, which was applied and credited at the time of audit prior to stating the amounts owed. Based on this surcharge liability, the applicable penalty is $3,672.96.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that Respondent Holly Hill Eagles be ordered to pay overdue surcharges in the amount of $14,691.83 and a penalty of $3,672.96, and a civil penalty of $250.00 suspended upon payment of the surcharge and penalty within 90 days of the entry of a Final Order in this matter. DONE AND ENTERED this 31th day of January, 1995, in Tallahassee, Leon County, Florida. DANIEL M. KILBRIDE 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 31th day of January, 1995. APPENDIX Petitioner's Proposed findings of facts. Accepted in substance: paragraphs 1-20 Respondent did not submit proposed findings of fact. COPIES FURNISHED: John F. Gilroy, Esquire Assistant General Counsel Department of Business and Professional Regulation 1940 N. Monroe Street Tallahassee, Florida 32399-1007 Michael Dukeshier P. O. Box 821 Holly Hill, Florida 32117 Jack McRay, Acting General Counsel Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792 John J. Harris, Acting Director Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792
