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WKDR II, INC. vs DEPARTMENT OF REVENUE, 21-000844 (2021)

Division of Administrative Hearings, Florida Filed:Tallahassee, Florida Mar. 04, 2021 Number: 21-000844 Latest Update: Feb. 04, 2025

The Issue Whether WKDR II, Inc. (WKDR), is jurisdictionally time-barred from bringing the challenges in Case Nos. 21-0844 and 21-0845 to contest the Department of Revenue's (Department) tax assessment and subsequent freeze of WKDR's bank account to attempt to collect on the assessment.

Findings Of Fact The Department administers Florida's sales tax statutes and performs audits to ensure compliance with sales tax laws. WKDR is a Ford franchise car dealership operating as LaBelle Ford. WKDR is organized as an "S" corporation and is wholly owned by Douglas Plattner (Mr. Plattner). WKDR's address is 851 South Main Street, LaBelle, Florida 33935 (851 South Main Street). Mark Smith (Mr. Smith) is a self-employed certified public accountant (CPA) at the firm of Smith and Waggoner CPAs. He is the CPA for Mr. Plattner and WKDR. Mr. Smith's business mailing address is 115 Tamiami Trail North, Suite 7, Nokomis, Florida 34275 (115 Tamiami Trail). On or about March 21, 2019, the Department began a sales tax audit of WKDR for the period of March 1, 2016, through February 28, 2019 (audit period). WKDR was notified of the audit through a Notice of Intent to Audit Books and Records, dated March 21, 2019. Jeff Barnard (Mr. Barnard) was a tax auditor for the Department. Mr. Barnard was responsible for examining the books and records of various taxpayers for compliance with Florida tax laws. Mr. Barnard retired from the Department in May 2021. He was employed by the Department for 30 years. He spent the last 15 years with the Department as a Tax Auditor IV—the most senior tax auditor position at the Department. Mr. Barnard was responsible for the tax audit of WKDR for the audit period. On or about July 30, 2019, Mr. Smith sent the Department a fully executed Power of Attorney/Declaration of Representative form (POA form) to appear as WKDR's representative in connection with the Department's audit. The POA form was completed and signed by WKDR's owner (Mr. Plattner) and its CPA (Mr. Smith). The POA form gave Mr. Smith authority to speak and act on WKDR's behalf for the Department's audit. The POA form correctly states the mailing addresses of both WKDR and its CPA/representative, Mr. Smith. It also correctly states the e-mail address and fax number for Mr. Smith. Mr. Smith entered WKDR's address in section 1 of the POA form. The POA form included spaces for a contact person's name, telephone number, and fax number at WKDR, but those spaces were left blank in the form signed by Mr. Smith and Mr. Plattner. The POA form signed by both Mr. Smith and Mr. Plattner set forth the name, address, telephone number, and fax number of Mr. Smith’s CPA firm in section 2 of the POA form. Section 6 of the POA form provides as follows: Notices and Communication. Do not complete Section 6 if completing Section 4. Notices and other written communications will be sent to the first representative listed in Part I, Section 2, unless the taxpayer selects one of the options below. Receipt by either the representative or the taxpayer will be considered receipt by both. If you want notices and communications sent to both you and your representative, check this box. If you want notices or communications sent to you and not your representative, check this box. Mr. Smith completed section 6 by checking option "a," indicating that they wished to have notices and communication sent to both the taxpayer (WKDR) and the representative (Mr. Smith). Mr. Smith's e-mail address was added on the POA form by the Department's employee, Lisa Weems, after she called Mr. Smith's telephone number to obtain his e-mail address. All other information was added by Mr. Smith after consultation with Mr. Plattner, before they both signed the form. Throughout the audit, the Department's auditor, Mr. Barnard, primarily communicated with WKDR through its designated representative—Mr. Smith—at his mailing address and e-mail address. This included multiple requests for documents. At times, Mr. Barnard communicated directly with Mr. Plattner while copying Mr. Smith on the correspondence. Mr. Barnard sent a letter dated November 14, 2019, by regular mail, to WKDR at 851 South Main Street, with a copy to Mr. Smith at 115 Tamiami Trail. Mr. Smith testified that he received and read this letter. The November 14 letter provided WKDR and Mr. Smith with notice that, as things stood on that date, a NOPA was imminent. The letter stated, in pertinent part: On September 20th, we wrote you a letter requesting the information needed to complete the audit of WKDR II Inc. and the DR54 Formal Notice of Demand to Produce Certain Records. The letter stated that your failure to provide the information be [sic] September 27, 2019 may result in an assessment. That is, the implementation of alternative audit procedures to estimate a liability based on the best available information. As of the date of this letter you have not complied with our request. Therefore, enclosed is the Notice of Intent to Make Audit Changes (DR1215) and the audit work papers, which are an estimate based upon the best information available as provided in Section 212.12(5)(b), Florida Statutes. You have 30 days to review the audit adjustments, which expires on December 16, 2019. * * * If we do not hear from you by December 16, 2019, the audit file will be sent to Tallahassee so that the Notice of Proposed Assessment (NOPA) can be issued to you. The NOPA is the formal notice of the amount due. The NOPA will also provide the procedures for filing informal and formal protests. The Notice of Intent to Make Audit Changes, which was included with the November 14 letter, listed a "balance due through 11/14/2019" of $1,157,025.16. This sum included taxes of $801,967.01, a penalty of $200,491.75, and interest of $154,566.40. The notice also explicitly laid out WKDR's opportunities to informally protest this preliminary sum through a conference with the auditor or the auditor's supervisor. It provided that after the 30-day informal conference period expired, a NOPA would be issued. On December 20, 2019, Mr. Barnard sent an e-mail to Mr. Plattner with a copy to Mr. Smith. Attached to the e-mail was a letter of the same date. The letter provided as follows: On November 14, 2019, a Notice of Intent to Make Tax Audit Changes (DR-1215) was issued with additional tax due of $801,967.00. The 30 day informal protest period with the Service Center was up December 13, 2019.[2] Although your representative, Mark Smith, did provide some sales invoices after issuance of the DR-1215 they did not represent a full month of invoices as requested. Please be advised all sales invoices for December 2018 must be provided by January 3, 2020 for any changes in the assessment to be considered. These invoices should consist of same for all new and used vehicle sales, parts sales, service invoices/tickets, and autobody invoices for December 2018. As indicated in the December 20 letter, one month before the NOPA was issued, Mr. Barnard notified Mr. Smith and Mr. Plattner that the 30-day informal protest period expired on December 13, 2019. Mr. Smith's testimony on this matter was evasive. At first, he acknowledged that he received the December 20 letter. However, after objection from WKDR's counsel, Mr. Smith backtracked and denied receipt. His attempted denial was not credible and is not credited. The undersigned finds that Mr. Smith received the December 20 letter. Mr. Barnard sent another letter, dated January 7, 2020, by regular mail to Mr. Plattner, and by e-mail to both Mr. Plattner and Mr. Smith, which stated as follows: Please be advised the information necessary to make an adjustment to the audit results issued on November 14, 2019 has not been provided. As stated in our December 20, 2019 letter this information was sales invoices for all new and used vehicle sales, parts sales, service invoices/tickets, and autobody invoices for the entire month of December 2018. 2 The Notice of Intent to Make Tax Audit Changes sent on November 14 provided a deadline of December 13 for the 30-day informal conference period, while the e-mail sent on December 20 referenced a deadline of December 16. The discrepancy in the December 20 letter is immaterial as both deadlines (December 13 and 16) had passed by the date of the December 20 letter. The audit will be closed and a Notice of Proposed Assessment will be issued shortly. Once again, Mr. Smith’s testimony was evasive. After seemingly admitting he received and read the January 7 letter, Mr. Smith testified that he did not receive the January 7 letter. The undersigned found Mr. Smith's testimony on this point wholly untruthful. At the hearing, during cross-examination, the Department's counsel asked Mr. Smith about his actions and impressions after receipt of the January 7 letter in the following exchange: Q. Let's go to Exhibit 22, which is Bates Number 00081. This is another e-mail sent to you on January 7th, 2020 to Mr. Plattner showing a carbon copy to Mr. Mark Smith CPA POA. The third sentence states; "The audit will be closed and a notice of proposed assessment will be issued shortly." Does that mean that the audit is still open or the audit is closed? A. That, like I said, I mean, I've -- I've dealt with audits where they say they're going to do this and do that and it's taken them two years to send anything. Q. This letter dated January 7th, 2020 does not give a new deadline, does it? A. It does not appear to but -- yeah, it does not appear to. Q. In fact, it says the audit is closed. That means that it's done, right? A. No. I don't -- I -- not necessarily. Q. It also says that the notice of proposed assessment will be issued shortly. So you knew at this time, the NOPA was imminent, right? A. Not necessarily. Q. Is there any language in this letter indicating that WKDR has any more time to provide additional documents? A. I've worked with the State before and they've provided us additional time quite often. Q. In fact, the auditor did provide you a deal -- a great deal of additional time to have the audit, didn't he? A. Well, we provided him so many documents that we thought he needed more time too. The whole tenor of Mr. Smith's testimony was to acknowledge that he read and understood the January 7 letter to say the NOPA was imminent, but that he knew from his experience the NOPA was "not necessarily" imminent. Notably, when asked if he knew at that time that the NOPA was imminent, Mr. Smith did not say that he did not know that because he did not receive or read the January 7 letter when it was sent to him by e-mail. Mr. Smith provided answers to these and several other questions about what he did or did not do in response to the January 7 letter. It was not until after an objection by WKDR's counsel that, as before, Mr. Smith backtracked to say that he did not receive the letter. In making the finding that Mr. Smith was untruthful when he testified that he had not received the January 7 letter, the undersigned had the distinct opportunity to observe the demeanor of Mr. Smith during testimony on this issue. He was not credible and his belated denial is not credited. The undersigned finds that Mr. Smith received the January 7 letter, reviewed it, and hoped that he could buy more time as he had thought he might be able to. Testimony of Lisa Weems Ms. Weems is a Revenue Specialist III for the Department. She has worked for the Department, in its Compliance Standards Section, for over 15 years. In addition to other tasks, Ms. Weems is responsible for printing NOPAs to send out to taxpayers and their representatives. Ms. Weems testified in great detail about the process she uses to send out NOPAs. When a NOPA is issued, it is uploaded to the Department's system overnight and cannot be printed until the following morning. Because of this, Ms. Weems sends out NOPAs only four days a week—Tuesdays, Wednesdays, Thursdays, and Fridays. Ms. Weems prints and mails out approximately 400 NOPAs per week. On the day of the final hearing, she had mailed out 88 NOPAs. Ms. Weems has a system in place to keep track of the NOPAs she sends out. Ms. Weems clearly and credibly testified about the process she used to send out NOPAs and when and by what means she used to send the NOPA to WKDR and its representative in this case. Each NOPA is mailed out in a packet that includes four documents: the NOPA, NOPA Remittance Coupon, Tax Audit Satisfaction Survey, and a document titled How to Pay Your Audit Assessment and Notice of Taxpayer Rights. The packets are sent by USPS first-class mail. WKDR's NOPA was issued on January 13, 2020. It had to load in the Department's system overnight, so it was printed on January 14, 2020. WKDR's NOPA assessed taxes of $801,967.01, a penalty of $200,491.75, and interest of $166,431.12, for a total due by WKDR of $1,168,889.88 following the audit.3 3 The amount of the taxes assessed and penalty remained the same as was listed in the Notice of Intent to Make Audit Changes. The amount of the interest had increased. The interest listed in the Notice of Intent to Make Audit Changes was for the period up to November 14, 2019. The NOPA specified that the deadline to request a formal hearing before DOAH was May 12, 2020, or 60 days from the date the assessment becomes a final assessment. The Notice of Taxpayer Rights provided detailed instructions on how to contest the assessment and provided further details on the timelines and deadlines to do so. Ms. Weems sent WKDR and Mr. Smith copies of the NOPA by USPS first-class mail on January 14, 2020. On January 14, 2020 (the day after the NOPA was uploaded), Ms. Weems printed an original and copy of WKDR's NOPA. She placed the original NOPA and the other three documents in a window envelope, addressed to WKDR at 851 South Main Street. A copy of the NOPA, along with the three other documents, were placed in another envelope, addressed to Mark Smith, CPA, at his business mailing address, 115 Tamiami Trail. Ms. Weems testified that she created a mail log sheet, wrapped the log sheet around the envelopes, and placed both of these NOPA envelopes in the outgoing mail basket. After placing the items in the outgoing mail basket, a Department employee from Building L picks up the outgoing mail and mails it out. Ms. Weems testified that she has mailed NOPAs this way for over 10 years. Ms. Weems testified that it was her practice, and what she was taught by the Department, to send NOPAs that had assessments for over $100,000.00 by fax and e-mail, in addition to regular mail.4 WKDR's assessment was for an amount greater than $100,000.00. On January 16, 2020, Ms. Weems sent a copy of the NOPA to Mr. Smith by fax transmission. 4 It must be noted that the Department's internal policy to send NOPAs with assessments over $100,000.00 by e-mail and fax is an unadopted rule; however, it is not necessary to rely on it as the basis for the determination in this matter. See § 120.57(1)(e)1., Fla. Stat. Ms. Weems sent the fax to Mr. Smith's fax number, which was provided on the POA form. Ms. Weems used a fax coversheet when sending the fax. The coversheet recorded several important pieces of information. It provided the case number and the taxpayer's name (WKDR). Two boxes on the fax coversheet were checked—a box indicating there was a "POA" (Power of Attorney) in the file and a box indicating the NOPA was to be sent to the "POA." Ms. Weems also made some notes on the fax coversheet. She wrote: "original notice mailed 1/14/20," "email: mark@swagcpa.com," and "(8) pages." Ms. Weems testified that the reference to eight pages represented the amount of pages she faxed. These pages included the four documents sent by USPS first-class mail mentioned above. After faxing the documents to Mr. Smith's fax number, Ms. Weems received a fax transmission report. The report indicated "Results OK." The term "OK" on a fax transmission report is generally accepted as meaning that the transmission was completed successfully. On January 16, 2020, Ms. Weems also sent a copy of the NOPA and Notice of Taxpayer Rights to Mr. Smith by e-mail. Ms. Weems sent the e-mail to Mr. Smith at mark@swagcpa.com—the e-mail address she obtained from Mr. Smith's office, and which he confirmed was his through testimony at the hearing. The e-mail's subject line stated "Audit Number 200262550-010 WKDR II, INC." The e-mail stated as follows: Please respond back to me by e-mail letting me know you did receive the Notice of Proposed Assessment (Nopa) and Taxpayer Rights by Email and Fax please. Good afternoon, Mr. Smith. I'm e-mailing you the Notice of Proposed Assessment (Nopa) & Taxpayer Rights. I also faxed you the Notice of Proposed Assessment (Nopa) & Taxpayer Rights to fax number 941-866-7691. The Original Notice of Proposed Assessment (Nopa) & Taxpayer Rights was mailed out on 1/14/2020. Any questions call the Nopa Line at 850-617-8565. Thanks, Lisa Weems. The e-mail included an attachment labeled "3125_001.pdf." Ms. Weems testified that the attachment was a copy of the NOPA and Taxpayer Rights. Ms. Weems requested a "delivery receipt" and "read receipt" through her e-mail platform for the e-mail she sent to Mr. Smith. This was her customary practice when sending e-mails. A few seconds after sending her e-mail, she received a "delivery receipt" confirmation that the e-mail was delivered to mark@swagcpa.com. Shortly thereafter, Ms. Weems received a "read receipt" confirmation that her e-mail was received by Mr. Smith and was "read." The use of delivery and read receipts are not novel practices. Delivery and read receipts are used by a sender of an e-mail to confirm that the e-mail sent has been delivered to the addressee and, subsequently "read," that is, opened by the recipient. Ms. Weems keeps a monthly log of the NOPAs she sends out by fax and e-mail. Ms. Weems's monthly log for January 2020 includes entries that confirm she sent the WKDR NOPA by e-mail and fax to Mr. Smith at the contact information he provided. In addition to her personal monthly log, Ms. Weems also used SAP—a Department computer system that employees work in every day—to document her activities. On January 16, 2020, Ms. Weems made a notation in SAP that stated as follows: "I faxed the Notice of Proposed Assessment (NOPA) & taxpayer rights to Mark Smith on 1/16/20 to fax number 941-866- 7691. I e-mailed the Notice of Proposed Assessment (NOPA) and taxpayer rights to Mark Smith on 1/16/20 to e-mail address (mark@swagcpa.com). See attachments and notes." Testimony of Mark Smith Mr. Smith testified that he did not receive the NOPA by USPS first- class mail, fax, or e-mail. If the undersigned took Mr. Smith's testimony as true, all three of the Department's avenues of sending the NOPA failed. Mr. Smith testified that the NOPA, sent by USPS first-class mail, in the same fashion used for several other letters that he had received from the Department, was not received. Other than Mr. Smith's denial, WKDR provided no evidence that the NOPA and accompanying documents Ms. Weems mailed in separate packages to WKDR at its address and to WKDR's representative's address were not received. Mr. Smith testified that during the time the NOPA was sent, his business utilized an electronic faxing service called MyFax.com. Through this service, he received faxes in e-mail format, with the contents of the fax attached to the e-mail as a PDF document. Mr. Smith testified that he did not receive the fax from Ms. Weems. Mr. Smith also testified that he rarely read faxes because "90 plus percent of our faxes are payroll-related" and belonged to his business partner. Mr. Smith did not credibly explain how he comes to know about the ten percent of faxes directed to him. While perhaps his business partner screens faxes, it is inconceivable that a business firm would not ensure that incoming faxes are directed to the person to whom they are sent. That is particularly true where, as here, Mr. Smith has provided his business fax number as a means to give him notices regarding WKDR's audit. Although the Department provided documentation of a delivery and read receipt of the NOPA sent by e-mail to Mr. Smith, Mr. Smith testified that he did not receive it. Mr. Smith offered no credible explanation for the delivery and read receipts. Once again, it is not credible that a CPA who serves as the POA for taxpayer WKDR would not be reviewing e-mails delivered to his e-mail address, when his office has provided that e-mail address to the Department. Notably, he acknowledged reviewing other e-mail communications from the Department with regard to WKDR's audit. Mr. Smith's feigned ignorance of an e-mail delivered to him and opened by him is not credible and is not credited. The competent substantial evidence establishes that the Department mailed the NOPA to both Mr. Smith and WKDR at the addresses provided on the POA form. The testimony that Mr. Smith did not receive the NOPA is not credible. WKDR did not deny that it received the NOPA mailed to it; WKDR offered no testimony on the subject.5 The NOPA was mailed to the same addresses provided by Mr. Smith and Mr. Plattner on the POA form and used by the Department to successfully communicate with Mr. Smith during the audit. WKDR and Mr. Smith were on notice that a NOPA was forthcoming. The Department advised WKDR and Mr. Smith by letter through regular mail and e-mail, on at least two occasions, that a NOPA was going to be issued and that the Department anticipated an assessment of additional taxes of approximately $801,967.00. The Department provided notice of the NOPA in a manner reasonably calculated to inform WKDR and its representative of WKDR's rights and of the deadlines to take action to protect those rights. WKDR and the Department communicated frequently during the audit, but after issuance of the NOPA, communications with WKDR and Mr. Smith ceased for several months. Mr. Smith did not reach out to the Department to find out why communications ceased. The reasonable inference is that Mr. Smith was fully aware of why the previous communications during the audit stopped: because the audit had culminated 5 In its post-hearing submittal, WKDR argued that the NOPA mail should have been sent to Mr. Plattner. But the NOPA package was addressed to WKDR, the taxpayer, at the mailing address given on the NOPA. WKDR had the opportunity in the POA form to designate Mr. Plattner as the taxpayer contact person but chose not to do so. in the NOPA and it was up to WKDR to contest the NOPA in a timely hearing request. On or around February 18, 2021, the Department issued an NIL against WKDR, by which it notified WKDR that it intended to freeze funds from WKDR's bank account in the amount of $999,999.99. The NIL provided that WKDR had 21 days from the date of receipt of the NIL to dispute the matter. On February 19, 2021, WKDR submitted a petition for a chapter 120 administrative hearing to challenge the NOPA. WKDR's petition challenging the Department's NOPA was filed with the Department 403 days after the date on the NOPA (January 13, 2020) and 286 days after the deadline for filing a petition to request an administrative hearing had passed. On February 23, 2021, WKDR timely filed a petition for an administrative hearing to dispute the NIL. WKDR's dispute of the NIL is solely based on its challenge to the NOPA, and its claim that it did not receive the NOPA when issued the year before. WKDR failed to timely exercise its opportunity to protest the amount of the Department's assessment, the underlying audit findings, and the methods the Department used to reach the amount in the assessment. There is no claim by WKDR in this case that the content of the Notice of Taxpayer Rights was unclear regarding the deadline to request a hearing or the manner in which a hearing must be requested; its claim is solely that it did not receive the NOPA and the accompanying Notice of Taxpayer Rights, a claim which is not credible. In sum, the persuasive and credible evidence adduced at hearing demonstrates that the Department sent the NOPA to WKDR's representative by USPS first-class mail, e-mail, and fax, and to WKDR directly by USPS first-class mail; and that Mr. Smith received the NOPA by USPS first-class mail, e-mail, and fax, and that WKDR received the NOPA by USPS first-class mail. WKDR did not submit a timely request for hearing to dispute the NOPA.

Conclusions For Petitioner: Michael J. Bowen, Esquire Akerman LLP 50 North Laura Street, Suite 3100 Jacksonville, Florida 32202 For Respondent: J. Clifton Cox, Esquire John G. Savoca, Esquire Office of the Attorney General Revenue Litigation Bureau The Capitol, Plaza Level 01 Tallahassee, Florida 32399

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