The Issue The issue in Case no. 92-4204 is whether the Respondent correctly reported and remitted the alcoholic beverage surcharge for the audit period of July 1, 1990 through March 31, 1991. The amount claimed by the Department for this case is $5,767.82. The issue in Case no. 92-4205 is whether the Respondent correctly reported and remitted the surcharge for the audit period of July 1, 1990 through March 31, 1991. The amount of the audit deficiency alleged by the Department for this case is $4,952.48.
Findings Of Fact Based upon the testimony of the witnesses and the documentary evidence received at the hearing, the following findings of fact are made: The Department is the state agency charged with the responsibility of enforcing and administering Chapter 561, Florida Statutes. Respondent is the owner and holder of two alcoholic beverage licenses. License no. 58-01411 which is a 4COP SRX license is for Hemingway's Oyster Bar and Caribbean Barbeque, Inc. doing business as Townsend's Fish House, Oyster Bar & Tavern (Fish House). The business location for that license is 35 West Michigan Street, Orlando, Florida. The second license, license no. 58-02757, is also a 4COP SRX license for Hemingway's Oyster Bar and Caribbean Barbeque, Inc. doing business as Townsend's Plantation and Doc Tommy's Tavern (Plantation). That business location is 604 E. Main Street, Apopka, Florida. Following the enactment of Section 561.501, Florida Statutes, the Department issued a form designated DBR 44-005E that directed alcoholic beverage licensees to elect a method of reporting and computing the beverage surcharge. The form directed licensees to specify whether the beverage surcharge would be paid based upon purchases or based upon sales. For vendors utilizing the sales method, form DBR 44-005E required a certification of the inventory of alcoholic beverages on hand before opening for business July 1, 1990. Respondent elected to utilize the sales method. The Fish House inventory certified that it had 351.05 gallons of beer (241 bottled, 110.05 draft), 79.48 gallons of wine, and 172.82 gallons of liquor on hand as of the date noted. The Plantation certified it had 183.84 gallons of beer, 139.14 gallons of wine, and 99.46 gallons of liquor. In May, 1991, auditors employed by the Department met with Respondent's employees at each of the licensed premises. An audit for the period July, 1990 through March, 1991, utilizing the depletion method was chosen since the licensee had elected the sales method for reporting and remitting the beverage surcharge. In performing the audit at the Plantation location, the Department accepted that 74.66 gallons of liquor, 39.85 gallons of wine, and 567 gallons of draft beer were used in food preparations and were, therefore, not included in the gallons reported for surcharge purposes (cooking allowance). The invoices for suppliers at the Plantation were reviewed for the following categories of purchases: draft beer, beer (presumably bottled or canned), wine coolers, wine, and liquor. By adding the total of all purchases for the audit period to the beginning inventory, the Department calculated a total volume for the Plantation. In theory, by subtracting the ending inventory from the total volume resulted in the amounts of beverages consumed. From that amount the Department subtracted the cooking allowance noted above, and a spillage amount provided for by rule. As it is presumed some spillage occurs in the mixing and serving of beverages, the rule provides for an offset for spillage by beverage category. Following the procedure outlined above, the auditor calculated that for the audit period, the Plantation had sold 720 gallons of draft beer, 1731.61 gallons of beer, 8.55 gallons of wine coolers, 1090.70 gallons of wine, and 546.27 gallons of liquor. When compared to the reports filed by the Plantation, the auditor determined that in each category noted, the licensee had under reported the volumes sold. The difference for each category was: 494.01 gallons of draft beer, 788.25 gallons of beer, 8.55 gallons of wine coolers, 642.01 gallons of wine, and 244.93 gallons of liquor. The total additional surcharge which should have been remitted based upon the difference not reported was $5,767.82. The auditors used the same approach when reviewing the records for the Fish House. The cooking allowance accepted by the Department for the Fish House was 1400 gallons beer, 67.38 gallons wine, and 9.50 gallons liquor. The spillage allowance was calculated as provided by rule. Additionally, a collection allowance was given for the Fish House in the amount of $195.85. After computing the totals as described above, the auditor found a difference in each of the categories reviewed. After applying the surcharge to the unreported sales amount, the Fish House was cited for a shortage of $4,952.48. The Fish House management claimed, as part of the volume unaccounted for, drinks which were deemed complimentary or free. However, such beverages should have been included in the volume reported as a sale. Respondent also claimed that the spillage allowance provided for by rule was arbitrarily low. Also unconsidered were the losses to inventory due to theft. When such losses are deemed minimal, the theft may go unreported to police or insurance. Cumulatively such losses may be significant. Also unconsidered in reconciling the inventory was the industry practice of "over pours." While discouraged by Respondent, it is not uncommon for bartenders to pour more than the standard measurement of liquor for a good customer. If so, the Respondent's practice of looking to the number of sales to determine ounces sold would have resulted in an under estimating of the ounces dispensed. The auditors did not review the sales tapes or other sales records to confirm the surcharge amounts. The Respondent was unaware of the audit method which would be used to review the surcharge accounting. No insurance or police reports were made for the loss or stolen inventory claimed by Respondent.
Recommendation Based on the foregoing, it is RECOMMENDED: That the Department of Business Regulation, Division of Alcoholic Beverages and Tobacco enter a final order in case no. 92-4204 requiring the Respondent to remit an additional surcharge in the amount of $5,767.82. For case no. 92-4205, the Department should require the Respondent to remit an addition surcharge amount of $4,952.48. DONE and ENTERED this 7th day of January, 1993, in Tallahassee, Leon County, Florida. JOYOUS D. PARRISH 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 7th day of January, 1993. APPENDIX TO CASE NOS. 92-4204 AND 92-4205 RULINGS ON THE PROPOSED FINDINGS OF FACT SUBMITTED BY THE PETITIONER: 1. Paragraphs 1, 2, 3, 5, 6, 7, 9, 13, 17, 18, 21, and 22 are accepted. Paragraph 4--the first sentence is accepted; otherwise rejected as irrelevant or comment. Paragraph 8 is rejected as irrelevant. Paragraphs 10, 11, and 12 are rejected as irrelevant or argument. Paragraph 14 is rejected as irrelevant. Paragraph 15 is rejected as repetitive, unnecessary or irrelevant. Paragraph 16 is rejected as argument. Paragraphs 19 and 20 are rejected as irrelevant. RULINGS ON THE PROPOSED FINDINGS OF FACT SUBMITTED BY THE RESPONDENT: Paragraphs 1 and 2 are accepted. Paragraph 3 is rejected as irrelevant. Paragraph 4 is rejected as contrary to the weight of credible evidence. Paragraph 5 is rejected as contrary to the weight of the evidence or irrelevant. Paragraph 6 is rejected as irrelevant. Paragraph 7 is rejected as irrelevant or contrary to governing law or rule. NOTE: Respondent mistakenly has alleged facts or circumstances more appropriately raised by a rule challenge procedure. Section 120.57(1) hearings do not resolve issues related to the lawfulness of rules. Further, challenges to unpromulgated agency policy should be challenged as an unpromulgated rule. Such challenges are not appropriate to this type of proceeding. COPIES FURNISHED: Miguel Oxamendi Asst. General Counsel Dept. of Business Regulation 725 S. Bronough Street Tallahassee, FL 32399-1007 Richard S. Wright Firstate Tower, Ste. 1550 255 S. Orange Avenue Orlando, FL 32801 Clay M. Townsend 35 W. Michigan St. Orlando, FL 32806 Richard W. Scully, Executive Director Dept. of Business Regulation 725 S. Bronough Street Tallahassee, FL 32399-1007 Donald D. Conn, General Counsel Dept. of Business Regulation 725 S. Bronough Street Tallahassee, FL 32399-1007
The Issue Whether Respondent Department of Revenue’s (Department) January 27, 2020, Notice of Proposed Assessment to Petitioner B Century 21, Inc. (B Century 21) is incorrect.
Findings Of Fact Parties The Department is the state agency responsible for administering Florida’s sales and use tax laws, pursuant to chapter 212, Florida Statutes. B Century 21 is a Florida S-Corporation that operates two liquor stores (Al’s Liquor and Arlington Liquor), as well as a bar (Overtime Sports Bar), in Jacksonville, Florida. Mr. Altheeb is the sole owner of B Century 21 and testified that he is solely responsible for the operation of it, including the two liquor stores and bar. With respect to the operation of B Century 21, Mr. Altheeb testified, “I do all the paperwork, all the books, all the taxes. I do all the orders.” Matters Deemed Admitted and Conclusively Established2 B Century 21 received correspondence from the Department, dated August 20, 2019. That correspondence, from Ms. Pitre, stated, in part, “I will be conducting an examination of your books and records as authorized under Section 213.34, Florida Statutes.” B Century 21 received the Department’s form DR840, Notice of Intent to Audit Books and Records, dated August 20, 2019, including the Sales and Use Tax Information Checklist. The form DR-840 indicated that the Department intended to audit B Century 21 for a tax compliance audit for the period of July 1, 2016, through June 30, 2019. The Sales and Use Tax Information Checklist listed a number of categories of documents the Department intended to review as part of this audit. B Century 21 (through its accountant, power of attorney, and qualified representative, Mr. Isaac) received the Department’s October 30, 2019, correspondence, which referenced the “Audit Scope and Audit Commencement,” and an attached Records Request list. B Century 21 (through Mr. Isaac) received an email, dated October 30, 2019, from Ms. Pitre. That email references an attached Audit Commencement Letter. B Century 21 (through Mr. Isaac) received an email, dated November 12, 2019, from Ms. Pitre, which inquired of “the status of the records requested during the meeting with you and Mr. Altheeb on October 29, 2019.” B Century 21 (through Mr. Isaac) received the Department’s Notice of Intent to Make Audit Changes, form DR-1215, dated December 16, 2019. The form DR-1215 reflects a total amount of tax of $170,232.93, a penalty of $42,558.24, and interest through December 16, 2019, of $25,461.86, for a total deficiency of $238,253.04. The form DR-1215 also reflects that if B Century 2 See Order Granting Motion Declaring Matters Admitted and Setting Discovery Deadline. Fla. R. Civ. P. 1.370(b). 21 did not agree with these audit changes, or only agreed with a portion, that it had until January 15, 2020, to request a conference or submit a written request for an extension. Further, the form DR-1215 attached a Notice of Taxpayer Rights, which included additional detail on the options available to B Century 21. B Century 21 (through Mr. Isaac) received correspondence from Ms. Pitre, dated December 16, 2019, which stated that as of the date of the correspondence, the Department had not received the information previously requested on October 13, 2019, which it needed to complete the audit. The correspondence stated that B Century 21 had 30 days to review the audit changes, provided contact information to B Century 21 if it wished to discuss the findings in the form DR-1215, and noted that if the Department did not hear from B Century 21 within 30 days, it would send the audit file to the Department’s headquarters in Tallahassee, Florida. B Century 21 (through Mr. Isaac) received the Department’s Notice of Proposed Assessment, form DR-831, dated January 27, 2020. The form DR- 831 reflects a total amount of tax of $170,232.93, a penalty of $42,558.24, and interest through January 27, 2020, of $27,224.82, for a total deficiency of $240,016.00. For the time period between August 20, 2019, and January 7, 2021, B Century 21 did not provide the Department with: (a) any sales records; (b) any purchase records; or (c) any federal tax returns. For the time period between August 20, 2019, and January 7, 2021, B Century 21 did not provide any records to the Department for examination in conducting the audit. Additional Facts In 2011, for the purpose of enforcing the collection of sales tax on retail sales, the Florida Legislature enacted section 212.133, Florida Statutes, which requires every wholesale seller (wholesaler) of alcoholic beverage and tobacco products (ABT) to annually file information reports of its product sales to any retailer in Florida. See § 212.133(1)(a) and (b), Fla. Stat. Once a year, ABT wholesalers report to the State of Florida their name, beverage license or tobacco permit number, along with each Florida retailer with which they do business, the Florida retailer’s name, retailer’s beverage license or tobacco permit number, retailer’s address, the general items sold, and sales per month. See § 212.133(3), Fla. Stat. The information collected captures the 12-month period between July 1 and June 30, and is due annually, on July 1, for the preceding 12-month period. Id. ABT wholesalers file these reports electronically through the Department’s efiling website and secure file transfer protocol established through the Department’s efiling provider. § 212.133(2)(a), Fla. Stat. Ms. Baker explained this statutory process further: [W]e annually, every year in the month of May, my unit reaches out to the Florida Department of Business and Professional Regulations. We compel them to give us a list of all of the active wholesalers who were licensed to sell to retailers in the state of Florida for the prior fiscal year. Once we receive that list, we then mail a notification to all those wholesalers and state the statute and the requirements and give them a user name and a password that will allow them to then log into that portal and submit their retail—their wholesale—or their wholesale sales to retailers in the state of Florida for the prior fiscal year. Those reports are due on July 1st of each year, but they are not considered late until September 30th of that year. So that gives the wholesaler population a couple of months to compile all of their sales for the prior year, fill out their reports and submit them to the Florida Department of Revenue by the end of September. Additionally, each month, and for each retail location, B Century 21 reports gross monthly sales to the Department, and remits sales tax, utilizing the Department’s form DR-15. Ms. Baker further described the process the Department utilizes in identifying an “audit lead,” utilizing the data that ABT wholesales provide: Specifically for ABT, we have a very, actually, kind of simple comparison that we do. . . . [A]s a taxpayer, as a retailer in the state of Florida, you may purchase from multiple wholesalers. So, part of our job is we compile all of the purchases that each beverage license or tobacco license has purchased, and once we compile all the purchases for the fiscal year, then to say, you know, what were the purchases for the fiscal year versus what were the reported sales for the fiscal year. And, again, a pretty simple comparison we really look to see, did you purchase, or . . . did you report enough sales to cover the amount of purchases that we know you made as a – as a retailer. And if the sales amount does not exceed the purchase amount, then we’ll create a lead on it. The Department’s efiling provider exports the ABT wholesalers’ information to SunVisn, the Department’s database. The Department’s analysts review the ABT wholesalers’ reported data, and taxpayer information, to identify audit leads. The Department then assigns these audit leads to its service centers to conduct an audit. A tax audit period is 36 months. In conducting ABT audits, the Department has 24 months of reported data (i.e., the first 24 months of the audit period) for review. This is because the timing of section 212.133(3) requires ABT wholesalers to report annually on July 1, for the preceding 12- month period of July 1 through June 30. For the ABT reporting data examination period of July 1, 2016, through June 30, 2018 (a period of 24 months), B Century 21’s gross sales for its two liquor stores was as follows: Liquor Store Reported Gross Sales Al’s Liquor $1,051,128.56 Arlington Liquor $902,195.49 For the same 24-month time period of July 1, 2016, to June 30, 2018, B Century 21’s wholesalers reported the following ABT inventory purchases to the State, as required under section 212.133: Liquor Store ABT Inventory Purchases Al’s Liquor $1,250,055.79 Arlington Liquor $1,174,877.98 As the ABT wholesalers’ reported ABT inventory purchases by B Century 21’s retail outlets were higher than B Century 21’s reported sales, the Department issued an audit lead, which led to the audit that is at issue in this proceeding. The Audit For the 36-month audit period of July 1, 2016, through June 30, 2019 (audit period), B Century 21’s reported gross sales for each of its locations was: Location Reported Gross Sales Al’s Liquor $1,557,569.74 Arlington Liquor $1,434,551.65 Overtime Sports Bar $968,476.08 On August 20, 2019, Ms. Pitre mailed to B Century 21 (and received by Mr. Altheeb), a Notice of Intent to Audit Books and Records for the audit period. Included with the Notice of Intent to Audit Books and Records was correspondence informing B Century 21 of the audit and requesting records. On August 26, 2019, Ms. Pitre received a telephone call from Mr. Altheeb. Ms. Pitre’s case activity notes for this call state: Received a call from Baligh Altheeb and he said he will be hiring Brett Isaac as his POA [power of attorney]. I informed him to complete the POA form and to give it to Mr. Isaac for signature and send to me. He knows about ABT Data assessments and asked that I note on the case activity that he contacted me regarding the audit. He was worried that his liquor license will be suspended if he does not respond right away. I informed him that once I receive the POA, I will contact Mr. Isaac and discuss the audit. On October 18, 2019, the Department received B Century 21’s executed power of attorney (POA) form naming Mr. Isaac as its POA for the audit. The executed POA form reflects that the Department’s notices and written communications should be sent solely to Mr. Isaac, and not B Century 21. The executed POA form further reflects that “[r]eceipt by either the representative or the taxpayer will be considered receipt by both.” On October 29, 2019, Ms. Pitre met with Mr. Altheeb and Mr. Isaac at Mr. Isaac’s office, for a pre-audit interview. Ms. Pitre’s case activity notes for this meeting state: Met with the taxpayer contact person, POA Brett Isaac and owner Baligh Thaleeb [sic], at the POA’s location to conduct the pre-audit interview. Discussed the scope of the audit, records needed to conduct the audit, availability of electronic records, business organization, nature of the business, internal controls, and the time line of the audit. Discussed sampling for purchases and POA signed sampling agreement. Made appointment to review records on November 12, 2019. Toured one of the location [sic] to observe business operations, Overtime Sports Bar. On October 30, 2019, Ms. Pitre emailed Mr. Isaac a copy of the Notice of Intent to Audit Books and Records, which included a “Sales and Use Tax Information Checklist,” which requested specific taxpayer records. After receiving no response from Mr. Isaac, Ms. Pitre, on November 12, 2019, emailed Mr. Isaac concerning “the status of the records requested during the meeting with you and Mr. Altheeb on October 29, 2019.” Section 212.12(5)(b) provides that when a taxpayer fails to provide records “so that no audit or examination has been made of the books and records of” the taxpayer: [I]t shall be the duty of the department to make an assessment from an estimate based upon the best information then available to it for the taxable period of retail sales of such dealer … or of the sales or cost price of all services the sale or use of which is taxable under this chapter, together with interest, plus penalty, if such have accrued, as the case may be. Then the department shall proceed to collect such taxes, interest, and penalty on the basis of such assessment which shall be considered prima facie correct, and the burden to show the contrary shall rest upon the [taxpayer]. Section 212.12(6)(b) further provides: [I]f a dealer does not have adequate records of his or her retail sales or purchases, the department may, upon the basis of a test or sampling of the dealer’s available records or other information relating to the sales or purchases made by such dealer for a representative period, determine the proportion that taxable retail sales bear to total retail sales or the proportion that taxable purchases bear to total purchases. Mr. Collier testified that, in the absence of adequate records, the Department “estimates using best available information, and for this industry … ABT sales are a higher percentage of their taxable sales.” Because B Century 21 did not provide adequate records to Ms. Pitre, she estimated the total taxable sales for the audit period. For each liquor store that B Century 21 operated, she multiplied its total ABT purchases by average markups to calculate total ABT sales. To derive these average markups, Mr. Collier explained that the Department receives data from wholesalers, and then: [W]e take that purchase information, apply average markup to the different ABT product categories, which include cigarettes, other tobacco, beer, wine, and liquor; and then that gets us to total ABT sales number. And then we derive what we call a percentage of ABT sales, percentage of that number represents. And in this particular model, 95.66 percent represents what we believe in a liquor store industry, that this type of business, that 95.66 percent of their sales are ABT products. We derive the markups, and the percentage of ABT sales from a number of liquor store audits that the Department had performed on liquor stores that provided records. The Department utilized markup data from other ABT audits. The Department applied the following markups to these ABT categories: 6.5 percent for cigarettes; 47.5 percent for other tobacco products; 17.33 percent for beer; 29.84 percent for wine; and 24.5 percent for liquor. Applying the Department’s markup for liquor stores to the wholesalers’ reported ABT data and percentage of taxable sales, Ms. Pitre estimated taxable sales for the ABT reporting data examination period and calculated the under-reported sales error ratio as follows: Location Estimated Taxable Sales Error Ratio Al’s Liquor $1,597.544.01 1.519837 Arlington Liquor $1,516,259.34 1.680633 The Department then divided B Century 21’s estimated taxable sales for the examination period, for each liquor store, by its self-reported tax sales in its DR-15s to arrive at the under-reported rate. The Department then multiplied the under-reported rate by the reported taxable monthly sales in the DR-15s to arrive at the estimated taxable sales for the 36-month audit period. The result of this calculation was: Location Estimated Taxable Sales Al’s Liquor $2,367,252.11 Arlington Liquor $2,410,954.82 The Department then multiplied the estimated taxable sales by an effective estimated tax rate which, after giving credit for B Century 21’s remitted sales tax, resulted in tax due for the Al’s Liquor and Arlington Liquor for the audit period, as follows: Location Sales Tax Owed Al’s Liquor $58,367.01 Arlington Liquor $70,068.44 For Overtime Sports Bar, the Department could not use ABT wholesalers’ data to estimate an assessment because the Department does not have audit data averages for bars and lounges. The Department used the “Tax Due Method” in estimating under-reported taxes and calculating under- reported taxable sales. Mr. Collier explained: The Department does not have average markup and percentage of sales for a bar. Though, you know, obviously, we all know that a bar, their main product that they sell and in most cases is ABT products. So, therefore, typically, an auditor would need to get information about that specific location. Bars can vary so much in their type of business that they do, they can be like nightclubs, or they can be like bar and grill that serves a lot of food. So there’s a lot of variances there for that particular type of industry, so we haven’t really come up with average markups, average percentage of sales for bars, per se. It’s a case-by- case situation, and in this case, the auditor decided that the fair, reasonable way to estimate the bar location would be to just average the error ratios that were derived from the Al’s Liquor and the other liquor store location and apply it to the taxable sales reported for the bar. And I think that’s a very fair and reasonable estimate based on what we all know in a bar situation; their markups are significantly higher. And of course, there can be plenty of other non-ABT taxable sales occurring in a bar setting, such as prepared food, you know, just your regular cokes and drinks. So it’s certainly a fair way to estimate in this particular audit and I believe only benefits the taxpayer. The undersigned credits the Department’s methodology for estimating an assessment for Overtime Sports Bar. Further, Mr. Altheeb testified that Overtime Sports Bar operates as both a sports bar and a liquor/package store, and stated: Most of it—it’s a liquor store. I don’t know if you know the area, it’s a liquor store on the Westside. So most of it—the sport bar doesn’t really do too much business in the Westside, mostly the liquor stores. People coming in and buy package, you know, buy bottles and leave. So, most of the business is the drive-through window. The Department’s decision to average the error ratios for the other two liquor stores to derive the additional tax due average for Overtime Sports Bar is reasonable, particularly in light of Mr. Altheeb’s testimony that Overtime Sports Bar operates primarily as a liquor (package) store. The Department calculated the additional tax due average error ratio for Overtime Sports Bar by averaging the error ratios of Al’s Liquor and Arlington Liquor, and then multiplied it by B Century 21’s reported gross sales to arrive at the additional tax due for Overtime Sports Bar of $41,797.49. Ms. Pitre testified that she determined that, for the audit period, B Century 21 owed additional sales tax of $170,232.93. In addition, the Department imposed a penalty and accrued interest. On December 16, 2019, Ms. Pitre sent correspondence, the preliminary assessment, and a copy of the audit work papers to B Century 21 (through Mr. Isaac), informing B Century 21 that it had 30 days to contact the Department’s tax audit supervisor to request an audit conference or submit a written request for an extension. After receiving no response from B Century 21, Ms. Pitre forwarded the audit workpapers to the Department’s headquarters in Tallahassee, Florida, to process the Notice of Proposed Assessment. B Century 21’s Position As mentioned previously, and after initially meeting with the Department, B Century 21 failed to provide requested financial records or respond to any of the numerous letters and notices received from the Department, despite being given adequate opportunity to do so. And, after filing its Amended Petition, it failed to timely respond to discovery requests from the Department which, inter alia, resulted in numerous matters being conclusively established. Mr. Isaac served as the POA for B Century 21 during the audit, and also appeared in this proceeding as a qualified representative. However, Mr. Isaac did not appear at the final hearing, did not testify as a witness at the final hearing, and does not appear to have done anything for B Century 21 in this proceeding, other than filing the Petition and Amended Petition. After Mr. Heekin appeared in this matter, and well after the time to respond to discovery, B Century 21 provided 127 pages of documents to the Department. These documents consist of: 18 pages of summaries of daily sales that Mr. Altheeb prepared for the hearing; 41 pages of sales and use tax returns from B Century 21 locations, covering 25 months (DR-15s); 2 pages of Harbortouch’s 2016 1099K, reporting credit card sales; 43 pages of unsigned federal tax returns from 2016, 2017, and 2018, prepared by Mr. Isaac; and 17 pages of B Century 21’s untimely responses to the Department’s discovery requests. Florida Administrative Code Rule 12-3.0012(3) defines “adequate records” to include: (3) “Adequate records” means books, accounts, and other records sufficient to permit a reliable determination of a tax deficiency or overpayment. Incomplete records can be determined to be inadequate. To be sufficient to make a reliable determination, adequate records, including supporting documentation, must be: Accurate, that is, the records must be free from material error; Inclusive, that is, the records must capture transactions that are needed to determine a tax deficiency or overpayment; Authentic, that is, the records must be worthy of acceptance as based on fact; and Systematic, that is, the records must organize transactions in an orderly manner. The nature of the taxpayer’s business, the nature of the industry, materiality, third-party confirmations and other corroborating evidence such as related supporting documentation, and the audit methods that are suitable for use in the audit, will be used to establish that the taxpayer has adequate records. The undersigned finds that the summaries of daily sales are not adequate records because Mr. Altheeb prepared them for use at the final hearing, rather than in the regular course of business. The undersigned finds that the DR-15s provided by Mr. Altheeb, covering 25 months, are not adequate records because they are incomplete and are not inclusive. The audit period encompassed 36 months, for B Century 21’s three retail locations; however, Mr. Altheeb only provided 25 months of DR-15s. The 2016, 2017, and 2018 federal tax returns that B Century 21 provided are not adequate records because they are not authentic. Mr. Altheeb was unable to verify if these tax returns were correct, and they were unsigned. B Century 21 did not provide any evidence that it had filed any of these federal tax returns with the Internal Revenue Service. Ms. Pitre reviewed the 127 pages of documents that B Century 21 provided and testified that the summaries of daily sales did not provide the “source documents” for verification. The unsigned federal tax returns reflect that B Century 21 reported a cost-of-goods-sold (COGS) of $518,606.00 for 2016; $1,246,839.00 for 2017; and $796,968.00 for 2018. Additionally, the unsigned federal tax returns reflect that B Century 21 reported a beginning inventory (BI) for 2016 of $95,847.00, and a year-end inventory (EI) for 2016 of $200,556.00, EI for 2017 of $280,235.00, and EI for 2018 of $295,628.00. When comparing the unsigned federal tax returns with the ABT wholesalers’ data, the federal tax returns reflect, for 2016, total inventory purchases of $623,315.00 (which is derived from $518,606.00 (COGS) + $200,556.00 (EI) - $95,847.00 (BI)). However, the ABT wholesalers’ data for 2016 reflects that B Century 21’s ABT purchases were $1,174,997.34 – a discrepancy of more than $500,000.00. For 2017, the federal tax returns reflect total inventory purchases of $1,326,518.00 (which is derived from $1,246,839.00 (COGS) + $280,235.00 (EI) for 2017 - $200,556.00 (EI) for 2016). However, the ABT wholesalers’ data for 2016 reflects that B Century 21’s ABT purchases were $1,422,854.79 – a discrepancy of over $96,000.00. And for 2018, the unsigned federal tax returns reflect total inventory purchases of $812,361.00 (which is derived from $796,968.00 (COGS) + $295,628.00 (EI) for 2018 - $280,235.00 (BI) for 2017). However, the ABT wholesalers’ data for 2018 reflects that B Century 21’s ABT purchases were $1,335,814.00 – a discrepancy of over $500,000.00. Mr. Altheeb testified that Arlington Liquor and Overtime Sports Bar opened in 2016 – after B Century 21 began ownership and operation of Al’s Liquor. He stated that he did not purchase inventory for the openings of the newer locations, but instead transferred excess inventory from Al’s Liquor, which resulted in lower total inventory purchases for 2016. Mr. Altheeb also testified that B Century 21’s three locations experienced spoiled inventory. However, B Century 21 should include spoiled inventory in COGS reported in its federal tax returns, and further, B Century 21 provided no additional evidence of the cost of spoilage for the audit period. The undersigned finds that the ABT wholesalers’ data for 2016 through 2018 reflects similar amounts for inventory purchases between 2016 through 2018. The undersigned credits the Department’s reliance on the ABT wholesalers’ data, which reflect fairly consistent purchases for each year. The undersigned does not find the unsigned federal tax returns that B Century 21 provided to be persuasive evidence that the Department’s assessment was incorrect. Mr. Altheeb testified that he believed Mr. Isaac, who B Century 21 designated as POA for the audit, and who appears as a qualified representative in this proceeding, was actively handling the audit. Mr. Altheeb stated that the audit, and the final hearing, “kind of came out of nowhere” and that once he learned of it, he retained Mr. Heekin and provided “everything” to him. However, it is conclusively established that the Department provided correspondence and notice to B Century 21 through its designated POA, and that B Century 21 failed to respond to record requests in a timely manner. Mr. Isaac neither testified nor appeared at the final hearing to corroborate Mr. Altheeb’s claims that Mr. Isaac did not keep Mr. Altheeb or B Century 21 apprised of the status of the audit, including the failure to provide requested records or to communicate with the Department. B Century 21 also attempted to challenge the Department’s use of markup data from other ABT audits, in an attempt to argue that the markups were inflated and not representative of B Century 21’s markups. However, and as previously found, B Century 21’s failure to timely provide records—or respond in any meaningful way to the audit—undermines this attempt. The undersigned credits the Department’s methodology in using the best information available to it for the audit period in calculating the assessment. Although it became apparent during the final hearing that Mr. Altheeb did not treat the audit of B Century 21 with appropriate seriousness, and deflected blame to Mr. Isaac, and that his approach resulted in a legally appropriate and sustainable audit and assessment based on the Department’s best information available, the undersigned does not find that B Century 21, Mr. Isaac, or Mr. Heekin knew that the allegations of the Amended Petition were not supported by the material facts necessary to establish the claim or defense, or would not be supported by the application of then-existing law to those material facts. The undersigned finds that the Department made its assessment based on the best information then available, and is thus prima facie correct, pursuant to section 212.12(5)(b). The undersigned further finds that B Century 21 did not prove, by a preponderance of the evidence, that the Department’s assessment is incorrect, pursuant to section 212.12(5)(b).
Conclusions For Petitioner: Robert Andrew Heekin, Esquire The Law Office of Rob Heekin, Jr., P.A. 2223 Atlantic Boulevard Jacksonville, Florida 32207 For Respondent: Randi Ellen Dincher, Esquire Franklin David Sandrea-Rivero, Esquire Office of the Attorney General Revenue Litigation Bureau Plaza Level 1, The Capitol Tallahassee, Florida 32399
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, the undersigned hereby RECOMMENDS that the Department enter a final order sustaining the January 27, 2020, Notice of Proposed Assessment to B Century 21, Inc. DONE AND ENTERED this 21st day of October, 2021, in Tallahassee, Leon County, Florida. S ROBERT J. TELFER III Administrative Law Judge 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 21st day of October, 2021. COPIES FURNISHED: Mark S. Hamilton, General Counsel Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668 Randi Ellen Dincher, Esquire Office of the Attorney General Revenue Litigation Bureau Plaza Level 1, The Capitol Tallahassee, Florida 32399 Robert Andrew Heekin, Esquire The Law Office of Rob Heekin, Jr., P.A. 2223 Atlantic Boulevard Jacksonville, Florida 32207 Franklin David Sandrea-Rivero, Esquire Office of the Attorney General Plaza Level 1, The Capitol Tallahassee, Florida 32399 Brett J. Isaac 2151 University Boulevard South Jacksonville, Florida 32216 James A Zingale, Executive Director Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668
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 The issue for determination is whether Respondents' alcoholic beverage licenses should be disciplined for violation of Chapter 561, Florida Statutes. Resolution of this issue requires a determination of whether Respondents correctly reported and remitted alcoholic beverage surcharges required for the audit period of July 1, 1990 through March 31, 1991. Petitioner claims that Respondent Southeast Central, Inc., was deficient in reporting, surcharge payments, and penalties for the period July 1, 1990, through March 31, 1991, in the total amount of $4,121.80, contrary to Section 561.501, Florida Statutes. Similarly, Petitioner alleges that Respondent Central Restaurants, Inc., was deficient in reporting, surcharge payments, and penalties for the same period in the total amount of $96.72.
Findings Of Fact Respondents are two corporations. Southeast Central Inc., operating as the Pirate's Den Seafood Cafe, holds license number 26-03346 SRX, series 4-COP, for premises located at 5023 Central Restaurants, Inc., operating as the Seafood Place, holds license number 26 Jacksonville, Florida. Robert Domin is president, sole corporate officer and sole stockholder of both corporations. Petitioner's auditor performed audits with regard to records of both Respondents, following their random selection by Petitioner, to verify Respondents' compliance with surcharge requirements imposed by Section 561.501, Florida Statutes, on the retail sales of "on premise consumption" of alcoholic beverages on licensed premises. The audits covered the period of July 1, 1990 through March 31, 1991, for both Respondents, and were performed during the period of early July through August 2, 1991. 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. Each Respondent submitted Petitioner's form DBR 44-005E, reflecting their election of the sales method. Form DBR 44-005E also requires disclosure of the licensee's inventory of alcoholic beverages on hand prior to opening of business on July 1, 1990. 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. Respondents' beginning inventory figures were provided by their employee, Heather Scrape. This finding is further supported by the identification of Scrape's handwriting on Respondents' exhibit number 2 at the final Hearing by Respondent's president as being that of Scrape. The figures written on the exhibit by Scrape correspond to figures earlier provided by Respondents to Petitioner on Form DBR 44-005E and corroborate testimony of Petitioner's auditor that Scrape provided Petitioner's audit personnel with beginning inventory information for Respondents. Scrape, no longer employed by Respondents, still lives and works in the area although she did not testify at the final hearing. Distributor invoices at each Respondent location were used to determine alcoholic beverage purchases by each Respondent for the audit period. The ending inventory for the audit period for each Respondent was provided to Petitioner's auditor by Respondents. The auditor considered a spillage allowance of 10 percent for draft beer and five percent for liquor, bottled or canned beer, wine coolers and wine. The spillage allowance is enunciated in Emergency Rule 7AER 90-5, effective July 1, 1990, and also codified in Rule 7A- 4.063, Florida Administrative Code. Respondents provided no documentation for cooking adjustment amounts. The audit for Respondent Southeast Central, Inc., revealed a deficiency in surcharge reporting and payment of $3,294.15 with a late penalty due in the amount of $827.65. The audit for Respondent Central Restaurants, Inc., revealed a deficiency of $84.24 with a late penalty of $16.85 which, after adjustment for spillage allowance, totalled $96.72. At request of Respondents, Petitioner's auditor returned to the premises of each licensee and re-conducted the audit. No substantial corrections were made as a result of this effort with the minor exception of discovery of additional invoices on the premises of Respondent Southeast Central Inc., which increased, by a minor sum, the surcharge amount and penalty to the current amounts. The deficiency for Respondent Southeast Central, Inc., represents 55 percent of the total surcharge due for the audit period. The deficiency for Respondent Central Restaurants represents 14 percent of the total surcharge due for the audit period. Petitioner's Form DBR 44-005S states that the surcharge is to be calculated on gallons and/or ounces by reporting licensees. A conversion calculation sheet is provided on the back of the form to assist retailers in converting alcoholic beverage measurements into gallons. Respondents' cash registers record the price and number of alcoholic beverages sold in terms of units, i.e., three glasses of beer, two bottles of beer, one glass of wine, etc. Respondents predetermined how many ounces of an alcoholic beverage should be in a particular drink. Respondents then used this ideal measurement or standard in calculating the surcharge due. The calculation involved multiplying the ideal standard or measurement by the units recorded through the cash registers as sold. There is no actual record made of the amount of alcoholic beverage in a unit sale. Sometime after August 2, 1991, Respondents provided Petitioner's auditor with a copy of a beginning July 1, 1990 inventory report for Respondent Southeast Central, Inc., derived from application of the ideal measurement or standard as a multiplier of units of recorded sales. This action by Respondents followed completion of Petitioner's initial audits and notice to Respondents of delinquency in surcharge payment amounts. Respondents presented no explanation as to why this inventory was not provided to Petitioner's auditor in the course of her initial audit. The inventory document was also not authenticated in accordance with Section 90.901, Florida Statutes, and is not credited at this time for establishing a beginning inventory for Respondent Southeast Central, Inc., at variance with the beginning inventory reported for this Respondent on Petitioner's form DBR 44-005E. Petitioner permits vendors a period of 30 days within which to remit delinquent surcharge payments following notice of delinquency. Neither Respondent complied with Petitioner's demands to remit delinquent surcharge payments discovered as the result of Petitioner's audit.
Recommendation Based on the foregoing, it is hereby RECOMMENDED that a Final Order be entered requiring payment by Respondent in Case No. 93-0322 in the amount of $4,121,80, the amount of total tax and liabilities claimed by Petitioner to be due; and requiring payment by Respondent in Case No. 93-0329 of the amount of $96.72, the amount of the total tax and liabilities claimed by Petitioner to be due in that case. DONE AND ENTERED this 4th day of August, 1993, in Tallahassee, Leon County, Florida. DON W. DAVIS 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 August, 1993. APPENDIX TO THE RECOMMENDED ORDER IN CASE NO. 93-0322 The following constitutes my specific rulings, in accordance with Section 120.59, Florida Statutes, on findings of fact submitted by the parties. Petitioner's Proposed Findings. 1.-5. Accepted, not verbatim. 6.-7. Rejected, subordinate to HO findings. 8.-13. Accepted, not verbatim. Respondent's Proposed Findings. 1.-7. Accepted, not verbatim. 8.-12. Rejected, subordinate to HO findings. Rejected, not relevant although this is a duty of the auditor. Accepted. Rejected, argumentative. Rejected, no evidence presented as to theft or overpouring. Further, Respondents were given benefit of spillage allowance. 17.-18. Rejected, weight of the evidence. COPIES FURNISHED: Miguel Oxamendi, Esquire Assistant General Counsel Department of Business and Professional Regulation Northwood Centre 1940 North Monroe Street Tallahassee, FL 32399-0792 Robert Domin, President Southeast Central, Inc. Central Restaurants, Inc. 4359 Roosevelt Boulevard Jacksonville, Florida 32210 Jack McCray General Counsel Department of Business and Professional Regulation Northwood Centre 1940 North Monroe Street Tallahassee, FL 32399-0792 George Stuart, Secretary Department of Business and Professional Regulation Northwood Centre 1940 North Monroe Street Tallahassee, FL 32399-0792 John Harris, Director Division of Alcoholic Beverages Department of Business and Professional Regulation Northwood Centre 1940 North Monroe Street Tallahassee, FL 32399-0792
The Issue Whether Respondents' alcoholic beverage license should be disciplined for the reasons stated in Petitioner's Notice to Show Cause dated September 14, 1982.
Findings Of Fact Based on the evidence presented, the following facts are determined: The Long Branch was operating under DABT License No. 74-878 in License Series 4-COP-SRX. This type of license requires food and nonalcoholic beverage sales to constitute at least 51 percent of all sales. Audit of the Long Branch's records, which were examined on a month-by- month breakdown of the sales for the period July 1 1981, to July 1, 1982, showed food and non- alcoholic beverage sales at 7.7 percent and alcoholic beverage sales at 92.3 percent of total sales. For the period July 1 through July 27, 1982, the ratio was 4.3 percent to 95.7 percent. At no time during the more than one year period audited did the food sales reach the required 51 percent.
Recommendation Based on the foregoing, it is RECOMMENDED: That Respondents' License No. 74-878 be revoked. RECOMMENDED this 31st day of March, 1983, in Tallahassee, Florida. ARNOLD H. POLLOCK, 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 31st day of March, 1983. COPIES FURNISHED: Thomas M. and Sandra J. Spera Long Branch 600 South Yonge Street Ormond Beach, Florida Mr, Howard M. Rasmussen Director, Division of Alcoholic Beverages and Tobacco Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32301 Mr Gary R. Rutledge Secretary Department of Business Regulation 725 South Bronough Street Tallahassee, Florida 32301
The Issue The issues are whether Respondent has incurred and failed to pay Petitioner a surcharge of $12,380.59 plus a penalty of $7553.07, in violation of Section 561.501, Florida Statutes, and whether Respondent has failed to maintain the records required by Section 561.501(2), Florida Statutes, and Rule 61A-4.063(8), Florida Administrative Code.
Findings Of Fact Respondent holds license number 39-00410 4COP. Respondent owns and operates the Station Bar located at 1947 Main Street in Tampa. Respondent sells alcoholic beverages, but is not a “pouring bar.” In other words, Respondent’s employees sell the alcoholic beverages, but never open and pour the alcoholic beverage into a glass. In the typical transaction, Respondent sells a bottle or six-pack of alcoholic beverages to a patron, who may also purchase from Respondent a nonalcoholic beverage to mix with his alcoholic beverage, as well as cups and stirrers. Sometimes, the patrons remain in the bar after the purchase. Respondent’s bar contains a dance floor, pool tables, video games, and a juke box for the entertainment of patrons choosing to remain and consume their alcoholic beverages in the bar. Respondent’s accounting system is fairly simple. Placing labels on each bottle, Respondent’s employees remove the label each time that a bottle is sold. If a patron chooses to consume his drink on the premises, the bartender is supposed to record this fact on a piece of paper. Either the bartender or Respondent’s manager records sales information on a daily sheet; Respondent’s manager transfers the information to weekly and monthly sheets. Respondent eventually produced for Petitioner's auditor some daily sheets, but they were not sufficiently detailed to document Respondent’s position concerning the sales of alcoholic beverages for off-premises consumption. Respondent also uses a two-tape cash register, but it shows only the sale amount and is not computerized. Neither tape reveals individual sales or whether the patron purchased his alcoholic beverage for consumption on premises. During the audit, Respondent took the position that about 60 percent of its sales of all alcoholic beverages were for off-premises consumption. However, despite repeated requests from Petitioner’s auditor, Respondent never produced a any detailed documentation of individual transactions. Instead, Respondent produced only highly summarized information supporting its position that few, if any, sales were for on- premises consumption. Petitioner’s auditor agreed to allow Respondent to keep detailed records of sales for on- and off-premises consumption for a period of time and then extrapolate the information back to the audit period. However, Respondent did not undertake such a process. Knowing that Respondent made some sales for consumption off premises, Petitioner’s auditor allocated 10 percent of all sales of beer and liquor for consumption off premises. Applying this 10 percent factor, Petitioner’s audit correctly determined that, from September 30, 1996, through December 31, 1998, Respondent incurred a surcharge liability of $14,114.90, as well as a penalty of $5,818.76, for a total liability of $19,933.66, taxes and penalty.
Recommendation It is RECOMMENDED that the Division of Alcoholic Beverages and Tobacco enter a final order finding Respondent liable for $12,380.59 in surcharge and $6190.29 in penalty, for a total liability of $18,570.88. DONE AND ENTERED this 13th day of June, 2001, in Tallahassee, Leon County, Florida. ROBERT E. MEALE 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 13th day of June, 2001. COPIES FURNISHED: Richard Turner, Director Division of Alcoholic Beverages and Tobacco Department of Business and Professional Regulation 1940 North Monroe Street, Northwood Centre Tallahassee, Florida 32399-2202 Hardy L. Roberts, III, General Counsel Department of Business and Professional Regulation 1940 North Monroe Street, Northwood Centre Tallahassee, Florida 32399-2202 Michael Martinez Assistant General Counsel Department of Business and Professional Regulation 1940 North Monroe Street, Suite 60 Tallahassee, Florida 32399-2202 Thomas A. Smith 800 West Platt, Suite 3 Tampa, Florida 33606 Captain John L. Blair 1313 Tampa Street Park Trammel Building, Suite 702 Tampa, Florida 33602
The Issue The issue in this case is whether the Petitioner, the Department of Business and Professional Regulation, Division of Alcoholic Beverages and Tobacco (DABT), should take disciplinary action against the Respondent, Sunny Acres of Tampa, Inc., d/b/a Miller's Seafood Center, on the following charges contained in an Administrative Action filed against the Respondent, DABT Case No. TA 940223: Count I, alleging a violation of Sections 562.02 and 561.29(1)(a), Fla. Stat. (1993) (for selling alcoholic beverages not authorized by law and the Respondent's beverage license); Count II, alleging a violation of Section 561.32(1)(a), Fla. Stat. (1993) (for failing to transfer its alcoholic beverage license to a new purchaser after a bona fide sale); and Count III, alleging a violation of Sections 561.29(1)(a) and (2), Fla. Stat. (1993) (for failing to comply with an official DABT request for documents and records).
Findings Of Fact The Respondent holds DABT beverage license number 39-01203, a Series 2COP license that only authorizes the sale of beer and wine. The Respondent is owned by Bianca Dammous; her husband, William Dammous, is listed on the license as the holder of a direct interest. On or about July 20, 1994, the Respondent sold its business to Abigail Vasquez and Sergio Sanchez. The Respondent did not apply to transfer its beverage license to Vasquez and Sanchez. Instead, the Respondent relied on them to file the application to transfer the license. However, the Respondent did note on its last DABT surcharge report filed on or about August 12, 1994, that the business had been sold and that the new owners were Vasquez and Sanchez. As of October 11, 1994, Vasquez and Sanchez still had not applied to transfer the beverage license. On October 11, 1994, Vasquez and Sanchez had seven sealed and 24 unsealed bottles of liquor, which was not authorized to be sold under the Respondent's beverage license, stored behind the bar of Miller's Seafood Center, in plain view from the vicinity of the bar. The liquor was left from a campaign party held at Miller's Seafood Center on October 8, 1994. Vasquez and Sanchez had rented a room and supplied the liquor for the party at a cost of $700. The liquor they purchased for the party had been brought onto the premises on or about October 4, 1995. While the Respondent sold the business on or about July 20, 1994, the purchase agreement contained a clause requiring William Dammous to be "available to Purchaser for consultation and assistance in the Business of Seller through December 31, 1994." In that capacity, Dammous was on the premises on a daily basis through October 11, 1994. Although the liquor stored behind the bar was in plain view from the vicinity of the bar, and other employees knew it had been there for about a week prior to October 11, 1994, Dammous did not have actual knowledge that it was there. For reasons not explained during the course of the hearing, he avoided the bar area while performing his services as "consultant" and "assistant." While Vasquez had asked Dammous for advice as to how much to charge for the rental of a room for the campaign party, and Dammous had advised her to charge $400, Dammous disclaimed any knowledge that she charged $700 for rental of the room, plus supplying the liquor. DABT special agents entered the premises on October 11, 1994, and saw the liquor bottles behind the bar. They approached Dammous and asked for the owner of the establishment. Dammous referred them to Vasquez. When the special agents learned that the Respondent had sold the business to Vasquez and Sanchez in July, 1994, Dammous explained that he had relied on the new owners to apply to transfer the license. Vasquez confirmed the Respondent's reliance on her and Sanchez to transfer the license and told the special agents and Dammous that she had an appointment with the DABT for October 13, 1994, for that very purpose. Vasquez and Dammous explained the facts regarding the liquor to the special agents. The special agents notified Dammous that charges would be filed against the Respondent both for the liquor violations and the failure to timely transfer the license to the new owners. Through Dammous, the Respondent was put on notice that Vasquez and Sanchez had not yet applied to transfer the license from the Respondent; but, like the special agents, he was given to understand that Vasquez would attend to the matter on October 13, 1994. On November 4, 1994, the DABT served on Dammous a "Record of [Business] Visit - Record Inspection" form. In the "Remarks" section of the form, it was requested that the Respondent: "provide any and all documents related to the sale of your business and alcoholic beverage license . . . to include purchase contracts, financial reports, managerial agreements/contracts [sic], all business records since July 1, 1994, personal financial records of Sunny Acres of Tampa, Inc. and Bianca Dammous, and any other documents pertinent to this transaction." The form also included a "Notice to Produce Records" and a notice that: "Failure to provide these records within 10 days of this notice will result in the filing of Administrative Charges against the license." In response to the records request, Dammous asked Vasquez to bring the DABT a copy of the Asset Purchase Agreement the next time she went to the DABT in connection with the application for transfer of the license. Although there were some additional documents and records technically within the terms of the DABT's request (primarily the Respondent's business records between July 1 and 20, 1994), Dammous believed that the Asset Purchase Agreement would satisfy the DABT's concerns and its documents and records request. No other documents were presented to the DABT. Vasquez presented a copy of the Asset Purchase Agreement to the DABT on or about November 10, 1994, and the DABT issued Vasquez and Sanchez a temporary license. Shortly after the temporary license was issued, Vasquez and Sanchez defaulted under the terms of the Asset Purchase Agreement, and the Respondent took back ownership and control of the business and license and continues to operate the business under the license.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the DABT enter a final order finding the Respondent guilty of a technical violation under Count I, but not guilty under Counts II and III, and assessing a $250 fine. RECOMMENDED this 23rd day of August, 1995, in Tallahassee, Florida. J. LAWRENCE JOHNSTON 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 23rd day of August, 1995. COPIES FURNISHED: Richard A. Grumberg, Esquire Department of Business and Professional Regulation 1940 N. Monroe Street Tallahassee, Florida 32399-1007 William Dammous Sunny Acres of Tampa Inc. d/b/a Miller's Seafood Center 2315 W. Linebaugh Avenue Tampa, Florida 33612 Captain B. E. Ashley District Supervisor Park Trammel Building 1313 Tampa Street Suite 802 Tampa, Florida 33602 John J. Harris, Director Department of Business and Professional Regulation 1940 N. Monroe Street Tallahassee, Florida 32399-1007 Lynda Goodgame, Esquire General Counsel Department of Business and Professional Regulation 1940 N. Monroe Street Tallahassee, Florida 32399-1007
The Issue The issues are whether Respondent has incurred and failed to pay Petitioner a surcharge of $38,218.31 plus a penalty of $25,946.18, in violation of Section 561.501, Florida Statutes, and whether Respondent has failed to maintain the records required by Section 561.501(2), Florida Statutes, and Rule 61A-4.063(8), Florida Administrative Code.
Findings Of Fact Respondent holds license number 39-04047 4COP. Respondent owns and operates Gene's Bar located at 2932 North 22nd Street in Tampa. Respondent sells alcoholic beverages, but is not a “pouring bar.” In other words, Respondent’s employees sell the alcoholic beverages, but never open and pour the alcoholic beverage into a glass. Respondent sells mostly liquor and beer, and lesser amounts of wine. In the typical transaction, Respondent sells a bottle or six-pack of alcoholic beverages to a patron, who may also purchase from Respondent a nonalcoholic beverage to mix with his alcoholic beverage, as well as cups and stirrers. Sometimes, the patrons remain in the bar after the purchase, often sitting at the half-dozen tables that Respondent provides for this purpose, and consume their alcoholic beverages in the bar. A sign on the premises prohibits patrons from taking open containers of alcoholic beverages out of the bar. Respondent has hired a security guard to enforce this prohibition on busy nights. Respondent’s accounting system is fairly simple. Placing labels on each bottle, Respondent’s employees remove the label each time that a bottle is sold. If a patron chooses to consume his drink on the premises, the bartender is supposed to record this fact on a piece of paper. Either the bartender or Respondent’s manager records sales information on a daily sheet; however, during the time period in question, if not also at present, Respondent’s manager discarded this sheet after he transfered the information to a weekly sheet. Respondent also uses a two-tape cash register, but it shows only the sale amount and is not computerized. Neither tape reveals individual sales or whether the patron purchased his alcoholic beverage for consumption on the premises. Respondent’s manager uses the tape with the more detailed information to reconcile any shortages. After doing so, or if no shortages arise, the manager discards the more detailed tape. During the audit, Respondent took the position that all of its wine sales and 78 percent of its beer and liquor sales were for off-premises consumption. However, despite repeated requests from Petitioner’s auditor, Respondent never produced a daily log or any documentation of individual transactions. Instead, Respondent produced only highly summarized information supporting its position. Respondent delayed providing the auditor with copies of its purchase invoices for the alcoholic beverages, although it eventually did so. Petitioner’s auditor agreed to allow Respondent to provide a detailed sample of sales from February to April, 2000. When the auditor requested the documentation from this sampling period, she received nothing. Knowing that Respondent made some sales for consumption off premises, Petitioner’s auditor allocated 20 percent of all sales of alcoholic beverages for consumption off premises. Applying this 20 percent factor, Petitioner’s audit determined that, from January 1, 1996, through December 31, 1998, Respondent incurred a surcharge liability of $38,218.31, as well as a penalty of $25,946.18, for a total liability of $64,164.49, taxes and penalty.
Recommendation It is RECOMMENDED that the Division of Alcoholic Beverages and Tobacco enter a final order finding Respondent liable for $38,218.31 in surcharge and $19,109.15 in penalty, for a total liability of $57,327.46. DONE AND ENTERED this 13th day of June, 2001, in Tallahassee, Leon County, Florida. ROBERT E. MEALE 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 13th day of June, 2001. COPIES FURNISHED: Richard Turner, Director Division of Alcoholic Beverages and Tobacco Department of Business and Professional Regulation 1940 North Monroe Street, Northwood Centre Tallahassee, Florida 32399-2202 Hardy L. Roberts, III, General Counsel Department of Business and Professional Regulation 1940 North Monroe Street, Northwood Centre Tallahassee, Florida 32399-2202 Michael Martinez Assistant General Counsel Department of Business and Professional Regulation 1940 North Monroe Street, Suite 60 Tallahassee, Florida 32399-2202 Thomas A. Smith 800 West Platt, Suite 3 Tampa, Florida 33606 Captain John L. Blair 1313 Tampa Street Park Trammel Building, Suite 702 Tampa, Florida 33602
Findings Of Fact Petitioner William G. Brunet owns and operates the Music Box Lounge, a bar in Lake Worth, Florida. Mr. Brunet is homosexual as are his employees and many of the patrons of the Music Box Lounge. At no time pertinent to these proceedings did any agent or employee of either respondent take any action affecting petitioner with any motive or intent to discriminate against petitioner on account of his homosexuality. On October 25, 1977, Margaret Sager called the Music Box Lounge to arrange to see the books for the period September 1, 1974, to August 31, 1977. Two days later she visited the Music Box Lounge where she spoke to the bartender, John J. Dolan, and to petitioner. On the basis of these discussions, Ms. Sager filled out a form. This form, which petitioner signed, was received in evidence as respondents' exhibit No. 1. For the most part, the form is an abbreviated price list for beer, champagne, other wine, and liquor, covering the period 1974 through 1977. The form indicates that one ounce drinks are poured at petitioner's establishment, and the notation "1 case of beer a week personal- 5 bottles of liq. per week personal" appears at the bottom of the form. Ms. Sager compared invoices reflecting petitioner's purchases of alcoholic beverages with the entries in petitioner's general ledger purporting to represent such purchases and found no discrepancies. She inquired of petitioner's suppliers as to how much the kegs of beer they had sold petitioner contained. She made allowance for petitioner's personal weekly use of one case of beer and four or five bottles of liquor, assumed that petitioner sold 30 drinks for each quart bottle of liquor he purchased from suppliers, and projected petitioner's gross sales on these assumptions. After a conference with petitioner and his accountant, and on the advice of her supervisor, Ms. Sager substituted the figure 25 drinks per quart to arrive at a second projection. By multiplying .045 times this second estimate, and subtracting from the product the amount of sales tax petitioner had remitted for the period September 1, 1974, to August 31, 1977, Ms. Sager arrived at the figure four thousand fourteen dollars and twenty-three cents ($4,014.23), representing the alleged deficiency on account of petitioner's sales. After the audit, Ms. Sager concluded that petitioner had remitted what he probably felt was a true figure for the period in question. In estimating petitioner's gross sales, Ms. Sager made no allowance for "happy hours" or other promotions; made no allowance for theft or bartenders' drinking; and made no allowance for the sale of liquor by the bottle rather than by the drink. During the period in question, petitioner operated his bar on two shifts, from ten in the morning till six in the evening and from six till closing, at two the following morning. Prices of drinks were not stated separately from sales tax due on account of their sale. The bartender started each shift with a certain amount of money in the cash register, and was instructed to ring up each sale as it occurred. At the end of the day, the bartender put the cash register tape and the money in the cash register into a box. The following day receipts were tabulated. Petitioner's accountant used the resulting daily reports in compiling sales tax reports, which petitioner filed regularly during the audit period in question. All but the first four monthly reports petitioner made during the audit period were received as a joint composite exhibit on August 15, 1978. During the period in question, petitioner sold package goods to his employees and friends at cost; sales tax was collected on these transactions. From April of 1975, to February of 1976, ten to fifteen quarts of liquor were sold at cost each week. Bruce MacFallon, who worked for petitioner as a bartender during and about the year 1974, purchased five cases of liquor from petitioner in a year's time. Gerald P. Mooney, who worked for petitioner as a bartender during the entire audit period, bought about fifteen bottles of liquor at wholesale from petitioner in a year's time. In addition, petitioner gave Mr. Mooney two or three bottles of liquor a year as presents. There was no evidence that petitioners' employees stole from him. At least during the period from April 1975 to February 1976, there were two sets of prices for drinks at petitioner's bar, one set for each shift. From four to six in the afternoon, moreover, prices were further reduced. Respondent's exhibit No. 1 does not reflect these diurnal price fluctuations. John J. Dolan, who worked the day shift as a bartender from April 1975 to February 1976, poured an ounce and a half of liquor for most drinks, but used two ounces in each martini. Bruce MacFallon poured up to two ounces of liquor in each regular drink and more in each manhattan or martini he prepared. He never poured as little as one ounce of liquor in a drink. Gerald P. Mooney poured one and one quarter to one and one half ounces of liquor in each normal drink he mixed and two to three ounces of liquor in each martini or manhattan he prepared. Martinis were especially popular during "happy hours." Petitioner authorized his bartenders to give complimentary drinks to good customers. As a rule of thumb, Mr. Mooney gave two or three free drinks a night to any customer who regularly spent twenty-five dollars or upwards on visits to the bar. On an average day, Mr. Dolan gave away fifteen to twenty or more highballs and ten or more beers. Mr. MacFallon gave away free drinks for every so many sold to a customer and has given away as many as twenty drinks a day in this fashion. Respondent's exhibit No. 1 overstates the prices petitioner charged for beer during the audit period in question. There was testimony to the effect that bars catering to homosexuals face stiffer competition than other bars and resort to promotions involving sales of liquor at reduced prices more often. Whether or not it is true, this general proposition has no bearing on the specific matters developed in the evidence in the present case. Except insofar as they recite that Ms. Sager was inexperienced and unfamiliar with the operation of bars and that she failed to consider spillage, petitioner's proposed findings of fact have been adopted in substance, insofar as relevant and consistent with the foregoing findings of fact.
Recommendation Upon consideration of the foregoing, it is RECOMMENDED: That respondents abandon the revised notice of proposed assessment and refund all monies collected pursuant to the revised notice of proposed assessment, except for one hundred thirty-five dollars and eighty-nine cents ($135.89), together with penalty and interest thereon. DONE and ENTERED this 7th day of September, 1978, in Tallahassee, Florida. ROBERT T. BENTON, II Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 7th day of September, 1978. COPIES FURNISHED: David S. Meisel, Esquire Rogers & Meisel 400 Royal Palm Way Palm Beach, Florida 33480 E. Wilson Crump, II, Esquire Assistant Attorney General Tax Division, Northwood Mall Tallahassee, Florida 32303
