The Issue The issue is whether Respondent, a Florida-licensed yacht salesman, should be disciplined for violation of Rule 61B- 60.006(2), Florida Administrative Code, as alleged in the Administrative Complaint dated May 10, 2000.
Findings Of Fact At all times pertinent to the issues herein, DBPR, through its Division of Florida Land Sales, Condominiums and Mobile Homes (the Division) was the state agency in Florida responsible for the licensing and discipline of yacht salespersons and brokers in this state and the regulation of the yacht-brokering profession. Respondent, Justo Lamar (Lamar), has been licensed as a yacht salesperson since November 1976. Prior to this action, Lamar has never been the subject of disciplinary action arising out of the practice of his profession. This action was precipitated by a yacht owner, Juan A. Galan (Galan), who unsuccessfully attempted to sell his yacht to a client of Lamar's. In July 1998, Galan listed his yacht, the Caliente, for sale through Ardell Yacht and Ship Brokers (Ardell). The listing resulted in negotiations for the purchase of the Caliente by one Larry Griggs (Griggs), a prospective customer represented by Lamar. At all times relevant to this case, Lamar was acting as a sales agent for Allied Marine and its broker, Dwight Tracy (Tracy). As set forth in more detail below, the negotiations between Galan and Griggs took place over a three-month period from October 1998 through December 1998 with no meeting of the minds. On July 12, 1999, some seven months after negotiations between Griggs and Galan terminated, Galan lodged a complaint with DBPR. Although the complaint was ostensibly directed against salesman Lamar and broker Tracy, each and every allegation in the complaint was directed to the broker's conduct, not Lamar's. Galan, who did not testify at final hearing, alleged in his complaint that "Broker presented a contract representing that deposit had been received/deposited (upon acceptance). In fact, broker never deposited check and we wasted our time and money on survey/sea trial as buyer was not (at that time or any time later) financially capable of buying boat @ $1.75 million." Galan provided some, but by no means all, of the documents which revealed the details of the prolonged and ultimately unsuccessful negotiations between Galan and Griggs. In the narrative portion of his complaint, Galan asserted that he lost money on sea trials and implied, without actually stating, that the Caliente had been taken off the market during the pendency of negotiations with Griggs. For reasons which remain unclear, the Division did not focus its investigation on Tracy, who was the obvious target of Galan's complaint. Instead, it targeted Lamar, who was an obvious add-on target of Galan's ire. The exhibits reveal a complex series of offers and counteroffers and jockeying for negotiating advantage, not just between Galan and Griggs as prospective Seller and Buyer of the Caliente, but also between Lamar and the two brokers, all three of whom stood to profit if the transaction were consummated. Negotiations for the Caliente began in late October 1998. On October 30, 1998, Lamar's client Griggs, through a corporation he controlled, issued a $150,000 check for "Deposit, 72' (sic) Caliente Sportfisherman." This check accompanied a Brokerage Purchase and Sale Agreement dated October 29, 1998, offering to purchase the Caliente for $1,500,000. That same day, Galan's representatives faxed Lamar to advise that Griggs' offer was insufficient. Lamar forthwith provided the check to his broker, Tracy. Negotiations between Galan and Griggs continued in November. Galan chose to by-pass his own Broker and negotiate directly with Lamar over lunch on November 18, 1998. Lamar wrote Galan's demands on the back of a restaurant placemat. The primary sticking point was Galan's insistence on a "bottom line" of $1,665,000 to him, after all commissions and other expenses, if any, were paid. Griggs nevertheless persevered in his effort to buy the Caliente for $1,500,000. On November 24, 2000, Griggs executed another Brokerage Purchase and Sale Agreement in which he offered an entity called Majua, Inc., of which Galan was President, the opportunity to sell the Caliente to Griggs for $1,500,000. Galan signed the November 24 agreement, but added an addendum which materially changed the terms. The addendum unilaterally purported to raise the sales prices to Galan's previously stated "bottom line" of $1,665,000. Thanksgiving passed, and negotiations wore on. On December 4, 1998, Griggs executed a third Brokerage Purchase and Sale Agreement, raising his offer to $1,755,000. The new offer expressly stipulated that Griggs' $150,000 earnest money check could be deposited when and if all parties executed this new proposed agreement. Like the October 29 and November 24 brokerage purchase and sale agreements, the December 4 document never ripened into a contract. The December 4 document was a clear and unembarrassed reminder from Griggs that an earnest money check had been written by Griggs, but was not on deposit, and was not going to be on deposit until such time as Galan had signed off on the contract as written by Griggs. Galan nevertheless permitted a sea trial of the Caliente in furtherance of negotiations, now in their fifth week. Also as part of the negotiating process, Galan permitted some, but not all, of the inspections requested by Griggs. Expenses for the sea trial and inspections were borne entirely by Griggs. By Christmas Eve, relations between the parties had deteriorated to the point where Lamar retrieved the check from the Allied Marine corporate files and returned it to Griggs. At no time did negotiations with Lamar's client Griggs preclude or interfere with efforts by Galan to negotiate with and sell the Caliente to any other prospective purchaser.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that DBPR enter a final order dismissing the Administrative Complaint against Respondent. DONE AND ENTERED this 1st day of March, 2001, in Tallahassee, Leon County, Florida. FLORENCE SNYDER RIVAS 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 1st day of March, 2001.
Findings Of Fact High-Tech Yacht & Ship, Inc. (Petitioner) is a Florida corporation engaged in the business of retail sales of marine vessels. Also, Petitioner is a registered retail dealer in the State of Florida. The President of Petitioner is its only corporate officer. On or about September 2, 1993, Petitioner, in the capacity of a broker, sold a motor yacht at retail to Regency Group, Inc. (purchaser), through its representative, for $78,000. The motor yacht is described as a 1988, 41' Amerosport Chris Craft, hull Number CCHEU075E788, and called the "Motivator". At the closing of the sale, on or about September 2, 1993, the purchaser refused to pay the sales tax on the purchase, which was $4,680. However, the purchaser agreed to pay the sales tax after being informed by Petitioner that, without the payment of the sales tax, there could be no closing. The purchaser's representative submitted, at closing, a personal check in the amount of $4,680 for the sales tax. All of the necessary documents were completed for ownership and registration to be transferred to the purchaser. Subsequently, Petitioner received notice from its bank that the check for the sales tax had been dishonored by the purchaser's bank. The purchaser's representative had stopped payment on the check. In October 1993, Petitioner submitted its sales and use tax return for the month of September 1993 to Respondent in which the sale of the yacht was reported. Respondent automatically reviews sales and use tax returns. Respondent's review of Petitioner's return revealed a shortage of sales tax collected in the amount of $4,680.. In January 1994, Respondent issued a notice of tax action for assessment of additional tax in the amount of $4,710, plus interest and penalty, to Petitioner. The $4,710 included the loss of Petitioner's collection allowance of $30, which loss resulted from Petitioner's failure to timely remit all taxes due. Having received the notice of tax action, by letter dated January 20, 1994, Petitioner generally informed Respondent of the circumstances regarding the sales tax shortage, including the dishonored check. Petitioner pointed out, among other things, that Respondent had the authority and the means to collect the tax, while it (Petitioner) had limited means, and suggested, among other things, that Respondent cancel the purchaser's Florida registration of the yacht. On or about January 31, 1994, approximately three months after the check for sales tax was dishonored, Petitioner issued a notice of dishonored check to the purchaser, in which Petitioner requested payment of the sales tax. The notice provided, among other things, that Petitioner could seek criminal prosecution and civil action if the monies were not paid to Petitioner. Having not received the $4,680, Petitioner contacted the local law enforcement agency. After investigation, the law enforcement agency informed Petitioner that a civil action would have to be instituted because the purchaser, through its representative, had indicated that it was not satisfied with the yacht. Although Petitioner engaged the services of an attorney for civil action, no civil action was commenced. Additionally, Petitioner did not engage the services of a collection agency for assistance in collecting the sales tax. Subsequent to its notice of tax action, on or about March 12, 1994, Respondent issued a notice of assessment to Petitioner. The notice of assessment provided, among other things, that Petitioner was being assessed taxes in the amount of $4,710, plus penalty and interest in the amount of $2,342.61, totalling $7,052.61. Petitioner protested the assessment. On February 8, 1995, Respondent issued its notice of reconsideration in which Respondent determined, among other things, that the assessment was appropriate and affirmed the assessment of $7,052.61, plus interest and penalty. The interest accrues at the rate of $1.55 per day. Petitioner has not remitted any of the assessed tax, including interest and penalty, to Respondent. Petitioner has not identified on its federal tax return the noncollection of the sales tax from the purchaser as a bad debt. Sales tax is part of the total sale price for an item. Respondent considers the sales tax as collectable by a seller in the same manner as any other debt owed by a purchaser to a seller. A retail dealer, who is also a seller, is considered to be an agent for the State in the collection of sales tax. The burden of collecting the sales tax is placed upon the retail dealer by Respondent. Some of Respondent's employees have been sympathetic to Petitioner's tax assessment matter. However, none of the employees indicated to or advised Petitioner that Respondent was or is in error.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order affirming the assessment of sales tax against High-Tech Yacht & Ship, Inc. in the amount of $7,052.61, plus interest and penalty. DONE AND ENTERED this 7th day of August 1996, in Tallahassee, Leon County, Florida. ERROL H. POWELL, 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 August 1996.
Findings Of Fact In June 1986, Petitioner purchased a 55 Ft. Ocean Yacht Super Sport from South Jersey Yacht Sales for $577,055 and took delivery in New Jersey. Although Petitioner is not a dealer, a dealer's license was used to purchase this vessel and Petitioner paid no sales tax to New Jersey on this sale. The boat was named "SEABURY", entered Florida waters in November 1986 and remained for 105 days, proceeded to Bahama Islands February 22, 1987 and returned to Florida April 7, 1987, and remained in Florida for 31 additional days before returning north. From bridge logs maintained by bridge tenders over the Intracoastal Waterway and docking receipts at Bahia Mar and other berthing spaces it was concluded the vessel was used in Florida. Respondent established a prima facie case that the M/V SEABURY entered Florida waters within 6 months of its purchase in New Jersey and was used in this state. No evidence to rebut this prima facie case was presented by Petitioner.
Findings Of Fact Petitioner Out Island Charters, Inc., Miami, Florida is a Florida corporation engaged in the business of selling, leasing, repairing and chartering yachts in South Florida. Robert H. Anderson is president of the firm. During the tax period in question, i.e., December 1, 1973 to November 30, 1976, Petitioner sold various sailing vessels and made repairs thereon. The purchasers individually entered into a "Yacht Charter Management Agreement" with Petitioner under which the latter agreed to act as the owners' agent to obtain charters of the boats from third parties, and to maintain, repair, and dock the vessels at the owners expense. The agreement provided that Petitioner would receive a percentage of the gross bareboat charter fee. It also contained a provision that the owner could use his vessel at any time without cost provided that no charters had been booked for the particular time period. Although this was a standard provision in all of the contracts, some of the owners deleted it prior to execution of the agreement. In most cases, the owners used their vessels occasionally for the purpose of testing equipment and performing routine maintenance and repairs. At such times, some of them were accompanied by their wives, mechanics, or friends who assisted in handling the vessels or performing the routine maintenance functions. They did not use the vessels for purely personal pleasure trips. When the vessels were purchased, sales tax under Chapter 212, Florida Statutes, was neither collected from the buyers by the Petitioner nor otherwise paid to the state. Sales tax was not paid on various equipment purchases, repair parts, dockage, or other expenses incident to the management and maintenance of the vessels. However, sales tax was collected by Petitioner from the third parties who rented the vessels except for a few inadvertent omissions. At the time Petitioner sold the vessels, none of the purchasers had applied for nor received from Respondent a certificate of registration to engage in or conduct business as a "dealer" in yacht chartering under Chapter 212, Florida Statutes, nor had they provided Petitioner with a certificate of resale. Anderson believed the transactions to be exempt from sales tax because the vessels were purchased for rental purposes, and he was unaware that registration as a dealer and submission of a resale certificate were required to establish such an exemption. (Exhibits 5-7, 9, Testimony of Wolin, Witmer, Gay, Harrill, Krapf, Purdy, Anderson, McLean (Exhibit 1), Bennett (Exhibit 2)) Pursuant to an audit of Petitioner's business by Respondent's tax examiner, a proposed assessment of sales tax, penalties, and interest was issued to Petitioner in the total amount of $28,790.76. The parties met at an informal conference on March 29, 1977, and, as a result of adjustments at that time, a revised Notice of Proposed Assessment was issued on May 19, 1977, showing a total sum due of $26,646.91. Petitioner thereafter requested an administrative hearing in the matter. (Exhibit 3) In March, 1977, Petitioner's counsel advised the various purchasers of the pending tax audit and requested that they either pay the sales tax if they had used the boats for personal business, or, if the boats had been exclusively used for chartering purposes, that they execute affidavits to that effect, together with applications for certificate of registration as dealers and blanket certificates of resale. Most of the purchasers returned the executed documents and were later registered with the Respondent as dealers in the chartering business. (Testimony of Anderson, Gay, Wolin, Witmer, Harrill, Krapf, Purdy, McLean, Bennett, Exhibits 1 - 2, 4 - 14) In one particular transaction wherein James Morgan purchased a vessel from Petitioner, Anderson testified that the vessel was removed from Florida to Tennessee where Morgan lived on the day after full payment had been made under the contract. Anderson, however, did not know if Morgan provided him with an affidavit for exemption of the boat by removal from the state, and no documentary evidence concerning the transaction was presented by Petitioner at the hearing. (Testimony of Anderson, Exhibit 15) In another transaction, Anderson purchased a vessel in 1973 from Coastal Sailing Services, Inc., of Tallahassee, Florida, and paid sales tax in the amount of $1,027.40. Later, Anderson believed that he was exempt from the payment of tax because he had purchased the vessel solely for rental purposes. He communicated with Respondent's sales tax bureau through his accountant for information concerning refund procedures. Remus O. Cook, Jr., an examiner in the state sales tax bureau, advised in a letter of August 14, 1974, that a refund from Coastal Sailing Service could be secured if the vessel had been purchased solely for rental purposes, and that such request to the seller should be accompanied by a certificate of sales tax exemption utilizing a form enclosed with the letter. Although the vessel had been purchased by Anderson, the letter made reference to Out Island Charters, Inc. as the buyer and cited its sales tax registration number. Cook testified that it was departmental policy to grant an exemption if tangible personal property was purchased exclusively for rental purposes, even if the purchaser was not registered as a dealer at the time of sale. However, Henry Coe, Jr., Respondent's Executive Director, testified that registration at or a few days after the time of sale was a prerequisite to exemption in such cases. Anderson proceeded to request the refund from the seller, but the exemption form was executed in the name of Out Island Charters, Inc. He received the refund in 1975. Respondent's tax examiner assessed this sale in the current proposed tax assessment because he found no documentary evidence that Anderson intended to use the boat for charter purposes when he purchased it, and there was no evidence that Anderson was registered as a dealer at that time or furnished a resale certificate to the seller when it was purchased. No evidence was presented that Anderson had used the boat for personal purposes and he testified that he purchased it solely for rental, but conceded that he had no dealer's registration number at the time of purchase. (Testimony of Anderson, Lloyd, Exhibit 18, Depositions of Cook, Coe (Exhibits 19, 20)) Petitioner conceded at the hearing that the tax computations were correct, but contested liability therefor except for the several instances where sales tax had not been collected on boat rentals. (Testimony of Anderson)
Recommendation That the proposed tax assessment be enforced against Petitioner herein. DONE and ENTERED this 9th day of June, 1978, in Tallahassee, Florida. THOMAS C. OLDHAM Hearing Officer Division of Administrative Hearings 530 Carlton Building Tallahassee, Florida 32304 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 9th day of June, 1978. COPIES FURNISHED: Patricia S. Turner, Esquire Assistant Attorney General Department of Legal Affairs The Capitol Tallahassee, Florida 32304 Howard Hochman, Esquire 2121 Biscayne Boulevard Suite 201 Miami, Florida 33137 John D. Moriarty, Esquire Department of Revenue Room 104, Carlton Building Tallahassee, Florida 32304
Findings Of Fact Tireless, Inc., was incorporated in the State of Delaware in October, 1981. On October 15, 1984, Tireless, Inc. purchased a 61 foot 1985 Hatteras motor yacht from Toledo Beach Marina in LaSalle, Michigan, for a purchase price of $771,339.00. Delivery was to be taken at New Bern, North Carolina. The above stated price was the factory invoice price of $746,330.00 plus a $25,000.00 profit to the dealer. The invoice for the sale, dated October 4, 1984, reflecting that the yacht was sold to Toledo Beach Marina, nonetheless reflects that the customer, who was to pay 100 per cent of the purchase price prior to delivery by customer pick up was Mr. Geiger. After purchase, the yacht was documented in Wilmington, Delaware and home-ported there. The name and home port appearing on the transom of the vessel reflected, "Tireless, Wilmington, Delaware." The vessel constituted the sole asset of its owning corporation. The vessel was purchased as an investment. It was anticipated that it would be used by company personnel for pleasure as well as business meetings and it could and would be chartered out on occasion. Though the vessel reportedly was to be used on the Great Lakes, because of the reported possibility of severe weather in that area at the time of pick up and of ice forming in one or more of the 38 locks of the canal across New York State to Lake Erie, a decision was made to take the boat to Florida for winter storage. Recognizing that dockage facilities are quite often difficult to come by, arrangements were made for the boat to be docked at the Bahia Mar Yacht Basin in Fort Lauderdale, arguably the premier, most active and most prestigious anchorage in South Florida. These arrangements were made well in advance of the arrival of the vessel. This was to be a winter dockage only. From the time of its arrival at the yacht basin in November, 1984 until it left to go north in April, 1985, it did not leave the basin although it was moved from one slip to another in the same marina. While at the Bahia Mar Yacht Basin, certain modifications were made to the vessel such as the installation of additional electronics and a custom interior was installed. From November 1, 1984 through April 5, 1985, Mr. Geiger visited the boat on six occasions staying overnight on it for one or more nights each time. The boat was not used for parties nor did any other person live aboard the boat during its stay at Bahia Mar. Though the Tireless was brought from North Carolina to Fort Lauderdale, there were other ports to the north where the boat could have been wintered including New Bern, itself, and various ports in South Carolina and Georgia, not even considering those Florida ports to the north. Mr. Geiger contends that corporate officials picked the Fort Lauderdale berth because of the availability of berthing facilities and the capability of electronics installation found in the immediate area. This argument is not persuasive, however. There was nothing shown to be particularly unique about the electronics installed or the interior customizing done which could not have been done in other marinas between New Bern and Fort Lauderdale such as Wilmington, North Carolina; Charleston, South Carolina; Savannah, Georgia; or Jacksonville, Florida. What is obvious, though no direct evidence of this was presented, is that in the wintertime, the climate of Fort Lauderdale is far superior and friendly than those other ports as are the social aspects. The boat was sailed from the factory to Fort Lauderdale by a crew made up of Mr. Geiger as captain and several other non- profession sailors who were friends or acquaintances of his. Upon arrival in Fort Lauderdale, Mr. Geiger put the boat into the marina immediately and stayed but one day prior to leaving to return up north. In addition to the six or so visits paid to the boat by Mr. Geiger referenced above, other unidentified individuals from up north did come down and onto the yacht at its berth for short periods. During the trip down from North Carolina, the boat utilized the Intracoastal Waterway and stopped at one or two Florida marinas over night on the way. On or about September 26, 1984, Mr. Geiger entered into a license agreement for dockage space with the Bahia Mar Hotel and Yachting Center for slip # E-251 for the Tireless at a rate of 90 per day to start on November 15, 1984. Thereafter, on November 2, he entered another agreement with the marina for a different slip, # H-359. The rate and estimated length of stay reflected on this second agreement is listed as "cond." No explanation of this notation was given. The bills for the dockage reflect numerous phone calls and other charges on an almost daily basis, the explanation for which is that they were calls made by workmen or others in reference to the work being done on the boat. When these bills came due they were paid and payment was authorized either by Mr. Geiger as President of Tireless, Inc., or by a yacht broker resident at the marina who was supervising the work being done on the vessel. In April, 1985, the boat was sailed from South Florida up to South Carolina where it stayed for a few weeks then on to North Carolina for a week and on to New York where it stayed for several weeks prior to going to the Great Lakes and its dockage in Ohio for the summer. While up north, it was, as intended, used for pleasure, business, and charter on several occasions. One of the individuals who showed a strong interest in chartering the vessel while it was in Ohio indicated also that he might be interested in chartering it in South Florida for the winter. As a result, Mr. Geiger had the boat brought back in the fall of 1985. However, the proposed charter fell through. While in Florida, however, the boat was sold to another individual who paid approximately $805,000.00 for it. The boat was sold in January, 1986. It was not until some four months later that the Department of Revenue filed its notice of delinquent tax. An informal hearing was held as a result of the assessment and on October 2, 1986, the Department, in a letter to Petitioner's counsel, stated as a notice of reconsideration and the final position of the Department that it affirmed the assessment and expected it to be paid in full. In essence, the Department concluded that the vessel was imported into the State of Florida and stored here initially for a period in excess of five months. While here, it was modified and improved and was available for use by the owner even though it may not have been taken out and that all of this was done prior to its being used elsewhere, in another state, for more than six months. The Department considered this to be co-mingling with the mass of property in the State of Florida rendering the yacht subject to use tax, and its position appears to be legally correct.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, therefore: RECOMMENDED that the Petitioner, Tireless, Inc., pay a use tax plus penalty and interest on the storage for use in Florida of the motor vessel, Tireless, and that such tax be based on a value assessment of $771,330.00. RECOMMENDED this 15th day of June, 1978 in Tallahassee, Florida. Arnold H. Pollock, Hearing Officer Division of Administrative Hearings The Oakland Building 2900 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 15th day of June. APPENDIX The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties hereto: By the Petitioner 1-8. Accepted and incorporated herein. Accepted as to the fact that prior arrangements were made due to concern over availability of winter dockage space. There was no evidence regarding any representations made by the Bahia Mar Club. Accepted. 11-12. Rejected. There was no evidence of actual weather conditions. In fact, the decision was made to go south reportedly due to possible weather conditions but no effort was made to make the trip to the Great Lakes at that time. 13. See 11-12. Accepted. Rejected while the vessel was not used for sailing, Mr. Geiger did live aboard on several visits down from Ohio. 16-17. No evidence was introduced by either party on the issue of intent. Evidence as to actual use or non-use is controlling in any event. 18-21. Rejected as irrelevant. 22. Accepted and incorporated herein. By the Respondent 1-5. Accepted and incorporated herein. 6-11. Accepted and incorporated herein. Rejected as contrary to the evidence. Accepted. 14-16. Accepted. 17-18. Accepted. 19-20. Accepted. COPIES FURNISHED: William D. Townsend, Esquire Department of Revenue 104 Carlton Building Tallahassee, FL 32399-0100 Debra A. Altizer, Esquire Post Office Box 14124 Fort Lauderdale, FL 33302 Kevin J. O'Donnell, Esquire Department of Legal Affairs Tax Section Capitol Building Tallahassee, FL 32399-1050 Randy Miller, Executive Director Department of Revenue 104 Carlton Building Tallahassee, FL 32399-0100
The Issue Whether the Department of Revenue (DOR) has properly issued an assessment against Petitioner for sales and use tax, interest, and penalty.
Findings Of Fact Petitioner is a Florida resident. In 1996, Petitioner began doing business as a sole proprietor under the name of "Duraline Industries" and registered with DOR as a sales tax dealer. Later, this entity was called "Dura Steel." Petitioner also operated as a corporation, Steel Engineered Design Systems, Inc. Petitioner's Florida sales tax numbers are 42-11-009271-63 and 40-00-003416- For purposes of these consolidated cases, Petitioner has been audited and charged individually as "Charles R. Bielinski," because the audit revealed that no checks were made out to the corporation(s) and that the monies received were received by Mr. Bielinski as a sole proprietor in one or more "doing business as" categories. Petitioner engaged in the business of fabricating items of tangible personal property, i.e., prefabricated steel buildings, many of which later became improvements to real property in Florida. Petitioner used some of the steel buildings in the performance of real property contracts by installing the buildings as improvements to real property. Petitioner also engaged in the business of selling buildings and steel component parts such as sheets and trim in Florida. Petitioner sold buildings and component parts in over- the-counter retail sales, also. On October 7, 2002, DOR issued Petitioner a Notification of Intent to Audit Books and Records for the period of September 1, 1999 through August 31, 2002. This audit was assigned number AO226920428. In 2002, Petitioner provided DOR's auditor with his sales activity records, such as contracts and job information. A telephone conversation/interview of Petitioner was conducted by the auditor. Over a period of several months, the auditor attempted to get Petitioner to provide additional records, but none were forthcoming. DOR deemed the contracts and job information provided by Petitioner to be an incomplete record of his sales activity for the audit period. Petitioner claimed that most of his sales activity records had been lost or destroyed. Due to the absence of complete records, DOR sampled Petitioner's available records and other information related to his sales in order to conduct and complete its audit. Petitioner purchased materials used to fabricate his steel buildings. Petitioner sometimes would erect the buildings on real property. Petitioner fabricated main frames for smaller buildings at a shop that he maintained at the Bonifay Airport. Otherwise, Petitioner subcontracted with like companies to fabricate main frames for larger buildings. Petitioner made some sales to exempt buyers, such as religious institutions and government entities. When he purchased the materials he used to fabricate the buildings, Petitioner occasionally provided his vendors with his resale certificate, in lieu of paying sales tax. Petitioner did not pay sales tax on the materials he purchased to fabricate buildings when such buildings were being fabricated for exempt buyers such as churches and governmental entities. On June 23, 2003, DOR issued Petitioner a Notice of Intent to Make Audit Changes (Form DR-840), for audit number AO226920428, covering the period of November 1, 1997 through August 31, 2002. DOR has assessed Petitioner sales tax on the buildings, sheets, and trim he sold over-the-counter in Florida. DOR has assessed Petitioner use tax on sales of the materials used in performing real property contracts in Florida. The auditor calculated a method of estimating taxes based on the limited documentation that had been provided by Petitioner. She used a sampling method based on Petitioner's contract numbering system; isolated the Florida contracts; and divided the Florida contracts between the actual sale of tangible property (sale of just the buildings themselves) and real property contracts (where Petitioner not only provided the building but also provided installation or erection services). The auditor scheduled the real property contracts and assessed only the material amounts as taxable in Florida. Since she had only 19 out of 47 probable contracts, or 40 percent, she projected up to what the taxable amount should be and applied the sales tax and surtax at the rate of seven percent, as provided by law. She then divided that tax for the entire audit period by the 58 months in the audit period, to arrive at a monthly tax amount. This monthly tax amount was broken out into sales and discretionary sales tax. Florida levies a six percent State sales tax. Each county has the discretion to levy a discretionary sales tax. Counties have similar discretion as to a surtax. The auditor determined that Petitioner collected roughly $22,000.00 dollars in tax from one of his sales tax registrations which had not been remitted to DOR. During the five-year audit period, Petitioner only remitted tax in May 1998. DOR gave Petitioner credit for the taxes he did remit to DOR during the audit period. The foregoing audit processes resulted in the initial assessment(s) of August 28, 2003, which are set out in Findings of Fact 25-31, infra. On August 28, 2003, DOR issued Petitioner a Notice of Proposed Assessment (Form DR-832/833), for additional discretionary surtax, in the sum of $2,582.19; interest through August 28, 2003, in the sum of $782.55; and penalty, in the sum of $1,289.91; plus additional interest that accrues at $0.50 per day. (DOAH Case No. 04-0008) On August 28, 2003, DOR issued Petitioner a Notice of Proposed Assessment (Form DR 832/833), for additional sales and use tax in the sum of $154,653.32; interest through August 28, 2003, in the sum of $50,500.06; and penalty, in the sum of $77,324.54, plus additional interest that accrues at $31.54 per day. (DOAH Case No. 04-0009) On August 28, 2003, DOR issued Petitioner a Notice of Proposed Assessment (Form DR 832/833), for additional local governmental infrastructure surtax, in the sum of $7,001.82; interest through August 28, 2003, in the sum of $2,352.09; and penalty in the sum of $3,497.35; plus additional interest that accrues at $1.45 per day. (DOAH Case No. 04-0010) On August 28, 2003, DOR issued Petitioner a Notice of Proposed Assessment (Form DR 832/833), for additional indigent care surtax, in the sum of $513.08; interest through August 28, 2003, in the sum of $156.33; and penalty, in the sum of $256.24; plus additional interest that accrues at $0.10 per day. (DOAH Case No. 04-0011) On August 28, 2003, DOR issued Petitioner a Notice of Proposed Assessment (Form DR 832/833), for additional school capital outlay surtax in the sum of $3,084.49; interest through August 28, 2003, in the sum of $922.23; and penalty, in the sum of $1,540.98; plus additional interest that accrues at $0.60 per day. (DOAH Case No. 04-0012) On August 28, 2003, DOR issued Petitioner a Notice of Proposed Assessment (Form DR 832/833), for additional charter transit system surtax, in the sum of $2,049.22; interest through August 28, 2003, in the sum of $766.07; and penalty, in the sum of $1,023.27; plus additional interest that accrues at $0.46 per day. (DOAH Case No. 04-0013) On August 28, 2003, DOR issued Petitioner a Notice of Proposed Assessment (Form DR 832/833), additional small county surtax, in the sum of $10,544.51; interest through August 28, 2003, in the sum of $3,437.85; and penalty in the sum of $5,282.30; plus additional interest that accrues at $2.15 per day. (DOAH Case No. 04-0014) However, the auditor testified at the May 13, 2004, hearing that she attended Petitioner's deposition on March 18, 2004. At that time, Petitioner provided additional documentation which permitted the auditor to recalculate the amount of tax due. The auditor further testified that she separated out the contracts newly provided at that time and any information which clarified the prior contracts she had received. She then isolated the contracts that would affect the Florida taxes due. Despite some of the new information increasing the tax on some of Petitioner's individual Florida contracts, the result of the auditor's new review was that overall, the contracts, now totaling 33, resulted in a reduction in total tax due from Petitioner. These changes were recorded in Revision No. 1 which was attached to the old June 23, 2003, Notice of Intent to Make Audit Changes, which was sent by certified mail to Petitioner. The certified mail receipt was returned to DOR as unclaimed. The auditor's calculations reducing Petitioner's overall tax are set out in Respondent's Exhibit 16 (Revision No. 1). That exhibit appears to now show that taxes are owed by Petitioner as follows in Findings of Fact 34-40 infra. For DOAH Case No. 04-0008, discretionary surtax (tax code 013), Petitioner only owes in the amount of $1,937.37, plus penalties and interest to run on a daily basis as provided by law. For DOAH Case No. 04-0009, sales and use tax (tax code 010), Petitioner only owes in the amount of $111,811.04, plus penalties and interest to run on a daily basis as provided by law. For DOAH Case No. 04-0010, local governmental infrastructure surtax (tax code 016), Petitioner only owes in the amount of $5,211.00, plus penalties and interest to run on a daily basis as provided by law. For DOAH Case No. 04-0011, indigent care surtax (tax code 230), Petitioner only owes in the amount of $317.39, plus penalties and interest to run on a daily basis as provided by law. For DOAH Case No. 04-0012, school capital outlay tax (tax code 530), Petitioner only owes in the amount of $2,398.68, plus penalties and interest to run on a daily basis as provided by law. For DOAH Case No. 04-0013, charter transit system surtax (tax code 015), Petitioner only owes in the amount of $1,558.66, plus penalties and interest to run on a daily basis as provided by law. For DOAH Case No. 04-0014, small county surtax (tax code 270), Petitioner only owes in the amount of $7,211.83, plus penalties and interest to run on a daily basis as provided by law.
Recommendation Based on the foregoing Findings of Facts and Conclusions of Law set forth above, it is RECOMMENDED that the Department of Revenue enter a final order upholding the amount of tax calculated against Petitioner in its June 21, 2003, Notice of Intent to Make Audit Changes, Revision No. 1, in the principal amounts as set forth in Findings of Fact Nos. 34-40, plus interest and penalty accruing per day as provided by law, until such time as the tax is paid. DONE AND ENTERED this 14th day of July, 2004, in Tallahassee, Leon County, Florida. S ELLA JANE P. 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 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 14th day of July, 2004.
The Issue Whether the Petitioners are responsible for a use tax on the purchase of tangible personal property as assessed by the Respondent and, if so, in what amount.
Findings Of Fact The Department of Revenue is the state agency charged with the responsibility of collecting use tax in accordance with Florida law. At all times material to the allegations of this case, Petitioners were residents of Miami, Florida. In August, 1992, Hurricane Andrew struck the Miami area and destroyed most, if not all, of Petitioners' household furnishings. The Petitioners were devastated by their personal losses. Financially the Petitioners did not recover enough from the losses to replace all that had been damaged or destroyed by the storm. When it came time to refurnish their home, Petitioners traveled to North Carolina and selected new household furnishings which were paid for by them and imported into the State of Florida at their direction. These household furnishings are considered tangible personal property under the applicable Florida laws. The trucking companies which transported Petitioners' new furnishings were required to stop at Department of Agriculture and Consumer Services weigh stations, and copies of the bills of lading for Petitioners' personal property were produced and copied. The Department of Revenue utilized such bills of lading to calculate the use tax owed and due on the Petitioners' personal property. The Department of Revenue does not instruct the employees of the Department of Agriculture to stop particular kinds of trucks for inspection, but rather trains the Agriculutre employees to look for certain kinds of commodities, in order to identify all commodities that may be subject to sales and use tax. The Department of Agriculture employees are instructed by the Department of Revenue to forward to the Department of Revenue the bills of lading from those shipments containing consumer commodities that are for use or consumption and are subject to tax, and they are instructed not to forward bills of lading for items which are exempt from tax or which are intended for resale. The purpose of this program is to assist the Department of Revenue in its enforcement of the sales and use tax. A purchaser of goods from out-of-state is required to voluntarily comply with the statutes imposing the use tax. The Department of Revenue calculated the amounts due from Petitioners for the use tax associated with their personal property imported into Florida and reduced such amounts to a final assessment. This assessment was issued by the Department on or about July 25, 1996. Petitioners have not disputed the accuracy of the assessment nor the fact that they imported the personal property described in the bills of lading used to calculate the assessment. Petitioners maintain that they should not be required to remit the tax set forth in the assessment as they were the victims of Hurricane Andrew and, but for their losses from that storm, would not have incurred the expense of new furnishings. The final assessment identified the following sums owed by Petitioners: tax in the amount of $1,020.84; penalty in the amount of $510.42; and interest through July 25, 1996, in the amount of $137.87. Petitioners did not establish that they had paid sales tax in North Carolina for the personal property shipped to Florida. Petitioners did not establish that they paid the use tax in Florida for the personal property described in the bills of lading used to calculate the tax assessed. Petitioners did not purchase the personal property through a charitable organization such as the Red Cross which was afforded tax exemption after Hurricane Andrew to purchase furnishings for the storm's victims. Petitioners did not establish that they are financially unable to pay the assessment.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order affirming the assessment in this cause. DONE AND ENTERED this 5th day of August, 1997, in Tallahassee, Leon County, Florida. J. D. PARRISH Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 5th day of August, 1997. COPIES FURNISHED: Larry Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100 Linda Lettera, General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 Elizabeth T. Bradshaw Assistant Attorney General Office of the Attorney General The Capitol, Tax Section Tallahassee, Florida 32399-1050 Alphonso Thurman Betty Thurman 13603 Southwest 102 Court Miami, Florida 33176
The Issue The issue is whether the Department of Revenue’s audit assessment of tax and interest against Petitioner, Dolphin Tanker Systems, Inc., issued on June 15, 2004, should be sustained.
Findings Of Fact Dolphin Systems is incorporated and domiciled in the State of Florida, having its principal place of business located at 3255 Mulford Road, Mulberry, Florida. Dolphin Systems sells water tanks and trucks to construction contractors and equipment dealers, both domestic and foreign. Products are sold and delivered within the state and also exported to other states and countries. Dolphin Systems is a "dealer" within the meaning of Subsection 212.06(2)(c), Florida Statutes (2003).1/ On or about May 9, 2003, the Department notified Petitioner that it would conduct an audit of Dolphin Systems business. The audit period was from April 1, 2000 through March 31, 2003. The Department and Dolphin Systems agreed that the audit would be conducted by the sampling method. See § 212.12(6)(c)1., Fla. Stat. On January 5, 2004, the Department concluded its record review and issued its Notice of Intent to Make Audit Changes ("NOI"). The NOI showed that Dolphin Systems owed the Department additional sales and use tax in the amount of $92,093.92, penalties in the amount of $23,023.48, and interest in the amount of $23,661.54. Dolphin Systems requested an audit conference to review the factual circumstances and reasons for the Department’s adjustments. During the conference, additional records were provided which resulted in a revision to the NOI (Revision No. 1). A subsequent revision to the NOI occurred on April 20, 2004 (Revision No. 2). On June 15, 2004, the Department sent Dolphin Systems a Notice of Proposed Assessment which indicated that Dolphin Systems owed the Department additional sales and use tax in the amount of $30,302.69; and interest through June 14, 2004, in the amount of $9,268.14, making a total assessment of $39,570.83. Determined Facts Based on the oral and documentary evidence presented at the final hearing and on the entire record of this proceeding, the following findings are made: The Department is authorized to conduct audits of taxpayers and to request information to ascertain their tax liability, if any, pursuant to Section 213.34, Florida Statutes. In May 2003, the Department initiated an audit of Dolphin Systems to determine whether Dolphin Systems was properly collecting and remitting sales and use tax to the Department. During the audit period, April 1, 2000 through March 31, 2003, Dolphin Systems purchased inventory, fixed assets, and other tangible property for use in its business. Additional tax was determined to be due (at the combined rate of 6.75 percent) on the general, fixed asset and inventory purchases made by Dolphin Systems during the audit period for which sales tax was either not paid to the vendor or where Dolphin Systems did not accrue the correct amount of use tax. Exempt Sales The Department’s work papers identify sales for which adequate documentation was not provided to support Petitioner's claimed exempt status. Specifically, Petitioner had no resale exemption certificates from sales made to either Florida dealers or to non-Florida dealers. There was no evidence that the item was or would be exported out of state. By its own terms, Invoice No. 2423 relates to a transaction that describes a New Dolphin 3500 gallon tank; Berkeley water pump; spray heads; and wash-down hose with reel, air controls in cab, primed, painted, decaled, and mounted on a provided chassis. Invoice No. 2423 reflects a sales price of $13,500.00, but does not show that sales tax was collected on the transaction. Dolphin Systems contends that the transaction involving Invoice No. 2423 is exempt from sales tax because it was an out-of-state sale. If RSV and Associates took possession of the property in Florida, but could document that there was uninterrupted export of the goods/property out of the country or a statement from the vendor that the property went out of the State of Florida for resale, that sale would be exempt from sales tax. However, Dolphin Systems provided no such documentation to the Department. To support its claim that the item was an out-of-state sale, Dolphin Systems provided shipping documentation which purported to show that the item listed on Invoice No. 2423 had been shipped to Puerto Rico. The unsigned shipping document described the property being shipped to Puerto Rico as a two- door white 1994 International truck. However, because the item listed on Invoice No. 2423 was different from the property noted on the unsigned shipping document, the Department could not tie the two records together. Therefore, the Department appropriately concluded that there was no basis for exempting the transaction reflected in Invoice No. 2423. Other Income The Notice of Proposed Assessment assessed sales tax on $62,500.00, which Dolphin System had categorized as "Other Income" on its Federal income tax return for the year 2000, Form 1120 ("2000 Tax Return"). The Department based this assessment on its work papers identified as "other income" for which adequate documentation was not provided to support the claim that tax had been remitted. Petitioner reported $62,500.00 in "other income" on its 2000 Tax Return and on its trial balance. No reconciliation of income per books, with income per return, was entered for this event. This income was not included on the state sales tax return for that period; and, therefore, it was properly scheduled as an exception. The Department included the $62,500.00 because Petitioner reported the income both on its financial statements and 2000 Tax Return. Because Petitioner uses the accrual method, events that gave rise to the creation of income are reported in the year the event took place. Accordingly, the "other income" is properly attributable to the year 2000. In response to the assessment, Dolphin Systems claimed that the $62,500.00 represented collection of a "bad debt," and the transaction represented a cash receipt of $62,500.00 from a settlement in a lawsuit for an unpaid invoice from prior years. As support for this claim, Dolphin Systems presented the Department with a copy of a Final Judgment in Dolphin System's favor. According to the Final Judgment dated September 1999, Kimmins Contracting Corporation ("Kimmins Contracting") was indebted to Dolphin Systems for $59,300.00, plus sales tax of $3,595.50, for a total of $62,895.50 for property sold and delivered between June 16, 1998 and July 8, 1998. There is no dispute that this property was taxable. Dolphin Systems also contended that in July 1998, it reported and remitted to the Department the sales tax on the property sold and delivered to Kimmins Contracting, even though Kimmins Contracting had not yet paid for the property or the sales tax thereon. As additional support for its claim, Dolphin Systems submitted to the Department a Sales and Use Return for the collection period July 1998, which showed a taxable amount of $100,000.00 and taxes collected as $6,112.50. Moreover, there was a discrepancy between the amount of gross sales on Petitioner's 2000 Tax Return and the gross sales reported for sales tax purposes to the Department on Form DR-15. Notwithstanding Petitioner's claim, there was no supporting documentation to either explain the discrepancy or to establish that Petitioner had already paid sales tax on the "other income." In the absence of any back-up data, the Department appropriately concluded that the foregoing Sales and Tax Use Return did not show that the sales tax for tangible personal property sold to Kimmins Contracting was included in the amount of sales taxes reported and remitted to the Department in July 1998. General Purchases The Department's work papers identify general purchases from various vendors for which adequate documentation was not provided to show that either tax was paid on the purchase or that it was exempt as a purchase for resale. In some instances, no invoices were presented; in which case, the Department could not determine that sales tax had, in fact, been paid. In other instances, invoices existed, but there was no documentation showing the purchase was for resale. Dolphin Systems is in the business of purchasing and/or building and repairing tankers for resale. When tankers are purchased for resale and this can be documented, there is no tax on the item. Here, Dolphin Systems claimed, but was unable to document, that certain items were for resale. Without such documentation, the Department properly scheduled the items included in the Notice of Proposed Assessment. Items normally purchased for resale are recorded in the cost of goods sold account, not in office supplies or shop supplies account. The items contained in these accounts normally are for items used in the business, and since they are being used, sales tax is due. Likewise, as in this case, reimbursement to the owner for credit card purchases, unless Petitioner documented the reason for each purchase, is a taxable use. In accordance with the Notice of Proposed Assessment, the Department properly assessed Dolphin Systems $30,302.69 for taxes and $9,268.14 for interest through June 15, 2004. Additionally, Dolphin Systems in liable for daily interest to be computed from June 16, 2004, at 6.64 per day. The Department has waived all penalties. There are no "other" penalties.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue issue a final order sustaining the assessment for sales and use tax and interest against Petitioner. DONE AND ENTERED this 7th day of April, 2005, in Tallahassee, Leon County, Florida. S CAROLYN S. HOLIFIELD 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 7th day of April, 2005.
The Issue The issue for determination is whether Petitioner is liable for use tax, pursuant to Chapter 212, Florida Statutes, to the Florida Department of Revenue for the use and storage of a vessel.
Findings Of Fact Camden Corporation (Petitioner) is a foreign corporation, incorporated in Delaware on August 7, 1990. Petitioner is a solely owned, closed corporation. Petitioner has two officers: a President, who is the sole owner, and a Treasurer. At all times material hereto, Petitioner's President and Treasurer were residents of Jacksonville, Florida. Petitioner's business address is in Jacksonville, Florida. Petitioner's officers handled its day-to-day activities and records from Jacksonville, Florida. Prior to the Petitioner's incorporation, its President wanted to purchase a vessel to take a world wide cruise. He obtained the services of a law firm to advise him on avoiding a state's sales and use tax on the purchase of a vessel, with Florida being one of the states. A lawyer in the firm contacted the Florida Department of Revenue (Respondent) and inquired, without relating any of Petitioner's factual circumstances, as to whether the case of Department of Revenue v. Yacht Futura, 510 So.2d 1047 (Fla. 1st DCA 1987) was still good case law in Florida. Yacht Futura was a case in which the parameters of Florida's sales and use tax were interpreted regarding repairs and personal use of vessels while in Florida waters. Respondent's representative informed the firm's lawyer that Yacht Futura was still being followed by Respondent and that no exceptions existed; but Respondent's representative further cautioned that the factual circumstances must conform to Yacht Futura. The firm's lawyer prepared a memorandum advising Petitioner's President, among other things, that no liability for Florida's sales and use tax would be incurred for repairs and personal use of a vessel in Florida's waters, so long as the circumstances complied with Yacht Futura. After having received the firm's advice and advice from tax advisors, Petitioner's President created and incorporated Petitioner. On August 14, 1990, Petitioner purchased a used motor vessel in international waters for $5,618,000. The vessel was a 131' Feadship with Coast Guard documentation number 623589. Petitioner named the vessel "CAMDEN." The CAMDEN was the only assest owned by Petitioner. Petitioner did not pay any Florida sales tax at the time of CAMDEN's purchase. From August 14, 1990 through October 15, 1990, the CAMDEN was outside the State of Florida. Petitioner's President had taken the vessel on a cruise. During the time period that the vessel was on the cruise, Petitioner did not pay any sales or use tax in any jurisdiction in the United States. Also, during the time period that the vessel was on the cruise, Petitioner did not license, title, or register the CAMDEN in any jurisdiction in the United States. On October 15, 1990, relying on the law firm's advice, Petitioner imported the CAMDEN into Florida waters for major repairs, with the intention of departing after the repairs and not returning to Florida waters. Petitioner obtained the services of Huckins Yacht Corporation, a registered repair facility, in Jacksonville to perform repairs to the CAMDEN, which had a dock in Huckins Marina. However, the dock at Huckins Marina was unable to accommodate a vessel the size of the CAMDEN. The vessel was docked at Southbank Marina which could accommodate the vessel and which was the closest marina to Huckins Marina. Petitioner's President was not in the State of Florida when the CAMDEN arrived in Florida waters. He did not return to Florida until October 24, 1990. Petitioner did not have a written contract with Huckins Yacht Corporation (Huckins) to perform any repairs on the CAMDEN. However, Huckins did perform some minor repairs to the CAMDEN. Also, Huckins arranged for a major repair to the CAMDEN. It arranged for Petitioner to purchase a global position satellite electronic system as a nonwarranty repair. The electronic system was to be installed by someone who was not an employee of Huckins and who did not have a contractual agreement with Huckins for the installation. The electronic system was installed on the CAMDEN at the Southbank Marina. During the time that repairs were being made to the CAMDEN, its crew remained on board. Petitioner never received any bill from Huckins for any repairs made to the CAMDEN, including the installation of the electronic system. While the vessel was docked for repairs at the Southbank Marina, it was used for personal entertainment. On October 25, 1990, Petitioner's President and his friends had an open house type of party on the CAMDEN. On October 26, 1990, Petitioner had a luncheon cruise on the CAMDEN. On October 27, 1990, Petitioner had a dinner cruise and a birthday party for the daughter of Petitioner's President. On October 28, 1990, Petitioner took the CAMDEN from Jacksonville to St. Augustine for a pleasure trip. Leaving St. Augustine, the CAMDEN traveled to Miami, Florida and docked there on October 30, 1990, to get the vessel prepared for world travel. In Miami, the CAMDEN was docked at the Moorings Yacht Services, Inc. (Moorings), a registered repair facility. In November 1990, the Moorings began repairs to the CAMDEN, and in December 1990, the vessel departed the Moorings. In November 1990, Petitioner hired a tax consultant, who was a former employee of Respondent, for advice regarding Petitioner's liability for sales and use tax of the CAMDEN in Florida. The tax consultant advised Petitioner to register the CAMDEN as a charter for sales and use tax. Further, he advised Petitioner to late-file with Respondent an Exemption Affidavit for Boats Placed in a Registered Repair Facility, referred to as a Safe Harbor Affidavit, pursuant to Subsection 212.08(7)(t), Florida Statutes. On December 19, 1990, a Safe Harbor Affidavit was executed by both Huckins and Petitioner's President. The Safe Harbor Affidavit indicated, among other things, that Huckins was a registered repair facility in Jacksonville, Florida and that, from October 16, 1990 through October 25, 1990, the CAMDEN was under the care, custody, and control of Huckins for the purpose of installing electronics, which was the electronic system. Even though the Safe Harbor Affidavit does not provide that Huckins installed the electronic system on the CAMDEN, it does infer that Huckins had installed the electronic device. Respondent interprets "care, custody, and control" as the vessel being in the "physical" care, custody, and control of the registered repair facility. Clearly shown on the Safe Harbor Affidavit is that it is to be filed with the Respondent within 72 hours after the repair facility takes possession of the vessel. Additionally, clearly shown on the Safe Harbor Affidavit is that a copy of it is to be filed with Respondent within 72 hours after the work is completed and the vessel is released to the owner. On or about December 22, 1990, the CAMDEN departed Florida waters for a pleasure cruise to the Bahamas. In early January 1991, the vessel returned to Florida. The CAMDEN remained in Florida until mid-January 1991, when it traveled to the Caribbean. Around mid-May 1991, the vessel returned to Florida. In 1990, Petitioner was not issued a permit by any agency of the United States government to use the CAMDEN in Florida waters. In April 1991, one of Respondent's representatives discovered, during a routine examination of the records of the Miami Marina, that the CAMDEN was named as a boat docked in Florida with an out-of-state hailing port. On May 13, 1991, Respondent's representative sent a Declaration for Florida Sales and Use Tax (Declaration) to Petitioner for it to complete and return to Respondent. Instead of completing the Declaration, on December 10, 1991, Petitioner's tax consultant delivered the Safe Harbor Affidavit executed on December 19, 1990, to Respondent's representative. Additionally, Petitioner's tax consultant verbally supported the Safe Harbor Affidavit by stating that the CAMDEN was docked at Southbank Marina in Jacksonville while the repairs to the vessel were being completed by Huckins and the nonemployee. The Moorings filed a Safe Harbor Affidavit with Respondent, providing that the CAMDEN entered the facility in November 1990 and departed in December 1990. The Safe Harbor Affidavit was not submitted to Respondent within 72 hours of the CAMDEN either entering the facility for repairs or departing the facility after the repairs were completed. 1/ Respondent has a practice of accepting late-filed Safe Harbor Affidavits, with the condition that all documents supporting repairs are also to be submitted. A subsequent review of all the documents submitted would determine whether a person would be responsible for sales and use tax. On December 10, 1991, based on the Safe Harbor Affidavit and the representations by Petitioner's tax consultant, Respondent's representative closed her file regarding the sales and use tax, without assessing any sales or use tax against Petitioner. However, she forwarded neither a closing letter nor a closing agreement to Petitioner. Even though Petitioner had not received a closing letter or a closing agreement from Respondent, it believed that Respondent had terminated its inquiry of any assessment against it. In or around November 1991, another of Respondent's representative (Respondent's second representative) observed, while performing a routine marina check, the CAMDEN docked at the Palm Harbor Marina in West Palm Beach, Florida. Subsequently, he opened a new file on the CAMDEN. Petitioner was unaware that Respondent's second representative had opened a new file. Respondent's second representative performed an investigation of the vessel, including reviewing the Safe Harbor Affidavit submitted to the Respondent's other representative on December 10, 1991. His investigation led to the assessment at issue. The investigation by Respondent's second representative showed, and it is determined as a finding of fact here, that the CAMDEN was not in the physical care, custody, and control of Huckins during the repairs for the period October 16, 1990 through October 25, 1990. From October 15, 1990, when the CAMDEN entered in Florida waters for repairs, the vessel remained in Florida for more than a total of 10 days. Petitioner decided to sell the CAMDEN and listed it for $6.9 million. On February 14, 1992, Petitioner sold the CAMDEN for $5.3 million, which was $1.6 million less than it was originally listed. For 1991 and 1992, Petitioner's President treated the CAMDEN as his personal second home and took a home interest deduction for federal income tax purposes. On October 10, 1992, Respondent notified Petitioner that it was assessed, as of April 10, 1992, a tax of $337,080, representing: 6 percent of the CAMDEN's purchase price of $5,618,000; $84,270 in penalty; $168,540 in specific penalty; and $59,826.60 in interest. On October 26, 1992, Respondent issued a notice of final assessment to Petitioner which included the above assessment and the facts and reasons, including legal reasons, for the assessment. Petitioner contested the assessment. On January 14, 1994, Respondent issued a notice of reconsideration of the assessment and revised final assessment, withdrawing the $168,540 in specific penalty but sustaining the remaining assessment of $503,113.02, which represented: $337,080 tax; $84,270 penalty; and $81,763.02 interest. In its notice of reconsideration, Respondent determined, among other things, that Petitioner was issued an out-of-state registration, effective December 1, 1990, as a result of Petitioner submitting an application for sales and use tax registration, listing the major business activity as rental of tangible personal property. Additionally, Respondent determined, among other things, that Petitioner, as the corporation, maintained control and use of the CAMDEN during the period December 1990 through February 1992 when the CAMDEN was sold. No tax at issue was assessed for this period of time. Petitioner protested the revised assessment. Petitioner has not paid any Florida use tax.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order affirming the assessment of use tax against the Camden Corporation in the amount of $503,113.02, plus accrued interest. DONE AND ENTERED on this 30th day of September, 1996, in Tallahassee, Leon County, Florida. ERROL H. POWELL, 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 30th day of September, 1996.
