Findings Of Fact At all times pertinent to this cause, Robert W. Pope has been the holder of license no. 62-600, series 4-COP, SRX, held with the State of Florida, Division of Beverage to trade as The Wedgewood Inn, located at 1701, 4th Street, South, St. Petersburg, Pinellas County, Florida. When the Respondent, Pope, began to operate the licensed premises he was given a registration sales tax number by the State of Florida, Department of Revenue. This number was provided in accordance with 212, F.S. That law required the remittance of the collected sales tax on a month to month basis, the period beginning with the first day of the month and ending with the last day of the month. The remittance was due on the first day of the following month and payable by the 20th day of the following month. Failure to pay by the 20th would result in a 5 percent penalty and 1 percent interest per month. The sales tax remittance due from the licensed premises for December, 1975 through August, 1976 was not made, and a lien was filed to aid collection of the tax. In mid 1976, the Respondent, contacted the State of Florida, Department of Revenue to discuss term payments of the sales tax remittance. The Respondent in October, 1976 tried to effect a partial release of the tax claim by paying $2,900. In keeping with their policy the Department of Revenue rejected these efforts. Subsequently, in February, 1977, the Respondent made a $10,000 initial payment and three monthly installments to satisfy the lien on this licensed premises and another licensed premises which the Respondent owned. At present all taxes due and owing under 212, F.S. are current. The above facts establish that the Respondent failed to comply with the provisions of 212, F.S. pertaining to the remittance of sales tax from the Respondent to the State of Florida, Department of Revenue. This violation, thereby subjects the Respondent to the possible penalties of 561.29, F.S.
Recommendation It is recommended that the Respondent, Robert W. Pope, be required to pay a civil penalty in the amount of $250.00 or have the license no. 62-600, series 4- COP, SRX, suspended for a period of 10 days. DONE AND ENTERED this 28th day of July, 1977, in Tallahassee, Florida. CHARLES C. ADAMS Hearing Officer Division of Administrative Hearings 530 Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: William Hatch, Esquire Division of Beverage 725 South Bronough Street Tallahassee, Florida 32304 Robert W. Pope, Esquire 611 First Avenue, North St. Petersburg, Florida 33701
The Issue The issue for determination is whether Petitioner owes sales tax of $15,230.15 plus interest from October 15, 1993.
Findings Of Fact Petitioner is a sole proprietorship organized in this state and doing business at 851 Monterey Road, Stuart, Florida. Respondent is the governmental agency responsible for administering the state sales tax in accordance with Chapter 212, Florida Statutes.1 In 1992, other businesses located at Petitioner's address reported to Respondent that they paid rent to Petitioner. However, Petitioner did not collect and remit sales tax on the rental income and was not registered as a dealer. On February 3, 1992, Respondent mailed a Notice of Intent to Audit Petitioner's books and records ("Notice of Intent to Audit") for the tax period February 1, 1987, through January 31, 1992. The Notice of Intent to Audit included a detailed list of the books and records needed for Respondent to conduct a detailed audit. The Notice also requested that Petitioner provide Respondent with a date on which it would be convenient to begin the audit. On February 11, 1992, Respondent had not heard from Petitioner. The auditor contacted Petitioner to schedule a date on which the audit could begin. At that time, Petitioner stated that he would not provide the auditor with any books and records. Petitioner refused to make available the books and records for 1990 through 1992 because Petitioner incorrectly suspected that Respondent maintained a secret "blacklist." Petitioner based his suspicion, in part, on the fact that he had refused to respond to a questionnaire Respondent had mailed to taxpayers throughout the state prior to the Notice of Intent to Audit. Petitioner also based his suspicion on the erroneous assumption that Respondent's audit was part of a criminal investigation by the Internal Revenue Service ("IRS") into Petitioner's federal taxes for 1987 and 1988. Petitioner refused to make available the books and records for 1987 through 1989 because those records were in the possession of the IRS. Petitioner maintained that the proposed audit was illegal. Respondent sent Petitioner copies of its statutory authority to audit Petitioner and made numerous attempts to arrange a mutually convenient time to begin the audit. Respondent did not commence the audit until March 10, 1993. On March 10, 1993, the auditor and audit group supervisor met with Petitioner and Mr. Eugene Nail, Petitioner's paralegal. Petitioner stated that he did not have the books and records Respondent needed to conduct a detailed audit because the IRS had confiscated them in connection with the pending criminal case. Respondent conducted the audit using the information Petitioner made available to the auditor. Petitioner made available: sales invoices for 1990 and 1991 and one month in 1992 grouped together by calendar month; sales and use tax return booklets; resale and exemption certificates; and commercial lease agreements. No journals and ledgers were available. Respondent determined Petitioner's tax deficiency by sampling the available information. Pursuant to Petitioner's request, the auditor used a six month sample period. The auditor explained to Petitioner that she would use Petitioner's invoices during the sample period to determine tax- exempt sales. She compared the invoices to resale certificates and calculated an error ratio based on discrepancies between the sales invoices and the resale certificates. Respondent determined the actual deficiency in sales tax during the six month sample period based on actual invoices that did not have a resale certificate and for which no sales tax was remitted. Respondent estimated the additional deficiency in sales tax by applying the error ratio to the balance of the audit period. Respondent examined only those invoices provided by Petitioner and previous sales tax returns filed by Petitioner. On April 9, 1993, the auditor conducted a meeting with Petitioner and discussed the audit procedures, results, applicable law, and abatement rules. On June 15, 1993, Respondent issued a Notice of Intent to Make Sales and Use Tax Changes in the amount of $45,469.05 ("Notice of Intent"). The Notice of Intent included a copy of all audit exhibits and workpapers. On August 30, 1993, Petitioner provided additional invoices to Respondent in a meeting with the auditor and audit group supervisor. On October 15, 1993, the auditor adjusted certain items in the audit file, reduced the proposed assessment, and issued a Revised Notice of Intent to Make Sales and Use Tax Changes in the amount of $37,417.45 ("Revised Notice of Intent"). Petitioner requested additional time to provide more information, including additional resale certificates. However, Petitioner failed to provide the additional information. By letter dated December 9, 1993, the audit group supervisor notified Petitioner that she was closing the case and sending it to the Tallahassee office as a contested case. On December 23, 1993, Respondent issued a Notice of Proposed Assessment to Petitioner assessing Petitioner for $37,417.45 in tax, penalty, and interest through October 15, 1993. On February 21, 1994, Respondent received Petitioner's written protest dated February 10, 1994. Respondent revised the audit figures again. On January 20, 1995, Respondent issued its Notice of Decision reducing the assessment against Petitioner to $15,230.15. The Notice of Decision assessed Petitioner for taxes of $8,900.55, penalties of $2,225.14, and interest of $4,104.46 through October 15, 1993. Interest accrues at the per diem rate of $2.93 until paid. On March 16, 1995, Petitioner timely appealed the Notice of Decision by filing a Petition for Formal Hearing with Respondent. Inadequate Records Petitioner failed to maintain adequate books and records within the meaning of Sections 212.12(6), 212.13(2), 212.35, and Florida Administrative Code Rules 12A-1.093(2) and (5).2 Petitioner failed to maintain adequate books and records for the five year audit period prescribed in Section 213.34(2). Petitioner failed to maintain general ledgers and journals for the five year audit period. The only records Petitioner maintained were sales invoices for 1990 and 1991 and one month in 1992. Petitioner was unable to produce adequate records for 1987 through 1989. Petitioner asserted that the IRS had those records and that Petitioner could not obtain the records required by Florida law. The federal tax case has been pending against Petitioner since 1990.3 During those seven years, Petitioner was unable to obtain copies of any records in the possession of the IRS. The journals and ledgers for 1987 and 1988 were maintained on computer floppy disks. Petitioner asserts that the floppy disks were lost. Petitioner asserts that his attorney kept the books and records for 1989 in an out-of-state location to avoid producing those records for the IRS. The journals and ledgers for 1990 though 1992 are in the possession of Petitioner's accountants. Petitioner did not produce those records during the audit or at the administrative hearing. Petitioner could have requested the journals and ledgers for 1989 through 1991 from his attorney and accountants, respectively, but chose not to do so. Petitioner made available to Respondent only sales invoices for 1990 and 1991 and one month in 1992. Without the general ledgers and cash journals to cross- reference the sales invoices, Respondent could not corroborate the financial records available for audit. Respondent was required by applicable law to conduct the audit by sampling Petitioner's available records. Exempt Sales: Resale Certificates Certain exempt sales claimed by Petitioner during the six month sample period were not supported by resale certificates. Respondent disallowed the exempt sales that were not supported by resale certificates and allowed the invoices that were supported by resale certificates. For the six month sample period, Respondent assessed an actual sales tax deficiency for those sales that did not have a corresponding resale certificate.4 Respondent prepared audit schedules for the six month sample period that listed the invoices with a sales tax deficiency due to the lack of a resale certificate. Based on the audit schedules, Respondent determined an error ratio and applied the error ratio over the five year audit period to determine the estimated tax deficiency.5 Respondent conducted the audit in accordance with generally accepted audit procedures and with applicable state law. Disallowed exempt sales were listed individually by invoice, name of vendor, and the date and amount of the sale. Disallowed exempt sales were listed for each of the six months in the sample period. Additional Taxable Sales Sales invoices for the six month sample period showed that Petitioner collected more sales tax than he reported to Respondent on his monthly sales tax returns. Respondent treated the collected, but unremitted, sales tax as "additional taxable sales" rather than as an unremitted sales tax. Respondent assessed Petitioner for the sales tax paid on Petitioner's invoices but not remitted to Respondent by Petitioner. The deficiency existed for May and June, 1990, and for January and February, 1991. Taxable Rent Respondent reviewed lease agreements relating to property rented by Petitioner at his business address. Respondent determined that Petitioner failed to collect and remit sales tax on the rental of his property. Respondent assessed Petitioner for sales tax Petitioner failed to collect and remit on taxable rent. Petitioner does not contest that portion of the assessment.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent enter a Final Order and therein UPHOLD Respondent's assessment of $15,230.15 plus interest statutorily due from October 15, 1993, until paid.RECOMMENDED this 17th day of February, 1997, in Tallahassee, Florida. DANIEL MANRY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 17th day of February, 1997.
The Issue Whether the contested and unpaid portions of the tax, penalty and interest assessment issued against Petitioners as a result of Audit No. 9317210175 should be withdrawn as Petitioners have requested?
Findings Of Fact Based upon the evidence adduced at hearing, and the record as a whole, the following Findings of Fact are made: Shuckers is an oceanfront restaurant and lounge located at 9800 South Ocean Drive in Jensen Beach, Florida. In November of 1992, Petitioner Mesa's brother, Robert Woods, Jr., telephoned Mesa and asked her if she wanted a job as Shuckers' bookkeeper. Woods had been the owner of Shuckers since 1986 through his ownership and control of the corporate entities (initially Shuckers Oyster Bar Too of Jensen Beach, Florida, Inc., and then NAT, Inc.) that owned the business. Mesa needed a job. She therefore accepted her brother's offer of employment, notwithstanding that she had no previous experience or training as a bookkeeper. When Mesa reported for her first day of work on November 19, 1992, she learned that Woods expected her to be not only the bookkeeper, but the general manager of the business as well. Mesa agreed to perform these additional responsibilities. She managed the day-to-day activities of the business under the general direction and supervision of Woods. After a couple of weeks, Woods told Mesa that it would be best if she discharged her managerial responsibilities through an incorporated management company. Woods had his accountant draft the documents necessary to form such a corporation. Among these documents were the corporation's Articles of Incorporation. Mesa executed the Articles of Incorporation and, on December 3, 1992, filed them with the Secretary of State of the State of Florida, thereby creating Petitioner TAN, Inc. TAN, Inc.'s Articles of Incorporation provided as follows: The undersigned subscribers to these Articles of Incorporation, natural persons competent to contract, hereby form a corporation under the laws of the State of Florida. ARTICLE I- CORPORATE NAME The name of the corporation is: TAN, INC. ARTICLE II- DURATION This corporation shall exist perpetually unless dissolved according to Florida law. ARTICLE III- PURPOSE The corporation is organized for the purpose of engaging in any activities or business permitted under the laws of the United States and the State of Florida. ARTICLE IV- CAPITAL STOCK The corporation is authorized to issue One Thousand (1000) shares of One Dollar ($1.00) par value Common Stock, which shall be designated "Common Shares." Article V- INITIAL REGISTERED OFFICE AND AGENT The principal office, if known, or the mailing address of this corporation is: TAN, INC. 9800 South Ocean Drive Jensen Beach, Florida 34957 The name and address of the Initial Registered Agent of the Corporation is: Linda A. W. Mesa 9800 South Ocean Drive Jensen Beach, Florida 34957 ARTICLE VI- INITIAL BOARD OF DIRECTORS This corporation shall have one (1) director initially. The number of directors may be either increased or diminished from time to time by the By-laws, but shall never be less than one (1). The names and addresses of the initial directors of the corporation are as follows: Linda A. W. Mesa 9800 South Ocean Drive Jensen Beach, Florida 34957 ARTICLE VII- INCORPORATORS The names and addresses of the incorporators signing these Articles of Incorporation are as follows: Linda A. W. Mesa 9800 South Ocean Drive Jensen Beach, Florida 34957 On the same day it was incorporated, December 3, 1992, TAN, Inc., entered into the following lease agreement with the trust (of which Woods was the sole beneficiary) that owned the premises where Shuckers was located: I, Michael Blake, Trustee, hereby lease to Tan, Inc. the premises known as C-1, C-2, C-3, C-4, 9800 South Ocean Drive, Jensen Beach, Florida for the sum of $3,000.00 per month. This is a month to month lease with Illinois Land Trust and Michael Blake, Trustee. Mesa signed the agreement in her capacity as TAN, Inc.'s President. She did so at Woods' direction and on his behalf. No lease payments were ever made under the agreement. 3/ The execution of the lease agreement had no impact upon Shuckers. Woods remained its owner and the person who maintained ultimate control over its operations. At no time did he relinquish any part of his ownership interest in the business to either Mesa or her management company, TAN, Inc. Mesa worked approximately 70 to 80 hours a week for her brother at Shuckers doing what he told her to do, in return for which she received a modest paycheck. Woods frequently subjected his sister to verbal abuse, but Mesa nonetheless continued working for him and following his directions because she needed the income the job provided. As part of her duties, Mesa maintained the business' financial records and paid its bills. She was also required to fill out, sign and submit to Respondent the business' monthly sales and use tax returns (hereinafter referred to as "DR- 15s"). She performed this task to the best of her ability without any intention to defraud or deceive Respondent regarding the business' tax liability. The DR-15s she prepared during the audit period bore NAT, Inc.'s Florida sales and use tax registration number. On the DR-15 for the month of December, 1992, Mesa signed her name on both the "dealer" and "preparer" signature lines. Other DR-15s were co-signed by Mesa and Woods. In April of 1993, Woods told Mesa that she needed to obtain a Florida sales and use tax registration number for TAN, Inc., to use instead of NAT, Inc.'s registration number on Shuckers' DR-15s. In accordance with her brother's desires, Mesa, on or about May 14, 1993, filed an application for a Florida sales and use tax registration number for TAN, Inc., which was subsequently granted. On the application form, Mesa indicated that TAN, Inc. was the "owner" of Shuckers and that the application was being filed because of a "change of ownership" of the business. In fact, TAN, Inc. was not the "owner" of the business and there had been no such "change of ownership." By letter dated June 22, 1993, addressed to "TAN INC d/b/a Shuckers," Respondent gave notice of its intention to audit the "books and records" of the business to determine if there had been any underpayment of sales and use taxes during the five year period commencing June 1, 1988, and ending May 31, 1993. The audit period was subsequently extended to cover the six year period from June 1, 1987 to May 31, 1993. Relying in part on estimates because of the business' inadequate records, auditors discovered that there had been a substantial underpayment of sales and use taxes during the audit period. The auditors were provided with complete cash register tapes for only the following months of the audit period: June, July, August and December of 1992, and January, February, March, April and May of 1993. A comparison of these tapes with the DR-15s submitted for June, July, August and December of 1992, and January, February, March, April and May of 1993 revealed that there had been an underreporting of sales for these months. Using the information that they had obtained regarding the three pre- December, 1992, months of the audit period for which they had complete cash register tapes (June, July and August of 1992), the auditors arrived at an estimate of the amount of sales that had been underreported for the pre- December, 1992, months of the audit period for which they did not have complete cash register tapes. The auditors also determined that Shuckers' tee-shirt and souvenir sales, 4/ Sunday brunch sales, cigarette vending sales, vending/amusement machine location rentals 5/ and tiki bar sales that should have been included in the sales reported on the DR-15s submitted during the audit period were not included in these figures nor were these sales reflected on the cash register tapes that were examined. According of the "Statement of Fact" prepared by the auditors, the amount of these unreported sales were determined as follows: TEE-SHIRT SALES: Sales were determined by estimate. This was determined to be $2,000/ month. No records were available and no tax remitted through May, 1993. SUNDAY BRUNCH SALES: Sales were determined by estimate. This was determined to be 100 customers per brunch per month (4.333 weeks). No audit trail to the sales journal was found and no records were available. CIGARETTE VENDING SALES: The estimate is based on a review of a sample of purchases for the 11 available weeks. The eleven weeks were averaged to determine monthly sales at $3/pack. VENDING MACHINE LOCATION RENTAL REVENUE: The revenue estimate is based on a review of a one month sample. TIKI BAR SALES: The sales estimate is based on a review of infrequent cash register tapes of February, 1993. The daily sales was determined by an average of the sample. The number of days of operation per month was determined by estimate. In addition, the auditors determined that TAN, Inc. had not paid any tax on the lease payments it was obligated to make under its lease agreement with Illinois Land Trust and Michael Blake, Trustee, nor had any tax been paid on any of the pre-December, 1992, lease payments that had been made in connection with the business during the audit period. According to the "Statement of Fact" prepared by the auditors, the amount of these lease payments were determined as follows: The estimate is based on 1990 1120 Corporate return deduction claimed. This return is on file in the Florida CIT computer database. The 1990 amount was extended through the 6/87 - 11/92 period. For the period 12/92 - 5/93 audit period, TAN's current lease agreement of $3,000/month was the basis. No documentation was produced during the audit supporting any the sales tax exemptions that the business had claimed during the audit period on its DR-15s. 6/ Accordingly, the auditors concluded that the sales reported as exempt on the business' DR-15s were in fact taxable. Using records of sales made on a date selected at random (February 1, 1993), the auditors calculated effective tax rates for the audit period. They then used these effective tax rates to determine the total amount of tax due. An initial determination was made that a total of $201,971.71 in taxes (not including penalties and interest) was due. The amount was subsequently lowered to $200,882.28. On or about December 22, 1993, TAN, Inc., entered into the following Termination of Lease Agreement with Ocean Enterprises, Inc.: TAN, Inc., a Florida corporation, hereby consents to termination of that certain lease of the premises known as C-1, C-2, C-3 and C-4 of ISLAND BEACH CLUB, located at 9800 South Ocean Drive, Jensen Beach, Florida, dated December 3, 1992, acknowledges a landlord's lien on all assets for unpaid rent; and transfers and sets over and assigns possession of the aforesaid units and all of its right, title and interest in and to all inventory, equipment, stock and supplies located on said premises 7/ in full satisfaction of said unpaid rent; all of the foregoing effective as of this 22nd day of December, 1993. FOR AND IN CONSIDERATION of the foregoing termin- ation of lease, OCEAN ENTERPRISES, Inc., a Florida corporation, hereby agrees to pay Linda Mesa, each month all of the net revenues of the operation of the bar and restaurant located on said premises, up to the sum of $15,000.00, for sales tax liability asserted against TAN, Inc. or Linda A. W. Mesa based upon possession or ownership of said premises or any of the assets located thereon, plus attorney's fees incurred in connection with defending or negotiating settlement of any such liability. Net revenue shall mean gross revenue, less operating expenses, includ- ing, but not limited to, rent, up to the amount of $5,000.00 per month, costs of goods sold, utilities, payroll and payroll expense and insurance. OCEAN ENTERPRISES, Inc. represents that it has entered into a lease of said premises for a term of five years commencing on or about December 22, 1993, pursuant to the terms and conditions of which OCEANFRONT [sic] ENTERPRISES, Inc. was granted the right to operate a restaurant and bar business on said premises. Ocean Enterprises, Inc., leases the property from Island Beach Enterprises, which obtained the property through foreclosure. TAN, Inc., has been administratively dissolved.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Department of Revenue enter a final order withdrawing the contested and unpaid portions of the assessment issued as a result of Audit No. 9317210175, as it relates to TAN, Inc., and Linda A. W. Mesa. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 27th day of June, 1995. STUART M. LERNER 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 27th day of June, 1995.
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: Petitioner, a corporation headquartered in Charlotte, North Carolina, is in the business of operating movie theatres both within and without the State of Florida. At these theatres Petitioner Operates concession stands which sell both candy items and drinks in various sizes at different prices to persons who frequent the theatres. For the period of time from September, 1985 through May, 1985, Petitioner remitted to the Department of Revenue sales tax on the total taxable value of all taxable items sold at its concession stands in all of its Florida theatres, in accordance with the presumptive effective rate of tax of 5.63 percent contained in Rule 12A-1.11(37), Florida Administrative Code. As a result of an audit for a previous period dated October 1, 1982, Petitioner remitted to the Department of Revenue the amount of $10,637.00 for sales tax on taxable items sold at its concession stands during this audit period in accordance with the presumptive effective tax rate of 4.5 percent as contained in Rule 12A-1.11(37), Florida Administrative Code during the audit period. On August 15, 1985, Petitioner filed with the Department of Revenue, as agent for Respondent, two (2) applications for sales tax refund in the amount of $16,876.52 and $10,637.00. The applications were dated August 13, 1985, and were timely filed. During the refund periods at issue in this matter, the Petitioner: (a) posted and charged flat prices for the various items offered for sale, which prices included sales tax (b) kept records of daily and weekly sales of taxable items at each of its Florida theatres (c) kept records of daily attendance at each movie shown by each Florida theatre and (d) kept records of weekly calculations, through inventory analysis, of sales of drinks and candy items, including the number, size and price of each item sold at each of its Florida theatre. During the refund periods at issue in this matter, the Petitioner did not maintain cash registers at its concession stands in its Florida theatres and did not maintain records made contemporaneously with the sale of taxable items from the concession stands which separately itemized the amounts of sales tax collected on each sale transaction occurring at the theatres' concession stands. Rather, Petitioner chose, for its own convenience, to operate a "cash box" operation at each of its concession stands in its Florida theatres and willingly remitted sales tax to the Department of Revenue pursuant to the presumptive effective tax rate contained in Rule 12-1.11(37), Florida Administrative Code for the relevant periods. In April, 1985, Petitioner placed computerized cash registers in each of its Florida theatre concession stands. These cash registers provided tapes of each individual transaction each day, specifically recording each taxable and nontaxable sale and the amount of sales tax due on each taxable sale with a daily summation on each tape at each theatre. Rule 12A-1.11(37), Florida Administrative Code, requires concessionaires such as Petitioner to remit sales tax at a rate of 5.63 percent of taxable sales under the present 5 percent statutory sales tax schedule and at 4.5 percent of taxable sales under the previous statutory sales tax schedule unless a concessionaire, through its records, shows another effective rate by "proof to the contrary". Petitioner produced an effective tax rate of 5.13 percent for the month of April 1985, for all its Florida theatres by dividing the total sales tax collected during April, 1985 by the total taxable sales during April, 1985, as evidenced by the cash register tapes from all of Petitioner's concession stands in Florida. Petitioner then used that tax rate as a base to retroactively reconstruct an effective tax rate for the refund periods by assuming that the product sales mix (product mix of products sold) and the transactional sales mix (the number of items purchased together in a single transaction by a customer) experienced during the refund periods were the same as that experienced during the month of April, 1985. There was no competent evidence that the product sales mix or the transactional sales mix experienced during the refund periods were the same as that experienced during the nonth of April, 1985. There is insufficient evidence in the record to support Petitioner's reconstructed effective tax rates that were used to calculate the refunds. Therefore, Petitioner has failed to show "proof to the contrary" that its reconstructed effective tax rates are correct or that the presumptive effective tax rate contained in Rule 12A-1.11(37), Florida Administrative Code were incorrect for the refund periods at issue in this matter.
Recommendation Based on the findings of fact and conclusions of law recited herein, it is RECOMMENDED that the Comptroller enter his final order DENYING Petitioner's refund applications. Respectfully submitted and entered this 25th day of September, 1986, in Tallahassee, Leon County, Florida. WILLIAM R. CAVE 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 25th day of September, 1986.
The Issue Whether Petitioners are liable for sales and use tax, penalty, and interest as assessed by the Department of Revenue (the Department)?
Findings Of Fact Salma is a Florida corporation with its principal place of business at 2231 Del Prado Boulevard, Cape Coral, Florida, 33990. Gausia is a Florida corporation with its principal place of business at 11571 Gladiolus Drive, Fort Myers, Florida, 33908. Petitioners are in the business of operating gas stations with convenience stores. The Department is an agency of the State of Florida and is authorized to administer the tax laws of the State of Florida. Petitioners were selected for audit because their reported gross sales were less than the total cost of items purchased (inventory) for the audit period. The Department issued Salma and Gausia each a Notice of Intent to Conduct a Limited Scope Audit or Self-Audit, dated April 26, 2013, for sales and use tax, for the period February 1, 2010, through January 31, 2013 (collectively referred to as the Notices). The Notices requested that Petitioners provide the Department: (a) a list of all their vendors for alcohol, tobacco, soda, chips, candy, etc.; (b) their total purchases of alcohol and tobacco, by vendor, for the period July 2010 to June 2011; (c) copies of their federal tax returns for the examination period; (d) purchase receipts for all purchases for the last complete calendar month; and (e) daily register (Z tapes) for the last complete calendar month. The Notices gave Petitioners 60 days to gather the requested documents before the audit was to commence. The Notices also requested that Petitioners complete an attached Questionnaire and Self Analysis Worksheet. In response to the Notices, Petitioners requested a 30- day extension of time until July 18, 2013, to provide the requested documents and to designate a Power of Attorney. Petitioners did not provide the Department any books and records for inspection, nor did they complete and return the questionnaire and self analysis worksheets. As a result, the Department's auditor determined the sales tax due based upon the best information available. To calculate an estimated assessment of sales tax, the Department used the purchase data of Petitioners' wholesalers and distributors of alcoholic beverages and tobacco, for July 1, 2010, through June 30, 2011; the 2010 National Association of Convenience Stores average markups and in-store sales percentages of alcoholic beverage and tobacco products; and historical audit data. After reviewing the purchase data for July 1, 2010, through June 30, 2011, and for July 1, 2011, through June 30, 2012, the Department's auditor determined that the data was missing a few vendors. As a result, the Department's auditor estimated the amount of Petitioners' cigarette purchases, based on historical audit data that shows that cigarette sales are generally 4.31 times more than beer sales. The Department's auditor and audit supervisor testified that the estimated gross sales seemed reasonable and consistent with the national averages and the purchase data for July 1, 2011, through June 30, 2012. The Department estimated gross sales (i.e., the retail sale value of the goods sold) by marking up the taxable sales and exempt sales reported on the sales and use tax returns submitted to the Department by Petitioners. For example, for July 1, 2010, through June 30, 2011, Salma purchased beer from its wholesalers and distributors for $148,826.15, and the Department marked up the purchase price by 27 percent for a retail value of $189,009.21. For July 1, 2010, through June 30, 2011, Gausia purchased beer from its wholesalers and distributors for $132,138.65, and the Department marked up the purchase price by 27 percent for a retail value of $167,816.09. The Department's markup on the alcoholic beverage and tobacco products is reasonable because the Department's auditor testified that he used a combination of 2010 National Association of Convenience Stores average markups and the competitive pricing and information from audits of other convenience stores. The Department determined that the exemption ratio reported on the sales and use tax returns submitted to the Department by Petitioners was extremely high for their industry. The Department used an exemption ratio of 15 percent, based on historical audit data for the industry, to calculate Petitioners' estimated taxable sales. A review of Petitioners' sales and use tax returns revealed that they did not apply the tax bracket system to their taxable sales transactions, as required under sections 212.12(9) and (10), Florida Statutes. Instead, Petitioners remitted sales tax on their taxable sales based on their gross receipts at a flat tax rate. The Department's auditor testified that this method of reporting tax is inappropriate and does not accurately reflect the sales activity of the business. The Department calculated the average effective tax rate of 6.0856 percent, based on historical audit data for the industry. To calculate the estimated tax due, the Department multiplied the effective tax rate by the estimated taxable sales and gave Petitioners credit for any tax remitted with their tax returns. The Department issued Salma a Notice of Intent to Make Audit Changes, dated August 8, 2013, for audit number 200149872. The Department issued Gausia a Notice of Intent to Make Audit Changes, dated August 8, 2013, for audit number 200149749. The Department assessed Petitioners sales tax on their sales of alcoholic beverages and tobacco. The Notice of Intent to Make Audit Changes gave Petitioners 30 days to request a conference with the auditor or audit supervisor, to dispute the proposed changes. Petitioners did not make such a request. The Department issued a Notice of Proposed Assessment (NOPA) to Salma on March 6, 2014, for tax in the sum of $159,282.26; for penalty in the sum of $39,820.57; and interest as of March 6, 2013, in the sum of $27,772.36. The Department issued a NOPA to Gausia on March 6, 2014, for tax in the sum of $213,754.46; for penalty in the sum of $53,438.62; and interest as of March 6, 2013, in the sum of $36,921.79. Additional interest accrues at $30.55 per day until the tax is paid. The NOPAs became final assessments on May 5, 2014. After filing a request for an administrative hearing, Petitioners completed the Questionnaire and Self Analysis Worksheet and produced the following documents to the Department: (a) a list of all of their vendors for alcohol, tobacco, soda, chips, candy, etc.; (b) a list of vendors for alcohol and tobacco, for the examination period of July 2010 to June 2011; (c) a summary of their taxable sales, for the period February 2010 through December 2012; (d) copies of their federal tax returns, for the tax years 2010 through 2013; (e) copies of its purchase receipts for the months of July 2013; and (f) copies of their daily register (Z-tapes) for the month of July 2013. The Department's auditor testified that aside from being untimely, the records and information provided by Petitioners during these proceedings were not reliable because Petitioners did not provide any source documents that would allow the Department to reconcile the reported figures and confirm the supplied information. In addition, the purchase receipts and Z- tapes were not relevant because they were from outside of the audit period. The Z-tapes are also unreliable because the manager of the convenience store testified at the final hearing that employees purposely and routinely entered taxable sales into the cash registers as tax exempt sales. Petitioners argue that the Department did not use the best information available when estimating the taxes due. Petitioners claim that because their businesses are combination gas station/convenience stores, the national data for standalone convenience stores is inapplicable. However, notably absent from Petitioners' testimony or evidence was any alternative data upon which the Department could have relied for more accurate estimates.2/
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order denying Petitioners' requests for relief and assessing, in full, the Department's assessments of sales tax, penalty, and interest against both Salma and Gausia. DONE AND ENTERED this 9th day of January, 2015, in Tallahassee, Leon County, Florida. S MARY LI CREASY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 9th day of January, 2015.
The Issue Whether Petitioner ("DEPARTMENT") is entitled to assess sales or use taxes, penalties, and interest against Respondent ("VOLPE") pursuant to Chapter 212, Florida Statutes, as set out in its Notice of Proposed Assessment dated March 20, 1980.
Findings Of Fact During 1975-1977, VOLPE was a general contractor engaged in the construction of a United States Post Office and Vehicle Maintenance Facility at Miami, Florida. In connection with that construction project, VOLPE purchased materials from numerous subcontractors, including Hardware Lighting and Emporium, and Jemco, Inc. (Testimony of Alford, Danca; P.E. 2, 3) On March 8, 1979, after audit of VOLPE's records, the DEPARTMENT proposed to assess VOLPE for delinquent sales and use tax, together with interest and penalties thereon, which it claimed were due from VOLPE's purchase of materials from various subcontractors. The DEPARTMENT's proposed assessment was based on its inability to verify, to its satisfaction, that sales and use tax due from those sales transactions was paid by VOLPE to the vendors, and subsequently remitted to the DEPARTMENT. (Testimony of Alford, P.E. 3.) With the DEPARTMENT's encouragement, VOLPE then wrote its vendors in the various sales transactions requesting proof that the requisite Florida sales or use tax had been remitted to the DEPARTMENT. In response, two vendors, Ohio Medical Products and Power Wash, remitted tax vendors, (collected from VOLPE at time of sale) to the DEPARTMENT, in the amounts of $10,070 and $1,635.50, respectively. In addition, VOLPE discovered that it had not paid the requisite tax to a vendor in one transaction and remitted a payment to the DEPARTMENT in the amount of $1,442.53. (Testimony of Danca, Alford, P.E. 1.) These late tax payments made by Ohio Medical Products, Power Wash, and VOLPE in partial satisfaction of the DEPARTMENT's March 8, 1979, proposed assessment consisted only of the tax due on the individual sales, including interest thereon. No penalty payments were made because Salvatore Danca, VOLPE's comptroller involved in collecting the sales tax from the various vendors, reasonably and in good faith believed that the DEPARTMENT would waive penalties if late tax payments were promptly submitted. Although Louis A. Crocco, the DEPARTMENT's representative, by affidavit denies making such a representation, he admits that the possibility of adjusting the penalties, otherwise due, was discussed with Danca. In the absence of more explicit evidence from the DEPARTMENT concerning those discussions, or attacking the credibility of Danca's testimony, it is determined that, based on discussions with DEPARTMENT representatives, Danca reasonably and in good faith believed penalties would be waived. (Testimony of Danca; P.E. 1, 6, R.E. 2, 3, 4, 5, 6.) As a result of partial payments and adjustments made to the DEPARTMENT's proposed sales and use tax assessment, the DEPARTMENT issued a fourth revision of the proposed assessment on March 20, 1980. By that revision, the DEPARTMENT asserts VOLPE, as of March 20, 1980, is liable for payment of tax, interest, and penalties as follows: Sales Transaction Sales And Use Tax Due Interest Penalties (25 Percent) Jemco, Inc., sale of mechanization equipment to VOLPE, per agreement dated December 5, 1975. $16,229.53 $4,047.88 Hardware, Lighting and Emporium, sale of finished hardware and accessories to VOLPE per VOLPE Purchase Order dated October 2, 1975. 1,556.10 389.02 Ohio Medical Products' Power Wash's, and unidenti- fied vendor's sale to VOLPE for which late payments of tax due and interest have been made. -0- 2,737.43 TOTAL: $17,856.10 $5,779.42 $7,174.33 (Testimony of Alford, Danca, 3.) Stipulation of Counsel; P.E. 1, 2, [AS TO JEMCO, INC./VOLPE TRANSACTION] By its standard Agreement dated December 5, 1975, VOLPE agreed to purchase from Jemco, Inc., of Fort Worth, Texas, post office mechanization equipment for the contract price of $347,900. Subsequent change orders resulted in an adjustment to $405,689.70. In order to minimize on-site installation problems, Jemco, Inc., was required to maximize assembly of the mechanization equipment at its out-of-state plant prior to shipping to the Miami job site. (Testimony of Danca; P.E. 2, R.E. 1.) The written sales Agreement, including attachments, between Jemco, Inc., and VOLPE expressly states, in three separate places, that the total contract sales price includes Florida sales tax. The DEPARTMENT admits that VOLPE has paid all monies due Jemco, Inc., under the contract. By virtue of its full payment of the contract price which expressly included sales tax, it must be concluded that VOLPE paid the requisite sales or use tax to Jemco, Inc. (Stipulation of Counsel; P.E. 2.) VOLPE's standard form, entitled "Subcontractor's Application for Payment" was used as a basis to make incremental payments to Jemco, Inc., pursuant to the Agreement. That form required the subcontractor to certify that, among other things, it had complied with state tax laws applicable to performance of the Agreement. (Testimony of Danca; R.E. 11.) VOLPE's actions in connection with the Jemco, Inc., sales transaction were consistent with its standard practice when entering contracts with vendors or subcontractors. That practice is to require that the sales price include the payment of necessary sales tax, the vendor or subcontractor is required to remit the required tax to the appropriate government entity. After performance of the contract, the subcontractor is required to certify that these requirements have been satisfied. The certification is in the form of a General Release which discharges VOLPE from all claims, debts and liabilities which the subcontractor may have against VOLPE because of the contract. In this case, Jemco, Inc., executed such a General Release in favor of VOLPE. (Testimony of Danca; R.E. 1.) The DEPARTMENT has not audited Jemco, Inc.'s records, thus, it does not know whether the tax it seeks to assess against VOLPE has already been remitted by Jemco, Inc. (Testimony of Alford.) The DEPARTMENT offered no affirmative evidence to contravene VOLPE's assertion that it had paid the requisite sales or use tax to Jemco, Inc. Its claim rests solely on the fact that VOLPE's evidence of payment does not contain a sales invoice or other documentation which itemizes, or separately states the amount of sales tax due from VOLPE. [AS TO HARDWARE AND LIGHTING EMPORIUM TRANSACTION] By purchase agreement dated October 2, 1975, VOLPE agreed to purchase finished hardware from Hardware and Lighting Emporium of Miami, Florida, for the contract price of $23,877, which expressly included Florida state sales tax. Each billing invoice issued by Hardware and Lighting Emporium separately itemizes and states the Florida sales tax due. In applying for payment under the agreement, Hardware and Lighting Emporium completed the VOLPE "Subcontractor's Application for Payment" forms certifying compliance with state sales tax laws in performing the agreement. VOLPE has fully satisfied its payment obligations under the purchase agreement. (Testimony of Danca; P.E. 3, R.E. 9, 10.)
Conclusions Conclusions: VOLPE established by a preponderance of evidence that it previously paid to its several vendors the sales and use tax which the DEPARTMENT now seeks. Accordingly, the proposed tax assessment, with penalties and interest thereon, cannot be sustained. Recommendation: That the DEPARTMENT's Notice of Proposed Assessment of Tax, Penalties, and Interest, under Chapter 212, Florida Statutes, dated March 20, 1980, be DISMISSED. Background By written notice issued on March 20, 1980, Petitioner ("DEPARTMENT") proposed to assess Respondent ("VOLPE") taxes, penalties, and interest allegedly due pursuant to Chapter 212, Florida Statutes. In response, VOLPE claimed that it had previously paid the tax in question, and requested an opportunity to submit proof at a formal hearing. On April 17, 1980, the DEPARTMENT forwarded VOLPE's request to the Division of Administrative Hearings, and asked that the requested hearing be conducted by a hearing officer. On May 15, 1980, final hearing was set for July 18, 1980. On June 17, 1980, the DEPARTMENT filed a motion to realign the parties. As grounds, it stated that VOLPE had the burden of proof, and the duty to present a prima facie case at hearing since VOLPE requested the hearing and was the party seeking relief. At the DEPARTMENT's request, ruling on its motion was withheld until presentation of arguments at final hearing. At hearing, the DEPARTMENT's motion was denied for the reasons stated in the Conclusions of Law below. In support of its proposed assessment against VOLPE, the DEPARTMENT called Marvin P. Alford, a tax examiner, as its only witness, and offered Petitioner's Exhibits 1/ 1 through 6, inclusive, each of which was received into evidence. VOLPE called Salvatore Danca, its comptroller, and Harold G. Gregory, its branch manager, as its witnesses, and offered Respondent's Exhibits 1 through 11, inclusive, each of which was received. At the conclusion of hearing, the parties were granted the opportunity to submit proposed findings of fact, conclusions of law, and memoranda within ten (10) days after filing of the transcript of hearing. The post-hearing submittals were filed by August 21, 1980. Based on the evidence submitted at hearing, the following facts are determined:
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, RECOMMENDED: That the DEPARTMENT's Notice of Proposed Assessment of Tax, Penalties, and Interest, Under Chapter 212, Florida Statutes, dated March 20, 1980, be DISMISSED. RECOMMENDED this 25th day of September, 1980, in Tallahassee, Florida. R. L. CALEEN, JR. Hearing Officer Division of Administrative Hearings Room 101 Collins Building Tallahassee, Florida 32301 (904) 488-9675 Filed with Clerk of the Division of Administrative Hearings this 25th day of September, 1980.
The Issue Whether the Department of Revenue's ("Department") assessment for sales and use tax, penalty, and interest is valid, correct, and should be upheld.
Findings Of Fact The undersigned makes the following findings of relevant and material fact: The Department is the agency responsible for administering Florida's revenue laws, including the imposition and collection of state sales and use taxes. §§ 20.21 and 213.05, Fla. Stat. Cellular is a Florida S-corporation, having a principal address and mailing address of 11050 Pembroke Road, Miramar, Florida 33025. Resp. Ex. 4, Bates stamped p. 031. Cellular is a "dealer" as defined under section 212.06(2), Florida Statutes, and is required to collect and remit sales and use taxes to the State. § 212.06(2), (3)(a), Fla. Stat. The Department notified Cellular of its intent to conduct an audit by written notice and the request for specific records mailed on or about October 3, 2014. Resp. Ex. 2. The audit period is September 1, 2011, to August 31, 2014. Resp. Ex. 2, Bates stamped p. 279. Cellular has several locations in Florida where it sells cellular phones, accessories, phone repair services, and minutes for international calling cards to its customers. Cellular also provides services such as money transfers and accepts payments on behalf of Metro PCS. Store locations are in neighborhood business centers and in malls. During the audit period, Cellular had 11 store locations operating in Florida. Resp. Ex. 4, Bates stamped p. 031. Julia Morales is a tax auditor for the Department. She has been employed with the Department for 11 years. Initially, Morales worked as a tax collector. She has held the position of tax auditor since 2011. Morales has a bachelor's degree in finance and also engages in ongoing training with the Department in order to stay current with Florida Statutes and Department rules. Morales performed the audit and prepared the assessment in this case. Early in the audit, Cellular informed the Department that most of its sales were exempt from Florida's sales tax. Morales explained that insufficient sales records were supplied by Cellular to enable the Department to establish the exempt nature of sales transactions, and, therefore, exempt sales were disallowed by the Department. Resp. Ex. 4, Bates stamped p. 033. On September 3, 2015, the Department issued an initial Notice of Intent to Make Audit Changes ("DR-1215") in the total sum due, as of that date, of $463,677.61 (i.e., $327,257.39 tax, $81,814.34 penalty, and $54,605.88 interest). After receiving the DR-1215, Cellular requested a conference with Morales to review the assessment. The conference was held on November 9, 2015. Resp. Ex. 1, Bates stamped pp. 007-008; Resp. Ex. 4, p. 030; Resp. Ex. 15, Bates stamped p. 131; Resp. Ex. 16, Bates stamped pp. 130-189. After the November 9, 2015, conference, Cellular provided Morales with sales invoices and detailed sales reports for the audit period. Morales explained that the supplemental records established that Cellular's reported tax exempt sales were properly exempt from sales tax, and, therefore, audit assessment Exhibits A01 to A11 were deactivated. Resp. Ex. 4, Bates stamped pp. 029-031; Resp. Ex. 18, Bates stamped pp. 058- 068. Audit assessment Exhibit A12 was also deactivated because Cellular provided records needed to reconcile the difference between gross sales reported on its 2012 federal tax return and gross sales reported on the sales and use tax returns for the same period. Resp. Ex. 18, Bates stamped p. 069. Among the supplemental records supplied by Cellular to establish the tax-exempt basis for some of its sales, its monthly Sales Transaction Detail reports showed that six of Cellular's 11 stores did not remit to the Department all the sales tax they collected during the audit period. Consequently, Morales added audit assessment Exhibits A13 through A18 to document the sales tax collected but not remitted, detailed by store. Resp. Ex. 4, Bates stamped pp. 029-030; Resp. Ex. 18, Bates stamped pp. 070- 110. Morales testified that one of Cellular's stores that under-remitted sales tax, namely the Northwest Store, was operating but not registered with the Department for the entire audit period. Morales discovered that the Northwest Store collected sales tax on its sales and did not start to remit collected tax to the Department until September 2014, which was after the audit period. Of the remaining five stores, Cellular remitted to the Department approximately 50 percent of the sales tax it collected from July 2012 to August 2014. Resp. Ex. 18, Bates stamped pp. 075, 082, 088, 095, 102, and 109. As to consumable purchases (audit assessment Exhibit B01) during the audit, Cellular failed to provide records to establish that it paid use tax on consumable purchases. The sums expensed in Cellular's federal tax returns, which could have a sales tax implication, were relied upon by the auditor to create Exhibit B01. Resp. Ex. 4, Bates stamped p. 034; Resp. Ex. 18, Bates stamped pp. 111-125. Based upon the supplemental records supplied after the November 2015 conference, on February 4, 2016, the Department issued a revised Notice of Intent to Make Audit Changes ("DR-1215"), reducing the total sum due, as of that date, to $277,211.42 (i.e., $194,346.98 tax, $48,586.76 penalty, and $34,277.68 interest). Resp. Ex. 18, Bates stamped p. 053. Penalty considerations were reviewed by the Department. Resp. Ex. 19. Due to Cellular's failure to remit to the State collected sales tax, penalty was not waived by the Department. In addition, accrued statutory interest was also imposed as required by section 213.235, Florida Statutes. Resp. Ex. 18, Bates stamped pp. 054-056; Resp. Ex. 29, Bates stamped p. 2. On February 15, 2016, the Department issued a Notice of Proposed Assessment ("NOPA") in the total sum due, as of that date, of $277,620.29 (i.e., $194,346.98 tax, $48,586.76 penalty, and $34,686.55 interest). Resp. Ex. 23. On March 18, 2016, Cellular submitted a timely protest letter to the Department's Technical Assistance and Dispute Resolution ("TADR"). Resp. Ex. 25. Martha Gregory also testified for the Department. She has been employed with the Department for 20 years. Gregory currently holds the position of taxpayer services process manager in TADR. Gregory holds a bachelor's degree in accounting and has also taken master's level courses. TADR manages an assessment after a taxpayer submits a protest of a NOPA with the Department. Gregory is familiar with TADR's involvement in Cellular's case. Gregory testified that despite repeated efforts by TADR during the protest period, Cellular submitted no new information to the Department for review. Consequently, on April 17, 2017, TADR issued a Notice of Decision ("NOD"), sustaining the assessment in its totality. Because of accruing interest, the total sum due, as of that date, increased to $293,353.77. Resp. Ex. 24. On June 16, 2017, Cellular timely filed its petition for a chapter 120, Florida Statutes, hearing. In its petition, Cellular contests all taxes, penalty, and interest that have been assessed. (See petition filed with the Division on December 5, 2017.) After receiving the petition, the Department made repeated attempts to obtain information from Cellular to support the claims raised in their petition. Resp. Ex. 28. Because no additional information was submitted by Cellular, the petition was referred to the Division on December 5, 2017. Prior to this final hearing of June 28, 2018, Cellular provided additional records relevant to the sales tax assessed on consumable purchases (audit assessment Exhibit B01). Based upon the newly supplied supplemental records, the Department also deactivated Exhibit B01 from the assessment and issued a revised reduced assessment. As a result, on June 12, 2018, the Department issued a revised assessment, which reduced the additional sales and use tax owed to $158,290.02, plus $39,572.50 for a penalty and $55,040.52 in interest, for a total sum owed, as of that date, of $252,903.04. Resp. Ex. 29, Bates stamped p. 2. Erica Torres appeared at the hearing as Cellular's corporate representative and testified on Cellular's behalf. Torres is employed by Cellular as a manager in charge of sales personnel, commissions, schedules, and bookkeeping. She has been employed by Cellular since 2001. Torres admitted that the reports relied upon by the Department in determining that Cellular collected and failed to remit sales tax were correct. Cellular introduced no credible or persuasive evidence to support that the assessment was incorrect. The undersigned finds that more credible and reliable evidence is in favor of the Department. Cellular failed to demonstrate by a preponderance of the evidence that the assessment or proposed penalty and interest proven by the Department are incorrect.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order denying Cellular's requests for relief and sustaining the assessment in its entirety. DONE AND ENTERED this 22nd day of August, 2018, in Tallahassee, Leon County, Florida. S ROBERT L. KILBRIDE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 22nd day of August, 2018. COPIES FURNISHED: Mark S. Hamilton, General Counsel Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668 (eServed) Randi Ellen Dincher, Esquire Office of the Attorney General Revenue Litigation Bureau The Capitol, Plaza Level 01 Tallahassee, Florida 32399 (eServed) Carlos M. Samlut, CPA Samlut and Company 550 Biltmore Way, Suite 200 Coral Gables, Florida 33134 (eServed) Leon M. Biegalski, Executive Director Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668 (eServed)
Findings Of Fact Petitioner is a corporation organized and existing under the laws of Florida with its sole place of business located at 6186 Southwest 8th Street, Miami, Florida. Petitioner operates a delicatessen and restaurant in the same building at the above location. Petitioner's restaurant prepares food to be served to paying customers who consume that food at tables provided in the restaurant for that purpose. This food is served by waiters and waitresses who prepare guest checks which separately indicate the amount of sales tax charged thereon. Petitioner's delicatessen sells unprepared food to customers who do not consume that food on the premises and for whom no eating facilities are provided. The items sold by Petitioner's delicatessen are grocery-type items. A common cash register serves the two facilities, which cash register has a separate key for the sale of delicatessen items and a separate key for the sale of restaurant items. The restaurant and delicatessen occupy the same general space and are not separated by a wall or other physical barrier. Petitioner's Exhibit 4 contains a list of those items sold on the delicatessen or grocery side of Petitioner's business. The accuracy of that list was not challenged in this proceeding and it is found as a matter of fact that those items on Petitioner's Exhibit 4 accurately reflect the items sold by Petitioner across his delicatessen counter. That list includes items such as bread, rolls, bagels, milk, beer, soda, catsup, canned goods and various meats such as salami, bologna, franks, fish and ham. Petitioner collects sales tax for those items sold in the restaurant portion of the business and does not collect sales tax on those items sold in the delicatessen portion of the business. The taxable and nontaxable items are segregated and distinguished on the cash register tapes. Petitioner has so conducted his business from its inception in 1959 through the audit period in question. Throughout that period of time Petitioner regularly maintained separate and distinct records sufficient to allocate sales between taxable restaurant sales and nontaxable delicatessen or grocery sales. Petitioner's tax returns have reflected this behavior for the above period of time. When the business first opened Mr. Leo Hoffman, the owner of Petitioner corporation, contacted the Department of Revenue by telephone and was told that the foregoing method of operation was proper. Petitioner has always filed tax returns reflecting this activity and such returns were apparently not questioned until the audit at issue here. The period of time for which Petitioner was audited in this cause was January 1, 1976, to December 31, 1978. On March 12, 1979, Respondent issued a proposed sales and use tax delinquency assessment against Petitioner in the amount of $40,018.14. This assessment was based on the total sales revenue generated by both of Petitioner's enterprises and did not allocate sales revenue between the delicatessen portion of the business and the restaurant portion of the business. On May 10, 1979, the Respondent issued a revised proposed sales tax delinquency assessment against Petitioner in the amount of $33,259.20. This revised assessment was based on the total sales revenue generated by both of Petitioner's separate enterprises and did not allocate sales revenue between the delicatessen portion of the business and the restaurant portion of the business. Petitioner did pay approximately $12,000 in sales tax for the subject audit period. That was the sales tax Petitioner believed he owed for the restaurant portion of his business. The additional assessment is apparently the sales tax (with penalty and interest) Respondent believes is owed for the delicatessen portion of Petitioner's business. The items sold on the delicatessen side of Petitioner's business represent approximately 75 percent of his gross revenue. The items sold on the restaurant, or taxable side of Petitioner's business, represents approximately 25 percent of his gross revenue. The assessment by Respondent against Petitioner was based, at least in part, upon Rule 12A-1.11(1), Florida Administrative Code. Petitioner holds a restaurant license from the State of Florida, Division of Hotels and Restaurants. Petitioner also holds a retail sales license from Dade County for its delicatessen operation.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is, therefore, RECOMMENDED: To the extent that the assessment for unpaid sales tax is based upon sales made by the delicatessen or grocery side of Petitioner's business, such assessment is invalid and should be withdrawn. DONE AND ENTERED this 4th day of June 1980 in Tallahassee, Florida. CHRIS H. BENTLEY Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 4th day of June 1980. COPIES FURNISHED: Mark J. Wolff, Esquire Sparber, Shevin, Rosen, Shapo & Heilbronner, P.A. First Federal Building, 30th Floor One Southeast Third Avenue Miami, Florida 33131 Linda C. Procta, Esquire Department of Legal Affairs Office of the Attorney General The Capitol, LL04 Tallahassee, Florida 32304
The Issue The issue is whether Petitioner owes the taxes, interest, and penalties assessed by the Department of Revenue based upon its audit of Petitioner for the period of August 1, 1996, through July 31, 2001.
Findings Of Fact Based upon the testimony and evidence received at the hearing, the following findings are made: Petitioner is a Florida corporation engaged in the business of selling and installing floor covering materials, such as carpet and tile. Petitioner's business is located in Hillsborough County, Tampa, Florida. Petitioner sales fall into two basic categories: "cash and carry sales" and "installation sales." The "cash and carry sales" are retail sales of floor covering materials to customers that come into Petitioner's store. These sales do not involve any installation work by Petitioner. The "installation sales" are sales in which Petitioner installs the floor covering material in the customer's home or business. These sales are performed pursuant to a lump-sum contract which incorporates the price of the installation and the price of the floor covering materials being installed. Petitioner purchases the floor covering materials from suppliers and distributors. Those purchases become part of the inventory from which Petitioner makes its "installation sales." Petitioner also makes general purchases of goods and services necessary for the day-to-day operation of its business. These purchases include items such as cleaning supplies and vehicle repairs. Petitioner made several fixed-assets purchases during the audit period for use in its business. It purchased a word processor in August 1996, and it purchased equipment and fixtures in December 1996. On those occasions that Petitioner collected sales tax from its customers on the "cash and carry sales" or paid sales tax on its inventory purchases and general purchases, it remitted or reported those amounts to the Department. However, as discussed below, Petitioner did not collect the full amount of sales tax due on each sale, nor did it pay the full amount of sales tax due on each purchase. The Department is the state agency responsible for administering Florida's sales tax laws. The Department is authorized to conduct audits of taxpayers to determine their compliance with the sales tax laws. By letter dated September 10, 2001, the Department notified Petitioner of its intent to conduct a sales tax audit of Petitioner's records for the period of August 1, 1996, through July 31, 2001. The audit was conducted by David Coleman, a tax auditor with seven years of experience with the Department. Petitioner designated its certified public accountant, P.J. Testa, as its representative for purposes of the Department's audit. That designation was memorialized through a power of attorney form executed by Petitioner on March 5, 2002. Mr. Coleman communicated with Mr. Testa throughout the course of the audit. Mr. Coleman conducted the audit using a sampling methodology agreed to by Mr. Testa on behalf of Petitioner. Pursuant to that methodology, Mr. Coleman conducted a comprehensive review of Petitioner's year-2000 purchase and sales invoices and extrapolated the results of that review to the other years in the audit period. The sampling methodology was used because of the volume of records and transactions during the audit period and because of the unavailability of all of the records for the audit period. The year 2000 was chosen as the sample period because Petitioner's records for the other years in the audit period were incomplete or unavailable. Mr. Coleman's audit of the year-2000 invoices focused on three broad types of transactions. First, he reviewed invoices of Petitioner's retail "cash and carry sales." Second, he reviewed the invoices through which Petitioner purchased the floor covering materials that it later sold as part of its "installation sales." Third, he reviewed the invoices through which Petitioner made general purchases of tangible personal property used in the day-to-day operation of its business. The sampling methodology was used for the audit of Petitioner's "cash and carry sales," the inventory purchases related to the "installation sales," and the general purchases. The methodology was not used for the audit of Petitioner's fixed-asset purchases; Mr. Coleman reviewed all of the available records for the fixed-asset purchases during each year of the audit period. Mr. Coleman's audit of Petitioner's retail "cash and carry sales" identified 29 invoices during year-2000 on which no sales tax or less than the full sales tax was paid by the customer. Those invoices amounted to $17,451.30, on which $1,178.11 in total sales tax was due, but only $552.97 was paid. As a result, Mr. Coleman's audit identified a sales tax deficiency of $625.14 for the retail sales during the sample period. Mr. Coleman's audit of Petitioner's purchases of floor covering that was later sold in the "installation sales" identified a considerable number of purchases during year-2000 on which no sales tax or less than the full sales tax was paid by Petitioner to the supplier or distributor of the materials. Those purchases amounted to $123,398.52, but only $123,397.80 of that amount was taxable. On the taxable amount, $8,330.07 in total sales tax was due, but only $6,810.68 was paid. As a result, Mr. Coleman's audit identified a sales tax deficiency of $1,519.41 for Petitioner's inventory purchases during the sample period. Mr. Coleman's audit of Petitioner's "general purchases" identified 10 sales during year-2000 on which sales tax was not paid. Those invoices amounted to $2,914.76, on which $196.77 in sales tax was due, but none of which was paid. As a result, Mr. Coleman's audit identified a sales tax deficiency of $196.77 for the general purchases during the sample period. Mr. Coleman's audit of Petitioner's fixed-asset purchases identified only two transactions during the entire audit period on which Petitioner did not pay the full sales tax. Those transactions amounted to $5,078.92, on which $330.14 in total sales tax was due, but none of which was paid. As a result, Mr. Coleman's audit identified a sales tax deficiency of $330.14 for the fixed-asset purchases during the audit period. The tax deficiencies calculated by Mr. Coleman for year-2000 for each category described above take into account any sales tax collected by Petitioner from its customers or paid by Petitioner to its vendors. After Mr. Coleman computed the tax deficiencies based upon his audit of the year-2000 records, he calculated a "percentage of error" for each category of sales/purchases. The percentage of error is the ratio used to extrapolate the results of the audit of the year-2000 records over the remainder of the audit period. No percentage of error was calculated for the fixed-asset purchases because Mr. Coleman reviewed the available records for those purchases over the entire audit period, not just year-2000. The percentage of error was calculated by dividing the sales tax deficiency identified in a particular category for the year-2000 by the total sales/purchases in that category for the year-2000. For the year-2000, Petitioner had retail sales of $1,143,182.45; general purchases of $21,254.88; and inventory purchases of $1,214,016.24. As a result, the applicable percentages of error were 0.000547 ($625.14 divided by $1,143,182.45) for the retail sales; 0.009258 ($196.77 divided by $21,254.88) for the general purchases; and 0.001252 ($1,519.41 divided by $1,214,016.24) for the inventory purchases. The percentages of error were then multiplied by the total sales in the applicable category for the entire audit period to calculate a total tax deficiency in each category. Petitioner's total retail sales over the audit period were $4,455,373.40. Therefore, the total tax deficiency calculated for that category was $2,437.12 (i.e., $4,455,373.40 multiplied by 0.000547). Petitioner's total general purchases over the audit period were $110,741.49. Therefore, the total tax deficiency calculated for that category was $1,025.25 (i.e., $110,741.49 multiplied by 0.009258). Petitioner's total inventory sales over the audit period were $3,130,882.10. Therefore, the total tax deficiency calculated for that category was $3,919.86 (i.e., $3,130,882.10 multiplied by 0.001252). Petitioner's total tax deficiency was computed by adding the deficiencies in each category, as follows: Retail Sales $2,437.12 General Purchases 1,025.25 Inventory Purchases 3,919.86 Fixed-asset purchases 330.14 TOTAL $7,712.37 Of that total, $6,863.02 reflects the state sales tax deficiency; $313.77 reflects the indigent care surtax deficiency; and $535.58 reflects the local government infrastructure surtax deficiency. The sales tax rate in effect in Hillsborough County during the audit period was 6.75 percent. The state sales tax was six percent; the remaining 0.75 percent was for county surtaxes, namely the local government infrastructure surtax and the indigent care surtax. That rate was used by Mr. Coleman in calculating the tax deficiencies described above. On October 4, 2002, Mr. Coleman hand-delivered the Notice of Intent to Make Audit Change (NOI) to Petitioner. The NOI is the end-product of Mr. Coleman's audit. The NOI identified the total tax deficiency set forth above, as well as a penalty of $3,856.26, which is the standard 50 percent of the tax deficiency amount, and interest of $2,561.63, which is calculated at a statutory rate. The NOI included copies of Mr. Coleman's audit work- papers which showed how the taxes, penalties, and interest were calculated. The NOI also included a copy of the "Taxpayers' Bill of Rights" which informed Petitioner of the procedure by which it could protest the audit results reflected on the NOI. On October 29, 2002, the Department issued three NOPAs to Petitioner. A separate NOPA was issued for each type of tax -- i.e., sales tax, indigent care surtax, and local government infrastructure surtax. The cumulative amounts reflected on the NOPAs were the same as that reflected on the NOI, except that the interest due had been updated through the date of the NOPAs. Interest continues to accrue on assessed deficiencies at a cumulative statutory rate of $1.81 per day. The NOPAs were sent to Petitioner by certified mail, and were received by Petitioner on November 1, 2002. By letter dated November 5, 2002, Petitioner protested the full amount of the taxes assessed on the NOPAs and requested a formal administrative hearing. The letter was signed by Mr. Testa on Petitioner's behalf. The protest letter does not allege that the methodology used by Mr. Coleman was improper or that the results of the audit were factually or legally erroneous. Instead, the protest letter states that Petitioner was disputing the results of the audit because it was "following procedures set forth by an agent from a previous audit who established the manner in which [Petitioner was] to compute sales tax on the items being questioned by the current auditor." Mr. Testa made similar comments to Mr. Coleman during the audit. When Mr. Coleman requested documentation from Mr. Testa to corroborate those comments about the procedures allegedly established by the prior auditor, Mr. Testa was unable to provide any such documentation. The record of this proceeding is similarly devoid of evidence to support Petitioner's allegation on this point. The record does not contain any evidence to suggest that Petitioner ever modified or revoked Mr. Testa's authority to represent it in connection with the audit or this protest, which Mr. Testa initiated on Petitioner's behalf. Petitioner, through Mr. Testa, had due notice of the date, time, and location of the final hearing in these cases. Neither Mr. Testa, nor anyone else on Petitioner's behalf, appeared at the final hearing.
Recommendation Based upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department of Revenue issue a final order imposing the taxes, interest, and penalties against Petitioner in the full amounts set forth in the three Notices of Proposed Assessment dated October 28, 2002. DONE AND ENTERED this 30th day of December, 2003, in Tallahassee, Leon County, Florida. S T. KENT WETHERELL, II 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 30th day of December, 2003.
