The Issue The issues are whether Respondent properly conducted a sales and use tax audit of Petitioner's books and records; and, if so, whether Petitioner is liable for tax and interest on its purchases of materials used for improvements to real property.
Findings Of Fact During the audit period, Petitioner was a Florida corporation with its principal place of business located at 7820 Professional Place, Suite 2, Tampa, Florida. Petitioner's Florida sales tax number was 39-00-154675-58, and Petitioner's federal employer identification number was 59-3089046. After the audit period, the Florida Department of State administratively dissolved Petitioner for failure to file statutorily required annual reports and filing fees. Petitioner engaged in the business of providing engineering services and fabricating control panels. Petitioner fabricated control panels in a shop Petitioner maintained on its business premises. Petitioner sold some of the control panels in over-the- counter sales. Petitioner properly collected and remitted sales tax on the control panels that Petitioner sold over-the-counter. Petitioner used other control panels in the performance of real property contracts by installing the panels as improvements to real property (contested panels). Petitioner was the ultimate consumer of the materials that Petitioner purchased and used to fabricate the contested panels. At the time that Petitioner installed the contested panels into real property, the contested panels became improvements to the real property. Petitioner failed to pay sales tax at the time Petitioner purchased materials used to fabricate the contested panels. Petitioner provided vendors with Petitioner's resale certificate, in lieu of paying sales tax, when Petitioner purchased the materials used to fabricate the contested panels. None of the purchase transactions for materials used to fabricate the contested panels were tax exempt. The audit is procedurally correct. The amount of the assessment is accurate. On October 23, 2000, Respondent issued a Notification of Intent to Audit Books and Records (form DR-840), for audit number A0027213470, for the period of October 1, 1995, through September 30, 2000. During an opening interview, the parties discussed the audit procedures and sampling method to be employed and the records to be examined. Based upon the opening interview, Respondent prepared an Audit Agreement and presented it to an officer and owner of the taxpayer. Respondent began the audit of Petitioner's books and records on January 22, 2001. On March 9, 2001, Respondent issued a Notice of Intent to Make Audit Changes (original Notice of Intent). At Petitioner's request, Respondent conducted an audit conference with Petitioner. At the audit conference, Petitioner provided documentation that the assessed transactions involved improvements to real property. At Petitioner's request, Respondent conducted a second audit conference with Petitioner's former legal counsel. Petitioner authorized its former legal counsel to act on its behalf during the audit. At the second audit conference, the parties discussed audit procedures and sampling methods, Florida use tax, fabricated items, and fabrication costs. Respondent revised the audit findings based upon additional information from Petitioner that the assessed transactions involved fabricated items of tangible personal property that became improvements to real property. Respondent assessed use tax on the materials used to fabricate control panels in those instances where Petitioner failed to document that Petitioner paid sales tax at the time of the purchase. Respondent also assessed use tax on fabrication costs including the direct labor and the overhead costs associated with the fabrication process, for the period of October 1, 1995, through June 30, 1999. Respondent eliminated use tax assessed on cleaning services in the original Notice of Intent because the amount of tax was de minimis. On August 29, 2001, Respondent issued a Revised Notice of Intent to Make Audit Changes (Revised Notice of Intent). On September 18, 2001, Petitioner executed a Consent to Extend the Time to Issue an Assessment to File a Claim for Refund until January 25, 2002. On October 18, 2001, Petitioner executed a second Consent to Extend the Time to Issue an Assessment to File a Claim for Refund until April 25, 2002. On February 6, 2002, Respondent issued a Notice of Proposed Assessment for additional sales and use tax, in the amount of $21,822.27; interest through February 6, 2002, in the amount of $10,774.64; penalty in the amount of $10,831.12; and additional interest that accrues at $6.97 per diem. Petitioner exhausted the informal remedies available from Respondent. On April 29, 2002, Petitioner filed a formal written protest that, in substantial part, objected to the audit procedures and sampling method employed in the audit. Respondent issued a Notice of Decision sustaining the assessment of tax, penalty, and interest. Respondent correctly determined that the audit procedures and sampling method employed in the audit were appropriate and consistent with Respondent's statutes and regulations. Respondent concluded that the assessment was correct based upon the best available information and that Petitioner failed to provide any documentation to refute the audit findings. Petitioner filed a Petition for Reconsideration that did not provide any additional facts, arguments, or records to support its position. On May 16, 2003, Respondent issued a Notice of Reconsideration sustaining the assessment of tax and interest in full, but compromising all penalties based upon reasonable cause.
Recommendation Based upon the findings of fact and the conclusions of law, it is RECOMMENDED that Respondent enter a Final Order denying Petitioner's request for relief and sustaining Respondent's assessment of taxes and interest in full. DONE AND ENTERED this 10th day of December, 2003, in Tallahassee, Leon County, Florida. S DANIEL MANRY 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 10th day of December, 2003. COPIES FURNISHED: Carrol Y. Cherry, Esquire Office of the Attorney General Revenue Litigation Section The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050 Michael E. Ferguson Control Design Engineering, Inc. 809 East Bloomingdale Avenue, PMB 433 Brandon, Florida 33511 Bruce Hoffmann, General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 James Zingale, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100
The Issue Whether the agency has an unpromulgated statement of general applicability that imposed a requirement not specifically required by statute or by an existing rule, and which has been utilized against Petitioners to their detriment.
Findings Of Fact On March 24, 1994, the Department of Revenue (Department) issued a Notice of Reconsideration (NOR) that claimed the Petitioners, Terry and Donna Ernst, had willfully failed to collect sales tax. Petitioners' assertion of an exemption in connection with the sales tax assessment was denied. The NOR provided that the Petitioners are the president and vice- president of Hussh, Inc., a retail apparel store in Palm Beach, Florida and that such company made sales to customers for delivery in the store and for shipment outside of the State of Florida. At issue were the alleged shipments to out of state destinations. Pertinent to this case is the language in the NOR found at page two which provided: Due to the inadequacy and volume of Hussh's records, the auditor sampled the available records, and assessed Hussh for asserted out of state sales that were improperly documented. According to the auditor, many of the sales receipts or invoices of asserted out of state shipments were missing the top portion of the invoice. Significantly, this portion of the invoice would contain the names, addresses, and asserted export destination information on each sale. Other invoices were stamped, "out of state shipped," but no destination information was present on the invoice. [Emphasis added.] The Petitioners maintain that the portions of the NOR emphasized in the foregoing paragraph constitute an agency statement of general applicability and is, therefore, an unpromulgated rule. The Department does not have a rule which lists all documentation which might establish an exemption for sales tax assessment. Similarly, the Department does not have a rule that lists the type of documentation which would be inadequate to establish an exemption for sales taxes. The Department's existing rule, Rule 12A-1.064, Florida Administrative Code, provides, in part: (1)(a) Sales tax is imposed on the sales price of each item or article of tangible personal property, unless otherwise exempt, when the property is delivered to the purchaser or his representative in this state. However, the tax does not apply to tangible personal property irrevocably committed to the exportation process at the time of sale, when such process has been continuous or unbroken. (b) Intent of the seller and the purchaser that the property will be exported is not sufficient to establish the exemption; nor does delivery of the property to a point in Florida for subsequent transportation outside Florida necessarily constitute placing the property irrevocably in the exportation process. Tangible personal property shall be deemed committed to the exportation process if: The dealer is required by the terms of the sale contract to deliver the goods outside this state using his own mode of transportation. The dealer must retain in his records trip tickets, truck log records, or other documentation reflecting the specific items and export destination; The dealer is required by the terms of the sale contract to deliver the goods to a common carrier for final and certain movement of such property to its out of state destination. Sales by a Florida dealer are exempt when the dealer delivers the merchandise to the transportation terminal for shipment outside this state and secures a dock or warehouse receipt and a copy of the bill of lading. On shipments to points outside the United States, a shipper's export declaration shall also be obtained; [Emphasis added.] Rule 12A-1.093, Florida Administrative Code, requires taxpayers to maintain and preserve records. This rule provides, in part: (2) Each dealer defined in Chapter 212, F.S., each licensed wholesaler, and any other person subject to the tax imposed by Chapter 212, F.S., shall keep and preserve a complete record of all transactions, together with invoices, bills of lading, gross receipts from sales, RESALE CERTIFICATES, CONSUMER EXEMPTION CERTIFICATES and other pertinent records and papers as may be required by the Department of Revenue for the reasonable administration of Chapter 212, F.S., and such books of account as may be necessary to determine the amount of tax due thereunder. The terms "bill of lading," "dock or warehouse receipt," and "invoice" are common terms used in the business community. Each connotes that, at the minimum, certain information will be retained on the face of the document. For example, according to Petitioners' witness, the minimum information expected on a bill of lading would be: the name of the person that the item is being shipped to, the item being shipped, the cost of the shipment, and the terms of the shipment with the value of the item being shipped. Similarly, the minimum information which is expected on an "invoice" would be: a description of the item sold, the amount of the sale, and the name of the person to whom the item was sold. The terms "bill of lading," "dock or warehouse receipt," and "invoice" are not defined by rule. The Department determined whether an exemption was documented based upon the results of this audit.
The Issue Whether Petitioner is required to pay sales tax on the commission its pays to property owners for the right to place and operate air and vacuum machines at various locations in central Florida.
Findings Of Fact Petitioner owns coin-operated air and vacuum machines, which it places at numerous convenience store and gas station locations throughout central Florida. The State of Florida, Department of Revenue, is an executive agency of the State of Florida, which is statutorily charged with the administration and enforcement of Florida's sales tax laws. The Department conducted an audit of Petitioner following the discovery of information developed during an audit of another company. It was determined that Petitioner had never registered with the Department of Revenue for sales tax collection or payment. During the audit, the Department determined that Petitioner had not paid sales tax on its out-of- state purchases of air and vacuum machines and equipment valued at approximately $303,429.00. These machines were purchased for use in Florida. The Department assessed sales tax on these purchases. The Petitioner conceded that it owed sales tax on these purchases and did not contest that portion of the assessment. It has paid said taxes. The Department assessed sales tax on payments made by the Petitioner to other companies for the right to place its machines at their business. Petitioner places coin-operated air and vacuum machines on premises of the convenience stores and gas stations under a verbal contract at will in which the land owner receives a portion of the gross receipts from the operation of the machines. Petitioner is solely responsible for the installation of the air and vacuum machines, including providing the electrical tie-in at the site of the machine. The air and vacuum machines are mounted on a six hundred pound concrete pad and transported and placed on the convenience store property. The air and vacuum machines are portable, even after placement at a convenience store, and are removed if Petitioner determines that the location is not sufficiently profitable. The air and vacuum machines are purchased by Petitioner and the air and vacuum machines are owned solely by Petitioner during the period that they are located on a convenience store's premises. Petitioner is solely responsible for regular inspection of the air and vacuum machine and is solely responsible for maintenance of the machines. Petitioner is solely responsible for cleaning the air and vacuum machines at all locations. Also, Petitioner is responsible for all repair work to the machines which are provided at no cost to the owner of the convenience store. Petitioner is entitled to ingress and egress from the property at any time to accomplish these repairs. Petitioner is ultimately responsible for refunding any money to the store operator when an air and vacuum machine fails to work properly. Petitioner is solely responsible for all licensing fees and taxes on the air and vacuum machines. Petitioner carries liability insurance coverage on the air and vacuum machines. On or about June 10, 1988, Petitioner entered into a written contact with Carse Oil Company, Inc., which owned convenience stores in the central Florida area, doing business as Ideal Food Stores. This agreement was in effect for a period of three or four years, including some years during the audit period, beginning September 1, 1988. The agreement, entitled "Air/Water Vacuum Commission Agreement" (hereinafter Agreement) is a contract between Petitioner and Carse Oil Company, Inc., by which Petitioner agreed to place an air and vacuum machine on Carse Oil's property. The written Agreement with Carse Oil Company, Inc. provides for the monthly payment to be made on a date certain each month. The Carse Oil Agreement is complete and contains all of the terms of the contract between the parties as to the duties and obligations of each party under the contract. This written Agreement is representative of the course of dealing with other businesses with which Petitioner entered oral agreements during the period of the audit. Like the Agreement, the oral agreements allowed Petitioner to place its machines at its own cost on the property of a convenience store. The Petitioner does not currently have, and has not ever had any agreements in writing with its customers other than the written Agreement with Carse Oil. Under the written and oral agreements, Petitioner was responsible for coming onto the property to repair its machines. Petitioner is also entitled to come onto the property to remove monies from the cash box located in the machine. Only Petitioner's employees held the key to the money box and were entitled to come onto the property any time to access the money box in the machine. None of Petitioner's customers has a key or other access to the money box located in each air and vacuum machine. Petitioner is solely responsible for calculating the commission payment to a convenience store after collecting the money in the machine. Petitioner is solely responsible for deciding whether to remove an air and vacuum machine from a convenience store's premises if it is unprofitable. With the exception of one customer, Petitioner does not pay a separate amount to the convenience store for the electricity that is used in the operation of the air and vacuum machine. Petitioner's agreements with its customers, including the Agreement with Carse Oil Company, provide for the convenience store to receive each month a percentage of the money collected in the previous month for the operation of the air and vacuum machine(s) located on the store's premises. The air and vacuum machines are equipped with a coin counter. Petitioner is solely responsible for periodically collecting the coins that have accumulated in each air and vacuum machine. The percentage that Petitioner pays to the convenience stores under its agreements with them ranges from 25 percent to 50 percent and are negotiated on an individual basis. Petitioner pays a higher percentage to a convenience store where the revenues generated are relatively higher than the revenues generated by machines at other locations. The payment to the location owner is thus based upon the business derived at a particular location. Thus, as part of the business decision of payment for allowing placement of the machine, Petitioner evaluates the value of the location of the machine and payment is guided by the performance at the location. Payment made by Petitioner is directly connected to the acquisition of the right of placement of the machine, and the location owner is not entitled to receive any compensation once a machine is removed from the premises. The location owner has no responsibility for the cost of placing the machine, the costs of maintenance and cleaning the machine during its placement, the cost of repair of the machine during placement or responsibility for payment of insurance coverage of machines during placement. The location owner involvement is limited to authorization of the use of the property for placement of the machine. The compensation or "commissions" are directly tied to payment for the right to place the machine on the premises of a convenience store. The payment which Petitioner characterized as a revenue sharing arrangement, regardless of the title placed on the agreement between the parties, is based upon the right of placement of the machines on the property of another distinct business entity. Petitioner paid out $613,125.00 during the years under audit based upon its written and oral agreements allowing for the placement of its equipment. The Department assessed sales tax on the payments made as "commissions" to the parties where the machines were placed. The Department assessed sales tax due in the amount of $54,994.40, plus penalty in the amount of $16,539.12 and interest in the amount of $15,643.48, for a total due of $87,177.00. On April 15, 1994, Petitioner paid $18,206.61 on this amount leaving a balance due of $68,970.39. Petitioner does not dispute the Department's mathematical calculations of the total sales dollars upon which the tax assessment is based. Petitioner has not paid sales taxes on the monies it remitted to the convenience stores during the audit period. Petitioner did not seek advice from the Department prior to the assessment as to whether sales tax should have been collected on the business transactions assessed by the Department.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Executive Director enter a Final Order denying the Petition contesting the assessment of tax and impose a sales and use tax audit assessment in the amount of $68,970.39, plus interest. DONE and ENTERED this 28th day of June, 1996, in Tallahassee, Florida. DANIEL M. KILBRIDE, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 28th day of June, 1996. APPENDIX TO RECOMMENDED ORDER, CASE NO. 95-2131 To comply with the requirements of Section 120.59(2), Florida Statutes (1993), the following rulings are made on the parties' proposed findings of fact: Petitioner's Proposed Findings of Fact. Petitioner did not submit proposed findings of fact as of the date of this Order. Respondent's Proposed Findings of Fact. Accepted in substance: paragraphs 1-31. COPIES FURNISHED: Gary Shader, Esquire Shader and Wilson 1750 North Maitland Avenue Maitland, Florida 32751 James F. McAuley, Esquire Elizabeth T. Bradshaw, Esquire Office of the Attorney General The Capitol, Tax Section Tallahassee, Florida 32399-1050 Linda Lettera, General Counsel Deparment of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 Larry Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100
Findings Of Fact By its bid proposal of August 13, 1973, the Petitioner, the Colson Company, offered a bid on subsystem #3 - heating, ventilating and air conditioning (HVAC) to the School Board of Marion County, Florida. This bid proposal was by a lump sum bid, and was further broken down into labor, materials and supplies, and sales tax on material and supplies. A copy of the bid proposal is shown in Petitioner's composite Exhibit #3, admitted into evidence in the course of the hearing. Pages IV-3-20 and IV-3-21 of Petitioner's composite Exhibit #3 give the details of the base bid and lump sum bid, together with the further breakdown as mentioned before. By letter of September 6, 1973, from the project architects, the Marion County School Board indicated their intent to enter into a contract for materials and installation for the purchase of the HVAC system, based upon the Petitioner's lump sum bid and consideration of item #20, option #1 and the interface associated with the project. A copy of this letter of intent together with unit price figures is Petitioner's composite Exhibit #4, admitted into evidence. On January 23, 1974, the Petitioner and the Marion County School Board signed two contract documents. The first contract document which is Petitioner's Exhibit #1, admitted into evidence, was a materials contract and the second contract document which is Petitioner's Exhibit #2, admitted into evidence, was a labor contract. The Petitioner in accordance with contract agreements supplied the materials and the labor necessary to install the HVAC subsystem for the Marion County School Board. By its notice of assessment of tax, penalties and interest, dated April 12, 1976, the Respondent called for payment of $6,172.41. This notice of assessment is attached as Exhibit A to the petition. The period being assessed was a period of January 1, 1973 through December 31, 1975. Prior to the notice of assessment, the Petitioner had paid sales tax on the labor contract with Marion County School Board of January 23, 1974. This sales tax payment was in the amount of $2,654.66. Still in dispute is the amount of Sales tax on the materials contract, which is reflected in the notice of assessment of April 12, 1976. Of the amount of alleged sales tax assessments for the materials, the Petitioner is protesting the amount of $4,642.54.
Recommendation It is recommended that the April 12, 1976 assessment placed against the Petitioner for the tax, penalties and interest in the year January 1, 1973 through December 31, 1975 be allowed. DONE and ENTERED this 19th day of October, 1976, in Tallahassee, Florida. COPIES FURNISHED: George Stelljes, Jr., Esquire Post Office Box 447 Jacksonville, Florida 32201 Harold F. X. Purnell, Esquire Assistant Attorney General The Capitol Tallahassee, Florida 32304 For the Department of Revenue CHARLES C. ADAMS Hearing Officer Division of Administrative Hearings 530 Carlton Building Tallahassee, Florida 32304 (904) 488-9675
Findings Of Fact The stipulated facts are as follows: The petitioner is GJPR Two Corporation, formerly Employers Insurance Management Corporation, a Florida Corporation, and its address is c/o W. L. Adams, Esquire, Pyszka, Kessler, Adams and Solomon, 2699 South Bayshore Drive, Miami, Florida 33133. Said petitioner has a substantial interest in these proceedings and has proper standing herein. The agencies affected are the Department of Revenue, Tallahassee, Florida, and the Office of the Comptroller of Florida, Tallahassee, Florida; no other agencies are affected. These proceedings have been properly initiated and are now properly before the Division of Administrative Hearings of the Department of Administration of the State of Florida. The parties are not in dispute as to any issues of fact, and agree to the following findings of fact: On or about June 1, 1977, petitioner sold all of its assets of every kind and type in a single transaction to Arthur J. Gallagher and Company. The assets sold included two aircraft. When the registration documents of such aircraft were presented to the State of Florida for transfer, payment of sales tax was required in the sum of $4,056.00. Said sum was paid under protest on or about June 10, 1977. Until the sale of its assets, the business of petitioner had always been the sale of insurance and the administration of self-insurance programs for insureds and self-insureds throughout Florida and other states. The aircraft had been used in the business of petitioner, but petitioner had never engaged in the sale or leasing of aircraft as all or any part of its business. Since the sale of its assets, petitioner has not been engaged in business and petitioner has adopted and filed with the Internal Revenue Service of the United States a Resolution requiring that petitioner conduct no further business and that petitioner be liquidated. The sale of the two aircraft upon which the tax in question was paid under protest is an occasional or isolated sale. Petitioner filed a Claim for Refund upon the ground that the sale was an isolated sale. The Claim for Refund was denied by letter of August 11, 1977 from the Office of the Comptroller of the State of Florida, a copy of which is appended hereto and incorporated herein as Exhibit "A."
Recommendation That the denial of tax refund to the petitioner by the State Comptroller be affirmed. DONE and ENTERED this 24th day of January, 1978, in Tallahassee, Florida. THOMAS C. OLDHAM 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 24th day of January, 1978. COPIES FURNISHED: Richard J. Horwich, Esquire Suite 302 University Federal Building 2222 Ponce de Leon Boulevard Coral Gables, Florida 33134 Cecil Davis, Esquire Department of Legal Affairs The Capitol Tallahassee, Florida 32304 John D. Moriarty, Esquire Department of Revenue Room 104 Carlton Building Tallahassee, Florida 32304
The Issue Whether the Petitioner owes sale and/or use tax for the purchase/lease of magnetic tapes containing mailing lists used by the Petitioner in its mail order business, as set forth in the Notice of Decision dated December 10, 2003, and, if so, the amount owed.
Findings Of Fact Based on the oral and documentary evidence presented at the final hearing and on the entire record of this proceeding, including the Joint Pre-Hearing Stipulation, the following findings of fact are made: The Department is the agency authorized to administer the tax laws of the State of Florida. See § 213.05, Florida Statutes (2004). At the times material to this proceeding, Spectramin was a Florida "S" corporation whose home office and principal place of business was located at 5401 Northwest 102 Avenue, Suite 119, Sunrise, Florida. Spectramin was a Florida- registered sales tax dealer. On October 19, 2001, the Department issued to Spectramin a Notification of Intent to Audit Books and Records for audit number A0127016590, which was a sales and use tax audit covering the Audit Period. On January 15, 2002, the Department and Spectramin signed an audit agreement that delineated the procedures and sampling method to be used by the Department for the audit. Because Spectramin's books and records were voluminous, the Department and Spectramin agreed to employ certain specified sampling procedures. For the audit, the Department examined Spectramin's purchase invoices, general ledgers, and income statements for the 2000 calendar year. At the times material to this proceeding, Spectramin was a mail-order company that sold nutritional supplements throughout the United States. It engaged in direct marketing of its products and employed two methods of direct marketing: Self-mailers were sent to prospective customers, and catalogs were sent to persons who had purchased its products, as a means of educating these buyers and converting them into repeat customers.1 In order to send self-mailers to prospective customers, Spectramin leased mailing lists consisting of names and addresses, and, in some instances, bar codes, compiled by various vendors who sold mailing lists. The contents of the mailing lists were based on demographic criteria specified by Spectramin. Under the terms of the lease, Spectramin was allowed to use the mailing list for only one mailing. Pertinent to this proceeding, Spectramin received some of the mailing lists in the form of data digitally encoded on magnetic tapes. The cost of leasing a mailing list was based on the number of names on the list, and the invoice for a list included a separately-stated, standard charge of $25.00 to cover the cost of the magnetic tape containing the data. The magnetic tapes themselves had no value to Spectramin; the only value of the tapes to Spectramin lay in the data encoded on the tapes, and the greatest part of the cost of the one-time lease was the cost of the data encoded on the magnetic tapes; for example, Spectramin paid $75.00 per 1,000 names for one of the mailing lists it leased, plus the $25.00 charge for the magnetic tape. Spectramin did not pay sales tax in Florida on the cost of the data encoded on the magnetic tapes at the time it leased the mailing lists. Spectramin did not have the computer equipment necessary to read the data on magnetic tapes, so it contracted with third-party letter shops and printers to process the magnetic tapes. The letter shops with which Spectramin has done business since 1991 are all located outside the state of Florida. Once a letter shop received magnetic tapes from Spectramin, the data on the tapes were downloaded to a computer, and cleaned, and sorted into usable names and addresses; the letter shop then sent the cleaned and sorted data to a print shop, which printed the names and addresses onto self-mailers provided by Spectramin. The letter shop sorted the self-mailers by zip code and mailed them. All of these operations took place outside Florida. At one time, Spectramin's practice was to have the mailing-list vendors ship the magnetic tapes encoded with the data directly to a letter shop specified by Spectramin. The letter shop held the Spectramin magnetic tapes until it had accumulated several tapes, and then it would process the data from the tapes, have the names and addresses printed on the self-mailers, and mail the self-mailers. Spectramin found that the letter shops with which it did business sometimes lost track of the tapes received for Spectramin's mailings, and it cost Spectramin additional time and money to track down the tapes or to purchase mailing lists. Because of the additional time and money Spectramin spent to track down the lists, it stopped having the magnetic tapes sent directly to the letter shop. At the times material to this proceeding, the magnetic tapes containing the digitally-encoded mailing lists were shipped directly to Spectramin by the mailing-list vendors, and Spectramin took delivery of the tapes at its principal place of business in Florida. The vendors sent the mailing lists to Spectramin's Florida office by overnight delivery through either Federal Express or United Parcel Service. It was Spectramin's usual business practice for an employee to take delivery of the magnetic tapes containing the mailing lists and to place them on a shelf in the front of the office. The boxes containing the magnetic tapes were not opened. When Spectramin had accumulated several boxes of magnetic tapes, an employee put the boxes into a larger box and sent the tapes by overnight delivery to one of the out-of-state letter shops with which Spectramin did business. Spectramin did not keep the tapes in its Florida office more than one or two days because the mailing lists it had leased lost their value with time.2 The only value of the magnetic tapes was in the names and addressed encoded on the tapes, and the only use to which Spectramin put the data was to cause the names and addresses it had leased to be printed on self-mailers and mailed to the prospective customers. Because the letter shops that printed the names and addresses and mailed the self-mailers were located outside of Florida, Spectramin did not "use" the data or the magnetic tapes in Florida. The only contact the magnetic tapes had with Florida was during the short period of time the tapes sat on the shelf at Spectramin's office before being shipped out of the state for processing. Spectramin did not pay use tax in Florida on the cost of the data encoded on the magnetic tapes.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue issue a final order withdrawing the sales and use tax assessment against Spectramin, Inc., for the audit period extending from September 1, 1996, through August 31, 2001. DONE AND ENTERED this 24th day of January, 2005, in Tallahassee, Leon County, Florida. S PATRICIA HART MALONO 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 24th day of January, 2005.
Findings Of Fact There are no disputed issues of fact. The parties stipulated to the following facts: (Exhibits referred to are not attached to this Recommended Order) As to Sun Oil Company: On February 14, 1978, a claim for refund was submitted to the Florida Department of Revenue and the Comptroller of the State of Florida. A copy of the transmittal letter is annexed as Exhibit 8 and a copy of the claim for refund is annexed as Exhibit 9. On August 31, 1978, another claim for refund, covering a subsequent time period was filed. A copy of the transmittal letter is annexed as Exhibit 10 and a copy of the claim for refund is annexed as Exhibit 11. Meanwhile, to the knowledge of all parties, the Exxon appeal referred to below was prosecuted. As to Exxon Corporation: On January 19, 1978, Exxon submitted to the Department of Revenue and to the Comptroller a claim for refund of severance tax which may have been overpaid by Exxon Corporation for the period March 1, 1974, through December 31, 1976. The claim reflected its contingent nature. A copy of the transmittal letter is annexed as Exhibit 1. A copy of the claim for refund of severance tax is annexed as Exhibit 2. (Subsequently, claims for subsequent time periods have also been filed with the Comptroller). By letter dated February 6, 1978, the Department of Revenue responded that the claim was barred by the one-year provision contained in Section 211.06, Florida Statutes. Enclosed with the response was a copy of an earlier letter to Exxon Corporation from the General Counsel of the Comptroller of the State of Florida, setting forth the position of the Comptroller that the contingent nature of the claim created no problem, but that the one-year provision in Section 211.06 was a statute of limitations. A copy of the letter of February 6, 1978, together with the enclosure, is annexed as Exhibit 3. On February 27, 1978, Petitioner wrote the Comptroller requesting consideration of the claim for refund under the provisions of Section 215.26, Florida Statutes. A copy is annexed as Exhibit 4. By letter dated March 7, 1978, the Comptroller wrote Petitioner denying the claim because it was not filed within one year from the date of payment of the tax as allegedly required by Section 211.06(2), stating that no further administrative review was available, and inviting judicial review, under Section 120.68, Florida Statutes. A copy of the letter is annexed as Exhibit 5. Petitioner filed a notice of appeal from the order contained in the letter of March 7, 1978 (Exhibit 5). The First District Court of Appeal of Florida in due course rendered a decision and opinion, a copy of which is annexed as Exhibit 6. The First District Court of Appeal held that the one-year period described in Section 211.06 did not bar the application for refund, that the refund provisions of Section 215.26, Florida Statutes, were applicable, and remanded the case. Thereafter, the Comptroller's Office asked for a further statement of Exxon's position on this matter, which was given in a letter dated May 24, 1979, a copy of which is annexed as Exhibit 7. As to Louisiana Land and Exploration Company: On January 25, 1978, Louisiana Land and Exploration Company submitted to the Department of Revenue and to the Comptroller a claim for refund of severance tax which may have been paid by Louisiana Land and Exploration company for the period March 1, 1974, through December 31, 1976. The claim reflected its contingent nature. A copy of the transmittal letter is annexed as Exhibit A copy of the claim for refund of severance tax is annexed as Exhibit 13. By letter dated February 6, 1978, the Department of Revenue responded that the claim was barred by the one-year provision contained in Section 211.06, Florida Statutes. Enclosed with the response was a copy of an earlier letter to Exxon Corporation from the General Counsel of the Comptroller of the State of Florida, setting forth the position of the Comptroller that the contingent nature of the claim created no problem, but that the one-year provision in Section 211.06 was a statute of limitations. A copy of the letter of February 6, 1978, together with the enclosure, is annexed as Exhibit 14. On October 31, 1978, Louisiana Land and Exploration Company again submitted to the Comptroller of the State of Florida a claim for refund of severance tax which may have been paid by Louisiana Land and Exploration Company for the period March 1, 1974, through December 31, 1976. The claim reflected its contingent nature. A copy of the transmittal letter is annexed as Exhibit A copy of the claim for refund of severance tax is annexed as Exhibit 16. Meanwhile, to the knowledge of all parties the Exxon appeal referred to above was prosecuted. As to Roadway Express, Inc.: On December 14, 1978, a claim for refund was submitted to the Florida Department of Revenue and the Comptroller of the State of Florida. A copy of the transmittal letter is annexed as Exhibit 17 and a copy of the claim for refund is annexed as Exhibit 18. On November 13, 1979, a similar claim for refund was submitted to the Department of Revenue and the Comptroller of the State of Florida. A copy of the transmittal letter is annexed as Exhibit 19 and a copy of the claim for refund is annexed as Exhibit 20. Meanwhile, to the knowledge of all parties the Exxon appeal referred to above was prosecuted. As to all Parties: In the case of each of the parties, by document entitled "Notice of Intent to Deny Refund" dated August 30, 1979 (and in the case of the second Roadway Express matter, Case No. 80-098, January 2, 1980), the Comptroller gave notice of his intent to deny refund solely because the contingent nature of the claim, stating as the sole grounds for denial: "At this time there is no basis under Section 215.26, Florida Statutes, to grant the requested refund." In response to the Notice of Intent to Deny Refund, Petitioners promptly requested a hearing, which has resulted in the above consolidated proceedings. There are no disputed issues of material fact with respect to this proceeding, at which the issue is whether or not the contingent claims filed within the three-year period prescribed by Section 215.26, Florida Statutes, should be held in abeyance until the contingency has occurred or it is determined that it will not occur. By agreeing that there are no disputed issues of material fact for the purpose of this proceeding, no party waives its right to present facts or contest facts in the event the case is considered in the future on its merits.
Findings Of Fact Certain hospital equipment ("Equipment") was sold in 1973 and 1974 by Hospital Contract Consultants ("Vendor") to F & E Community Developers and Jackson Realty Builders (hereinafter referred to as "Purchasers") who simultaneously leased the Equipment to Petitioner. These companies are located in Indiana. At the time of purchase, Florida sales tax ("Tax") was paid by the Purchasers and on or about March 18, 1974, the tax was remitted to the State of Florida by the Vendor. However, the Tax was paid in the name of Medical Facilities Equipment Company, a subsidiary of Vendor. In 1976, the Department of Revenue audited Petitioner and on or about April 26, 1976 assessed a tax on purchases and rental of the Equipment. On or about April 26, 1976, petitioner agreed to pay the amount of the assessment on the purchases and rentals which included the Equipment, in monthly installments of approximately Ten Thousand and no/100 Dollars ($10,000.00) each and subsequently paid such amount of assessment with the last monthly installment paid on or about November 26, 1976. On or about December, 1976, the Department of Revenue, State of Florida, checked its records and could not find the Vendor registered to file and pay sales tax with the State of Florida. Petitioner then looked to the State of Indiana for a tax refund. On or about January 4, 1977, Petitioner filed for a refund of sales tax from the State of Florida in the amount of Thirty Five Thousand One Hundred Four and 02/100 Dollars ($35,104.02). This amount was the sales tax paid to and remitted by various vendors for certain other equipment purchased in 1973 and 1974 and simultaneously leased. The amount of this refund request was granted and paid. Relying upon the facts expressed in paragraph 4 heretofore, Petitioner on or about June 2, 1977 filed with the Department of Revenue of the State of Indiana for the refund of the Tax. On or about June 7, 1979, the Department of Revenue of Indiana determined that the Vendor was registered in the State of Florida as Medical Facilities Equipment Company and therefore Petitioner should obtain the refund of the Tax form the State of Florida. So advised, Petitioner then filed the request for amended refund, which is the subject of this lawsuit, on July 16, 1979 in the amount of Seventeen Thousand Two Hundred Sixteen and 28/100 Dollars ($17,216.28). This request for refund was denied by Respondent, Office of the Comptroller, on the basis of the three year statute of non-claim set forth in section 215.26, Florida Statutes. Purchasers have assigned all rights, title and interest in sales and use tax refunds to Petitioner. During the audit of Petitioner in 1976 the lease arrangement on the equipment apparently came to light and Petitioner was advised sales tax was due on the rentals paid for the equipment. This resulted in an assessment against Petitioner of some $80,000 which was paid at the rate of $10,000 per month, with the last installment in November, 1976. The auditor advised Petitioner that a refund of sales tax on the purchase of this equipment was payable and he checked the Department's records for those companies registered as dealers in Florida. These records disclosed that sales taxes on the sale of some of this rental equipment had been remitted by the sellers of the equipment but Hospital Contract Consultants was not registered. Petitioner was advised to claim a refund of this sales tax from Indiana, the State of domicile of Hospital Contract Consultants. By letter on March 18, 1974, Amedco Inc., the parent company of wholly owned Hospital Contract Consultants, Inc. had advised the Florida Department of Revenue that Medical Facilities Equipment Company, another subsidiary, would report under ID No. 78-23-20785-79 which had previously been assigned to Hospital Contract Consultants Inc. which had erroneously applied for this registration. (Exhibit 2) Not stated in that letter but contained in Indiana Department of Revenue letter of April 18, 1979 was the information that the name of Hospital Contract Consultants had been changed to Medical Facilities Equipment Company. The request for the refund of some $17,000 submitted to Indiana in 1976 was finally denied in 1979 after research by the Indiana Department of Revenue showed the sales tax had been paid to Florida and not to Indiana.
Findings Of Fact Petitioner is a real estate broker. After 18 years in the business in Michigan, Petitioner moved to Florida in August, 1988. After about one and one- half years working in residential real estate, Petitioner devoted his efforts exclusively to the sale of mobile homes. He soon began to specialize in the resale of mobile homes. In June 1990, Petitioner became self-employed and registered, or was required to register, as a dealer. He engaged in two types of mobile home sales: mobile homes with land and mobile homes without land. This case involves solely the sale of mobile homes without land. From June 20, 1990, through April 26, 1991, Petitioner was involved in the sale of 11 mobile homes without land, and these sales are the subject of the present case. In each transaction, Petitioner never took title or possession of the mobile homes; they remained on a rented lot in a mobile home park. In each transaction, Petitioner stated, on a notarized bill of sale, the sales price of the mobile home and the sales price of associated tangible personal property, such as sheds, carports, and furniture. The associated tangible personal property is typically referred to as "appurtenances." In most transactions, Petitioner listed the mobile home and found the buyer. At these closings, he collected a $2000 commission. In one transaction, which closed March 18, 1991, Petitioner did not secure the buyer, nor did he have the listing. The buyer and seller approached Petitioner and asked him to prepare the closing papers. In this case, Petitioner charged only $250. The sales price of this transaction was $18,900 with $7560 allocated to the appurtenances. The resulting additional tax liability was $453.60. In another transaction, Petitioner did not secure the buyer so he charged a reduced commission. In a third transaction, which closed April 5, 1991, Petitioner was not the listing agent, but agreed to prepare the closing documents because the listing broker was under sales tax audit and evidently did not wish to increase his potential liability. Only one more transaction followed the April 5 closing. The total sales price allocated to appurtenances in the 11 transactions is $145,280. The sales tax arising from these 11 transactions is $8716.80. On January 15, 1992, Respondent mailed to Petitioner a Notice of Intent to Make Sales and Use Tax Audit Changes. The notice sought to impose additional sales taxes of $8716.80, penalties of $2179.20, interest through said date of $1034.94, and per diem interest thereafter of $2.87. Respondent maintained this position through subsequent informal conferences. Petitioner acted in the capacity of a dealer in all transactions except the one on March 18, 1991, when he closed the transaction as an accommodation and charged a nominal fee. After deducting the sales tax on the appurtenances from the March 18 transaction, the remaining sales tax liability is $8263.20. There is no doubt that at all material times the Lee County Tax Collector's Office misinformed Petitioner and other dealers that they were not required to collect the sales tax on the casual sale of appurtenances in connection with the casual sale of a mobile home on a rented lot. However, there is no evidence that the Lee County Tax Collector's Office is an agent of Respondent. Petitioner failed to prove that Respondent misinformed him as to his liability as a dealer to collect the tax on the sale of the mobile home and appurtenances.
Recommendation Based on the foregoing, it is hereby RECOMMENDED that the Department of Revenue enter a final order assessing Respondent for $8263.20 in sales tax, plus interest, but waiving all penalties. ENTERED on October 18, 1994, in Tallahassee, Florida. ROBERT E. MEALE 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 on October 18, 1994. APPENDIX Rulings on Petitioner's Proposed Findings 1-2: adopted or adopted in substance. 3: rejected as subordinate. 4: adopted or adopted in substance. 5: rejected as unsupported by the appropriate weight of the evidence. 6: adopted or adopted in substance. 7: rejected as unsupported by the appropriate weight of the evidence and irrelevant. 8: adopted or adopted in substance. 9: rejected as subordinate. 10: rejected as subordinate and recitation of evidence. 11-13: rejected as subordinate and irrelevant. Rulings on Respondent's Proposed Findings 1-2: adopted or adopted in substance. 3-4: rejected as subordinate and recitation of evidence. 5: adopted or adopted in substance. 6-16: rejected as subordinate. 17: rejected as unsupported by the appropriate weight of the evidence. 18: rejected as subordinate. COPIES FURNISHED: Larry Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, FL 32399-0100 Linda Lettera, General Counsel Department of Revenue 204 Carlton Building Tallahassee, FL 32399-0100 James G. Decker Decker and Smith, P.A. P.O. Box 9208 Ft. Myers, FL 33902-9208 Lealand L. McCharen Assistant Attorney General Department of Legal Affairs The Capitol--Tax Section Tallahassee, FL 32399-1050
The Issue The issue posed herein is whether or not the Petitioner remitted to Respondent, pursuant to Chapter 212.05(1), Florida Statutes, the, proper amount of sales tax on the boat "Captain Deebold" which was purchased on November 29, 1976. A related issue, assuming that the proper sales taxes were not remitted by Petitioner, is whether or not a levy of penalty and interest is warranted under the circumstances.
Findings Of Fact Based upon my observation of the witnesses and their demeanor while testifying, the documentary evidence received, legal memoranda submitted by the parties and the entire record compiled herein, the following relevant facts are found. Petitioner purchased the vessel "Captain Deebold" on November 29, 1976, and alleged that the purchase price of the boat was $20,000.00. Accordingly, Petitioner remitted to the Department sales taxes based on the declared value of $20,000.00. Respondent maintained that the subject boat was purchased for the sum of $75,000.00 and has, therefore, issued an assessment against Petitioner for the additional taxes, penalty and interest. By letter dated November 29, 1978, Respondent's Revenue Investigator, Leslie J. Smithling, advised Petitioner that a routine verification concerning his purchase of the subject boat revealed a transaction amount of $75,000.00 upon which the four percent Florida Sales Tax is $3,000.00. Petitioner was further advised therein that his remittance in the amount of $4,202.00 was due no later than December 15, 1979. Taxes, penalties and interest were calculated as follows: Purchase Price $75,000.00 Tax Rate 4% Tax $ 3,000.00 Minus Tax Paid (Based on $20,000.00) $ 800.00 Tax Due $ 2,200.00 Administrative Penalty (Ch. 212.12[2], F.S.) $ 550.00 Fraud Penalty (Ch. 212.12[2], F.S.) $ 1,100.00 Interest: 1% per month from 8/1/77 to 12/1/77 16% Plus $.72 daily thereafter Total Interest Accrued $ 352.00 Total Tax, Penalties & Interest Due $ 4,202.00 In support of its position that the true purchase price of the boat was only $20,000.00, Petitioner points out that the seller of the boat, Frank Deebold, had neglected the boat and had only made repairs that were absolutely necessary to operate the vessel. Thus, when Petitioner purchased the vessel, numerous repairs were made to make it seaworthy including 1) repaired electrical wiring; 2) sealed the deck seams; 3) reconnected the port fuel tank; 4) repaired the clutch in the port engine; 5) repaired leaks in the starboard stern quarter; 6) replaced and rebolted the chines; 7) replaced a section of the keel; 8) rebuilt the main clutch; 9) caulked deck; 10) replaced or repaired the winch on the anchor; 11) reworked and/or repaired the engine room, including insulation, lighting, lining, painting and hauling. To perform these repairs, Petitioner places the value on materials utilized at approximately $18,000.00. Additionally, Petitioner estimated that the value of his labor involved in making the approximately $25,000.00. The articles of agreement for the purchase of the boat provides in pertinent part as follows: Witnesseth, that if the said party of the second part shall (purchaser) first make the payments and perform the covenants hereinafter mentioned on his part to be made and performed, the said party of the first part (seller) hereby covenants and agrees to convey and assure to the said party of the second part, his heirs, personal represent- atives or assigns, clear of all encumbrances, whatever by a good and sufficient bill of sale the Oil Screw vessel, Captain Deebold, o/n294675, gross tons-36, its equipment, hull, machinery, present insurance policies and business including fifty or more used rods and reels, one 3.5 KW Lister auxiliary generator, used and in need of repair, spare Jabsco water pump (used and in need of repair), spare 24 volt DC alternator, spare 24 volt DC main engine starter, spare stub shaft, three spare propellers (used and in need of repair) and a spare UHF Pierce- Simpson radio transceiver (used and in need of repair) and the said party of the second part hereby covenants and agrees to pay to the said party of the first part the sum of seventy-five thousand and 00/100 ($75,000.00) dollars in the manner following. . . . Nevertheless, Petitioner stressed that inasmuch as the Articles of Agreement provided that the seller only required Petitioner to maintain insurance coverage in the amount of $50,000.00 indicating that the purchase price was something less than $75,000.00 and in fact was no more than $50,000. Pursuant to the Articles of Agreement, the amount insurance coverage required was $50,000.00. Petitioner also declared that included in the $75,000.00 purchase price were other items which included the business (dock space), and reduced prices for miscellaneous supplies and fuel prices. In this regard, an examination of the Articles revealed that these items were provided Petitioner on a cost plus basis and the dock space was leased for an amount based on a rebate of the percentage of ticket sales or charter fees received. Petitioner ultimately sold the boat for 95,000.00. Petitioner initially tried to sell the boat for the sum of $105,000.00 of which $10,000.00 represented the value he (Petitioner) placed on the business. An examination of the accounting records introduced indicated that Petitioner placed the sum of $75,000.00 as the purchase price for the boat. Petitioner thought that his estimation of the labor and materials necessary to properly repair the boat were items that could be used as a setoff to reduce the amount of taxes due. Petitioner testified that he, in no way, intended to defraud the Respondent of taxes properly due and owing. Petitioner's testimony in this regard is credited.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that: Petitioner remit to the Respondent the proper interest as set forth herein in paragraph 4 of the Conclusions of Law. Petitioner remit to the Respondent an administrative penalty of 5 percent of the aggregate taxes due as set forth herein in Paragraph 5 of the Conclusions of Law. Petitioner not be held liable for payment of for allegedly filing a "false or fraudulent" return for reasons set forth herein in Paragraph 6 of the Conclusions of Law. RECOMMENDED this 27th day of February 1981, in Tallahassee, Florida. JAMES E. BRADWELL Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 FILED with the Clerk of the Division of Administrative Hearings this 27th day of February 1981.
