Findings Of Fact The Petitioner, Tommy C. Chastain, III, is a Property Appraiser II (appraiser) employed by the Respondent, State of Florida, Department of Revenue (Department). The Petitioner has been employed in that capacity in excess of 12 years. The Respondent is an agency of the State of Florida charged with enforcing and carrying out the taxing authority of the State of Florida, embodied in Chapter 212, Florida Statutes, and other extant law. Its regulatory authority, in raising state revenues through taxes, includes regulatory oversight and the certification process concerning county ad valorem tax rolls and related tax administration. On or about March 27, 1996, the Petitioner submitted a written request to the Department's Executive Director, Mr. Fuchs, requesting authorization to seek political office as a Property Aappraiser, a county officer, of Bradford County, Florida, while remaining an employee of the Department. This request was made pursuant to Rule 60K-13, Florida Administrative Code, a rule of the Department of Management Services (DMS) concerning the circumstances under which employees of the State of Florida may obtain permission to seek political office. This rule embodies an examination and determination of whether such candidacies pose conflicts with the duties and responsibilities of such a candidate's state employment. The Executive Director denied the request on April 16, 1996 on the basis that the Department was unable to certify, under prevailing DMS rules and Florida Statutes, that the Petitioner's candidacy would involve "no interest which conflicts or activity which interferes" with the Petitioner's state employment with the Department. The Petitioner sought a formal proceeding before the Division of Administrative Hearings to contest that initial determination. The Petitioner has been employed with the Department since 1983. Approximately two years after he was so employed, the Petitioner's wife was elected to the School Board of Bradford County, Florida. Due to his wife's position on the Bradford County School Board, the Petitioner requested and the Respondent, through the Petitioner's supervisor, agreed that the Petitioner should not and would not be assigned to do the Department's appraisal work in and with regard to Bradford County and its tax rolls. This was due to a perceived conflict of interest, or the possibility thereof, on the part of both the Petitioner and the Respondent. It was a voluntary arrangement. Since that time, the Petitioner has not been assigned to do any appraisal work related to Bradford County. The duties of a property appraiser for the Department, such as the Petitioner, involve assisting county property appraisers and employees in the county appraiser's office in appraisal techniques, to arrive at estimated values concerning commercial, residential and personal property. The Department appraiser administers policies and procedures pertaining to appraisal of real and personal property, set forth in the Florida Statutes and policies, rules and regulations of the Department, and it consults with all levels of government officials, as well as property owners and private appraisers, concerning problems involving appraisal of real and personal property. The Department property appraiser also investigates and reports on conduct and performance of county officials involved in the ad valorem taxing process. The property appraiser also investigates taxpayer complaints and applies the appraisal process, as defined by the American Institute of Real Estate Appraisers, to arrive at estimated values for these types of property. The appraisal studies performed by employees, such as the Petitioner, for a given tax year, are kept confidential from the county property appraiser, until a year-end review is conducted between the county and Department, pursuant to Section 195.096(2)(e), Florida Statutes. The Petitioner is assigned to the Lake City Regional Office in the property tax administration program. He does not perform appraisal work in and for Bradford County nor has he worked with that county's property appraiser or his staff. It is possible, however, that based upon legitimate business decisions by the Department, including considerations of saving expense funds, that he could be assigned to perform appraisal work in any county in the Lake County region, including Bradford County, although that has not been the case heretofore. The Petitioner's duties and responsibilities entail safeguarding certain confidential tax information, pursuant to Department directive 0101.10 and Section 6103 and 7213, of the Internal Revenue Code (IRC), as well as pursuant to various internal security procedures for safeguarding confidential information, including procedures and policies for safeguarding information sources, mandated by the Department's rules and policies. The Department appraisers are relied upon for their independent professional judgment in performing their duties and responsibilities involved in appraising property and in the tax administration process for the counties under their audit authority. Conflicts may arise between the Department appraiser and the county Property Appraiser. Judgmental adjustments to comparable sales transactions in a county that indicate market value for properties being appraised may differ between that of the county Property Appraiser and the Department appraiser, thereby affecting the measurement of the overall tax rolls the county Property Appraiser is required to submit to the Department for approval, pursuant to statute. The Petitioner's current duties and responsibilities provide him with access to information within the Lake City regional office files which include information related to Bradford County's assessment levels for a particular year, even though he himself is not assigned to work in the Bradford County taxing appraisal and tax roll approval process. Such information is available to the Petitioner prior to it becoming known to the Bradford County Property Appraiser, the official the Petitioner seeks to oppose in the upcoming election. County Property Appraisers make the determination of how to increase assessment or just value on each parcel of real estate and the amount of assessment valuation increase on homestead property, by authority of Sections 193.011 and 193.155, Florida Statutes. The Department is charged with oversight of each county Property Appraiser's office to insure that all properties are assessed at just value, with equity and uniformity. The Department's goal in property tax administration is to achieve compliance with statutory standards through the aid and cooperation of the local Property Appraiser and his staff. Cooperation by the county appraisers is essential. If Department employees gather information, contemporaneously with running for office against the Property Appraiser, it would tend to arouse suspicion in the county Property Appraisers and their staffs concerning the Department's motivations. It would call into question the independence of the Department in local tax administration matters in all the counties under its jurisdiction, as well as in a particular county involved. The independent judgment of Department appraisers, in performing their assessment studies for counties, is essential for the Department to determine whether the county Property Appraiser's increases and assessments are in compliance with the Department policies, administrative rules, and statutory requirements. The failure of the county Property Appraiser's tax roll to comply with the Department standards can result in disapproval of the county tax roll, which, in turn, may lead to punitive, interim roll procedures and ultimately culminate in litigation if the discrepancies are not amicably resolved. The Department appraiser performing such assessment studies for the year in controversy would likely be required to testify and ultimately defend his or her work product in litigation in a manner adverse to the interests of the county Property Appraiser. Moreover, appraisal studies performed by a Department appraiser for one county can affect the appraisal assessments in another county. The Department develops a "systematic base rate" for use in the appraisal system, from data gathered from a particular region, including appraisal data for the entire region. Data gathered for the Lake City region, where the Petitioner practices, would include data for Bradford, Baker, Union and Alachua Counties, as well as for southern Clay County, in determining what rate would be appropriate for any of those counties for individual base rates. Thus, the appraisal work performed by the Petitioner, even though he does not do appraisal work in Bradford County, can affect the appraisal assessments in Bradford County. The Department appraisers are called upon to resolve disputes over tax roll assessments in counties other than that in which they are regularly assigned. The Petitioner, for instance, has been called upon to provide aid and assistance in the Jacksonville Regional Office in this capacity, during the time he has been assigned to the Lake City Regional Office. Confidential appraisal information generated by the county Property Appraisers and their staff is available to all the Department appraisers within a particular region, as is confidential appraisal information generated by a Department appraiser assigned to a particular county in that region. The Petitioner has, and has had, access to all confidential appraisal information pertaining to Bradford County, in his Lake City Region, even though he himself is not assigned to do appraisal work in Bradford County. He has had access to that information prior to the information being made available to the Bradford County Property Appraiser. The Department's goal, through its aid and assistance to the county Property Appraisers, is for the Property Appraisers in the counties to meet their statutory and constitutional obligations and have their tax rolls approved by the Department. If the county tax rolls are not in compliance with the Department assessments, and issues are not reconciled within 90 percent of the Department's assessment values, then the Department will issue review notices or administrative orders directing compliance. Such disputes can culminate in litigation. In order to avoid disruption to the tax administration process and to the impartial and independent appraisal judgment exercised by the Department's appraisal staff, as well as by the county appraisal staffs, it is essential that the atmosphere of trust, confidence and reliance on the exercise of independent judgment by the Department's appraisers, and by the county appraisers, be maintained. In the Department's experience, the candidacy of a Department appraiser for the local county Property Appraiser's office can easily arouse suspicion and distrust on the part of the county Property Appraisers towards the Department's tax administration staff and its appraisers. It can foster the belief in the county Property Appraisers, even if mistaken, that the Department is fostering the candidacies and elections of its own staff members with their own ideas and judgments concerning appraisal processes and techniques against the interests of the incumbent appraisers and their counties. This is a state of affairs the Department must assiduously seek to avoid, which is why it has historically followed a policy of not approving its property appraisers' candidacies for county Property Appraiser offices while they are still Department employees. The property tax administration program is primarily responsible for measuring the relevant levels of assessment of property in the state between the various counties and certifying that level for each county annually for the Department of Education, for use in disbursement of general revenue funds to the counties based upon the relevant levels of assessment in reference to a statewide average level of assessment. Thus, as an incident of that function, the tax rolls of each county must be approved each year by the Department. In the appraisals conducted by both the county appraisers and the Department, of the sampled properties that are provided in any county, the methodologies that are used to appraise the property depend on the independent, impartial judgment of the appraiser doing the appraisals and applying that methodology. A candidate for the Property Appraiser office has the ability to affect that judgment and call into question the product of those appraisals and methodologies (Department employee candidate). If tax rolls are litigated in any county in which those appraisals were done, or in counties bordering on those counties, the appraisals could be called into question in the course of litigation of those tax rolls if disapproved by the Department, as analogous appraisals. The appraisers who performed those appraisals for the same county or for neighboring counties, which were called into question in disputes with the Property Appraiser of a particular county, could be called as witnesses to defend their work product, even though their work was done in and for different counties in the Department's region from the litigating county. The Department appraiser has the ability to call into question the methodologies used in any county in the state. Even if that Department appraiser was not assigned to the county in question, under the Department's practice in the Petitioner's regional office, the appraisers for the various counties have a review function over the appraisal work done for any particular county, a sort of "peer review process". Because of this process and their access to the confidential records pertaining to any county in their region, a Department appraiser who is a candidate for the county Property Appraiser's office against an incumbent, in a county in his region, could thus have access to information which might be advantageous to his political campaign. Access and use of this information, even if only a possibility and not actually practiced by such an appraiser candidate, would jeopardize the Department's relationship of cooperation and trust with each of the county Property Appraisers. The county Property Appraiser, in turn, has the ability to call into question both the appraisals made by the Department's field appraisers in other counties and the methodologies applied in those appraisals, the policies of the Department that underlie those methodologies, the decision-making process for which those methodologies and policies were decided and the administration of property taxes in general by the Department. They can do this through the vehicle of disputing formally or informally the application of Department appraisal techniques, methodologies and policies in his or her own county. The Department thus has a concern and a very real interest in maintaining the perception, in the administration of its taxing authority, that the independent and impartial adherence to the revenue statutes and policies involved is maintained. The Department has a real concern that if it authorizes one of its appraisers to run for the county Property Appraiser's office, the Department's policies would be perceived as motivated by an effort to install replacements to the incumbent county Property Appraisers who are more favorable to the Department's view of tax appraisal and assessment methodologies and policies. If the credibility of the Department's decision to disapprove a county's tax roll is called into question because a Department appraiser is challenging that incumbent property appraiser, the Department would be prejudiced during the litigation over disapproval of that county's tax roll. This is due to the fact that a candidate for Property Appraiser, rather than a disinterested Department employee, will have performed some of the appraisal work, even if done in a different county, upon which the Department is relying to defend its litigation position and its appraisal methodologies and policies by the means of comparing independent and purportedly analogous appraisal methodologies and practices by the Department in the various neighboring counties. In Lake County, Florida, for example, the current county Property Appraiser is now being challenged by a former Department appraiser. That former Department appraiser's work product in a neighboring county has been called into question and made the subject of the political campaign in the media. The methodologies used by the former Department appraiser, the appraiser's competency in applying those methodologies, the appraiser's training and level of education, and the Department's policies and the decision-making process under which those policies were selected, have been called into question in the political campaign. In a like vein, the appraisal methodology used by the Department for Dixie County has been introduced into litigation presently occurring in Levy County. The issue is the neighboring county's methodology for applying and calculating the "base rate", which is a unit of measurement per square foot for dollar valuation of structures. The county Property Appraisers have knowledge of how the Department appraisers and other counties apply Department policy and the Department appraisers assigned to each county know how their counterparts assigned to neighboring counties apply appraisal principles in Department appraisal policy. They know this because they have direct access to the confidential appraisal- related records as to each county in their region and, moreover because, as found above, they engage in a "peer review" of each other's audit and appraisal work periodically. Because of this knowledge of or access to confidential information pertaining to any particular county by any Department appraiser assigned to any county in that same region, that appraiser could have an undue advantage in a political campaign. The county Property Appraisers, of course, realize this. If the Department countenanced such employed Department appraisers opposing county Property Appraisers for election, immediate distrust and suspicion of the Department's motives would arise on the part of the county Property Appraisers. Thus, such a candidacy by a still-employed Department appraiser would represent a conflict of interest with his continued employment with the Department, which requires the maintenance of both the appearance and the fact of independent, impartial exercise of appraisal judgment and the maintenance of confidentiality of the tax administration-related records pertaining to any county. The appraisal studies, along with all documentation attendant thereto, are confidential until they are completed for the year-end assessment. The findings therein are then discussed with the county Property Appraisers. Only after that time do they become public record. Section 196.095(2)(e), Florida Statutes. In summary, the candidacy for the office of county property appraiser by a still-employed Department appraiser presents a real conflict of interest between the Petitioner's employment with the Department in that circumstance and the Department's statutory mission, which includes, as a necessary part, the maintenance of a cooperative relationship between the Department tax administration personnel and the county Property Appraisers. There exists the possibility that the platform or public statements of the Petitioner as a candidate would conflict with the Department's administration and interpretation of the tax laws under Chapters 192-197, Florida Statutes, which could impair the essential reputation of the Department for impartiality and independent judgment in appraisal work and administration of the tax laws among all of the counties under its jurisdiction. This would create a direct conflict with the Petitioner's continued state employment under those circumstances.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses, and the pleadings and arguments of the parties, it is RECOMMENDED that a Final Order be entered by the Department of Revenue denying certification that the Petitioner's candidacy for the office of Property Appraiser for Bradford County involves no interest which conflicts with or activity which interferes with his state employment and thus denying authorization for him to become a candidate for that office while remaining employed by the Department of Revenue, for purposes of Section 110.233(4)(a), Florida Statutes. DONE AND ENTERED this 1st day of August, 1996, in Tallahassee, Florida. P. MICHAEL RUFF, 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 1st day of August, 1996. APPENDIX TO RECOMMENDED ORDER Petitioner's Proposed Findings of Fact 1-11. Accepted, but not in themselves materially dispositive of the issues presented for resolution by the Hearing Officer. Respondent's Proposed Findings of Fact 1-26. Accepted, except to the extent modified by the Hearing Officer. 27. Rejected, as immaterial due to its speculative nature. 28-43. Accepted, except as modified by the findings of fact of the Hearing Officer. COPIES FURNISHED: G. Keith Quinney, Jr., Esquire Bryant, Miller & Olive, P.A. 201 South Monroe Street, Suite 500 Tallahassee, FL 32301 Peter S. Fleitman, Esquire Brian F. McGrail, Esquire Post Office Box 6668 Tallahassee, FL 32314-6668 Linda Lettera, General Counsel Department of Revenue 204 Carlton Building Tallahassee, FL 32399-0100 Larry Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, FL 32399-0100
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 The issue posed for decision herein is whether or not the Petitioner, Adwell Corporation, is entitled to separate accounting in computing its Florida corporate income tax based on the nature of its Florida operations.
Findings Of Fact Based upon my observation of the witnesses and their demeanor while testifying, the documentary evidence received, the arguments of counsel and the entire record compiled herein, the following relevant facts are found. The Petitioner, Adwell Corporation, is an Illinois corporation which is actively engaged in the business of farming approximately twelve thousand (12,000) acres of farmland near Jacksonville, Illinois; owns and leases ten (10) acres of real property under a "triple net lease" arrangement for a shopping mall in Minnesota and operates a two-hundred unit (200) apartment complex called the Yacht Basin Apartments (YBA) in Clearwater, Florida. An audit of Petitioner's books during 1978 resulted in a report of income tax audit changes dated July 28, 1978, for Petitioner's Florida income tax returns for fiscal years ending May 31, 1975; 1976 and 1977. The deficiency adjustment as proposed by the Respondent amounted to $1,248.00 for fiscal year ending May 31, 1975; $10,042.00 for fiscal year ending 1976 and $11,238.00 for fiscal year 1977. As originally filed, Petitioner, computing its Florida corporate income tax, based it on a separate accounting of its Florida activities on its claim that it is not a unitary business and that to combine its total corporate income of Florida, Illinois and Minnesota would unfairly represent the extent of its tax base attributable to Florida. Thus, Petitioner contends that the formula apportionment called for in Florida Statutes Sections 220.15 and 214.71 should not be applied. Instead, Petitioner contends that it is entitled to the exceptions to the general method of formula apportionment as set forth in Sections 214.72 and 214.73, Florida Statutes. PETITIONER'S ILLINOIS OPERATIONS As stated, Petitioner farms approximately twelve thousand (12,000) acres of agricultural land utilizing two methods of farming: the "direct" farming method and the "landlord/tenant" arrangement. During the years in question, the "direct" farming operation was used on approximately one-third (4,000 acres) of Petitioner's agricultural land. Under the "direct" method, in addition to the land, Petitioner provides the equipment, fertilizer, chemical, seed, and weed and pest control. Under the "direct" farm method, Petitioner retains an operator who is paid a flat fee for his services which is negotiated on a yearly basis. The remaining two-thirds (approximately 8,000 acres) of the agricultural land is farmed using the "landlord/tenant" method. Under this method, Petitioner, in addition to providing the land, provides the tenant farmer 50 percent of the seed, fertilizer and chemicals for weed and pest control. The crop is divided equally between the farmer and the Petitioner. In both farming methods, Petitioner determines with the crop will be planted; the type of crop and fertilizer and its method of application; the type chemicals for both pest and weed control and decides when and how the crop will be planted and harvested. Prior to 1970, Petitioner's headquarters (for the Illinois farming) was situated in Chicago, Illinois. In 1970, corporate headquarters were moved to Jacksonville, Illinois, based on the corporate decision that "absentee" ownership was not conducive to efficient and productive business operations. During 1970, Petitioner invested in real property in Florida and Minnesota using income realized from the forced sale of real estate under threat of governmental condemnation. PETITIONER'S FLORIDA OPERATIONS In Florida, Petitioner purchased the real property under the Yacht Basin Apartments which was simultaneously leased to the Yacht Basin Apartment owners. The Minnesota real property lay under and was leased to owners of a shopping center. Both leases were "triple net leases", thereby relieving Petitioner of the responsibilities of taxes, maintenance and the other activities associated with land ownership. During 1973, Adwell Corporation purchased the Yacht Basin Apartments and other related improvements which were situated on the Clearwater property. From 1973 through November of 2974, Adwell retained the services of an independent property management firm to manage the Yacht Basin Apartments. However, during this period (November of 1974), Petitioner relocated an accountant, Steve McClellan, who was then employed by Petitioner as an accountant in Jacksonville, Illinois to manage YBA. After Mr. McClellan became familiar with the management operations of the Yacht Basin Apartments, the arrangement was severed with the independent management contractor and Petitioner authorized Mr. McClellan to do virtually all that was necessary to efficiently manage and operate the Yacht Basin Apartments. Examples of the authority given and exercised by Mr. McClellan included hiring and firing employees; negotiating leases; expending large capital outlays for improvements and repairs, including for example, replacement of kitchen cabinets in several apartments, total roof repair and replacement, replacement of the master T.V. antenna and replacement of all windows. (See Petitioner's Exhibits 1 through 5.) Mr. McClellan was assigned the goal of operating the Florida apartments on the rent receipts, which goal was realized. Petitioner maintains what is referred to as an internal accounting procedure which requires that all checks be signed by the operation's President, Donald R. Pankey. Evidence adduced during the hearing reveals that Mr. McClellan was given almost complete control over the operation and management of the Florida property and in no instance was any recommended expenditure by him rejected by President Pankey. Evidence also reveals that Petitioner maintains separate accounts for each of its operations in Florida, Illinois and Minnesota. The Florida operations are not integrated with or dependent upon nor contribute to the other business operations of Petitioner in Illinois and Minnesota. The Florida property as stated compromises approximately ten (10) acres of reality plus the improvements. During the period in question, the Florida operation employed approximately twelve (12) to fifteen (15) employees. Aside from its Florida employees, Petitioner only employs the President and his secretary in Jacksonville, Illinois.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is hereby, RECOMMENDED: That the Petitioner is entitled to and should be allowed to separately account its Florida corporate income tax as it originally filed its Florida corporate income tax returns for the tax years 1975, 1976 and 1977. Accordingly, it is therefore RECOMMENDED that the Respondent withdraw the Report of Income Tax Audit Changes dated July 28, 1978. RECOMMENDED this 12th day of September, 1980, in Tallahassee, Florida. JAMES E. BRADWELL, Hearing Officer Division of Administrative Hearings 101 Collins Building Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 12th day of September, 1980. COPIES FURNISHED: Steven A. Crane, Esq. Post Office Box 3324 Tampa, Florida 33601 Shirley W. Ovletrea, Esq. and E. Wilson Crump, II, Esq. Assistant Attorneys General Department of Legal Affairs The Capitol, LL04 Tallahassee, Florida 32301 Robert A. Pierce, Esq. General Counsel Department of Revenue Room 104, Carlton Building Tallahassee, Florida 32301
The Issue Is the purchase or use of tangible personal property by a contractor who purchases material and supplies for use in performing non-public works contracts taxable under Chapter 212, Florida Statutes, and Rule 12A-1.051, Florida Administrative Code?
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant findings of fact are made. Petitioner is a Florida Corporation having its principal place of business located at 560 Highway 27 North, Sebring, Florida 33820, and is subject to the taxes imposed under Chapter 212, Florida Statutes. The Department is the agency authorized to administer the tax laws of the State of Florida, pursuant to Section 213.05, Florida Statutes. The Department is authorized to prescribe the records to be kept by all persons subject to taxes under Chapter 212, Florida Statutes. Such persons have a duty to keep and preserve their records, and the records shall be open to examination by the Department or its authorized agents at all reasonable hours pursuant to Section 212.12(6), Florida Statutes. The Department is authorized to conduct audits of taxpayers and to request information to ascertain their tax liability, if any, pursuant to Section 213.34, Florida Statutes. The Department conducted an audit of Petitioner to determine if Petitioner was properly collecting and remitting sales and use tax to the Department. The audit covers the period from November 1, 1992, through October 31, 1997. Petitioner is a retail carpet store, selling carpet and other flooring material, both installed and non-installed, in Sebring, Florida, and the surrounding areas. An invoice is prepared for each sales transaction. Petitioner rents the building in which its business is conducted and where Petitioner’s inventory and supplies are stored. Petitioner pays rent monthly. During the audit period, tax was neither paid nor collected on the rent payments. Petitioner purchases carpet samples from out-of-state vendors for use in its business. During the audit period, sales tax was not paid on all purchases. Petitioner collected tax on the price of the carpet or other flooring materials, as reflected on the invoice, where the customer was a taxpaying entity and collected tax on the total price on the invoice when the invoice specified installation. Petitioner did not collect tax on the price of the carpet or other flooring material, as reflected on the invoice, for tax-exempt entities, whether the invoice reflected the carpet or other flooring material as installed or non-installed. On May 18, 1998, a Notice of Intent to Make Audit Changes was presented to Petitioner. Additional sales and use tax and infrastructure surtax were determined to be due for the following taxable events: (a) rental expenses; (b) taxable purchases of samples; and, (c) sales to tax-exempt entities where the sale of carpet or other flooring materials included installation to real property. On May 18, 1998, Petitioner paid the additional tax assessed for taxable rental expenses and taxable purchases of samples and has been given credit for such payment. Petitioner protests the tax assessed on the cost price of carpeting used where the customer was a tax-exempt entity and the sales price included installation. On July 16, 1998, the Department sent to Petitioner its Notice of Proposed Assessment showing that Petitioner owed additional sales and use tax and infrastructure surtax in the amount of $13,569.15 and $2,188.01, respectively. Added to the tax owed by Petitioner were penalties in the amount of $6,730.78 and $1,085.02, respectively, and interest through July 16, 1998, in the amount of $4,627.66 and $736.95, respectively. The total assessment was $24,927.59 and $4,009.98, respectively. Credits in the amount of $8,233.87 and $1,372.30 respectively, have been applied against the taxes assessed and reflect the payments made by Petitioner on May 18, 1998. The amount of taxable rental expenses reported on the audit work paper Schedule B010 is consistent with Petitioner’s monthly reports. The amount of taxable sample expenses reported on the audit work paper Schedule B020 is consistent with Petitioner’s monthly reports. 18 The amount of exempt sales reported on the audit work paper Schedule B030 is consistent with Petitioner’s monthly reports. Petitioner timely filed a written protest of the Department’s proposed assessment. On October 25, 1998, the Department issued its Notice of Decision as to the protest of Petitioner. The proposed assessment was sustained by the Department. All invoices in the Department’s Composite Exhibit numbered 2, with the exception of invoices numbered 68, 197, 262, 432, 481, 482, 497, and 498, which are related to transactions that do not involve real property, are records of contracts between Petitioner and the tax-exempt entity to furnish and install wall-to-wall carpet or other flooring materials on real property. There is no retained title provision in any of these contracts. With the exception of invoices numbered 68, 197, 262, 432, 481, 482, 497, and 498, the invoices contained in the Department’s Composite Exhibit numbered 2 reflect an improvement being made to real property. Each of the invoices in the Department’s Composite Exhibit numbered 2 corresponds to a specific entry in Schedule B030 of the audit work papers and which is included under Tab 7a, pages 19 through 32, of the Department’s Composite Exhibit numbered 1. When Petitioner installed, or subcontracted the installation of carpet, the carpet was affixed to the floor by glue, nails, or other means and became the finished floor. Although tack strips, glue, nails, seaming tape, and other items were not listed on the invoice, these items are commonly used in the industry to complete performance of contracts such as those involved in this proceeding. In providing for the installation of carpet or other flooring materials involved in this proceeding, Petitioner engaged subcontractors and paid the subcontractor by the square yard. The square yard price included all materials and labor. With some exceptions, such as metal strips, materials used in the installation of the carpet or other flooring materials were not reflected on the invoices. Since there was no itemization of parts and labor, the invoices contained in the Department’s Composite Exhibit numbered 2, with the exception of invoices numbered 68, 197, 262, 432, 481, 482, 497, and 498, are lump-sum contracts. During his testimony at the hearing, John T. Griffin described Petitioner’s invoices as lump-sum contracts. Petitioner argued that the Department had failed to provide the proper information and training concerning the Department’s position on the imposition of the tax. However, based on the testimony of the Department’s witnesses concerning this matter it appears that sufficient information and sufficient training concerning the Department’s position on the imposition of the tax was readily available to Petitioner or its employees. The noncompliance by Petitioner with the applicable sales and use tax rules was not due to willful negligence, willful neglect, or fraud. It is the recommendation of the Department’s employees that the penalty assessed in this matter be waived. As of January 18, 2000, the total sales and use tax, penalty, and interest was $17,658.80. The local governmental infrastructure total surtax, penalty, and interest was $2,786.58. These totals do not reflect a downward adjustment for the taxes, penalty, and interest assessed against invoices numbered 68, 197, 262, 432, 481, 482, 497, and 498. For these invoices, the adjustment for taxes assessed, penalty, and interest shall be calculated from the date of each specific invoice and Petitioner given credit for any taxes, penalty, or interest charged against it for invoices numbered 68, 197, 262, 432, 481, 482, 497, and 498. The interest that has been assessed for the taxes that were not paid on the rent of the building or the carpet samples is appropriate. Petitioner does not disagree with this interest.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Department enter a final order upholding its assessments dated October 25, 1998, of sales and use tax, the local infrastructure surtax, plus applicable interest against Griffin Carpet Mart, Inc., with credit being provided for any payments made and for the assessments related to invoices numbered 68, 197, 262, 432, 481, 482, 497, and 498. It is further recommended after considering all the circumstances surrounding this case, that all penalties be waived. DONE AND ENTERED this 7th day of April, 2000, in Tallahassee, Leon County, Florida. WILLIAM R. CAVE 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) 921-6947 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 7th day of April, 2000. COPIES FURNISHED: James F. McCollum, Esquire Law Offices of James F. McCollum, P.A. 129 South Commerce Avenue Sebring, Florida 33870-3698 John Mika, Esquire Nicholas Bykosky, Esquire Office of the Attorney General Department of Legal Affairs The Capitol, Tax Section Tallahassee, Florida 32399-1050 Larry Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100 Linda Lettera, General Counsel Department of Revenue 204 Carlton Building Post Office Box 6668 Tallahassee, Florida 32314-6668
The Issue The issue is whether petitioner's candidacy for the office of Tax Collector would conflict or interfere with his employment as an auditor for the Department of Revenue.
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: Petitioner, Robert M. Hendrick, a career service employee, is employed with respondent, Department of Revenue (DOR), as a Tax Auditor IV in its Leesburg, Florida field office. He has been employed by DOR since September 1991. In his position, petitioner primarily audits tangible personal property assessments performed by the local Property Appraiser and, on occasion, he inspects the property which is the subject of the assessment. In March 1996, the Lake County Tax Collector publicly announced that he would not run for reelection. After learning of this decision, by letter dated March 19, 1996, petitioner requested authorization from his employer to run for that office. The letter was received by DOR's Executive Director on April 1, 1996. On April 10, 1996, the Executive Director issued a letter denying the request on the ground the candidacy would conflict with petitioner's job duties. More specifically, the letter stated in relevant part that: Under section 195.002, Florida Statutes, the Department of Revenue has supervision of the tax collection and all other aspects of the administration of such taxes. Your position with the Department may require you to review or audit the activities of the office you propose to seek. Also some of your duties in supervising other officials in the administration of property taxes may be affected by your proposed candidacy. Your job requires you to review appropriate tax returns, and other records to resolve complex issues related to taxing statutes administered by the Department of Revenue. It also requires you to identify and scrutinize transactions to ascertain whether taxpayers have escaped paying property taxes. In addition, it also requires you to review and audit procedures used by counties to identify and value tangible personal property and accomplish statutory compliance, to investigate taxpayer complaints, to conduct field review with county staff as appropriate, and to provide education and assistance to county taxing officials. Because of the Department's statutory supervision of the office of tax collector, there cannot be a certification that your candidacy would involve "no interest which conflicts or activity which interferes" with your state employment within the definitions in section 110.233(4), Florida Statutes. The letter went on to say that This letter is a specific instruction to you that you should not qualify or become a candidate for office while employed in your current position. If you wish to commence your campaign by performing the pre-filing requirements, the law requires that you first resign from the Department. Failure to do so shall result in disciplinary action to dismiss you from your position in accordance with the Department's disciplinary standards and procedures, and Rule 60K-4.010, F.A.C., on the grounds that you are in violation of the Department's Code of Conduct, Section 110.233, Florida Statutes, and Rule 60K- 13.002(3), F.A.C. After receiving the above decision, by letter dated April 15, 1996, petitioner requested that the Executive Director reconsider his decision. Thereafter, on April 24, 1996, petitioner filed a request for a formal hearing to contest the agency's decision. Both the Property Appraiser and Tax Collector play a role in the property tax program in the State of Florida. The Property Appraiser generally values or assesses property subject to taxation and applies the millage rate set by the taxing authority. After the tax roll is approved by DOR, it is certified to the Tax Collector who then collects the taxes and distributes them to the appropriate taxing authorities. It is noted that ad valorem taxes make up the lion's share of taxes at the local level while tangible personal property taxes are a very small source of revenues. DOR is charged with the duties of providing oversight to the property tax program and aid and assistance to the Property Appraiser and Tax Collector. In this regard, DOR views the two offices as an integral part of the property tax program rather than two separate entities. It characterizes the program as "a stream or process where (the) lines of delineation (between the two offices) are not as distinct as they might have been ten or fifteen years ago." Because of the highly sensitive nature of the tax program, it follows that a certain degree of trust and integrity must exist between DOR (and its employees) and the local offices. Petitioner does not interface with the office of Tax Collector in any respect, and his duties do not require that he audit any of that office's records. His only duties are to audit the tangible personal property assessments performed by the Property Appraiser. These facts were not controverted. Although he has never differed with a valuation of the Property Appraiser during his five year tenure at DOR, and no such disagreement has occurred in Lake County during the last twenty-five years, petitioner could conceivably disagree with an assessment while running for office during the next few months. If the matter could not be informally settled, the tax rolls would not be certified by DOR, and litigation against DOR could be initiated by the Property Appraiser. Under those unlikely circumstances, petitioner might be called as a witness in the case, although the general practice has always been for DOR to use personnel from the Tallahassee office in litigation matters. To the very minor extent that petitioner could affect the tax rolls by disagreeing with the Property Appraiser's valuations, this could also impact the amount of money collected by the Tax Collector. DOR cites these circumstances as potentially affecting in an adverse way the level of trust and integrity between DOR and the office of Tax Collector. However, under the facts and circumstances of this case, this potential conflict is so remote and miniscule as to be wholly immaterial. The evidence also shows that in his audit role, petitioner has the "opportunity . . . to look and have access to tax returns," some of which "are of TPP (tangible personal property) nature (and) have attached to them federal tax returns" which might be used by the Property Appraiser for establishing the value of tangible personal property. Whether petitioner has ever had access to, or reviewed such, returns is not of record. In any event, to the extent this set of circumstances would pose a potential conflict with the Property Appraiser, as to the Tax Collector, it would be no more significant than the purported conflict described in finding of fact 7. Finally, DOR suggests that if petitioner was unsuccessful in his bid for office, it would likely damage the "relationship of trust" that now exists between DOR and the Tax Collector. Again, this purported conflict is so speculative as to be deemed immaterial. The parties have stipulated that, as of the date of hearing, petitioner's only option for qualifying to run for office is to pay a $6,173.00 qualifying fee no later than noon, July 19, 1996. The opportunity for submitting an appropriate number of signatures in lieu of a filing fee expired on June 24, 1996. On the few, isolated occasions during the last twenty-five years when the Lake County Tax Collector has requested information from DOR personnel, he has spoken by telephone with DOR legal counsel in Tallahassee. Those matters of inquiry, primarily relating to ad valorem taxes, do not concern any area related to petitioner's job duties. He also pointed out that his office always cooperates with the office of the Property Appraiser, especially when "corrections" must be made due to errors by that office. Even so, he described the two offices as being separate and with entirely different duties. This testimony is accepted as being the most persuasive on this issue. At least four persons have already announced that they would run for Tax Collector for Lake County. The parties have stipulated that one of those persons is a regional administrator for the Department of Highway Safety and Motor Vehicles who was not required to resign his position in order to run for office. According to the incumbent Tax Collector, that individual supervises other state employees who occasionally audit certain aspects of his office pertaining to automobile license plates and decals. Because of the time constraints in this case, and although not legally obligated to do so, respondent has voluntarily agreed to allow petitioner to take annual leave (or presumably leave without pay) commencing on the date he qualifies for local public office, or July 19, 1996, and to remain on leave until a final order is issued by the agency. At that time, if an adverse decision is rendered, petitioner must choose between resigning or withdrawing as a candidate. These terms are embodied in a letter from DOR's counsel to petitioner dated July 3, 1996. If petitioner is allowed to run for office without resigning, he has represented that he will campaign while on leave or after regular business hours. He has also represented, without contradiction, that his campaign activities will not interfere with his regular duties. If elected, he intends to resign his position with DOR.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department of Revenue enter a final order granting petitioner's request that it certify to the Department of Management Services that his candidacy for the office of Lake County Tax Collector would involve no interest which conflicts, or activity which interferes, with his state employment. DONE AND ENTERED this 10th day of July, 1996, in Tallahassee, Florida. DONALD R. ALEXANDER, 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 10th day of July, 1996. APPENDIX TO RECOMMENDED ORDER Respondent: Partially accepted in finding of fact 1. Partially accepted in findings of fact 2 and 3. 3-5. Partially accepted in finding of fact 1. 6. Partially accepted in finding of fact 5. 7-9. Partially accepted in finding of fact 4. 10-11. Partially accepted in finding of fact 7. 12. Rejected as being irrelevant since petitioner was not an employee of DOR in 1990. 13-17. Partially accepted in finding of fact 7. 18. Rejected as being unnecessary. 19-20. Partially accepted in finding of fact 5. 21. Partially accepted in finding of fact 8. 22-23. Partially accepted in finding of fact 5. Partially accepted in finding of fact 9. Rejected as being unnecessary. Note - Where a proposed finding of fact has been partially accepted, the remainder has been rejected as being irrelevant, not supported by the evidence, unnecessary, subordinate, or a conclusion of law. COPIES FURNISHED: L. H. Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100 Linda Lettera, Esquire Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 Mr. Robert M. Hendrick 5022 County Road 48 Okahumpka, Florida 34762 Peter S. Fleitman, Esquire Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668
The Issue At issue herein is whether or not the Respondent's certificate to practice as a certified public accountant in the State of Florida should be revoked based on conduct which will be set forth hereinafter in detail for alleged violations of Chapter 473, Florida Statutes, and the rules and regulations promulgated and adopted thereunder in Chapter 21A, Florida Administrative Code.
Findings Of Fact Based on the testimony of witnesses and their demeanor while testifying, the documentary evidence introduced at the hearing, and the entire record compiled herein, the following relevant facts are found. Mark Finkel, Respondent, is the holder of certificate No. 2327 as a certified public accountant in the State of Florida. As such, the Respondent is subject to the provisions of Chapter 473, Florida Statutes, and the rules and regulations promulgated in Chapter 21A, Florida Administrative Code. The Respondent has been so registered as a certified public accountant since 1968. During early 1973, Respondent was engaged by David E. Wells, M.D., P.A., to prepare and file individual and corporate tax returns for the entity, David E. Wells, M.D., P.A., for the three years ending June 30, 1975. Respondent's engagement stamped from a referral of Dr. Wells' former C.P.A., Tom Williams, who relocated from Florida during late 1972. At the outset of his engagement by Dr. Wells, Respondent was briefed on the nuances of Dr. Wells' cardiology practice by Tom Williams. Respondent, according to Dr. Wells, was told that his duties would include those of filing corporate and individual tax returns and proper accounting for the administration and payment of pension plan taxes. During 1973, Respondent made quarterly visits to Dr. Wells' office to review records and billing information. The record reveals that Respondent filed quarterly payroll tax returns through September of 1976 and individual income tax returns for the years ending 1973 and 1974. Respondent failed to file individual income tax returns for the year ending December, 1975, or corporate returns for the years ending June 30, 1973, through 1976, and pension tax returns for the years ending 1973 through 1976. However, Respondent represented to Dr. Wells that all necessary returns were filed with the Internal Revenue Service and the other governmental agencies charged with the collection of taxes. For the years 1973 through 1976, Dr. Wells received inquiries from the Internal Revenue Service requesting information as to why corporate tax returns had not been filed for his corporation for the three years ending June 30, 1975. Based on the correspondence received from the Internal Revenue Service, Dr. Wells attempted to communicate with Respondent to either get the necessary forms filed or to request a return of Respondent's working papers which would assist another C.P.A. in preparing and filing the pertinent returns, to no avail. In this regard, after repeated calls, Dr. Wells obtained what records Respondent had which were of little use to his newly retained accountant, Myron Kahn, a certified public accountant who, since 1959, has been licensed in Florida and North Carolina. Messr. Kahn was retained by Dr. Wells in December of 1976 and established that the Respondent had only filed an individual income tax return for Dr. Wells for the calendar year 1973, plus quarterly payroll tax returns filed which were current. (See Petitioner's Exhibits 1 and 2.) Based on the available records, Messr. Kahn reconstructed the necessary accounting data based on cash receivables and disbursement vouchers for the prior four-year period. Messr. Kahn, after diligent search, found no control sheets, financial summaries, analyses, etc., which would have been kept if the pertinent income tax returns had been filed as required. Because Messr. Kahn had to reconstruct the necessary accounting data, he spent an inordinate amount of time compiling the returns he needed to file. Evidence reveals that due to Dr. Wells' late filing of tax returns for the fiscal year ending June 30, 1974, he incurred an additional penalty of $12,600, plus approximately $2,700 in interest and for his state corporate return, a penalty of $1,700 was assessed, plus $325 for interest. For the year ending June 30, 1975, Dr. Wells paid a Federal penalty of $5,618, plus $878 in interest, and a state penalty of $1,052, plus $132 in interest. Douglas H. Thompson, Jr., the Board's Executive Director, has been a certified public accountant since April, 1968. Director Thompson is the Board's chief administrative officer and custodian of records. On approximately December 16, 1976, Director Thompson received a complaint from David E. Wells, M.D., based on Respondent's "failure to file requested corporate returns and to return certain documents."
Recommendation Based on the foregoing findings of fact and conclusions of law, and in the absence of any effort on Respondent's part to refute or otherwise mitigate the evidence presented, it is hereby, RECOMMENDED: That the Respondent's license to practice as a certified public accountant (certificate No. 2327) be REVOKED. DONE and ENTERED this 6th day of August, 1979, in Tallahassee, Florida. JAMES E. BRADWELL Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675
The Issue Whether or not the Petitioner is required to pay taxes under the authority of Chapter 212, Florida Statutes, which are set forth in the assessment by the Respondent, State of Florida, Department of Revenue, dated May 18, 1977.
Findings Of Fact The Respondent, State of Florida, Department of Revenue, performed an audit of the business which is the Taj Apartments, for purposes of determining if sales and use taxes were owed by that operation. At the time of the initial contact by the Respondent, the Taj Apartments were owned by individuals other than the Petitioner, Robert Hartley. However, in the process of the audit, it was determined that Hartley would be responsible for paying some of the assessments which were being alleged against the operation located on the premises which constitutes the Taj Apartments. Further liability for the audit period was established when Robert Hartley foreclosed a mortgage which he held from the owners of record who were the owners when the tax audit was first commenced. By his action of foreclosure, he became responsible for any tax assessments under Chapter 212, Florida Statutes, which were mete and proper during the audit period, which dated from September 1, 1973, through May 31, 1975. Those dates include the time that Robert Hartley d/b/a Taj Apartments was still in control of the premises. The assessment of the property from September 1, 1973, through May 31, 1975, was made upon the basis of a consideration of the rents collected as reflected in Hartley's ledger cards and receipts. The taxation was based upon a consideration of the number of units, in contrast to a consideration of the number of tenants found in the apartment building. The distinction of taxation on units and not tenants is significant because Hartley, in his petition, challenges the right of the Respondent to tax on a formula which pertains to units and not tenants. The language of the applicable section of Chapter 212, Florida Statutes, specifically, Section (7)(c), Florida Statutes, states the following: The rental of facilities, including trailer lots, which are intended primarily for rental as a principal or permanent place of residence is exempt from the tax imposed by this chapter. The rental of facilities that primarily serve transient guests is not exempt by this subsection. In the application of this law, or in making any determination against the exemption, the department shall consider and be guided by, among other things: Whether or not a facility caters primarily to the traveling public; Whether less than half of its tenants have a continuous residence in excess of 3 months; and The nature of the advertising of the facility involved. It can be seen that the language of that provision clearly invisions that permanent residents are exempt from consideration of the tax, and transient guests are not exempt. Discussion of tenants is used only in describing some of the matters that the Respondent shall consider and be guided by, and is not the only determination which the Respondent must look to in determining whether an exemption from the provisions of this subsection has been established. Furthermore, the fact that Rule 12A-1.61, Florida Administrative Code, which implements Chapter 212, Florida Statutes, in this particular taxing theory speaks in terms of units and not tenants is not inconsistent or in violation of the above quoted statutory provision, because that statutory provision allows the Respondent to look at other things in making its determination of an exemption. The language of Rule 12A-1.61, Florida Administrative Code, spoken of, states the following: Rental of living quarters, sleeping or housekeeping accommodations. (1) Every person, except housing authorities which are specifically exempt from provisions hereof by Section 212.08(10), F.S., is exercising a taxable privilege when he engages in the business of renting, leasing or letting any living quarters, sleeping or housekeeping accommodations in connection with any hotel, motel, apartment house, duplex, rooming house, tourist or mobile home court subject to the provisions of Chapter 212, F.S. Notwithstanding the aforesaid provisions of this paragraph, effective March 1, 1972, the tax shall not apply to the rental of living accommodations which are rented primarily to persons as their principal or permanent place of residence but the tax shall apply to the rental of such facilities at hotels, motels, and seasonal lodging facilities that primarily serve transient guests. (See paragraph 9 of this rule.) When a lodging facility does not primarily cater or advertise that it primarily caters to seasonal or transient guests, or to the traveling public, and when fifty percent or more of its total units are rented to persons who have resided thereat continuously for the three months immediately preceding March 1, 1972, the facility shall have an exempt status until a redetermination has been made. Landlords beginning business after March 1, 1972 shall determine the taxable status of their lodging facility as of the commencing of business. In making their determination, the above guidelines will be applied except that the three months prior residence requirement will be waived in those instances where leases or other records of the facility clearly reflect that the facility does not primarily cater to or advertise that it caters to seasonal or transient guests or the traveling public. All landlords are required to make a redetermination of the taxable status of their businesses on July 1 of each year and in the event that his taxable status has changed, he shall notify the Department of such change. Therefore, the Petitioner's challenge to the Respondent's utilization of rental units, as opposed to tenants residing in the apartment building of the Petitioner during the pendancy of the audit period, to decide the issue whether less than half of the tenants (units) have a continuous residence in excess of three months must fail. Moreover, when an assessment is made under the theory of Section 212.03, Florida Statutes, it is incumbent on the taxpayer to establish an exemption and the petitioner offered no evidence to establish an exemption. In view of the fact that the information for the assessment was taken from the books and records of the Petitioner, and their being no testimony to establish an exemption from the tax imposed on the rentals of the Taj Apartments which was serving transient guests in the time period at issue; the tax together with penalties and interest as set forth in the assessment document (Respondent's Exhibit No. 1, admitted into evidence) should stand. The audit brought about a further assessment for use tax due and owing during the period of the audit. The use tax pertains to Robert Hartley's rental of television sets to the guests in his rental facility and the rental of parking spaces to the guests in the rental facility. The determination of taxes owed for those rentals was also premised upon an examination of Mr. Hartley's books and records. No reason was established for not using the figures found in the hooks and records, in assessing any tax that might be owed for the rental of television sets and parking spaces. Consequently, the portion of the assessment of May 18, 1977, pertaining to a use tax on the rentals of the television sets and parking spaces should be upheld. The imposition of the assessment of May 18, 1977, is a revision of a prior assessment which was rendered before Mr. Hartley provided his books and records. This revised assessment reduced the initial assessment, premised upon an examination of Mr. Hartley's books and records and certain credits for exemptions in the year 1974. The revised assessment reflects this in its provision entitled "Abatements:" The revised assessment then becomes an assessment of $15,960.92. This assessment is constituted of a tax on the transient rentals, parking spaces and television sets; together with penalties on that tax amount and interest through May 8, 1977. The facts show that the revised assessment of May 18, 1977, is correct.
Recommendation It is recommended that the assessment of May 18, 1977, which has been placed against the Petitioner, Robert F. Hartley, d/b/a Taj Apartments, be upheld. DONE AND ENTERED this 17th day of February, 1978, in Tallahassee, Florida. CHARLES C. ADAMS, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Mr. Robert F. Hartley Post Office Box 82 Middletown, California 95461 and Mr. Robert F. Hartley 33 Southwest 2nd Avenue Miami, Florida 33130 Edwin Stacker, Esquire Assistant Attorney General Department of Legal Affairs The Capitol Tallahassee, Florida 32304 John D. Moriarty, Esquire Department of Revenue Room 104 Carlton Building Tallahassee, Florida 32304
