Findings Of Fact Modern Tool and Die, (MTD), is a privately held corporation engaged in manufacturing equipment. In 1965 they started the manufacture of bumper guards which required electroplating. They entered into agreements with MPC pursuant to which MTD erected two buildings adjacent to their plant which they leased to MPC in which to do the electroplating of the bumper guards. MPC is also a privately held corporation and there is no common ownership of these two companies. The two buildings built for MPC's occupancy were partitioned, compartmented and wired as desired by MPC and at its expense. Florida Power Corporation supplied electricity to the complex through the main transformer of MTD. In 1965 and to a lesser extent now, electricity rates per kilowatt-hour (kwh) were lowered with increased usage of electricity. Since both MTD and MPC are large users of electricity they obtain a cheaper rate if all electricity used is billed from the master meter serving MTD. Accordingly, and at the recommendation of the power company, additional transformers and meters were placed at the two buildings occupied by MPC and read monthly at or about the same time the master meter is read by the power company. The kw used at the two buildings is forwarded by MPC to MTD each month. The latter, upon receipt of the power company bill, computes the cost of the power per kwh and in turn bills MPC for its portion of the bill based upon the usage forwarded by MPC to MTD. Upon the commencement of this working agreement between these two companies in 1965 MPC, pursuant to an oral lease, has paid rent to MTD monthly at the rate of approximately $2,400 per month. It has also paid to MTD its pro rata cost for the electricity used each month. The rent is invoiced each month on the first of the month as in Exhibit 3 and paid by the 10th by MPC. Sales tax is added to the rent and remitted to DOR. Electricity usage is also invoiced by MTD to MPC on or about the 20th of the month and paid by MPC on or about the first of the following month. (Exhibit 4). Sales tax on the electricity used is paid by MTD to Florida Power Company who presumably remits this to DOR. During the 15 years these two companies have shared the cost of electric power they have been audited numerous times; the arrangement was made known to the auditors; and no auditor, prior to the present, suggested that the cost of electricity was part of the rent paid by MPC upon which sales tax was due. Notice of Proposed Assessment (Exhibit 1) in the amount of $9,747.34 is based upon the cost of electricity billed to MPC during the period of the audit December 1, 1976 through November 30, 1979 multiplied by 4 percent sales tax plus penalties and interest. The parties stipulated to the accuracy of this amount. They differ only as to whether the tax is owed.
The Issue The issue in this case is whether the Respondent's certificates of registration should be revoked for an alleged failure to file tax returns and to remit taxes to the Petitioner.
Findings Of Fact The Petitioner is the state agency responsible for collection of sales and use taxes in Florida, pursuant to chapter 212, Florida Statutes (2011).1/ The Respondent is a Florida company doing business at 7810 U.S. Highway 19, Port Richey, Florida, and is a "dealer" as defined at section 212.06(2). The Respondent holds two certificates of registration issued by the Petitioner (Certificate No. 61-8012297146-3 and Certificate No. 61-8012297147-0) and is statutorily required to file tax returns and remit taxes to the Petitioner. As set forth herein, the Respondent has failed to file tax returns or has filed returns that were not accompanied by the appropriate tax payments. During the time the Respondent has held the certificates, the Petitioner has filed 15 separate warrants against the Respondent related to unpaid taxes, fees, penalties, and interest. The Petitioner is authorized to cancel a dealer's certificate of registration for failure of a dealer to comply with state tax laws. Prior to such cancellation, the Petitioner is required by statute to convene a conference with a dealer. On June 24, 2011, the Petitioner issued a Notice of Conference on Revocation of Certificate of Registration (Notice). The conference was scheduled for July 27, 2011. The Respondent received the Notice and attended the conference. Certificate of Registration No. 61-8012297146-3 The Respondent failed to file tax returns related to Certificate No. 61-8012297146-3 for the period of August through December 2001. The Petitioner assessed estimated taxes of $587.50, fees of $110.95, and a penalty of $285.00. As of the date of the Notice, the accrued interest due was $633.79. Additionally, the Respondent failed to remit taxes of $5,623.63 related to Certificate No. 61-8012297146-3 that were due according to his filed tax returns. Based thereon, the Respondent assessed fees of $994.58 and a penalty of $2,478.26. As of the date of the Notice, the accrued interest due was $4,702.27. As of the date of the Notice, the Respondent's total unpaid obligation on Certificate No. 61-8012297146-3 was $15,415.98, including taxes of $6,211.13, fees of $1,105.53, penalties of $2,763.26, and accrued interest of $5,336.06. Certificate of Registration No. 61-8012297147-0 The Respondent failed to file tax returns related to Certificate No. 61-8012297147-0 for the months of June 2000, September 2000, May 2001, and August 2001. The Petitioner assessed estimated taxes of $619.00 and fees of $202.00. As of the date of the Notice, the accrued interest due was $782.56. Additionally, the Respondent failed to remit taxes related to Certificate No. 61-8012297147-0 of $4,332.48 that were due according to his filed tax returns. Based thereon, the Respondent assessed fees of $771.71 and a penalty of $1,576.87. As of the date of the Notice, the accrued interest due was $4,725.27. As of the date of the Notice, the Respondent's total unpaid obligation related to Certificate No. 61-8012297147-0 was $13,009.89, including taxes of $4,951.48, fees of $973.71, penalties of $1,576.87, and accrued interest of $5,507.83. The Audit A separate audit of the Respondent's business records for the period of February 2004 through January 2007 resulted in an additional assessment totaling $9,314.07, including taxes of $5,048.23, fees of $661.76, and a penalty of $252.42. As of the date of the Notice, the accrued interest due was $3,351.66. At the July 27, 2011, conference, the parties negotiated a compliance agreement under which the Respondent would have retained the certificates of registration. The agreement required the Respondent to make an initial deposit of $2,000.00 by August 15, 2011, and then to make periodic payments towards satisfying the unpaid obligation. The Respondent failed to pay the $2,000.00 deposit, and the Petitioner subsequently filed the Complaint at issue in this proceeding. As of the date that the Complaint was filed, the Respondent owed a total of $37,797.66 to the State of Florida, including taxes of $15,004.34, estimated taxes of $1,206.50, fees of $2,741.00, penalties of $4,592.55, and accrued interest of $14,253.27.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue issue a final order revoking the certificates of registration held by the Respondent. DONE AND ENTERED this 1st day of May, 2012, in Tallahassee, Leon County, Florida. S WILLIAM F. QUATTLEBAUM Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 1st day of May, 2012.
Findings Of Fact Finding no record that Taxpayer had filed or paid intangible taxes for the years 1979 and 1980, on June 17, 1982, DOR notified Taxpayer they were reviewing Taxpayer's intangible personal property tax account for the years 1979 through 1982 (Exhibit 16). During the audit which followed Taxpayer presented copies of the 1981 and 1982 tax returns and cancelled checks evidencing payment. The audit disclosed small discrepancies in these returns and those discrepancies were satisfied by the Taxpayer and are not an issue in these proceedings. On December 15, 1982, Gateway Hospital sold its assets to Humana Corporation and in December 1983 the corporation was dissolved and a liquidating trust was established to settle accounts and distribute proceeds to the stockholders. After this date none of Taxpayer's employees were located at the Gateway Hospital address, 5115 - 58th Avenue North, St. Petersburg, Florida. One of Taxpayer's contentions on the timeliness issue is that all notices from DOR were sent to the 58th Street address and were either not received or not timely received by Taxpayer. No special notification to DOR of a change of address was submitted by Taxpayer. The 1983 intangible tax return showed Taxpayer's address as 5800 49th Street, Suite 201, St. Petersburg, Florida. However, in the petition for hearing dated March 21, 1985, Petitioner's address is shown as 5115 58th Avenue North, St. Petersburg, Florida 33709. On April 2, 1984, DOR sent Taxpayer Notice of Proposed Assessment (Exhibit 6) for tax years 1979, 1980, 1981, 1982, and 1983 in the amount of $19,786.36 with interest through February 23, 1984. This notice advised Taxpayer that this was final agency action and of its right to petition for an administrative hearing within 60 days or file an action in circuit court within 60 days, and that failure to so petition or file would render the proposed assessment final and no action could thereafter be brought to contest the assessment. This notice was sent certified mail and receipted for at the 58th Avenue North address. Alan Steinbach, the chief operating officer of the liquidating trust, testified he never received Exhibit 6. Subsequent to June 19, 1984, DOR sent Notice of Demand for Payment (Exhibit 7) to Taxpayer to the 58th Avenue North address. This document, the top part of which is identical to Exhibit 6 except interest has been computed to 6/19/84, was received by Steinbach. Steinbach contacted DOR and told Randy Miller, Executive Director, that this was the first notice of a delinquency he had received from DOR and needed additional time to show the taxes had been paid. Miller agreed to allow Taxpayer more time and communicated this to Steven J. Barger, Jr., Chief, Bureau of Audit Selection. By letter dated August 13, 1984 (Exhibit 8), Barger advised Steinbach that the collection procedure would be delayed 30 days to permit Taxpayer time to submit the information necessary to set aside the assessment. By letters dated September 11, 1984 (Exhibit 9) and October 17, 1984 (Exhibit 12), the collection procedures were further stayed until December 12, 1984. During this period Taxpayer presented evidence that the 1982 and 1983 intangible personal property taxes had been paid and all errors in those returns were corrected and the correct taxes paid. By Notice of Proposed Assessment dated 1/9/85 (Exhibit 14) an audit assessment for the tax years 1979-1983 was forwarded to Taxpayer showing the tax, penalties and interest for the tax years 1979 and 1980 through 1/3/85 in the amount of $12,296.30 were due and no taxes were due for the other years. The explanation of appeal rights attached to this audit assessment advised the Taxpayer had 60 days from the date of assessment to contest the assessment in an administrative proceeding or a judicial proceeding. On March 21, 1985, the instant petition was filed. During the period prior to January 9, 1985, Petitioner was unable to locate tax returns or cancelled checks showing payment for 1979 and 1980 although Taxpayer produced returns and cancelled checks for all of the other years from 1977 through 1983. DOR also located evidence showing intangible personal property taxes paid by Taxpayer before and after 1979 and 1980, but could find no record of returns being filed or taxes paid for the years 1979 and 1980. Upon receipt of a tax return and payment DOR photographs the return and payment check on microfilm, enters the data from the return in the computer, and forwards the tax return to the archives in the Department of State. An index for a tax year is compiled after the close of that tax year. Until this index is prepared, DOR cannot readily locate any tax return. As a result, whether or not a tax return was filed by a particular taxpayer cannot be ascertained by DOR until six to nine months after the close of the tax year. At the time Exhibit 7 was forwarded to Taxpayer, DOR could not have located the Taxpayer's 1983 return which, in fact, had been filed, as had the 1981 and 1982 returns. Taxpayer could not locate the returns or cancelled checks representing payment for the years 1979 and 1980. When asked why Taxpayer did not obtain bank records to establish payment, Steinbach responded that the corporation wrote 1000- 1500 checks per month and too many check would have to be screened. Since all payments by Taxpayer for the five years for which returns were produced were made in June, except for one year, 1983, which was paid in July, that does not appear to be an onerous task to avoid a tax liability of more than $12,000.
Findings Of Fact Petitioner purchased the facilities of a bankrupt chemical recovery plant and on May 13, 1987, was issued a temporary tax exemption (Exhibit 1) for sales taxes on equipment purchased for the production or processing of tangible personal property for resale. Petitioner essentially operates a distillation plant where products are distilled and certain chemicals are produced. The plant also operates as a servicing facility in removing impurities from products submitted for distillation. Because the materials received at the plant were not as clean as originally anticipated, there was less product for resale and more servicing provided than originally intended. The items on which sales tax refunds are requested were used to ,repair and/or refurbish the distillation plant, and the business qualifies as new business under Section 212.08(5)(b)(1), Florida Statutes. In 1987, Petitioner had receivables totaling $824,819 of which only $63,474 (7.7%) was in the account for sale of tangible personal property (Exhibit 3). Petitioner's witness testified that the other receivable accounts (Exhibit 3) are not service accounts. Petitioner now has an inventory of tangible personal property for sale in excess of $100,000 which was produced through the distillation plant. Although Respondent's auditor initially contended that Petitioner had failed to produce all invoices and bills to justify the exemptions claimed, on cross-examination he acknowledged that the refund for sale taxes paid on the equipment purchased was denied solely on the basis that the equipment and plant was not used principally for the production of tangible personal property for sale. The Notice of Intent (Exhibit 6) denied Petitioner's application for a sales tax refund in the amount of $12,592.75 for the reason that: Business is primarily a service organiza- tion and tangible personal property is only a minute show (sic) of the operation. Records were incomplete. The witness who signed the Notice of Intent understands the denial of the refund of sales taxes was because the sale of tangible personal property produced by Petitioner was not the primary or a substantial part of the revenues generated by the plant.
The Issue The issue in this case is whether Petitioner is liable for certain taxes and, if so, how much.
Findings Of Fact Petitioner is a Florida corporation with its principal place of business in Manatee County, Florida. Petitioner is in the printing business. Specifically, Petitioner produces, manufactures, assembles, and publishes telephone directories for mobile home parks in Florida. All of Petitioner's work in connection with these directories takes place in Florida. The directories list the names, addresses, and telephone numbers of residents of the mobile home park for which the directory is prepared. The directories also contain advertisements, which Petitioner solicits from merchants seeking to sell goods or services to the mobile home park residents. Following the production of the directories, Petitioner distributes them to the mobile home park residents, who maintain possession of the directories. However, Petitioner retains ownership of each directory, even after it is distributed. Petitioner is solely responsible for the manufacture and distribution of the directories. Petitioner owns accounts receivable reflecting monies owned it by entities for which Petitioner has performed work. Petitioner owns treasury stock. Following an audit, Respondent issued its Intent to Make Sales and Use Tax Audit Changes. The proposed changes assessed additional sales and use taxes of $44,151.77, intangible tax of $1297.08, and $194,75 of health care tax. The bases of proposed liability for the sales and use tax were for the publication and distribution of directories for which no sales or use tax had been collected and for the sale of advertising during the period of the service tax from July 1, 1986, through December 31, 1986, for which no sales tax on advertising had been collected. The basis of proposed liability for the intangible tax was for the failure to pay intangible tax on accounts receivable and treasury stock. The basis of proposed liability for the health care tax was for the failure to pay the Hillsborough County Health Care Tax and Discretionary Sales Surtax. On February 11, 1991, Petitioner protested the proposed assessments. On April 24, 1992, Respondent issued its Notice of Decision sustaining the proposed sales and use tax and intangible tax, but eliminating the proposed health care tax. On May 12, 1992, Petitioner filed a Petition for Reconsideration concerning the proposed sales and use tax. On November 24, 1992, Respondent issued its Notice of Reconsideration sustaining the proposed sales and use tax. On January 21, 1993, Petitioner timely filed its petition for a formal administration hearing. Subject to the accuracy of its legal position, Respondent's assessment is factually accurate. Petitioner will pay the assessed amount of sales and use tax, plus interest, if its position is not sustained following the conclusion of this proceeding, including judicial review.
Recommendation Based on the foregoing, it is hereby RECOMMENDED that a final order be entered determining that, for each assessed period, Petitioner is liable for the assessed corporate intangible tax plus interest, the use tax on the cost price of the materials and other covered items plus interest, the sales tax on services on the advertising revenues, but not for any sales tax apart from the period covered by the sales tax on services. ENTERED on January 25, 1994, in Tallahassee, Florida. ROBERT E. MEALE Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings on January 25, 1994. COPIES FURNISHED: David M. Carr David Michael Carr, P.A. 600 East Madison Street Tampa, Florida 33602 Eric J. Taylor Assistant Attorney General Office of the Attorney General 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 Tallahassee, Florida 32399-0100
The Issue The Petitioner and Respondent have agreed by stipulation that the following four issues of law are to be determined by the Hearing Officer: Whether Red Lobster must pay four percent sales tax on ad valorem taxes paid directly to a governmental taxing unit on leases in which it is set forth that Red Lobster, the Lessee, will, in addition to the rental payments, be obligated to pay the ad valorem taxes. Whether certain waitress uniforms and denominators purchased from vendors outside the State of Florida by Red Lobster and shipped to Red Lobster Headquarters within the State of Florida for storage purposes and subsequently transshipped for use in Red Lobster locations outside the State of Florida are subject to Florida sales or use tax. Whether those automobiles purchased by Red Lobster's parent company, General Mills, Inc., outside the State of Florida and on which a sales tax was paid in the state in which purchased and then leased to Red Lobster for use in the State of Florida for periods in excess of twelve months are subject to a Florida sales or use tax on the rental payments. Whether Red Lobster is obligated to pay an amount of sales tax determined by the Bracket System as set forth in Florida Statutes or is obligated to pay all sales tax actually collected so long as the sales tax collected equals or exceeds 4 percent of gross sales.
Findings Of Fact The Respondent Department of Revenue assessed certain sales and use tax against Petitioner Red Lobster Inns of America, Inc., for a three-year period commencing February 1, 1971 through January 31, 1974. The Petitioner filed a petition for hearing to the Division of Administrative Hearings pursuant to Chapter 120, Florida Statutes, contesting the imposition of said sales and use taxes by Respondent. Each of the issues will be treated separately. ISSUE I Whether Petitioner must pay 4 percent sales tax on ad valorem taxes paid directly to a governmental unit on leases in which it is set forth that Red Lobster, the Lessee, will, in addition to the rental payments, be obligated to pay the ad valorem taxes. Two kinds of leases are involved here. One type (Exhibit "A") provides the payment of "all real estate taxes" shall be "as additional rent" and a second type (Exhibit "B") provides that "The lessee shall be responsible for the payment of all real estate taxes" without labeling such payments as additional rental. In both types of leases, the ad valorem tax payments on the leased real estate are the obligation of Red Lobster, Lessee. The Petitioner, Lessee, paid the sales tax on the amount it considered "rent" paid but did not pay the sales tax on the monies paid the Lessor for the payment of the ad valorem taxes on the leased property. The Respondent Department of Revenue contends: that all the monies paid by Petitioner as Lessee, including the amount paid for the payment of ad valorem taxes, constitute consideration for the lease and thus constitute rent for purposes of Chapter 212. Petitioners contend: that these payments for ad valorem taxes are not "total rent charges for such real property" under Section 212.031(c); that to require that sales and use tax be paid on ad valorem tax payments is double taxation; that the imposition of a sales and use tax on an existing ad valorem tax constitutes a pyramiding of taxation contrary to Section 212.031(2)(b). Petitioner further contends that the rule 12A-1.70(3) exceeds the statutory authority of Section 212.031, Florida Statutes, inasmuch as the statute states a tax is levied on the "rent charged" whereas the rule states that the tax shall be paid "on all considerations." The lease between the parties marked for identification as Exhibit "A" provides in pertinent part on page 1, Section 2, Demise of Premises: "In consideration of the rents and covenants herein stipulated to be paid and performed by Lessee, Lessor hereby demises and lets to Lessee . . . the parcel of land . . . together with all buildings, structures and other improvements constructed thereon . . ." On page 5, in Section 9, Taxes and Other Charges: "(a) Lessee also agrees . . . to pay and discharge as auditional rent, punctually as and when the same shall become due and payable without penalty, all real estate taxes, personal property taxes, business and occupation taxes, occupational license taxes . . . and all other governmental taxes which at any time during the term of the lease shall become due " Clearly, the payment of taxes was understood by both parties as being part of the rent in Exhibit "A" contracts. The lease between the parties marked for identification as Exhibit "B" does not specifically provide that the payment of taxes is part of the rent. However, it speaks to the issue on page 1 providing: "That for and in consideration of the covenants and agreements herein contained and in consideration of the rents herein reserved to be paid by lessee to lessors, the parties hereto do hereby mutually covenant and agree . . . ." to do certain things and includes the specific requirement on page 3: "9. The lessee shall be responsible for the payment of all real estate taxes, both city and county, assessed against the demised premises and shall pay the same before the taxes become delinquent." It is apparent that the payment of real estate taxes is a part of the "total rent charges for such real property" in Exhibit "B" contracts. Designation by the Lessor as to the method of distributing the gross sum of rent does not relieve the Lessee from his payments to the Lessor or change the fact that it is for rent due and for the "return . . . which the tenant makes to the landlord for the use of the demised premises." 52 CJS, Section 462, p. 344. Thus, there is no pyramiding or double taxation. Inasmuch as the payment of ad valorem taxes is a part of the rental agreement between the parties, sales tax would be due on the amount paid by Lessee for ad valorem taxes regardless of whether the Lessee or the Lessor performed the transmittal duties of paying the taxes. The acceptance by the Lessee of the onerous duties of timely paying the numerous taxes, charges, assessments and other impositions is a valuable consideration and a part of the rent charge itself. The statute supports the assessment of Respondent. The contention that the rule is invalid is not well taken inasmuch as the rule is presumed valid for the purpose of this hearing. Thus, the Hearing Officer determines that the Petitioner Red Lobster Inns of America must pay the 4 percent sales tax on the ad valorem taxes paid directly to a governmental taxing unit. ISSUE II Whether the waitresses' uniforms and denominators (a counting device) purchased from vendors outside the State of Florida by Petitioner and shipped to Petitioner's headquarters in Florida for storage purposes and thereafter shipped for use in Red Lobster Inn locations outside the State of Florida are subject to Florida sales or use tax. The Respondent Department of Revenue sought to impose a use tax upon the uniforms and denominators which were purchased outside the state, sent in and then sent out again. The Petitioner Red Lobster Inns does not contest the assessment of sales or use tax on the uniforms and denominators that were used and consumed in this state. However, it contests the assessment on the items that were bought outside the state, sent in to Florida and then sent out of state in the same condition. Red Lobster uses uniforms both within and without the state and also denominators both inside and outside the state. The Respondent Department of Revenue contends: that the sales and use tax is properly applied inasmuch as the uniforms and denominators came to rest in the State of Florida, were delivered and stored and therefore became part of the mass property in the state. It contends that they were used in that a right of ownership was exercised. The Petitioner Red Lobster Inns contends: that the tax is not due on the items that were brought in and transshipped out again; that the goods never actually came to rest because the storage time was very short and was in fact part of the shipment process; that the uniforms and denominators were reshipped without having been used or consumed in this state. Section 212.05, Sales, storage, use tax.-- provides: "It is hereby declared to be the legislative intent that every person is exercising a tangible privilege who engages in the business of selling tangible personal property at retail in this state, or who rents or furnishes any of the things or services taxable under this chapter, or who stores for use or consumption in this state any item or article of tangible personal property as defined herein and who leases or rents such property within the state . . . . * * * (2) At the rate of 4 percent of the cost price of each item or article of tangible personal property when the same is not sold but is used, consumed, distributed or stored for use or consumption in this state." Section 212.06(6), Sales, storage, use tax; collectible from dealers; dealers defined; dealers to collect from purchasers; legislative intent as to scope of tax, provides: "(6) It is however, the intention of this chapter to levy a tax on the sale at retail, the use, the consumption, the distribution, and the storage to be used or consumed in this state of tangible personal property after it has come to rest in this state and has become a part of the mass property of this state." The Petitioner was correct in paying the tax on the waitresses' uniforms and the denominators that were used and consumed in this state. Those uniforms and denominators that were temporarily stored in this state and sent outside the state in the same condition were not a part of the mass property of this state, had not come to rest in this state nor became a part of the mass property of this state. They were not used or consumed in this state. The use and consumption of the uniforms and denominators were subsequent to their shipment outside of the state and therefore no use tax is due on those items reshipped to other states. ISSUE III Whether those automobiles purchased by Red Lobster's parent company, General Mills, Inc., outside the State of Florida and on which a sales tax was paid in the state in which purchased and then leased to Red Lobster for use in the State of Florida for periods in excess of twelve months are subject to Florida sales or use tax on the rental payments. The Petitioner contends: that it is entitled to the exemption in Rule 12A-1.07(13)(b) because the purchase of the automobiles was made out of state and sales tax was paid out of state. The Respondent Department of Revenue contends: the exemption of the rule applies only when the sales tax was paid to the State of Florida. Section 212.21(2), Declaration of legislative intent.-- provides in pertinent part: "(2) It is hereby declared to be the specific legislative intent to tax each and every sale, admission, use, storage, consumption or rental levied and set forth in this chapter, except as to such sale, admission, use, storage, consumption or rental, as shall be specifically exempted therefrom by this chapter, subject to the conditions appertaining to such exemption." Section 212.07(9), Sales, storage, use tax; tax added to purchase price; dealer not to absorb liability of purchasers who cannot prove payment of the tax; penalties; general exemptions:-- provides in part: "(9) Any person who has . . . leased tangible personal property, . . . and cannot prove that the tax levied by this chapter has been paid to his vendor or lessor shall be directly liable to the state for any tax, interest, or penalty due on any such taxable transactions." Rule 12A-1.07(13)(b) provides: "When the term of a lease or rental to one lessee or rentee is for a period of 12 or more months, the lessor-owner may pay the tax on the acquisition of the vehicle. In such cases, the rental to the initial lessee and the renewals thereof to the same lessee are not subject to the rental tax. Rentals of the same vehicle to subsequent lessees by the owner are taxable." Clearly, it appears from the foregoing that the rule made pursuant to the authority of the legislature does in fact state that the tax may be paid "on the acquisition of the vehicle" and that the lessee is then not subject to the rental tax. The rule is presumed to be valid. Thus, in answer to the question in Issue III, the answer is that the rental cars are not subject to the Florida sales or use tax on the rental payments having been specifically exempted. ISSUE IV Whether Red Lobster is obligated to pay an amount of sales tax determined by the Bracket System set forth in Florida Statutes or is obligated to pay all sales tax actually collected so long as the sales tax collected equals or exceeds 4 percent of gross sales. The Respondent Department of Revenue contends: that the Petitioner must collect and pay the tax according to the Bracket Method provided in the statutes. The Petitioner contends: that it does not have to be governed by the Bracket Method as long as Petitioner pays 4 percent of its gross sales to the State of Florida and that the Bracket System is merely a convenience method. Section 212.12(1), Dealer's credit for collecting tax; penalties for noncompliance; powers of Department of Revenue in dealing with delinquents; brackets applicable to taxable transactions; records required, providing for the Bracket System.-- clearly states in pertinent part: "(10) . . . Notwithstanding the rate of taxes imposed upon the privilege of sales, admissions and rentals, and communication services, the following brackets shall be applicable to all 4 percent taxable transactions: On single sales of less than 10 cents no tax shall be added. On single sales in amounts from 10 cents to 25 cents, both inclusive, 1 cent shall be added for taxes. On sales in amounts from 26 cents to 50 cents, both inclusive, 2 cents shall be added for taxes. On sales in amounts from 51 cents to 75 cents, both inclusive, 3 cents shall be added for taxes. On sales in amounts from 76 cents to $1, both inclusive, 4 cents shall be added for taxes. On sales in amounts of more than $1, 4 percent shall be charged upon each dollar of price, plus the above bracket charges upon any fractional part of a dollar." It is self-evident that the foregoing statute does in fact require the Bracket Method to be used inasmuch as it dictates that is shall be applicable to all 4 percent taxable transactions. The tax is increased when the Bracket Method is used. In summary, the findings of the Hearing Officer are: On Issue I, Petitioner Red Lobster Inns of America must pay ad valorem tax on the full amount of the consideration as set forth in its various leases. On Issue II, the waitresses' uniforms and denominators which were reshipped in the same condition outside the state were not subject to Florida sales and use tax. On Issue III, the automobiles on which a sales tax was paid to the state in which they were purchased and then leased to Red Lobster for use in this state for periods in excess of twelve months are not subject to the Florida sales and use tax on rental payments. On Issue IV, Petitioner Red Lobster Inns of America is obligated to pay an amount of sales tax determined by the Bracket System as set forth in Florida Statutes.
Recommendation Affirm the position of the Respondent Department of Revenue on Issue I. Affirm the position of the Petitioner Red Lobster Inns of America on Issue II. Affirm the position of the Petitioner Red Lobster Inns of America on Issue III. Affirm the position of the Respondent Department of Revenue on Issue IV. DONE and ORDERED this 16th day of March, 1977, in Tallahassee, Florida. DELPHENE C. STRICKLAND Hearing Officer Division of Administrative Hearings Room 530 Carlton Building Tallahassee, Florida 32304 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 16th day of March, 1977. COPIES FURNISHED: Terrell Griffin, Esquire 515 Pan American Building 250 North Orange Avenue Orlando, Florida 32801 Charles E. DeMarco, Esquire Staff Attorney Red Lobster Inns of America, Inc. Post Office Box 13330 Orlando, Florida 32801 Caroline C. Mueller, Esquire Department of Legal Affairs The Capitol Tallahassee, Florida 32304 =================================================================
Findings Of Fact Burger King, a Florida corporation, is a wholly owned subsidiary of the Pillsbury Company, with headquarters located in Minneapolis, Minnesota. Burger King filed its intangible tax returns and made its original tax payments on or before their respective due dates of June 30, 1972, and June 30, 1973. On May 3, 1974, DOR sent a letter to Burger King indicating that Burger King's intangible tax account was being reviewed and that DOR's records did not reflect having received the 1972 or 1973 returns. The next piece of correspondence between the parties (according to the record) occurred over two years later on June 3, 1976. At that time DOR informed Burger King that it was auditing Burger King's intangible tax account for the tax year 1973. This letter constitutes the initiation of an investigation prior to the expiration of three years from the due date for filing the 1973 return. The parties make no further reference in their correspondence to the 1972 return or the tax year 1972. However, DOR does request a copy of Burger King's balance sheet dated December 31, 1972. This request is contained in DOR's letter of September 12, 1977, which letter in its opening paragraph limits the inquiry to tax years 1973 through 1977, inclusive. In addition to its letter of June 3, 1976, DOR filed its proposed assessment for tax year 1973, on the same date, June 3, 1976. Typed at the bottom of the proposed assessment was the following statement: This proposed assessment shall become final within sixty (60) days of receipt, unless you file a protest requesting a departmental conference, or petition for a hearing under the provisions of the Administrative Procedures Act, Chapter 120, F.S. Upon receipt of these documents, Mr. Tom Howell, the property tax manager for Pillsbury Corporation asked for an extension of time to file the information requested in the June 3rd letter, which extension was granted by DOR. However, no protest or petition for hearing was filed within the sixty (60) days. Subsequently, Mr. Nicolas Joanos, a tax examiner with DOR recommended that Burger King file an amended tax return to take advantage of savings that would accrue if subsidiary corporations were consolidated on the return. While no such amended return was filed, a recomputation of tax liability based upon consolidation was made by DOR on January 6, 1977. On January 27, 1977, Burger King paid the additional tax for the years 1974, 1975, and 1976 but declined to pay the tax due for the 1973 tax year on the ground that the billing was dated past the expiration date for making a 1973 assessment. On February 23, 1977, DOR computed a new proposed assessment which included accrued interest from the prior proposed assessment. Burger King subsequently filed its request for a hearing pursuant to the provisions of Chapter 120, Florida Statutes. The intangible properties sought to be taxed by DOR for 1973 include some $11,000,000 of inter-company accounts receivable due from Burger King's parent corporation, The Pillsbury Company. DOR does not contest that Burger King overpaid its intangible tax for the tax year 1972, but opposes a refund on the procedural ground more fully explained below. During the applicable periods of time herein, Burger King never made application for a refund for the 1972 tax paid. Rather, the issue was first raised by Burger King in its amended petition dated January 29, 1978.
Findings Of Fact Upon consideration of the pleadings, stipulations and oral representations of the parties, the following facts are found: During the years in question, petitioner was a corporation organized under the laws of the State of Delaware and was duly qualified and authorized to do business in the State of Florida. Petitioner is the parent corporation of a consolidated group of corporations, two of which (including petitioner) had Florida transactions or were otherwise separately subject to the Florida corporate income tax code. None of the other members of the consolidated group were subject to taxation in Florida. For the fiscal and calendar years 1972 through 1974, Petitioner filed federal and Florida income tax returns on behalf of the parent corporation, which included the returns for the consolidated group of corporations -- both the Florida and non- Florida members. Each member of the group consented to such consolidated filing and the component members of the Florida return group were identical to the members of the federal return group. Respondent issued its proposed deficiencies for the 1972 and 1973 tax years, ruling that for a parent corporation to include all of its subsidiary corporations for the purposes of consolidating its taxable income, it must be incorporated in Florida. For the years 1972, 1973 and 1974, respondent's Rule 12C-1.131(1), F.A.C., contained a definition of a "Florida parent company" as the term is used in the second sentence of Florida Statutes 220.131(1). This rule was amended on August 4, 1975, to delete said sentence defining the term "Florida parent company."
Recommendation Based upon the findings of fact and conclusions of law recited above, it is recommended that: petitioner pay the assessment of $3,786.33 for the year 1972, with interest, as stipulated by petitioner, the proposed assessment for the year 1973 in the amount of $112,281.06 be dismissed and set aside, and the petitioner's method of computing its corporate income tax for the year 1974 be upheld. Respectfully submitted and entered this 21st day of June, 1977, in Tallahassee, Florida. DIANE D. TREMOR Hearing Officer Division of Administrative Hearings Room 530 Carlton Building Tallahassee, Florida 32304 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 21st day of June, 1977. COPIES FURNISHED: M. Lewis Hall, Jr. Hall and Hedrick Greater Miami Federal Building 200 Southeast First Street Miami, Florida E. Wilson Crump, II Assistant Attorney General Department of Legal Affairs Tax Division, Northwood Mall Tallahassee, Florida 32303
Findings Of Fact The Petitioner paid intangible personal property taxes in the amount of $2,706.26 on March 22, 1977 for the tax year of 1977. The said taxes were not due until June, 1997. The Petitioner filed an application with the Respondent, Office of the Comptroller, State of Florida, on May 5, 1980, requesting a refund of the taxes paid because of the subsequent discovery by the Petitioner that the monies had been paid by mistake or in error. The Respondent, Office of The Comptroller, served a Notice of Intent to Deny by U.S. Mail upon the Petition on November 12, 1980. Respondent's Notice of Intent to Deny Refund is based upon the three- year statute of non-claim, as provided in Section 199.252, Florida Statutes. The issues to be determined are whether the right to refund accrued to the Petitioner when the taxes were paid (March 22, 1977) or when the taxes were due (June 30, 1977).
The Issue Are Petitioners entitled to repayment of funds paid to the State Treasury as intangible taxes in relation to accounts receivable generated by sales made in the state of Florida? See Section 215.26, Florida Statutes.
Findings Of Fact Specialty Products & Insulation Co. (Specialty Products or Petitioner), A C & S, Inc. (A C & S or Petitioner), and Centin Corporation (Centin or Petitioner) are sibling companies owned by a common corporate parent company. Each of the three Petitioner companies is domiciled in a state other than Florida, and each has its headquarters in Pennsylvania. The Department is an agency of the state of Florida charged with the duty of administering Chapter 199, Florida Statutes, involving intangible taxes. Specialty Products, A C & S, and Centin remitted intangible taxes to the state of Florida for tax years 1993, 1994, and 1995. By letter dated June 17, 1996, Special Products and A C & S sought refunds from the Department of intangible taxes in the amounts of $19,848.01 and $4,796.41, respectively. By letter dated July 23, 1996, Centin also sought a refund from the Department of intangible taxes in the amount of $4,924.34. The Petitioners' refund applications argued that a refund of intangible taxes was due because the account receivable on which the taxes had been paid did not have a taxable situs in the state of Florida. On August 28, 1996, the Department issued Notices of Decision of Refund Denial to Specialty Products and A C & S, denying their refund applications in their entirety. On January 21, 1997, the Department issued its Notice of Decision of Refund Denial to Centin, also denying in its entirety Centin's application for refund. All three of the Petitioners timely challenged the Department's notices of decision by filing petitions for administrative hearings. Each of the petitions was originally assigned a separate case number by the Division of Administrative Hearings. By order dated January 16, 1997, Specialty Products and Insulation Co., v. Department of Revenue, (Case No. 96-5098) and A C & S, Inc., v. Department of Revenue, (Case No. 96-5099) were consolidated. By order dated January 23, 1998, Centin Corporation v. Department of Revenue, (Case No. 97-1115) was consolidated with the other two cases, as well. Specialty Products and Insulation, Co. Specialty Products is a building construction company operating in the state of Florida both as a contractor and by making sales of building materials to other contractors at retail. At all times relevant to this matter, Specialty Products was registered to do business as a non-domiciliary with the Florida Department of State, Division of Corporations. At all times relevant to this matter, Specialty Products was registered as a dealer with the Department of Revenue for purposes of collecting and remitting sales taxes. Although it is headquartered in Pennsylvania, at all times relevant to this matter, Specialty Products maintained a number of branch offices in the state of Florida through which it conducted business, including in Pompano Beach, Medley, Orlando, Tampa, and Fort Myers. At its various Florida branch offices, Specialty Products employed branch managers, operation managers, sales representatives, inside sales people, sales service clerks, office coordinators, warehousers and truck drivers. During the period from 1993 through 1995, Specialty Products made retail sales of its products from its Florida branch offices to Florida customers. During the period from 1993 through 1995, Specialty Products remitted intangible taxes to the state of Florida on the accounts receivable that were generated by its retail sales to its Florida customers. Specialty Products does not employ any credit managers at any of its Florida branch offices. Specialty Products' credit service, credit, cash application, and accounting departments are all located in Pennsylvania. When a customer seeks credit from Petitioner in order to purchase materials or services, the customer executes a credit application and contract for purchase at Petitioner's Florida branch office. With the exception of those described in paragraph 20, below, all applications for credit submitted by its Florida customers are forwarded by Petitioner's Florida branch offices to Petitioner's credit department in Pennsylvania for review and approval. Limited authority for granting credit (in an amount up to $5,000) to a Florida customer in an emergency is delegated to the branch manager located at each Florida branch office. All corporate bank accounts are located in Pennsylvania. All payments relating to sales made in the state of Florida are received and recorded in Pennsylvania, and all deposits are made into Petitioner's bank account in Pennsylvania. If a Florida customer sends a payment to a Florida branch office, this payment is forwarded to the Pennsylvania offices of the Petitioner to be recorded, processed, and deposited. All control procedures related to Specialty Products' accounts receivable are performed by employees located in Pennsylvania. No cash payments or bank accounts are maintained by Specialty Products in the state of Florida. A C & S, Inc. A C & S, Inc., is an insulation contracting company specializing in the thermal insulation of mechanical systems, and it operates in the state of Florida. At all times relevant to this matter, A C & S, Inc., was registered to do business as a non-domiciliary with the Florida Department of State, Division of Corporations. At all times relevant to this matter, A C & S, Inc., was registered as a dealer with the Department of Revenue for purposes of collecting and remitting sales taxes. Although it is headquartered in Pennsylvania, at all times relevant to this matter, A C & S, Inc., maintained at least one branch office in the state of Florida through which it conducted business. This branch office is located in Jacksonville, Florida. A C & S, Inc., also had a branch office in Merritt Island, Florida, until August 1995. At its Florida branch office, A C & S, Inc., employed a district manager, contract manager, construction superintendent, secretary, more than one sales representative, and an estimator. During the period from 1993 through 1995, A C & S, Inc., remitted intangible taxes to the state of Florida on the accounts receivable that were generated by its contracting sales to its Florida customers. A C & S, Inc., does not employ any credit managers at any of its Florida branch offices. A C & S, Inc.'s credit service, credit, cash application, and accounting departments are all located in Pennsylvania. When a customer seeks credit from Petitioner in order to purchase materials or services, the customer executes a credit application and contract for purchase at Petitioner's Florida branch office. With the exception of those described in paragraph 35, below, all applications for credit submitted by its Florida customers are forwarded by Petitioner's Florida branch offices to Petitioner's credit department in Pennsylvania for review and approval. Limited authority for granting credit (in an amount up to $5,000) to a Florida customer in an emergency is delegated to the branch manager located at each Florida branch office. All corporate bank accounts are located in Pennsylvania. All payments relating to sales made in the state of Florida are received and recorded in Pennsylvania, and all deposits are made into Petitioner's bank account in Pennsylvania. If a Florida customer sends a payment to a Florida branch office, this payment is forwarded to the Pennsylvania offices of the Petitioner to be recorded, processed, and deposited. All control procedures related to A C & S, Inc.'s accounts receivable are performed by employees located in Pennsylvania. No cash payments or bank accounts are maintained by A C & S, Inc., in the state of Florida. Centin Corporation Centin Corporation is an insulation contracting company operating in the state of Florida. At all times relevant to this matter, Centin Corporation was registered to do business as a non-domiciliary with the Florida Department of State, Division of Corporations. At all times relevant to this matter, Centin was registered as a dealer with the Department of Revenue for purposes of collecting and remitting sales taxes. Although it is headquartered in Pennsylvania, at all times relevant to this matter, Centin Corporation maintained at least one branch office in the state of Florida through which it conducted business. This branch office is located in Pompano Beach, Florida. At its Florida branch office, Centin employed a branch manager, construction superintendent, secretary, and more than one sales representative. During the period from 1993 through 1995, Centin remitted intangible taxes to the state of Florida on the accounts receivable that were generated by its contracting sales to its Florida customers. Centin does not employ any credit managers at any of its Florida branch offices. Centin's credit service, credit, cash application, and accounting departments are all located in Pennsylvania. When a customer seeks credit from Petitioner in order to purchase materials or services, the customer executes a credit application and contract for purchase at Petitioner's Florida branch office. With the exception of those described in paragraph 50, below, all applications for credit submitted by its Florida customers are forwarded by Petitioner's Florida branch offices to Petitioner's credit department in Pennsylvania for review and approval. Limited authority for granting credit (in an amount up to $5,000) to a Florida customer in an emergency is delegated to the branch manager located in each Florida branch office. All corporate bank accounts are located in Pennsylvania. All payments relating to sales made in the state of Florida are received and recorded in Pennsylvania, and all deposits are made into Petitioner's bank account in Pennsylvania. If a Florida customer sends a payment to a Florida branch office, this payment is forwarded to the Pennsylvania offices of the Petitioner to be recorded, processed, and deposited. All control procedures related to Centin's accounts receivable are performed by employees located in Pennsylvania. No cash payments or bank accounts are maintained by Centin in the state of Florida.
Recommendation Based upon the facts found in the conclusions of law reached, it is RECOMMENDED: That the requests for repayment of funds paid to the State Treasury as intangible personal property taxes for all years in question be denied. DONE AND ENTERED this 23rd day of March, 1998, in Tallahassee, Leon County, Florida. CHARLES C. ADAMS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 23rd day of March, 1998. COPIES FURNISHED: Elizabeth Bradshaw, Esquire Jarrell L. Murchison, Esquire Office of Attorney General The Capitol, Tax Section Tallahassee, Florida 32399-1050 Paul R. Vidas, CPA Director Zelenkofske, Axelrod and Company, Inc. 101 West Avenue, Suite 300 Jenkintown, Pennsylvania 19046 Tom Roche Specialty Products and Insulation Company A C & S, Inc. Post Office Box 1548 Lancaster, Pennsylvania 17608 Tom Roche IREX Corporation Post Office Box 1548 Lancaster, Pennsylvania 17608 Linda Lettera, Esquire Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 Larry Fuchs Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100
