The Issue Whether Petitioners are liable for sales and use tax, penalty, and interest as assessed by the Department of Revenue (the Department)?
Findings Of Fact Salma is a Florida corporation with its principal place of business at 2231 Del Prado Boulevard, Cape Coral, Florida, 33990. Gausia is a Florida corporation with its principal place of business at 11571 Gladiolus Drive, Fort Myers, Florida, 33908. Petitioners are in the business of operating gas stations with convenience stores. The Department is an agency of the State of Florida and is authorized to administer the tax laws of the State of Florida. Petitioners were selected for audit because their reported gross sales were less than the total cost of items purchased (inventory) for the audit period. The Department issued Salma and Gausia each a Notice of Intent to Conduct a Limited Scope Audit or Self-Audit, dated April 26, 2013, for sales and use tax, for the period February 1, 2010, through January 31, 2013 (collectively referred to as the Notices). The Notices requested that Petitioners provide the Department: (a) a list of all their vendors for alcohol, tobacco, soda, chips, candy, etc.; (b) their total purchases of alcohol and tobacco, by vendor, for the period July 2010 to June 2011; (c) copies of their federal tax returns for the examination period; (d) purchase receipts for all purchases for the last complete calendar month; and (e) daily register (Z tapes) for the last complete calendar month. The Notices gave Petitioners 60 days to gather the requested documents before the audit was to commence. The Notices also requested that Petitioners complete an attached Questionnaire and Self Analysis Worksheet. In response to the Notices, Petitioners requested a 30- day extension of time until July 18, 2013, to provide the requested documents and to designate a Power of Attorney. Petitioners did not provide the Department any books and records for inspection, nor did they complete and return the questionnaire and self analysis worksheets. As a result, the Department's auditor determined the sales tax due based upon the best information available. To calculate an estimated assessment of sales tax, the Department used the purchase data of Petitioners' wholesalers and distributors of alcoholic beverages and tobacco, for July 1, 2010, through June 30, 2011; the 2010 National Association of Convenience Stores average markups and in-store sales percentages of alcoholic beverage and tobacco products; and historical audit data. After reviewing the purchase data for July 1, 2010, through June 30, 2011, and for July 1, 2011, through June 30, 2012, the Department's auditor determined that the data was missing a few vendors. As a result, the Department's auditor estimated the amount of Petitioners' cigarette purchases, based on historical audit data that shows that cigarette sales are generally 4.31 times more than beer sales. The Department's auditor and audit supervisor testified that the estimated gross sales seemed reasonable and consistent with the national averages and the purchase data for July 1, 2011, through June 30, 2012. The Department estimated gross sales (i.e., the retail sale value of the goods sold) by marking up the taxable sales and exempt sales reported on the sales and use tax returns submitted to the Department by Petitioners. For example, for July 1, 2010, through June 30, 2011, Salma purchased beer from its wholesalers and distributors for $148,826.15, and the Department marked up the purchase price by 27 percent for a retail value of $189,009.21. For July 1, 2010, through June 30, 2011, Gausia purchased beer from its wholesalers and distributors for $132,138.65, and the Department marked up the purchase price by 27 percent for a retail value of $167,816.09. The Department's markup on the alcoholic beverage and tobacco products is reasonable because the Department's auditor testified that he used a combination of 2010 National Association of Convenience Stores average markups and the competitive pricing and information from audits of other convenience stores. The Department determined that the exemption ratio reported on the sales and use tax returns submitted to the Department by Petitioners was extremely high for their industry. The Department used an exemption ratio of 15 percent, based on historical audit data for the industry, to calculate Petitioners' estimated taxable sales. A review of Petitioners' sales and use tax returns revealed that they did not apply the tax bracket system to their taxable sales transactions, as required under sections 212.12(9) and (10), Florida Statutes. Instead, Petitioners remitted sales tax on their taxable sales based on their gross receipts at a flat tax rate. The Department's auditor testified that this method of reporting tax is inappropriate and does not accurately reflect the sales activity of the business. The Department calculated the average effective tax rate of 6.0856 percent, based on historical audit data for the industry. To calculate the estimated tax due, the Department multiplied the effective tax rate by the estimated taxable sales and gave Petitioners credit for any tax remitted with their tax returns. The Department issued Salma a Notice of Intent to Make Audit Changes, dated August 8, 2013, for audit number 200149872. The Department issued Gausia a Notice of Intent to Make Audit Changes, dated August 8, 2013, for audit number 200149749. The Department assessed Petitioners sales tax on their sales of alcoholic beverages and tobacco. The Notice of Intent to Make Audit Changes gave Petitioners 30 days to request a conference with the auditor or audit supervisor, to dispute the proposed changes. Petitioners did not make such a request. The Department issued a Notice of Proposed Assessment (NOPA) to Salma on March 6, 2014, for tax in the sum of $159,282.26; for penalty in the sum of $39,820.57; and interest as of March 6, 2013, in the sum of $27,772.36. The Department issued a NOPA to Gausia on March 6, 2014, for tax in the sum of $213,754.46; for penalty in the sum of $53,438.62; and interest as of March 6, 2013, in the sum of $36,921.79. Additional interest accrues at $30.55 per day until the tax is paid. The NOPAs became final assessments on May 5, 2014. After filing a request for an administrative hearing, Petitioners completed the Questionnaire and Self Analysis Worksheet and produced the following documents to the Department: (a) a list of all of their vendors for alcohol, tobacco, soda, chips, candy, etc.; (b) a list of vendors for alcohol and tobacco, for the examination period of July 2010 to June 2011; (c) a summary of their taxable sales, for the period February 2010 through December 2012; (d) copies of their federal tax returns, for the tax years 2010 through 2013; (e) copies of its purchase receipts for the months of July 2013; and (f) copies of their daily register (Z-tapes) for the month of July 2013. The Department's auditor testified that aside from being untimely, the records and information provided by Petitioners during these proceedings were not reliable because Petitioners did not provide any source documents that would allow the Department to reconcile the reported figures and confirm the supplied information. In addition, the purchase receipts and Z- tapes were not relevant because they were from outside of the audit period. The Z-tapes are also unreliable because the manager of the convenience store testified at the final hearing that employees purposely and routinely entered taxable sales into the cash registers as tax exempt sales. Petitioners argue that the Department did not use the best information available when estimating the taxes due. Petitioners claim that because their businesses are combination gas station/convenience stores, the national data for standalone convenience stores is inapplicable. However, notably absent from Petitioners' testimony or evidence was any alternative data upon which the Department could have relied for more accurate estimates.2/
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order denying Petitioners' requests for relief and assessing, in full, the Department's assessments of sales tax, penalty, and interest against both Salma and Gausia. DONE AND ENTERED this 9th day of January, 2015, in Tallahassee, Leon County, Florida. S MARY LI CREASY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 9th day of January, 2015.
The Issue Whether the Department of Revenue (DOR) has properly issued an assessment against Petitioner for sales and use tax, interest, and penalty.
Findings Of Fact Petitioner is a Florida resident. In 1996, Petitioner began doing business as a sole proprietor under the name of "Duraline Industries" and registered with DOR as a sales tax dealer. Later, this entity was called "Dura Steel." Petitioner also operated as a corporation, Steel Engineered Design Systems, Inc. Petitioner's Florida sales tax numbers are 42-11-009271-63 and 40-00-003416- For purposes of these consolidated cases, Petitioner has been audited and charged individually as "Charles R. Bielinski," because the audit revealed that no checks were made out to the corporation(s) and that the monies received were received by Mr. Bielinski as a sole proprietor in one or more "doing business as" categories. Petitioner engaged in the business of fabricating items of tangible personal property, i.e., prefabricated steel buildings, many of which later became improvements to real property in Florida. Petitioner used some of the steel buildings in the performance of real property contracts by installing the buildings as improvements to real property. Petitioner also engaged in the business of selling buildings and steel component parts such as sheets and trim in Florida. Petitioner sold buildings and component parts in over- the-counter retail sales, also. On October 7, 2002, DOR issued Petitioner a Notification of Intent to Audit Books and Records for the period of September 1, 1999 through August 31, 2002. This audit was assigned number AO226920428. In 2002, Petitioner provided DOR's auditor with his sales activity records, such as contracts and job information. A telephone conversation/interview of Petitioner was conducted by the auditor. Over a period of several months, the auditor attempted to get Petitioner to provide additional records, but none were forthcoming. DOR deemed the contracts and job information provided by Petitioner to be an incomplete record of his sales activity for the audit period. Petitioner claimed that most of his sales activity records had been lost or destroyed. Due to the absence of complete records, DOR sampled Petitioner's available records and other information related to his sales in order to conduct and complete its audit. Petitioner purchased materials used to fabricate his steel buildings. Petitioner sometimes would erect the buildings on real property. Petitioner fabricated main frames for smaller buildings at a shop that he maintained at the Bonifay Airport. Otherwise, Petitioner subcontracted with like companies to fabricate main frames for larger buildings. Petitioner made some sales to exempt buyers, such as religious institutions and government entities. When he purchased the materials he used to fabricate the buildings, Petitioner occasionally provided his vendors with his resale certificate, in lieu of paying sales tax. Petitioner did not pay sales tax on the materials he purchased to fabricate buildings when such buildings were being fabricated for exempt buyers such as churches and governmental entities. On June 23, 2003, DOR issued Petitioner a Notice of Intent to Make Audit Changes (Form DR-840), for audit number AO226920428, covering the period of November 1, 1997 through August 31, 2002. DOR has assessed Petitioner sales tax on the buildings, sheets, and trim he sold over-the-counter in Florida. DOR has assessed Petitioner use tax on sales of the materials used in performing real property contracts in Florida. The auditor calculated a method of estimating taxes based on the limited documentation that had been provided by Petitioner. She used a sampling method based on Petitioner's contract numbering system; isolated the Florida contracts; and divided the Florida contracts between the actual sale of tangible property (sale of just the buildings themselves) and real property contracts (where Petitioner not only provided the building but also provided installation or erection services). The auditor scheduled the real property contracts and assessed only the material amounts as taxable in Florida. Since she had only 19 out of 47 probable contracts, or 40 percent, she projected up to what the taxable amount should be and applied the sales tax and surtax at the rate of seven percent, as provided by law. She then divided that tax for the entire audit period by the 58 months in the audit period, to arrive at a monthly tax amount. This monthly tax amount was broken out into sales and discretionary sales tax. Florida levies a six percent State sales tax. Each county has the discretion to levy a discretionary sales tax. Counties have similar discretion as to a surtax. The auditor determined that Petitioner collected roughly $22,000.00 dollars in tax from one of his sales tax registrations which had not been remitted to DOR. During the five-year audit period, Petitioner only remitted tax in May 1998. DOR gave Petitioner credit for the taxes he did remit to DOR during the audit period. The foregoing audit processes resulted in the initial assessment(s) of August 28, 2003, which are set out in Findings of Fact 25-31, infra. On August 28, 2003, DOR issued Petitioner a Notice of Proposed Assessment (Form DR-832/833), for additional discretionary surtax, in the sum of $2,582.19; interest through August 28, 2003, in the sum of $782.55; and penalty, in the sum of $1,289.91; plus additional interest that accrues at $0.50 per day. (DOAH Case No. 04-0008) On August 28, 2003, DOR issued Petitioner a Notice of Proposed Assessment (Form DR 832/833), for additional sales and use tax in the sum of $154,653.32; interest through August 28, 2003, in the sum of $50,500.06; and penalty, in the sum of $77,324.54, plus additional interest that accrues at $31.54 per day. (DOAH Case No. 04-0009) On August 28, 2003, DOR issued Petitioner a Notice of Proposed Assessment (Form DR 832/833), for additional local governmental infrastructure surtax, in the sum of $7,001.82; interest through August 28, 2003, in the sum of $2,352.09; and penalty in the sum of $3,497.35; plus additional interest that accrues at $1.45 per day. (DOAH Case No. 04-0010) On August 28, 2003, DOR issued Petitioner a Notice of Proposed Assessment (Form DR 832/833), for additional indigent care surtax, in the sum of $513.08; interest through August 28, 2003, in the sum of $156.33; and penalty, in the sum of $256.24; plus additional interest that accrues at $0.10 per day. (DOAH Case No. 04-0011) On August 28, 2003, DOR issued Petitioner a Notice of Proposed Assessment (Form DR 832/833), for additional school capital outlay surtax in the sum of $3,084.49; interest through August 28, 2003, in the sum of $922.23; and penalty, in the sum of $1,540.98; plus additional interest that accrues at $0.60 per day. (DOAH Case No. 04-0012) On August 28, 2003, DOR issued Petitioner a Notice of Proposed Assessment (Form DR 832/833), for additional charter transit system surtax, in the sum of $2,049.22; interest through August 28, 2003, in the sum of $766.07; and penalty, in the sum of $1,023.27; plus additional interest that accrues at $0.46 per day. (DOAH Case No. 04-0013) On August 28, 2003, DOR issued Petitioner a Notice of Proposed Assessment (Form DR 832/833), additional small county surtax, in the sum of $10,544.51; interest through August 28, 2003, in the sum of $3,437.85; and penalty in the sum of $5,282.30; plus additional interest that accrues at $2.15 per day. (DOAH Case No. 04-0014) However, the auditor testified at the May 13, 2004, hearing that she attended Petitioner's deposition on March 18, 2004. At that time, Petitioner provided additional documentation which permitted the auditor to recalculate the amount of tax due. The auditor further testified that she separated out the contracts newly provided at that time and any information which clarified the prior contracts she had received. She then isolated the contracts that would affect the Florida taxes due. Despite some of the new information increasing the tax on some of Petitioner's individual Florida contracts, the result of the auditor's new review was that overall, the contracts, now totaling 33, resulted in a reduction in total tax due from Petitioner. These changes were recorded in Revision No. 1 which was attached to the old June 23, 2003, Notice of Intent to Make Audit Changes, which was sent by certified mail to Petitioner. The certified mail receipt was returned to DOR as unclaimed. The auditor's calculations reducing Petitioner's overall tax are set out in Respondent's Exhibit 16 (Revision No. 1). That exhibit appears to now show that taxes are owed by Petitioner as follows in Findings of Fact 34-40 infra. For DOAH Case No. 04-0008, discretionary surtax (tax code 013), Petitioner only owes in the amount of $1,937.37, plus penalties and interest to run on a daily basis as provided by law. For DOAH Case No. 04-0009, sales and use tax (tax code 010), Petitioner only owes in the amount of $111,811.04, plus penalties and interest to run on a daily basis as provided by law. For DOAH Case No. 04-0010, local governmental infrastructure surtax (tax code 016), Petitioner only owes in the amount of $5,211.00, plus penalties and interest to run on a daily basis as provided by law. For DOAH Case No. 04-0011, indigent care surtax (tax code 230), Petitioner only owes in the amount of $317.39, plus penalties and interest to run on a daily basis as provided by law. For DOAH Case No. 04-0012, school capital outlay tax (tax code 530), Petitioner only owes in the amount of $2,398.68, plus penalties and interest to run on a daily basis as provided by law. For DOAH Case No. 04-0013, charter transit system surtax (tax code 015), Petitioner only owes in the amount of $1,558.66, plus penalties and interest to run on a daily basis as provided by law. For DOAH Case No. 04-0014, small county surtax (tax code 270), Petitioner only owes in the amount of $7,211.83, plus penalties and interest to run on a daily basis as provided by law.
Recommendation Based on the foregoing Findings of Facts and Conclusions of Law set forth above, it is RECOMMENDED that the Department of Revenue enter a final order upholding the amount of tax calculated against Petitioner in its June 21, 2003, Notice of Intent to Make Audit Changes, Revision No. 1, in the principal amounts as set forth in Findings of Fact Nos. 34-40, plus interest and penalty accruing per day as provided by law, until such time as the tax is paid. DONE AND ENTERED this 14th day of July, 2004, in Tallahassee, Leon County, Florida. S ELLA JANE P. DAVIS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 14th day of July, 2004.
The Issue The issues are whether Respondent properly conducted a sales and use tax audit of Petitioner's books and records; and, if so, whether Petitioner is liable for tax and interest on its purchases of materials used for improvements to real property.
Findings Of Fact During the audit period, Petitioner was a Florida corporation with its principal place of business located at 7820 Professional Place, Suite 2, Tampa, Florida. Petitioner's Florida sales tax number was 39-00-154675-58, and Petitioner's federal employer identification number was 59-3089046. After the audit period, the Florida Department of State administratively dissolved Petitioner for failure to file statutorily required annual reports and filing fees. Petitioner engaged in the business of providing engineering services and fabricating control panels. Petitioner fabricated control panels in a shop Petitioner maintained on its business premises. Petitioner sold some of the control panels in over-the- counter sales. Petitioner properly collected and remitted sales tax on the control panels that Petitioner sold over-the-counter. Petitioner used other control panels in the performance of real property contracts by installing the panels as improvements to real property (contested panels). Petitioner was the ultimate consumer of the materials that Petitioner purchased and used to fabricate the contested panels. At the time that Petitioner installed the contested panels into real property, the contested panels became improvements to the real property. Petitioner failed to pay sales tax at the time Petitioner purchased materials used to fabricate the contested panels. Petitioner provided vendors with Petitioner's resale certificate, in lieu of paying sales tax, when Petitioner purchased the materials used to fabricate the contested panels. None of the purchase transactions for materials used to fabricate the contested panels were tax exempt. The audit is procedurally correct. The amount of the assessment is accurate. On October 23, 2000, Respondent issued a Notification of Intent to Audit Books and Records (form DR-840), for audit number A0027213470, for the period of October 1, 1995, through September 30, 2000. During an opening interview, the parties discussed the audit procedures and sampling method to be employed and the records to be examined. Based upon the opening interview, Respondent prepared an Audit Agreement and presented it to an officer and owner of the taxpayer. Respondent began the audit of Petitioner's books and records on January 22, 2001. On March 9, 2001, Respondent issued a Notice of Intent to Make Audit Changes (original Notice of Intent). At Petitioner's request, Respondent conducted an audit conference with Petitioner. At the audit conference, Petitioner provided documentation that the assessed transactions involved improvements to real property. At Petitioner's request, Respondent conducted a second audit conference with Petitioner's former legal counsel. Petitioner authorized its former legal counsel to act on its behalf during the audit. At the second audit conference, the parties discussed audit procedures and sampling methods, Florida use tax, fabricated items, and fabrication costs. Respondent revised the audit findings based upon additional information from Petitioner that the assessed transactions involved fabricated items of tangible personal property that became improvements to real property. Respondent assessed use tax on the materials used to fabricate control panels in those instances where Petitioner failed to document that Petitioner paid sales tax at the time of the purchase. Respondent also assessed use tax on fabrication costs including the direct labor and the overhead costs associated with the fabrication process, for the period of October 1, 1995, through June 30, 1999. Respondent eliminated use tax assessed on cleaning services in the original Notice of Intent because the amount of tax was de minimis. On August 29, 2001, Respondent issued a Revised Notice of Intent to Make Audit Changes (Revised Notice of Intent). On September 18, 2001, Petitioner executed a Consent to Extend the Time to Issue an Assessment to File a Claim for Refund until January 25, 2002. On October 18, 2001, Petitioner executed a second Consent to Extend the Time to Issue an Assessment to File a Claim for Refund until April 25, 2002. On February 6, 2002, Respondent issued a Notice of Proposed Assessment for additional sales and use tax, in the amount of $21,822.27; interest through February 6, 2002, in the amount of $10,774.64; penalty in the amount of $10,831.12; and additional interest that accrues at $6.97 per diem. Petitioner exhausted the informal remedies available from Respondent. On April 29, 2002, Petitioner filed a formal written protest that, in substantial part, objected to the audit procedures and sampling method employed in the audit. Respondent issued a Notice of Decision sustaining the assessment of tax, penalty, and interest. Respondent correctly determined that the audit procedures and sampling method employed in the audit were appropriate and consistent with Respondent's statutes and regulations. Respondent concluded that the assessment was correct based upon the best available information and that Petitioner failed to provide any documentation to refute the audit findings. Petitioner filed a Petition for Reconsideration that did not provide any additional facts, arguments, or records to support its position. On May 16, 2003, Respondent issued a Notice of Reconsideration sustaining the assessment of tax and interest in full, but compromising all penalties based upon reasonable cause.
Recommendation Based upon the findings of fact and the conclusions of law, it is RECOMMENDED that Respondent enter a Final Order denying Petitioner's request for relief and sustaining Respondent's assessment of taxes and interest in full. DONE AND ENTERED this 10th day of December, 2003, in Tallahassee, Leon County, Florida. S DANIEL MANRY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 10th day of December, 2003. COPIES FURNISHED: Carrol Y. Cherry, Esquire Office of the Attorney General Revenue Litigation Section The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050 Michael E. Ferguson Control Design Engineering, Inc. 809 East Bloomingdale Avenue, PMB 433 Brandon, Florida 33511 Bruce Hoffmann, General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 James Zingale, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100
The Issue Whether the Department of Revenue properly denied Petitioner's March 10, 2000, Application For Refund of Sales and Use Tax, Petitioner having asserted that the Department of Revenue obtained the Closing Agreement through misrepresentation and intimidation.
Findings Of Fact Petitioner, Tuskawilla Learning Center, is a Florida corporation which operates a private Montessori School in Oviedo, Seminole County, Florida. Petitioner has elected to be an "S" corporation for federal income tax reporting purposes. Tuskawilla Learning Center is owned by its shareholders, Thomas E. Phillips; his wife, Lois; his daughter, Terry Lynn DeLong; and his son-in-law, Daniel F. DeLong. At all times material to this matter, a partnership comprised of the above-named owners of the Tuskawilla Learning Center also owned the real property upon which the Tuskawilla Learning Center operated. In early July 1997, Respondent audited Petitioner's corporate transactions for the period from July 1, 1992, through June 30, 1997, for compliance with sales and use tax and the local government infrastructure surtax. During the audit Petitioner was requested to provide all information and documents which Petitioner felt supported its business activities. Respondent issued a Notice Of Intent To Make Audit Changes on September 25, 1997, which advised Petitioner that the audit revealed that Petitioner had failed to pay use tax on purchases Petitioner made from out-of-state vendors, which Petitioner acknowledged and paid. The audit also revealed that Petitioner failed to pay sales tax on the monthly rental charges that Petitioner paid to the property owner on which the Tuskawilla Learning Center operated. Petitioner did not agree with Respondent's position on the sales tax on monthly rental charges. On October 28, 1997, an audit conference was held in Orlando, Florida, where the tax assessment on the monthly rental charges was discussed. The parties were unable to resolve the issue, and Petitioner requested that the issue be referred to Tallahassee for further review. The review in Tallahassee essentially confirmed the original audit findings, and a Notice of Proposed Assessment was issued on January 26, 1998. Petitioner filed a protest and requested a further review of the Notice of Proposed Assessment. As a result, the entire audit was reviewed, and Petitioner was allowed to provide additional documentation to support its position. On August 4, 1998, Respondent issued a Notice of Decision which essentially confirmed the findings of the original audit. At this point, Petitioner had certain rights of appeal which had to be exercised within specific time limits, or Petitioner could elect to pay the taxes and interest as set forth in a Closing Agreement in which Respondent waived the penalties which had accrued for failure to pay the tax. The various time deadlines passed without Petitioner electing one of the avenues of appeal nor did Petitioner execute the Closing Agreement. After all deadlines for appeal had passed, Petitioner contacted Respondent through an attorney seeking relief. Respondent found no basis for relief but renewed the opportunity for Petitioner to sign the Closing Agreement. On February 5, 1999, Petitioner executed the Closing Agreement and paid $71,693.87 (a $285.31 overpayment). The Closing Agreement clearly states: The taxpayer waives any and all rights to institute any judicial or administrative proceedings, including the remedies provided by ss. 213.21(2)(a) and 72.011(1), F.S., to recover, compromise, or avoid any tax, penalty or interest paid or payable pursuant to this agreement. This agreement is for the sole purpose of compromising and settling taxpayer's liability to the State of Florida . . . This agreement is final and conclusive with respect to the audit assessment or specific transaction/assessment and period described . . . and no additional assessment may be made by the Department against the taxpayer for the specific liability referenced above, except upon showing of fraud or misrepresentation of material fact . . . . On March 10, 2001, Petitioner filed an Application for Refund of the taxes and interest paid with the Closing Agreement. Attached to the Application for Refund was Petitioner's four-page "position paper," which outlined facts and arguments related to the sales tax issue. Petitioner's Application for Refund states that "the State has misled us." The Application for Refund went through the review process. On May 5, 2000, Respondent issued a Notice of Proposed Denial for the refund claim. Petitioner sought an informal review of the proposed refund denial. After an informal review of the proposed refund denial, on June 16, 2000, Respondent issued a Notice of Decision denying Petitioner's Application for Refund. On August 12, 2000, Petitioner forwarded a letter to Respondent, which was interpreted as a request for an administrative hearing to review the decision to deny the Application for Refund which resulted in the instant administrative hearing. Thomas E. Phillips has a Ph.D. in accounting from the University of Nebraska, is a Certified Public Accountant, and had taught accounting at the University of Central Florida for 23 years prior to his retirement. He and his family founded the Tuskawilla Learning Center. On behalf of Petitioner, Dr. Phillips maintains that the tax audit and subsequent review process were "intimidating" and that Respondent "misled" Petitioner. Notwithstanding Dr. Phillips' assertion that the audit and review process were "intimidating," he testified that he found the auditor and her supervisor "not intimidating, but were very pleasant." Dr. Phillips testified about several aspects of the audit and review process and activities that occurred during the audit and review process that he found objectionable. For example, Dr. Phillips testified that Respondent failed to respond to his inquiries in an appropriate way and that Respondent had misinterpreted certain case law that he felt applicable. Nothing offered by Dr. Phillips suggests any impropriety or misrepresentation by Respondent.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is recommended that Respondent enter a final order denying Petitioner's Application for Refund. DONE AND ENTERED this 26th day of April, 2001, in Tallahassee, Leon County, Florida. JEFF B. CLARK 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 26th day of April, 2001. COPIES FURNISHED: Joseph C. Mellichamp, III, Esquire Office of the Attorney General Department of Legal Affairs The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050 John Mika, Esquire Office of the Attorney General Department of Legal Affairs The Capitol, Tax Section Tallahassee, Florida 32399-1050 Thomas E. Phillips 1625 Montessori Point Oviedo, Florida 36527 Linda Lettera, 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 Does the taxpayer owe sales tax, penalty, and interest as assessed by the Department of Revenue.
Findings Of Fact Petitioner, Department of Revenue, is an agency of the State of Florida, lawfully created and organized pursuant to Section 20.21, Florida Statutes. By law, the Department is vested with the responsibility of regulating, controlling and administering the revenue laws of the State of Florida, including, specifically, the laws relating to the imposition and collection of the state's sales and use tax, pursuant to Chapter 212, Florida Statutes. Respondent, Worldwide Equipment Group, LLC, is a Florida limited liability company, whose principal address is Post Office Box 1050, Freeport, Florida 32439. Respondent sells and leases heavy equipment. In early 2006, Petitioner, Department of Revenue, conducted an audit of the books and records of Petitioner, pursuant to statutory notice. The period covered by the audit was March 1, 2002, through February 28, 2005. The audit was conducted by Department of Revenue auditor David Collins and addressed three issues. Issue A-01 addressed misclassified exempt sales, i.e. failure to collect appropriate sales and use tax or lack of documentation to prove tax exempt status of certain sales. Issue A-03 addressed discrepancies in sales for 2003 as reported for federal income tax returns and for state sales and use tax returns. Issue A-03 addressed interest owed due to a timing difference between actual transactions and the filing of state returns: basically a manipulation of the grace period for payment of sales and use taxes. Respondent was notified of the apparent discrepancies observed by the auditor. The original Notice of Intent To Make Audit Changes was issued February 17, 2006, and started at more than $75,000.00 in taxes, penalty, and interest due. Respondent then filed amended federal income tax returns, reflecting larger sales figures covering a portion of the audit period which reduced the discrepancy. The dispute was originally referred to the Division of Administrative Hearings (DOAH) on or about August 30, 2006. The original facts in dispute surrounded an addendum to the Notice of Proposed Assessment showing a balance due of $31,434.82. This was DOAH Case No. 06-3287. The request for a disputed-fact hearing was made by David R. Johnson CPA, who has a power of attorney on file with Petitioner Agency permitting him to represent Respondent. Throughout these proceedings, Worldwide has been served through Mr. Johnson by Petitioner and by DOAH. The parties filed a Joint Motion for Provisional Closing Order in DOAH Case No. 06-3287 on November 1, 2006. On November 2, 2006, DOAH Case No. 06-3287 was closed with leave to return if the parties' proposed settlement was not finalized. Mr. Johnson met once with counsel for Petitioner during the time the case was returned to the Agency. At some point, Respondent had produced certain accounting entries and supporting documents to the auditor. These were used to adjust the assessment levied by the Department. A Revised Notice Of Intent To Make Audit Changes dated March 13, 2007, was issued with a letter of the same date. The revised, and final Notice included an assessment of tax, penalty and interest totaling $15,065.24, as of the date of issue and information that the tax accrues interest at the rate of $3.10 per diem. On April 4, 2007, Petitioner filed before DOAH its Motion to Re-open Case and Notice for Trial. No timely response in opposition was filed by Respondent. By an Order to Re-open Case File, entered April 19, 2007, the case was re-opened as the instant DOAH Case No. 07-1710. Petitioner has established that the amount of $15,065.24 as tax, penalty, and interest was due as of March 13, 2007.
Recommendation Based on the foregoing Findings of Facts and Conclusions of Law, it is RECOMMENDED that the Department of Revenue sustain the March 13, 2007, assessment of the subject sales tax, penalties and interest to Petitioner. DONE AND ENTERED this 8th day of October, 2007, in Tallahassee, Leon County, Florida. S ELLA JANE P. DAVIS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 8th day of October, 2007. COPIES FURNISHED: Warren J. Bird, Esquire Office of the Attorney General The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050 Bruce Hoffmann, General Counsel Department of Revenue The Carlton Building, Room 204 501 South Calhoun Street Tallahassee, Florida 32399-0100 Lisa Echeverri, Executive Director Department of Revenue The Carlton Building, Room 104 501 South Calhoun Street Tallahassee, Florida 32399-0100 David R. Johnson, CPA 1265 Highway 331 South Defuniak Springs, Florida 32435 Worldwide Equipment Group LLC Post Office Box 1050 Freeport, Florida 32439
The Issue The issues to be resolved in this proceeding concern whether the Petitioner owes sales and use tax or specifically use tax, on certain purchases of tangible personal property in accordance with the relevant provisions of Chapter 212, Florida Statutes.
Findings Of Fact The Petitioner, Florida Property Care, Inc. (Petitioner, taxpayer), was a Florida "Subchapter-S Corporation" having its home office in Dade City, Florida, at times pertinent hereto. The Petitioner's federal employer identification number was 59-3288869 and its Florida sales tax number was 06-1041158. The Petitioner was engaged in the business of cutting and removing trees, driveway construction, lawn maintenance, and landscaping. The Department of Revenue (Department) is an agency of the State of Florida charged with administering the tax laws of the state in accordance with Section 212 and 213, Florida Statutes. After issuing proper notification to the Petitioner on January 2, 2003, the Department conducted a sales and use tax audit of the Petitioner's business records. The audit covered the period of December 1, 1999 through December 16, 2001. The Petitioner corporation ceased doing business on December 16, 2001. The Department examined purchase invoices, general ledgers, and federal income tax returns of the Petitioner in the course of its audit. The Department elected to examine the records in detail rather than doing a statutorily permissible sample audit, since the assessment period was relatively short. The Petitioner was engaged in the business of making improvements to real property (construction driveways, landscaping, etc.) through the purchase and use of items of tangible personal property, as raw materials, it bought for use in its business. This included the purchase of limerock, plants, sod, mulch and the like for use in maintaining or landscaping real property. Because the Petitioner was engaged in the business of making improvements to real property, and not merely re-selling limerock, mulch, etc., it was generally only liable to pay sales tax on its purchases of items of tangible personal property used in its business, but not to charge and collect sales tax on its landscaping and real property improvement business activities or services for its ultimate customers. See Chapter 212, Fla. Stat. During the audit period, it was determined by the Department that sales tax had not been paid by the Petitioner on some of its purchases of items of tangible personal property used in the conduct of its business, such items as sod, limerock, asphalt, hay, and other products. The Department also found that the Petitioner had not paid sales tax on certain auto repairs that included both parts and labor charges. Accordingly, the Department noticed an assessment to the Petitioner for use tax on the purchases of items of tangible personal property, for which sales invoices produced in the audit, and by the Petitioner, did not indicate that sales tax had been paid when the items had been purchased from the suppliers. The Department calculated the additional tax due by multiplying the taxable amounts taken from the purchase invoices by the applicable tax rate. The Department also gave the Petitioner credit for sales taxes already paid. Specifically, on a purchase invoice for auto repairs, the Department gave the Petitioner credit for sales tax paid on the parts used in the repairs. The Petitioner's witnesses testified that the four purchase invoices identified as Petitioner's Composite Exhibit 2 in evidence, represented freight charges and were not tangible personal property purchase amounts for the limerock involved. Those purchase invoices, however, indicate on their face that they were for limerock. They indicate the total tonnage and the price per ton and do not indicate any portion of the charges representing freight or delivery charges. The price indicated per ton appears reasonable as a price for limerock and not just for freight charges. Moreover, the Petitioner's own witnesses concede that the purchase invoices in composite Exhibit 2 do not indicate any itemization or amount for freight charges. It is determined that these invoices are actually invoices for the purchase of limerock and not merely freight charges. The Petitioner contends that it assumed that the purchase invoices, identified as Petitioner's Exhibits 1, 4, and 7-9, in evidence, included sales tax in the unit price represented on those invoices, even though any sales tax increment of those invoices is not separately stated and itemized. The Petitioner's witness in this regard conceded, however, that he had no way of knowing whether the vendors from whom he purchased the goods actually charged sales tax on the subject invoices, since it was not itemized. He was only assuming that the tax was included in the unit price he paid, as a part of the total number. The Petitioner contends that it is not liable for the sales tax because sales tax was included in the unit price of the tangible personal property that the Petitioner purchased. The Petitioner argues, in the alternative, that it is not liable for sales tax because the vendors were responsible for charging and collecting the sales tax and that they should be held liable for the tax. In consideration of the evidence which shows that the Petitioner bought the limerock, sod, and other items for use in its business of providing landscaping, maintenance, and other improvements to real property, the Petitioner did not provide documentary or other evidence to corroborate its testimonial assumption or belief that the invoices were either not subject to tax or that the invoiced amounts included payment of the tax. Most of the invoices (the only documentary evidence of billing and the amount and category of payment), do not depict an itemization or category for tax on the face of the invoices. The evidence adduced by the Petitioner does show, as to Invoice Number 29, that tax indeed was paid on that purchase in the amount of $679.25. Additionally, with regard to APAC Invoice Number PORT 16175, $73.39 in tax was paid. Any assessment and collection of tax, penalty and interest by the Department upon conclusion of this proceeding should reflect credit to the Petitioner for these amounts. On June 3, 2003, a Notice of Proposed Assessment was issued by the Department to the Petitioner, setting forth deficient sales and use tax in the sum of $1,812.86, with interest through June 3, 2003, in the sum of $354.34, accruing at the rate of $.25 per day as well as a penalty in the sum of $906.44. The Notice of Proposed Assessment became a Final Assessment on August 2, 2003, for purposes of filing a request for formal proceeding before the Division of Administrative Hearings or for contesting the assessment in the circuit court. On September 30, 2003, the Petitioner elected to file a Petition with the Division of Administrative Hearings seeking a formal proceeding and hearing to contest the final assessment in this case.
Recommendation Having considered the foregoing Findings of Fact and Conclusions of Law, the evidence of record, the candor and demeanor of the witnesses and the pleadings and the arguments of the parties, it is, therefore, RECOMMENDED that a final order be entered by the Department of Revenue assessing the tax as depicted in the notice of assessment, in evidence herein, including credit for the tax shown to have been collected on the two invoices referenced in the above Findings of Fact, and assessing interest and penalties in the amounts legally prescribed or as agreed to by the parties. DONE AND ENTERED this 9th day of June, 2004, in Tallahassee, Leon County, Florida. S P. MICHAEL RUFF 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 9th day of June, 2004. COPIES FURNISHED: Carrol Y. Cherry, Esquire Office of the Attorney General The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050 Charles B. Morrow Jeanne Morrow Post Office Box 659 Astor, Florida 32102 James Zingale, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100 Bruce Hoffmann, General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100
The Issue The issue in this case is whether the Respondent's certificate of registration to collect sales tax should be revoked.
Findings Of Fact In 1996, the Respondent and Lance Arnette were engaged in a dissolution of marriage action in the circuit court, Case No. 96-1185-FD. On June 20, 1997, the business known as Giff’s Sub Shop was awarded to Respondent, Linda Arnette. The circuit court transferred the business to Respondent free of any and all liabilities. Later, Respondent discovered that there was an undisclosed sales tax liability. The amount of that liability was not clear from the record. However, the Department was not a party to the Arnette’s dissolution of marriage action. On March 3, 1998, Respondent filed an application for a certificate of registration with the Department. The reason for the application was due to the change of ownership from Respondent’s ex-husband to Respondent. The application reflected an opening date for the business of June 1, 1997. Linda Arnette was reflected as the owner of the business. Respondent was the only person who signed the application. No other person was listed as having an interest in the sub shop. The certificate of registration was issued to Respondent and she became the registered dealer for the sub shop. As such, she was under a legal duty to collect and remit all taxes collected by the sub shop to the Department. She was also responsible to file tax returns for the business with the Department. Her first return would have been due on July 20, 1997. A tax warrant or lien for unpaid taxes was filed against Respondent on October 26, 2005. It is unclear what happened with the 2005 warrant. Department records reflect that the sub shop did not file returns for November 2006, December 2006, January 2007, and February 2007. A second tax warrant for unpaid taxes was filed against Respondent on April 4, 2007. The warrant covered the period from August 2003 to February 2007. The amount of tax due under the warrant was $14,658.07, plus interest and penalties. The 2003 date was well after Respondent had taken over operation of the sub shop from her ex-husband. The evidence did not show that the amount included any taxes which may have been due prior to her award of the sub shop in 1997 or prior to the August 2003 date. Moreover, the warrant did not include months for which Respondent had timely paid the tax due. Data from the Department revocation worksheet showed that Respondent owed only interest for the months of August 2003 and March through August, 2006. The fact she owed only interest in those months indicates that the taxes were paid late. The Department’s data showed the month of December 2005 with zero tax due and zero interest due. It is not clear from the evidence why the Department claimed the month of December 2005 was out of compliance. However, even without the month of December 2005, the Department’s data showed 30 months of noncompliance by Respondent either by not filing timely or not paying the tax. On March 2, 2007, the Department sent Respondent a notice of its intent to revoke her certificate of registration. An informal meeting was scheduled for April 17, 2007. The purpose of the meeting was to permit Respondent to present evidence on why her certificate of registration should not be revoked and to show that the amount of taxes due was incorrect. Respondent attended the meeting on April 17, 2007. The Department waived the penalties due on her tax liability. Interest due totaled $2,857.68. Respondent did not raise any issue regarding her ex-husband’s past tax liability or any payments she had allegedly made thereon. Indeed, Respondent’s argument regarding payment on her ex-husband’s past tax liability did not make sense and was not borne out by the evidence. Respondent did file her tax returns for November 2006, December 2006, January 2007, and February 2007. It was unclear, if Respondent brought her account books for the sub shop to the meeting. Respondent’s own books reflect that she reported tax liability for the period August 2003 through August, 2006 in the amount of $25,133.97, and through December 2006, she owed $27,620.97. Respondent’s records did not reflect the return amounts for 2007. Her records also reflect that for the period August 2003 through August 2006, she paid $13,311.68 and through December 2006, she paid $16,029.68 to the Department. Returns filed with the Department for 2007 totaled $1,379.78 though February 2007. In 2007, Respondent’s records reflect that through April 2007, she paid $1,912.08 to the Department. In short, Respondent’s own records reflect that for the period August 2003 through August 2006, she owed past due taxes in the amount of $11,822.19 and through December 2006, she owed past due taxes in the amount of $11,591.29. Her own records reflect she had repeatedly not complied with the requirements of Chapter 212, Florida Statutes, to timely remit and pay taxes. More importantly, Respondent entered into a compliance agreement with the Department at the April 17, 2007, meeting. In the agreement, Respondent admitted she owed taxes in the amount of $14,658.07, plus interest in the amount of $2,857.68, for a total of $17,515.75, to the Department. She admitted she had not complied with Sections 212.14(1), 212.14(2) and 212.15(1), Florida Statutes, regarding timely filing of returns and timely payment of taxes. These failures were repeated. Additionally, Respondent agreed to timely file all tax returns for the period April 2007 through March 2008, timely pay all tax due for the same period, as well as, comply with the payment schedule for the past due amount referenced above. Failure to abide by the terms of the compliance agreement would permit the Department to initiate revocation of the Respondent’s certificate of registration and the use of the compliance agreement to establish the facts of the earlier noncompliance with Chapter 212, Florida Statutes. Respondent made the payments required under the payment schedule in the compliance agreement, but did not make such payments timely. Her most current return was late. Respondent also paid the current taxes due each month, but did not timely pay those taxes. Thus, Respondent has accrued $2,519.96 in interest and $214.22 in penalties through July 18, 2007, in addition to the amount she agreed was due in the compliance agreement. Given this history, Respondent has clearly not complied with the requirements of Chapter 212, Florida Statutes, and her certificate of registration should be revoked.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is: RECOMMENDED that the Department of Revenue enter a final order revoking Respondent’s certificate of registration pursuant to Section 212.18, Florida Statutes. DONE AND ENTERED this 14th day of March, 2008, in Tallahassee, Leon County, Florida. S DIANE CLEAVINGER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 14th day of March, 2008. COPIES FURNISHED: Warren J. Bird, Esquire Office of the Attorney General The Capitol, Plaza Level 101 Revenue Litigation Bureau Tallahassee, Florida 32399-1050 Glen M. Swiatek, Esquire 5 Clifford Drive Shalimar, Florida 32579 Marshall Stranburg, General Counsel Department of Revenue The Carlton Building, Room 204 501 South Calhoun Street Post Office Box 6668 Tallahassee, Florida 32314-6668 Lisa Echeverri, Executive Director Department of Revenue The Carlton Building, Room 104 501 South Calhoun Street Tallahassee, Florida 32399-0100
The Issue Whether the Department of Revenue can levy on petitioner's bank accounts where the petitioner failed to challenge the final sales tax assessment and failed to remit the tax, penalties, and interest due pursuant to the assessment.
Findings Of Fact Based on the oral and documentary evidence presented at the final hearing and the entire record of this proceeding, the following findings of fact are made: Petitioner, Forest Hill Convenience, Inc., is a Florida corporation. It owns one convenience store in Palm Beach County, Kwik Stop number 320, and owned a second convenience store in Palm Beach County, One-Stop Food Mart, during the time relevant to this proceeding. Samson Abraham Francis is Forest Hill's President and only corporate officer. In December 1993, at the request of Forest Hill and a third party which was interested in purchasing the convenience stores, Van T. Ho, a Tax Auditor IV with the Department, performed an audit of Forest Hill's books and records for the period October 1, 1992 through November 31, 1993. As a result of the audit, the Department identified sales tax deficiencies. Forest Hill was notified on January 10, 1994, that the audit had revealed a tax deficiency of $1,046.78, exclusive of penalties and interest. On January 11, 1994, Mr. Francis met with Ms. Ho to go over the audit results. On January 13, 1994, Ms. Ho telephoned Mr. Francis and notified him that she had discovered an error in the initial audit and that Forest Hill's sales tax deficiency was $5,217.45, for a total tax liability of $7,354.86, with penalties and accrued interest. Mr. Francis did not object to the revision during this telephone conversation, and Ms. Ho sent Forest Hill the revised audit papers, together with a Notice of Intent to Make Audit Changes dated January 18, 1994. In this Notice, Forest Hill was advised that it must submit any objections to the proposed audit changes, in writing, by February 17, 1994, and that, if no objections were filed, a Proposed Notice of Deficiency would issue on March 21, 1994. In a letter dated February 22, 1994, Mr. Francis requested an extension of time to allow Forest Hill's accountant time to review the Notice and the audit papers. Mr. Francis did not register a protest to the tax deficiency identified in the revised audit papers in this letter. A two-week extension was granted. Even though the Department did not receive an objection to the proposed audit changes, it offered, in a letter dated March 25, 1994, to schedule a meeting to resolve any objections Mr. Francis might have to the proposed tax liability. The Department did not receive a response to this letter, and, in a letter dated September 9, 1994, Mr. Francis was advised that the audit file was being forwarded to Tallahassee. A Notice of Proposed Assessment dated October 6, 1994, was sent to Forest Hill via certified United States mail to Mr. Francis's then-current home address. In the Notice, the Department advised Forest Hill that it owed the Department $8,320.21, consisting of $5,217.45 in sales tax, $2,284.02 in penalties, and $818.74 in interest, with additional interest accruing at the rate of $1.72 per day. The Department further advised Forest Hill that, if it did not request informal proceedings, the assessment would become final on December 5, 1995, and that no relief could be granted by the Department, the Division of Administrative Hearings, or the courts beyond sixty days from the date the assessment became final, that is, by February 3, 1995. The Notice was returned to the Department unclaimed after two attempts at delivery. Forest Hill did not timely file a request for informal proceedings to challenge the proposed assessment, and the proposed assessment became a final assessment on December 5, 1994. On January 24, 1995, a Tax Warrant was filed by the Department with the Clerk of Court in Palm Beach County, Florida, and Forest Hill was so advised in a letter dated January 24, 1995. Forest Hill did not challenge the final assessment in circuit court or by petition to the Division Administrative Hearings by the date specified in the Notice of Proposed Assessment. The Department issued a Notice of Delinquent Tax dated March 24, 1995, to Forest Hill's bank. On April 13, 1995, the Department received a letter from Mr. Francis, dated March 9, 1995, protesting the amount of the assessment. In a letter dated May 4, 1995, Linda Howe, the Department's West Palm Beach Collection and Enforcement Administrator, notified Forest Hill that the audit could not be reopened because all protest rights had expired. Ms. Howe advised Forest Hill that it could pursue a compromise with the Department, and she stated that a written request for such relief had to be filed with the Department within fourteen days, during which time she would suspend collection and enforcement action on the warrant. Forest Hill failed to respond to the Department's letter of May 4, 1995, and a Notice to Freeze, dated May 31, 1995, was sent to Great Western Bank in Delray Beach, Florida, freezing Forest Hill's assets in the amount of $9,050.25. Forest Hill did not satisfy the warrant, and, on June 13, 1995, the Department sent the Notice of Intent to Levy via certified United States mail to Forest Hill at its business address. The only basis on which Forest Hill challenges the Notice of Intent to Levy is that the amount of the assessment is incorrect and unfair. Forest Hill has, however, waived any right to contest the correctness or validity of the assessment. The Department followed the procedures established by statute and rule in proceeding to issue a final tax assessment against Forest Hill. Mr. Francis did not participate on Forest Hill's behalf in the informal proceedings offered by the Department to resolve his objections to the correctness of the tax deficiency, nor did he timely request a hearing to contest either the proposed assessment or the final assessment. The Department has met its burden of showing by a preponderance of the evidence that Forest Hill has an outstanding tax liability in the amount shown on the Notice of Intent to Levy. Forest Hill has failed to prove any ground upon which the Department's proposed levy is defective or illegal. It has, therefore, failed to establish that the Department cannot properly levy on the bank accounts and certificates of deposit subject to the Notice of Freeze and the Notice of Intent to Levy.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is: RECOMMENDED that the Department of Revenue enter a Final Order upholding the Department's Notice of Intent to Levy and allowing it to proceed with the garnishment of the bank accounts and certificates of deposit owned by Forest Hill Convenience, Inc., in the amount of $8,320.21, including tax, penalties, and interest, together with such interest as has accrued since October 7, 1994. DONE AND ORDERED in Tallahassee, Leon County, Florida, this 12th day of March 1996. PATRICIA HART MALONO 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 12th day of March 1996.
The Issue The issue for determination is whether Respondent should grant Petitioner's application for a sales tax exemption certificate as a charitable institution within the meaning of Section 212.08(7), Florida Statutes. 1/
Findings Of Fact Respondent is the governmental agency responsible for issuing sales tax exemption certificates in accordance with Section 212.08(7). Petitioner is a non-profit, Florida corporation and a charitable organization, within the meaning of Section 501(c)(3) of the Internal Revenue Code, for purposes of the federal income tax. On December 29, 1995, Petitioner applied for an exemption from state sales and use tax ("sales tax") as a charitable institution. On February 8, 1996, Respondent denied Petitioner's application. The parties stipulated that Petitioner is a non-profit corporation. The parties further stipulated that the only exemption under which Petitioner may qualify for a sales tax exemption is the exemption for a charitable institution. In order to qualify as a charitable institution, Petitioner must provide one or more of seven services listed in Section 212.08(7). The parties stipulated that the only service Petitioner arguably provides as a charitable institution is that of raising funds for medical research within the meaning of Section 212.08(7)(o)2b(V). It is uncontroverted that Petitioner does not provide medical research directly. Petitioner raises funds for its national organization. The national organization then disburses funds raised by local affiliates. Petitioner failed to submit any competent and substantial evidence showing the disposition of funds by its national organization. Petitioner failed to show that its national organization either provides direct medical research or raises funds for one or more organizations that provide medical research.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent enter a Final Order and therein DENY Petitioner's request for a sales tax exemption. RECOMMENDED this 4th day of June, 1996, in Tallahassee, Florida. DANIEL S. MANRY, 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 4th day of June, 1996.
The Issue The issue for determination is whether Petitioner owes sales tax of $15,230.15 plus interest from October 15, 1993.
Findings Of Fact Petitioner is a sole proprietorship organized in this state and doing business at 851 Monterey Road, Stuart, Florida. Respondent is the governmental agency responsible for administering the state sales tax in accordance with Chapter 212, Florida Statutes.1 In 1992, other businesses located at Petitioner's address reported to Respondent that they paid rent to Petitioner. However, Petitioner did not collect and remit sales tax on the rental income and was not registered as a dealer. On February 3, 1992, Respondent mailed a Notice of Intent to Audit Petitioner's books and records ("Notice of Intent to Audit") for the tax period February 1, 1987, through January 31, 1992. The Notice of Intent to Audit included a detailed list of the books and records needed for Respondent to conduct a detailed audit. The Notice also requested that Petitioner provide Respondent with a date on which it would be convenient to begin the audit. On February 11, 1992, Respondent had not heard from Petitioner. The auditor contacted Petitioner to schedule a date on which the audit could begin. At that time, Petitioner stated that he would not provide the auditor with any books and records. Petitioner refused to make available the books and records for 1990 through 1992 because Petitioner incorrectly suspected that Respondent maintained a secret "blacklist." Petitioner based his suspicion, in part, on the fact that he had refused to respond to a questionnaire Respondent had mailed to taxpayers throughout the state prior to the Notice of Intent to Audit. Petitioner also based his suspicion on the erroneous assumption that Respondent's audit was part of a criminal investigation by the Internal Revenue Service ("IRS") into Petitioner's federal taxes for 1987 and 1988. Petitioner refused to make available the books and records for 1987 through 1989 because those records were in the possession of the IRS. Petitioner maintained that the proposed audit was illegal. Respondent sent Petitioner copies of its statutory authority to audit Petitioner and made numerous attempts to arrange a mutually convenient time to begin the audit. Respondent did not commence the audit until March 10, 1993. On March 10, 1993, the auditor and audit group supervisor met with Petitioner and Mr. Eugene Nail, Petitioner's paralegal. Petitioner stated that he did not have the books and records Respondent needed to conduct a detailed audit because the IRS had confiscated them in connection with the pending criminal case. Respondent conducted the audit using the information Petitioner made available to the auditor. Petitioner made available: sales invoices for 1990 and 1991 and one month in 1992 grouped together by calendar month; sales and use tax return booklets; resale and exemption certificates; and commercial lease agreements. No journals and ledgers were available. Respondent determined Petitioner's tax deficiency by sampling the available information. Pursuant to Petitioner's request, the auditor used a six month sample period. The auditor explained to Petitioner that she would use Petitioner's invoices during the sample period to determine tax- exempt sales. She compared the invoices to resale certificates and calculated an error ratio based on discrepancies between the sales invoices and the resale certificates. Respondent determined the actual deficiency in sales tax during the six month sample period based on actual invoices that did not have a resale certificate and for which no sales tax was remitted. Respondent estimated the additional deficiency in sales tax by applying the error ratio to the balance of the audit period. Respondent examined only those invoices provided by Petitioner and previous sales tax returns filed by Petitioner. On April 9, 1993, the auditor conducted a meeting with Petitioner and discussed the audit procedures, results, applicable law, and abatement rules. On June 15, 1993, Respondent issued a Notice of Intent to Make Sales and Use Tax Changes in the amount of $45,469.05 ("Notice of Intent"). The Notice of Intent included a copy of all audit exhibits and workpapers. On August 30, 1993, Petitioner provided additional invoices to Respondent in a meeting with the auditor and audit group supervisor. On October 15, 1993, the auditor adjusted certain items in the audit file, reduced the proposed assessment, and issued a Revised Notice of Intent to Make Sales and Use Tax Changes in the amount of $37,417.45 ("Revised Notice of Intent"). Petitioner requested additional time to provide more information, including additional resale certificates. However, Petitioner failed to provide the additional information. By letter dated December 9, 1993, the audit group supervisor notified Petitioner that she was closing the case and sending it to the Tallahassee office as a contested case. On December 23, 1993, Respondent issued a Notice of Proposed Assessment to Petitioner assessing Petitioner for $37,417.45 in tax, penalty, and interest through October 15, 1993. On February 21, 1994, Respondent received Petitioner's written protest dated February 10, 1994. Respondent revised the audit figures again. On January 20, 1995, Respondent issued its Notice of Decision reducing the assessment against Petitioner to $15,230.15. The Notice of Decision assessed Petitioner for taxes of $8,900.55, penalties of $2,225.14, and interest of $4,104.46 through October 15, 1993. Interest accrues at the per diem rate of $2.93 until paid. On March 16, 1995, Petitioner timely appealed the Notice of Decision by filing a Petition for Formal Hearing with Respondent. Inadequate Records Petitioner failed to maintain adequate books and records within the meaning of Sections 212.12(6), 212.13(2), 212.35, and Florida Administrative Code Rules 12A-1.093(2) and (5).2 Petitioner failed to maintain adequate books and records for the five year audit period prescribed in Section 213.34(2). Petitioner failed to maintain general ledgers and journals for the five year audit period. The only records Petitioner maintained were sales invoices for 1990 and 1991 and one month in 1992. Petitioner was unable to produce adequate records for 1987 through 1989. Petitioner asserted that the IRS had those records and that Petitioner could not obtain the records required by Florida law. The federal tax case has been pending against Petitioner since 1990.3 During those seven years, Petitioner was unable to obtain copies of any records in the possession of the IRS. The journals and ledgers for 1987 and 1988 were maintained on computer floppy disks. Petitioner asserts that the floppy disks were lost. Petitioner asserts that his attorney kept the books and records for 1989 in an out-of-state location to avoid producing those records for the IRS. The journals and ledgers for 1990 though 1992 are in the possession of Petitioner's accountants. Petitioner did not produce those records during the audit or at the administrative hearing. Petitioner could have requested the journals and ledgers for 1989 through 1991 from his attorney and accountants, respectively, but chose not to do so. Petitioner made available to Respondent only sales invoices for 1990 and 1991 and one month in 1992. Without the general ledgers and cash journals to cross- reference the sales invoices, Respondent could not corroborate the financial records available for audit. Respondent was required by applicable law to conduct the audit by sampling Petitioner's available records. Exempt Sales: Resale Certificates Certain exempt sales claimed by Petitioner during the six month sample period were not supported by resale certificates. Respondent disallowed the exempt sales that were not supported by resale certificates and allowed the invoices that were supported by resale certificates. For the six month sample period, Respondent assessed an actual sales tax deficiency for those sales that did not have a corresponding resale certificate.4 Respondent prepared audit schedules for the six month sample period that listed the invoices with a sales tax deficiency due to the lack of a resale certificate. Based on the audit schedules, Respondent determined an error ratio and applied the error ratio over the five year audit period to determine the estimated tax deficiency.5 Respondent conducted the audit in accordance with generally accepted audit procedures and with applicable state law. Disallowed exempt sales were listed individually by invoice, name of vendor, and the date and amount of the sale. Disallowed exempt sales were listed for each of the six months in the sample period. Additional Taxable Sales Sales invoices for the six month sample period showed that Petitioner collected more sales tax than he reported to Respondent on his monthly sales tax returns. Respondent treated the collected, but unremitted, sales tax as "additional taxable sales" rather than as an unremitted sales tax. Respondent assessed Petitioner for the sales tax paid on Petitioner's invoices but not remitted to Respondent by Petitioner. The deficiency existed for May and June, 1990, and for January and February, 1991. Taxable Rent Respondent reviewed lease agreements relating to property rented by Petitioner at his business address. Respondent determined that Petitioner failed to collect and remit sales tax on the rental of his property. Respondent assessed Petitioner for sales tax Petitioner failed to collect and remit on taxable rent. Petitioner does not contest that portion of the assessment.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent enter a Final Order and therein UPHOLD Respondent's assessment of $15,230.15 plus interest statutorily due from October 15, 1993, until paid.RECOMMENDED this 17th day of February, 1997, in Tallahassee, Florida. DANIEL MANRY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 17th day of February, 1997.
