Findings Of Fact Arthur W. Hastings is a registered real estate salesman associated with Alpheus C. Stubbs, a registered real estate broker, doing business at 103 East Burleigh Boulevard, Tavares, Florida 32778. Said employment with Alpheus Stubbs is part-time and Arthur W. Hastings is employed full-time as an agricultural economist by Southern Fruit Distributors, Inc. During 1975, the School Board of Orange County sought to condemn property owned by Southern Fruit Distributors, Inc. known as Hurley Grove for a proposed high school site in the Winter Garden-Ocoee-Windermere area consisting of forty-three (43) acres. In that regard, suit was brought by the School Board of Orange County as Petitioner against Southern Fruit Distributors, Inc. in the Circuit Court of the Ninth Judicial Circuit, in and for Orange County, Florida, Civil Action No. 73-8434. Southern Fruit Distributors, Inc. was represented in that action by William Eagan, Attorney at Law, who sought to present the best possible case for his client in terms of evaluation of the property to be condemned. In that regard, Mr. Eagan had an appraisal of the property prepared by Duckworth, Duckworth and Perdue, Inc., realtors specializing in property appraisal. This appraisal estimated the fair market value of the fee simple interest in the Hurley Grove as of the date of the appraisal using the comparable sales method. In addition, Mr. Eagan soght a means of presenting at the trial other evidence indicating the full value to include profits from the business conducted on the property. In this regard, Mr. Eagan was placed in contact by the owner of the property with its employee, Mr. Arthur W. Hastings. Arthur W. Hastings was employed full-time by Southern Fruit Distributors, Inc. as an agricultural economist. His training experience, and background enabled him to render an opinion as to the economic value of the Hurley Grove. Mr. Eagan requested Mr. Hastings to provide him with information regarding the profits of the business and the loss of those profits associated with taking of the Hurley Grove. Pursuant to Mr. Eagan's request and under the direction of his employer, Mr. Hastings prepared two reports on the Hurley Grove. The first of these was received into evidence as Exhibit 6 and the second was received as Exhibit 5. The basis of both of these reports was an evaluation of the loss which would be suffered by Southern Fruit by the loss of Hurley Grove. Hasting's method for computing this was explained on page 255 of the transcript of the trial. First, the production of the grove was derived from the books of Southern Fruit. This was used to establish income figures for the longest period possible. This figure was then capitalized at a rate determined to be a reasonable return which was taken as 6 percent in this case. This was then divided into the net profit to arrive at 100 percent of the property's economic value to the owner. In his first report, however, Hastings also included the value of certain improvements to the property of which the other appraisers had not been aware: an underground drainage system, a large drainage ditch, and an eight (8) inch irrigation well, plus the value of the land itself. This report was discussed with Perdue and Eagan, and as a result, Eagan directed Hastings to prepare a new report which was limited solely to a capitalization of profits approach. This second report was Exhibit 5. At the trial of the condemnation case between the School Board of Orange County and Southern Fruit Distributors, Inc., Mr. Hastings was called as an expert witness by the Respondent, qualified as an expert in agricultural economics, and testified as to the economic loss to the owner of the property. His testimony related to the second report he prepared and submitted to Mr. Eagan. The only testimony relating to his qualifications as a real estate salesman were on cross examination and indicated that Hasting's did not present his report as an expert in the values of real estate. None of the activities undertaken by Arthur C. Hastings were under the direction or through his broker, Alpheus C. Stubbs.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, the Hearing Officer recommends that the charges against Arthur W. Hastings be dismissed and that no action be taken against him. DONE and ORDERED this 23rd day of February, 1977, in Tallahassee, Florida. STEPHEN F. DEAN, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Bruce M. Bogin, Esquire Joseph A. Doherty, Esquire 619 East Washington Street Florida Real Estate Commission Orlando, Florida 32801 2699 Lee Road Winter Park, Florida 32789
The Issue The issue is whether Respondent Allen’s Sod Service owes Petitioner Lake Jem Farms, Inc., money for grass sod.
Findings Of Fact Before the transaction of business which is the subject of this proceeding, Petitioner’s predecessor sold lawn sod to Respondent over a period of time. Petitioner and Respondent verbally agreed that payment of Respondent’s indebtedness to Petitioner would be forthcoming upon Respondent’s retirement of indebtedness to Petitioner’s predecessor. Despite this condition of payment to Petitioner’s predecessor, Respondent nevertheless made payments to Petitioner for grass sod, thereby effectively waiving the condition with regard to amounts presently owed to Petitioner. Respondent made 24 purchases of sod from Petitioner during the months of August and September 1999, and paid Petitioner for 18 of the sod purchases. Six purchases remained unpaid for a total of $6,244.52 owed to Petitioner by Respondent. Respondent’s representative claimed at final hearing that certain sod purchases were defective, but admitted the six sod purchases for which money was still owed to Petitioner, were not among the defective purchases. Other than the allegations of other defective sod purchases, Respondent’s representative presented no direct, competent evidence of the existence of the defective products. Additionally, the evidence establishes that Respondent’s representative signed for each individual load of sod, certifying that the sod was acceptable. Thereafter each sod purchase entered into possession of Respondent’s employee for transport to the work site.
Recommendation It is RECOMMENDED that the Department of Agriculture and Consumer Services enter a final order determining that Respondent owes Petitioner the sum of $6,244.52, which, if unpaid, is due from Respondent Fidelity & Deposit Company Of Maryland under the bond. DONE AND ENTERED this 20th day of April, 2000, in Tallahassee, Leon County, Florida. DON W. 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 20th day of April, 2000. COPIES FURNISHED: Michael A. Croak, Esquire 14229 U.S. Highway 441 Tavares, Florida 32778 Rena Weekly, Qualified Representative Allen’s Sod Service 8148 Southeast 147th Place Summerfield, Florida 34491 Richard Tritschler, General Counsel Department of Agriculture and Consumer Services The Capitol, Plaza Level 10 Tallahassee, Florida 32399-0810 Brenda Hyatt, Chief Bureau of License and Bond Department of Agriculture and Consumer Services 508 Mayo Building Tallahassee, Florida 32399-0800 Honorable Bob Crawford, Commissioner Department of Agriculture and Consumer Services The Capitol, Plaza Level 10 Tallahassee, Florida 32399-0810
The Issue The issues in this case are whether Respondent violated Sections 475.25(1)(a),(b), and (e) and 475.42(1)(a),(b), and (d), Florida Statutes (1997), by operating as a broker without holding a valid broker's license, operating as a broker while licensed as a salesperson, collecting money except in the name of his employer, and committing misrepresentation, false pretenses, dishonest dealing by trick, scheme or device, culpable negligence, or breach of trust; and, if so, what, if any, penalty should be imposed. (All Chapter and Section references are to Florida Statutes (1997) unless otherwise stated.)
Findings Of Fact Petitioner is the state agency responsible for the regulation and discipline of real estate licensees in the state. Respondent is licensed in the state as a salesperson pursuant to license number 0575377. The last license issued was issued as an involuntary inactive salesperson at 361 Godfrey Road Southeast, Palm Bay, Florida 32909. After March 31, 1995, Respondent's license as a salesperson became inactive after Respondent did not renew it. Between March 1994 and January 1997, Respondent was employed as a salesperson by Prestige Homes of Brevard, Inc. ("Prestige"). Prestige is a Florida corporation wholly owned by Mr. Mark Pagliarulo and Mr. John Wales. Prestige is engaged in the business of residential construction. Mr. G. Wayne Carter was the sponsoring broker for Respondent from March 1994 through January 1997. Mr. Carter was licensed in the state as a broker until his license was revoked in 1998. Between March 1994 and January 1997, Prestige paid Respondent a sales commission of three percent of the sales price of each home constructed by Prestige and sold by Respondent. Prestige paid Respondent a weekly draw against commissions earned by Respondent. Mr. Carter, the sponsoring broker for Respondent, had no knowledge of the payments received by Respondent. Respondent did not deposit any sales commissions to Mr. Carter's escrow account. Respondent participated in various activities that violate relevant provisions in Sections 475.25 and 475.42. Respondent collected $1,100 from Marcia Pitts for a sprinkler system, a $1,000 initializing fee from Linda and David Grogan, and a $1,000 "design fee" from Mrs. Robert Leudesdorf. Respondent converted the foregoing sums to his personal use without the knowledge of his employers at Prestige and without the knowledge of Respondent's broker. Respondent operated as a broker without a valid broker's license, while licensed as a salesperson, and collected money for himself rather than for his broker or his employer. Respondent routinely designed variations on a "custom" home design without his employers' knowledge. Respondent then charged the purchasers approximately $1,000 for the plan changes. Respondent routinely deducted the $1,000 fee from the contract price Prestige charged the customer and converted the $1,000 fee directly to his personal use. Respondent failed to disclose to the purchasers that he was not acting on behalf of Prestige. The purchasers believed they were dealing with Prestige. The omission and failure to disclose amounted to a misrepresentation, false pretense, and breach of trust in a real estate transaction. For a time, Respondent's employers at Prestige condoned Respondent's "free lance" activities. Respondent's employers reduced Respondent's draws against commissions by the amount of the "free lance" fees converted by Respondent. After Respondent failed to discontinue his "free lance" activities, however, Prestige terminated Respondent's employment.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Commission enter a final order finding Respondent guilty of violating Sections 475.25(1)(a),(b), and (e) and 475.42(1)(a),(b), and (d), and revoking Respondent's license. DONE AND ENTERED this 31st day of March, 1999, in Tallahassee, Leon County, Florida. 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 31st day of March, 1999. COPIES FURNISHED: Steven Johnson, Esquire Department of Business and Professional Regulation Post Office Box 1900 Orlando, Florida 32802-1900 Steven Michael Wallace 361 Godfrey Road Palm Bay, Florida 32909 James Kimbler, Acting Division Director Division of Real Estate Department of Business and Professional Regulation Post Office Box 1900 Orlando, Florida 32802-1900 William Woodyard, Acting General Counsel Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing the following relevant facts are found: GENERAL BACKGROUND On May 25, 1979, the respondent, through its Division of Purchasing, issued its invitation to bid (ITB) entitled "Plain Bond and Magazine Finish Bond Copying Machines" to sixty-five (65) companies. The ITB proposes to establish an annual contract (from October 1, 1979 through September 30, 1980) under which all state agencies may acquire an indefinite amount of copying machines using a choice of four acquisition plans. No awardee under the contract is assured of any specific quantity. It is contemplated that all copiers purchased by a state agency will he purchased under the contract, and each category of copier machine listed in the ITB reflects the specific needs of the various agencies. In order to acquire equipment covered under the proposed contract, an agency would simply issue a purchase order and send certification to the respondent's Division of Purchasing. No prior authorization would be necessary. If an agency desired to acquire a copying matching not covered by the state contract, it would have to apply to the respondent for an exception and receive verification from the respondent that the exception met the needs of the agency. Between May 25, 1979, and August 22, 1979, the respondent held two prebid conferences and published five addenda to the ITB. The ITB establishes approximately eighty (80) categories of award for plain bond copiers and for magazine finish copiers. These copiers are categorized into types according to features and into classes according to machine speeds and copy volumes. Each category contains four available acquisition plans: monthly rental, annual rental, two-year lease and outright purchase. The ITB proposes a contract award in each category to the vendor responding to the technical specifications with a copier offering the lowest cost per copy. Thus, the basis for evaluation of each responsive bidder was cost per copy, and the ITB provided a cost formula. On September 10, 1979, twelve vendors submitted responses to the ITB. These twelve included the petitioner and the four intervenors. The bids were opened on September 12, 1979. As noted above, the bidding process was structured for competitive award, and the basis for evaluation was cost per copy of responsive bids. Under the competitive award method, when the respondent fails to receive either qualified bids or two or more bids, it weighs the options and then decides to either negotiate with the bidders or to reject all bids and rebid the contract. DGS did not receive qualified or two or more responsible bids in all categories in this instance. Due to the time constraints imposed by the near expiration date of the prior annual contract, respondent elected to communicate with some of the bidders in an attempt to obtain withdrawal or modification of the variations or conditions contained in their responses. These communications were conducted at a time when all bidders had knowledge of what other vendors had bid. When evaluating the bid responses of petitioner, respondent found that in six different respects petitioner had qualified its bid in a manner inconsistent with the specified bid terms and conditions. After discussion and correspondence, three of these qualification were subsequently withdrawn or deleted by petitioner. The remaining three pertained to variations from the ITB with respect to Xerox's pricing plan for the annual and two-year acquisition methods; the removal of machines by Xerox for failure to comply with guidelines for supply use; and the service of machines in remote areas. When the bids were evaluated and the bid prices were verified by respondent, Xerox's supply costs were recalculated and Xerox's bids were disqualified in the outright purchase category, for the 9200 Model and for the 3450 Model. By memorandum dated October 18, 1979,the respondent recommended the award of contracts In 73 categories to eight vendors. The petitioner was included in the eight, but only subject to the withdrawal of those terms and conditions in conflict with the ITB. OUTRIGHT PURCHASES In the outright purchase method of acquisition, Xerox did not insert on its bid sheets a dollar figure indicating the price of the machine hid. Instead, petitioner inserted an "X" in the blank next to the outright purchase acquisition plan. Xerox's bid package did include a 100-page catalog which, on page 69, contained a list of equipment purchase prices. The bid sheet form included in the original ITB contained a dollar sign at the beginning of the four blanks for the four different acquisition plans. One of the addendums to the ITB included a revised bid sheet, and bidders were instructed to use only the revised form. This bid sheet had no dollar signs by the four acquisition method blanks, though the form contained dollar signs on many other blanks. Ms. Ruth Eberhard, a purchasing contract specialist with the respondent, testified that the dollar sign on the revised bid sheet form in the outright purchase category was inadvertently removed when the form was revised. Mr. John Isensee, an employee of Xerox who assisted in preparing the bid response, testified that he telephoned Ms. Eberhard and inquired how to complete the acquisition plan blanks on the bid sheets. According to Mr. Isensee, he was instructed to place an "X" to indicate the method of acquisition. Respondent proposes to disqualify every one of petitioner's outright purchase bids because petitioner did not insert the purchase price of the machine on its bid sheet. Had these bids not been disqualified, it is estimated that Xerox would have received awards in three or four different categories. Ms. Eberhard, who was assigned the duty of verifying figures on the bid sheet and evaluating the bids for the lowest cost per copy, could not verify the petitioner's cost per copy without the purchase price of the machine appearing on the bid sheet. It was her testimony that she could not look beyond the bid sheet for information to insert figures not contained therein when verifying prices per copy. This is consistent with the terms and conditions of the ITB, which expressly admonishes bidders not to rely on catalogs and price lists. Page 4 of the special conditions of the ITB provides, under the heading of "Bid Page," that "GSA catalogs, price lists, and copies of vendor purchase and/or lease contracts outlining terms and conditions are not acceptable." Ms. Eberhard testified that no other bidder in the outright purchase acquisition method failed to insert the machine cost on their bid sheets, though one bidder did insert the machine price elsewhere on the page. The petitioner presented testimony that the acquisition price of the machine could be ascertained from the information listed on the bid sheet by performing a four-step mathematical process. The result could then have been verified by comparing it with the equipment prices listed in the catalog. Ms. Eberhard did not consider using this method because it was her duty to verify the price per copy and not the purchase price of the machine. The cost per copy could not be verified without the purchase price. It was further her opinion that even using the prices contained in the catalog, she could not verify the machine acquisition cost per copy with the information provided by petitioner on its bid sheet. The machine cost information cannot be correlated with other information on the bid sheet in accordance with the cost formula contained in the ITB. SUPPLY COSTS The ITB contains a provision relating to the computation of supply costs which are to he inserted on the bid form, and are used to calculate the ultimate cost per copy. Bidders were to compute their supply costs either on the manufacturer's brand or by using the prices contained in the then-existing state contract. The ITB further provides that "the volume price used by the vendor to compute supply cost shall be based on the monthly median volume of the type and class bid." According to the formula contained in the ITB, Xerox did not enter the correct supply costs on its bid responses. Instead of using tie monthly median volume for paper, Xerox used quantity discount prices available only in purchases of 1,000 cartons or more. It did this in order to offer the state the benefit of volume discount. The paper supply costs inserted by petitioner affects the amount of its bid. No other vendor utilized a volume discount price as opposed to the monthly median volume price. In accordance with her duties to verify costs, Ms. Eberhard recomputed the supply costs submitted by Xerox to reflect the volume price based on the monthly median volume of the type and class bid. While Ms. Eberhard could not use outside sources to insert information omitted on the bid sheet, she did use other information to verify figures supplied by the bidder. This recomputation had the result of raising the prices Xerox bid for supplies so that Xerox was no longer the low bidder in approximately four categories. 9200 MODEL Xerox bid its 9200 Model in five categories. The respondent recommends rejection of these bids on the basis that the 9200 is not a walk-up convenience copier, but is instead print shop equipment requiring a dedicated operator. This model has been tested and acquired by state agencies for use as a sophisticated, high speed duplicator which must be run by a dedicated operator. With one exception, Model 9200 is being used by the state in a print shop operation with a dedicated operator. The Model 9200 was originally marketed by Xerox in 1975 as a duplicator with a dedicated operator. It is capable of producing 7,200 copies per hour and is less expensive in cost per copy than other models. The main difference between the 9200 Model and walk-up convenience Model 5400 is speed, with the 9200 Model having greater sorting capacity, a more comprehensive logic system and the ability to deal easier with multiple documents. The operating buttons on the 9200 Model are not complicated. The 9200 may be used as either a duplicator or a copier, depending upon the nature of the work required and the pricing plan selected. The amount of training for its operators depends upon its usage as a duplicator or as a convenience, walk-up copier. If used as a copier, the training is approximately two hours or the same as other convenience copiers manufactured by Xerox. If used as a duplicator in a print shop operation, the training of a dedicated operator would require approximately two days. The Department of Corrections acquired a Model 9200 in August of 1978. It was initially acquired as a high speed, high volume machine with an inmate trained as a dedicated operator. When the inmate was paroled, the machine was used in the central office as a convenience, walk-up copier. The 9200 Model is currently being used in the central office of the Department of Corrections by some thirty (30) different people a week and is currently fulfilling the Department's copying needs. There was no evidence adduced at the hearing that the bids of Xerox with respect to its 9200 Model constituted the lowest offered bids in those categories. 3450 MODEL The ITB requires testing and approval of all items bid prior to the time and date of the bid opening. Testing is to extend for a period of twenty (20) working days. Page 3 of the 1TH provides under the heading of "Equipment Approval" that In the event evaluation and acceptance of untested machines has not been accomplished prior to the bid opening date and time, such machines shall not be eligible for an award." The mandatory nature of this requirement was further addressed in question and answer number 9 attached to the ITB. Xerox bid its 3450 Model in two different classes of plain bond copying machines. The Xerox bid was the only bid received by the respondent in Group I, Type III, Class 2A, and it was bid at a lower price than the machine recommended for award in Group I, Type III, Class 3A. The machine did not arrive in time to complete its testing due to a trucking strike during its travel. The bid opening date was September 12, 1979, and the Model 3450 completion of testing and approval did not occur until September 18, 1979. For this reason, the Model 3450 was disqualified for consideration by the respondent. At least two other bidders either opted not to bid their equipment due to insufficient time for testing or went to extreme expenses to comply with the testing requirements. OTHER VARIATIONS FROM THE ITB The catalog rental plans of Xerox vary from the ITB conditions with respect to firm pricing and terms of rental. Under the ITB, an agency acquiring a copier on annual lease at any time during the contract year is entitled to twelve months of firm prices from the date of purchase. The same is true under the two-year lease plan. Contrary to these conditions, the Xerox bid contains extensive fiscal option plans and extended term plans which could include price increases and, if not renewed at the option time, liquidated damages to Xerox. Under the terms and conditions of the Xerox bid, an agency cannot purchase equipment under the annual or two-year lease plans with the assurance of firm- pricing and no liquidated damages or removal charges. The ITB provides that the bidder must maintain or have access to facilities and personnel capable of servicing equipment anywhere in the state within four hours after notification. The Xerox bid reserves the right not to accept installation or service in areas which are remote or not readily or adequately serviced by Xerox. The term "remote" is not defined by Xerox in its catalog. The Xerox bid reserves to Xerox the right to cancel its contract in whole or in part upon 30 days prior written notice. The ITB mandates that contract provisions prevail for at least 180 days after the effective date of the contract, and then allows cancellation after 30 days prior written notice.
Recommendation Based upon the above findings of fact and conclusions of law, it is RECOMMENDED that a final order be entered declaring that Xerox Corporation failed to submit a low responsive bid in the categories provided in the Invitation to Bid. It is further RECOMMENDED that an Order be entered holding that: the Department properly disqualified the Xerox bids in the outright purchase plan of acquisition; the Department properly recalculated the supply cost figures in the Xerox bid; the Department improperly disqualified the Model 9200 on the ground that it is not a walk-up convenience copier. However, due to the unresponsiveness of other portions of Xerox's bid (see paragraph 5 below) and a lack of evidence that Xerox submitted a low bid on Model 9200, the Department was justified in disqualifying the Xerox bid for Model 9200; the Department properly disqualified the Model 3450; and the terms and conditions of the Xerox bid with respect to the annual and two-year lease methods of acquisition, service of equipment and 30day cancellation reservation constitute material deviations from the ITB, and thus the Xerox bid is unresponsive. Respectively submitted and entered this 29th day of February, 1980, in Tallahassee, Florida. DIANE D. TREMOR, Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: John Radey and Honorable George Firestone Vicki Gordon Kaufman, Esquires Secretary of State Holland and Knight The Capitol Post Office Drawer 810 Tallahassee, Florida 32301 Tallahassee, Florida 32302 Honorable Hill Gunter Tom Beason and State Treasurer Spiro T. Kypreos, Esquires State of Florida Office of General Counsel The Capitol Department of General Services Tallahassee, Florida 32301 Room 457, Larson Building Tallahassee, Florida 32301 Honorable Doyle Conner Commissioner of Agriculture Thomas J. Guilday, Esquire State of Florida Akerman, Senterfitt and Eidson The Capitol Post Office Box 1794 Tallahassee, Florida Tallahassee, Florida 32301 Honorable Ralph Turlington Thomas F. Woods, Esquire Commissioner of Education 1030 East Lafayette Street State of Florida Suite 112 - The Capitol Tallahassee, Florida 32301 Tallahassee, Florida 32301 Philip S. Parsons, Esquire MacFarlane, Ferguson, Allison and Kelly Post Office Box 1548 Tallahassee, Florida 32302 Donald M. Middlebrooks, Esquire 1400 Southeast First National Bank Building Miami, Florida 33131 Mr. Thomas A. Brown Executive Director State of Florida Department of General Services 115 Larson Building Tallahassee, Florida 32301 Honorable Bob Graham Governor, State of Florida The Capitol Tallahassee, Florida 32301 Honorable Jim Smith Attorney General State of Florida The Capitol Tallahassee, Florida 32301 Honorable Gerald A. Lewis Comptroller State of Florida The Capitol Tallahassee, Florida 32301
The Issue The issues to be resolved in this proceeding concerns whether the Department of Revenue (Department) has properly issued an assessment against Mitchell's Grocery and Seafood (Mitchell's) for additional sales and use tax, interest and penalty; local government infrastructure surtax, interest and penalty; and school capital outlay surtax, interest and penalty; purportedly due in connection with business operations of Mitchell's relating to underreported taxable sales.
Findings Of Fact Mitchell's Grocery and Seafood is located at 8221 North Century Boulevard, Century, Florida. Mr. Harold Mitchell is the sole proprietor of that business and it is a retail sales business meeting the definition of the term "dealer" as defined in Section 212.06(2)(c)(d), Florida Statutes (2001). The Department is an agency of the State of Florida charged with administering and enforcing the tax laws of the State of Florida in accordance with Section 213.05, Florida Statutes. Mitchell's is engaged in the business of operating a "general store," selling fresh seafood, fishing tackle, fish bait, animal feed and general grocery items during times relevant to the audit period. On June 7, 2001 the Department sent Mitchell's a Form DR-840, being a Notice of Intent to Audit Books and Records. The audit was conducted between June 2001 and July 20, 2001. The purpose of the audit was to determine whether Mitchell's was properly collecting and remitting sales and use taxes to the State of Florida through the Department. The audit period with which the audit effort was concerned relates to May 1, 1996 through April 30, 2001 (audit period). On September 4, 2001, as a result of its audit, the Department sent a "Notice of Proposed Assessment" (Assessment) to Mitchell's indicating that it believed Mitchell's owed additional sales and use taxes in the amount of $50,864.13 with a related penalty of $25,138.96, with interest through September 4, 2001 in the amount of $15,950.65, for a total amount of $91,953.74. It also assessed a local government infrastructure surtax amount allegedly due of $8,477.43, with related penalty of $4,126.79, with interest through September 4, 2001, of $2,658.39, as well as additional school capital outlay tax allegedly due $2,934.02, with related penalty of $1,505.55, with interest through September 4, 2001 of $637.96. The taxpayer, the Petitioner chose to contest this assessment and filed a protest letter, dated August 18, 2001. The Petitioner submitted financial information in an additional letter submitted to by the Department during its informal protest. Mitchell's filed a formal protest by letter dated April 23, 2002. The Petitioner availed itself of the reconsideration process by the Department and a Notice of Reconsideration dated October 16, 2002, was issued by the Department. This was done after the Department's representatives visited the Petitioner's place of business on July 9, 2002, reviewed the taxable "markup" percentages and the exempt markups and elected to reduce its total tax assessment from $62,275.58 to $58,371.47 and, concomitantly, the related penalty and interest sought as to the amount of the reduction. The Department conducted the audit of the books and records of Mitchell's from June 5, 2001 through July 10, 2001. The necessary documentation was provided by the Petitioner for the Department to make its assessment. With Mitchell's concurrence, the Department's auditor determined that Mitchell's records were voluminous and on June 21, 2001, due to the voluminous nature and substance of the records, the Department and Mitchell's agreed to a two-month sale sampling period, representing the months of July 1999 and March 2001, being used for purposes of the audit. The Department followed a regular audit program it has developed for convenience stores similar to Mitchell's which it used in conducting the audit. Upon concluding the audit, the auditor determined a proper ratio of taxable sales to gross sales should be 53 percent. He used invoices from the two months representing the Petitioner's purchases for re-sale, as a sample in determining the ratio of taxable sales to gross sales. The auditor found that during the audit period the reported taxable sales were an average of 26 percent of the invoice-supported purchases for re- sale and that after the audit period Mitchell's reported taxable sales rose to approximately 43 percent of taxable sales in ratio to the total purchases for re-sale. The auditor found that during the audit period Mitchell's purchased between $20,000.00 to $27,000.00 of taxable items to sell at retail while reporting, on a monthly basis to the Department, taxable sales of between $12,000.00 to $15,000.00. The Department's auditor found the taxpayer to be knowledgeable about the items that were taxable that he carried in inventory for sale in his store. The Department's auditor used the Petitioner's purchases supported by purchase invoices in the sample months, to determine the tax liability because of the inherent inability to determine what Mitchell's actually sold, since the cash register tapes do not show the items sold; they only show the amount and the category of the item sold. Moreover, the cash register tapes would not reflect what happened to inventory that was not sold (for instance the owner "eating out of the store"), would not show cash sales which were not "rung up" on a cash register and would not reflect items stolen. This is the procedure that the Department has determined from long practice to be the most effective in ascertaining tax liability resulting from an audit. The auditor's determination of the amount of tax actually owed by Mitchell's was not based upon what Mitchell's purchased. Rather, the auditor used the purchases to determine the proper taxable ratio of taxable items purchased for re-sale to apply in determining Mitchell's proper tax remittance to the Department. The most reliable records used by the Department to determine the tax liability were the taxpayer's own invoices of purchased inventory. Because the taxpayer's records are voluminous the Department exercised its discretion under the law and entered into a sampling agreement with Mitchell's, wherein it made a good faith effort to reach an agreement on a sampling procedure, as required by law. The records shows that Mitchell's provided documentation during the protest period which the Department also considered and analyzed, resulting in a small reduction to the assessment. The Department's assessment is based upon the average, initially 53 percent, of Mitchell's taxable purchases for re-sale. Through the Department's Notice of Reconsideration process this percentage was reduced to 51 percent. The Petitioner contends that the auditor's approach of using invoices of purchased inventory to determine the proper taxable ratio of the taxable items purchased for resale, fails to take into account that just because items come into inventory does not mean they are sold or does not mean they are sold during the period the auditor is sampling. In this regard, however, the auditor found that Mitchell's has sold essentially the same inventory mix of items, over the time period since the audit period, as was typically sold during the audit period (i.e. the mix of nontaxable to taxable items). Moreover, the auditor examined and compared Mitchell's federal tax returns and concluded that the taxpayer's inventory did not radically change during the audit period. He also determined that the inventory did not build up and remain unsold over several months, but rather tended to turn over and be completely sold on a monthly basis. He determined this by examination of the taxpayer's own yearly inventory records. Mr. Mitchell testified that his sales had not increased since the end of the audit period. The auditor for the Department testified that he determined the mark-up ratio from each invoice provided to him from the taxpayer or after talking with the taxpayer concerning his practice on determining mark-up. Based upon this determination of information by the auditor, the mark-up ratio or percentage was entered into the Department's computer program to calculate the retail price of the taxable items purchased. The mark-up is the difference between the cost of the item when purchased and the price of the item when sold by the Petitioner at retail. For each transaction reflected in the invoices provided by the Petitioner to the Department, the auditor calculated the average taxable ratio for the Petitioner. The taxable ratio is based upon an analysis of Mitchell's gross sales, exempt sales, taxable sales, tax collected and the tax rate. The taxable ratio is determined by dividing the gross purchases for re-sale at retail made by Mitchell's in a particular month, divided by the taxable purchases for re-sale at retail. The taxable amount owed by the Petitioner is calculated by a computer program. The retail mark-up for each transaction is examined to derive the taxpayer's taxable ratio for each transaction. The computer program then calculates the average taxable ratio for all of the transactions. The taxable amount owed by the Petitioner is then calculated by multiplying the taxable ratio by the amount of gross sales. At the end of each day the taxpayer finalizes the total number of sales by "zeeing it off" at the cash register. This procedure allows the taxpayer to ascertain the taxable merchandise sold and the total income. The "zee tapes" break down the transactions into the various categories of the items sold by the taxpayer, including sales of non-taxable items. The taxpayer records the total taxable sales in a journal at the end of each day. This journal and the sales invoices are sent to the taxpayer's accountant who figures out the taxpayer's monthly remittance of tax to the Department. Mr. Mitchell did not submit into evidence the journals used by the accountant to ascertain Mitchell's monthly tax liability. Mr. Mitchell contends that "to meet Mr. Statum's (the Department's auditor) expectations of the assessment, I would have to have approximately nine hundred dollars a day in taxable sales 30 days a month." The taxpayer stated that $900.00 in taxable sales is achieved only a "few days." The Petitioner retained the summary tapes that break down each category of items sold by the Petitioner. The summary tapes were not made available to the auditor during the audit period, nor placed into evidence. The Petitioner contends that the sampling period did not account for changes in inventory. He noted that inventory fluctuations occurred, especially with respect to fish bait and tackle. Records of spoiled inventory (fish bait) during the audit period were provided to Mitchell's accountant. The spoilage was taken into account by Mitchell's as a tax deduction. Mitchell's accountant prepared the federal income tax returns based upon journals provided by Mitchell's. The Petitioner signed those tax returns prepared by his accountant and found them to be acceptable. Mr. Mitchell testified that his accountant prepared his personal tax returns for the years 1996 through 2001 during the audit period. He testified that the inventory figures on the "Schedule C's" for the years 1996 through 2001 during the audit period, were accurate. The taxpayer's accountant, Better Business Services, also prepares a monthly income statement which shows Mitchell's gross sales, purchases, expenses, gross profit and net profit. Mr. Mitchell testified that his accountant provided him with accurate information on the income statements for the years 1996 through 2001. The Petitioner accounted for the fact that purchases of inventory on a monthly basis are greater than the taxable sales reported to the Department by stating that he has unsold inventory in his store including a lot of nails, wine, cigarettes, fishing tackle, fishing rods and reels, high powered rifle cartridges, and shotgun shells, as reflected in the inventory figures shown on his Schedule C's of his federal tax returns for the years 1996-1998. The Petitioner also contended that the auditor's mark- up prices for soda pop, potato chips (which are delivered pre- priced) and animal feed were not correct. He also contends that the auditor's mark-up prices do not reflect inflation and thus that the auditor's wrongly assessed the cost value of his inventory at 2001 prices when he bought some of it as far back as 1996 at cheaper prices. For the two months that the auditor sampled, July 1999 and March 2001, the tax liability was computed by applying the taxable ratio of 53 percent to Mitchell's gross sales. The auditor then input over 100 transactions of items sold by Mitchell in June, 2001 into a computer program in order to compute the "effective rate" of tax, taking into account the statutorily mandated "bracket" rates for taxable transactions in accordance with Section 212.12, Florida Statutes. Concerning the auditor-sampled month of July 1999, the Petitioner agreed with the "mark-up" figures as reflected in "Exhibit A01, Sales Exhibit" with regard to cigarettes, fishing tackle, and Baldwin Snacks. The taxpayer agreed with the cost figures put forth by the auditor as reflected in that exhibit. The Department's auditor determined that for the month of July 1999 the Petitioner would have more taxable merchandise sold than he reported. Concerning the sample month of March 2001, the auditor determined that the Petitioner would have more taxable merchandise sold than he reported. The Petitioner agreed that the total figure for the inventory purchases reflected in the above referenced exhibit, was accurate. The auditor examined the taxpayer's exhibits (see exhibit volume II pages 160-327) and found that purchases for the months represented in those exhibits, May, June, August, September and October, 1999, were well in excess of taxable sales reported to the Department. The auditor found that Mitchell's reported taxable sales to the Department increased by approximately 75 percent after the audit period. The records of the two sample months from the audit period show a taxable sales amount reported that is comparable to the taxable sales reported to the Department after the audit period, specifically during the month of July 2003. The Department's Exhibit, pages 335-336, shows that during months after conclusion of the audit, beginning in September 2001 through December 2002 the Petitioner had more taxable sales reported to the Department than before the audit, showing an average increase of almost 75 percent after the audit period. Indeed, for several days examined for July of 2003 (immediately prior to the hearing) the taxable sales ratio was running in the range of approximately 50 percent of gross sales. The Petitioner contends that the difference in the taxable sales ratio as reported during the audit period, with the taxable sales ratio reported after the audit period, was because, as to the months of July 2002 and July 2003, he sells more fish bait, ice and beer in the month of July. He also stated that the more outdoor-oriented workforce in the area depends on good weather to achieve a steady income, which results in his July sales being inordinately high compared to other months. The Petitioner contends that July sales do not represent an average month. In summary, the Department's audit and the method it employed in its audit was shown to be reasonable under the circumstances and in accord with the statutory authority cited below. The result of that audit, culminating in the testimony and evidence adduced by the Department, shows that the Petitioner under-reported taxable sales to the Department during the audit period. The testimony of the Petitioner concerning such matters as inventory spoilage, climatic and seasonal weather changes and their effect on the local economy and therefore sales, and discrepancies with the Department's auditor over the mark-up prices of certain items sold in the store does not constitute sufficient evidence to overcome the preponderant showing that the Department's assessment is correct.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, the candor and demeanor of the witness, and the pleadings and arguments of the parties it is, therefore, RECOMMENDED that a Final Order be entered by the Department of Revenue sustaining the revised assessment at issue in the amount of $58,371.47 plus concomitant penalty and interest and subject to any discretionary negotiated settlement of tax, penalty and interest amounts. DONE AND ENTERED this 15th day of December, 2003, 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 Clerk of the Division of Administrative Hearings this 15th day of December, 2003. COPIES FURNISHED: Harold L. Mitchell Post Office Box 13 Century, Florida 32535 Robert F. Langford Assistant General Counsel Office of the Attorney General The Capitol-Tax Section Tallahassee, Florida 32399-1050 Bruce Hoffmann, General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 James Zingale, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100
The Issue The issue is whether Petitioner is a common carrier for the purpose of prorating taxes under Section 212.08(9)(b), Florida Statutes, and Rule 12A-1.064(4)(a), Florida Administrative Code.
Findings Of Fact Petitioner owns Jumbo Interstate Trucking. Petitioner's principal place of business is located in Palm Coast, Florida. The Federal Highway Administration issued Permit No. MC326745 to Petitioner to operate as a contract carrier with a service date of October 17, 1997. Petitioner's federal permit authorizes him to engage in the transportation of property (except household goods) by motor vehicle in interstate or foreign commerce. Common carriers transport cargo according to a rate schedule that applies to anyone in the general public. Contract carriers haul cargo according to market rates and pursuant to an arm's length contract that sets the mileage and freight rates with individual customers. At all times material to this case, Petitioner hauled goods in interstate commerce outside the State of Florida as a common carrier. He does not haul goods as a common carrier pursuant to a predetermined rate schedule or published tariffs. According to Petitioner, he negotiates his contracts as he goes along. Petitioner has never operated or filed an application to operate his business other than as a contract carrier. Additionally, his motor vehicles are not insured as common carriers.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That Respondent issue a final order denying Petitioner's request for a refund. DONE AND ENTERED this 10th day of June, 2002, in Tallahassee, Leon County, Florida. SUZANNE F. HOOD 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 June, 2002. COPIES FURNISHED: Raymond Gunter Jumbo Interstate Trucking 45 Moody Drive Palm Coast, Florida 32137 R. Lynn Lovejoy, Esquire Office of the Attorney General The Capitol, Tax Section Tallahassee, Florida 32399-1050 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 Pursuant to Subsection 320.641(3), Florida Statutes (2006),1 the issues in the case are whether Nissan North America, Inc.'s (Respondent), proposed termination of the dealer agreement with Classic Nissan, Inc. (Petitioner), was clearly permitted by the franchise agreement, undertaken in good faith, undertaken for good cause, and based on material and substantial breach of the dealer agreement; and whether the grounds relied upon for termination have been applied in a uniform and consistent manner.
Findings Of Fact Pursuant to definitions set forth at Section 320.60, Florida Statutes, the Petitioner is a "motor vehicle dealer" and the Respondent is a "licensee." In 1997, the Petitioner and the Respondent entered into an agreement whereby the Petitioner took control of an already- existing Nissan dealership located in Orlando, Florida. In 1999, the Petitioner and the Respondent entered into a Dealer Sales and Service Agreement (Dealer Agreement), which is a "franchise agreement" as defined at Subsection 320.60(1), Florida Statutes. The Respondent's proposed termination of the 1999 Dealer Agreement is at issue in this proceeding. At all times material to this case, the dealership has been owned by Classic Holding Company. Classic Holding Company is owned by four members of the Holler family. Christopher A. Holler is identified in the Dealer Agreement as the principal owner and the executive manager of the dealership. The family owns a number of other dealerships, representing a variety of auto manufacturers. The Respondent does not sell cars at retail to individual purchasers. Standard Provision Section 3.A. of the Dealer Agreement requires that the Petitioner "actively and effectively promote" vehicle sales to individual retail purchasers. Standard Provision Section 3.B. of the Dealer Agreement permits the Respondent to develop and select the criteria by which sales are measured, as long as the measurement criteria is reasonable. Standard Provision Section 12.B.1.a. of the Dealer Agreement permits the Respondent to terminate a dealership when a dealer fails to substantially meet its vehicle sales obligation. The Dealer Agreement includes examples of various criteria that may be used to measure dealer performance. Specifically included among the examples is the calculation of a dealer's "sales penetration" within a defined geographic "Primary Market Area" (PMA) around the dealership as compared to other local and regional dealers. Sales penetration is calculated by dividing a dealer's total new vehicle sales by the number of competitive new vehicles registered in the dealer’s PMA. Data related to vehicle registration was compiled by R. L. Polk (Polk), a nationally recognized organization commonly relied upon in the auto industry for such information. There was no evidence offered to suggest the Polk data was incorrect. The dealer's sales penetration is compared to Nissan's regional sales penetration to determine the dealer's sales performance as measured against other Nissan dealer's in the region. A dealer performing at 100 percent of the regional average is performing at an "average" level. Otherwise stated, an average dealer is performing at a "C" level. The use of sales penetration calculations as a measurement of dealer performance is common in the automotive industry. The Respondent has used sales penetration as a measurement of dealer sales performance for more than 20 years. The Respondent's use of sales penetration as a measurement of dealer performance was reasonable or was permitted by the specific terms of the Dealer Agreement. The Respondent's use of the sales penetration measurements was widely communicated to dealers, who were advised on a routine basis as to the performance of their dealerships compared to local dealers and on a regional basis. The Petitioner knew, or should have known, that sales penetration was being used to measure the Petitioner's sales performance. There was no credible evidence presented at the hearing that the Respondent calculated sales penetration in order to disadvantage the Petitioner relative to other Nissan dealers in the region. At the hearing, the Petitioner suggested alternative standards by which sales performance should be reviewed, including consideration of total sales volume. The use of sales volume to measure retail effectiveness would penalize dealerships in smaller markets and fail to reflect the market opportunity available to each dealer. There was no credible evidence presented at the hearing that total sales volume more accurately measured the Petitioner's sales performance than did sales penetration. The Petitioner suggested that the use of sales penetration to substantiate the proposed termination of the Dealer Agreement at issue in this case was unreasonable and unfair because approximately half of Nissan's dealerships will be performing below 100 percent of the regional average at any given time, yet the Petitioner has not proposed termination of dealership agreements with half of its dealer network; however, the proposed termination at issue in this case is not based merely on the Petitioner's sales penetration. In 2002, the Petitioner's sales penetration was 110.5 percent, well above the regional average. At that time, the Respondent was preparing to introduce a number of new vehicles to the market. Some of the new vehicles were revisions of previous models, while others were intended to compete with products against which Nissan had not previously competed. Nissan representatives believed that the new models would substantially expand sales opportunities for its dealerships, and they encouraged their dealer network to prepare for the new environment. Some dealers responded by increasing staff levels and modernizing, or constructing new facilities. The Petitioner failed to take any substantive action to prepare for the new model lineup. Beginning in 2003, and continuing throughout the relevant period of this proceeding, the Petitioner's regional sales penetration went into decline. From 2002 to 2003, the Petitioner's annualized sales penetration fell more than 30 points to 85.13 in 2003. The Petitioner's sales penetration for 2004 was 65.08 percent. The Petitioner's sales penetration for the first quarter of 2005 was 61.78 percent. Following the introduction of the new models and during the relevant period of this proceeding, regional Nissan sales increased by about 40 percent. By 2004, the average Nissan dealer in the Petitioner's region had a sales penetration of 108.8 percent of the regional average. Through the first quarter of 2005, the average dealer in the region had a sales penetration of 108.6 percent of the regional average. Compared to all other Florida Nissan dealers during the relevant period of this proceeding, the Petitioner was ranked, at its best, 54th of the 57 Florida Nissan dealerships and was ranked lowest in the state by January 2005. Every Florida Nissan dealership, other than the Petitioner, sold more new cars in 2004 than in 2002. The Petitioner sold 200 fewer vehicles in 2004 than it had two years earlier. The three other Orlando-area Nissan dealers experienced significant sales growth at the same time the Petitioner's performance declined. The Petitioner has suggested that the Respondent failed to provide the information to appropriate management of the dealership. The Dealer Agreement indicated that Christopher A. Holler was the executive manager of the dealership; however, his address was located in Winter Park, Florida, and he did not maintain an office in the dealership. The Respondent's representatives most often met with managers at the dealership, who testified that they communicated with Mr. Holler. On several occasions as set forth herein, Nissan representatives met with Mr. Holler for discussions and corresponded with him. There was no credible evidence presented at the hearing that the Petitioner was unaware that its sales penetration results were declining or that the Petitioner was unaware that the Respondent was concerned with the severity of the decline. The Respondent communicated with the Petitioner on a routine basis as it did with all dealers. As the Petitioner's sales performance declined, the Respondent communicated the monthly sales report information to the Petitioner, and the topic of declining sales was the subject of a continuing series of discussions between the parties. In February 2003, Tim Pierson, the Respondent's district operations manager (DOM), met with the Petitioner's on- site manager, John Sekula, and discussed the dealership's declining sales penetration. Mr. Sekula was subsequently transferred by the ownership group to another auto manufacturer's dealership. In August 2003, Mr. Pierson met with the Petitioner's new manager, Darren Hutchinson, as well as with a representative from the ownership group, to discuss the continuing decline in sales penetration, as well as an alleged undercapitalization of the dealership and the lack of an on-site executive manager with authority to control dealership operations. On October 1, 2003, the Respondent issued a Notice of Default (NOD) charging that the Petitioner was in default of the Dealer Agreement for the failure to "retain a qualified executive manager" and insufficient capitalization of the dealership. In December 2003, Mr. Pierson met with Christopher A. Holler to discuss the dealership's problems. By the time of the meeting, Mr. Hutchinson had been designated as the executive manager, although Mr. Hutchinson's decision-making authority does not appear to have extended to financial operations. During that meeting, based on the Petitioner's failure to meet the capitalization requirements and respond to the deterioration in sales, Mr. Pierson inquired as to whether the Petitioner was interested in selling the dealership, but Mr. Pierson testified without contradiction that Mr. Holler responded "no." Mr. Hutchinson explained at the hearing that he asked the question because there was little apparent effort being made to address the deficiencies at the dealership, and he was attempting to ascertain the Petitioner's intentions. Mr. Hutchinson was directed to prepare a plan to address the Petitioner's customer service rating, which had fallen to the lowest in the area. Based on an apparent belief that the ownership group was going to remedy the Respondent's concerns about capitalization, the Respondent extended the compliance deadline set forth in the NOD, but the extended deadline passed without any alteration of the dealership's capitalization. A letter to the Respondent dated March 25, 2004, allegedly from Mr. Holler, noted that sales and customer service scores had improved; however, there was no credible evidence presented during the hearing to support the claimed improvement in either sales or customer service. The letter also stated that the capitalization of the dealership would be increased in April 2004 and that new vehicle orders were being reduced. On March 19, 2004, Mr. Pierson spoke with Mr. Holler and believed, based on the conversation, that a meeting would be scheduled to discuss the sales and capitalization issues. In anticipation of the meeting, Pierson sent the sales penetration reports directly to Mr. Holler, but the meeting did not occur. There was no additional capital placed into the dealership during April 2004. In April 2004, Andy Delbrueck, a new DOM for the area, met with Mr. Hutchinson to discuss the continuing decline in sales penetration through the end of March 2004. Other dealers in the area were experiencing increased sales at this time, but the Petitioner's regional sales penetration continued to decline and was below the region for almost all Nissan models. Mr. Hutchinson advised that he was hiring additional staff and had sufficient advertising funds to return the regional sales penetration averages by June. In early May 2004, Mr. Delbrueck and a Nissan vice president, Patrick Doody, sent a letter about the Petitioner's declining sales performance to Mr. Holler and requested that the Petitioner prepare a plan to address the problem. On May 18, 2004, Mr. Delbrueck again met with Mr. Hutchinson and discussed the decline in sales performance and customer service scores, as well as the issue of the dealership's undercapitalization. A May 25, 2004, letter to the Respondent, allegedly from Mr. Holler, noted that the dealership's sales penetration had improved, that additional staff had been hired, and that the Petitioner anticipated reaching or exceeding the regional sales penetration average by the end of the third quarter of 2004. The Petitioner never reached regional sales penetration averages following this letter, and, at the time it was written, there had been no material improvement in the dealership's sales penetration. On June 17, 2004, Mr. Delbrueck met with Mr. Holler to discuss the continuing decline in the Petitioner's sales performance. Mr. Delbrueck believed, based on the meeting, that Mr. Holler was aware of the problem and would make the changes necessary to improve sales, including employing additional sales staff. On July 7, 2004, the Respondent issued an Amended NOD, citing the continuing decline in the Petitioner's sales performance as grounds for the default, in addition to the previous concerns related to capitalization that were identified in the earlier NOD. The Amended NOD established a deadline of November 29, 2004, by which time the cited deficiencies were to be remedied. One day later, Mr. Delbrueck met with Mr. Hutchinson, discussed the Amended NOD, and made various suggestions as to how the Petitioner could improve the dealership's sales, including marketing and staffing changes. Mr. Delbrueck also offered to send in a trained Nissan representative, William Hayes, to review dealership operations and provide suggestions to improve conditions at the facility and ultimately to increase car sales. Mr. Hutchinson accepted the offer. A letter to the Respondent dated July 23, 2004, allegedly from Christopher A. Holler, noted that staffing levels had increased as had sales for the month of July; however, there was no credible evidence presented at the hearing that any substantive increase in staffing had occurred or that the Petitioner's sales penetration had increased. The letter contained no specific plan for remedying the problems cited in the Amended NOD. In late July 2004, a Nissan training representative, William Hayes, performed a focused review of the Petitioner's operations and provided a list of specific recommendations intended to improve the Petitioner's sales performance. He met with Mr. Hutchinson at the dealership and discussed the list of recommendations. At that time, Mr. Hutchinson stated that he believed the recommendations were useful. On September 10, 2004, Nissan Vice President Doody sent another letter to Mr. Holler referencing the Petitioner's declining sales performance and, again, requesting that the Petitioner prepare a plan to address the issue. A September 30, 2004, letter to the Respondent, allegedly from Mr. Holler, noted that staffing levels had been increased, a new executive manager (Mr. Hutchinson) had been hired, advertising funds had been increased, and customer service scores had improved. However, by that time, Mr. Hutchinson had been employed at the dealership since at least August of 2003, and there was no credible evidence presented at the hearing that staffing levels, advertising funds, or customer satisfaction scores had been materially increased. On October 18, 2004, Nissan Vice President Doody, sent another letter to Mr. Holler about the Petitioner's declining sales performance, noting that whatever efforts had been made by the Petitioner to improve sales had been unsuccessful. Thereafter, Mr. Doody arranged a meeting with Mr. Delbrueck, Mr. Holler, and another member of the Holler family to discuss the deteriorating situation at the dealership and between the parties. The meeting occurred on October 26, 2004, during which the Nissan representatives addressed the issues including under- capitalization, declining sales, and customer satisfaction scores. The Nissan representatives noted the Petitioner's failure to respond to any of the continuing problems and advised the Petitioner that, if the situation did not improve, the Respondent could initiate proceedings to terminate the Dealer Agreement. At the hearing, the Nissan representatives testified that the Holler family members in attendance at the October 26th meeting had no response during the discussion and offered no specific plan to resolve the situation. The Petitioner presented no credible evidence to the contrary. Shortly after the meeting, and in the absence of any substantive attempt by the Petitioner to resolve the concerns set forth in the NODs, the Nissan representatives decided to pursue termination of the Dealer Agreement if the Petitioner's sales penetration continued to be unsatisfactory. The Petitioner's regional sales penetration as of November 2004 was 65.69 percent. The year-end sales penetration for 2004 was 64.5 percent of regional average. On January 7, 2005, Mr. Delbrueck met with Mr. Hutchinson to discuss the dealership's sales performance. By that time, more than a year had passed since Mr. Hutchinson's designation as executive manager, yet the dealership's sales performance had not improved. Mr. Delbrueck inquired as to whether the Petitioner would be interested in using an additional Nissan resource (the EDGE program) designed to identify specific deficiencies in the sales process. The EDGE program included an extensive review of the sales process from the customer perspective, including a six-month survey period and four hidden camera "mystery shopper" visits. There was a charge to dealers participating in the EDGE program. Mr. Hutchinson told Mr. Delbrueck that he would have to discuss the program with the owners. The Petitioner subsequently chose not to participate. During the January 7th meeting, Mr. Delbrueck also encouraged Mr. Hutchinson to hire additional sales staff. At the hearing, Mr. Hutchinson testified that at the time of this meeting, he had been "building a sales force" yet by March of 2005, the Petitioner's full-time sales staff was approximately one-half of what it had been in 2003. On February 11, 2005, Mr. Delbrueck met with Mr. Hutchinson and Holler family members to follow up on the NOD and the October 26th meeting, but made no progress towards resolving the problems. On February 23, 2005, Mr. Delbrueck and Mr. Hayes met with Mr. Hutchinson to follow up on the recommendations Mr. Hayes made in July 2004. Mr. Hutchinson continued to state that the recommendations were useful, but very few had been implemented, and he offered no plausible explanation for the delay in implementing others. On February 24, 2005, the Respondent issued a Notice of Termination (NOT) of the Dealer Agreement that set forth the continuing decline in sales penetration as grounds for the action, as well as the alleged undercapitalization. At some point in early 2005, the Petitioner increased the capitalization of the dealership and corrected the deficiency, although it was implied during the hearing that the correction was temporary and that the increased capital was subsequently withdrawn from the dealership. In any event, the Respondent issued a Superceding NOT on April 6, 2005, wherein capitalization was deleted as a specific ground for the proposed termination. The Petitioner's January 2005 sales penetration was 49.3 percent of regional average, the lowest of any Nissan dealer in the State of Florida. Consumers typically shop various automobile brands, and a consumer dissatisfied with a dealer of one brand will generally shop dealers of competing brands located in the same vicinity, in order to purchase a vehicle at a convenient dealership for ease of obtaining vehicle service. The Respondent asserted that it was harmed by the Petitioner's deteriorating sales performance because Nissan sales were "lost" to other manufacturers due to the Petitioner's failure to appropriately market the Nissan vehicles. The Petitioner asserted that because Nissan's overall sales performance in the Petitioner's PMA was average, no Nissan sales were lost. The Respondent offered testimony suggesting that sales lost to Nissan may not have been lost to the Holler ownership group because the group also owned nearby Mazda and Honda dealerships. The evidence regarding the calculation of lost Nissan sales was sufficiently persuasive to establish that Nissan was harmed by the Petitioner's inadequate vehicle sales volume and by the Petitioner's failure to meet its obligation to "actively and effective promote" the sale of Nissan vehicles to individual purchasers as required by the Dealer Agreement. The number of sales lost is the difference between what a specific dealer, who met regional sales averages, should have sold compared to what the dealer actually sold. In 2003, the Respondent lost 185 sales based on the Petitioner's poor sales performance. In 2004, the Respondent lost 610 sales based on the Petitioner's poor sales performance, 200 more lost sales than from the next poorest performing Nissan dealer in Florida. The parties offered competing theories for the Petitioner's declining performance, which are addressed separately herein. The greater weight of the evidence presented at the hearing establishes that as set forth herein, the Respondent's analysis of the causes underlying the Petitioner's poor sales performance was persuasive and is accepted. The Respondent asserted that the sales decline was caused by operational problems, including an inadequate facility, inadequate capitalization, poor management, ineffective advertising, inadequate sales staff, and poor customer service. Competing dealerships in the area have constructed improved or new facilities. Customers are more inclined to shop for vehicles at modern dealerships. Upgraded dealerships typically experience increased customer traffic and sales growth. The Petitioner's facility is old and in disrepair. Some dealership employees referred to the facility as the "Pizza Hut" in recognition of the sales building's apparent resemblance to the shape of the restaurant. Nissan representatives discussed the condition of the facility with the Petitioner throughout the period at issue in this proceeding. When the Respondent began preparing for the introduction of new models in 2002, the Respondent began to encourage dealerships including the Petitioner, to participate in the "Nissan Retail Environment Design Initiative" (NREDI), a facility-improvement program. Apparently, the Petitioner was initially interested in the program, and, following a design consultation with the Respondent's architectural consultants, plans for proposed improvements to the Petitioner's facility were created. At the time, the Respondent was encouraging dealers to improve facilities, the Respondent had a specified amount of funding available to assist dealers who chose to participate in the NREDI program, and there were more dealers interested than funds were available. Although funds were initially reserved for the Petitioner's use, the Petitioner declined in June of 2003 to participate in the program, and the funds were reallocated to other dealerships. The Respondent implied that one of the reasons the Petitioner did not upgrade the dealership facility was a lack of capitalization. The allegedly inadequate capitalization of the dealership was the subject of continuing discussions between the Petitioner and the Respondent for an extended period of time; however, inadequate capitalization was specifically deleted from the grounds for termination set forth in the NOT at issue in this proceeding. Although the evidence indicates that lack of capitalization can limit a dealer's ability to respond to a multitude of problems at a dealership, the evidence is insufficient to establish in this case that an alleged lack of capitalization was the cause for the dealership's failure to upgrade its facility. In a letter to the Respondent dated June 30, 2003, the Petitioner stated only that it was "not feasible" to proceed and indicated an intention only "to proceed in the future," but offered no additional explanation for the lack of feasibility. Similarly, it is not possible, based on the evidence presented during the hearing, to find that Petitioner's failure to respond to the deteriorating operations at the dealership was due to a lack of financial resources. Daily operations at the dealership were hampered by the lack of appropriate management at the dealership location. Although Mr. Holler was identified in the Dealer Agreement as the principal owner and the executive manager of the dealership, his address was located in Winter Park, Florida, and there was no credible evidence presented that he managed the operation on a daily basis. As sales deteriorated, the Respondent began to insist that the Petitioner designate someone located on-site at the facility as executive manager with full control over the day-to- day operations of the dealership. In June 2003, Mr. Sekula was appointed as executive manager, but his authority was limited and his decisions required approval of the ownership group. At the hearing, Mr. Sekula acknowledged that the ownership group was bureaucratic. Shortly after his appointment, he was transferred by the ownership group to another of their competing dealerships. Several months later, Mr. Hutchinson was appointed as executive manager. There was no credible evidence presented to establish that Mr. Hutchinson ran the fiscal operations of the dealership. He prepared budgets for various expenditures and submitted them to the ownership group. The ownership group apparently controlled the "purse strings" of the dealership. There was no credible evidence presented as to the decision- making process within the group; however, decisions on matters such as the dealership's advertising budget required approval of the ownership group. The failure to provide appropriate on-site management can delay routine decisions and negatively affect the ability to manage and motivate sales staff. For example, when Nissan offered Mr. Hutchinson the opportunity to participate in the Nissan EDGE sales program, Mr. Hutchinson was initially unable to respond, because he lacked the ability to commit the financial resources to pay for the program. Mr. Hutchinson testified that the ownership group routinely approved his advertising budget requests. As the Petitioner's sales declined, so did advertising expenditures, from $694,107 in 2002 to $534,289 in 2004. The Petitioner's declining advertising expenditures were a contributing factor in deteriorating sales. The Petitioner reduced its total advertising budget while the Orlando market was growing, and the Petitioner's sales penetration declined while competing dealerships sales increased. Additionally, the Petitioner did not monitor the effectiveness of its advertising. The Petitioner's advertising was implemented through "Central Florida Marketing," a separate company owned by the Holler organization. There is no evidence that either the Petitioner or Central Florida Marketing monitored the effectiveness of the advertising. A substantial number of Nissan buyers within the Petitioner's PMA purchased vehicles from other dealerships, suggesting that the advertising failed to attract buyers to the Petitioner's dealership. Only eight percent of the Petitioner's customers acknowledged seeing the Petitioner's advertising, whereas about 20 percent of car shoppers in the Orlando area admit being influenced by dealer advertising. The Respondent asserted that the Petitioner failed to have sufficient sales staff to handle the increased customer traffic precipitated by the introduction of new Nissan models in 2002 and 2003. The Respondent offered evidence that the average vehicle salesperson sells eight to ten cars monthly, five to six of which are new cars and that, based on sales expectations, the Petitioner's sales force could not sell enough cars to meet the regional averages. Although the evidence establishes that the Petitioner cut sales staff as sales declined at the dealership, there is no credible evidence that customers at the Petitioner's facility were not served. The assertion relies upon an assumption that the Petitioner experienced increased sales traffic upon the introduction of new models and that the sales staff was inadequate to sufficiently service the increased traffic. The evidence failed to establish that the Petitioner experienced an increase in sales traffic such that sales were lost because staff was unavailable to assist customers. However, the Petitioner's sales staff failed to take advantage of customer leads provided to the dealership by the Respondent. The Respondent gathered contact information from various sources including persons who requested vehicle information from the Respondent's internet site, as well as the names of lease customers whose lease terms were expiring. The contact information was provided to dealers without charge through the Respondent's online dealer portal. The Petitioner rarely accessed the data, and it is, therefore, logical to presume that the leads resulted in few closed sales. The Petitioner's customer satisfaction scores also declined during the time period relevant to this proceeding. Poor customer service can eventually influence sales as negative customer "word-of-mouth" dampens the interest of other prospective customers. The Respondent monitored the customer opinions of dealer operations through a survey process, which resulted in "Customer Service Index" (CSI) scores. Prior to 2003, the Petitioner's CSI scores had been satisfactory, and then CSI scores began to decline. By the close of 2003, the CSI scores were substantially below regional scores, and the sales survey score was the lowest in the Petitioner's district. Although the Petitioner asserted on several occasions that CSI scores were increasing, the evidence established that only the March 2004 CSI scores improved and that no other material improvement occurred during the time period relevant to this proceeding. The Petitioner asserted at the hearing that the sales performance decline was caused by a lack of vehicle inventory, the alteration of the Petitioner's PMA, a lack of available financing from Nissan Motors Acceptance Corporation (NMAC), hurricanes, improper advertising by competing dealers, and the death of Roger Holler, Jr. The Petitioner also asserted that this termination action is being prosecuted by the Respondent because the Petitioner declined to participate in the NREDI dealer-facility upgrade program and declined to sell the Respondent's extended service plan product. A number of the suggested causes offered by the Petitioner during the hearing were omitted from the Petitioner's Proposed Recommended Order, but nonetheless are addressed herein. The Petitioner asserted that the Respondent failed to make available marketable inventory sufficient for the Petitioner to meet sales penetration averages. The evidence failed to support the assertion. Nissan vehicles were distributed according to an allocation system that reflected dealer sales and inventory. The Respondent used a "two-pass" allocation system to distribute 90 percent of each month's vehicle production. The remaining 10 percent were reserved for allocation by Nissan market representatives. Simply stated, dealers earned new vehicles to sell by selling the vehicles they had. New vehicle allocations were based upon each dealer's "days' supply" of cars. The calculation of days' supply is essentially based on the number of vehicles a dealer had available on the lot and the number of vehicles a dealer sold in each month. Through the allocation system, a dealership that failed to sell cars and lower its days' supply would be allocated fewer cars during the following month. More vehicles were made available to dealers with low days' supplies than were available to dealers with higher supplies. It is clearly reasonable for the Respondent to provide a greater supply of vehicles to the dealers who sell more cars. At some point during the period relevant to this proceeding, Nissan removed consideration of sales history from the days' supply-based allocation system calculation; however, there was no credible evidence presented to establish that the elimination of the sales history component from the calculation reduced the vehicle allocation available to the Petitioner. The Respondent applied the same allocation system to all of its dealerships, including the Petitioner. There is no evidence that the Respondent manipulated the allocation system to deny any vehicles to the Petitioner. The Respondent provided current inventory and allocation information to all of its dealerships, including the Petitioner, through a computerized database system. The Petitioner was responsible for managing vehicle inventory and for utilizing the allocation system to acquire cars to sell. Although the Petitioner asserted that the decline in sales was related to a lack of vehicle inventory, there was no evidence that the Petitioner's inventory declined during the period relevant to this proceeding. In fact, the evidence established that the Petitioner's inventory actually increased from 150 vehicles in early 2003 to 300 vehicles in early 2004, at which time the Petitioner reduced vehicle orders and the inventory began to decline. The Petitioner also asserted that it was provided vehicles for sale that were undesirable to the Petitioner's customers, due to expensive or excessive options packages. There was no credible evidence that the Petitioner's sales declines were related to an inventory of undesirable vehicles. Further, there was no evidence that the decline in sales penetration was related to poor supply of any specific vehicle model. Other than two truck models, the Petitioner's sales penetration decline occurred across the full range of Nissan vehicles offered for sale. Every Nissan dealer had the ability to exercise significant control (including color and option package choices) over most of the inventory acquired during the "first pass" allocation. Any inventory deficiencies that may have existed were the result of the Petitioner's mismanagement of inventory. Mr. Hutchinson did not understand the vehicle allocation system or its relationship to the days' supply calculation. The Petitioner routinely declined to order units of Nissan's apparently most marketable vehicles during the allocation process. During 2003, the Petitioner declined 137 vehicles from the "first pass" allocation, including 18 Sentras and 56 Altimas, and declined 225 vehicles from the "second pass" allocation, including 59 Sentras and 59 Altimas. During the first half of 2004, the Petitioner declined 58 vehicles from the "first pass" allocation and 42 vehicles from the "second pass" allocation. During the hearing, one of the Petitioner's witnesses generally asserted that the Respondent's turndown records were erroneous; however, the witness was unable to identify any errors of significance, and the testimony of the witness was disregarded. After the two-pass allocation process was completed, there were usually some vehicles remaining for distribution to dealers. Nissan assigned responsibility to DOMs to market these units to dealers. The DOMs used the days' supply calculation to prioritize the order in which they contacted dealers, although the vehicles were available to any dealer. There is no evidence that any DOM manipulated the days' supply-based prioritization of vehicles for denying the Petitioner the opportunity to obtain vehicles to sell. Any vehicles remaining available after the DOM attempts to distribute the vehicles were identified as "Additional Vehicle Requests" (AVR) and were made available to all dealers simultaneously. Dealerships were notified of such availability by simultaneous facsimile transmission or through the Nissan computerized database. There was no evidence that the Petitioner was denied an opportunity to obtain AVR vehicles, and in fact, the Petitioner obtained vehicles through the AVR system. The Petitioner asserted that the Nissan practice of reserving 10 percent of each month's production for allocation by market representatives rewarded some dealers and punished others. Market representative allocations are standard in the industry, and such vehicles are provided to dealerships for various reasons. Nissan market representative allocations were used to supply extra cars to newly opened dealerships or in situations where a dealership was sold to new ownership. Nissan market representative allocations were also provided to dealers who participated in the NREDI facility upgrade program. The provision of additional vehicles by market representatives to new or expanded sales facilities was reasonable because the standard allocation system would not reflect the actual sales capacity of the facility. The Petitioner presented no evidence that the Respondent, or any of its market representatives, manipulated the 10 percent allocation to unfairly reward any of the Petitioner's competitors or to punish the Respondent for not participating in various corporate programs. Prior to 2001, the Respondent had a program of providing additional vehicles to under-performing dealers in an apparent effort to increase sales by increasing inventory; however, the program did not cause an increase in sales and actually resulted in dealers being burdened with excessive unsold inventory and increased floor plan financing costs. The Respondent eliminated the program in 2001, and there is no evidence that any dealership was provided vehicles through this program during the time period relevant to this proceeding. There is no evidence that the Respondent eliminated the program for the purpose of reducing the vehicles allocated or otherwise provided to the Petitioner. The Petitioner asserted that the Respondent altered the Petitioner's assigned PMA in March 2004 and that the alteration negatively affected the Petitioner's sales penetration calculation because the Petitioner's area of sales responsibility changed. Prior to March 2004, the Petitioner's PMA was calculated using information reported by the 1990 United States Census. After completion of the 2000 Census, the Respondent evaluated every Nissan dealer's PMA and made alterations based upon population changes as reflected within the Census. Standard Provision Section 3.A. of the Dealer Agreement provides that the Respondent "may, in its reasonable discretion, change the Dealer's Primary Market Area from time to time." There was no credible evidence presented to establish that the 2000 PMA was invalid or was improperly designated. There was no evidence that the Respondent's evaluation of the Petitioner's PMA was different from the evaluation of every other PMA in the United States. There was no evidence that the Respondent evaluated or altered the Petitioner's PMA with the intent to negatively affect the Petitioner's ability to sell vehicles or to meet regional sales penetration averages. There was no credible evidence that the 2000 PMA adversely affected the dealership or that the Petitioner's declining sales penetration was related to the change in the PMA. The alteration of the PMA did not sufficiently affect the demographics of the Petitioner's market to account for the decline in sales penetration. Recalculating the Petitioner's sales penetration under the prior PMA did not markedly improve the Petitioner's sales penetration. The Petitioner suggested that the 2000 PMA revision was an impermissible modification or replacement of the Dealer Agreement, but no credible evidence was offered to support the assertion. There was no evidence that the Petitioner did not receive proper notice of the 2000 PMA. At the hearing, the Petitioner implied that the Respondent caused a decline in sales by refusing to make Nissan Motor Acceptance Corporation (NMAC) financing available to the Petitioner's buyers. NMAC is a finance company affiliated with, but separate from, the Respondent. NMAC provides a variety of financing options to dealers and Nissan vehicle purchasers. NMAC relies in lending decisions, as do most lenders, on a "Beacon score" which reflects the relative creditworthiness of a customer's application to finance the purchase of a car. Vehicle financing applications are grouped into four general "tiers" based on Beacon scores. Various interest rates are offered to customers based on Beacon scores. The Petitioner offered data comparing the annual number of NMAC-approved applications submitted in each tier by the Petitioner on behalf of the Petitioner's customers to suggest that the decline in the Petitioner's sales indicated a decision by NMAC to decrease the availability of NMAC credit to the Petitioner's customers. There was no evidence that NMAC treated the Petitioner's customers differently than the customers of competing dealerships or that NMAC-financed buyers received preferential interest rates based upon the dealership from which vehicles were purchased. There was no evidence that the Respondent exercised any control over individual financing decisions made by NMAC. There was no evidence that the Respondent manipulated, or had the ability to manipulate, the availability of NMAC financing for the purpose of negatively affecting the Petitioner's ability to sell vehicles. A number of hurricanes passed through the central Florida region in August and September of 2004. The Petitioner asserted that the dealership's physical plant was damaged by the storms, and that the hurricane-related economic impact on area consumers caused, at least in part, the decline in sales. The evidence failed to establish that the Petitioner's physical plant sustained significant hurricane damage to the extent of preventing vehicle sales from occurring. None of the Petitioner's vehicle inventory sustained hurricane- related damage. There was no evidence presented to indicate that the Petitioner's customers experienced a more significant economic impact than did the customers of competing dealers in the area. There was no credible evidence that the hurricanes had any material impact on the Petitioner's sales penetration. The Petitioner's sales penetration immediately prior to the hurricanes was 62.8 percent. The Petitioner's sales penetration in August 2004 was 61.6 percent, in September was 61.1 percent, and in October was 62.3 percent. Generally, within 30 to 45 days after a hurricane, customers with damaged vehicles use insurance proceeds to purchase new vehicles. The Petitioner's sales volume increased at this time; although because other dealers in the region also experienced increased sales, there was no change to the Petitioner's sales penetration calculation. The Petitioner asserted that improper advertising of "double rebates" by competing dealers caused declining sales, and offered evidence in the form of newspaper advertisements in support of the assertion; however, the Petitioner's own advertising indicated the availability of such rebates on occasion. There was no evidence presented to establish that the Respondent was responsible for creating or approving advertisements for dealerships. The Respondent has a program whereby dealers who meet certain advertising guidelines can obtain funds to defray advertising costs, but the program is voluntary. The Respondent does not regulate vehicle advertising or retail pricing. There was no evidence that the Petitioner reported any allegedly misleading or illegal advertising with any law enforcement agency having jurisdiction over false advertising or unfair trade practices. Mr. Hutchinson testified that the death of Roger Holler, Jr., in February 2004, negatively affected sales at the dealership, but there was no evidence that Roger Holler, Jr., had any role in managing or operating the dealership. The Petitioner's sales decline commenced prior to his death and continued thereafter. The evidence failed to establish that the death had any impact on the operation of the dealership or the Petitioner's sales performance. The Petitioner asserted that the Respondent's effort to terminate the Dealer Agreement was an attempt to punish the Petitioner for declining to participate in the NREDI program and offered a chronology of events intended to imply that the Respondent's actions in this case were a deliberate plan to force the Petitioner to either build a new facility or sell the dealership. The assertion is speculative and unsupported by credible evidence. During the time period relevant to this proceeding, only one of the four Orlando-area Nissan dealers agreed to participate in the NREDI program. Of the four dealerships, three experienced increased sales activity during the period relevant to this proceeding. The Petitioner was the only one of the four dealerships to experience a decline in sales penetration during this period. The Respondent has taken no action against the two other dealerships that declined to participate in the NREDI program. There was no credible evidence that the Respondent has taken any punitive action against any dealership solely based on a dealership's decision not to participate in the NREDI program. The Petitioner asserted that the Respondent's actions in this case were intended to punish the Petitioner for not selling the Respondent's extended service contract (known as "Security Plus") and for selling a product owned by the Petitioner, but there was no evidence supporting the assertion. A substantial number of dealers in the region did not sell the Security Plus product to new car buyers. There was no evidence that the Respondent has penalized any dealer, including the Petitioner, for refusing to sell the Nissan Security Plus product. During the hearing, the Petitioner identified a number of other troubled Nissan dealerships, ostensibly to establish that other dealerships similarly situated to the Petitioner had not been the subject of Dealer Agreement termination proceedings and that the Respondent had failed to enforce the Dealer Agreement termination provisions fairly. A number of the dealerships cited by the Petitioner are outside the State of Florida and are immaterial to this proceeding. The Dealer Agreement provides for termination of an agreement if the dealer materially and substantially breaches the agreement. The Dealer Agreement does not require termination of every dealership that fails to achieve average regional sales penetration. Termination of a Dealer Agreement because of sales performance requires a dealer-specific analysis that includes consideration of the factors underlying poor sales and consideration of conditions that may warrant delaying termination proceedings. As to the other Florida Nissan dealers cited by the Petitioner, many had higher sales penetration levels than did the Respondent. When compared to the Florida dealerships, the magnitude of the Petitioner's sales penetration decline exceeded that of all the other dealerships. Many of the cited dealerships had also initiated changes in management, staffing, and facilities to address sale and service deficiencies. Some of the cited dealers had already shown sales and service-related improvements. One dealership, Love Nissan, had already been terminated, even though its sales penetration had exceeded that of the Petitioner. One dealership cited by the Petitioner was Hampton Nissan, against whom the Respondent had initiated termination proceedings in 2003. Changes to Hampton's PMA based on the 2000 PMA resulted in an increase in the dealership's sales penetration eventually to levels exceeding those of the Petitioner, and Nissan has rescinded the action. There was no evidence that the Hampton Nissan PMA was calculated differently than the Petitioner's PMA, or that either PMA was altered purposefully to affect the dealer's sales penetration results. Other dealerships cited by the Petitioner were being monitored by the Respondent to ascertain whether efforts to improve sales performance succeed. The Respondent may ultimately pursue termination proceedings against underperforming dealerships if sales performance fails to improve. There was no credible evidence that, prior to initiating this termination proceeding, the Respondent failed to consider the facts and circumstances underlying the Petitioner's poor sales and the Petitioner's response to the situation. The Petitioner has experienced a substantial and continuing decline in sales penetration and has failed to respond effectively to the deteriorating situation during the period at issue in this proceeding.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Highway Safety and Motor Vehicles enter a final order dismissing Petitioner's protest and approving the April 6, 2005, Superceding Notice of Termination. DONE AND ENTERED this 20th day of March, 2007, 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 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 20th day of March, 2007.
The Issue Whether or not Petitioners (complainants) are entitled to recover $10,258.98, or any part thereof against Respondent dealer and his surety company.
Findings Of Fact Petitioners are growers of watermelons and qualify as "producers" under Section 604.15(5) F.S. Respondent Eddie D. Griffin d/b/a Quality Brokerage is a broker-shipper of watermelons and qualifies as a "dealer" under Section 604.15(1) F.S. Respondent United States Fidelity & Guaranty Company is surety for Respondent Griffin d/b/a Quality Brokerage. This cause is governed by the claims made in the amended complaint. (Exhibit P-13) That amended complaint sets out the parameters of the claimed amounts as follows: AGREED PRICE PAID PRICE DIFFERENCE CLAIMED 6-13-92 Inv.#573 45,429 lbs. Jub. melons @ .04/lb.$1,816.80 (paid on 41,720 lbs.) Adv. -700.00 NWPB - 9.08 1,107.72 950.46 157.26 6-14-92 Inv.#586 48,060 lbs. Jub. melons @ .05/lb. 2,403.00 (paid @ .04/lb.) Adv. -700.00 NWPB - 9.61 1,693.39 1,202.79 490.60 6-14-92 Inv.#587 50,610 lbs. Jub. melons @ .05/lb. 2,530.50 (paid @ .04/lb.) Adv. -700.00 NWPB - 10.12 1,820.38 1,304.28 516.10 6-15-92 Inv.#592 44,800 lbs. Crim. melons @ .05/lb. 2,240.00 (paid @ .04/lb.) Adv. -700.00 NWPB - 8.96 1,531.04 1,153.04 378.00 6-15-92 Inv.#593 46,340 lbs. Crim. melons @ .05/lb. 2,317.00 (paid @ .04/lb.) Adv. -700.00 NWPB - 9.27 1,607.73 1,144.33 463.40 6-16-92 Inv.#598 47,170 lbs. Crim. melons @ .05/lb. 2,358.50 (paid @ .04/lb.) Adv. -700.00 NWPB - 9.43 1,649.07 1,177.37 471.70 6-16-92 Inv.#607 48,320 lbs. Crim. melons @ .05/lb. 2,416.00 (paid @ .04/lb.) Adv. -700.00 NWPB - 9.66 1,706.34 1,223.14 483.20 6-17-92 Inv.#628 1/ 40,890 lbs. Jub. melons @ .05/lb. 2,044.50 (no inv.# provided producer) Adv. -700.00 NWPB - 8.18 1,336.32 .00 1,336.32 6-17-92 Inv.#626 36,690 lbs. Jub. melons @ .05/lb. 1,834.50 (paid on 27,890 lbs.) Adv. -700.00 NWPB - 7.34 1,127.16 688.92 438.24 6-17-92 Inv.#627 37,300 lbs. Jub. melons @ .05/lb. 1,865.00 (paid on 30,500 lbs.) Adv. -700.00 NWPB - 7.46 1,157.54 818.90 338.64 6-17-92 Inv.#642 43,350 lbs. Job. melons @ .05/lb. 2,167.50 (paid @ .04/lb.) Adv. -700.00 NWPB - 8.67 1,458.83 1,025.33 433.50 6-18-92 Inv.#643 44,150 lbs. Crim. melons @ .05/lb. 2,207.50 (paid @ .04/lb.) Adv. -700.00 NWPB - 8.83 1,498.67 1,057.17 441.50 6-18-92 Inv.#644 45,060 lbs. Crim. melons @ .05/lb. 2,253.00 Adv. -700.00 NWPB - 9.01 1,543.99 .00 1,543.99 6-18-92 Inv.#646 43,180 lbs. Crim. melons @ .05/lb. 2,159.00 (paid on 38,380 lbs.) Adv. -700.00 NWPB - 8.64 1,450.36 1,211.32 239.04 6-18-92 Inv.645 47,070 lbs. Jub. melons @ .05/lb. 2,353.50 Adv. -700.00 NWPB - 9.41 1,644.09 .00 1,644.09 6-19-92 Inv.#663 43,520 lbs. Crim. melons @ .05/lb. 2,176.00 (paid @ .04/lb.) Adv. -700.00 NWPB - 8.70 1,467.30 1,032.10 435.20 6-19-92 Inv.#685 44,820 Crim. melons lbs. @ .05/lb. 2,241.00 Adv. -700.00 NWPB - 8.96 1,532.04 1,083.84 448.20 TOTAL DUE $10,258.98 The amended complaint admits that Respondent's deductions for advances and NWPB were appropriate on each load/invoice, and these are not in contention. The amended complaint admits that Respondent has already made the payments to Petitioners, which are indicated. It is only the claimed shortfall on each load that is at issue. At formal hearing, Petitioners discussed a load they claimed they had delivered to Respondent on 6-20-92. They had neither receipts, weight tickets, nor settlement sheets, (invoices) nor payment from Respondent on this load. This "lost load," as the parties described it, is not named in the amended complaint. Therefore, no findings of fact can be made thereon, due to lack of jurisdiction. Petitioner's Exhibit 1 appears to apply to loads 560, 561, 562, and 563, all loads occurring on 6-11-92. That date and those load numbers also are not listed in the amended complaint. Accordingly, no findings of fact will be made with regard to loads 560, 561, 562 or 563, due to lack of jurisdiction. Petitioners delineated two theories of recovery as to the seventeen claims actually named in the amended complaint. Petitioners claimed the right to recover from Respondents due to Respondent dealer's failure to pay for all or some of the poundage delivered by Petitioners to Respondent dealer on the following loads: 6-13-92 #573, 6-17-92 #628, 6-17-92 #626, 6-17-92 #627, 6-18-92 #644, 6-18-92 #646, 6-18-92 #645, 6- 19-92 #685. Petitioners claim the right to recover from Respondents due to Respondent dealer's failure to pay per pound at the rate of one cent below the "wire price" per pound on the following loads: 6-14-92 #586, 6-14-92 #587, 6- 15-92 #592, 6-15-92 #593, 6-16-92 #598, 6-16-92 #607, 6-17-92 #642, 6-18-92 #643, and 6-19-92 #663. For 6-15-92 18-24 lb. average 4.50 - 5.00 cents, few 6.00 26-32 lb. average 4.50 - 5.00 cents, few 6.00 For 6-16-92 18-24 lb. average 5.00 - 6.00 cents 26-32 lb. average 5.00 - 6.00 cents For 6-17-92 18-24 lb. average 6.00 cents, few higher and lower 26-32 lb. average 6.00 cents, few higher and lower For 6-18-92 18-24 lb. average 6.00 - 6.50 cents, "Wire prices" are printed in "spread" form. Evidence was presented (Composite Exhibit P-14), and the parties are agreed, that the following were the "wire prices" at certain times material. Otherwise, there is no evidence in this record concerning amounts or dates of "wire prices." mostly 6.00, few higher 26-32 lb. average 6.00 - 6.50 cents, mostly 6.00, few higher and lower For 6-19-92 18-24 lb. average 6.00 - 6.50 cents, mostly 6.00, few higher 26-32 lb. average 6.00 - 6.50 cents mostly 6.00, few higher and lower Since no "wire prices" were proven up for the days involved in loads 586, and 587, Petitioners are not entitled to recover on their theory of entitlement for those loads. Upon the allegations of the amended complaint and the "wire prices" proven, it appears that Petitioners have already received payment from Respondent dealer at one cent (or better) below the proven low-end "wire price" on loads 592, 593, 598, and 607. Therefore, Petitioners are not entitled to recover on their theory of entitlement for those loads. Petitioners (grower-producers) believed that they had negotiated an oral contract with Respondent dealer to the effect that the dealer would pay Petitioners at the rate of one cent below the "wire price" per pound on those days that Respondent took delivery from them of their watermelons. Respondent testified contrariwise that although such an arrangement was discussed, the parties' final oral agreement was concluded in terms of an excellent quality of every melon, and after negotiations were completed, the dealer understood that the price he was to pay the producers was just the same price per pound he paid all his other producers on any given day. In determining the daily uniform price per pound, Respondent admitted that he used the "wire price" as a guideline, but never explained exactly how the "wire price" constituted a guideline. The Petitioners and Respondent dealer had dealt with one another over a period of years. In past years they had discussed what was to occur if any loads were refused, in whole or in part, by retail buyers at their ultimate destinations. Over the years, the parties had agreed that for loads involving a "small deduct," that is, a small amount of refused melons, Respondent had unilateral authority to informally agree to dump the bad melons or take whatever he could get for the load and pass on the monetary loss to Petitioners. Petitioners conceded that the discretion to take or not take such losses always had been entirely that of Respondent during the parties' several years of past dealing, and that before 1992, whenever an ultimate recipient had refused melons, the "deduct" had been "worked out" this way with no prior notice to Petitioners. In short, by Petitioners' own evidence, it appears that up until the loads at issue in 1992, Petitioners had always simply accepted the Respondent's calculations concerning refusals for quality without requiring proof by way of a federal inspection. Mr. Randal Roberts Sr. testified that in his opinion, any "deduct" over 300 pounds was not "small." However, no evidence defining an industry standard for the relative terms of "small deducts" or "large deducts" was introduced. In light of the parties' standard arrangement over the whole course of their business dealings, it is deemed that Respondent continued to be within his rights in 1992 to unilaterally decide which melons to pay Petitioners for and which melons not to pay Petitioners for where quality became an issue between himself and the ultimate recipients. Petitioners estimated that on a scale of one to ten, the melons they had delivered to Respondent dealer in 1992 were "about a seven" when they delivered them to him, even though Respondent's agents culled out the really bad melons. It may be inferred therefrom that the loads were no better and were probably in worse condition when they reached their ultimate destinations. Respondent testified that he had dumped all or part of the remaining loads in question or reduced the price per pound from that of the "wire price" due to the poor quality of the melons based on complaints or refusals by the recipients when the melons reached their ultimate destinations. These are loads 573, 628, 626, 627, 644, 646, 645, 685, 642, 643, and 663. Although Petitioners adamantly denied that they had ever agreed to rely on federal inspections to determine which melons were bad and which were good, Respondent had gotten federal inspection sheets (R-2) to support his decision to dump all or part of loads 628, 643, 645, 663, and 685. Respondent dealer introduced his business journal (R-3) to show that load 643 was "bad" and load 644 was "dumped" due to poor quality. Respondent dealer introduced his contemporaneous business journal (R- 3) to show that except for loads 607, 643, 644, 663, and 685 he had paid as much to Petitioners per pound as to anyone else on the respective days he had taken delivery. On those loads he had paid Petitioners less than some other producers whom he dealt with on those days, but contended that he had reduced the price per pound paid to Petitioners on those days on the basis of poor quality, too. Nonetheless, 607 was paid at least at one cent below the "wire price" (See Finding of Fact 14), 643 was shown bad by inspection, 644 was dumped in its entirety per the dealer's journal, and 663 and 685 were shown bad by inspection. Upon the foregoing, it is determined that Respondent was within the parameters of his standard dealings with Petitioners where he reduced the price per pound of loads 643 and 663 on the basis of quality, just as he was within his clear unilateral authority and discretion to dump or discard whole melons from loads 628, 644, 645, and 685. After accounting for the foregoing loads, that leaves only loads 573, 626, 627, and 646 left in issue as to poundage and only load 642, (for which Respondent paid 4 cents per pound instead of one cent below the "spread" of the "wire price" for that day) at issue as to price per pound. As to each of these loads, Respondent produced business records wherein he had made contemporaneous notations concerning the quality complaints and/or number of melons rejected by the ultimate recipients. (R-2) Respondent did not pay Petitioners anything on load 645 because of freight deductions and Respondent also made freight deductions on some other invoices. There is no evidence in this record regarding how the parties had negotiated who would bear the ultimate cost of the freight. However, the Petitioners have not proven any entitlement to recover these charges which Respondent advanced and paid. Likewise, Petitioners also have not set out any trail by which the undersigned can trace any mathematical errors on any loads/settlement sheets to the Respondent dealer over Petitioners. Under the parties' standard mode of doing business, Respondent had clear unilateral authority and discretion to dump or discard whole melons for quality and pay Petitioners nothing for the whole melons dumped or discarded in loads 573, 626, 627, and 646. Upon the foregoing, it is determined that Respondent was also within the parameters of his standard dealings with Petitioners in not paying full negotiated price per pound on load 642 where some lesser price per pound could be negotiated with the ultimate recipient as to quality.
Recommendation Upon the foregoing findings of fact and conclusions of law, it is recommended that the Department of Agriculture enter a final order dismissing all named claims against Respondents. RECOMMENDED this 7th day of July, 1993, at Tallahassee, Florida. ELLA JANE P. DAVIS 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 7th day of July, 1993.
The Issue The issue for consideration in this matter is whether Petitioner, Classie Sales, Inc. (Classie), is entitled to be compensated for produce sold and delivered to Respondent, Tolar Farms (Tolar), and if so, in what amount.
Findings Of Fact On June 30, 1990, Roger Harloff, on behalf of Roger Harloff Farms, and John A. Tipton, Secretary of Classie Sales, Incorporated, a sales agent founded by Harloff, entered into a written agreement whereby Classie would serve as sales agent for all sales of produce grown by or on Roger Harloff Farms. Between October 17, 1995 and December 9, 1995, Classie, on behalf of Roger Harloff Farms, sold watermelons with a total net sales price of $170,839.27 and tomatoes with a total net value of $1,720.00 to Tolar Farms. These sales were not direct sales to Tolar but transactions wherein Tolar was to sell the produce to whomever would buy it at an agreed price and would withhold its 3/4 per pound commission from the sales price, remitting the balance to Classie. Trucks arranged for by Tolar picked the produce up at the growing field and at the time of pickup, Classie issued to Tolar a packet jacket for each load sold. As the loads were sold Tolar would issue a ticket for that load which bore the shipping date, the lot number, the farmer, the transporting trailer's tag, the truck broker, the truck driver, and the weight of the product. Sometime later, when the produce was sold, Tolar issued an invoice bearing Classie Sales' logo, reflecting Tolar as the buyer and showing the lot number which corresponded to the load ticket, the shipping date, a description of the produce, the quantity, the unit price for that load, and the extended price from which was deducted Tolar's commission and an unspecified assessment. These documents were then forwarded to Classie. The terms of the sale between Tolar and Classie, on behalf of Harloff, were loose. The invoice documents reflected a net due 21 days after invoice date. The first delivery in issue here was made on October 17, 1995, and 21 days after that is November 7, 1995. The amount reflected by the deliveries made after that date is $27,509.72. Respondent, Preferred, claims that since Classie continued to make deliveries to Tolar's drivers after it was not paid within 21 days after the first shipment, it failed to mitigate its damages and should not be paid for any deliveries made after November 7, 1995. Classie was not paid for any of the instant invoices by Tolar, but Classie did not become concerned about Tolar's failure to make timely payment until January 1996. Tolar's payment and pricing practices were no different during this time than in years past. Typically, Tolar would start out quickly notifying Classie of the sales. As the number of shipments grew, however, the time for notification grew longer. It must be noted that less than two months transpired from the date of the first shipment in issue to the last.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Department of Agriculture enter a Final Order in this matter directing Tony and Robert Tolar, d/b/a Tolar Farms, to pay Classie Sales, Inc., the sum of $172,559.27. In the event this sum is not paid by Tolar, the Department should apply the bond posted by Preferred National Insurance Company in the amount of $75,000.00. DONE and ENTERED this 15th day of July, 1996, in Tallahassee, Florida. ARNOLD H. POLLOCK, 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 15th day of July, 1996. APPENDIX TO RECOMMENDED ORDER, CASE NO. 96-1776A To comply with the requirements of Section 120.59(2), Florida Statutes (1995), the following rulings are made on the parties' proposed findings of fact: Petitioner's Proposed Findings of Fact. 1. - 13. Accepted and incorporated herein. Accepted and incorporated herein as the testimony of the witness. Not a Finding of Fact but a comment on the issues. Accepted and incorporated herein. Respondent Preferred's Proposed Findings of Fact. Preferred accepted all of Classie's Proposed Findings of Fact but suggested an amendment to Number 14. The suggested amendment was made a part of the Findings of Fact made by the Hearing Officer. Respondent Tolar's Proposed Findings of Fact: Tolar consented and agreed to all Petitioner's Proposed Findings of Fact except for Number 9. The substance of Tolar's objection to Classie's Number 9, relating to a provision for a commission, has been made a part of the Findings of Fact of the Hearing Officer. COPIES FURNISHED: Hywel Leonard, Esquire Carlton Fields Post Office Box 3239 Tampa, Florida 33601-3239 Scott R. Teach, Esquire Meuers and Associates, P.A. 2590 Golden Gate Parkway, Suite 109 Naples, Florida 34106 David A. Higley, Esquire Higley and Barfield, P.A. The Maitland Forum 2600 Lake Lucien Drive, Suite 237 Maitland, Florida 32751-7234 Honorable Bob Crawford Commissioner of Agriculture The Capitol, PL-10 Tallahassee, Florida 32399-0810 Richard Tritschler General Counsel Department of Agriculture The Capitol, PL-10 Tallahassee, Florida 32399-0810 Brenda Hyatt, Chief Bureau of Licensing and Bond Department of Agriculture 508 Mayo Building Tallahassee, Florida 32399-0800
The Issue Whether Respondent Department of Revenue’s (Department) January 27, 2020, Notice of Proposed Assessment to Petitioner B Century 21, Inc. (B Century 21) is incorrect.
Findings Of Fact Parties The Department is the state agency responsible for administering Florida’s sales and use tax laws, pursuant to chapter 212, Florida Statutes. B Century 21 is a Florida S-Corporation that operates two liquor stores (Al’s Liquor and Arlington Liquor), as well as a bar (Overtime Sports Bar), in Jacksonville, Florida. Mr. Altheeb is the sole owner of B Century 21 and testified that he is solely responsible for the operation of it, including the two liquor stores and bar. With respect to the operation of B Century 21, Mr. Altheeb testified, “I do all the paperwork, all the books, all the taxes. I do all the orders.” Matters Deemed Admitted and Conclusively Established2 B Century 21 received correspondence from the Department, dated August 20, 2019. That correspondence, from Ms. Pitre, stated, in part, “I will be conducting an examination of your books and records as authorized under Section 213.34, Florida Statutes.” B Century 21 received the Department’s form DR840, Notice of Intent to Audit Books and Records, dated August 20, 2019, including the Sales and Use Tax Information Checklist. The form DR-840 indicated that the Department intended to audit B Century 21 for a tax compliance audit for the period of July 1, 2016, through June 30, 2019. The Sales and Use Tax Information Checklist listed a number of categories of documents the Department intended to review as part of this audit. B Century 21 (through its accountant, power of attorney, and qualified representative, Mr. Isaac) received the Department’s October 30, 2019, correspondence, which referenced the “Audit Scope and Audit Commencement,” and an attached Records Request list. B Century 21 (through Mr. Isaac) received an email, dated October 30, 2019, from Ms. Pitre. That email references an attached Audit Commencement Letter. B Century 21 (through Mr. Isaac) received an email, dated November 12, 2019, from Ms. Pitre, which inquired of “the status of the records requested during the meeting with you and Mr. Altheeb on October 29, 2019.” B Century 21 (through Mr. Isaac) received the Department’s Notice of Intent to Make Audit Changes, form DR-1215, dated December 16, 2019. The form DR-1215 reflects a total amount of tax of $170,232.93, a penalty of $42,558.24, and interest through December 16, 2019, of $25,461.86, for a total deficiency of $238,253.04. The form DR-1215 also reflects that if B Century 2 See Order Granting Motion Declaring Matters Admitted and Setting Discovery Deadline. Fla. R. Civ. P. 1.370(b). 21 did not agree with these audit changes, or only agreed with a portion, that it had until January 15, 2020, to request a conference or submit a written request for an extension. Further, the form DR-1215 attached a Notice of Taxpayer Rights, which included additional detail on the options available to B Century 21. B Century 21 (through Mr. Isaac) received correspondence from Ms. Pitre, dated December 16, 2019, which stated that as of the date of the correspondence, the Department had not received the information previously requested on October 13, 2019, which it needed to complete the audit. The correspondence stated that B Century 21 had 30 days to review the audit changes, provided contact information to B Century 21 if it wished to discuss the findings in the form DR-1215, and noted that if the Department did not hear from B Century 21 within 30 days, it would send the audit file to the Department’s headquarters in Tallahassee, Florida. B Century 21 (through Mr. Isaac) received the Department’s Notice of Proposed Assessment, form DR-831, dated January 27, 2020. The form DR- 831 reflects a total amount of tax of $170,232.93, a penalty of $42,558.24, and interest through January 27, 2020, of $27,224.82, for a total deficiency of $240,016.00. For the time period between August 20, 2019, and January 7, 2021, B Century 21 did not provide the Department with: (a) any sales records; (b) any purchase records; or (c) any federal tax returns. For the time period between August 20, 2019, and January 7, 2021, B Century 21 did not provide any records to the Department for examination in conducting the audit. Additional Facts In 2011, for the purpose of enforcing the collection of sales tax on retail sales, the Florida Legislature enacted section 212.133, Florida Statutes, which requires every wholesale seller (wholesaler) of alcoholic beverage and tobacco products (ABT) to annually file information reports of its product sales to any retailer in Florida. See § 212.133(1)(a) and (b), Fla. Stat. Once a year, ABT wholesalers report to the State of Florida their name, beverage license or tobacco permit number, along with each Florida retailer with which they do business, the Florida retailer’s name, retailer’s beverage license or tobacco permit number, retailer’s address, the general items sold, and sales per month. See § 212.133(3), Fla. Stat. The information collected captures the 12-month period between July 1 and June 30, and is due annually, on July 1, for the preceding 12-month period. Id. ABT wholesalers file these reports electronically through the Department’s efiling website and secure file transfer protocol established through the Department’s efiling provider. § 212.133(2)(a), Fla. Stat. Ms. Baker explained this statutory process further: [W]e annually, every year in the month of May, my unit reaches out to the Florida Department of Business and Professional Regulations. We compel them to give us a list of all of the active wholesalers who were licensed to sell to retailers in the state of Florida for the prior fiscal year. Once we receive that list, we then mail a notification to all those wholesalers and state the statute and the requirements and give them a user name and a password that will allow them to then log into that portal and submit their retail—their wholesale—or their wholesale sales to retailers in the state of Florida for the prior fiscal year. Those reports are due on July 1st of each year, but they are not considered late until September 30th of that year. So that gives the wholesaler population a couple of months to compile all of their sales for the prior year, fill out their reports and submit them to the Florida Department of Revenue by the end of September. Additionally, each month, and for each retail location, B Century 21 reports gross monthly sales to the Department, and remits sales tax, utilizing the Department’s form DR-15. Ms. Baker further described the process the Department utilizes in identifying an “audit lead,” utilizing the data that ABT wholesales provide: Specifically for ABT, we have a very, actually, kind of simple comparison that we do. . . . [A]s a taxpayer, as a retailer in the state of Florida, you may purchase from multiple wholesalers. So, part of our job is we compile all of the purchases that each beverage license or tobacco license has purchased, and once we compile all the purchases for the fiscal year, then to say, you know, what were the purchases for the fiscal year versus what were the reported sales for the fiscal year. And, again, a pretty simple comparison we really look to see, did you purchase, or . . . did you report enough sales to cover the amount of purchases that we know you made as a – as a retailer. And if the sales amount does not exceed the purchase amount, then we’ll create a lead on it. The Department’s efiling provider exports the ABT wholesalers’ information to SunVisn, the Department’s database. The Department’s analysts review the ABT wholesalers’ reported data, and taxpayer information, to identify audit leads. The Department then assigns these audit leads to its service centers to conduct an audit. A tax audit period is 36 months. In conducting ABT audits, the Department has 24 months of reported data (i.e., the first 24 months of the audit period) for review. This is because the timing of section 212.133(3) requires ABT wholesalers to report annually on July 1, for the preceding 12- month period of July 1 through June 30. For the ABT reporting data examination period of July 1, 2016, through June 30, 2018 (a period of 24 months), B Century 21’s gross sales for its two liquor stores was as follows: Liquor Store Reported Gross Sales Al’s Liquor $1,051,128.56 Arlington Liquor $902,195.49 For the same 24-month time period of July 1, 2016, to June 30, 2018, B Century 21’s wholesalers reported the following ABT inventory purchases to the State, as required under section 212.133: Liquor Store ABT Inventory Purchases Al’s Liquor $1,250,055.79 Arlington Liquor $1,174,877.98 As the ABT wholesalers’ reported ABT inventory purchases by B Century 21’s retail outlets were higher than B Century 21’s reported sales, the Department issued an audit lead, which led to the audit that is at issue in this proceeding. The Audit For the 36-month audit period of July 1, 2016, through June 30, 2019 (audit period), B Century 21’s reported gross sales for each of its locations was: Location Reported Gross Sales Al’s Liquor $1,557,569.74 Arlington Liquor $1,434,551.65 Overtime Sports Bar $968,476.08 On August 20, 2019, Ms. Pitre mailed to B Century 21 (and received by Mr. Altheeb), a Notice of Intent to Audit Books and Records for the audit period. Included with the Notice of Intent to Audit Books and Records was correspondence informing B Century 21 of the audit and requesting records. On August 26, 2019, Ms. Pitre received a telephone call from Mr. Altheeb. Ms. Pitre’s case activity notes for this call state: Received a call from Baligh Altheeb and he said he will be hiring Brett Isaac as his POA [power of attorney]. I informed him to complete the POA form and to give it to Mr. Isaac for signature and send to me. He knows about ABT Data assessments and asked that I note on the case activity that he contacted me regarding the audit. He was worried that his liquor license will be suspended if he does not respond right away. I informed him that once I receive the POA, I will contact Mr. Isaac and discuss the audit. On October 18, 2019, the Department received B Century 21’s executed power of attorney (POA) form naming Mr. Isaac as its POA for the audit. The executed POA form reflects that the Department’s notices and written communications should be sent solely to Mr. Isaac, and not B Century 21. The executed POA form further reflects that “[r]eceipt by either the representative or the taxpayer will be considered receipt by both.” On October 29, 2019, Ms. Pitre met with Mr. Altheeb and Mr. Isaac at Mr. Isaac’s office, for a pre-audit interview. Ms. Pitre’s case activity notes for this meeting state: Met with the taxpayer contact person, POA Brett Isaac and owner Baligh Thaleeb [sic], at the POA’s location to conduct the pre-audit interview. Discussed the scope of the audit, records needed to conduct the audit, availability of electronic records, business organization, nature of the business, internal controls, and the time line of the audit. Discussed sampling for purchases and POA signed sampling agreement. Made appointment to review records on November 12, 2019. Toured one of the location [sic] to observe business operations, Overtime Sports Bar. On October 30, 2019, Ms. Pitre emailed Mr. Isaac a copy of the Notice of Intent to Audit Books and Records, which included a “Sales and Use Tax Information Checklist,” which requested specific taxpayer records. After receiving no response from Mr. Isaac, Ms. Pitre, on November 12, 2019, emailed Mr. Isaac concerning “the status of the records requested during the meeting with you and Mr. Altheeb on October 29, 2019.” Section 212.12(5)(b) provides that when a taxpayer fails to provide records “so that no audit or examination has been made of the books and records of” the taxpayer: [I]t shall be the duty of the department to make an assessment from an estimate based upon the best information then available to it for the taxable period of retail sales of such dealer … or of the sales or cost price of all services the sale or use of which is taxable under this chapter, together with interest, plus penalty, if such have accrued, as the case may be. Then the department shall proceed to collect such taxes, interest, and penalty on the basis of such assessment which shall be considered prima facie correct, and the burden to show the contrary shall rest upon the [taxpayer]. Section 212.12(6)(b) further provides: [I]f a dealer does not have adequate records of his or her retail sales or purchases, the department may, upon the basis of a test or sampling of the dealer’s available records or other information relating to the sales or purchases made by such dealer for a representative period, determine the proportion that taxable retail sales bear to total retail sales or the proportion that taxable purchases bear to total purchases. Mr. Collier testified that, in the absence of adequate records, the Department “estimates using best available information, and for this industry … ABT sales are a higher percentage of their taxable sales.” Because B Century 21 did not provide adequate records to Ms. Pitre, she estimated the total taxable sales for the audit period. For each liquor store that B Century 21 operated, she multiplied its total ABT purchases by average markups to calculate total ABT sales. To derive these average markups, Mr. Collier explained that the Department receives data from wholesalers, and then: [W]e take that purchase information, apply average markup to the different ABT product categories, which include cigarettes, other tobacco, beer, wine, and liquor; and then that gets us to total ABT sales number. And then we derive what we call a percentage of ABT sales, percentage of that number represents. And in this particular model, 95.66 percent represents what we believe in a liquor store industry, that this type of business, that 95.66 percent of their sales are ABT products. We derive the markups, and the percentage of ABT sales from a number of liquor store audits that the Department had performed on liquor stores that provided records. The Department utilized markup data from other ABT audits. The Department applied the following markups to these ABT categories: 6.5 percent for cigarettes; 47.5 percent for other tobacco products; 17.33 percent for beer; 29.84 percent for wine; and 24.5 percent for liquor. Applying the Department’s markup for liquor stores to the wholesalers’ reported ABT data and percentage of taxable sales, Ms. Pitre estimated taxable sales for the ABT reporting data examination period and calculated the under-reported sales error ratio as follows: Location Estimated Taxable Sales Error Ratio Al’s Liquor $1,597.544.01 1.519837 Arlington Liquor $1,516,259.34 1.680633 The Department then divided B Century 21’s estimated taxable sales for the examination period, for each liquor store, by its self-reported tax sales in its DR-15s to arrive at the under-reported rate. The Department then multiplied the under-reported rate by the reported taxable monthly sales in the DR-15s to arrive at the estimated taxable sales for the 36-month audit period. The result of this calculation was: Location Estimated Taxable Sales Al’s Liquor $2,367,252.11 Arlington Liquor $2,410,954.82 The Department then multiplied the estimated taxable sales by an effective estimated tax rate which, after giving credit for B Century 21’s remitted sales tax, resulted in tax due for the Al’s Liquor and Arlington Liquor for the audit period, as follows: Location Sales Tax Owed Al’s Liquor $58,367.01 Arlington Liquor $70,068.44 For Overtime Sports Bar, the Department could not use ABT wholesalers’ data to estimate an assessment because the Department does not have audit data averages for bars and lounges. The Department used the “Tax Due Method” in estimating under-reported taxes and calculating under- reported taxable sales. Mr. Collier explained: The Department does not have average markup and percentage of sales for a bar. Though, you know, obviously, we all know that a bar, their main product that they sell and in most cases is ABT products. So, therefore, typically, an auditor would need to get information about that specific location. Bars can vary so much in their type of business that they do, they can be like nightclubs, or they can be like bar and grill that serves a lot of food. So there’s a lot of variances there for that particular type of industry, so we haven’t really come up with average markups, average percentage of sales for bars, per se. It’s a case-by- case situation, and in this case, the auditor decided that the fair, reasonable way to estimate the bar location would be to just average the error ratios that were derived from the Al’s Liquor and the other liquor store location and apply it to the taxable sales reported for the bar. And I think that’s a very fair and reasonable estimate based on what we all know in a bar situation; their markups are significantly higher. And of course, there can be plenty of other non-ABT taxable sales occurring in a bar setting, such as prepared food, you know, just your regular cokes and drinks. So it’s certainly a fair way to estimate in this particular audit and I believe only benefits the taxpayer. The undersigned credits the Department’s methodology for estimating an assessment for Overtime Sports Bar. Further, Mr. Altheeb testified that Overtime Sports Bar operates as both a sports bar and a liquor/package store, and stated: Most of it—it’s a liquor store. I don’t know if you know the area, it’s a liquor store on the Westside. So most of it—the sport bar doesn’t really do too much business in the Westside, mostly the liquor stores. People coming in and buy package, you know, buy bottles and leave. So, most of the business is the drive-through window. The Department’s decision to average the error ratios for the other two liquor stores to derive the additional tax due average for Overtime Sports Bar is reasonable, particularly in light of Mr. Altheeb’s testimony that Overtime Sports Bar operates primarily as a liquor (package) store. The Department calculated the additional tax due average error ratio for Overtime Sports Bar by averaging the error ratios of Al’s Liquor and Arlington Liquor, and then multiplied it by B Century 21’s reported gross sales to arrive at the additional tax due for Overtime Sports Bar of $41,797.49. Ms. Pitre testified that she determined that, for the audit period, B Century 21 owed additional sales tax of $170,232.93. In addition, the Department imposed a penalty and accrued interest. On December 16, 2019, Ms. Pitre sent correspondence, the preliminary assessment, and a copy of the audit work papers to B Century 21 (through Mr. Isaac), informing B Century 21 that it had 30 days to contact the Department’s tax audit supervisor to request an audit conference or submit a written request for an extension. After receiving no response from B Century 21, Ms. Pitre forwarded the audit workpapers to the Department’s headquarters in Tallahassee, Florida, to process the Notice of Proposed Assessment. B Century 21’s Position As mentioned previously, and after initially meeting with the Department, B Century 21 failed to provide requested financial records or respond to any of the numerous letters and notices received from the Department, despite being given adequate opportunity to do so. And, after filing its Amended Petition, it failed to timely respond to discovery requests from the Department which, inter alia, resulted in numerous matters being conclusively established. Mr. Isaac served as the POA for B Century 21 during the audit, and also appeared in this proceeding as a qualified representative. However, Mr. Isaac did not appear at the final hearing, did not testify as a witness at the final hearing, and does not appear to have done anything for B Century 21 in this proceeding, other than filing the Petition and Amended Petition. After Mr. Heekin appeared in this matter, and well after the time to respond to discovery, B Century 21 provided 127 pages of documents to the Department. These documents consist of: 18 pages of summaries of daily sales that Mr. Altheeb prepared for the hearing; 41 pages of sales and use tax returns from B Century 21 locations, covering 25 months (DR-15s); 2 pages of Harbortouch’s 2016 1099K, reporting credit card sales; 43 pages of unsigned federal tax returns from 2016, 2017, and 2018, prepared by Mr. Isaac; and 17 pages of B Century 21’s untimely responses to the Department’s discovery requests. Florida Administrative Code Rule 12-3.0012(3) defines “adequate records” to include: (3) “Adequate records” means books, accounts, and other records sufficient to permit a reliable determination of a tax deficiency or overpayment. Incomplete records can be determined to be inadequate. To be sufficient to make a reliable determination, adequate records, including supporting documentation, must be: Accurate, that is, the records must be free from material error; Inclusive, that is, the records must capture transactions that are needed to determine a tax deficiency or overpayment; Authentic, that is, the records must be worthy of acceptance as based on fact; and Systematic, that is, the records must organize transactions in an orderly manner. The nature of the taxpayer’s business, the nature of the industry, materiality, third-party confirmations and other corroborating evidence such as related supporting documentation, and the audit methods that are suitable for use in the audit, will be used to establish that the taxpayer has adequate records. The undersigned finds that the summaries of daily sales are not adequate records because Mr. Altheeb prepared them for use at the final hearing, rather than in the regular course of business. The undersigned finds that the DR-15s provided by Mr. Altheeb, covering 25 months, are not adequate records because they are incomplete and are not inclusive. The audit period encompassed 36 months, for B Century 21’s three retail locations; however, Mr. Altheeb only provided 25 months of DR-15s. The 2016, 2017, and 2018 federal tax returns that B Century 21 provided are not adequate records because they are not authentic. Mr. Altheeb was unable to verify if these tax returns were correct, and they were unsigned. B Century 21 did not provide any evidence that it had filed any of these federal tax returns with the Internal Revenue Service. Ms. Pitre reviewed the 127 pages of documents that B Century 21 provided and testified that the summaries of daily sales did not provide the “source documents” for verification. The unsigned federal tax returns reflect that B Century 21 reported a cost-of-goods-sold (COGS) of $518,606.00 for 2016; $1,246,839.00 for 2017; and $796,968.00 for 2018. Additionally, the unsigned federal tax returns reflect that B Century 21 reported a beginning inventory (BI) for 2016 of $95,847.00, and a year-end inventory (EI) for 2016 of $200,556.00, EI for 2017 of $280,235.00, and EI for 2018 of $295,628.00. When comparing the unsigned federal tax returns with the ABT wholesalers’ data, the federal tax returns reflect, for 2016, total inventory purchases of $623,315.00 (which is derived from $518,606.00 (COGS) + $200,556.00 (EI) - $95,847.00 (BI)). However, the ABT wholesalers’ data for 2016 reflects that B Century 21’s ABT purchases were $1,174,997.34 – a discrepancy of more than $500,000.00. For 2017, the federal tax returns reflect total inventory purchases of $1,326,518.00 (which is derived from $1,246,839.00 (COGS) + $280,235.00 (EI) for 2017 - $200,556.00 (EI) for 2016). However, the ABT wholesalers’ data for 2016 reflects that B Century 21’s ABT purchases were $1,422,854.79 – a discrepancy of over $96,000.00. And for 2018, the unsigned federal tax returns reflect total inventory purchases of $812,361.00 (which is derived from $796,968.00 (COGS) + $295,628.00 (EI) for 2018 - $280,235.00 (BI) for 2017). However, the ABT wholesalers’ data for 2018 reflects that B Century 21’s ABT purchases were $1,335,814.00 – a discrepancy of over $500,000.00. Mr. Altheeb testified that Arlington Liquor and Overtime Sports Bar opened in 2016 – after B Century 21 began ownership and operation of Al’s Liquor. He stated that he did not purchase inventory for the openings of the newer locations, but instead transferred excess inventory from Al’s Liquor, which resulted in lower total inventory purchases for 2016. Mr. Altheeb also testified that B Century 21’s three locations experienced spoiled inventory. However, B Century 21 should include spoiled inventory in COGS reported in its federal tax returns, and further, B Century 21 provided no additional evidence of the cost of spoilage for the audit period. The undersigned finds that the ABT wholesalers’ data for 2016 through 2018 reflects similar amounts for inventory purchases between 2016 through 2018. The undersigned credits the Department’s reliance on the ABT wholesalers’ data, which reflect fairly consistent purchases for each year. The undersigned does not find the unsigned federal tax returns that B Century 21 provided to be persuasive evidence that the Department’s assessment was incorrect. Mr. Altheeb testified that he believed Mr. Isaac, who B Century 21 designated as POA for the audit, and who appears as a qualified representative in this proceeding, was actively handling the audit. Mr. Altheeb stated that the audit, and the final hearing, “kind of came out of nowhere” and that once he learned of it, he retained Mr. Heekin and provided “everything” to him. However, it is conclusively established that the Department provided correspondence and notice to B Century 21 through its designated POA, and that B Century 21 failed to respond to record requests in a timely manner. Mr. Isaac neither testified nor appeared at the final hearing to corroborate Mr. Altheeb’s claims that Mr. Isaac did not keep Mr. Altheeb or B Century 21 apprised of the status of the audit, including the failure to provide requested records or to communicate with the Department. B Century 21 also attempted to challenge the Department’s use of markup data from other ABT audits, in an attempt to argue that the markups were inflated and not representative of B Century 21’s markups. However, and as previously found, B Century 21’s failure to timely provide records—or respond in any meaningful way to the audit—undermines this attempt. The undersigned credits the Department’s methodology in using the best information available to it for the audit period in calculating the assessment. Although it became apparent during the final hearing that Mr. Altheeb did not treat the audit of B Century 21 with appropriate seriousness, and deflected blame to Mr. Isaac, and that his approach resulted in a legally appropriate and sustainable audit and assessment based on the Department’s best information available, the undersigned does not find that B Century 21, Mr. Isaac, or Mr. Heekin knew that the allegations of the Amended Petition were not supported by the material facts necessary to establish the claim or defense, or would not be supported by the application of then-existing law to those material facts. The undersigned finds that the Department made its assessment based on the best information then available, and is thus prima facie correct, pursuant to section 212.12(5)(b). The undersigned further finds that B Century 21 did not prove, by a preponderance of the evidence, that the Department’s assessment is incorrect, pursuant to section 212.12(5)(b).
Conclusions For Petitioner: Robert Andrew Heekin, Esquire The Law Office of Rob Heekin, Jr., P.A. 2223 Atlantic Boulevard Jacksonville, Florida 32207 For Respondent: Randi Ellen Dincher, Esquire Franklin David Sandrea-Rivero, Esquire Office of the Attorney General Revenue Litigation Bureau Plaza Level 1, The Capitol Tallahassee, Florida 32399
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, the undersigned hereby RECOMMENDS that the Department enter a final order sustaining the January 27, 2020, Notice of Proposed Assessment to B Century 21, Inc. DONE AND ENTERED this 21st day of October, 2021, in Tallahassee, Leon County, Florida. S ROBERT J. TELFER III Administrative Law Judge 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 21st day of October, 2021. COPIES FURNISHED: Mark S. Hamilton, General Counsel Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668 Randi Ellen Dincher, Esquire Office of the Attorney General Revenue Litigation Bureau Plaza Level 1, The Capitol Tallahassee, Florida 32399 Robert Andrew Heekin, Esquire The Law Office of Rob Heekin, Jr., P.A. 2223 Atlantic Boulevard Jacksonville, Florida 32207 Franklin David Sandrea-Rivero, Esquire Office of the Attorney General Plaza Level 1, The Capitol Tallahassee, Florida 32399 Brett J. Isaac 2151 University Boulevard South Jacksonville, Florida 32216 James A Zingale, Executive Director Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668
