The Issue The issue herein is whether the Department of Revenue's sales tax assessment against West Broward Chamber of Commerce as a result of the purchase of promotional books by the Chamber from Creative Public Relations and Marketing, Inc., is valid.
Findings Of Fact The West Broward Chamber of Commerce (Petitioner) entered into an oral contract with Mr. Randy Avon, a representative of Creative Public Relations, to purchase a promotional booklet pertaining to the West Broward area for distribution to the public. (Petitioner's Exhibit #1). Creative Public Relations in turn contracted with International Graphics to print the booklet. Mr. Bernard Fox, the Department of Revenue's (Respondent Area Manager in the Fort Lauderdale office and Mr. James W. Darrow, who worked with International Graphics during the time the transaction in question took place, testified and established that Mr. Randy Avon secured a sales tax number for the purchase of the promotional books in issue and presented the sales tax number to International Graphics. International Graphics sold the books to Mr. Avon for resale, without tax. The Department of Revenue issued an assessment against Petitioner for sales tax, penalty and interest due on the purchase of the books in question by Petitioner in the total amount of $1,307.56. Evidence reveals that said assessment was due as of December 20, 1978, and that since that time interest is accruing at a daily rate of $.31. This assessment was based on a total purchase price of $24,214.10, which, according to Mr. Fox and the statements contained in Respondent's Exhibit #1, was the price that Mrs. Gail Duffy, Petitioner's Executive Director informed the Respondent that the Chamber paid for the promotional booklets. Petitioner's treasurer, Helen Kerns, also testified that the total purchase price paid by Petitioner for the books was $22,104 and that part of the purchase price was paid directly to Creative Public Relations due to a dispute with an officer of the contracting entity, International Graphics. Mrs. Kerns testified that commissions were, however, paid by the Petitioner to Creative Public Relations, which commissions were not included in the purchase price as testified to by Mrs. Kerns. James W. Darrow, a witness who was allegedly privy to the agreement and understanding between the Petitioner and the seller, Creative Public Relations, testified that the oral contract price specifically included sales taxes on the transaction. Additionally, Mrs. Duffy testified that in her opinion, the sales taxes due on the purchase by Petitioner had been paid because she under stood that the total purchase price paid to Creative Public Relations by Petitioner included the sales tax. No sales invoices, receipt, or other tangible evidence of sales were offered into evidence at the hearing herein. Petitioner contends that the sales tax in question was included in the total purchase price. Based thereon, Petitioner contends that Creative Public Relations is now liable for the tax. Respondent, on the other hand, takes the position that the taxes from the sales transaction can be imposed on either the seller or the purchaser.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department of Revenue's sales tax assessment against Petitioner be upheld. DONE AND ENTERED this 10th day of September 1979 in Tallahassee, Florida. JAMES E. BRADWELL Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 10th day of September 1979. COPIES FURNISHED: James T. Moore, Esquire 1265 Northwest 40th Avenue Lauderhill, Florida 33313 Cecil L. Davis, Jr., Esquire Assistant Attorney General The Capitol, Room LL04 Tallahassee, Florida 32301 Robert A. White, Esquire 5460 North State Road #7, Suite 220 Fort Lauderdale, Florida 33319
Findings Of Fact Modern Tool and Die, (MTD), is a privately held corporation engaged in manufacturing equipment. In 1965 they started the manufacture of bumper guards which required electroplating. They entered into agreements with MPC pursuant to which MTD erected two buildings adjacent to their plant which they leased to MPC in which to do the electroplating of the bumper guards. MPC is also a privately held corporation and there is no common ownership of these two companies. The two buildings built for MPC's occupancy were partitioned, compartmented and wired as desired by MPC and at its expense. Florida Power Corporation supplied electricity to the complex through the main transformer of MTD. In 1965 and to a lesser extent now, electricity rates per kilowatt-hour (kwh) were lowered with increased usage of electricity. Since both MTD and MPC are large users of electricity they obtain a cheaper rate if all electricity used is billed from the master meter serving MTD. Accordingly, and at the recommendation of the power company, additional transformers and meters were placed at the two buildings occupied by MPC and read monthly at or about the same time the master meter is read by the power company. The kw used at the two buildings is forwarded by MPC to MTD each month. The latter, upon receipt of the power company bill, computes the cost of the power per kwh and in turn bills MPC for its portion of the bill based upon the usage forwarded by MPC to MTD. Upon the commencement of this working agreement between these two companies in 1965 MPC, pursuant to an oral lease, has paid rent to MTD monthly at the rate of approximately $2,400 per month. It has also paid to MTD its pro rata cost for the electricity used each month. The rent is invoiced each month on the first of the month as in Exhibit 3 and paid by the 10th by MPC. Sales tax is added to the rent and remitted to DOR. Electricity usage is also invoiced by MTD to MPC on or about the 20th of the month and paid by MPC on or about the first of the following month. (Exhibit 4). Sales tax on the electricity used is paid by MTD to Florida Power Company who presumably remits this to DOR. During the 15 years these two companies have shared the cost of electric power they have been audited numerous times; the arrangement was made known to the auditors; and no auditor, prior to the present, suggested that the cost of electricity was part of the rent paid by MPC upon which sales tax was due. Notice of Proposed Assessment (Exhibit 1) in the amount of $9,747.34 is based upon the cost of electricity billed to MPC during the period of the audit December 1, 1976 through November 30, 1979 multiplied by 4 percent sales tax plus penalties and interest. The parties stipulated to the accuracy of this amount. They differ only as to whether the tax is owed.
Findings Of Fact At the time and place scheduled for final hearing, nobody appeared on behalf of petitioner and no evidence was adduced.
Recommendation It is, accordingly recommended that respondent dismiss petitioner's request for a formal administrative proceeding. RECOMMENDED this 19th day of November, 1991, in Tallahassee, Florida. ROBERT T. BENTON, II Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 19th day of November, 1991. COPIES FURNISHED: J. Thomas Herndon, Executive Director Department of Revenue 104 Carlton Building Tallahassee, FL 32399-0100 Vicki Weber, General Counsel Department of Revenue 204 Carlton Building Tallahassee, FL 32399-0100 Kevin J. O'Donnell, Esquire Department of Legal Affairs Tax Section, The Capitol Tallahassee, FL 32399-1050 Louise J. Allen, Esquire Stearns, Weaver, Miller, Weissler, Alhadeff & Sitterson, P.A. 150 W. Flagler Street, Suite 2200 Miami, FL 33130
The Issue The issues are whether Respondent violated Chapter 212, Florida Statutes, by failing to pay sales tax and local government infrastructure surtax, and if so, what penalty should be imposed.
Recommendation Based upon the findings of fact and conclusions of law, it is RECOMMENDED: That Respondent enter a Final Order upholding its assessment against Petitioner in full, including all taxes, penalties, and interest statutorily due until date of payment for both the sales and use tax and the local government infrastructure. DONE AND ENTERED this 29th day of September, 1998, 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 Filed with the Clerk of the Division of Administrative Hearings this 29th day of September, 1998.
The Issue Whether sales tax and local government infrastructure surtax is due on the lingerie modeling session fees received by Petitioner, and, if so, whether the Department of Revenue should compromise any portion of the tax, interest, or penalty assessed against Petitioner.
Findings Of Fact Based upon the testimony and evidence received at the hearing, the following findings are made: Petitioner was established as a Florida corporation in November 1992. At the time of its incorporation, Petitioner's name was Ultimate Fantasy of Pinellas, Inc. Subsequently, the name was changed to U.F., Inc. Petitioner is an "S Corporation," having filed the required election pursuant to Section 1362 of the Internal Revenue Code in June 1994. Steve Smith was the sole shareholder and president of Petitioner during the audit period. Mr. Smith sold his interest in Petitioner in January 2002. Starting on October 1, 1994, Petitioner leased space for its business in a small shopping center at 8248 Ulmerton Road, in unincorporated Pinellas County. Petitioner's store was less than 1,000 square feet in size. Petitioner's lease included the following schedule of lease payments due from Petitioner to the lessor:1 Period Rent Sales Tax (7%) Total 10/1/94 - $585.00 $40.95 $625.95 9/30/96 10/1/96 - $605.00 $42.35 $647.35 9/30/98 10/1/98 - $630.00 $44.10 $674.10 9/30/99 4/1/00 - $670.00 $46.90 $716.90 3/31/02 The record does not include receipts showing that Petitioner actually made those lease payments. However, Mr. Smith testified that Petitioner made those payments, and the weight of the evidence clearly supports the inference that the payments were made. Specifically, Petitioner claimed a deduction for rent expenses on its federal income tax returns in amounts comparable to that set forth above, and Petitioner was actually operating its business at the location specified in the lease during the audit period. Petitioner made payments of $2,288.65 in sales tax to the lessor during the course of the audit period, computed as follows: Period Sales Tax Amount Months Total 5/1/95 - $40.95 17 $ 695.15 9/30/96 10/1/96 - $42.35 24 $1,016.40 9/30/98 10/1/98 - $44.10 12 $ 529.20 9/30/99 4/1/00 - $46.90 1 $ 46.90 4/30/00 8. Petitioner's lease stated that Petitioner would use the premises "as a retail store and for no other uses whatsoever." That limitation was apparently waived by the landlord because the lingerie modeling conducted in Petitioner's store required an adult entertainment permit from Pinellas County and the landlord's consent was required for Petitioner to obtain a permit. Petitioner's business includes the retail sale of lingerie as well as charging patrons a fee to watch lingerie modeling sessions which occur in Petitioner's store. Patrons are not charged to come into Petitioner's store. They are free to come in, look at merchandise, purchase merchandise, and/or leave. However, a patron who comes into Petitioner's store and wants to see a piece of lingerie modeled pays a fee to Petitioner. The fee is $30.00 per session, with a session lasting no more than a half hour. With a discount coupon, the fee was $20.00 per session. No sales tax was collected or remitted on those amounts. After the patron pays the fee to Petitioner, he then identifies the lingerie to be modeled and a model does so. The patron compensates the model for the session through tips. Neither Petitioner, nor any of its employees are involved in that transaction. The patron is not required to purchase the lingerie that is modeled and, as evidenced by the small amount of sales on which Petitioner paid tax during the audit period, such purchases rarely occurred. If the lingerie is purchased, Petitioner collects sales tax from the purchaser and remits it to the Department. If the lingerie is not purchased, it goes back into Petitioner's inventory. Almost all of Petitioner's income over the course of the audit period was derived from the lingerie modeling sessions. On the quarterly sales tax reports filed with the Department, Petitioner reported gross sales of $556,733.83 between May 1995 and December 1999. Of that amount, $554,829.88, or 99.65 percent, was from the fees for the lingerie modeling sessions and was reported as exempt sales. Only $1,978.57, or 0.35 percent, was reported as taxable lingerie sales. The women who model the lingerie are not employees of Petitioner. They are not paid anything by Petitioner, nor do they pay Petitioner anything. Petitioner did provide security for the models. The modeling sessions occurred in "segregated areas" of the store. They did not occur behind closed doors, behind a curtain, or in separate rooms, as that is prohibited by the Pinellas County Code.2 The "segregated areas" accounted for approximately 85 percent of the store's floor space. Thus, it is possible that a session could be observed from a distance by persons other than the patron who paid a fee to Petitioner. However, only the patron who pays the fee can view the modeling session in the "segregated areas" where the model performs. Before Petitioner opened for business, Mr. Smith contacted an accountant, Peter Ristorcelli, to provide accounting and tax services to Petitioner. Those services included compliance with Florida's sales tax laws. Mr. Ristorcelli had never worked for a client whose business was similar to that of Petitioner. Accordingly, Mr. Ristorcelli advised Petitioner to obtain guidance from the Department when he registered as a dealer and obtained a sales tax number. Mr. Smith went to the Department's Clearwater office pursuant to Mr. Ristorcelli's advice. While there, he explained the type and operation of Petitioner's business and asked whether sales tax was due on the receipts from the modeling sessions. Mr. Smith was told by an unknown Department employee that the receipts from the modeling sessions were not subject to the sales tax, but that they should be reported as exempt sales. Mr. Smith was also told that receipts from the sale of lingerie should be reported as taxable sales, and that sales tax should be collected on those sales. Mr. Smith conveyed this information to Mr. Ristorcelli who then confirmed it with Bonnie Steffes, an employee in the Department's sales tax collection division in the Clearwater office with whom Mr. Ristorcelli had prior dealings. In their conversations with the Department employees, both Mr. Smith and Mr. Ristorcelli fully explained the nature and manner of operation of Petitioner's business. Those explanations were not made in writing, nor were the Department's responses. Ms. Steffes is no longer employed by the Department, and she was not called as a witness at the hearing because she could not be located. Thus, the record does not contain any corroboration of the self-serving testimony of Mr. Smith and Mr. Ristorcelli on these events. Nevertheless, the undersigned finds their testimony to be credible. Petitioner followed the advice Mr. Smith and Mr. Ristorcelli received from the Department. Petitioner reported the receipts from the modeling sessions as exempt sales and did not collect or remit sales tax on those receipts. As stated above, Petitioner reported $554,829.88 in receipts from the modeling sessions for the period of May 1995 through December 1999. Petitioner reported the receipts from the sales of lingerie as taxable sales and collected and remitted sales tax on those receipts. As stated above, Petitioner reported taxable sales of $1,978.57, and it collected and remitted sales tax in the amount of $138.58 for the period of May 1995 through December 1999. Had Mr. Smith been told that the lingerie modeling sessions were taxable, he would have collected sales tax from the patron and remitted it to the Department. The Department's Audit On June 1, 2000, the Department gave Petitioner notice of its intent to conduct a sales tax audit on Petitioner's books and records for the audit period of May 1, 1995, to April 30, 2000. The audit was conducted by Jose Bautista, a tax auditor in the Department's Clearwater office. Mr. Bautista reviewed Petitioner's books and records and spoke with Mr. Ristorcelli and Mr. Smith on several occasions. In conducting the audit, Mr. Buatista utilized standard methods of assessment and followed the Department's rules and practices. He relied on the facts presented to him by Mr. Smith and Mr. Ristorcelli regarding the operation of Petitioner's business and, more specifically, the form and nature of the lingerie modeling transactions. The audit did not identify any underreporting of taxable lingerie sales, nor did it find any underreporting of the receipts from the modeling sessions. In this regard, the proposed assessment (discussed below) was simply based upon the Department's determination that the receipts from the lingerie modeling sessions were taxable, not exempt from taxation. The audit working papers indicate receipts of $573,642.89 upon which sales tax was not paid over the course of the audit period. That amount is solely attributable to the receipts from the modeling sessions over the audit period, as identified in the Department's audit. That amount does not correspond with the receipts for the modeling sessions reported to the Department by Petitioner on its periodic sales tax returns. As stated above, Petitioner reported exempt sales from the modeling sessions in the amount of $554,829.88 for the period of May 1995 through December 1999. For that same period, the audit working papers show receipts from the modeling sessions as being only $540,460.32, calculated as follows: Grand Total for Audit Period (5/95 - 4/00) Less: April 2000 ($7,177.49) $ 573,642.89 March 2000 ( 8,208.15) February 2000 ( 8,872.59) January 2000 ( 8,924.34) Total for Period ( 33,182.57) Of 5/95 - 12/99 $ 540,460.32 This discrepancy works in Petitioner's favor. Had the Department simply based its assessment on the amount reported by Petitioner as exempt sales between May 1995 and December 1999 ($554,829.88), and then added the receipts for the period of January 2000 through April 2000 ($33,182.57), the amount upon which Petitioner would have owed sales tax would have been $588,012.45 rather than $573,642.89 as found in the Department's audit. Based upon the audit conducted by Mr. Bautista, the Department issued a Notice of Intent to Make Audit Changes (Notice of Intent) on August 16, 2000. The Notice of Intent assessed a total tax deficiency of $40,155.29, which included a sales tax deficiency of $34,418.81 and a local government infrastructure surtax deficiency of $5,736.78. Those amounts were calculated in accordance with the standardized, statutory methods of calculation. Petitioner does not contest the calculation of the tax deficiency. The Notice of Intent also assessed interest and penalty. The interest and penalty were calculated on the amount of the tax deficiency pursuant to standardized, statutory methods of calculation. Petitioner does not contest the calculation of the interest or penalty. Petitioner, through Mr. Ristorcelli, sought administrative review of the Notice of Intent. That review is conducted at the district office level, which in this case was Clearwater. George Watson supervised the review. No changes were made based upon the review, and on October 26, 2000, the Department issued a Notice of Proposed Assessment which formally assessed the tax deficiency, interest, and penalty described above against Petitioner. Petitioner, through Mr. Ristorcelli, protested the Notice of Proposed Assessment, and on July 5, 2001, the Department issued its Notice of Decision rejecting the protest. The review which resulted in the Notice of Decision was conducted in Tallahassee by Charles Wallace. The Notice of Decision upheld the tax deficiency, interest, and penalty in full. Petitioner, through Mr. Ristorcelli, sought reconsideration of the Notice of Decision. On December 17, 2001, the Department issued its Notice of Reconsideration which again upheld the proposed assessment in full and refused to compromise any portion of the tax, interest, or penalty. The legal basis for the assessments asserted by the Department in the Notice of Intent and Notice of Proposed Assessment was that the fee paid to Petitioner by a patron to view a lingerie modeling session was an admission charge. Based upon additional facts and clarifying information presented to the Department by Petitioner through the protest process, the Department concluded that the fee charged by Petitioner was more akin to a license to use real property and therefore taxable as such. That is the legal position asserted by the Department in its Notice of Decision and its Notice of Reconsideration. That legal position was also argued by the Department at the hearing and in its Proposed Recommended Order.3 Despite the change in the legal basis of the assessment, the amount of the assessment set forth in the Notice of Reconsideration is the same as the amount set forth in the Notice of Intent and Notice of Proposed Assessment. It was still based upon the full amount of the receipts from the lingerie modeling sessions (as determined by the audit) which had been reported as exempt sales.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue issue a final order that assesses tax, interest, and penalties, against Petitioner in the amounts set forth in the Notice of Reconsideration dated December 17, 2001; and, if the tax assessed in the final order is based upon Section 212.031 (license to use) rather than Section 212.04 (admissions), the Department should grant Petitioner a credit in the amount of $1,945.35, for the sales tax paid by Petitioner to its landlord on that portion of Petitioner's store where the lingerie modeling sessions occurred. DONE AND ENTERED this 14th day of June, 2002, in Tallahassee, Leon County, Florida. T. KENT WETHERELL, II Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 14th day of June, 2002.
The Issue The issue is whether Respondent's Certificate of Registration 39-8011930243-9 should be revoked for the reasons stated in an Administrative Complaint for Revocation of Certificate of Registration (Administrative Complaint) issued by the Department of Revenue (Department) on June 5, 2014.
Findings Of Fact The Department is the state agency charged with administering and enforcing the state revenue laws, including the laws related to the imposition and collection of sales and use taxes pursuant to chapter 212. Respondent is a Florida limited liability corporation doing business as The Hyde Park Cafe at 1806 West Platt Street, Tampa, Florida. For purposes of collecting and remitting sales and use taxes, it is a dealer as defined in section 212.06(2) and is required to comply with chapter 212. Respondent holds Certificate of Registration number 39- 8011930243-9, which became effective on July 27, 2000. A certificate of registration is required in order to do business in the state and requires its holder to collect and remit sales tax pursuant to chapter 212. See § 212.05(1), Fla. Stat. Respondent is also an employing unit as defined in section 443.036(20) and is subject to the unemployment compensation tax (UCT) provisions of chapter 443, as provided in section 443.1215. Through an interagency agreement with the Department of Economic Opportunity, the Department provides collection services for UCTs. See § 443.1316(1), Fla. Stat. In doing so, the Department is considered to be administering a revenue law of the state. See § 443.1316(2), Fla. Stat. A dealer must file with the Department sales tax returns and remit the tax collected on a monthly basis. See § 212.15(1), Fla. Stat. Also, an employment unit must remit payment to the Department for UCTs due and owing on a quarterly basis. The Department is authorized to revoke a dealer's certificate of registration for failure to comply with state tax laws. See § 212.18(3)(e), Fla. Stat. If the Department files a warrant, notice of lien, or judgment lien certificate against the property of a dealer, it may also revoke a certificate of registration. See § 213.692(1), Fla. Stat. Before revoking a certificate of registration, the Department must convene an informal conference that the dealer is required to attend. See § 213.692(1)(a), Fla. Stat. At the conference, the dealer may either present evidence to refute the Department's allegations of noncompliance or enter into a compliance agreement with the Department to resolve the dealer's failure to comply with chapter 212. Id. After a compliance agreement is executed by the dealer, the Department may revoke the certificate of registration if the dealer fails to comply with its terms and conditions. See Pet'r Ex. 6, p. 2, ¶ E. If a breach occurs, the entire amount is due and payable immediately. Id. at ¶ G. An informal conference can be characterized as the Department's last administrative remedy to collect delinquent taxes before beginning revocation proceedings. A dealer can also enter into a diversion program with the State Attorney's Office to resolve liabilities, but the record shows that Respondent defaulted on that arrangement. According to the Department, collection problems with this dealer first began in 2003. Department records show that Respondent failed to remit required sales taxes for the months of January 2012, August through December 2012, January through December 2013, and January and February 2014. In addition, Respondent failed to remit UCTs for the calendar quarters ending September 2010, December 2010, March 2011, June 2011, September 2011, December 2011, March 2012, June 2012, September 2012, December 2012, and March 2013. Respondent does not dispute that it failed to timely remit and pay the foregoing taxes for the time periods listed above. For the purpose of collecting the delinquent taxes, the Department issued and filed against Respondent delinquent tax warrants, notices of lien, or judgment lien certificates in the Hillsborough County public records. See Pet'r Ex. 3. Before seeking revocation of Respondent's certificate of registration, on February 5, 2014, the Department's Tampa Service Center served on Respondent a Notice of Conference on Revocation of Certificate of Registration (Notice). See Pet'r Ex. 4. The Notice scheduled an informal conference on March 21, 2014. It listed 16 periods of sales and use tax noncompliance and 11 periods of re-employment tax noncompliance and provided the total tax liability as of that date. This number was necessarily fluid, as the taxes owed were accruing interest, penalties, and/or fees on a daily basis. The purpose of the informal conference was to give Respondent a final opportunity to make full payment of all delinquent taxes, or to demonstrate why the Department should not revoke its Certificate of Registration. As pointed out by the Department, an informal conference allows a dealer to bring up "any concerns" that it has regarding its obligations. Respondent's manager and registered agent, Christopher Scott, appeared at the conference on behalf of Respondent.1/ At the meeting, he acknowledged that the dealer had not timely paid the taxes listed in the Notice and that the money was used instead to keep the business afloat. However, Mr. Scott presented paperwork representing that sales and use tax returns and payments for the months of November 2013 through February 2014 had just been filed online, and checks in the amount of $8,101.41 and $9,493.99 were recently sent to Tallahassee. It takes 24 hours for online payments to show up in the system, and even more time for checks to be processed in Tallahassee. Accordingly, the Department agreed that Mr. Scott could have a few more days before signing a compliance agreement. This would allow the Department to verify that the payments were posted and recalculate the amount of taxes still owed. Also, before entering a compliance agreement, Respondent was required to make a down payment of around $20,000.00. Mr. Scott had insufficient cash, and a delay of a few days would hopefully allow him to secure the necessary money for a down payment. When none of the payments had posted by March 25, 2014, the Department calculated a total liability of $113,448.13, consisting of sales and use taxes and UCTs, penalties, interest, and fees. As of that date, none of the taxes listed in Finding of Fact 9 had been paid. On March 25, 2014, Respondent's controller, who did not attend the informal conference, sent an email to the Department requesting a breakdown on the new tax liability. In response to her request, the Department faxed a copy of the requested information. See Resp. Ex. 4. After getting this information, the controller continued to take the position that the Department's calculations overstate Respondent's tax liability. On March 31, 2014, Mr. Scott signed the compliance agreement. See Pet'r Ex. 6. Despite the controller testifying that she did not agree with the numbers, no question was raised by Mr. Scott when he signed the agreement. By then, the check in the amount of $8,101.41 had cleared and been credited to Respondent's account. Along with other funds, it was used towards the down payment of $20,000.00. The record does not show the status of the other payments that Mr. Scott claimed were mailed or filed online prior to the informal conference; however, on March 31, 2014, except for the one check, none had yet posted. The compliance agreement required scheduled payments for 12 months, with the final payment, a balloon payment in an undisclosed amount, being subject to renegotiation in the last month. Payments one and two were $1,500.00, while payments three through 11 were $2,900.00. The compliance agreement reflected a balance owed of $95,887.36, consisting of $60,504.34 in sales taxes and $35,347.02 in UCTs.2/ In return for the Department refraining from pursuing revocation proceedings, the compliance agreement required Respondent to "remit all past due amounts to the Department as stated in the attached payment agreement," "accurately complete and timely file all required tax returns and reports for the next 12 months," and "timely remit all taxes due for the next 12 months." Pet'r Ex. 1, p. 1. In other words, the compliance agreement addressed both delinquent taxes and current taxes that would be due during the following 12-month period, and it required that both categories of taxes be timely paid in the manner prescribed by the agreement. To summarize the salient points of the agreement, all taxes were to be timely paid; delinquent taxes were to be paid by certified check, money order, or cash and were to be mailed or hand delivered to the Tampa Service Center and not Tallahassee; and while not specifically addressed in the agreement, the dealer was instructed to pay all current obligations electronically, as required by law. Otherwise, Respondent was in violation of the compliance agreement. A Payment Agreement Schedule for past due taxes was incorporated into the compliance agreement and provided that the first payment was due April 30, 2014, payable to: Florida Department of Revenue, Tampa Service Center, 6302 East Dr. Martin Luther King, Jr. Boulevard, Suite 100, Tampa, Florida 33619. Payments 2 through 12 were to be mailed or hand delivered to the same address. This meant, with no ambiguity, that money should not be sent to Tallahassee. There is no credible evidence that these instructions were misunderstood. Unless a waiver is granted, Respondent is required by statute and rule to electronically file sales and use tax returns and UCT reports. See § 213.755, Fla. Stat.; Fla. Admin. Code R. 12-24.009 (where a taxpayer has paid its taxes in the prior state fiscal year in an amount of $20,000.00 or more, subsequent payments shall be made electronically). No waivers have been approved. In 2003, the Department notified Respondent of these requirements and Respondent complied with this directive until 2009. For reasons not disclosed, in 2009 Respondent voluntarily quit filing electronically. The record is silent on why this was allowed.3/ In any event, at the informal conference, Mr. Scott was specifically told that all current returns, reports, and taxes must be filed electronically, and not by mail, and that no money should be sent to Tallahassee. There is no credible evidence that he misunderstood these instructions. In its PRO, Respondent correctly points out that the requirement to file current returns electronically was not specifically addressed in the compliance agreement. This is because the compliance agreement does not set forth every statutory and rule requirement that applies to a dealer. If this amount of detail were required, a dealer could ignore any otherwise applicable rule or statute not found in the compliance agreement. This contention has no merit. Respondent failed to electronically file the current sales and use tax return and payment for the month of March 2014, due no later than April 21, 2014. Instead, it sent a paper check, which was returned by the bank for insufficient funds. This constituted a breach of the compliance agreement. Despite repeated instructions on how and where to pay the delinquent taxes, payment 1, due on April 30, 2014, was paid by regular check and sent to Tallahassee, rather than the Tampa office. This contravened the compliance agreement. When payment was not timely received by the Tampa Service Center, Respondent was told that a check must be delivered to the Tampa office by May 9. Respondent hand delivered a second check, this one certified, to the Tampa Service Center on May 9, 2014, or after the April 30 due date. The second check was treated as payment 1. Respondent points out that on May 7 the Tampa Service Center granted its request for an extension of time until May 9 in which to deliver the certified check. While this is true, the extension was allowed in an effort to "work with" the Respondent on the condition that the account would be brought current by that date; otherwise, revocation proceedings would begin. Even if the extra ten days is construed as a grace period for payment 1, there were other violations of the compliance agreement set forth below. Payment 2 for delinquent taxes, due on May 30, 2014, was paid by regular check and sent by mail to Tallahassee rather than the Tampa Service Center.4/ This contravened the compliance agreement. After the May 30, 2014 payment, Respondent made no further payments pursuant to the Payment Agreement Schedule. This constituted a violation of the compliance agreement. Respondent did not remit payment with its current sales and use return for the month of August 2014. This contravened the compliance agreement. Respondent did not file any current sales and use tax returns or remit payment for the months of July 2014 or September through January 2015. This contravened the compliance agreement. Beginning in March 2014, Respondent filed current reemployment tax returns and payments using the incorrect tax rate on every return. This delayed their processing and resulted in penalties being imposed. In addition, even though Respondent was repeatedly told that such returns must be filed electronically, none were filed in that manner, as required by statute and rule. This contravened the compliance agreement. In its PRO, Respondent contends the compliance agreement cannot be enforced because there was no "meeting of the minds" by the parties on all essential terms of the agreement. Specifically, it argues that the total amount of taxes owed was still in dispute -- the dealer contended that it owed $23,000.00 less than was shown in the agreement; the Payment Schedule Agreement did not specify the amount of the final balloon payment; the compliance agreement failed to state when payments are due if the due date falls on a weekend or holiday; the compliance agreement did not specify how the dealer's payments would be allocated between UCTs and sales and use taxes; and the compliance agreement failed to address the issue of filing electronically. Although some of these issues were not raised in the parties' Joint Pre-hearing Stipulation, or even addressed by testimony at hearing, they are all found to be without merit for the reasons expressed below. First, Mr. Scott did not dispute the amount of taxes owed when he signed the agreement, and he brought no evidence to the conference to support a different amount. Second, as explained to Mr. Scott at the informal conference, the precise amount of the balloon payment can only be established in the 12th month. This is because the exact amount depends on the dealer's compliance with the agreement over the preceding 11 months, and the amount of interest, penalties, and/or other fees that may have accrued during the preceding year. Third, there is no evidence that the dealer was confused when a due date for a payment fell on a weekend or holiday. Even if it was confused, reference to section 212.11(1)(e) and (f) would answer this question. Fourth, there is no statute or rule that requires the Department to specify how the delinquent payments are allocated. Moreover, neither Mr. Scott nor the controller requested that such an allocation be incorporated into the agreement before it was signed. Finally, the issue of filing electronically already has been addressed in Finding of Fact 22 and Endnote 3. At hearing, Respondent's controller testified that she was out of town when the conference was held, suggesting that Mr. Scott, who is not an accountant, was at a disadvantage when he attended the informal conference. However, Respondent had six weeks' notice before the conference, and there is no evidence that Respondent requested that the meeting be rescheduled to a more convenient day. Also, Respondent does not dispute that Mr. Scott was authorized to represent its interests at the conference, or that he could have been briefed by the controller before attending the informal conference or signing the compliance agreement. See also Endnote 1. Notably, at hearing, the controller testified that she "was involved in actually negotiating the agreement both before and after it was actually signed" even though she did not attend the conference. Tr. at 89. Respondent also contends that after the Department considered the compliance agreement to be breached, the dealer had no further obligation to make payments pursuant to the agreement or state law until the parties negotiated a new agreement. Aside from Respondent's failure to cite any authority to support this proposition, nothing in the compliance agreement comports with this assertion. To the contrary, the compliance agreement specifically provides that if a breach occurs, the entire tax liability becomes due immediately. See Pet'r Ex. 6, p. 2, ¶ G. Thus, Respondent is obligated to pay the entire tax liability, which now exceeds $200,000.00. All other arguments raised by Respondent have been carefully considered and are rejected as being without merit.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order revoking Respondent's Certificate of Registration 39- 8011930243-9. DONE AND ENTERED this 11th day of June, 2015, in Tallahassee, Leon County, Florida. S D. R. ALEXANDER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 11th day of June, 2015.
The Issue The issue is whether Petitioner owes the taxes, interest, and penalties assessed by the Department of Revenue based upon its audit of Petitioner for the period of August 1, 1996, through July 31, 2001.
Findings Of Fact Based upon the testimony and evidence received at the hearing, the following findings are made: Petitioner is a Florida corporation engaged in the business of selling and installing floor covering materials, such as carpet and tile. Petitioner's business is located in Hillsborough County, Tampa, Florida. Petitioner sales fall into two basic categories: "cash and carry sales" and "installation sales." The "cash and carry sales" are retail sales of floor covering materials to customers that come into Petitioner's store. These sales do not involve any installation work by Petitioner. The "installation sales" are sales in which Petitioner installs the floor covering material in the customer's home or business. These sales are performed pursuant to a lump-sum contract which incorporates the price of the installation and the price of the floor covering materials being installed. Petitioner purchases the floor covering materials from suppliers and distributors. Those purchases become part of the inventory from which Petitioner makes its "installation sales." Petitioner also makes general purchases of goods and services necessary for the day-to-day operation of its business. These purchases include items such as cleaning supplies and vehicle repairs. Petitioner made several fixed-assets purchases during the audit period for use in its business. It purchased a word processor in August 1996, and it purchased equipment and fixtures in December 1996. On those occasions that Petitioner collected sales tax from its customers on the "cash and carry sales" or paid sales tax on its inventory purchases and general purchases, it remitted or reported those amounts to the Department. However, as discussed below, Petitioner did not collect the full amount of sales tax due on each sale, nor did it pay the full amount of sales tax due on each purchase. The Department is the state agency responsible for administering Florida's sales tax laws. The Department is authorized to conduct audits of taxpayers to determine their compliance with the sales tax laws. By letter dated September 10, 2001, the Department notified Petitioner of its intent to conduct a sales tax audit of Petitioner's records for the period of August 1, 1996, through July 31, 2001. The audit was conducted by David Coleman, a tax auditor with seven years of experience with the Department. Petitioner designated its certified public accountant, P.J. Testa, as its representative for purposes of the Department's audit. That designation was memorialized through a power of attorney form executed by Petitioner on March 5, 2002. Mr. Coleman communicated with Mr. Testa throughout the course of the audit. Mr. Coleman conducted the audit using a sampling methodology agreed to by Mr. Testa on behalf of Petitioner. Pursuant to that methodology, Mr. Coleman conducted a comprehensive review of Petitioner's year-2000 purchase and sales invoices and extrapolated the results of that review to the other years in the audit period. The sampling methodology was used because of the volume of records and transactions during the audit period and because of the unavailability of all of the records for the audit period. The year 2000 was chosen as the sample period because Petitioner's records for the other years in the audit period were incomplete or unavailable. Mr. Coleman's audit of the year-2000 invoices focused on three broad types of transactions. First, he reviewed invoices of Petitioner's retail "cash and carry sales." Second, he reviewed the invoices through which Petitioner purchased the floor covering materials that it later sold as part of its "installation sales." Third, he reviewed the invoices through which Petitioner made general purchases of tangible personal property used in the day-to-day operation of its business. The sampling methodology was used for the audit of Petitioner's "cash and carry sales," the inventory purchases related to the "installation sales," and the general purchases. The methodology was not used for the audit of Petitioner's fixed-asset purchases; Mr. Coleman reviewed all of the available records for the fixed-asset purchases during each year of the audit period. Mr. Coleman's audit of Petitioner's retail "cash and carry sales" identified 29 invoices during year-2000 on which no sales tax or less than the full sales tax was paid by the customer. Those invoices amounted to $17,451.30, on which $1,178.11 in total sales tax was due, but only $552.97 was paid. As a result, Mr. Coleman's audit identified a sales tax deficiency of $625.14 for the retail sales during the sample period. Mr. Coleman's audit of Petitioner's purchases of floor covering that was later sold in the "installation sales" identified a considerable number of purchases during year-2000 on which no sales tax or less than the full sales tax was paid by Petitioner to the supplier or distributor of the materials. Those purchases amounted to $123,398.52, but only $123,397.80 of that amount was taxable. On the taxable amount, $8,330.07 in total sales tax was due, but only $6,810.68 was paid. As a result, Mr. Coleman's audit identified a sales tax deficiency of $1,519.41 for Petitioner's inventory purchases during the sample period. Mr. Coleman's audit of Petitioner's "general purchases" identified 10 sales during year-2000 on which sales tax was not paid. Those invoices amounted to $2,914.76, on which $196.77 in sales tax was due, but none of which was paid. As a result, Mr. Coleman's audit identified a sales tax deficiency of $196.77 for the general purchases during the sample period. Mr. Coleman's audit of Petitioner's fixed-asset purchases identified only two transactions during the entire audit period on which Petitioner did not pay the full sales tax. Those transactions amounted to $5,078.92, on which $330.14 in total sales tax was due, but none of which was paid. As a result, Mr. Coleman's audit identified a sales tax deficiency of $330.14 for the fixed-asset purchases during the audit period. The tax deficiencies calculated by Mr. Coleman for year-2000 for each category described above take into account any sales tax collected by Petitioner from its customers or paid by Petitioner to its vendors. After Mr. Coleman computed the tax deficiencies based upon his audit of the year-2000 records, he calculated a "percentage of error" for each category of sales/purchases. The percentage of error is the ratio used to extrapolate the results of the audit of the year-2000 records over the remainder of the audit period. No percentage of error was calculated for the fixed-asset purchases because Mr. Coleman reviewed the available records for those purchases over the entire audit period, not just year-2000. The percentage of error was calculated by dividing the sales tax deficiency identified in a particular category for the year-2000 by the total sales/purchases in that category for the year-2000. For the year-2000, Petitioner had retail sales of $1,143,182.45; general purchases of $21,254.88; and inventory purchases of $1,214,016.24. As a result, the applicable percentages of error were 0.000547 ($625.14 divided by $1,143,182.45) for the retail sales; 0.009258 ($196.77 divided by $21,254.88) for the general purchases; and 0.001252 ($1,519.41 divided by $1,214,016.24) for the inventory purchases. The percentages of error were then multiplied by the total sales in the applicable category for the entire audit period to calculate a total tax deficiency in each category. Petitioner's total retail sales over the audit period were $4,455,373.40. Therefore, the total tax deficiency calculated for that category was $2,437.12 (i.e., $4,455,373.40 multiplied by 0.000547). Petitioner's total general purchases over the audit period were $110,741.49. Therefore, the total tax deficiency calculated for that category was $1,025.25 (i.e., $110,741.49 multiplied by 0.009258). Petitioner's total inventory sales over the audit period were $3,130,882.10. Therefore, the total tax deficiency calculated for that category was $3,919.86 (i.e., $3,130,882.10 multiplied by 0.001252). Petitioner's total tax deficiency was computed by adding the deficiencies in each category, as follows: Retail Sales $2,437.12 General Purchases 1,025.25 Inventory Purchases 3,919.86 Fixed-asset purchases 330.14 TOTAL $7,712.37 Of that total, $6,863.02 reflects the state sales tax deficiency; $313.77 reflects the indigent care surtax deficiency; and $535.58 reflects the local government infrastructure surtax deficiency. The sales tax rate in effect in Hillsborough County during the audit period was 6.75 percent. The state sales tax was six percent; the remaining 0.75 percent was for county surtaxes, namely the local government infrastructure surtax and the indigent care surtax. That rate was used by Mr. Coleman in calculating the tax deficiencies described above. On October 4, 2002, Mr. Coleman hand-delivered the Notice of Intent to Make Audit Change (NOI) to Petitioner. The NOI is the end-product of Mr. Coleman's audit. The NOI identified the total tax deficiency set forth above, as well as a penalty of $3,856.26, which is the standard 50 percent of the tax deficiency amount, and interest of $2,561.63, which is calculated at a statutory rate. The NOI included copies of Mr. Coleman's audit work- papers which showed how the taxes, penalties, and interest were calculated. The NOI also included a copy of the "Taxpayers' Bill of Rights" which informed Petitioner of the procedure by which it could protest the audit results reflected on the NOI. On October 29, 2002, the Department issued three NOPAs to Petitioner. A separate NOPA was issued for each type of tax -- i.e., sales tax, indigent care surtax, and local government infrastructure surtax. The cumulative amounts reflected on the NOPAs were the same as that reflected on the NOI, except that the interest due had been updated through the date of the NOPAs. Interest continues to accrue on assessed deficiencies at a cumulative statutory rate of $1.81 per day. The NOPAs were sent to Petitioner by certified mail, and were received by Petitioner on November 1, 2002. By letter dated November 5, 2002, Petitioner protested the full amount of the taxes assessed on the NOPAs and requested a formal administrative hearing. The letter was signed by Mr. Testa on Petitioner's behalf. The protest letter does not allege that the methodology used by Mr. Coleman was improper or that the results of the audit were factually or legally erroneous. Instead, the protest letter states that Petitioner was disputing the results of the audit because it was "following procedures set forth by an agent from a previous audit who established the manner in which [Petitioner was] to compute sales tax on the items being questioned by the current auditor." Mr. Testa made similar comments to Mr. Coleman during the audit. When Mr. Coleman requested documentation from Mr. Testa to corroborate those comments about the procedures allegedly established by the prior auditor, Mr. Testa was unable to provide any such documentation. The record of this proceeding is similarly devoid of evidence to support Petitioner's allegation on this point. The record does not contain any evidence to suggest that Petitioner ever modified or revoked Mr. Testa's authority to represent it in connection with the audit or this protest, which Mr. Testa initiated on Petitioner's behalf. Petitioner, through Mr. Testa, had due notice of the date, time, and location of the final hearing in these cases. Neither Mr. Testa, nor anyone else on Petitioner's behalf, appeared at the final hearing.
Recommendation Based upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department of Revenue issue a final order imposing the taxes, interest, and penalties against Petitioner in the full amounts set forth in the three Notices of Proposed Assessment dated October 28, 2002. DONE AND ENTERED this 30th day of December, 2003, in Tallahassee, Leon County, Florida. S T. KENT WETHERELL, II 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 30th day of December, 2003.
The Issue The issue is whether Respondent's Certificate of Registration 46-8015920490-4 should be revoked for the reasons stated in an Administrative Complaint for Revocation of Certificate of Registration (Administrative Complaint) issued by the Department of Revenue (Department) on July 17, 2015.
Findings Of Fact The Department is the state agency charged with administering and enforcing the state revenue laws, including the laws related to the imposition and collection of sales and use taxes pursuant to chapter 212. Respondent is an active for-profit Florida corporation and a licensed motor vehicle dealer located at 613 Southwest Pine Island Road, Suite 14, Cape Coral, Florida. For purposes of collecting and remitting taxes, Respondent is a dealer as defined in section 212.06(2) and is required to comply with chapter 212. Annais German is the president and agent of the corporation. Respondent holds Certificate of Registration number 46- 8015920490-4. A certificate of registration is required in order to do business in the state and requires its holder to collect and remit sales tax pursuant to chapter 212. See § 212.05(1), Fla. Stat. A dealer must file with the Department sales tax returns and remit the tax collected on a monthly basis. See § 212.15(1), Fla. Stat. The Department is authorized to revoke a dealer's certificate of registration for failure to comply with state tax laws. See § 212.18(3)(e), Fla. Stat. Before revoking a certificate of registration, the Department must convene an informal conference that the dealer is required to attend. See § 213.692(1)(a), Fla. Stat. At the conference, the dealer may either present evidence to refute the Department's allegations of noncompliance or enter into a compliance agreement with the Department to resolve the dealer's failure to comply with chapter 212. Id. After a compliance agreement is executed by the dealer, the Department may revoke the certificate of registration if the dealer fails to comply with its terms and conditions. If a breach occurs, the entire amount is due and payable immediately. After Respondent failed to remit taxes that were due, the Department issued tax warrants and rendered judgment liens against Respondent in March, April, and December 2014 and April 2015. An informal conference was conducted with the taxpayer on April 7, 2015. Respondent was represented at the conference by Orlando German, who was given power of attorney by Annais German to represent the corporation. He signed an agreement, which required the entire balance to be paid by the end of the month. Two weeks later, Annais German requested that a new agreement be executed which allowed her to pay the delinquent taxes over a longer period of time. The Department agreed with her request. On April 23, 2015, Ms. German executed an Agreement reflecting that her corporation owes $7,297.52. See Pet'r Ex. 2, p. 1. The Agreement required Respondent to make a down payment of $2,500.00 on or before April 28, 2015, followed by ten monthly payments of 375.00 on the 28th of each month, and a final payment of $671.52 on April 28, 2016. Id. at p. 3. The Agreement required these payments to be made at the Fort Myers Service Center. Id. Payments required under a compliance agreement are always remitted to the local district office, rather than Tallahassee, to allow the Department to track the payment and ensure that it is being made in a timely fashion. The Agreement also required Respondent to "timely remit payment in full for all types of taxes, returns, and reports due from the Taxpayer for the duration of this agreement (and any extensions hereof) or for the next 12 months following the date of this agreement, whichever is longer." Id. at p. 1. In other words, besides making payments for past due taxes, interest, penalties, and fees, Respondent was required to timely file returns and pay current obligations as they became due during the life of the Agreement. The Agreement specifically provides that if the taxpayer fails to comply with the Agreement, revocation proceedings will be initiated without further notice. Respondent paid the $2,500.00 down payment one day late, but as of the date of the hearing in this case, no other payments for past or current obligations have been made. Returns for April and May 2015 were not timely filed. Respondent admits that in April 2015, at least three vehicles were sold, but its April return, when eventually filed, reported that no sales were made. Since filing its June and July 2015 returns, Respondent has filed no other returns. By failing to pay the monthly obligations required by the Agreement or any current obligations, Respondent has violated the Agreement.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order revoking Respondent's Certificate of Registration 46- 8015920490-4. DONE AND ENTERED this 25th day of February, 2016 in Tallahassee, Leon County, Florida. S D. R. ALEXANDER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 25th day of February, 2016. COPIES FURNISHED: Stephen M. Masterson, Esquire Office of the Attorney General Revenue Litigation Bureau The Capitol, PL-01 Tallahassee, Florida 32399-1050 (eServed) Annais German World Champions Auto, Inc. 429 Northwest 38th Place Cape Coral, Florida 33993-5536 Annais German World Champions Auto, Inc. 613 Southwest Pine Island Road, Suite 14 Cape Coral, Florida 33991-1950 George C. Hamm, Acting General Counsel Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668 (eServed) Marshall C. Stranburg, Executive Director Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668 (eServed)
The Issue Does the taxpayer owe sales tax, penalty, and interest as assessed by the Department of Revenue.
Findings Of Fact Petitioner, Department of Revenue, is an agency of the State of Florida, lawfully created and organized pursuant to Section 20.21, Florida Statutes. By law, the Department is vested with the responsibility of regulating, controlling and administering the revenue laws of the State of Florida, including, specifically, the laws relating to the imposition and collection of the state's sales and use tax, pursuant to Chapter 212, Florida Statutes. Respondent, Worldwide Equipment Group, LLC, is a Florida limited liability company, whose principal address is Post Office Box 1050, Freeport, Florida 32439. Respondent sells and leases heavy equipment. In early 2006, Petitioner, Department of Revenue, conducted an audit of the books and records of Petitioner, pursuant to statutory notice. The period covered by the audit was March 1, 2002, through February 28, 2005. The audit was conducted by Department of Revenue auditor David Collins and addressed three issues. Issue A-01 addressed misclassified exempt sales, i.e. failure to collect appropriate sales and use tax or lack of documentation to prove tax exempt status of certain sales. Issue A-03 addressed discrepancies in sales for 2003 as reported for federal income tax returns and for state sales and use tax returns. Issue A-03 addressed interest owed due to a timing difference between actual transactions and the filing of state returns: basically a manipulation of the grace period for payment of sales and use taxes. Respondent was notified of the apparent discrepancies observed by the auditor. The original Notice of Intent To Make Audit Changes was issued February 17, 2006, and started at more than $75,000.00 in taxes, penalty, and interest due. Respondent then filed amended federal income tax returns, reflecting larger sales figures covering a portion of the audit period which reduced the discrepancy. The dispute was originally referred to the Division of Administrative Hearings (DOAH) on or about August 30, 2006. The original facts in dispute surrounded an addendum to the Notice of Proposed Assessment showing a balance due of $31,434.82. This was DOAH Case No. 06-3287. The request for a disputed-fact hearing was made by David R. Johnson CPA, who has a power of attorney on file with Petitioner Agency permitting him to represent Respondent. Throughout these proceedings, Worldwide has been served through Mr. Johnson by Petitioner and by DOAH. The parties filed a Joint Motion for Provisional Closing Order in DOAH Case No. 06-3287 on November 1, 2006. On November 2, 2006, DOAH Case No. 06-3287 was closed with leave to return if the parties' proposed settlement was not finalized. Mr. Johnson met once with counsel for Petitioner during the time the case was returned to the Agency. At some point, Respondent had produced certain accounting entries and supporting documents to the auditor. These were used to adjust the assessment levied by the Department. A Revised Notice Of Intent To Make Audit Changes dated March 13, 2007, was issued with a letter of the same date. The revised, and final Notice included an assessment of tax, penalty and interest totaling $15,065.24, as of the date of issue and information that the tax accrues interest at the rate of $3.10 per diem. On April 4, 2007, Petitioner filed before DOAH its Motion to Re-open Case and Notice for Trial. No timely response in opposition was filed by Respondent. By an Order to Re-open Case File, entered April 19, 2007, the case was re-opened as the instant DOAH Case No. 07-1710. Petitioner has established that the amount of $15,065.24 as tax, penalty, and interest was due as of March 13, 2007.
Recommendation Based on the foregoing Findings of Facts and Conclusions of Law, it is RECOMMENDED that the Department of Revenue sustain the March 13, 2007, assessment of the subject sales tax, penalties and interest to Petitioner. DONE AND ENTERED this 8th day of October, 2007, in Tallahassee, Leon County, Florida. S ELLA JANE P. DAVIS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 8th day of October, 2007. COPIES FURNISHED: Warren J. Bird, Esquire Office of the Attorney General The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050 Bruce Hoffmann, General Counsel Department of Revenue The Carlton Building, Room 204 501 South Calhoun Street Tallahassee, Florida 32399-0100 Lisa Echeverri, Executive Director Department of Revenue The Carlton Building, Room 104 501 South Calhoun Street Tallahassee, Florida 32399-0100 David R. Johnson, CPA 1265 Highway 331 South Defuniak Springs, Florida 32435 Worldwide Equipment Group LLC Post Office Box 1050 Freeport, Florida 32439
The Issue Whether the Department of Revenue's ("Department") assessment for sales and use tax, penalty, and interest is valid, correct, and should be upheld.
Findings Of Fact The undersigned makes the following findings of relevant and material fact: The Department is the agency responsible for administering Florida's revenue laws, including the imposition and collection of state sales and use taxes. §§ 20.21 and 213.05, Fla. Stat. Cellular is a Florida S-corporation, having a principal address and mailing address of 11050 Pembroke Road, Miramar, Florida 33025. Resp. Ex. 4, Bates stamped p. 031. Cellular is a "dealer" as defined under section 212.06(2), Florida Statutes, and is required to collect and remit sales and use taxes to the State. § 212.06(2), (3)(a), Fla. Stat. The Department notified Cellular of its intent to conduct an audit by written notice and the request for specific records mailed on or about October 3, 2014. Resp. Ex. 2. The audit period is September 1, 2011, to August 31, 2014. Resp. Ex. 2, Bates stamped p. 279. Cellular has several locations in Florida where it sells cellular phones, accessories, phone repair services, and minutes for international calling cards to its customers. Cellular also provides services such as money transfers and accepts payments on behalf of Metro PCS. Store locations are in neighborhood business centers and in malls. During the audit period, Cellular had 11 store locations operating in Florida. Resp. Ex. 4, Bates stamped p. 031. Julia Morales is a tax auditor for the Department. She has been employed with the Department for 11 years. Initially, Morales worked as a tax collector. She has held the position of tax auditor since 2011. Morales has a bachelor's degree in finance and also engages in ongoing training with the Department in order to stay current with Florida Statutes and Department rules. Morales performed the audit and prepared the assessment in this case. Early in the audit, Cellular informed the Department that most of its sales were exempt from Florida's sales tax. Morales explained that insufficient sales records were supplied by Cellular to enable the Department to establish the exempt nature of sales transactions, and, therefore, exempt sales were disallowed by the Department. Resp. Ex. 4, Bates stamped p. 033. On September 3, 2015, the Department issued an initial Notice of Intent to Make Audit Changes ("DR-1215") in the total sum due, as of that date, of $463,677.61 (i.e., $327,257.39 tax, $81,814.34 penalty, and $54,605.88 interest). After receiving the DR-1215, Cellular requested a conference with Morales to review the assessment. The conference was held on November 9, 2015. Resp. Ex. 1, Bates stamped pp. 007-008; Resp. Ex. 4, p. 030; Resp. Ex. 15, Bates stamped p. 131; Resp. Ex. 16, Bates stamped pp. 130-189. After the November 9, 2015, conference, Cellular provided Morales with sales invoices and detailed sales reports for the audit period. Morales explained that the supplemental records established that Cellular's reported tax exempt sales were properly exempt from sales tax, and, therefore, audit assessment Exhibits A01 to A11 were deactivated. Resp. Ex. 4, Bates stamped pp. 029-031; Resp. Ex. 18, Bates stamped pp. 058- 068. Audit assessment Exhibit A12 was also deactivated because Cellular provided records needed to reconcile the difference between gross sales reported on its 2012 federal tax return and gross sales reported on the sales and use tax returns for the same period. Resp. Ex. 18, Bates stamped p. 069. Among the supplemental records supplied by Cellular to establish the tax-exempt basis for some of its sales, its monthly Sales Transaction Detail reports showed that six of Cellular's 11 stores did not remit to the Department all the sales tax they collected during the audit period. Consequently, Morales added audit assessment Exhibits A13 through A18 to document the sales tax collected but not remitted, detailed by store. Resp. Ex. 4, Bates stamped pp. 029-030; Resp. Ex. 18, Bates stamped pp. 070- 110. Morales testified that one of Cellular's stores that under-remitted sales tax, namely the Northwest Store, was operating but not registered with the Department for the entire audit period. Morales discovered that the Northwest Store collected sales tax on its sales and did not start to remit collected tax to the Department until September 2014, which was after the audit period. Of the remaining five stores, Cellular remitted to the Department approximately 50 percent of the sales tax it collected from July 2012 to August 2014. Resp. Ex. 18, Bates stamped pp. 075, 082, 088, 095, 102, and 109. As to consumable purchases (audit assessment Exhibit B01) during the audit, Cellular failed to provide records to establish that it paid use tax on consumable purchases. The sums expensed in Cellular's federal tax returns, which could have a sales tax implication, were relied upon by the auditor to create Exhibit B01. Resp. Ex. 4, Bates stamped p. 034; Resp. Ex. 18, Bates stamped pp. 111-125. Based upon the supplemental records supplied after the November 2015 conference, on February 4, 2016, the Department issued a revised Notice of Intent to Make Audit Changes ("DR-1215"), reducing the total sum due, as of that date, to $277,211.42 (i.e., $194,346.98 tax, $48,586.76 penalty, and $34,277.68 interest). Resp. Ex. 18, Bates stamped p. 053. Penalty considerations were reviewed by the Department. Resp. Ex. 19. Due to Cellular's failure to remit to the State collected sales tax, penalty was not waived by the Department. In addition, accrued statutory interest was also imposed as required by section 213.235, Florida Statutes. Resp. Ex. 18, Bates stamped pp. 054-056; Resp. Ex. 29, Bates stamped p. 2. On February 15, 2016, the Department issued a Notice of Proposed Assessment ("NOPA") in the total sum due, as of that date, of $277,620.29 (i.e., $194,346.98 tax, $48,586.76 penalty, and $34,686.55 interest). Resp. Ex. 23. On March 18, 2016, Cellular submitted a timely protest letter to the Department's Technical Assistance and Dispute Resolution ("TADR"). Resp. Ex. 25. Martha Gregory also testified for the Department. She has been employed with the Department for 20 years. Gregory currently holds the position of taxpayer services process manager in TADR. Gregory holds a bachelor's degree in accounting and has also taken master's level courses. TADR manages an assessment after a taxpayer submits a protest of a NOPA with the Department. Gregory is familiar with TADR's involvement in Cellular's case. Gregory testified that despite repeated efforts by TADR during the protest period, Cellular submitted no new information to the Department for review. Consequently, on April 17, 2017, TADR issued a Notice of Decision ("NOD"), sustaining the assessment in its totality. Because of accruing interest, the total sum due, as of that date, increased to $293,353.77. Resp. Ex. 24. On June 16, 2017, Cellular timely filed its petition for a chapter 120, Florida Statutes, hearing. In its petition, Cellular contests all taxes, penalty, and interest that have been assessed. (See petition filed with the Division on December 5, 2017.) After receiving the petition, the Department made repeated attempts to obtain information from Cellular to support the claims raised in their petition. Resp. Ex. 28. Because no additional information was submitted by Cellular, the petition was referred to the Division on December 5, 2017. Prior to this final hearing of June 28, 2018, Cellular provided additional records relevant to the sales tax assessed on consumable purchases (audit assessment Exhibit B01). Based upon the newly supplied supplemental records, the Department also deactivated Exhibit B01 from the assessment and issued a revised reduced assessment. As a result, on June 12, 2018, the Department issued a revised assessment, which reduced the additional sales and use tax owed to $158,290.02, plus $39,572.50 for a penalty and $55,040.52 in interest, for a total sum owed, as of that date, of $252,903.04. Resp. Ex. 29, Bates stamped p. 2. Erica Torres appeared at the hearing as Cellular's corporate representative and testified on Cellular's behalf. Torres is employed by Cellular as a manager in charge of sales personnel, commissions, schedules, and bookkeeping. She has been employed by Cellular since 2001. Torres admitted that the reports relied upon by the Department in determining that Cellular collected and failed to remit sales tax were correct. Cellular introduced no credible or persuasive evidence to support that the assessment was incorrect. The undersigned finds that more credible and reliable evidence is in favor of the Department. Cellular failed to demonstrate by a preponderance of the evidence that the assessment or proposed penalty and interest proven by the Department are incorrect.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order denying Cellular's requests for relief and sustaining the assessment in its entirety. DONE AND ENTERED this 22nd day of August, 2018, in Tallahassee, Leon County, Florida. S ROBERT L. KILBRIDE Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 22nd day of August, 2018. COPIES FURNISHED: Mark S. Hamilton, General Counsel Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668 (eServed) Randi Ellen Dincher, Esquire Office of the Attorney General Revenue Litigation Bureau The Capitol, Plaza Level 01 Tallahassee, Florida 32399 (eServed) Carlos M. Samlut, CPA Samlut and Company 550 Biltmore Way, Suite 200 Coral Gables, Florida 33134 (eServed) Leon M. Biegalski, Executive Director Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668 (eServed)
