Findings Of Fact Clarke Engineering Company submitted a bid and was awarded a contract on 19 October 1978 by the City of Pompano Beach for the construction of storm drainage improvements in the City of Pompano Beach. In addition to the normal provisions of public works contracts such as prevailing wage rates, bonds, subcontractors, etc., this contract included the following provision: PRICES BID- The prices are to include selling directly to the City and delivering all materials, equipment supplies, [sic] including applicable taxes, and all other facilities at agreed prices, and the performance of all labor and services necessary or proper for the installation and completion of the work at additional agreed prices except as may be otherwise expressly provided in the contract documents. Under the present interpretation of statutes and rules of the Department of Revenue, items involving materials, equipment and supplies sold and delivered to the City of Pompano Beach, are exempt from sales tax, provided the Contractor meets the requirements of the Department of Revenue. Bid items involving labor and installation are not exempt from the Florida State Sales Tax. The Contractor will be responsible for reviewing the pertinent State Statutes and Florida Department of Revenue Rules and Regulations and any other applicable regulations or codes involving the sales tax and complying with all requirements. Item No. 1 on this contract provided for the Contractor to sell and deliver to the City eight items of personal property at the bid price per unit. These items comprised 15", 18", 24", 27" and 42" diameter corrugated steel pipe; type "C" inlets; type "E" inlets; and manholes. The total bid submitted by Petitioner for Item No. 1 was $69,466.00. Although this is an estimated total and not the dollar amount actually delivered to City, it is the sales tax on Item 1 that is in dispute. The exact amount of supplies and materials charged to the City pursuant to this item was not presented at the hearing but is obviously not in dispute. On all other supplies and materials used by the Contractor in connection with this contract, Clarke paid the sales tax without protest. Upon acceptance of Clarke's bid by the City, Clarke, on 19 October 1978 submitted and application for a certificate of registration to conduct business as a dealer involving sales and use tax. (Exhibit 2). A copy of his contract with the City was forwarded with the application. This application was forwarded by the local revenue office in Tallahassee on 14 November 1978 for review and appropriate action. (Exhibit 2). By letter dated 20 November 1978 Respondent's Chief, Sales Tax Bureau, denied Petitioner's application for sales tax registration on the ground that in his opinion the contract did not "clearly meet the definition of Rule 12A- 1.52(2)(d)." Additional correspondence between Clarke and the Department of Revenue (DOR) failed to modify Respondent's position and by letter dated April 26, 1979, DOR advised Petitioner it could consult with an attorney if deemed aggrieved by the action of DOR. By letter dated May 17, 1979, Clarke requested an administrative hearing to review this determination and this proceeding followed.
The Issue Whether Petitioner owes the assessment for sales and use tax as alleged by the Department of Revenue.
Findings Of Fact George Schoenrock is a resident of the State of Florida. His address is 7600 Miami View Drive, Northgate Village, Miami, Florida. Mr. Schoenrock is the owner of a company known as Action Marine. This company is located in the State of Florida and manufactures and sells new boats. In 1996 Mr. Schoenrock also formed a company in North Carolina called Action Boatworks. This company, Action Boatworks, is the Petitioner in this cause. In 1996 Petitioner purchased a boat made in Wanchese, North Carolina and named it the "Action Lady." The boat was purchased to re-sell for profit by Petitioner, a dealer in North Carolina. Action Boatworks is not registered in Florida to sell boats nor does it possess a Florida sales tax dealer's license or a tax number from the Florida Department of Revenue. At the time of purchase Mr. Schoenrock considered the "Action Lady" unfinished as it lacked canvas, fishing equipment, chair rigging, and electronic equipment for navigation. The total paid to Davis Boatworks, Inc. (the manufacturer) for the "Action Lady" was in excess of $571,000.00. The invoice for this purchase, dated May 21, 1996, did not list Petitioner as the purchaser of the vessel but identified a "Barney Schoenrock." After the purchase of the boat, Mr. Schoenrock brought the "Action Lady" to South Florida where he intended to complete the installation of the items noted above and re-sell it. The vessel entered the State of Florida by the end of May 1996, and proceeded down the coast to a dock at Mr. Schoenrock's residence. One deterrent to the re-sale of the "Action Lady" was immediately discovered by Mr. Schoenrock. That is, the diesel engines did not pass a "P.I.D." inspection required for the warranty to be effective. This inspection required Detroit Diesel to complete the P.I.D. test and to certify the engines were acceptable. The vessel eventually passed this inspection some eight or nine months after Mr. Schoenrock had received the boat. The first effort to repair the vessel in order to pass the P.I.D. test was in June of 1996 when it was taken to a repair facility known as Safety Harbor. The "Action Lady" remained at Safety Harbor until August 7, 1996, when it returned to Mr. Schoenrock's residence. Thereafter, on or about October 24, 1996, the vessel went back to Safety Harbor for additional repairs which lasted approximately two weeks. After the repairs were completed, sometime in November 1996, the boat was returned to Mr. Schoenrock's residence. In October 1996 Mr. Schoenrock listed the "Action Lady" for sale with Walsh Yachts. The asking price was noted at $695,520.00. Also at this time it was placed in the Fort Lauderdale boat show. Except for the time the boat was in repairs or on exhibition during the October boat show, the "Action Lady" remained docked at Mr. Schoenrock's residence. Eventually, Petitioner sold the vessel in South Florida to Joseph Gregory in March of 1997. According to Mr. Schoenrock the boat was not used for his own personal use. It was not used by others for personal use. It was subject to repairs, testing, and demonstration the entire time it was in Florida prior to its sale. According to Mr. Schoenrock, when he purchased the boat in North Carolina, he paid sales tax in that state totaling $2500.00. Mr. Schoenrock's company, Action Marine, was never in any way an owner of the "Action Lady." Mr. Schoenrock insured the vessel for its value and was the beneficiary of the policy. From June 1, 1996, through its resale in March 1997, the "Action Lady" did not leave the State of Florida.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a Final Order affirming the use tax assessment. DONE AND ENTERED this 5th day of May, 1999, in Tallahassee, Leon County, Florida. J. D. PARRISH 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 5th day of May, 1999. COPIES FURNISHED: Eric J. Taylor, Assistant Attorney General Office of the Attorney General The Capitol, Tax Section Tallahassee, Florida 32399-1050 Eric Taylor, Assistant Attorney General 401 Northwest Second Avenue, N607 Miami, Florida 33128 Jack Stein, Esquire Arthur Rosenberg, Esquire Stein, Rosenberg & Winikoff Seventh Floor 4875 North Federal Highway Fort Lauderdale, Florida 33308 Linda Lettera, General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 Larry Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100
The Issue Whether the Department of Revenue (DOR) has properly issued an assessment against Petitioner for sales and use tax, interest, and penalty.
Findings Of Fact Petitioner is a Florida resident. In 1996, Petitioner began doing business as a sole proprietor under the name of "Duraline Industries" and registered with DOR as a sales tax dealer. Later, this entity was called "Dura Steel." Petitioner also operated as a corporation, Steel Engineered Design Systems, Inc. Petitioner's Florida sales tax numbers are 42-11-009271-63 and 40-00-003416- For purposes of these consolidated cases, Petitioner has been audited and charged individually as "Charles R. Bielinski," because the audit revealed that no checks were made out to the corporation(s) and that the monies received were received by Mr. Bielinski as a sole proprietor in one or more "doing business as" categories. Petitioner engaged in the business of fabricating items of tangible personal property, i.e., prefabricated steel buildings, many of which later became improvements to real property in Florida. Petitioner used some of the steel buildings in the performance of real property contracts by installing the buildings as improvements to real property. Petitioner also engaged in the business of selling buildings and steel component parts such as sheets and trim in Florida. Petitioner sold buildings and component parts in over- the-counter retail sales, also. On October 7, 2002, DOR issued Petitioner a Notification of Intent to Audit Books and Records for the period of September 1, 1999 through August 31, 2002. This audit was assigned number AO226920428. In 2002, Petitioner provided DOR's auditor with his sales activity records, such as contracts and job information. A telephone conversation/interview of Petitioner was conducted by the auditor. Over a period of several months, the auditor attempted to get Petitioner to provide additional records, but none were forthcoming. DOR deemed the contracts and job information provided by Petitioner to be an incomplete record of his sales activity for the audit period. Petitioner claimed that most of his sales activity records had been lost or destroyed. Due to the absence of complete records, DOR sampled Petitioner's available records and other information related to his sales in order to conduct and complete its audit. Petitioner purchased materials used to fabricate his steel buildings. Petitioner sometimes would erect the buildings on real property. Petitioner fabricated main frames for smaller buildings at a shop that he maintained at the Bonifay Airport. Otherwise, Petitioner subcontracted with like companies to fabricate main frames for larger buildings. Petitioner made some sales to exempt buyers, such as religious institutions and government entities. When he purchased the materials he used to fabricate the buildings, Petitioner occasionally provided his vendors with his resale certificate, in lieu of paying sales tax. Petitioner did not pay sales tax on the materials he purchased to fabricate buildings when such buildings were being fabricated for exempt buyers such as churches and governmental entities. On June 23, 2003, DOR issued Petitioner a Notice of Intent to Make Audit Changes (Form DR-840), for audit number AO226920428, covering the period of November 1, 1997 through August 31, 2002. DOR has assessed Petitioner sales tax on the buildings, sheets, and trim he sold over-the-counter in Florida. DOR has assessed Petitioner use tax on sales of the materials used in performing real property contracts in Florida. The auditor calculated a method of estimating taxes based on the limited documentation that had been provided by Petitioner. She used a sampling method based on Petitioner's contract numbering system; isolated the Florida contracts; and divided the Florida contracts between the actual sale of tangible property (sale of just the buildings themselves) and real property contracts (where Petitioner not only provided the building but also provided installation or erection services). The auditor scheduled the real property contracts and assessed only the material amounts as taxable in Florida. Since she had only 19 out of 47 probable contracts, or 40 percent, she projected up to what the taxable amount should be and applied the sales tax and surtax at the rate of seven percent, as provided by law. She then divided that tax for the entire audit period by the 58 months in the audit period, to arrive at a monthly tax amount. This monthly tax amount was broken out into sales and discretionary sales tax. Florida levies a six percent State sales tax. Each county has the discretion to levy a discretionary sales tax. Counties have similar discretion as to a surtax. The auditor determined that Petitioner collected roughly $22,000.00 dollars in tax from one of his sales tax registrations which had not been remitted to DOR. During the five-year audit period, Petitioner only remitted tax in May 1998. DOR gave Petitioner credit for the taxes he did remit to DOR during the audit period. The foregoing audit processes resulted in the initial assessment(s) of August 28, 2003, which are set out in Findings of Fact 25-31, infra. On August 28, 2003, DOR issued Petitioner a Notice of Proposed Assessment (Form DR-832/833), for additional discretionary surtax, in the sum of $2,582.19; interest through August 28, 2003, in the sum of $782.55; and penalty, in the sum of $1,289.91; plus additional interest that accrues at $0.50 per day. (DOAH Case No. 04-0008) On August 28, 2003, DOR issued Petitioner a Notice of Proposed Assessment (Form DR 832/833), for additional sales and use tax in the sum of $154,653.32; interest through August 28, 2003, in the sum of $50,500.06; and penalty, in the sum of $77,324.54, plus additional interest that accrues at $31.54 per day. (DOAH Case No. 04-0009) On August 28, 2003, DOR issued Petitioner a Notice of Proposed Assessment (Form DR 832/833), for additional local governmental infrastructure surtax, in the sum of $7,001.82; interest through August 28, 2003, in the sum of $2,352.09; and penalty in the sum of $3,497.35; plus additional interest that accrues at $1.45 per day. (DOAH Case No. 04-0010) On August 28, 2003, DOR issued Petitioner a Notice of Proposed Assessment (Form DR 832/833), for additional indigent care surtax, in the sum of $513.08; interest through August 28, 2003, in the sum of $156.33; and penalty, in the sum of $256.24; plus additional interest that accrues at $0.10 per day. (DOAH Case No. 04-0011) On August 28, 2003, DOR issued Petitioner a Notice of Proposed Assessment (Form DR 832/833), for additional school capital outlay surtax in the sum of $3,084.49; interest through August 28, 2003, in the sum of $922.23; and penalty, in the sum of $1,540.98; plus additional interest that accrues at $0.60 per day. (DOAH Case No. 04-0012) On August 28, 2003, DOR issued Petitioner a Notice of Proposed Assessment (Form DR 832/833), for additional charter transit system surtax, in the sum of $2,049.22; interest through August 28, 2003, in the sum of $766.07; and penalty, in the sum of $1,023.27; plus additional interest that accrues at $0.46 per day. (DOAH Case No. 04-0013) On August 28, 2003, DOR issued Petitioner a Notice of Proposed Assessment (Form DR 832/833), additional small county surtax, in the sum of $10,544.51; interest through August 28, 2003, in the sum of $3,437.85; and penalty in the sum of $5,282.30; plus additional interest that accrues at $2.15 per day. (DOAH Case No. 04-0014) However, the auditor testified at the May 13, 2004, hearing that she attended Petitioner's deposition on March 18, 2004. At that time, Petitioner provided additional documentation which permitted the auditor to recalculate the amount of tax due. The auditor further testified that she separated out the contracts newly provided at that time and any information which clarified the prior contracts she had received. She then isolated the contracts that would affect the Florida taxes due. Despite some of the new information increasing the tax on some of Petitioner's individual Florida contracts, the result of the auditor's new review was that overall, the contracts, now totaling 33, resulted in a reduction in total tax due from Petitioner. These changes were recorded in Revision No. 1 which was attached to the old June 23, 2003, Notice of Intent to Make Audit Changes, which was sent by certified mail to Petitioner. The certified mail receipt was returned to DOR as unclaimed. The auditor's calculations reducing Petitioner's overall tax are set out in Respondent's Exhibit 16 (Revision No. 1). That exhibit appears to now show that taxes are owed by Petitioner as follows in Findings of Fact 34-40 infra. For DOAH Case No. 04-0008, discretionary surtax (tax code 013), Petitioner only owes in the amount of $1,937.37, plus penalties and interest to run on a daily basis as provided by law. For DOAH Case No. 04-0009, sales and use tax (tax code 010), Petitioner only owes in the amount of $111,811.04, plus penalties and interest to run on a daily basis as provided by law. For DOAH Case No. 04-0010, local governmental infrastructure surtax (tax code 016), Petitioner only owes in the amount of $5,211.00, plus penalties and interest to run on a daily basis as provided by law. For DOAH Case No. 04-0011, indigent care surtax (tax code 230), Petitioner only owes in the amount of $317.39, plus penalties and interest to run on a daily basis as provided by law. For DOAH Case No. 04-0012, school capital outlay tax (tax code 530), Petitioner only owes in the amount of $2,398.68, plus penalties and interest to run on a daily basis as provided by law. For DOAH Case No. 04-0013, charter transit system surtax (tax code 015), Petitioner only owes in the amount of $1,558.66, plus penalties and interest to run on a daily basis as provided by law. For DOAH Case No. 04-0014, small county surtax (tax code 270), Petitioner only owes in the amount of $7,211.83, plus penalties and interest to run on a daily basis as provided by law.
Recommendation Based on the foregoing Findings of Facts and Conclusions of Law set forth above, it is RECOMMENDED that the Department of Revenue enter a final order upholding the amount of tax calculated against Petitioner in its June 21, 2003, Notice of Intent to Make Audit Changes, Revision No. 1, in the principal amounts as set forth in Findings of Fact Nos. 34-40, plus interest and penalty accruing per day as provided by law, until such time as the tax is paid. DONE AND ENTERED this 14th day of July, 2004, in Tallahassee, Leon County, Florida. S ELLA JANE P. DAVIS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 14th day of July, 2004.
The Issue Broadly stated, the issue in this proceeding the validity of the proposed deficiency in petitioner's corporate income in the amount of $25,712.80 for the 1972 fiscal year. More specifically, the issue is whether Florida may lawfully tax for the gain it realized on the sale of securities in the of $941,418.00. Included within this issue is the question of whether the apportionment formula set forth in Florida Statutes is applicable to petitioner.
Findings Of Fact Upon consideration of the pleadings, the stipulations the parties and the record in this proceeding, the following relevant During the calendar year 1972, petitioner was a foreign " Corporation subject to the Florida Corporate Income Tax, imposed Chapter 220, Florida Statutes. Petitioner also operated a business in St. Louis, Missouri. January 1, 1972, petitioner held a 95 percent interest in Bal Harbour Joint Venture, which owned and operated the Ivanhoe Hotel and Restaurant in Bal Harbour, Florida. On December 15, 1972, petitioner was the sole owner of the Ivanhoe Hotel and Restaurant. November 16, 1972, the petitioner acquired by merger 100 percent interest in the Clearwater Beach Hilton, a motel and restaurant business located in Clearwater, Florida, and continued to own this interest on December 31, 1972. The Clearwater and Ivanhoe hotel and restaurant businesses in Florida and the petitioner's business in Missouri have separate, individual general managers. There is no central purchasing by the hotels and no centralized operating records are maintained by petitioner. There are no central reservation services available between the hotels and the hotels advertise separately and unilaterally in local publications in the cities in which they are located. No standardized product lines exist. On November 2, 1972, petitioner sold certain securities which resulted in a realized gain to petitioner for federal income tax purposes of $941,418.00. Said securities were purchased, located and sold in the State of Missouri, and had no relationship to petitioner's Florida transactions. Petitioner timely filed its 1972 Florida corporate income tax return on which it subtracted from its federal taxable income the gain realized from the sale of the securities. Its "Florida net income" and its "total tax due" were thus reported as "none." On or about May 8, 1974, respondent advised petitioner of a proposed deficiency in petitioner's 1972 tax in the amount of $29,392.00. In accordance with the provisions of Florida Statutes Sec. 214.11, petitioner timely filed with respondent its protest of the proposed deficiency assessment. After a hearing, respondent issued to petitioner its Notice of Decision in which the proposed, deficiency was reduced to $25,712.80, and the reasons therefor were set forth. Petitioner requested reconsideration by respondent. On March 11, 1975, the parties stipulated that further proceedings in this cause would be, processed under the Florida Administrative Procedures Act. The petition for hearing was forwarded by respondent to the Division of Administrative Hearings, the undersigned was duly assigned as the Hearing Officer.
Recommendation Based upon the findings of fact and conclusions of law recited above, it is recommended that: the proposed deficiency assessment in the amount of $25,712.80 be vacated and set aside; and The respondent permit petitioner to file an amended 1972 return utilizing, within the discretion of the respondent, the employment of either separate accounting, a monthly averaging formula or another method which would effectuate an equitable apportionment of petitioner's income to the State of Florida. Respectfully submitted and entered this 8th day of August, 1977, in Tallahassee, Florida. DIANE D. TREMOR, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Donald A. Pleasants Shackleford, Farrior, Stallings and Evans Post Office Box 3324 Tampa, Florida 33601 Louis de la Parte, Jr. 725 East Kennedy Boulevard Tampa, Florida 33602 Patricia S. Turner Assistant General The Capitol Tallahassee, Florida 32304 ================================================================= AGENCY FINAL ORDER =================================================================
Findings Of Fact The parties have stipulated to all facts in this proceeding. Those facts found relevant to a determination of the issue are as follows: Petitioner, American Telephone and Telegraph Company, is a New York corporation and is functionally divided into two divisions: the Long Lines Department and the General Department. Through its Long Lines Department, petitioner is a federally regulated public utility and common carrier which furnishes interstate and international telecommunications services. Long Lines is responsible generally for the construction, operation and maintenance of a nationwide system of interstate telecommunications facilities and related equipment which serve to interconnect the facilities of over 1700 operating telecommunications companies in the United States as well as telecommunications systems abroad. Some of these facilities extend into and through the State of Florida. In performing this interstate business, Long Lines operates, and thus has property or employees or both in 49 states, including Florida. Through its General Department, petitioner is the parent corporation of 21 operating telecommunications companies (known as "Associated Companies"), Western Electric Company, Inc. ("Western") and Bell Telephone Laboratories, Inc. ("Bell Labs"). The General Department holds and manages the stock owned in these subsidiaries and two minority owned companies, and provides capital. advice and assistance to them. It conducts these activities principally in New York and New Jersey and conducts no business and has no property or employees in Florida. The only business activities in the State of Florida during 1972, 1973 and 1974 were conducted through petitioner's Long Lines Department in connection with the operation of the interstate and international long distance telecommunications network. None of the Associated Companies is organized under the laws of Florida or has its headquarters in Florida. The Only Associated Company which conducts business or has property or employees within Florida is the Southern Bell Telephone and Telegraph Company (hereinafter "Southern Bell"), a wholly owned subsidiary of petitioner. Southern Bell files its own separate Florida income tax returns and during the period 1972-1974 paid approximately $10 million in income tax to Florida. The respondent concurs that petitioner is entitled to deduct 100 percent of the dividends paid by Southern Bell to petitioner. Western, also a wholly owned subsidiary of petitioner, is a manufacturing corporation with its own Board of Directors and officers, doing business in all 50 states. During the period 1972-1974 Western paid approximately $1.7 million in income tax to Florida. The respondent concurs that petitioner is entitled to deduct 100 percent of the dividends paid by Western to petitioner. For each of the 1972, 1973 and 1974 tax years, petitioner has filed a federal consolidated income tax return, and has made a valid election under Section 243 of the Internal Revenue Code for each of those years. That provision of the federal tax law permits a domestic corporation to deduct 100 percent of the dividends received from its wholly-owned domestic subsidiaries. Petitioner's federal income tax returns were audited by the Internal Revenue Service and the respective tax liabilities were determined and paid for each of the years in question. The Internal Revenue Service did not tax dividends received by petitioner from its affiliates. Petitioner timely filed its Florida corporate income tax returns for the years ending December 31, 1972, December 31, 1973 and December 31, 1974. Petitioner did not elect and was not required to file a Florida consolidated income tax return under Section 220.131, Florida Statutes. For each of the years in question, petitioner reported on line 1--"federal taxable income (line 30, Form 1120 or corresponding line on related form 1120 series, 990C or 990T)"- -of its Florida corporation income tax return (Form F-1120) its taxable income for federal income tax purposes computed as if petitioner had filed a separate federal income tax return for each of the years in question and for each preceding taxable year for which it was a member of an affiliated group. These amounts were: 1972 $ 94,020,281 1973 $213,364,165 1974 $110,770,402 On its Florida corporation income tax return for each of the years in question, petitioner made the additions and subtractions required by the form of the return in computing "adjusted federal income" and apportioned this amount by the prescribed three-factor formula to obtain "Florida net income." The Department of Revenue adjusted the amount of "federal taxable income" and hence "Florida net income" of petitioner for each of the years in question by adding thereto 15 percent of the dividends received from subsidiaries which were deductible for federal income tax purposes under Section 243 of the Internal Revenue Code. On April 10, 1978, the Department issued a notice of proposed deficiency for petitioner's tax years ended December 31, 1972, December 31, 1973 and December 31, 1974. The total amount of the proposed deficiency was $1,131,158, computed as follows: YEAR AUDITED TAX TAX AS FILED DEFICIENCY 1972 $426,468 $122,365 $304,103 1973 668,597 281,168 387,429 1974 594,300 154,674 439,626 Total $1,689,365 $558,207 $1,131,158 After a timely protest to the proposed deficiencies was filed by the petitioner, correspondence and an informal conference between the parties was had. Finally, on April 16, 1981, the Department issued a letter denying the protest and petitioner petitioned for an administrative hearing. Through correspondence and discussions with the petitioner, the Department of Revenue has taken the position that it would allow only an 85 percent dividend deduction for the dividends received by petitioner from those affiliates which were not subject to the Florida corporate income tax code. Petitioner is seeking to take a 100 percent deduction of all dividends which it received from its subsidiaries, as it did on its federal income tax returns. The dividends received by petitioner which the Department is attempting to subject to Florida tax by its proposed deficiency assessment are derived from its equity investment in its subsidiaries and they represent to petitioner a return on such investment. Since the actual capital, however, for that investment is furnished primarily by public investors, the principal use of the dividends received by petitioner is to meet its obligation to its shareholders and bondholders for the payment of dividends and interest. For example, in 1974 petitioner received dividends from the Associated Companies, Western and other affiliates in the amount of $2,538,443,000 and paid dividends to shareholders in the amount of $2,039,800,000 and interest on its long and intermediate term debt of $475,670,000. Petitioner, therefore, serves as the investor interface between the investing public and its subsidiary companies, whereby the purchase of petitioner's stock or debt issues actually represents an investment in the earnings of the Bell System. Petitioner, acting through its General Department, thus provides the avenue by which the subsidiaries pass their net earnings to the investing public. The income which the Department seeks to tax is derived from dividends received by petitioner primarily from earnings generated by the property and employees of the Associated Companies which are devoted to furnishing intrastate and interstate telecommunications services in their operating territories in states other than the State of Florida. These earnings are subject to income taxes in all states in which the Associated Companies provide telecommunications services that impose income taxes on corporations. The dividends received by petitioner do not contribute to the funding of Long Lines since (1) the pervasive regulation under which petitioner's subsidiaries operate limits their earnings to that amount sufficient for the needs of their own operations and effectively prevents those earnings from being available for use in other businesses and (2) earnings paid out as dividends by petitioner's subsidiaries are principally required to be passed to the public investors in the Bell System, through petitioner's General Department, in order to meet dividend and interest obligations to these outside shareholders and bondholders. During the tax years in question, the Department of Revenue had not promulgated any rule with respect to the disallowance of a deduction for 100 percent of dividends received as provided for under Section 243 of the Internal Revenue Code, and the Florida corporate income tax return forms did not require any such add-back or adjustment. During the 1980 legislative session, an amendment to Chapter 220, Florida Statutes, was proposed which would have changed the definition of "affiliated group of corporations." Such proposed legislation was not passed and did not become law.
Recommendation Based upon the findings of fact and conclusions of law recited herein, it is RECOMMENDED that that portion of the Department's proposed assessment of deficiencies for the 1972, 1973 and 1974 tax years as is based upon dividends received by the petitioner from its affiliates be withdrawn as being contrary to law and invalid. Respectfully submitted and entered this 28th day of April, 1982. DIANE D. TREMOR, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 28th day of April, 1982.
Recommendation Based upon the findings of fact and conclusions of law recited herein, it is RECOMMENDED that petitioners' request for a refund of corporate income taxes for the year ending January 31, 1975, be DENIED. DONE AND ORDERED in Tallahassee, Leon County, Florida, this 14th day of January, 1981. DIANE D. TREMOR Hearing Officer Division of Administrative Hearings 101 Collins Building Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 14th day of January, 1981.
The Issue The issue to be resolved in this proceeding concerns whether the Petitioner is liable for sales tax, together with interest and penalties on the purported unpaid tax amount, as referenced in the assessment and the Respondent agency's notice of decision issued on October 18, 1994.
Findings Of Fact The Petitioner is the sole proprietor of a marina and restaurant business located in Pensacola Beach, Florida. The Respondent is an agency of the State of Florida charged with enforcing pertinent statutes and rules providing for the collection of sales and use taxes, as well as penalties and interest for tax amounts determined to be due and payable but not timely paid to the Department and the State of Florida. Included within the Department's regulatory authority over the assessment and collection of sales and use taxes is the authority to conduct audits of taxpayers to determine amounts of tax due and owing to the State, as well as whether such taxes have been timely and properly remitted and otherwise accounted for. The relevant audit period involved in this proceeding extended from October 1, 1987 through December 31, 1992. The Petitioner's marina and restaurant business operated during the audit period was operated on property owned by the Santa Rosa Island Authority (Authority) and the State of Florida Department of Natural Resources (now Department of Environmental Protection, DEP). The property was leased to the Petitioner for the purpose of operation of this business. The property leased by the Petitioner from the Authority consisted of certain land above the mean high water mark and five boat slips. These five boat slips will be referred to sometimes hereafter as the "Santa Rosa boat slips". During the audit period, the Petitioner operated the restaurant business on the property leased from the Authority and rented the five boat slips to various boating customers. The Petitioner also rented 70 other boat slips to customers during the audit period. These slips were built by the Petitioner in 1977 on submerged land which had been leased from the State of Florida, Department of Natural Resources, Bureau of Land Management. This property adjoined the property leased from the Authority. On November 16, 1992, the Department sent to the Petitioner a notice of intent to audit its books and records. As part of the audit, the Department requested that the Petitioner produce various records, including but not limited to, the Petitioner's federal tax returns, Florida corporation income tax returns, Florida sales and use tax returns, depreciation schedules, general ledgers, property records, cash receipts journals, cash disbursement journals, purchase journals, general journals, sales journals, sales invoices, shipping documents, purchase invoices, intangible property records, sales tax exemption certificates and lease agreements for the real or tangible property involved in the Petitioner's business. The Petitioner basically was able to provide few records to support his restaurant sales and boat slip rental receipts, except for Florida sales tax returns and federal income tax returns. There were no sales control documentation records, such as general ledgers and general journals provided to the Department's auditor for review, except for a cash register tape for the night of December 1, 1992, representing that night's restaurant gross receipts activity. The Petitioner's method of record keeping essentially consisted of his writing down the gross sales each evening from the cash register tapes, totaling those figures at the end of the month, and reporting this total on his Florida sales tax returns as the gross receipts from the restaurant business. However, the Petitioner did not keep the cash register tapes or maintain other documents to support the information reported to the Respondent on the monthly sales tax returns. The Petitioner reported as, "exempt income," the rental from the boat slips for the five Santa Rosa boat slips on the monthly sales tax returns filed with the Respondent. He did not report his monthly rental income from the remaining 70 boat slips on his sales tax returns filed with the Respondent. He did report a great deal more gross receipts on his federal income tax returns than on his Florida sales tax returns. The Department compared the Petitioner's federal income tax returns during the audit period with his Florida sales tax returns and determined that the gross receipts reported to the federal government were substantially larger than the gross receipts reported to the Department. It determined that the primary difference in the gross receipts was attributable to rental revenues from the boat slips, which were not accounted for by the Petitioner in his Florida monthly sales tax returns. The auditor determined that four percent of the recorded restaurant gross receipts were attributable to alcohol sales and 96 percent to food sales. The Department calculated the sales tax due on the undisclosed income through the audit, which represented gross receipts from the restaurant business and the boat-slip rental business, which was not reported by the Petitioner on his Florida sales tax returns. It calculated the sales tax due during the audit period on the rentals of the five boat slips, which were improperly listed as exempt sales on the Petitioner's monthly sales tax returns filed with the Respondent. It was also revealed that during the audit period, the Petitioner had sub-leased a portion of the Santa Rosa property to his former wife for $5,000.00 per year. The Department calculated that the Petitioner owed $300.00 in taxes based upon the sub-lease to his former wife. The Department additionally calculated that the Petitioner owed an additional $314.00 for use taxes, based upon non-exempt purchases of tangible personal property. The Department assessed the Petitioner's sales taxes based upon the estimated boat-slip rental receipts, although it did not assess the lease payments made by the Petitioner to the Authority or to the State of Florida, Department of Natural Resources. On February 12, 1993, the Department assessed the Petitioner a total of $71,308.30 for the audit period, representing $45,694.90 of sales tax due, $14,093.37 of interest due thereon, $11,041.36 of penalties, and $314.98 of use tax, together with $91.02 of interest due on use taxes unpaid, and $72.67 of penalties due thereon. Daily interest of $15.13 commencing on February 13, 1993 was also assessed. Additionally, on February 12, 1993, the Department assessed the Petitioner $1,060.97 for the audit period, including penalties and interest, for local government infrastructure surtax due. Daily interest of $.29, commencing on February 13, 1993, was assessed on that amount. The Petitioner, in essence, does not dispute the Department's calculation of the assessed amount. The Petitioner, rather, contends that he believes that he reported all income and paid all sales taxes which were due and that his certified public accountant failed to account properly for his gross receipts and income to the federal internal revenue service, without the Petitioner's knowledge, during the audit period. He maintains, therefore, that the method of calculation of the Department's tax assessment, based upon the difference between the gross receipts depicted on the federal income tax returns and on the sales tax returns filed with the Department, is inaccurate, apparently because of the CPA's errors. Additionally, the Petitioner maintains that he was of the belief that the boat-slip rentals were not taxable and reportable for sales tax purposes to the Department because he believes, citing Rule 12A-1.061(5)(a) and (b), Florida Administrative Code. He bases this view on his assertion that the persons residing in the boat slips were "95 percent" live-aboard-type tenants, residing on their boats and that, essentially, they treated their boats as beach homes or condominiums, etc., for purposes of that rule, by residing for longer periods than six months. He thus contends that the rental revenues from such residents were tax exempt. The Department, however, established through its auditor's testimony and the Department's Composite Exhibit 2, that the Petitioner's CPA, through information he generated, did not establish that the difference between the gross receipts reported to the internal revenue service on the federal tax returns and the gross receipts reported on the Florida sales tax returns was not taxable. The Petitioner's proof does not show the factual elements necessary to establish that the 75 boat slips meet the rule's standard for exempt revenues from non-taxable residences.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record and the candor and demeanor of the witnesses, it is, therefore RECOMMENDED that a Final Order be entered by the Respondent assessing the taxes, penalties, and accumulated interest in the above-found amounts. DONE AND ENTERED this 21st day of June, 1996, in Tallahassee, Florida. P. MICHAEL RUFF, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 21st day of June, 1996. APPENDIX TO RECOMMENDED ORDER CASE NO. 94-7256 Petitioner's Proposed Findings of Fact Accepted. Accepted, based upon the Petitioner's testimony in this regard, but immaterial. 3-4. Rejected, as not established by preponderant evidence. The Petitioner did not show that all or even most of the tenants are on annual rentals and, moreover, if they were, the rule cited by the Petitioner himself requires that such lease agreements or contracts be written. The Petitioner has simply failed to establish that the boat-slip rental arrangements were exempt transactions. Rejected, as incorrect as a matter of law and as immaterial and irrelevant. Rejected, as immaterial and irrelevant to the issues in this proceeding. Rejected, as subordinate to the Hearing Officer's findings of fact on this subject matter and as not probative by a preponderance of evidence that the assessment is incorrect. Rejected, as immaterial to the issues in this proceeding. The Department is not seeking to establish fraudulent intent. 9-27. These constitute argument and enunciation of the Petitioner's and the Respondent's perceived legal positions, and attempted equitable arguments concerning justification for the Petitioner's lack of relevant records, including a description of his financial difficulties related to destruction of his business by fire and by two hurricanes. While this is understandable and regrettable, these arguments and positions asserted by the Petitioner are immaterial and irrelevant to the issues in this case. Respondent's Proposed Findings of Fact 1-26. Accepted. COPIES FURNISHED: Richard E. Wells 715 Pensacola Beach Boulevard Post Office Box 505 Pensacola Beach, FL 32562-0505 Jarrell L. Murchison, Esquire Office of the Attorney General The Capitol - Tax Section Tallahassee, FL 32399-1050 Linda Lettera, General Counsel Department of Revenue 204 Carlton Building Tallahassee, FL 32399-0100 Larry Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, FL 32399-0100
The Issue Whether the Department of Revenue's (Department) assessment of tax and interest against American Business USA Corp. (Taxpayer) is valid and correct.
Findings Of Fact The Department is the agency responsible for administering the revenue laws of the state of Florida, including the imposition and collection of the state's sales and use taxes pursuant to chapter 212, Florida Statutes. The Taxpayer is an active for-profit corporation with its principal address and mailing address at 12805 Newton Place, Wellington, Florida 33414-6226. The Taxpayer is a "dealer" as that term is defined by section 212.06(2). The Taxpayer has a federal employer identification number and a certificate of registration number.1/ The Taxpayer began doing business in Florida in January 2001, but did not register with the Department as a sales tax dealer until February 19, 2004. The Taxpayer does business as "1Vende.com." The Department audited the Taxpayer for sales and use tax compliance. The audit period was April 1, 2008, through March 31, 2011. FACTS RELATED TO THE AUDIT PERIOD Mr. Gomez and Ms. Niño, who are husband and wife, each hold 50 percent of the shares in the Taxpayer. There were two principal aspects of the Taxpayer's business during the audit period. First, the Taxpayer specialized in the sale of flowers, gift baskets, and other items of tangible personal property. Second, the Taxpayer specialized in the sale of "prepaid calling arrangements," within the meaning of section 212.05(1)(l). All of the Taxpayer's sales were initiated online. The Taxpayer sold to customers throughout Latin America, in Spain, and in the United States (including Florida). All payments to the Taxpayer were made by credit card or wire transfer. The Taxpayer generated electronic invoices for all its sales. The Taxpayer marketed itself to the public on its website as a company that sells flowers. The Taxpayer did not maintain any inventory of flowers, gift baskets, or other items of tangible personal property. When the Taxpayer received an order over the Internet for items of tangible personal property, the Taxpayer relayed the order to a florist in the vicinity of the customer (the local florist). The Taxpayer utilized the Internet or telephone to relay an order. The Taxpayer did not use telegraph. The Taxpayer used a local florist to fill the order it had received for flowers, gift baskets, and other items of tangible personal property. The Taxpayer charged its customers sales tax on sales of flowers, gift baskets, and other items of tangible personal property delivered in Florida. The Taxpayer did not charge its customers sales tax on sales of flowers, gift baskets, and other items of tangible personal property delivered outside of Florida. The Taxpayer did not charge sales tax on the delivery fee it charged its customers on orders of flowers, gift baskets, and other items of tangible personal property. The Taxpayer primarily sold prepaid calling arrangements in $2.00, $5.00, $10.00, and $20.00 increments. When customers purchased prepaid calling arrangements, the Taxpayer sent them an authorization number by email. The Taxpayer did not charge its customers sales tax on the prepaid calling arrangements it sold. THE AUDIT The Taxpayer filed its federal tax returns on an accrual basis with the fiscal year ending December 31. The taxpayer's accountant recorded sales on the federal tax returns (form IRS 1120) based on the deposits recorded on the bank statements. Mr. Gomez prepared the Florida sales and use tax returns (form DR-15) for the Taxpayer and calculated the tax due by multiplying its taxable sales by the applicable tax rate. On May 9, 2011, the Department mailed the Taxpayer a Notice of Intent to Audit Books and Records, form DR-840, for audit 200105422. The Department requested Mr. Gomez provide for audit the Taxpayer's chart of accounts, general ledgers, cash receipt journals, sales journals, resale certificates, general journals, federal tax returns, state sales tax returns, shipping documents, and bank statements. Along with the DR-840, the Department mailed the Taxpayer a Pre-audit Questionnaire and Request for Information and Electronic Audit Survey. On May 23, 2011, the Taxpayer returned to the Department the completed Pre-audit Questionnaire and Request for Information and Electronic Audit Survey. On June 15, 2011, the Department's auditor and Mr. Gomez had a pre-audit interview, in which they discussed auditing techniques and records available for audit. Mr. Gomez provided for audit a download of the Taxpayer's electronic records, including its sales database, bank statements, and federal tax returns. The Taxpayer did not keep for audit books and records that would allow the Department to reconcile the sales in the electronic database to the deposits on the bank statement. The Department determined that the Taxpayer's books and records were inadequate for audit and relied upon the "best information then available" of the Taxpayers' sales tax liability, in accordance with section 212.12(5)(b). The Taxpayer did not maintain sales invoices, sales journals, or general ledgers. On August 8, 2011, the Department's auditor met with Mr. Gomez and discussed the audit findings regarding sales. On August 18, 2011, the Department's auditor met with Mr. Gomez and discussed the taxability of the prepaid calling arrangements. On October 31, 2011, the Department mailed the Taxpayer a Notice of Intent to Make Audit Changes, form DR-1215, for audit number 200105422. Prior to issuing the DR-1215, the Department compromised in full the assessed penalty. On February 16, 2012, the Department mailed the Taxpayer a Notice of Proposed Assessment for audit number 200105422. The Department assessed the Taxpayer $102,508.28 in sales tax and interest through February 16, 2012, in the amount of $18,097.52. Interest accrues at $19.62 per day until the tax is paid in full.2/ ESTOPPEL In its Amended Petition, the Taxpayer asserts that it "relied on advice and instruction from [the Department] when it failed to collect Telecommunication tax and should not be subject to any taxes or penalties as a result of their [sic] reasonable reliance." Mr. Gomez and Ms. Niño made three visits to the Department's service centers, but only one of those three visits pre-dated the audit period. The other two visits were after the audit period. In February 2001 they visited the service center in Miami, Florida, where they talked to someone named "Maria" about the taxability of their new business. Both Mr. Gomez and Ms. Niño testified that as a result of the first visit with "Maria" in 2001, the Taxpayer only charged customers sales tax on the sales of flowers, gift baskets, and other items of tangible personal property delivered in Florida. The owners testified that they relied on advice given to them by "Maria." "Maria" did not testify at the formal hearing. There was no written confirmation of the advice given by "Maria." After the audit period while the audit was ongoing (between August 8 and August 18, 2011) they visited the service center in Coral Springs, Florida, where they spoke to someone named "Paula" about the ongoing audit. The third and final visit was on August 18, 2011, when they met with Everald Thomas at the service center in West Palm Beach. Mr. Thomas was the Department's auditor in this case. The owners talked to him about the taxability of the prepaid calling arrangements. The Taxpayer timely filed its Amended Petition for Administrative Hearing. The Taxpayer continues to dispute the assessment.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order that validates the assessment against American Business USA Corp. DONE AND ENTERED this 27th day of February, 2013, in Tallahassee, Leon County, Florida. CLAUDE B. ARRINGTON 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 27th day of February, 2013.
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)
Findings Of Fact Upon consideration of the pleadings, stipulations and oral representations of the parties, the following facts are found: During the years in question, petitioner was a corporation organized under the laws of the State of Delaware and was duly qualified and authorized to do business in the State of Florida. Petitioner is the parent corporation of a consolidated group of corporations, two of which (including petitioner) had Florida transactions or were otherwise separately subject to the Florida corporate income tax code. None of the other members of the consolidated group were subject to taxation in Florida. For the fiscal and calendar years 1972 through 1974, Petitioner filed federal and Florida income tax returns on behalf of the parent corporation, which included the returns for the consolidated group of corporations -- both the Florida and non- Florida members. Each member of the group consented to such consolidated filing and the component members of the Florida return group were identical to the members of the federal return group. Respondent issued its proposed deficiencies for the 1972 and 1973 tax years, ruling that for a parent corporation to include all of its subsidiary corporations for the purposes of consolidating its taxable income, it must be incorporated in Florida. For the years 1972, 1973 and 1974, respondent's Rule 12C-1.131(1), F.A.C., contained a definition of a "Florida parent company" as the term is used in the second sentence of Florida Statutes 220.131(1). This rule was amended on August 4, 1975, to delete said sentence defining the term "Florida parent company."
Recommendation Based upon the findings of fact and conclusions of law recited above, it is recommended that: petitioner pay the assessment of $3,786.33 for the year 1972, with interest, as stipulated by petitioner, the proposed assessment for the year 1973 in the amount of $112,281.06 be dismissed and set aside, and the petitioner's method of computing its corporate income tax for the year 1974 be upheld. Respectfully submitted and entered this 21st day of June, 1977, in Tallahassee, Florida. DIANE D. TREMOR Hearing Officer Division of Administrative Hearings Room 530 Carlton Building Tallahassee, Florida 32304 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 21st day of June, 1977. COPIES FURNISHED: M. Lewis Hall, Jr. Hall and Hedrick Greater Miami Federal Building 200 Southeast First Street Miami, Florida E. Wilson Crump, II Assistant Attorney General Department of Legal Affairs Tax Division, Northwood Mall Tallahassee, Florida 32303
