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
The Issue Whether Petitioners are liable for sales and use tax, penalty, and interest as assessed by the Department of Revenue (the Department)?
Findings Of Fact Salma is a Florida corporation with its principal place of business at 2231 Del Prado Boulevard, Cape Coral, Florida, 33990. Gausia is a Florida corporation with its principal place of business at 11571 Gladiolus Drive, Fort Myers, Florida, 33908. Petitioners are in the business of operating gas stations with convenience stores. The Department is an agency of the State of Florida and is authorized to administer the tax laws of the State of Florida. Petitioners were selected for audit because their reported gross sales were less than the total cost of items purchased (inventory) for the audit period. The Department issued Salma and Gausia each a Notice of Intent to Conduct a Limited Scope Audit or Self-Audit, dated April 26, 2013, for sales and use tax, for the period February 1, 2010, through January 31, 2013 (collectively referred to as the Notices). The Notices requested that Petitioners provide the Department: (a) a list of all their vendors for alcohol, tobacco, soda, chips, candy, etc.; (b) their total purchases of alcohol and tobacco, by vendor, for the period July 2010 to June 2011; (c) copies of their federal tax returns for the examination period; (d) purchase receipts for all purchases for the last complete calendar month; and (e) daily register (Z tapes) for the last complete calendar month. The Notices gave Petitioners 60 days to gather the requested documents before the audit was to commence. The Notices also requested that Petitioners complete an attached Questionnaire and Self Analysis Worksheet. In response to the Notices, Petitioners requested a 30- day extension of time until July 18, 2013, to provide the requested documents and to designate a Power of Attorney. Petitioners did not provide the Department any books and records for inspection, nor did they complete and return the questionnaire and self analysis worksheets. As a result, the Department's auditor determined the sales tax due based upon the best information available. To calculate an estimated assessment of sales tax, the Department used the purchase data of Petitioners' wholesalers and distributors of alcoholic beverages and tobacco, for July 1, 2010, through June 30, 2011; the 2010 National Association of Convenience Stores average markups and in-store sales percentages of alcoholic beverage and tobacco products; and historical audit data. After reviewing the purchase data for July 1, 2010, through June 30, 2011, and for July 1, 2011, through June 30, 2012, the Department's auditor determined that the data was missing a few vendors. As a result, the Department's auditor estimated the amount of Petitioners' cigarette purchases, based on historical audit data that shows that cigarette sales are generally 4.31 times more than beer sales. The Department's auditor and audit supervisor testified that the estimated gross sales seemed reasonable and consistent with the national averages and the purchase data for July 1, 2011, through June 30, 2012. The Department estimated gross sales (i.e., the retail sale value of the goods sold) by marking up the taxable sales and exempt sales reported on the sales and use tax returns submitted to the Department by Petitioners. For example, for July 1, 2010, through June 30, 2011, Salma purchased beer from its wholesalers and distributors for $148,826.15, and the Department marked up the purchase price by 27 percent for a retail value of $189,009.21. For July 1, 2010, through June 30, 2011, Gausia purchased beer from its wholesalers and distributors for $132,138.65, and the Department marked up the purchase price by 27 percent for a retail value of $167,816.09. The Department's markup on the alcoholic beverage and tobacco products is reasonable because the Department's auditor testified that he used a combination of 2010 National Association of Convenience Stores average markups and the competitive pricing and information from audits of other convenience stores. The Department determined that the exemption ratio reported on the sales and use tax returns submitted to the Department by Petitioners was extremely high for their industry. The Department used an exemption ratio of 15 percent, based on historical audit data for the industry, to calculate Petitioners' estimated taxable sales. A review of Petitioners' sales and use tax returns revealed that they did not apply the tax bracket system to their taxable sales transactions, as required under sections 212.12(9) and (10), Florida Statutes. Instead, Petitioners remitted sales tax on their taxable sales based on their gross receipts at a flat tax rate. The Department's auditor testified that this method of reporting tax is inappropriate and does not accurately reflect the sales activity of the business. The Department calculated the average effective tax rate of 6.0856 percent, based on historical audit data for the industry. To calculate the estimated tax due, the Department multiplied the effective tax rate by the estimated taxable sales and gave Petitioners credit for any tax remitted with their tax returns. The Department issued Salma a Notice of Intent to Make Audit Changes, dated August 8, 2013, for audit number 200149872. The Department issued Gausia a Notice of Intent to Make Audit Changes, dated August 8, 2013, for audit number 200149749. The Department assessed Petitioners sales tax on their sales of alcoholic beverages and tobacco. The Notice of Intent to Make Audit Changes gave Petitioners 30 days to request a conference with the auditor or audit supervisor, to dispute the proposed changes. Petitioners did not make such a request. The Department issued a Notice of Proposed Assessment (NOPA) to Salma on March 6, 2014, for tax in the sum of $159,282.26; for penalty in the sum of $39,820.57; and interest as of March 6, 2013, in the sum of $27,772.36. The Department issued a NOPA to Gausia on March 6, 2014, for tax in the sum of $213,754.46; for penalty in the sum of $53,438.62; and interest as of March 6, 2013, in the sum of $36,921.79. Additional interest accrues at $30.55 per day until the tax is paid. The NOPAs became final assessments on May 5, 2014. After filing a request for an administrative hearing, Petitioners completed the Questionnaire and Self Analysis Worksheet and produced the following documents to the Department: (a) a list of all of their vendors for alcohol, tobacco, soda, chips, candy, etc.; (b) a list of vendors for alcohol and tobacco, for the examination period of July 2010 to June 2011; (c) a summary of their taxable sales, for the period February 2010 through December 2012; (d) copies of their federal tax returns, for the tax years 2010 through 2013; (e) copies of its purchase receipts for the months of July 2013; and (f) copies of their daily register (Z-tapes) for the month of July 2013. The Department's auditor testified that aside from being untimely, the records and information provided by Petitioners during these proceedings were not reliable because Petitioners did not provide any source documents that would allow the Department to reconcile the reported figures and confirm the supplied information. In addition, the purchase receipts and Z- tapes were not relevant because they were from outside of the audit period. The Z-tapes are also unreliable because the manager of the convenience store testified at the final hearing that employees purposely and routinely entered taxable sales into the cash registers as tax exempt sales. Petitioners argue that the Department did not use the best information available when estimating the taxes due. Petitioners claim that because their businesses are combination gas station/convenience stores, the national data for standalone convenience stores is inapplicable. However, notably absent from Petitioners' testimony or evidence was any alternative data upon which the Department could have relied for more accurate estimates.2/
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order denying Petitioners' requests for relief and assessing, in full, the Department's assessments of sales tax, penalty, and interest against both Salma and Gausia. DONE AND ENTERED this 9th day of January, 2015, in Tallahassee, Leon County, Florida. S MARY LI CREASY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 9th day of January, 2015.
Findings Of Fact Having considered the pleadings, evidence and legal arguments presented in this cause, the following facts are found: Petitioner is a corporation duly organized under the laws of the State of New Jersey and qualified to do business is one State of Florida. Two of the subsidiaries of Petitioner are Island Properties, Inc., formerly known as Heftler International, Inc., and Island Land Corporation, formerly known as Heftler Construction Company of Puerto Rico, Inc. These corporations are organized under the laws of the State of Florida and the State of New Jersey respectively and maintain principal places of business in Puerto Rico. For the fiscal years ending July 31, 1972 and July 31, 1973, petitioners properly included losses from the operations of the Puerto Rico corporations in their consolidated income tax returns filed with the Internal Revenue Service. For the fiscal years ending July 31, 1972, and July 31, 1973, petitioners timely filed with the respondent consolidated income tax returns including therein the operations of the Puerto Rico corporations. After a timely audit, the respondent excluded, for the purposes of computing adjusted federal income as defined by 220.13, the losses sustained by the Puerto Rico corporations. The respondent also excluded from the computation of the apportionment factors defined in F.S. s. 214.71 and 220.15 the value of the property, payroll and sales utilized in the operations of the Puerto Rico corporations. The respondent cited F.S. ss. 220.13(1)(b)2.b, 220.15(3) and 214.71 as its authority. The adjustments made by the respondent results in a net proposed deficiency of $75,076.46 for the two fiscal years in question. After attempts by the parties to resolve the issues by informal means failed, the petitioner requested a formal hearing and the respondent requested the Division of Administrative Hearings to conduct the hearing.
Recommendation Based upon the above findings of fact and conclusions of law, it is recommended that there is no basis for affording petitioners any relief from the proposed deficiency and that said deficiency in the amount of $75,076.46 be sustained. Respectfully submitted and entered this 20th day of November, 1975, in Tallahassee, Florida. DIANE D. TREMOR, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Lewis M. Kanner, Esquire WILLIAMS, SALOMON, KANNER DAMIAN 1003 du Pont Building Miami, Florida 33131 E. Wilson Crump, II, Esquire Assistant Attorney General Department of Legal Affairs Tax Division, Northwood Mall Tallahassee, Florida 32303 Mr. J. Ed Straughn Executive Director Department of Revenue Tallahassee, Florida 32304
The Issue Whether the Petitioners are responsible for a use tax on the purchase of tangible personal property as assessed by the Respondent and, if so, in what amount.
Findings Of Fact The Department of Revenue is the state agency charged with the responsibility of collecting use tax in accordance with Florida law. At all times material to the allegations of this case, Petitioners were residents of Miami, Florida. In August, 1992, Hurricane Andrew struck the Miami area and destroyed most, if not all, of Petitioners' household furnishings. The Petitioners were devastated by their personal losses. Financially the Petitioners did not recover enough from the losses to replace all that had been damaged or destroyed by the storm. When it came time to refurnish their home, Petitioners traveled to North Carolina and selected new household furnishings which were paid for by them and imported into the State of Florida at their direction. These household furnishings are considered tangible personal property under the applicable Florida laws. The trucking companies which transported Petitioners' new furnishings were required to stop at Department of Agriculture and Consumer Services weigh stations, and copies of the bills of lading for Petitioners' personal property were produced and copied. The Department of Revenue utilized such bills of lading to calculate the use tax owed and due on the Petitioners' personal property. The Department of Revenue does not instruct the employees of the Department of Agriculture to stop particular kinds of trucks for inspection, but rather trains the Agriculutre employees to look for certain kinds of commodities, in order to identify all commodities that may be subject to sales and use tax. The Department of Agriculture employees are instructed by the Department of Revenue to forward to the Department of Revenue the bills of lading from those shipments containing consumer commodities that are for use or consumption and are subject to tax, and they are instructed not to forward bills of lading for items which are exempt from tax or which are intended for resale. The purpose of this program is to assist the Department of Revenue in its enforcement of the sales and use tax. A purchaser of goods from out-of-state is required to voluntarily comply with the statutes imposing the use tax. The Department of Revenue calculated the amounts due from Petitioners for the use tax associated with their personal property imported into Florida and reduced such amounts to a final assessment. This assessment was issued by the Department on or about July 25, 1996. Petitioners have not disputed the accuracy of the assessment nor the fact that they imported the personal property described in the bills of lading used to calculate the assessment. Petitioners maintain that they should not be required to remit the tax set forth in the assessment as they were the victims of Hurricane Andrew and, but for their losses from that storm, would not have incurred the expense of new furnishings. The final assessment identified the following sums owed by Petitioners: tax in the amount of $1,020.84; penalty in the amount of $510.42; and interest through July 25, 1996, in the amount of $137.87. Petitioners did not establish that they had paid sales tax in North Carolina for the personal property shipped to Florida. Petitioners did not establish that they paid the use tax in Florida for the personal property described in the bills of lading used to calculate the tax assessed. Petitioners did not purchase the personal property through a charitable organization such as the Red Cross which was afforded tax exemption after Hurricane Andrew to purchase furnishings for the storm's victims. Petitioners did not establish that they are financially unable to pay 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 affirming the assessment in this cause. DONE AND ENTERED this 5th day of August, 1997, 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 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 5th day of August, 1997. COPIES FURNISHED: Larry Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100 Linda Lettera, General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 Elizabeth T. Bradshaw Assistant Attorney General Office of the Attorney General The Capitol, Tax Section Tallahassee, Florida 32399-1050 Alphonso Thurman Betty Thurman 13603 Southwest 102 Court Miami, Florida 33176
The Issue Whether the Petitioner is liable for sales tax, interest, and penalties as alleged by the Department of Revenue (Department).
Findings Of Fact Based on the oral and documentary evidence presented at the final hearing, the following Findings of Fact are made: The Petitioner is a Florida corporation formed in October 2004. The principal office and mailing address of the Petitioner is 518 North Tampa Street, Suite 300, Tampa, Florida 33602. The directors of the corporation are Brenda Dohring and Robert Hicks (husband and wife), and Joshua Dohring (their son). Brenda Dohring and Robert Hicks are residents of Tampa, Florida, and registered voters in Hillsborough County. Brenda Dohring and Robert Hicks hold Florida driver's licenses. Joshua Dohring is a resident of the United States Virgin Islands, where he operates a charter boat business. On November 8, 2004, the Petitioner purchased, in St. Petersburg, Florida, a 36-foot catamaran sailboat (hull No. QPQ0000D089) for $113,000. On November 15, 2004, the Petitioner purchased, in St. Petersburg, Florida, an inflatable tender with outboard motor and accessories (hull No. XMO18119G405) for $4,865. The catamaran and tender were purchased for the use of Joshua Dohring in his charter boat business in the Virgin Islands. They were to replace his previous boat that was destroyed by Hurricane Ivan. Because Joshua Dohring did not have sufficient financial resources or credit, Brenda Dohring and Robert Hicks decided to make the purchases for him. They created the Petitioner corporation to purchase and own the catamaran and tender because they wanted protection from personal liability that might arise from Joshua Dohring's use of the vessels in the Virgin Islands. At the time of each purchase, Joshua Dohring was provided a Department affidavit form to be completed and filed with the Department to claim exemption from sales tax. Joshua Dohring indicated the name of the Petitioner corporation on the affidavit forms along with the names of the corporation's directors. The Department's affidavit form for sales tax exemption includes several statements that the affiant must attest to, including the following: 4. I represent a corporation which has no officer or director who is a resident of, or makes his or her permanent place of abode in Florida. David Erdman, a licensed yacht broker in Florida who assisted Joshua Dohring in the purchase of the catamaran and tender, believed that the purchases were exempt from Florida sales tax because Joshua Dohring was not a Florida resident and was going to remove the vessels from Florida. Mr. Erdman did not understand that, because the purchaser was not Joshua Dohring, but a Florida corporation, the sales tax exemption did not apply. Mr. Erdman advised Joshua Dohring that the purchases were exempt from Florida sales tax. There is no evidence in the record, and the Department did not allege, that the Petitioner intended to defraud the State. On this record, it is clear that the Petitioner's directors were simply mistaken in their belief that the purchases of the boats were exempt from Florida sales tax, based primarily on the erroneous advice of Mr. Erdman. The Department made a routine investigation after its receipt of the sales tax exemption affidavits signed by Mr. Dohring and determined that the exemption did not apply because the Petitioner is a Florida corporation with directors who are residents of Florida. In January 2005, the Department notified the Petitioner of its billing for the sales tax due on the boat purchases, plus penalty and interest, totaling $8,474.67. An informal conference regarding the billing was requested by the Petitioner, and a conference was held in an attempt to resolve the matter. Subsequently, the Department's Final Assessment was issued on January 23, 2005, indicating tax, penalty, and interest totaling $9,229.26. Because of the circumstances indicating that the Petitioner's failure to pay was due to a mistake and bad advice, the Department proposes to eliminate the penalty.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department issue an final order: finding that the Petitioner's purchases of the catamaran and inflatable tender are subject to sales tax; and assessing sales tax of six percent on the purchases; and imposing interest on the taxes until paid; and imposing no penalty. DONE AND ENTERED this 22nd day of September, 2005, in Tallahassee, Leon County, Florida. BRAM D. E. CANTER 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 22nd day of September, 2005.
The Issue The two issues for determination are: (1) whether Rhinehart Equipment Co. (Rhinehart) a foreign corporation domiciled in Rome, Georgia, during the period July 1, 2002, through June 30, 2005, had "substantial nexus" with the state of Florida through its advertising, sale, and delivery into Florida of new and used heavy tractor equipment, sufficient to require it to collect and remit sales tax generated by these sales to the Florida tax authorities; and (2) Whether the applicable statute of limitations for assessing sale tax had expired when DOR issued its "final assessment" on September 11, 2009.
Findings Of Fact The Parties Rhinehart Equipment Co. (“Rhinehart”) is a retail heavy equipment dealer located in Rome, Georgia, and does not own or maintain a showroom or office location in Florida or directly provide financing to any Florida resident for any of its sales. Rhinehart does not provide Florida customers with any after-sale services such as assembly, technical advice, or maintenance. Rhinehart does not have any employees residing in Florida. Respondent is an agency of the State of Florida charged with the regulation, control, administration, and enforcement of the sales and use tax laws of the state of Florida embodied in Chapter 212, Florida Statutes, and as implemented by Florida Administrative Code Chapter 12A-1. Background In early March 2005, the Department received an anonymous tip pursuant to section 213.30, Florida Statutes. The caller alleged that Rhinehart was selling equipment to Florida residents without including sales and use tax in the sales price and was delivering the equipment to Florida customers using its own trucks. The tipster also alleged that Rhinehart was advertising in a commercial publication Heavy Equipment Trader, Florida Edition. By letter dated March 31, 2005, Respondent contacted Rhinehart and advised that its business activities in the state might be such as to require Rhinehart to register as a “dealer” for purposes of assessing Florida sales and use tax, and that it could be required to file corporate income tax returns, potentially subjecting it to liability for other Florida taxes. Included with this letter was a questionnaire for Rhinehart to complete and return to the Department "to assist us in determining whether Nexus exists between your company and the State of Florida." On May 2, 2005, Rhinehart, without the advice of counsel, responded to the Department’s inquiry by returning the completed questionnaire, which was signed by its president, Mark Easterwood. By letter addressed to Mr. Easterwood dated May 4, 2005, the Department advised that it had determined that Rhinehart had nexus with the state of Florida and that therefore Rhinehart was required to register as a dealer to collect and remit Florida sales and use tax. According to the letter, the Department's determination was "based on the fact that your company makes sales to Florida customers and uses the company's own truck to deliver goods to customers in the State of Florida." By application effective July 1, 2005, Rhinehart registered to collect and/or report sales and use tax to the state of Florida, In a letter dated June 8, 2005, the Department invited Rhinehart to self-disclose any tax liability that it may have incurred during the three-year period prior to its registration effective date, to wit, July 1, 2002, through June 30, 2005 (the audit period). Specifically, the letter stated: At this time, we would like to extend an opportunity for you to self-disclose any tax liability that you may have incurred prior to your registration effective date (for the period July 1, 2002, through June 30, 2005). This Self-Disclosure Program affords you an opportunity to pay any applicable tax and interest due for the prior three-year period (or when Nexus was first established) without penalty assessments. In response to the Department's June 8, 2005, letter, Rhinehart's legal counsel sent a letter dated August 8, 2005, requesting a meeting or conference call to discuss a "few legal issues" concerning the Department’s determination regarding nexus. Thereafter, Rhinehart began filing the required tax returns relating to its Florida sales, noting in writing by cover letter that the returns were being filed “under protest.” Rhinehart began collecting and remitting sales and use tax starting in July 2005. However, Rhinehart declined to provide any information regarding sales made prior to July 1, 2005. On September 30, 2005, Rhinehart's legal counsel sent the Department a detailed protest letter and advised that, in Rhinehart's view: (1) the Department had not established “substantial nexus” with Florida as interpreted under the Commerce Clause of the United States Constitution; and (2) Rhinehart was not required to register as a Florida dealer for sales and use tax purposes. On May 23, 2008, the Department issued a "Notice of Intent to Make an Assessment," and on September 11, 2009, a "Notice of Final Assessment," for the audit period. The assessment totaled $354,839.30, which was comprised of $229,695.00 in taxes and $125,144.30 in interest. The assessment was calculated by Respondent using Rhinehart’s sales tax returns filed from July 2005 through March 2008. The Notice of Final Assessment advised Rhinehart that the final assessment would become binding agency action unless timely protested or contested through the informal protest process, or by filing a complaint in circuit court or petition for an administrative hearing. Rhinehart unsuccessfully sought to resolve the matter through informal review and then ultimately filed its petition seeking an administrative hearing to challenge the Department's September 11, 2009, assessment. Based on sales records and other information provided by Rhinehart, on March 9, 2011, the Department revised its September 11, 2009, assessment. The revised assessment totaled $380,967.89, which included the past due sales and use tax liability, and interest accrued through that date. Rhinehart's Florida Activities Rhinehart produced records of its sales to Florida customers during the audit period. Those records reflected sales to 116 different Florida customers as follows: one sale in the second-half of 2002; 12 sales in 2003; 84 sales in 2004; and 19 sales thorough June 2005. The total value of the merchandise sold to Florida residents was $2,928,981.00. The majority of Rhinehart's sales during the audit period were "sight unseen" by the customer, and were negotiated by telephone. Numerous hurricanes made landfall in Florida during the 2004 and 2005 hurricane season. Since 2005, Rhinehart’s sales to Florida customers have substantially dropped, with no sales occurring in some quarters. During the audit period Rhinehart accepted a number of trade-ins toward the purchase of new equipment. The records showed trade-in transactions as follows: none (0) in 2002; five (5) in 2003; eleven (11) in 2004; and none in 2005. Concurrent with the delivery of the new equipment purchased from Rhinehart, used equipment taken in trade was transported by Rhinehart employees using Rhinehart transport equipment back to Rhinehart’s location in Georgia. In these instances, the trade-in equipment remained with the Florida customer following negotiation of the sale and prior to Rhinehart physically taking possession of it. During the audit period the equipment accepted as trade-ins had a total value of $168,915.00. The valuation of trade-in equipment was done based on a customer’s representations (i.e. sight unseen, with no Rhinehart employee personally inspected the equipment) and pursuant to industry guidelines. Rhinehart’s drivers would deliver the purchased equipment, load any trade-in equipment, and return to Georgia, if possible, on the same day. To the extent that the Department of Transportation regulations mandated that they cease driving in a given day, the drivers would rest in the back of their trucks for the required amount of time, sometimes overnight, and then complete their journey back to Georgia. Rhinehart's dealership is located approximately 300 miles north of the Florida state line. Sales invoices reflect that Rhinehart's customers were located throughout the state of Florida, as far south as Miami on the east coast and Naples on the west coast. During the audit period, Rhinehart placed advertisements with with the Trader Publishing Company, located in Clearwater, Florida. The Trader Publishing Company is the publisher of the Heavy Equipment Trader magazine which is distributed in Georgia, Alabama, Florida, and Tennessee. Trader Publishing Company publishes a "Florida Edition" of the magazine which is directed to potential heavy equipment customers located in Florida. Stipulated Exhibit 19 consists of advertising invoices for advertisements placed by Rhinehart in the Florida Edition of Heavy Equipment Trader magazine during the audit period. These invoices establish that Rhinehart regularly and systematically purchased advertising for its products which was targeted toward potential customers located in Florida.
Recommendation Having considered the foregoing Findings of Fact, Conclusions of Law, the evidence of record, and the pleadings and arguments of the parties, it is, therefore, RECOMMENDED that a final order be entered by the Department of Revenue: Confirming that substantial nexus existed during the audit period and that Petitioner was therefore subject to the taxing authority of the state of Florida; Confirming that the assessment at issue is not time- barred; Allowing Petitioner a reasonable period of time to determine whether any of the sales it made during the audit period would have qualified as exempt sales pursuant to section 212.08(3) and if so, to obtain the required certifications from the purchasers; and Imposing on Petitioner an assessment for the unpaid taxes, with accrued interest, for all sales during the audit period not qualifying for exemption. DONE AND ENTERED this 27th day of August, 2012, in Tallahassee, Leon County, Florida. S W. DAVID WATKINS 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 August, 2012.
Findings Of Fact The Petitioner is, and during the years in question was, a corporation organized under the laws of the State of Delaware, properly qualified and authorized to do business in the State of Florida, and the parent company of a consolidated group of corporations that kept its books and records and filed its federal and state income tax returns on the basis of a fiscal year ending August 31. During the tax years in question, the consolidated group consisted of 36 corporations, of which 15 (including Petitioner) had Florida transactions or were otherwise separately subject to taxation under the Florida Corporate Income Tax Code (the "Florida members"). The other 21 corporations had no such transactions or were not subject to taxation under the Florida Code (the "non- Florida members"). For both years 1972 and 1973, petitioner filed federal and Florida income tax returns on behalf of the entire group. On the Florida return's, it duly elected under the second sentence of Subsection 220.131(1), F.S., to include both the Florida and non-Florida members. As required by Subsections 220.131(1)(a), (b) and (c), each member of the group consented to such filing, the group filed a consolidated federal return for each year, and the component members of the Florida return group were identical to the members of the federal return group. Petitioner protested the proposed corporate income tax assessment for 1972 and 1973, but, by letter, dated July 7, 1976, T. H. Swindal, Chief, Corporation Income Tax Bureau, Florida Department of Revenue, adhered to the original determination 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. The letter further explained: ". . . The Florida Legislature obviously considered these classifications justified and constitutionally permissible. Any regulation, therefore, which is so drafted as to permit an interpretation which in substance changes or strikes the statutory classification is a nullity. It appears that the Department's regulation may have been inadvertently so drafted as to invite an unintended and contrary-to-the- statute interpretation. When the Department became aware of the situation it proceeded, in accordance with the prescribed statutory requirements of Chapter 120, to amend the regulation by striking those words being misinterpreted." The regulation referred to in Swindal's letter was Rule 12C-1.131(1), F.A.C., the first sentence of which had read as follows: "12C-1.131 Adjusted Federal Income; Affiliated Groups. The term "Florida parent company" as used in the second sentence of Code subsection 220.131(1) shall mean any corporation qualified to do business in Florida or otherwise subject to tax under the Code, irrespective of its place of incorporation " The aforesaid rule was in effect during 1972 and 1973, and was amended on August 4, 1975, to delete the above-mentioned sentence.
Recommendation That Petitioner not be held liable for the proposed assessment of corporate income tax deficiency for fiscal years 1972 and 1973. DONE and ENTERED this 26th day of April , 1977, in Tallahassee, Florida. THOMAS C. OLDHAM Hearing Officer Division of Administrative Hearings Room 530 Carlton Building Tallahassee, Florida 32304 COPIES FURNISHED: E. Wilson Crump, II, Esquire Department of Legal Affairs The Capitol Tallahassee, Florida 32304 Alan L. Reinstein, Esquire Dancona, Pflaum, Wyatt and Riskind 30 North LaSalle Street Chicago, Illinois 60602
Findings Of Fact On January 31, 1984, the subject vessel, a 1969 sixty-five foot Hargrave Halmatic motor yacht, was purchased by Nelson Gross as President and principal of the corporation, Binghamton Too, Inc., for $457,500 in Houston Texas. It was financed through a Connecticut bank. The closing was held in Mr. Gross' New Jersey office. No sales or use tax has been paid on the yacht in Florida or in any other state. Mr. Gross' initial intent was to operate his new purchase as a commercial charter boat in conjunction with the "Binghamton," a ferryboat permanently moored and operating in Edgewater, New Jersey, as a floating restaurant. To get the new motor yacht there, Mr. Gross directed that it be brought to New Jersey around the Florida coast under its own power. The motor yacht reached Florida on February 17, 1984, but en route from Texas an unexpected vibration had arisen which required emergency repairs. These repairs were commissioned at Bradford Marine, Ft. Lauderdale, Florida, where the motor yacht remained, except for sea trials in connection with the vibration problem, until the first week in April, 1984. A cracked strut was diagnosed as the cause of the vibration problem. Repair costs of this emergency problem totalled $5,975. The balance of charges incurred at Bradford Marine, Ft. Lauderdale, was $21,729, including dockage. Many more of the repairs catalogued by Respondent's Exhibit 5, the Bradford Marine records for this period, were clearly voluntary, discretionary, and cosmetic in nature. The majority were of a non-emergency nature. The vessel, by then relettered "Binghamton Too," left Florida waters approximately April 20, 1984. "Binghamton Too" next spent approximately three weeks at Thunderbolt Marine Industries in Georgia at an approximate cost of $12,000. There, a strap was fabricated to hold the strut and the yacht proceeded on to New Jersey. The "Binghamton Too" began its charter business as part of the "Binghamton" operation in Edgewater, New Jersey on May 5, 1984. Seventy-five to eighty charters were accomplished between May, 1984 and October, 1984 under New Jersey state and local chartering, transit liquor, and environmental licenses and under U.S. Corps of Engineers permits. "Binghamton Too" returned to Florida waters sometime on or before October 25, 1984, when it was sighted at the Indian River Causeway Bridge. On October 26, 1984, it was sighted at Flagler Bridge in West Palm Beach. Thereafter, it went on to the Lantana Boat Works Marina, Lantana, Florida, for repairs. Lantana is the location of the yacht's original builder, whose equipment and expertise were preferable to that of other boatyards for certain strut repairs due to the peculiar nature of this type of yacht. After those repairs, the yacht was anchored in Palm Beach from January 1985 to April 1985. Although Mr. Gross testified that the strut repairs of necessity had to be done in the Lantana boatyard, his view is not necessarily conclusive of this issue because he admitted "Binghamton Too" was the first yacht he had ever purchased, because he was vague about equating desirability and necessity without any supporting direct expert testimony, and because of the facts found infra. The Lantana repair records from October 29 to December 31, 1984 show $42,521.82 in repairs, of which only $2,500 pertain to fabrication of a strut. Again, the majority of repairs was to refurbish and paint the vessel. Mr. Gross spent approximately October 1984 to April 1985, October 1985 to April 1986, and October 1986 to April 1987 in his father's home in West Palm Beach, Florida. By his own testimony, he confirmed that he established the "technical" office for his "Binghamton Too" business there. He applied, in early December 1984, for a Florida sales tax registration to operate a charter business, representing Palm Beach as his place of business. The account was established January 1, 1985 with the account number of 60-22-080051-61. The captain and mate of the "Binghamton Too" also wintered in Florida each of these years. On December 6, 1984, Mr. Gross wrote the State of New Jersey's Division of Taxation that the yacht's "principal location and headquarters are in West Palm Beach, Florida where it maintains an office and full-time employees," thus successfully arguing that the "Binghamton Too" should be exempt from New Jersey's registration requirements for any vessel residing in that state in excess of 180 days. This correspondence was in connection with a tax problem of the mother ship "Binghamton," still moored in New Jersey. Mr. Gross further represented that Florida was "Binghamton Too's" primary location with trips to the Bahamas." For most of the period from late December, 1984 to early April, 1985, the yacht was in Palm Harbor Marina, West Palm Beach, Florida, the first time not in repairs, and clearly could have returned to New Jersey under its own power had Mr. Gross chosen to do so. From January 24 to March 26, 1985, the boat was in operation, as sighted at the Pompano Beach and Fort Lauderdale bridges. From April 1985 until October of 1985, the yacht was operated as part of Petitioner's commercial charter operation in New Jersey, which included over 100 charters during this time period. Nonetheless, on June 10, 1985, Mr. Gross purchased a boat slip at Ocean Reef Club in Key Largo, Florida. This slip was later sold. Upon the foregoing Findings of Fact 6-12, which clearly establish a pattern of wintering the yacht in Florida waters, it is inferred that, despite Mr. Gross' testimony that it was "necessary" to have "Binghamton Too's" strut repaired in late 1984 by the original Florida manufacturer of the yacht, its presence in Florida from October 1984 until April, 1985 was primarily and substantially due to the preference of Mr. Gross, Petitioner's President, and not due to necessity or emergency. In October of 1985, the yacht returned to Florida where it remained until April of 1986. During this time, the boat underwent further repairs, including the complete repainting of the hull, the need for which Mr. Gross attributed to the old paint being cracked and shaken off by the vibration of the yacht. From April 1986 until October of 1986, the yacht was operated as part of Petitioner's commercial charter operation in New Jersey, which included over 100 charters during this time period. The yacht returned to Florida in October, 1986, and again remained in Florida until early April, 1987, when it left for New Jersey. In late October 1987, the yacht returned to Florida where it was traded in as part of the consideration for a larger yacht in November of 1987. The closing date was December 30, 1987. The cash equivalent received by Petitioner as credit on the trade-in was $100,000. In all, Petitioner asserts that over $200,000 was spent by the corporation on the "Binghamton Too" before it was traded. Shortly after buying the "Binghamton Too", Petitioner had begun trying to sell it for the highest price obtainable. These sales efforts included large ads in national yachting publications and listings with active yacht brokers. The highest outright offer received by Petitioner was $75,000. However, this was Mr. Gross' first sales effort of this kind, and his opinion testimony that the "Binghamton Too" was not bought from the Petitioner outright and at a good price because of latent defects and cost of repair is neither credible nor persuasive since his opinion does not possess the reliability of an expert in assessing whether it was the condition of the yacht, its unusual "Halmatic" type, or some other factor which made the "Binghamton Too" undesirable to potential purchasers. The Florida Department of Revenue issued a Notice of Delinquent Tax January 30, 1987, of five-percent use tax upon the purchase price plus 25 percent penalty. Interest was figured at 12 percent per annum. Petitioner timely protested. The agency conceded that the purchase price on the original notice was mistakenly listed at $475,000, that the assessment appropriately should have been on $457,500 (see Finding of Fact No. 1) and that the State presently claims only the tax amount of 5% of Petitioner's initial $457,500 purchase price at $22,875, the 25 percent penalty at $5,719, and interest on the tax from February 18, 1984, to June 18, 1989 at $14,650. (Interest accrues at $7.52 daily.) The total assessment through June 18, 1989 is $43,234.
Recommendation Upon the foregoing findings of fact and conclusions of law, it is recommended that the Department of Revenue enter a Final Order affirming the assessment of $22,875, with 25% penalty and interest at $7.52 per day from February 18, 1984 until paid. DONE and RECOMMENDED this 11th day of August, 1989, in Tallahassee, Leon County, Florida. ELLA JANE P. DAVIS 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 11th day of August, 1989. APPENDIX TO RECOMMENDED ORDER Upon consideration of Section 120.59(2) Florida Statutes the following rulings are made upon the parties' respective proposed findings of fact (PFOF). Petitioner's PFOF: 1, 2,3, 5, 10, 11, 13, 14, 15, 17, 18, 19, 21, 22: Accepted except to the degree not proven. 4: Rejected as stated because not supported by the greater weight of the evidence as a whole. 6, 12: Rejected in part as not proven, in part as subordinate and unnecessary, and in part as to the conclusion-if law as "latent." 7, 8, 9: Accepted except as subordinate and unnecessary to the facts as found. 16: Accepted that Mr. Gross testified to this amount, however, the evidence does not support the amount precisely nor that it all went to "repairs." 20: Accepted as modified to better express the record as a whole. Respondent's PFOF: 1: Accepted, but as a Conclusion of Law. 2, 3, 4, 9, 10, 12, 13, 14, 15, 16, 17, 19, 20, 21, 22, 23: Accepted. 5: Accepted in substance; what is not adopted is either mere recitation/characterization of testimony, is cumulative, or is subordinate to the facts as found. 6: Accepted but subordinate and unnecessary to the facts as found. 7: Sentence 1 is accepted. The remainder is rejected as mere legal argument or subordinate to the facts as found. 8, 11: Accepted as modified to conform to the record as a whole. Mr. Gross testified to a May 5, 1984 date for No. 8. 18: Except for mere legal argument, accepted. 24: Accepted upon the terms set forth in the Recommended Order. 25: Except as subordinate and unnecessary, accepted. COPIES FURNISHED: Gene D. Brown, Esquire 3836 Killearn Court Tallahassee, Florida 32308 Linda G. Miklowitz, Esquire Department of Legal Affairs Tax Section, The Capitol Tallahassee, Florida 32399-1050 William D. Moore, General Counsel Department of Revenue 203 Carlton Building Tallahassee, Florida 32399-0100 Katie D. Tucker Executive Director Department of Revenue 102 Carlton Building Tallahassee, Florida 32399-0100
Findings Of Fact Based on the testimony of the witnesses and the exhibits received in evidence at the hearing, I make the following findings of fact: On January 9, 1980, Richard Morgentaler, Trustee, obtained title to 574 lots in Pinecrest Estates, a subdivision located in St. Johns County, Florida. Pinecrest Estates is registered with the Division. (Pet. Ex. 1) Richard Morgentaler paid 22,960.00 for the 574 lots, or approximately $40 per lot. (Pet. Ex. 23) On July 21, 1980, Richard Morgentaler conveyed 44 lots to Florida Crown Corporation. (Pet. Ex. 15) The deed reflects a documentary stamp tax of 8.80. Murray Fields was the president and sole stockholder of Florida Crown Corporation. (Pet. Ex. 20) The Corporation was formed on July 17, 1980, only 4 days before the corporation obtained title to the 44 lots from Richard Morgentaler. On August 29, 1980, Richard Morgentaler also conveyed 10 lots in Pinecrest Estates to Murray Fields. (Pet. Ex. 18) Neither Florida Crown Corporation nor Murray Fields has ever been registered with the Division to offer or sell subdivided lands. (Pet. Ex. 2) On August 29, 1980, Shirley Arthur purchased 9 lots in Pinecrest Estates from Richard Morgentaler, Trustee, for $21,860.00. (Pet. Ex. 16 & 22) Present at the closing in Morgentaler's office were Shirley Arthur, Murray Fields, Barry Shelomith and Richard Morgentaler. Shirley Arthur had previously met Murray Fields when Murray Fields became her driving instructor. As a friendship developed between Shirley Arthur and Murray Fields, Shirley Arthur placed a great deal of trust and confidence in Murray Fields. Murray Fields told Shirley Arthur about some allegedly great investments in land through Barry Shelomith, who was described by Fields as "liquidator of estates." Fields and Shelomith presented brochures about Pinecrest Estates and the surrounding area and made many representations to Shirley Arthur about the value of the land as well as potential development in the area. (Pet. Ex. 21) Murray Fields also told Shirley Arthur that he was buying 10 lots in Pinecrest Estates at the same time. Shirley Arthur's belief that Murray Fields was buying lots at the same time was a major factor in her decision to purchase, because of the trust she placed in Murray Fields. Shirley Arthur was not given a public offering statement prior to or at the closing. At no time did Murray Fields disclose to Shirley Arthur the adverse features of the land, the absence of roads to the subdivision, the absence of roads in the subdivision, or the amount of water continually covering the subdivided land. (Testimony of Shirley Arthur; Pet. Ex 4) As president of Florida Crown Corporation, Murray Fields sold subdivision lots to many individuals from July 1980 to July 1981. (Pet. Ex. 5 through 14) Most of these deeds reflect documentary stamp taxes in the amount of $5.20 to $13.60). 1/
Recommendation On the basis of all of the foregoing it is recommended that the Department of Business Regulation, Division of Florida Land Sales and Condominiums, issue a Final Order as follows: Ordering Murray Fields to cease and desist from offering or disposing and from partici pating in the offer or disposition of interests in Pinecrest Estates or any other subdivided lands until he has a valid order or registration, delivers a current public offering statement, and otherwise complies with Chapter 498, Florida Statutes: and Ordering Murray Fields to pay to the Division, within 30 days from the entry of the Final Order, a civil penalty in the amount of $5,000 for violation of Section 498.023(1) and Section 498.023(2), Florida Statutes. DONE and ORDERED this 28th day of September, 1984, at Tallahassee, Florida. MICHAEL M. PARRISH 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 September, 1984.
