The Issue The issue presented is whether HMY New Yacht Sales, Inc., is liable for the payment of use tax, together with penalty and interest, on a yacht which it purchased for resale and for use as a demonstrator.
Findings Of Fact Petitioner HMY New Yacht Sales, Inc., is a Florida cor-poration located in Dania, Florida. It is a franchise and an authorized dealer for several lines of new boats. Petitioner is registered as a dealer for Florida sales tax purposes and has a dealer decal. Petitioner became an authorized dealer for Davis Yachts, a manufacturer located in North Carolina, in 1985. In January 1990 Petitioner purchased a boat from Davis Yachts to be used for demonstration and promotional activities and for resale. The boat was a 47-foot fiberglass sports fisherman named "The Bandit." When the boat was delivered, Petitioner outfitted The Bandit with extensive electronics and fishing equipment, including a tuna tower, outriggers, a fighting chair, rocket launchers, and live wells. It took approximately two months (until the second week in March 1990) to outfit the boat to have it ready for its intended sports fishing purpose. The type of equipping done by Petitioner is typical of that done on every such boat when it is sold since such a boat cannot be used for its intended purpose without the electronics and other equipment. Petitioner, however, wanted the boat to be "ready to go," when Petitioner sold it rather than having the purchaser wait for the outfitting to be done before the purchaser could use the boat. Petitioner paid the factory approximately $520,000 for the boat. Petitioner's payments to local vendors for services and materials used in outfitting the boat brought Petitioner's cost to approximately $590,000. The Bandit was never documented or registered in the state of Florida. It was only operated under Petitioner's dealer registration and decal, as provided in Section 327.13, Florida Statutes. The boat was purchased with the intent to sell it, and it was always for sale from the first moment it was outfitted and ready to be shown. It was never Petitioner's intent to keep the boat. As soon as it was outfitted, the boat had on board, at all times, a file containing a complete inventory of the boat's equipment, including custom and standard options, and a color brochure with pictures of the boat to be given to potential customers. While Petitioner was attempting to sell the boat, it was also used by Petitioner as a sales promotional tool. Petitioner took the boat to various fishing tournaments and exhibited it at boat shows and open houses. Davis Yachts bore some of the expense of those activities since promoting the boat inured to the benefit of Davis as well as of Petitioner. When the boat was being used for promotional or sales activities, it would always have on board employees or salespersons of Petitioner or of Davis Yachts and customers. On occasion, family members accompanied Petitioner's salespersons on board the boat. The manner in which The Bandit was marketed--taking it to fishing tournaments and boat shows and having open house at various events--is typically the way new sport fisherman yachts are sold throughout the industry. The boat was shown to prospective customers at least once a month. Approximately 50 customers were taken on sea trials. The boat was never loaned or rented to anyone. It was used only under the direction of Petitioner or Davis Yachts. The only compensation received by Petitioner relating to the boat resulted from the occasions when Davis Yachts split some of the expenses for the promotional or sales activities. The boat did not sell as quickly as Petitioner hoped. In October 1990 Petitioner placed the boat on the Buck System, a multiple listing service which distributes information to other yacht brokers concerning boats which are for sale. Generally, boat dealers would not put new inventory in the multiple listing system. Petitioner did so in this instance, however, in order to quickly sell the boat because the government had announced a luxury tax proposal which Petitioner feared would result in a downturn in the boat market. Even with all the effort put into attempting to sell the boat, it did not sell until November 1991. In July 1992 the Department began a routine sales tax audit of Petitioner. The audit was completed in September 1992 and covered the period of time from March 1987 through February 1992. The Department auditor determined that Petitioner owed use tax on The Bandit because in November 1990, on the advice of its accountant, Petitioner took the boat out of its inventory account and placed it in its fixed assets account in order to take depreciation for federal income tax purposes. Based solely on Petitioner's treatment of the vessel on its corporate books, the auditor determined that Petitioner converted The Bandit to its own use and was, therefore, responsible for payment of the statutory use tax rate of 6 percent of the value of the boat as reflected on Petitioner's records. Based upon the audit, the Department issued its Notice of Proposed Assessment, assessing Petitioner $33,921.94 in tax, $8,480.50 in penalty, and $7,085.52 in interest through September 16, 1992. Interest continues to accrue at $11.15 per day.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered determining that Petitioner is not liable for payment of use tax, penalty, or interest on The Bandit, and withdrawing the assessment which is the subject of this proceeding. DONE and ENTERED this 2nd day of August, 1995, at Tallahassee, Florida. LINDA M. RIGOT, 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 2nd day of August, 1995. APPENDIX TO RECOMMENDED ORDER Petitioner's proposed findings of fact numbered 1-12, 15, and 19 have been adopted either verbatim or in substance in this Recommended Order. Petitioner's proposed findings of fact numbered 13, 14, and 18 have been rejected as not constituting findings of fact but rather as constituting argument of counsel, conclusions of law, or recitation of the testimony. Petitioner's proposed findings of fact numbered 16, 17, and 20 have been rejected as being unnecessary to the issues involved herein. Respondent's proposed findings of fact numbered 1-3, 6, 8, and 9 have been adopted either verbatim or in substance in this Recommended Order. Respondent's proposed findings of fact numbered 4, 5, and 10 have been rejected as not being supported by the weight of the competent evidence in this cause. Respondent's proposed finding of fact numbered 7 has been rejected as being unnecessary to the issues involved herein. COPIES FURNISHED: Cynthia S. Tunnicliff, Esquire Pennington & Haben, P.A. Post Office Box 10095 Tallahassee, Florida 32302-2095 Mark T. Aliff, Esquire Office of the Attorney General Tax Section, The Capitol Tallahassee, Florida 32399-1050 Linda Lettera General Counsel Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100 Larry Fuchs Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100
The Issue The issue for determination is whether Respondent should grant Petitioner's application for a sales tax exemption certificate as a charitable institution within the meaning of Section 212.08(7), Florida Statutes. 1/
Findings Of Fact Respondent is the governmental agency responsible for issuing sales tax exemption certificates in accordance with Section 212.08(7). Petitioner is a non-profit, Florida corporation and a charitable organization, within the meaning of Section 501(c)(3) of the Internal Revenue Code, for purposes of the federal income tax. On December 29, 1995, Petitioner applied for an exemption from state sales and use tax ("sales tax") as a charitable institution. On February 8, 1996, Respondent denied Petitioner's application. The parties stipulated that Petitioner is a non-profit corporation. The parties further stipulated that the only exemption under which Petitioner may qualify for a sales tax exemption is the exemption for a charitable institution. In order to qualify as a charitable institution, Petitioner must provide one or more of seven services listed in Section 212.08(7). The parties stipulated that the only service Petitioner arguably provides as a charitable institution is that of raising funds for medical research within the meaning of Section 212.08(7)(o)2b(V). It is uncontroverted that Petitioner does not provide medical research directly. Petitioner raises funds for its national organization. The national organization then disburses funds raised by local affiliates. Petitioner failed to submit any competent and substantial evidence showing the disposition of funds by its national organization. Petitioner failed to show that its national organization either provides direct medical research or raises funds for one or more organizations that provide medical research.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent enter a Final Order and therein DENY Petitioner's request for a sales tax exemption. RECOMMENDED this 4th day of June, 1996, in Tallahassee, Florida. DANIEL S. MANRY, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 4th day of June, 1996.
The Issue 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 Whether the Petitioner owes sale and/or use tax for the purchase/lease of magnetic tapes containing mailing lists used by the Petitioner in its mail order business, as set forth in the Notice of Decision dated December 10, 2003, and, if so, the amount owed.
Findings Of Fact Based on the oral and documentary evidence presented at the final hearing and on the entire record of this proceeding, including the Joint Pre-Hearing Stipulation, the following findings of fact are made: The Department is the agency authorized to administer the tax laws of the State of Florida. See § 213.05, Florida Statutes (2004). At the times material to this proceeding, Spectramin was a Florida "S" corporation whose home office and principal place of business was located at 5401 Northwest 102 Avenue, Suite 119, Sunrise, Florida. Spectramin was a Florida- registered sales tax dealer. On October 19, 2001, the Department issued to Spectramin a Notification of Intent to Audit Books and Records for audit number A0127016590, which was a sales and use tax audit covering the Audit Period. On January 15, 2002, the Department and Spectramin signed an audit agreement that delineated the procedures and sampling method to be used by the Department for the audit. Because Spectramin's books and records were voluminous, the Department and Spectramin agreed to employ certain specified sampling procedures. For the audit, the Department examined Spectramin's purchase invoices, general ledgers, and income statements for the 2000 calendar year. At the times material to this proceeding, Spectramin was a mail-order company that sold nutritional supplements throughout the United States. It engaged in direct marketing of its products and employed two methods of direct marketing: Self-mailers were sent to prospective customers, and catalogs were sent to persons who had purchased its products, as a means of educating these buyers and converting them into repeat customers.1 In order to send self-mailers to prospective customers, Spectramin leased mailing lists consisting of names and addresses, and, in some instances, bar codes, compiled by various vendors who sold mailing lists. The contents of the mailing lists were based on demographic criteria specified by Spectramin. Under the terms of the lease, Spectramin was allowed to use the mailing list for only one mailing. Pertinent to this proceeding, Spectramin received some of the mailing lists in the form of data digitally encoded on magnetic tapes. The cost of leasing a mailing list was based on the number of names on the list, and the invoice for a list included a separately-stated, standard charge of $25.00 to cover the cost of the magnetic tape containing the data. The magnetic tapes themselves had no value to Spectramin; the only value of the tapes to Spectramin lay in the data encoded on the tapes, and the greatest part of the cost of the one-time lease was the cost of the data encoded on the magnetic tapes; for example, Spectramin paid $75.00 per 1,000 names for one of the mailing lists it leased, plus the $25.00 charge for the magnetic tape. Spectramin did not pay sales tax in Florida on the cost of the data encoded on the magnetic tapes at the time it leased the mailing lists. Spectramin did not have the computer equipment necessary to read the data on magnetic tapes, so it contracted with third-party letter shops and printers to process the magnetic tapes. The letter shops with which Spectramin has done business since 1991 are all located outside the state of Florida. Once a letter shop received magnetic tapes from Spectramin, the data on the tapes were downloaded to a computer, and cleaned, and sorted into usable names and addresses; the letter shop then sent the cleaned and sorted data to a print shop, which printed the names and addresses onto self-mailers provided by Spectramin. The letter shop sorted the self-mailers by zip code and mailed them. All of these operations took place outside Florida. At one time, Spectramin's practice was to have the mailing-list vendors ship the magnetic tapes encoded with the data directly to a letter shop specified by Spectramin. The letter shop held the Spectramin magnetic tapes until it had accumulated several tapes, and then it would process the data from the tapes, have the names and addresses printed on the self-mailers, and mail the self-mailers. Spectramin found that the letter shops with which it did business sometimes lost track of the tapes received for Spectramin's mailings, and it cost Spectramin additional time and money to track down the tapes or to purchase mailing lists. Because of the additional time and money Spectramin spent to track down the lists, it stopped having the magnetic tapes sent directly to the letter shop. At the times material to this proceeding, the magnetic tapes containing the digitally-encoded mailing lists were shipped directly to Spectramin by the mailing-list vendors, and Spectramin took delivery of the tapes at its principal place of business in Florida. The vendors sent the mailing lists to Spectramin's Florida office by overnight delivery through either Federal Express or United Parcel Service. It was Spectramin's usual business practice for an employee to take delivery of the magnetic tapes containing the mailing lists and to place them on a shelf in the front of the office. The boxes containing the magnetic tapes were not opened. When Spectramin had accumulated several boxes of magnetic tapes, an employee put the boxes into a larger box and sent the tapes by overnight delivery to one of the out-of-state letter shops with which Spectramin did business. Spectramin did not keep the tapes in its Florida office more than one or two days because the mailing lists it had leased lost their value with time.2 The only value of the magnetic tapes was in the names and addressed encoded on the tapes, and the only use to which Spectramin put the data was to cause the names and addresses it had leased to be printed on self-mailers and mailed to the prospective customers. Because the letter shops that printed the names and addresses and mailed the self-mailers were located outside of Florida, Spectramin did not "use" the data or the magnetic tapes in Florida. The only contact the magnetic tapes had with Florida was during the short period of time the tapes sat on the shelf at Spectramin's office before being shipped out of the state for processing. Spectramin did not pay use tax in Florida on the cost of the data encoded on the magnetic tapes.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue issue a final order withdrawing the sales and use tax assessment against Spectramin, Inc., for the audit period extending from September 1, 1996, through August 31, 2001. DONE AND ENTERED this 24th day of January, 2005, in Tallahassee, Leon County, Florida. S PATRICIA HART MALONO 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 24th day of January, 2005.
The Issue The issue in this case is whether the taxpayer owes use tax, penalty and interest on the purchase of tangible personal property under Chapter 212, Florida Statutes.
Findings Of Fact Iseaseal, LLC, a Delaware corporation, has its principal place of business at 695 East Main Street, Suite 103, Stamford, Connecticut. Its federal employer identification number is 06-1600000. On November 22, 2000, the taxpayer purchased a 1982, 72-foot, Hatteras CPMY yacht, named “Windcrest,” with hull number HATBN3270182 and 60 net tons of admeasurement. The purchase was made through a registered yacht broker. The yacht’s sales price was $725,000. On November 21, 2000, at the closing for the yacht, the taxpayer’s managing member, Paul Bakker, signed an Affidavit for Exemption of Boat Sold for Removal from the State of Florida by a Nonresident Purchaser. The yacht was also registered with the Coast Guard. However, to date, the yacht has not been registered or titled in Florida or any other U.S. state or territory. The taxpayer took possession of the yacht at Pier 66, in Fort Lauderdale, Florida, on November 22, 2000. Also, on November 22, 2000, the taxpayer was issued a 90-day decal known as a “cruising decal.” A cruising decal, with certain restrictions, exempts the purchase of a yacht from sales tax if the purchaser agrees to remove the yacht from Florida within 90 days after the date of purchase and does remove the purchased yacht. On December 28, 2000, the taxpayer removed the yacht from Florida to the Bahamas. The removal occurred within 90 days after the purchase date. As a result, the sale became exempt from Florida sales tax and the Petitioner did not pay Florida sales tax on the purchase of the yacht. On January 15, 2001, the taxpayer returned the yacht to Florida for repairs. A repair bill shows that the yacht remained at the repair facility for four and a half hours on January 16, 2001. The repair visit was within six months after the departure date of December 28, 2000. There was no evidence that the repair facility was registered with the Department of Revenue or how long the boat remained in Florida waters. The yacht also returned to Florida for repairs on May 21, 2001. Again there was no evidence that the repair facility was registered or how long the boat remained in Florida waters. The evidence did not establish that the tax exemption related to use of Florida waters for 20 days or repairing a boat in Florida apply. Since the purchase date, the Petitioner has leased mooring space in Florida. The Petitioner’s insurance policy also indicates that the yacht was moored in Florida and includes a Florida endorsement for such mooring. Additionally, the Petitioner reported to Connecticut’s Department of Revenue that the yacht was exempt from Connecticut sales tax because the yacht was purchased and berthed in the State of Florida. Based on copies of the bill of sale, closing statement, banking statements, credit card statements, mortgage documents, insurance agreements, mooring agreements, repair and parts receipts and a chronological listing of the yacht’s whereabouts since the date of purchase, the yacht has operated, and continues to operate, in Florida waters. Indeed, the yacht remained in Florida for more than 183 days from July 1, 2002 through December 31, 2002. Moreover, since September 11, 2002, the yacht has been moored or stored in Florida the majority of the time because the main users of the yacht lost interest in sailing the yacht and travel after the terrorist attack on the twin towers in New York City. The Department found that the Petitioner was liable for use tax on its use and storage of the yacht here in Florida. On May 5, 2004, the Department issued an enforcement billing to the Petitioner for use tax, penalty and interest, pursuant to Sections 212.05(1)(a)2 and 212.06(8), Florida Statutes. The Department assessed the Petitioner use tax and interest based on the sales price of the yacht. The Department also assessed the Petitioner a mandatory penalty equal to the tax because it returned the yacht to Florida within six months of the departure date. The Petitioner admitted that, through ignorance of Florida’s tax exemption law, he violated Chapter 212, but argues that the assessment of tax, interest and mandatory penalty is excessive. On May 24, 2004, the Department issued the Petitioner a Notice of Final Assessment for Sales and Use Tax, Penalty and Interest Due. The Notice set forth the basis for the assessment of tax, in the sum of $43,500, penalty, in the sum of $43,500, and interest, in the sum of $14,759.84, plus additional interest that accrues at the rate of $10.73 per day. The Department issued the Petitioner the Final Assessment because it returned the yacht to Florida within six months of the departure date and the yacht remained in Florida for more than 183 days in a calendar year. Since the Petitioner returned the yacht to Florida within 6 months of the purchase date and allowed the yacht to remain in Florida for more than 183 days in a calendar year, the Petitioner is liable for use tax, penalty and interest in the use and storage of the yacht in Florida.
Recommendation Based upon the Findings of Fact and Conclusions of Law, it is RECOMMENDED: That the Department of Revenue enter a final order upholding the assessment of use tax, penalty and interest against the Petitioner. DONE AND ENTERED this 31st day of January, 2005, in Tallahassee, Leon County, Florida. S DIANE CLEAVINGER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 31st day of January, 2005. COPIES FURNISHED: Paul Bakker Iseaseal, LLC 695 East Main Street Stamford, Connecticut 06901 Carrol Y. Cherry, Esquire Assistant Attorney General Office of the Attorney General Revenue Litigation Section Plaza Level 01, The Capitol Tallahassee, Florida 32399-1050 Bruce Hoffman, General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 James Zingale, Executive Director Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100
The Issue The issue posed herein is whether or not the Petitioner remitted to Respondent, pursuant to Chapter 212.05(1), Florida Statutes, the, proper amount of sales tax on the boat "Captain Deebold" which was purchased on November 29, 1976. A related issue, assuming that the proper sales taxes were not remitted by Petitioner, is whether or not a levy of penalty and interest is warranted under the circumstances.
Findings Of Fact Based upon my observation of the witnesses and their demeanor while testifying, the documentary evidence received, legal memoranda submitted by the parties and the entire record compiled herein, the following relevant facts are found. Petitioner purchased the vessel "Captain Deebold" on November 29, 1976, and alleged that the purchase price of the boat was $20,000.00. Accordingly, Petitioner remitted to the Department sales taxes based on the declared value of $20,000.00. Respondent maintained that the subject boat was purchased for the sum of $75,000.00 and has, therefore, issued an assessment against Petitioner for the additional taxes, penalty and interest. By letter dated November 29, 1978, Respondent's Revenue Investigator, Leslie J. Smithling, advised Petitioner that a routine verification concerning his purchase of the subject boat revealed a transaction amount of $75,000.00 upon which the four percent Florida Sales Tax is $3,000.00. Petitioner was further advised therein that his remittance in the amount of $4,202.00 was due no later than December 15, 1979. Taxes, penalties and interest were calculated as follows: Purchase Price $75,000.00 Tax Rate 4% Tax $ 3,000.00 Minus Tax Paid (Based on $20,000.00) $ 800.00 Tax Due $ 2,200.00 Administrative Penalty (Ch. 212.12[2], F.S.) $ 550.00 Fraud Penalty (Ch. 212.12[2], F.S.) $ 1,100.00 Interest: 1% per month from 8/1/77 to 12/1/77 16% Plus $.72 daily thereafter Total Interest Accrued $ 352.00 Total Tax, Penalties & Interest Due $ 4,202.00 In support of its position that the true purchase price of the boat was only $20,000.00, Petitioner points out that the seller of the boat, Frank Deebold, had neglected the boat and had only made repairs that were absolutely necessary to operate the vessel. Thus, when Petitioner purchased the vessel, numerous repairs were made to make it seaworthy including 1) repaired electrical wiring; 2) sealed the deck seams; 3) reconnected the port fuel tank; 4) repaired the clutch in the port engine; 5) repaired leaks in the starboard stern quarter; 6) replaced and rebolted the chines; 7) replaced a section of the keel; 8) rebuilt the main clutch; 9) caulked deck; 10) replaced or repaired the winch on the anchor; 11) reworked and/or repaired the engine room, including insulation, lighting, lining, painting and hauling. To perform these repairs, Petitioner places the value on materials utilized at approximately $18,000.00. Additionally, Petitioner estimated that the value of his labor involved in making the approximately $25,000.00. The articles of agreement for the purchase of the boat provides in pertinent part as follows: Witnesseth, that if the said party of the second part shall (purchaser) first make the payments and perform the covenants hereinafter mentioned on his part to be made and performed, the said party of the first part (seller) hereby covenants and agrees to convey and assure to the said party of the second part, his heirs, personal represent- atives or assigns, clear of all encumbrances, whatever by a good and sufficient bill of sale the Oil Screw vessel, Captain Deebold, o/n294675, gross tons-36, its equipment, hull, machinery, present insurance policies and business including fifty or more used rods and reels, one 3.5 KW Lister auxiliary generator, used and in need of repair, spare Jabsco water pump (used and in need of repair), spare 24 volt DC alternator, spare 24 volt DC main engine starter, spare stub shaft, three spare propellers (used and in need of repair) and a spare UHF Pierce- Simpson radio transceiver (used and in need of repair) and the said party of the second part hereby covenants and agrees to pay to the said party of the first part the sum of seventy-five thousand and 00/100 ($75,000.00) dollars in the manner following. . . . Nevertheless, Petitioner stressed that inasmuch as the Articles of Agreement provided that the seller only required Petitioner to maintain insurance coverage in the amount of $50,000.00 indicating that the purchase price was something less than $75,000.00 and in fact was no more than $50,000. Pursuant to the Articles of Agreement, the amount insurance coverage required was $50,000.00. Petitioner also declared that included in the $75,000.00 purchase price were other items which included the business (dock space), and reduced prices for miscellaneous supplies and fuel prices. In this regard, an examination of the Articles revealed that these items were provided Petitioner on a cost plus basis and the dock space was leased for an amount based on a rebate of the percentage of ticket sales or charter fees received. Petitioner ultimately sold the boat for 95,000.00. Petitioner initially tried to sell the boat for the sum of $105,000.00 of which $10,000.00 represented the value he (Petitioner) placed on the business. An examination of the accounting records introduced indicated that Petitioner placed the sum of $75,000.00 as the purchase price for the boat. Petitioner thought that his estimation of the labor and materials necessary to properly repair the boat were items that could be used as a setoff to reduce the amount of taxes due. Petitioner testified that he, in no way, intended to defraud the Respondent of taxes properly due and owing. Petitioner's testimony in this regard is credited.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that: Petitioner remit to the Respondent the proper interest as set forth herein in paragraph 4 of the Conclusions of Law. Petitioner remit to the Respondent an administrative penalty of 5 percent of the aggregate taxes due as set forth herein in Paragraph 5 of the Conclusions of Law. Petitioner not be held liable for payment of for allegedly filing a "false or fraudulent" return for reasons set forth herein in Paragraph 6 of the Conclusions of Law. RECOMMENDED this 27th day of February 1981, in Tallahassee, Florida. JAMES E. BRADWELL Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 FILED with the Clerk of the Division of Administrative Hearings this 27th day of February 1981.
Findings Of Fact Petitioner is engaged in the cattle business and sells these cattle to in-state and out-of-state buyers who purchase the cattle at Clewiston, Florida, and have them transported either by the purchaser's own equipment or by a commercial carrier to their in-state or out-of-state destination. Those sales determined to be out-of-state sales are not included in the numerator of the fraction used to compute what percentage of Petitioner's income results from Florida sales and is therefore subject to Florida income tax. In making the determination respecting out-of-state sales Respondent applies the destination test if the cattle are shipped by common carrier but treats all other carriers as agents of the buyer to whom the cattle are delivered at Clewiston, thereby making such sales in-state sales. It is this policy determination which Petitioner contends is a rule. The policy has not been promulgated in accordance with Chapter 120, Florida Statutes, and, if this interpretation constitutes a rule, it is invalid because it was never promulgated as required. In determining whether certain sales are subject to the Florida sales tax, the Legislature in Section 212.06(5)(a), Florida Statutes, excluded from tax that tangible property imported or manufactured for export and provided such tangible property shall not be considered as being manufactured for export unless the manufacturer delivers the same to a licensed exporter for exporting or to a common carrier for shipment outside the State or mails the same by United States Mail to a destination outside the State. The rationale of the sales tax provision is used by Respondent in determining whether the sales are in-state sales for the purpose of computing Florida income tax. Respondent has promulgated, to its auditors, as a policy and as an interpretation of the statute, the directive to apply the destination test in determining out-of-state sales only when the merchandise sold is shipped by common carrier to a destination out of state. It is this policy determination or interpretation of the statutes that Petitioner contends is a rule and attacks in these proceedings. In the testimony Respondent acknowledged that this policy determination is uniformly applied. It also has application both within and outside the agency. Respondent further testified that if the merchandise (here cattle) had been delivered by Petitioner to the buyer outside the State of Florida by any means of transportation Petitioner chose, it would have treated the sale as an out-of-state sale.
The Issue Whether the contested and unpaid portions of the tax, penalty and interest assessment issued against Petitioners as a result of Audit No. 9317210175 should be withdrawn as Petitioners have requested?
Findings Of Fact Based upon the evidence adduced at hearing, and the record as a whole, the following Findings of Fact are made: Shuckers is an oceanfront restaurant and lounge located at 9800 South Ocean Drive in Jensen Beach, Florida. In November of 1992, Petitioner Mesa's brother, Robert Woods, Jr., telephoned Mesa and asked her if she wanted a job as Shuckers' bookkeeper. Woods had been the owner of Shuckers since 1986 through his ownership and control of the corporate entities (initially Shuckers Oyster Bar Too of Jensen Beach, Florida, Inc., and then NAT, Inc.) that owned the business. Mesa needed a job. She therefore accepted her brother's offer of employment, notwithstanding that she had no previous experience or training as a bookkeeper. When Mesa reported for her first day of work on November 19, 1992, she learned that Woods expected her to be not only the bookkeeper, but the general manager of the business as well. Mesa agreed to perform these additional responsibilities. She managed the day-to-day activities of the business under the general direction and supervision of Woods. After a couple of weeks, Woods told Mesa that it would be best if she discharged her managerial responsibilities through an incorporated management company. Woods had his accountant draft the documents necessary to form such a corporation. Among these documents were the corporation's Articles of Incorporation. Mesa executed the Articles of Incorporation and, on December 3, 1992, filed them with the Secretary of State of the State of Florida, thereby creating Petitioner TAN, Inc. TAN, Inc.'s Articles of Incorporation provided as follows: The undersigned subscribers to these Articles of Incorporation, natural persons competent to contract, hereby form a corporation under the laws of the State of Florida. ARTICLE I- CORPORATE NAME The name of the corporation is: TAN, INC. ARTICLE II- DURATION This corporation shall exist perpetually unless dissolved according to Florida law. ARTICLE III- PURPOSE The corporation is organized for the purpose of engaging in any activities or business permitted under the laws of the United States and the State of Florida. ARTICLE IV- CAPITAL STOCK The corporation is authorized to issue One Thousand (1000) shares of One Dollar ($1.00) par value Common Stock, which shall be designated "Common Shares." Article V- INITIAL REGISTERED OFFICE AND AGENT The principal office, if known, or the mailing address of this corporation is: TAN, INC. 9800 South Ocean Drive Jensen Beach, Florida 34957 The name and address of the Initial Registered Agent of the Corporation is: Linda A. W. Mesa 9800 South Ocean Drive Jensen Beach, Florida 34957 ARTICLE VI- INITIAL BOARD OF DIRECTORS This corporation shall have one (1) director initially. The number of directors may be either increased or diminished from time to time by the By-laws, but shall never be less than one (1). The names and addresses of the initial directors of the corporation are as follows: Linda A. W. Mesa 9800 South Ocean Drive Jensen Beach, Florida 34957 ARTICLE VII- INCORPORATORS The names and addresses of the incorporators signing these Articles of Incorporation are as follows: Linda A. W. Mesa 9800 South Ocean Drive Jensen Beach, Florida 34957 On the same day it was incorporated, December 3, 1992, TAN, Inc., entered into the following lease agreement with the trust (of which Woods was the sole beneficiary) that owned the premises where Shuckers was located: I, Michael Blake, Trustee, hereby lease to Tan, Inc. the premises known as C-1, C-2, C-3, C-4, 9800 South Ocean Drive, Jensen Beach, Florida for the sum of $3,000.00 per month. This is a month to month lease with Illinois Land Trust and Michael Blake, Trustee. Mesa signed the agreement in her capacity as TAN, Inc.'s President. She did so at Woods' direction and on his behalf. No lease payments were ever made under the agreement. 3/ The execution of the lease agreement had no impact upon Shuckers. Woods remained its owner and the person who maintained ultimate control over its operations. At no time did he relinquish any part of his ownership interest in the business to either Mesa or her management company, TAN, Inc. Mesa worked approximately 70 to 80 hours a week for her brother at Shuckers doing what he told her to do, in return for which she received a modest paycheck. Woods frequently subjected his sister to verbal abuse, but Mesa nonetheless continued working for him and following his directions because she needed the income the job provided. As part of her duties, Mesa maintained the business' financial records and paid its bills. She was also required to fill out, sign and submit to Respondent the business' monthly sales and use tax returns (hereinafter referred to as "DR- 15s"). She performed this task to the best of her ability without any intention to defraud or deceive Respondent regarding the business' tax liability. The DR-15s she prepared during the audit period bore NAT, Inc.'s Florida sales and use tax registration number. On the DR-15 for the month of December, 1992, Mesa signed her name on both the "dealer" and "preparer" signature lines. Other DR-15s were co-signed by Mesa and Woods. In April of 1993, Woods told Mesa that she needed to obtain a Florida sales and use tax registration number for TAN, Inc., to use instead of NAT, Inc.'s registration number on Shuckers' DR-15s. In accordance with her brother's desires, Mesa, on or about May 14, 1993, filed an application for a Florida sales and use tax registration number for TAN, Inc., which was subsequently granted. On the application form, Mesa indicated that TAN, Inc. was the "owner" of Shuckers and that the application was being filed because of a "change of ownership" of the business. In fact, TAN, Inc. was not the "owner" of the business and there had been no such "change of ownership." By letter dated June 22, 1993, addressed to "TAN INC d/b/a Shuckers," Respondent gave notice of its intention to audit the "books and records" of the business to determine if there had been any underpayment of sales and use taxes during the five year period commencing June 1, 1988, and ending May 31, 1993. The audit period was subsequently extended to cover the six year period from June 1, 1987 to May 31, 1993. Relying in part on estimates because of the business' inadequate records, auditors discovered that there had been a substantial underpayment of sales and use taxes during the audit period. The auditors were provided with complete cash register tapes for only the following months of the audit period: June, July, August and December of 1992, and January, February, March, April and May of 1993. A comparison of these tapes with the DR-15s submitted for June, July, August and December of 1992, and January, February, March, April and May of 1993 revealed that there had been an underreporting of sales for these months. Using the information that they had obtained regarding the three pre- December, 1992, months of the audit period for which they had complete cash register tapes (June, July and August of 1992), the auditors arrived at an estimate of the amount of sales that had been underreported for the pre- December, 1992, months of the audit period for which they did not have complete cash register tapes. The auditors also determined that Shuckers' tee-shirt and souvenir sales, 4/ Sunday brunch sales, cigarette vending sales, vending/amusement machine location rentals 5/ and tiki bar sales that should have been included in the sales reported on the DR-15s submitted during the audit period were not included in these figures nor were these sales reflected on the cash register tapes that were examined. According of the "Statement of Fact" prepared by the auditors, the amount of these unreported sales were determined as follows: TEE-SHIRT SALES: Sales were determined by estimate. This was determined to be $2,000/ month. No records were available and no tax remitted through May, 1993. SUNDAY BRUNCH SALES: Sales were determined by estimate. This was determined to be 100 customers per brunch per month (4.333 weeks). No audit trail to the sales journal was found and no records were available. CIGARETTE VENDING SALES: The estimate is based on a review of a sample of purchases for the 11 available weeks. The eleven weeks were averaged to determine monthly sales at $3/pack. VENDING MACHINE LOCATION RENTAL REVENUE: The revenue estimate is based on a review of a one month sample. TIKI BAR SALES: The sales estimate is based on a review of infrequent cash register tapes of February, 1993. The daily sales was determined by an average of the sample. The number of days of operation per month was determined by estimate. In addition, the auditors determined that TAN, Inc. had not paid any tax on the lease payments it was obligated to make under its lease agreement with Illinois Land Trust and Michael Blake, Trustee, nor had any tax been paid on any of the pre-December, 1992, lease payments that had been made in connection with the business during the audit period. According to the "Statement of Fact" prepared by the auditors, the amount of these lease payments were determined as follows: The estimate is based on 1990 1120 Corporate return deduction claimed. This return is on file in the Florida CIT computer database. The 1990 amount was extended through the 6/87 - 11/92 period. For the period 12/92 - 5/93 audit period, TAN's current lease agreement of $3,000/month was the basis. No documentation was produced during the audit supporting any the sales tax exemptions that the business had claimed during the audit period on its DR-15s. 6/ Accordingly, the auditors concluded that the sales reported as exempt on the business' DR-15s were in fact taxable. Using records of sales made on a date selected at random (February 1, 1993), the auditors calculated effective tax rates for the audit period. They then used these effective tax rates to determine the total amount of tax due. An initial determination was made that a total of $201,971.71 in taxes (not including penalties and interest) was due. The amount was subsequently lowered to $200,882.28. On or about December 22, 1993, TAN, Inc., entered into the following Termination of Lease Agreement with Ocean Enterprises, Inc.: TAN, Inc., a Florida corporation, hereby consents to termination of that certain lease of the premises known as C-1, C-2, C-3 and C-4 of ISLAND BEACH CLUB, located at 9800 South Ocean Drive, Jensen Beach, Florida, dated December 3, 1992, acknowledges a landlord's lien on all assets for unpaid rent; and transfers and sets over and assigns possession of the aforesaid units and all of its right, title and interest in and to all inventory, equipment, stock and supplies located on said premises 7/ in full satisfaction of said unpaid rent; all of the foregoing effective as of this 22nd day of December, 1993. FOR AND IN CONSIDERATION of the foregoing termin- ation of lease, OCEAN ENTERPRISES, Inc., a Florida corporation, hereby agrees to pay Linda Mesa, each month all of the net revenues of the operation of the bar and restaurant located on said premises, up to the sum of $15,000.00, for sales tax liability asserted against TAN, Inc. or Linda A. W. Mesa based upon possession or ownership of said premises or any of the assets located thereon, plus attorney's fees incurred in connection with defending or negotiating settlement of any such liability. Net revenue shall mean gross revenue, less operating expenses, includ- ing, but not limited to, rent, up to the amount of $5,000.00 per month, costs of goods sold, utilities, payroll and payroll expense and insurance. OCEAN ENTERPRISES, Inc. represents that it has entered into a lease of said premises for a term of five years commencing on or about December 22, 1993, pursuant to the terms and conditions of which OCEANFRONT [sic] ENTERPRISES, Inc. was granted the right to operate a restaurant and bar business on said premises. Ocean Enterprises, Inc., leases the property from Island Beach Enterprises, which obtained the property through foreclosure. TAN, Inc., has been administratively dissolved.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Department of Revenue enter a final order withdrawing the contested and unpaid portions of the assessment issued as a result of Audit No. 9317210175, as it relates to TAN, Inc., and Linda A. W. Mesa. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 27th day of June, 1995. STUART M. LERNER 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 27th day of June, 1995.
The Issue The issue for determination is whether Respondent committed the offenses set forth in the Administrative Complaint for Revocation of Certificate of Registration issued on November 16, 2009, and, if so, what action should be taken.
Findings Of Fact There is no dispute that the Department is the state agency charged with the responsibility of regulating, controlling, and administering the revenue laws of the State of Florida, including the laws relating to the imposition and collection of the state's sales and use tax pursuant to chapter 212, Florida Statutes. There is no dispute that Abkey is a Florida corporation whose principal address is 7800 Southwest 104th Street, Miami, Florida 33156. Abkey is a restaurant. At the time of hearing, Abkey had 33 employees and was operating at a deficit. There is no dispute that, at all times material hereto, Abkey possessed Florida sales tax certificate of registration number 23-8012096448-9, issued by the Department on April 18, 1994. There is no dispute that Abkey is a dealer as defined in section 212.06(2), Florida Statutes, and has been a dealer at all times material hereto. For the month of June 2009, Abkey failed to file a sales tax return. As a result of this failure, the Department assessed Abkey an estimated sales tax due in the amount of $9,500.00. For 2005, Abkey failed to remit its self-reported sales tax liability to the Department for the months of July, September, October, November, and December. Abkey self-reported its tax liability, by filing sales tax returns, for the said months. For 2006, Abkey failed to remit its self-reported sales tax liability to the Department for the months of January and May. Abkey self-reported its tax liability, by filing sales tax returns, for the said months. Also, for 2006, Abkey failed to timely remit its sales tax liability for the month of October for which the Department assessed a penalty and an administrative/collection/processing fee. For 2007, Abkey failed to remit its self-reported sales tax liability to the Department for the months of February and August. Abkey self-reported its tax liability, by filing sales tax returns, for the said months. Also, for 2007, Abkey failed to timely remit its sales tax liability for the month of October, for which the Department assessed a penalty and an administrative/collection/processing fee. In total, for 2005, 2006, and 2007, Abkey self- reported sales tax due and failed to remit to the Department sales tax reportedly due in the amount of $122,355.36. As a result of Abkey's failure to file the sales tax return, to remit the $122,355.36 in sales tax, and to remit timely sales tax, the Department assessed Abkey, as of October 29, 2009, $16,287.59 in interest, $4,891.73 in penalties, and $13,845.10 in administrative/collection/ processing fees. Additionally, for the month of February 2007, Abkey issued to the Department a dishonored check (electronic funds transfer) on March 23, 2007, in the amount of $18,254.00. The Department assessed a $150.00 return check fee for the dishonored check. Shortly after being notified of the dishonored check by the Department, Abkey paid the $18,254.00. Abkey has a significant history of delinquency in remitting payments to the Department. The Department made several attempts, unsuccessfully, to collect the delinquent tax liabilities, including issuing Tax Warrants. In January 2007, the Department sought to revoke Abkey's Certificate of Registration for delinquent returns and outstanding liability and engaged in an informal conference with Abkey. As a result of the informal conference, Abkey and the Department entered into a Compliance Agreement executed on February 15, 2010. The Compliance Agreement required Abkey, among other things, to remit all past due payments; for 12 months (January through December 2007), to timely file tax returns and to timely remit all sales tax due; and to make a down payment of $45,000.00 (in three monthly installments but no later than April 1, 2007), 11 monthly payments of $5,000.00 (beginning May 1, 2007), and a balloon payment of $141,982.43 on April 1, 2008. Further, regarding the balloon payment of $141,982.43, the Compliance Agreement provided that the balloon payment might be negotiated for another 12 months. However, in order for Abkey to take advantage of this provision, Abkey was required to be compliant with the terms of the Compliance Agreement and its account was required to be in good standing with the Department. In accordance with the Compliance Agreement, Abkey paid the down payment of $45,000.00 (in three monthly installments) and the 11 payments of $5,000.00 although the 11 payments were late. Additionally, for the period of January through December 2007, Abkey was late filing tax returns and remitting sales tax. Abkey requested a renewal of the Compliance Agreement. Despite the late payments, the Department approved the renewal of the Compliance Agreement. A Compliance Agreement Renewal was executed on May 1, 2008. It required Abkey, among other things, to remit all past due payments and to timely file tax returns and timely remit all sales tax due for the next 12 months (May 1, 2008 through April 30, 2009); and to make 11 monthly payments of $5,000.00 (beginning May 1, 2008), and a balloon payment of $120,749.14 on April 1, 2009. Furthermore, regarding the balloon payment of $120,749.14, the Compliance Agreement Renewal provided that the balloon payment might be negotiated for another 12 months. However, in order for Abkey to take advantage of this provision, Abkey was required to be compliant with the terms of the Compliance Agreement Renewal and its account was required to be in good standing with the Department. Under the Compliance Agreement Renewal, Abkey made four payments of $5,000.00 but the payments were late. Abkey requested a reduction in the amount of the monthly payments from $5,000.00 to $2,000.00. The Department granted Abkey's request. Abkey made 12 payments of $2,000.00 but the payments were late. Additionally, for the period of May 1, 2008 through April 30, 2009, Abkey was late filing tax returns and remitting sales tax. Further, Abkey failed to make the balloon payment of $120,749.14 that was due on April 1, 2009. Abkey did not request a renegotiation of the balloon payment. At that time, Abkey did not request another Compliance Agreement. As of September 28, 2010, Abkey owed the Department $122,355.36 in actual sales tax (per Abkey's sales tax returns), $9,500.00 in estimated tax, $4,419.73 in penalty2, $14,572.80 in administrative/collection/processing fees3, $25,032.28 in interest, and $20.00 in warrant fees; totaling $175,900.17. The Department seeks to revoke Abkey's Certificate of Registration.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order revoking the Certificate of Registration issued to and held by Abkey No. 1 Limited. DONE AND ENTERED this 18th day of February, 2011, in Tallahassee, Leon County, Florida. S ERROL H. POWELL 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 18th day of February, 2011.
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
