Findings Of Fact The parties stipulated to certain facts, legal issues, and their respective contentions, as follow: "1. At all times pertinent to this action, Petitioner Lawrence Nali Construction Company, Inc., was a Florida Corporation licensed and doing business in the State of Florida. At all times pertinent to this action, Respondent Department of Revenue, State of Florida, was an agency of the State of Florida exercising duties relating to the assessment and collection of sales and use taxes pursuant to Chapter 212, Florida Statutes. Respondent conducted an audit of tran- sactions involving Petitioner for the period November 1, 1972, through October 31, 1975. As a result of that audit, Respondent claims that as of September 17, 1976, the Petitioner had a balance due to the Depart- ment of Revenue of $17,383.58 in taxes, interest and penalties. The assessment indicating the above amount is attached as Exhibit A. Petitioner is in agreement that if the assessment is upheld, Petitioner owes to the Respondent the amount of $17,383.58 plus interest calculated to date of payment to Respondent. The tax assessment in this case is based upon two factual situations: Petitioner, manufactured and installed asphaltic concrete from raw material at a rate certain per ton determined by bid, as an improvement to the real property of political entities consisting of cities, towns, municipalities, counties, school boards, junior colleges and others. Petitioner also hauled the asphalt to the job cite (sic) at a fixed ton/mile rate determined by bid. Petitioner, as a subcontractor, manu- factured and installed asphaltic concrete from raw material at a rate certain per ton determined by bid, as an improvement to the real property of political entities above described. The general contractor contracted with the political entities in various fashions but the Petitioner's duties were always the same and included manufacture, installation and hauling of asphaltic concrete based on a rate certain per ton and per ton mile. The issue in this case is whether the Respondent is correct in contending that the Petitioner must pay a sales and use tax on the produced asphalt which it uses in the performance of the construction contract jobs described in paragraph 6. It is agreed by the parties that no sales or use tax was remitted, by the Petitioner on the produced asphalt. It is agreed by the parties that no sales or use tax was paid by the instant customers to the Petitioner. It is Respondent's contention that, pursuant to the above-cited rules, the Peti- tioner is required to pay sales or use tax on the produced asphalt which is used to construct real property pursuant to a con- tract described in Rule 12A-1.51(2)(a), F.A.C. It is Petitioner's contention that the above-cited rules do not apply in the instant case since the customers involved in the instant fact situations are political subdivision or because the transaction was of the type described by Rule 12A-1.51(2)(d), F.A.C. Petitioner is entitled to rely on the earlier 1967 audit by Respondent because neither Petitioner's method of doing business, nor the law, has changed materially since 1967. Respondent agrees that this is an issue but fails to agree that Petitioner is so entitled to rely." All purchase orders or invitations for bid received by petitioner from political subdivisions stated that the entity was exempt from federal and state sales taxes and that such taxes should not be included in the bid. Typical bid forms entitled "Specifications for Asphaltic Concrete" called for a lump-sum price per ton for delivery and placement of the material by the vendor plus a sum per ton per mile for transportation costs. No breakdown of amounts for the cost of materials and cost of installation is reflected in the bid documents. (Testimony of Cowan, Cook, Exhibits 3, 7 (late filed)) Respondent audited petitioner's operations in 1967 and, although it had had previous transactions with governmental entities prior to that date, no assessment for back taxes was issued for failure to pay sales tax on such transactions nor was petitioner advised to do so in the future by state officials. After 1967, petitioner did not seek information from respondent concerning the subject of sales tax. As a consequence of the 1967 audit, petitioner believed that it was unnecessary to charge or pay sales tax on such transactions with political subdivisions. (Testimony of Cowan, Cook) As of April 1, 1977, Brevard County had a population of over 250,000. Although it is a large county in terms of size, respondent has only two auditors in the sales tax division to cover the entire county. (Testimony of Alberto, Cowan, Exhibit 4)
Recommendation That the petitioner Lawrence Nali Construction Company, Inc. be held liable for sales tax, penalty, and interest under Chapter 212, Florida Statutes, as set forth in respondent's proposed assessment. DONE and ENTERED this 9th day of September, 1977, in Tallahassee, Florida. THOMAS C. OLDHAM Hearing Officer Division of Administrative Hearings 530 Carlton Building Tallahassee, Florida 32304 COPIES FURNISHED: Daniel Brown, Esquire Department of Legal Affairs The Capitol Tallahassee, Florida 32304 Andrew A. Graham, Esquire Post Office Box 1657 Cocoa, Florida 32922
The Issue Should the Department of Revenue grant Petitioner's request for a temporary tax exemption permit and request for refund of sales and use tax which has been paid under protest? See Section 212.08(5)(a) and (b)3a, Florida Statutes.
Findings Of Fact Petitioner opened a new commercial laundry facility in Pompano Beach, Florida, in 1993. Petitioner installed in the new facility machinery and equipment costing approximately $1,400,000.00 for the purposes of cleaning and processing linens used by hospitals in the south Florida area (the "Laundry Equipment"). Petitioner charges a fee to hospitals in the south Florida area for cleaning and processing the hospitals' linens with the Laundry Equipment. The new facilities are additional, not replacement, facilities. The Laundry Equipment: Qualifies as "industrial machinery and equipment", as defined by Section 212.08(5)(b) and (6)(c), Florida Statutes; Was purchased by Petitioner for use in a new business; Processes items of tangible personal property, the hospital's linens, at a fixed location; Was purchased before Petitioner first began its productive operations and delivery was made within 12 months of that date; and Has increased productive output at Petitioner's commercial laundry facility. The equipment included a tunnel washer system, conveyers, feeders/folders, ironers, a boiler, and air compressors. By application dated September 3, 1993, Petitioner applied for a temporary tax exemption permit with respect to the Laundry Equipment which it planned to purchase for use in its new business. Section 212.08(5)(b), Florida Statutes, requires that a taxpayer obtain that permit to receive the exemption. The Department denied Petitioner's application. On August 22, 1994, Petitioner paid to the Department, under protest, the sum of $18,095.36, which represented the tax of $16,773.98, plus interest of $1,321.38, on Petitioner's purchase of the Laundry Equipment. Petitioner timely filed its claim for refund, which the Department denied. Respondent denied Petitioner's request for a temporary tax exemption permit, and Respondent denied Petitioner's refund claim based upon Rule 12A- 1.096, Florida Administrative Code. Petitioner's request for a tax exemption permit and Petitioner's refund claim are based upon the exemption provided in Section 212.08(5)(b), Florida Statutes, which applies to a new (as opposed to an expanding) business.
Recommendation In consideration of the facts found and conclusions of law reached, it is, RECOMMENDED: That a final order be entered which denies the request for a tax exemption permit and a refund in the amount of $18,095.36. DONE and ENTERED this 13th day of November, 1995, in Tallahassee, Florida. CHARLES C. ADAMS, 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 13th day of November, 1995. COPIES FURNISHED: Robert A. Pierce, Esquire Emily S. Waugh, Esquire MACFARLANE, AUSLEY, FERGUSON & MCMULLEN Post Office Box 391 Tallahassee, FL 32302 James McAuley, Esquire Office of the Attorney General The Capitol-Tax Section Tallahassee, FL 32399 Linda Lettera, General Counsel Department of Revenue 204 Carlton Building Tallahassee, FL 32399-0100 Larry Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, FL 32399-0100
The Issue Whether the Respondent, Holiday Inn Oceanside/Cleveland Caribbean, Inc., is liable for the payment of $10,176.18, together with a penalty of 5 percent and interest accruing daily as claimed in the audit by the Petitioner, State of Florida, Department of Revenue, for the period September 1, 1975, through August 31, 1970.
Findings Of Fact This cause comes on for consideration based upon the Respondent, Holiday Inn Oceanside/Cleveland Caribbean, Inc.`s challenge to the tax audit conducted by the Petitioner, State of Florida, Department of Revenue, covering the period September 1, 1975, through August 31, 1978. The claim of the audit is for sales tax due pursuant to Chapter 212, Florida Statutes, and its supporting rules found in the Florida Administrative Code. The audit document showing the Proposed Notice of Assessment of Tax, Penalties and Interest may be found as the Petitioner's Exhibit A admitted into evidence. Although the audit document originally claimed tax in the amount of $29,600.37, at the commencement of the hearing the amount remaining in dispute was $15,288.75, together with a penalty of 5 percent and interest accruing until date of payment. During the hearing, a stipulation was entered into between the parties to the effect that, of the remaining disputed tax, penalty and interest, $5,112.57, together with the applicable penalty and interest was acknowledged to be owed by the Respondent. Therefore, there remains in dispute the amount of $10,176.18, with a 5 percent penalty and interest accruing until date of payment. This amount of tax, penalty and interest claimed represents the difference between the tax rate which the Petitioner has applied in this assessment process and the tax rate that the Respondent claims to be applicable. The Petitioner claims that a tax rate of 4.5 percent against total receipts, in keeping with the authority of Rule 12A-1.57(3), Florida Administrative Code. The Respondent counters that position by offering its own formula arrived at in view of the nature of its prices charged its customers, and that tax rate is 4.1666667 percent. The sales in question during the audit period pertain to sales of alcoholic and malt beverage in the lounges of the Respondent's licensed premises located in Dade County, Florida. The facts reveal that the sale of all alcoholic beverages in the time period at issue were made in increments of a quarter dollar ($.25). These quarter-dollar increments included the imposition of sales tax. As example: SALES PRICE TAX TOTAL $ .48 $.02 $ .50 .72 .03 .75 .96 .04 1.00 1.20 .05 1.25 1.44 .06 1.50 1.68 .07 1.75 Although the tax was computed on the sales price and this system was made known to the public by prominently displaying the price list, which list indicated that the beverage prices included tax; the Respondent did not separate the increment of the total price into categories of sales price and tax at the time of each transaction. Consequently, the books audited in the process of making the claim for assessment only demonstrated the total sales price of a given day's alcoholic beverage sales as an aggregate and did not reflect the tax as a separate item from the sales price. To this aggregate amount the Respondent applied its tax rate formula of 4.166667 by taking the amount of total receipts for the day and dividing by 1.04666667 to get gross sales. The gross sales were then subtracted from the amount of total receipts to obtain the figure for tax collected. This method was rounded off to the nearest penny on each day of computation. The Petitioner, as stated before, relies on Rule 12A-1.57(3), Florida Administrative Code, as a basis for its claim that the rate of tax should be 4.5 percent. That provision states: (3) Dealers in alcoholic and malt beverages are required to remit the actual tax collected to the State. In some instances, however, it may be impractical for such dealers to separately record the sales price of the beverage and the tax collected thereon. In such cases, dealers may elect to report tax on the following basis. Package stores who sell no mixed drinks should remit the tax at 4.3 percent of total receipts and dealers who sell mixed drinks or a combination of mixed drinks and packaged goods should remit the tax at the rate of 4.5 percent of total receipts. In those instances where the sales price and the tax have not been separately recorded but where it can be demonstrated that the public has been put on notice by means of price lists posted prominently throughout the establishment that the total charge includes tax, the dealer may deduct the tax from the total receipts to arrive at the appropriate tax and gross sales figures using the method shown below: Total receipts divided by the tax rate = gross sales. For example, a package store which sells no mixed drinks and whose total receipts are $2,000 would compute sales as follows: $2,000 divided by 1.043 percent = gross sales $1,917.54 tax collected 82.46 A dealer who sells drinks or a combination of drinks and package goods and whose total receipts are $2,000 would compute sales as follows: $2,000 divided by 1.045 percent = gross sales $1,913.87 tax collected 86.12 When the public has hot been put on notice through the posting of price lists that tax is included in the total charge, tax shall be computed by multiplying total receipts by the applicable rates referred to in this rule. In the mind of the Petitioner, by failing to segregate the total amounts collected into the categories of sales price and tax and then to remit the tax collected as a separate item, the Respondent is relegated to the utilization of Rule 12A-1.57(3), Florida Administrative Code, in remitting its tax. Under its theory, the Petitioner has taken the total receipts recorded in the Respondent's work sheets and divided those total receipts by the formula 1.045 percent to get gross sales and then subtracted the gross sales from the amount of total receipts to get the amount of tax that should have been collected, and then made a further subtraction of the tax which the Respondent remitted, from the tax formula which the Petitioner claims to be due on the transactions to arrive at the tax presently outstanding. This amount being the figure referenced above. From that computation, the amount of penalty and interest has been claimed. (By its position the Petitioner does not seem to question the fact that the public has been put on notice by price lists posted throughout the establishment that the total charge reflected on the price lists includes tax, as referred to in the subject Rule 12A-1.57(3), Florida Administrative Code.) According to the Respondent, the reason for the utilization of the rate of 4.1666667 percent was the fact that all beverages having a break in price increments of a quarter-dollar ($.25), it is mathematically impossible for the proper effective rate being charged on all beverages sold in the lounges to vary from their tax rate of 4.1666667 percent because each increment of increase has the same ratio of sales price to tax. The Respondent argues that to claim a rate of 4.5 percent causes the collection in excess of the amount allowed by Chapter 212, Florida Statutes. After considering the position of the parties, the Respondent is found to be correct in its position. The overall scheme of Chapter 212, Florida Statutes, calls for the taxation of sales of tangible personal property at a rate of 4 percent, see Section 212.05, Florida Statutes. A further refinement of that theory is found in Subsection 212.12(10), Florida Statutes, which creates a bracketing system for sales representing the various fractions of a dollar in amount. This bracketing system thereby causes imposition of a sales tax greater than 4 percent in some transactions. The Petitioner is granted further authority to refine the system of taxation by those provisions of Subsections 212.17(6) and 212.18(2), Florida Statutes, which state in turn: 212.17(6) The department shall have the power to make, prescribe and publish reasonable rules and regulations not inconsistent with this chapter, or the other laws, or the constitution of this state, or the United States, for the enforcement of the provisions of this chapter and the collection of revenue hereunder, and such rules and regulations shall when enforced be deemed to be reasonable and just. 212.18(2) The department shall administer and enforce the assessment and collection of the taxes, interest, and penalties imposed by this chapter. It is authorized to make and publish such rules and regulations not inconsistent with this chapter, as it may deem necessary in enforcing its provisions in order that there shall not be collected on the average more than the rate levied herein. The department is authorized to and it shall provide by rule and regulation a method for accomplishing this end. It shall prepare instructions to all persons required by this chapter to collect and remit the tax to guide such persons in the proper collection and remission of such tax and to instruct such persons in the practices that may be necessary for the purpose of enforcement of this chapter and the collection of the tax imposed hereby. The use of tokens in the collection of this tax is hereby expressly forbidden and prohibited. It can be seen that the Petitioner has the authority to promulgate the necessary rules for the accomplishment of the purpose of Chapter 212, Florida Statutes, but is restricted in this task by being prohibited from making rules and regulations which are inconsistent with this chapter or other statutes within the laws of the State of Florida or the Constitution of the United States or the Constitution of the State of Florida and it is further restricted from imposing rules or regulations which cause the tax to be collected on the average more than the rate levied in Chapter 212, Florida Statutes. While it is clear that the legislature intended to keep the effective rate of tax as near the 4 percent level as possible, it is also evident that the system contemplated a segregation of the amount collected in a sale as sales price, and the amount of tax applied to the sale at the point of the transaction. This is a means of accountability that helps insure that the proper remittance of tax due on each and every retail sales occurs. However, the preeminent charge to the Petitioner is the duty to collect the tax at a rate which most closely approximates the 4 percent called for, without abandoning responsibility or the close monitoring of the records of a given taxpayer. When considered in the overall context of the purpose of Chapter 212, Florida Statutes, the method which the Respondent used to collect and remit tax, does not violate the conditions of Chapter 212, Florida Statutes, nor the rules designed to enforce that chapter. The tax rate of 4.1666667 percent has been proven to be correct, in the sense of more closely approximating the 4 percent tax rate called for than the application of a tax rate of 4.5 percent. The correctness is established because the increments charged for alcoholic beverages are always in the amount of a quarter-dollar ($.25) and each increment of increase carries the same tax rate. This fact, when considered with the additional fact that the break-out of the tax in the price structure as established by the Respondent, is in keeping with the tables of the bracket system found in Subsection 212.12(10), Florida Statutes, is sufficiently convincing to demonstrate the propriety of the Respondent's position. Nonetheless, a further examination of the Petitioner's argument is indicated. The focus of the Petitioner's position is Rule 12A-1.57(3), Florida Administrative Code, and a detailed reading of this rule reveals that dealers who have properly put the public on notice that their sales prices include tax, "may" elect to remit tax by using the formula of the rate of 4.5 percent of total receipts as the tax due. The use of the word "may" in this instance creates an option on the part of the Respondent, an option which it has elected not to proceed under and by the facts of this case, the alternate method which the Respondent used in computing this tax, i.e., the rate 4.1666667 percent is efficacious. Finally, the Petitioner has advanced the argument that the formula found in Rule 12A-1.57(3), Florida Administrative Code, is unique to that rule and may not be utilized unless the prerequisite factors are shown and unless the tax rate factor 4.5 percent is part of the formula. Even though the formula as expressed in Rule 12A-1.57(3), Florida Administrative Code, may have legitimate application to some cases, it is not preemptive in its scope and it would not prohibit the Respondent in this case from using the formula and substituting the rate of tax of 4.1666667 percent for the rate of 4.5 percent in that part of the formula. In summary, the Petitioner has failed to demonstrate its entitlement to the tax, penalty and interest under its claim founded on Rule 12A-1.57(3), Florida Administrative Code. (Petitioner in this cause had submitted Proposed Findings of Fact, Conclusions of Law and a Recommendation in the case styled, Holiday Inn Oceanside/Cleveland Caribbean, Inc., Petitioner, vs. State of Florida, Department of Revenue, Respondent, D.O.A.H. Case No. 70-1003R, and in doing so made reference to matters which have been considered in the present case. Therefore, to the extent that those matters are not inconsistent with this Recommended Order they have been utilized. To the extent that those proposals are inconsistent with this Recommended Order they are specifically rejected. The Respondent has also submitted Proposed Findings of Fact, Conclusions of Law and a Recommended Order and to the extent that those matters are not inconsistent with this Recommended Order they have been utilized. To the extent that those proposals are inconsistent with this Recommended Order they are specifically rejected.)
Recommendation It is recommended that the Respondent, Holiday Inn Oceanside/Cleveland Caribbean, Inc., be relieved from further responsibility to pay the amount of tax, $10,176.18 and the 5 percent penalty and interest accruing on that amount of tax. DONE AND ENTERED this 29th day of June, 1979, in Tallahassee, Florida. CHARLES C. ADAMS, Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: Martha J. Cook, Esquire Department of Revenue Room 422, Fletcher Building Tallahassee, Florida 32301 Richard Watson, Esquire c/o Spieth, Bell, McCurdy & Newell 1190 Union Commerce Building Cleveland, Ohio 44115 Mark J. Wolff, Esquire and Howard E. Roskin, Esquire First Federal Building, 30th Floor One Southeast Third Avenue Miami, Florida 33131
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: Background Petitioner, Gainesville Amateur Radio Society, Inc. (GARS or petitioner), a Florida non-profit corporation, was incorporated on December 31, 1975. Its stated purpose is to promote an interest in amateur radio operation. Among other things, GARS provides preparation for Federal Communication Commission licensing examinations, supports community activities with free communication services, and encourages public awareness of ham radio activities through the publication of a monthly newsletter called the GARS-MOUTH. Respondent, Department of Revenue (DOR), is charged with the responsibility of administering and implementing the Florida Revenue Act of 1949, as amended. It has the specific task of collecting sales taxes and enforcing the state tax code and rules. By law, certain transactions are exempt from the state sales and use tax. Among these are sales or lease transactions involving "scientific organizations." In order for an organization to be entitled to an exemption, it must make application with DOR for a consumer's certificate of exemption and demonstrate that it is a qualified scientific organization within the meaning of the law. Once the application is approved, the certificate entitles the holder to make tax exempt purchases that are otherwise taxable under Chapter 212, Florida Statutes. In the case of petitioner, a certificate would enable it to save a hundred or so dollars per year. Claiming that it was entitled to a certificate of exemption as a charitable organization, GARS filed an application with DOR on December 21, 1993. After having the application preliminarily disapproved by DOR on the ground it did not expend "in excess of 50.0 percent of the . . . organization's expenditures toward referenced charitable concerns, within (its) most recent fiscal year," a requirement imposed by DOR rule, GARS then amended its application to claim entitlement on the theory that it was a scientific organization. Although DOR never formally reviewed the amended application, it takes the position that GARS still does not qualify for a certificate under this new theory. Is GARS a Scientific Organization? Under Section 212.08(7)(o)2.c., Florida Statutes, a scientific organization is defined in relevant part as an organization which holds a current exemption from the federal income tax under section 501(c)(3) of the Internal Revenue Code. A DOR rule tracks this statute almost verbatim. Accordingly, as a matter of practice, in interpreting this statutory exemption, DOR simply defers to the final determination of the Internal Revenue Service (IRS). If the IRS grants an organization a 501(c)(3) status based on the determination that it is a scientific organization, then DOR accepts this determination at face value. DOR does not make an independent determination whether the organization is "scientific" or question the decision of the IRS. This statutory interpretation is a reasonable one and was not shown to be erroneous or impermissible. GARS received a federal income tax exemption from the IRS regional office in Atlanta, Georgia by letter dated August 12, 1993. The record shows that GARS was granted an "exempt organization" status as a "charitable organization" and as an "educational organization" under Treasury Regulation Section 1.501(c)(3). However, GARS did not receive an exempt status as a "scientific organization" nor did the IRS make that determination. Therefore, GARS does not qualify as a scientific organization within the meaning of the law. While petitioner submitted evidence to show that it engages in what it considers to be a number of scientific endeavors, these activities, while laudable, are irrelevant under Florida law in making a determination as to whether GARS qualifies for a sales tax exemption as a scientific organization. Therefore, the application must be denied.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that respondent enter a final order denying petitioner's application for a consumer certificate of exemption. DONE AND ENTERED this 23rd day of June, 1995, in Tallahassee, Florida. DONALD R. ALEXANDER 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 23rd day of June, 1995. APPENDIX TO RECOMMENDED ORDER, CASE NO. 94-1200 Petitioner: 1-2. Partially accepted in finding of fact 4. 3. Partially accepted in finding of fact 6. 4. Partially accepted in finding of fact 1. 5. Rejected as being irrelevant. 6. Rejected as being unnecessary. 7. Partially accepted in finding of fact 5. 8-9. Partially accepted in finding of fact 7. 10. Partially accepted in finding of fact 5. 11. Partially accepted in finding of fact 7. 12. Partially accepted in finding of fact 6. 13. Rejected as being unnecessary. 14. Partially accepted in finding of fact 6. Respondent: 1. Partially accepted in finding of fact 1. 2. Partially accepted in finding of fact 2. 3. Rejected as being unnecessary. 4. Rejected as being cumulative. 5-12. Partially accepted in finding of fact 7. 13-14. Partially accepted in finding of fact 4. 15. Partially accepted in finding of fact 3. 16. Covered in preliminary statement. 17. Partially accepted in finding of fact 4. 18-19. Partially accepted in finding of fact 6. 20-21. Rejected as being unnecessary. 22. Partially accepted in finding of fact 5. 23-24. Partially accepted in finding of fact 6. Note - Where a proposed finding has been partially accepted, the remainder has been rejected as being irrelevant, unnecessary for a resolution of the issues, not supported by the evidence, cumulative, subordinate, or a conclusion of law. COPIES FURNISHED: Mr. Larry Fuchs Executive Director Department of Revenue 104 Carlton Building Tallahassee, FL 32399-0100 Linda Lettera, Esquire General Counsel Department of Revenue 204 Carlton Building Tallahassee, FL 32399-0100 Sidney Schmukler, Esquire 3922 N. W. 20th Lane Gainesville, Florida 32605-3565 Olivia P. Klein, Esquire Department of Legal Affairs The Capitol-Tax Section Tallahassee, Florida 32399-1050
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: Petitioner, Christian Television Corporation, is a not for profit Florida corporation formed in April of 1977. It is exempt from federal income taxation under Section 501(c)(3) of the Internal Revenue Code (1954). Its first application for a Florida Consumer's Certificate of Exemption was initially denied by the Department of Revenue in December of 1977. After petitioner was successful in a rule-challenge proceeding to a portion of the Department's rules defining a "church", the Department reversed its initial decision and issued the petitioner a Consumer's Certificate of Exemption. Based on that issuance, petitioner dismissed its request for a formal administrative hearing regarding the initial denial of exempt status. In 1983, the Legislature enacted Section 212.084, Florida Statutes, which required the Department of Revenue to review every sales tax exemption certificate issued before July 1, 1983, to ensure that the possessor of the certificate was actively engaged in an exempt endeavor. The Department was given the authority to revoke the certificates of those entities found to be no longer qualified for an exemption. Section 212.084(3), Florida Statutes. Pursuant to this statute, the respondent notified the petitioner that an application for renewal of its previously issued Certificate would be required. Petitioner submitted such an application and the respondent gave notice of its intent to revoke petitioner's Certificate effective January 29, 1986. According to its Articles of Incorporation, the petitioner was organized "to produce and broadcast to the general public religious television and radio programs and thereby educate and instruct the general public in religious matters, and make available guidance to promote the general public welfare..." In furtherance of this purpose, the petitioner operates a facility in Largo, Florida, in a 43,000 square foot building. The building contains two television broadcasting studios, control rooms, storage rooms, administrative offices, a counseling area and a chapel. The petitioner views its purpose as one of assisting churches of all denominations in presenting the gospel to the community. It produces many programs in its Largo studios and considers these programs to be ministries in themselves. Live audiences are often present in the studios, which can accommodate from 30 to 100 people, depending upon the program. For example, during the production of "Joy Junction", children from various Christian schools in the area attend the taping. Senior adults come to the Largo studios to attend the "Action Sixties" program, and single adults attend the taping of "Solo Act". In addition, the petitioner sells air time to local churches and ministries. The petitioner also conducts benevolence activities in cooperation with area churches and local agencies. These include fund-raisers for other ministries and raising money or collecting clothing and food for the needy. Petitioner provides on-air announcement services for area churches and ministerial associations and allows other ministries to utilize its broadcasting facilities. Petitioner's staff also attempts to work with "non-Christian people" within the community and "pass them through our ministry into other churches". The petitioner provides a telephone counseling service from its Largo facility. For this purpose, it utilizes 45 regular, and 100 substitute, volunteer counselors. These counselors are trained by petitioner's staff, and callers receive Biblical answers to their questions and problems. Many who call in want prayer for some particular need. Callers perceived to have a more severe problem are referred to a Christian counselor in the area. Approximately 32,000 calls per year are received on petitioner's "prayer lines". The petitioner's staff includes two ministers. One serves as the director of the benevolence ministry and the counseling department, and the other serves as director of community ministries and does the liaison work with other churches. Both were previously Pastors of their own churches, and feel that Christian Television is as much or more of a "church" as the more traditional churches they formerly pastored. They described the use of video technology as an advantage and an asset, rather than as a substitute for more traditional forms of religious training. Worship services are conducted in the petitioner's chapel by both the staff ministers and other volunteer or paid ministers. The chapel, containing 1200 square feet and having a seating capacity of about 150, has high ceilings and contains an organ, an altar, a pulpit and chairs. The estimated value of the assets within the chapel is ten or twenty thousand dollars. The chapel is actively utilized during the week for staff devotionals and communion services, and is open to the public for special services and advertised programs conducted by those using a Biblical approach. Other approved ministries are permitted to utilize the chapel without charge for Bible studies or special prayer times. The chapel is not used as a production or broadcasting studio. As of December 31, 1983, the value of petitioner's assets, including plant, property and equipment, was $2,185,564.00. During 1983, petitioner received contributions totalling $1,137,000.00, and realized slightly more than one million dollars in revenue by providing broadcast and production time to various religious organizations.
Recommendation Based upon the findings of fact and conclusions of law recited herein, it is RECOMMENDED that petitioner's Consumer Certificate of Exemption be reissued for a period of five (5) years. Respectfully submitted and entered this 6th day of October, 1986. DIANE D. TREMOR Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 6th day of October, 1986. APPENDIX TO RECOMMENDED ORDER, CASE NO. 86-0456 The proposed findings of fact submitted by the petitioner and the respondent have been carefully considered and are accepted and/or incorporated in this Recommended Order, except as noted below: Petitioner: 3 - 5. Recitations of testimony accepted as correct, but not included as factualfindings. 7. Partially rejected as argument as opposed to factual findings. COPIES FURNISHED: Jon H. Anderson, Esquire NCNB Bank Building 5001 South Florida Avenue Lakeland, Florida 33803 Edwin A. Bayo, Esquire Assistant Attorney General Department of Legal Affairs The Capitol Tallahassee, Florida 32301 Randy Miller Executive Director Department of Revenue 102 Carlton Building Tallahassee, Florida 32301 William D. Townsend General Counsel 104 Carlton Building Tallahassee, Florida 32301
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant findings of fact are made: At all times material to this proceeding the Petitioners, Patrick G. Sullivan and George Walter, as individuals, owned the property in question, having purchased it in 1983 which consisted of six acres being used for bona fide agricultural purposes and two acres for commercial purposes, for a total of eight acres. At all times material to this proceeding, the Petitioners leased the property to Gulf Breeze Landscaping, Inc., a corporation whose stock was held in its entirety by the Petitioners. Starting in July 1985 through December 1986 the monthly rental (lease) payment to the Petitioners was $1,916.11 for the eight acres. Starting January 1987 through December 1988 the monthly rental (lease) payment to the Petitioners was $3,000.00 for the eight acres. At all times material to this proceeding, the Petitioners were not registered as taxpayers with the Department, and neither collected any sales tax from Gulf Breeze Landscaping, Inc. for the rental of the property in question nor remitted any sales tax to the Department for the rental of the property in question. The Department's audit was for the period July 1985 through December 1988. The Department's Tax Warrant Worksheet dated January 11, 1989 indicated that the estimated sales tax due on the rental of the property in question for the audit period to be $8,400.00 with $2,100.00 in penalties and $840.00 in interest added for a combined total of $11,340.00. A Clerk's filing fee of $12.00 was added bringing the grand total to $11,352.00. On January 12, 1989 the Department issued a Notice of Assessment and Jeopardy Finding informing the Petitioners of the delinquent sales tax for the audit period. On January 31, 1989 the Petitioners protested the assessment, including the penalty and interest. After some delay, for which the Department assumed responsibility, the Department issued a Notice of Reconsideration on July 2, 1991 which calculated the tax due for the audit period to be $5,769.54 with a $288.48 penalty and interest of $1,032.04 for a total amount of $7,090.06. Along with the Notice of Reconsideration the Department included a Closing Agreement wherein it would be settled for a total amount of $7,090.06 with no interest accruing from January 12, 1989 until payment of the assessment because of the Department's excessive delay in handling the Petitioners' protest. The Petitioners did not execute the Closing Agreement, contending that the rental payments for the use of the six acres being used for bona fide agricultural purposes should have been exempt from the imposition of sales tax under Section 212.031, Florida Statutes. At this point, the Petitioners had presented no evidence that the six acres had been granted agricultural classification pursuant to Section 198.461, Florida Statutes during the audit period. On July 3, 1991, due to the Petitioners' failure to execute the Closing Agreement, the tax assessed began to accrue interest at the statutory rate. For the years 1984 through 1988 the Petitioners neither applied for agricultural classification for the property in question nor did the Property Appraiser of Sarasota County classify the property in question as agricultural pursuant to Section 193.461, Florida Statutes. The sales tax as calculated by the Department for the audit period of July 1985 through December 1988 in the amount of $5,769.54 is mathematically correct as is the interest in the amount of $1,032.04 calculated by the Department. The Department having agreed to compromise the penalty from $1,307.34 to $288.48 due to its excessive delay in acting on the petition, there was no evidence to show that the penalty of $288.48 was excessive, or that the Department acted in an arbitrary or capricious manner in arriving at the amount of the penalty. In fact, the Petitioners do not dispute the calculation of the assessment but only that portion of the assessment contributable to the six acres on the theory that any rental payment for the six acres is exempt from the imposition of sales tax due to the property being used for a bona fide agricultural purpose. In this regard, the Petitioners, at the time of objecting to the Notice of Reconsideration and filing a petition requesting a hearing, paid $1,442.39 tax, $255.01 interest and the total penalty of $288.48. This partial payment of $1,985.88 reduced the tax owed to $4,327.15, and the interest owed to $777.03 as of July 3, 1991 and the penalty to zero.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, accordingly recommended that the Department enter a Final Order finding Petitioners to owe sales tax on the rental payments for the property in question for the audit period from July 1985 through December 1988 in the amount of $4,327.15 plus interest amount of $777.03 for a total amount of $5,104.18. The $4,327.15 in tax shall accrue interest at the statutory rate beginning July 3, 1991 until paid. RECOMMENDED this 16th day of December, 1991, in Tallahassee, Florida. WILLIAM R. CAVE 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 16th day of December, 1991. APPENDIX TO RECOMMENDED ORDER, CASE NO. 91-4854 The following constitutes my specific rulings pursuant to Section 120- 59(2), Florida Statutes, on all of the Proposed Findings of Fact submitted by the parties in the case. Rulings on Proposed Finding of Fact Submitted by the Petitioners No proposed findings of fact submitted by Petitioners. Rulings on Proposed Findings of Fact Submitted by the Respondent 1. Not material or relevant to this proceeding. 2. Adopted in Finding of Fact 1. 3. - 7. Adopted in substance as modified 14. in Finding of Fact 8. Not material or relevant to this proceeding. 9. - 11. Adopted in substance as modified in Finding of Fact 1. 12. - 13. Adopted in substance as modified in Findings of Fact 3 and 4, respectively. 14. - 18. Adopted in substance as modified in Findings of Fact 10, 11, 12, 13 and 15. 19. - 21. Not material or relevant to this proceeding. 22. Adopted in substance as modified in Finding of Fact 6. 23. - 24. Not material or relevant. 25. Adopted in substance as modified 14. in Finding of Fact Not material or relevant to this proceeding. Adopted in substance as modified in Findings of Fact and 15. Adopted in substance as modified in Findings of Fact and 13. COPIES FURNISHED: Vicki Weber, General Counsel Department of Revenue 204 Carlton Building Tallahassee, FL 32399-0100 J. Thomas Herndon, Exec. Director Department of Revenue 104 Carlton Building Tallahassee, FL 32399-0100 George Walter 1200 North Indian Avenue Englewood, FL 34223 Ralph R. Jaeger, Esquire Department of Legal Affairs Tax Section, Capitol Bldg. Tallahassee, FL 32399-1050
Findings Of Fact In Exhibit 3 Petitioner disputed the overpayment of sales tax, penalties and interest in the amount of $62,035.63. At the hearing it was stipulated that the disputed sum is $62,000.00. Petitioner is owner and publisher of a weekly paper, The Tampa/Metro Neighbor (Neighbor), published in Tampa and distributed in the Tampa metropolitan area of Hillsborough County. The Neighbor is distributed to readers free of charge. Petitioner started rack sales September 27, 1980, and has sold approximately 125 per week since that time. Its total circulation is approximately 164,009. The Neighbor has not been entered or qualified to be admitted and entered as second class mail matter at a post office in the county where it is published. The Neighbor is delivered by approximately one thousand carriers to residences and apartments in Hillsborough County each Thursday. The papers are placed in plastic bags to protect them from the weather. Petitioner claims sales tax exemption for the purchase of newsprint, ink, and plastic bags used to print and distribute the Neighbor. Newspapers such as The Tampa Tribune are exempt from sales tax on these items. Only newspapers and other periodical publications are eligible for mailing at second class rates of postage. Publications primarily designed for free circulation and/or circulation at nominal rates may not qualify for the general publications category (Exhibit 24). General publications primarily designed for advertising purposes may not qualify for second class privileges. Those not qualifying include those publications which contain more than 75 Percent advertising in more than half of the issues published during any 12- month period (Exhibit 24). Second class mail privilege is a very valuable asset for newspapers and other qualifying publications. The editorial content of the Neighbor, which they define as everything except advertisement, is comprised of local news, sporting news, local investigative reporting, an opinion section, and an entertainment section. The advertising is split into classified ads and other. The Neighbor contains no national or international news, no wire service reports, no comics, no stock market reports, no sports statistics, no weather reports, no national syndicated columnists, no state capital news, no obituaries, no book review section, and no special section such as home design, gardening, etc. Neighbor considers its primary competitor to be The Tampa Tribune. However, this competition is limited to advertising as the Neighbor has none of the traditional newspaper features above noted which are normally carried in daily newspapers. Petitioner presented two expert witnesses who opined that the Neighbor met the requirements to be classified as a newspaper because it was published in newspaper format; that it had an editorial section which provided some news as contrasted to that provided in a shopping guide; that the 75 percent - 25 percent advertising-editorial content did not make the Neighbor primarily an advertising paper; that the requirements of the U.S. Post Office for a periodical to obtain second class mail privileges is not relevant to a determination that the Neighbor is not newspaper; that the requirements of the Department of Revenue Rules 12A-1.08(3)(d) and 12A-1.08(4) Florida Administrative Code, are not relevant in determining whether the Neighbor is a newspaper; and that in a journalistic concept the Neighbor is a newspaper. The Neighbor was purchased in 1979 by North American Publications, Inc., a wholly owned subsidiary of Morris Communications Corporation. Morris Communications Corporation owns several newspapers scattered from Florida to Alaska, both daily and weekly publications. Most of these publications are sold to paid subscribers. Petitioner's testimony that sales tax was not collected from Petitioner's predecessor owners was flatly contradicted by the testimony of Respondent's witness. Since the latter witness is in a much better position to know the facts respecting sales taxes levied on the former owner of the Neighbor, this testimony is the more credible. In any event, Petitioner did not claim estoppel.
The Issue As to DOAH Case No. 18-4475RX, whether Florida Administrative Code Rule 12A-1.044(5)(a) is an invalid exercise of delegated legislative authority in violation of section 120.52(8), Florida Statutes.1/ As to DOAH Case No. 18-4992RU, whether the Department of Revenue's ("Department") Standard Audit Plan, Vending and Amusement Machines--Industry Specific, section 1.1.3.3 ("SAP") is an unadopted rule in violation of sections 120.54 and 120.56, Florida Statutes.
Findings Of Fact The Parties and Audit Period GBR is a Florida corporation with its principal place of business in Miami, Florida. Gilda Rosenberg is the owner of GBR and a related entity, Gilly Vending, Inc. ("Gilly"). GBR and Gilly are in the vending machine business. At all times material hereto, Amit Biegun served as the chief financial officer of the two entities. The Department is the state agency responsible for administering Florida's sales tax laws pursuant to chapter 212, Florida Statutes. This case concerns the audit period of January 1, 2012, to December 31, 2014. GBR's Provision of Vending Machine Services Prior to the audit period, the school boards of Broward and Palm Beach County issued written solicitations through invitations to bid ("ITB"), seeking vendors to furnish, install, stock, and maintain vending machines on school property. The bids required a "full turn-key operation." The stated objectives were to obtain the best vending service and percentage commission rates that will be most advantageous to the school boards, and to provide a contract that will be most profitable to the awarded vendor. The stated goal was that student choices from beverage and snack vending machines closely align with federal dietary guidelines. GBR operates approximately 700 snack and beverage vending machines situated at 65 schools in Broward, Palm Beach, and Miami-Dade Counties. Of these 65 schools, 43 are in Broward County, 21 are in Palm Beach County, and one is in Miami-Dade County. The snack vending machines are all owned by GBR. Beverage vending machines are owned by bottling companies, such as Coca-Cola and Pepsi. Of the 700 vending machines, approximately 60 percent of the machines are for beverages and the remaining 40 percent are for snacks. GBR has written vending agreements with some schools. In these agreements, GBR is designated as a licensee, the school is designated as the licensor, and GBR is granted a license to install vending machines on school property in exchange for a commission. Furthermore, GBR is solely responsible to pay all federal, state, and local taxes in connection with the operation of the vending machines. Ownership of the vending machines does not transfer to the schools. However, in some cases the schools have keys to the machines. In addition, designated school board employees have access to the inside of the machines in order to review the meter, monitor all transactions, and reconcile the revenue from the machines. GBR places the vending machines on school property. However, the schools control the locations of the vending machines. The schools also require timers on the machines so that the schools can control the times during the day when the machines are operational and accessible to students. The schools also control the types of products to be placed in the machines to ensure that the products closely align with the federal dietary guidelines. The schools also control pricing strategies. GBR stocks, maintains, and services the vending machines. However, Coca-Cola and Pepsi may repair the beverage machines they own. GBR is solely responsible for repairing the machines it owns. The schools require that any vendor service workers seeking access to the vending machines during school hours pass background checks. GBR route drivers collect the revenue from all of the vending machines and the revenues are deposited into GBR's bank accounts. In exchange for GBR's services, the schools receive from GBR, as a commission, a percentage of the gross receipts. However, neither GBR nor the schools are guaranteed any revenue unless sales occur from the machines. On its federal income tax returns, GBR reports all sales revenue from the vending machines. For the tax year 2012, GBR's federal income tax return reflects gross receipts or sales of $5,952,270. Of this amount, GBR paid the schools $1,363,207, a percentage of the gross receipts which GBR characterized on the tax return and its general ledger as a commission and equipment space fee and cost of goods sold. For the tax year 2013, GBR's federal income tax return reflects gross receipts or sales of $6,535,362. Of this amount, GBR paid directly to the schools $1,122,211, a percentage of the gross receipts which GBR characterized on the tax return and its general ledger as a commission and equipment space fee and cost of goods sold. For the tax year 2014, GBR's federal income tax return reflects gross receipts or sales of $6,076,255. Of this amount, GBR paid directly to the schools $1,279,682, a percentage of the gross receipts which GBR characterized on the tax return and its general ledger as a commission and equipment space fee and cost of goods sold. Thus, for the audit period, and according to the federal tax returns and general ledgers, GBR's gross receipts or sales were $18,563,887. Of this amount, GBR paid directly to the schools $3,765,100, as a commission and equipment space fee and cost of goods sold. The Department's Audit and Assessment On January 27, 2015, the Department, through its tax auditor, Mary Gray, sent written notice to GBR of its intent to conduct the audit. This was Ms. Gray's first audit involving vending machines at schools. Thereafter, GBR provided Ms. Gray with its general ledger, federal returns, and bid documents. On October 28, 2015, Ms. Gray issued a draft assessment to GBR. The email transmittal by Ms. Gray to GBR's representative states that "[t]he case is being forwarded for supervisory review." In the draft, Ms. Gray determined that GBR owed additional tax in the amount of $28,589.65, but there was no mention of any purported tax on the monies paid by GBR to the schools as a license fee to use real property. However, very close to the end of the audit, within one week after issuing the draft, and after Ms. Gray did further research and conferred with her supervisor, Ms. Gray's supervisor advised her to issue the B03 assessment pursuant to section 212.031 and rule 12A-1.044, and tax the monies paid by GBR to the schools as a license fee to use real property. Thus, according to the Department, GBR was now responsible for tax in the amount of $246,230.93, plus applicable interest. Of this alleged amount, $1,218.48 was for additional sales tax (A01); $4,181.41 was for purchase expenses (B02); $13,790 was for untaxed rent (B02); and $227.041.04 was for the purported license to use real property (B03). Ms. Gray then prepared a Standard Audit Report detailing her position of the audit and forwarded the report to the Department's dispute resolution division. On January 19, 2016, the Department issued the Notice of Proposed Assessment ("NOPA") against GBR for additional tax and interest due of $288,993.31. The Department does not seek a penalty against GBR. At hearing, Ms. Gray testified that the Department's SAP is an audit planning tool or checklist which she used in conducting GBR's audit. Employees of the Department are not bound to follow the SAP, and the SAP can be modified by the auditors on a word document. The SAP was utilized by Ms. Gray during the audit, but it was not relied on in the NOD.4/
The Issue The issue is whether Petitioner showed by a preponderance of the evidence that it is entitled to a refund of $1,500,216.60 in sales and use tax paid during the period from January 2005 through January 2007 to purchase industrial printing machinery that allegedly satisfied the statutory requirement for a 10 percent increase in productive output for printing facilities that manufacture, process, compound or produce tangible personal property at fixed locations in the state within the meaning of Subsection 212.08(5)(b), Florida Statutes (2005), and Florida Administrative Rule 12A-1.096.1/
Findings Of Fact Respondent is the agency responsible for administering the state sales tax imposed in Chapter 212. Petitioner is a "for profit" Florida corporation located in St. Petersburg, Florida. Petitioner is engaged in the business of publishing newspapers and commercial printing. Petitioner derives approximately 85 percent of its revenue from advertising and approximately 15 percent of its revenue from circulation subscriptions. In April, 2007, Petitioner requested a refund of $403,780.05 in sales and use taxes paid for the purchase of industrial machinery and equipment during the period from January, 2005, to January, 2006. In October, 2007, Petitioner requested a refund of $1,096,436.61 in sales and use taxes paid for the purchase of industrial machinery and equipment for the period from January, 2006, to January, 2007. The first refund request in April, 2007, became DOAH Case Number 08-3938, and the second refund request in October, 2007, became DOAH Case Number 08-3939. The two cases were consolidated into this proceeding pursuant to the joint motion of the parties. The parties stipulated that the only issue for determination in this consolidated proceeding is whether Petitioner satisfied the requirement for a 10 percent increase in productive output in Subsection 212.08(5)(b) and Rule 12A- 1.096. If a finding were to be made that Petitioner satisfied the 10 percent requirement, the parties stipulate that the file will be returned to Respondent for a determination of whether the items purchased are qualifying machinery and equipment defined in Subsection 212.08(5)(b) and Rule 12A-1.096. The issue of whether Petitioner satisfied the statutory requirement for a 10 percent increase in productive output in Subsection 212.08(5)(b) and Rule 12A-1.096 is a mixed question of law and fact. The ALJ concludes as a matter of law that Petitioner did not satisfy the 10 percent requirement. The ALJ discusses that conclusion briefly, for context, in paragraphs 6 and 7 of the Findings of Fact, and explains the conclusion and the supporting legal authority more fully in the Conclusions of Law. It is an undisputed fact that Petitioner counts items identified in the record as "preprints," "custom inserts," and "circulation inserts" separately from the "newspaper" as a means of exceeding the 10 percent requirement in Subsection 212.08(5)(b). Respondent construes the 10 percent exemption authorized in Subsection 212.08(5)(b) in pari materia with the exemption authorized in Subsection 212.08(5)(1)(g) for "preprints," "custom inserts," and "circulation inserts" (hereinafter "inserts"). The latter statutory exemption treats inserts as a "component part of the newspaper" which are not to be treated separately for tax purposes. For reasons stated more fully in the Conclusions of Law, the ALJ agrees with the statutory construction adopted by Respondent. That conclusion of law renders moot and, therefore, irrelevant and immaterial, the bulk of the evidence put forth by the parties during the two-day hearing because the evidence assumed arguendo that Petitioner's statutory interpretation would be adopted by the ALJ, i.e., inserts would be counted separately from the newspaper for purposes of satisfying the 10 percent requirement in Subsection 212.08(5)(b). In an abundance of caution, the fact-finder made findings of fact based on the legal assumption that inserts are statutorily required to be counted separately for purposes of the 10 percent requirement in Subsection 212.08(5)(b). Those findings are set forth in paragraphs 9 through 11. The verification audit by Respondent's field office was able to verify an output increase of only 4.27 percent for 2005 and only 8.72 percent for 2006. A preponderance of evidence in this de novo proceeding did not overcome those findings. The trier of fact finds the evidence from Petitioner during this de novo proceeding to be inconsistent and unpersuasive. For example, Petitioner inflated production totals by counting materials printed for its own use, and materials in which the unit of measurement was inconsistent. In other instances, production totals for printing presses identified in the record as Didde and Ryobi presses varied dramatically with circulation. In other instances, Petitioner's reporting positions changed during the course of the proceeding. There is scant evidence that the alleged increase in production created jobs in the local market in a manner consistent with legislative intent. Rather, a preponderance of evidence shows that when Petitioner placed the equipment in service it was job neutral or perhaps reduced jobs.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent enter a final order finding that Petitioner did not satisfy the requirement for a 10 percent increase in productive output defined in Subsection 212.08(5)(b) and Rule 12A-1.096, and denying Petitioner's request for a refund. DONE AND ENTERED this 20th day of October 2009, in Tallahassee, Leon County, Florida. S DANIEL MANRY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 20th day of October, 2009.
The Issue The issue for determination is whether Petitioner owes sales tax of $15,230.15 plus interest from October 15, 1993.
Findings Of Fact Petitioner is a sole proprietorship organized in this state and doing business at 851 Monterey Road, Stuart, Florida. Respondent is the governmental agency responsible for administering the state sales tax in accordance with Chapter 212, Florida Statutes.1 In 1992, other businesses located at Petitioner's address reported to Respondent that they paid rent to Petitioner. However, Petitioner did not collect and remit sales tax on the rental income and was not registered as a dealer. On February 3, 1992, Respondent mailed a Notice of Intent to Audit Petitioner's books and records ("Notice of Intent to Audit") for the tax period February 1, 1987, through January 31, 1992. The Notice of Intent to Audit included a detailed list of the books and records needed for Respondent to conduct a detailed audit. The Notice also requested that Petitioner provide Respondent with a date on which it would be convenient to begin the audit. On February 11, 1992, Respondent had not heard from Petitioner. The auditor contacted Petitioner to schedule a date on which the audit could begin. At that time, Petitioner stated that he would not provide the auditor with any books and records. Petitioner refused to make available the books and records for 1990 through 1992 because Petitioner incorrectly suspected that Respondent maintained a secret "blacklist." Petitioner based his suspicion, in part, on the fact that he had refused to respond to a questionnaire Respondent had mailed to taxpayers throughout the state prior to the Notice of Intent to Audit. Petitioner also based his suspicion on the erroneous assumption that Respondent's audit was part of a criminal investigation by the Internal Revenue Service ("IRS") into Petitioner's federal taxes for 1987 and 1988. Petitioner refused to make available the books and records for 1987 through 1989 because those records were in the possession of the IRS. Petitioner maintained that the proposed audit was illegal. Respondent sent Petitioner copies of its statutory authority to audit Petitioner and made numerous attempts to arrange a mutually convenient time to begin the audit. Respondent did not commence the audit until March 10, 1993. On March 10, 1993, the auditor and audit group supervisor met with Petitioner and Mr. Eugene Nail, Petitioner's paralegal. Petitioner stated that he did not have the books and records Respondent needed to conduct a detailed audit because the IRS had confiscated them in connection with the pending criminal case. Respondent conducted the audit using the information Petitioner made available to the auditor. Petitioner made available: sales invoices for 1990 and 1991 and one month in 1992 grouped together by calendar month; sales and use tax return booklets; resale and exemption certificates; and commercial lease agreements. No journals and ledgers were available. Respondent determined Petitioner's tax deficiency by sampling the available information. Pursuant to Petitioner's request, the auditor used a six month sample period. The auditor explained to Petitioner that she would use Petitioner's invoices during the sample period to determine tax- exempt sales. She compared the invoices to resale certificates and calculated an error ratio based on discrepancies between the sales invoices and the resale certificates. Respondent determined the actual deficiency in sales tax during the six month sample period based on actual invoices that did not have a resale certificate and for which no sales tax was remitted. Respondent estimated the additional deficiency in sales tax by applying the error ratio to the balance of the audit period. Respondent examined only those invoices provided by Petitioner and previous sales tax returns filed by Petitioner. On April 9, 1993, the auditor conducted a meeting with Petitioner and discussed the audit procedures, results, applicable law, and abatement rules. On June 15, 1993, Respondent issued a Notice of Intent to Make Sales and Use Tax Changes in the amount of $45,469.05 ("Notice of Intent"). The Notice of Intent included a copy of all audit exhibits and workpapers. On August 30, 1993, Petitioner provided additional invoices to Respondent in a meeting with the auditor and audit group supervisor. On October 15, 1993, the auditor adjusted certain items in the audit file, reduced the proposed assessment, and issued a Revised Notice of Intent to Make Sales and Use Tax Changes in the amount of $37,417.45 ("Revised Notice of Intent"). Petitioner requested additional time to provide more information, including additional resale certificates. However, Petitioner failed to provide the additional information. By letter dated December 9, 1993, the audit group supervisor notified Petitioner that she was closing the case and sending it to the Tallahassee office as a contested case. On December 23, 1993, Respondent issued a Notice of Proposed Assessment to Petitioner assessing Petitioner for $37,417.45 in tax, penalty, and interest through October 15, 1993. On February 21, 1994, Respondent received Petitioner's written protest dated February 10, 1994. Respondent revised the audit figures again. On January 20, 1995, Respondent issued its Notice of Decision reducing the assessment against Petitioner to $15,230.15. The Notice of Decision assessed Petitioner for taxes of $8,900.55, penalties of $2,225.14, and interest of $4,104.46 through October 15, 1993. Interest accrues at the per diem rate of $2.93 until paid. On March 16, 1995, Petitioner timely appealed the Notice of Decision by filing a Petition for Formal Hearing with Respondent. Inadequate Records Petitioner failed to maintain adequate books and records within the meaning of Sections 212.12(6), 212.13(2), 212.35, and Florida Administrative Code Rules 12A-1.093(2) and (5).2 Petitioner failed to maintain adequate books and records for the five year audit period prescribed in Section 213.34(2). Petitioner failed to maintain general ledgers and journals for the five year audit period. The only records Petitioner maintained were sales invoices for 1990 and 1991 and one month in 1992. Petitioner was unable to produce adequate records for 1987 through 1989. Petitioner asserted that the IRS had those records and that Petitioner could not obtain the records required by Florida law. The federal tax case has been pending against Petitioner since 1990.3 During those seven years, Petitioner was unable to obtain copies of any records in the possession of the IRS. The journals and ledgers for 1987 and 1988 were maintained on computer floppy disks. Petitioner asserts that the floppy disks were lost. Petitioner asserts that his attorney kept the books and records for 1989 in an out-of-state location to avoid producing those records for the IRS. The journals and ledgers for 1990 though 1992 are in the possession of Petitioner's accountants. Petitioner did not produce those records during the audit or at the administrative hearing. Petitioner could have requested the journals and ledgers for 1989 through 1991 from his attorney and accountants, respectively, but chose not to do so. Petitioner made available to Respondent only sales invoices for 1990 and 1991 and one month in 1992. Without the general ledgers and cash journals to cross- reference the sales invoices, Respondent could not corroborate the financial records available for audit. Respondent was required by applicable law to conduct the audit by sampling Petitioner's available records. Exempt Sales: Resale Certificates Certain exempt sales claimed by Petitioner during the six month sample period were not supported by resale certificates. Respondent disallowed the exempt sales that were not supported by resale certificates and allowed the invoices that were supported by resale certificates. For the six month sample period, Respondent assessed an actual sales tax deficiency for those sales that did not have a corresponding resale certificate.4 Respondent prepared audit schedules for the six month sample period that listed the invoices with a sales tax deficiency due to the lack of a resale certificate. Based on the audit schedules, Respondent determined an error ratio and applied the error ratio over the five year audit period to determine the estimated tax deficiency.5 Respondent conducted the audit in accordance with generally accepted audit procedures and with applicable state law. Disallowed exempt sales were listed individually by invoice, name of vendor, and the date and amount of the sale. Disallowed exempt sales were listed for each of the six months in the sample period. Additional Taxable Sales Sales invoices for the six month sample period showed that Petitioner collected more sales tax than he reported to Respondent on his monthly sales tax returns. Respondent treated the collected, but unremitted, sales tax as "additional taxable sales" rather than as an unremitted sales tax. Respondent assessed Petitioner for the sales tax paid on Petitioner's invoices but not remitted to Respondent by Petitioner. The deficiency existed for May and June, 1990, and for January and February, 1991. Taxable Rent Respondent reviewed lease agreements relating to property rented by Petitioner at his business address. Respondent determined that Petitioner failed to collect and remit sales tax on the rental of his property. Respondent assessed Petitioner for sales tax Petitioner failed to collect and remit on taxable rent. Petitioner does not contest that portion of the assessment.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent enter a Final Order and therein UPHOLD Respondent's assessment of $15,230.15 plus interest statutorily due from October 15, 1993, until paid.RECOMMENDED this 17th day of February, 1997, in Tallahassee, Florida. DANIEL MANRY 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 17th day of February, 1997.
