The Issue The issue for determination is whether Petitioner is liable for use tax, pursuant to Chapter 212, Florida Statutes, to the Florida Department of Revenue for the use and storage of a vessel.
Findings Of Fact Camden Corporation (Petitioner) is a foreign corporation, incorporated in Delaware on August 7, 1990. Petitioner is a solely owned, closed corporation. Petitioner has two officers: a President, who is the sole owner, and a Treasurer. At all times material hereto, Petitioner's President and Treasurer were residents of Jacksonville, Florida. Petitioner's business address is in Jacksonville, Florida. Petitioner's officers handled its day-to-day activities and records from Jacksonville, Florida. Prior to the Petitioner's incorporation, its President wanted to purchase a vessel to take a world wide cruise. He obtained the services of a law firm to advise him on avoiding a state's sales and use tax on the purchase of a vessel, with Florida being one of the states. A lawyer in the firm contacted the Florida Department of Revenue (Respondent) and inquired, without relating any of Petitioner's factual circumstances, as to whether the case of Department of Revenue v. Yacht Futura, 510 So.2d 1047 (Fla. 1st DCA 1987) was still good case law in Florida. Yacht Futura was a case in which the parameters of Florida's sales and use tax were interpreted regarding repairs and personal use of vessels while in Florida waters. Respondent's representative informed the firm's lawyer that Yacht Futura was still being followed by Respondent and that no exceptions existed; but Respondent's representative further cautioned that the factual circumstances must conform to Yacht Futura. The firm's lawyer prepared a memorandum advising Petitioner's President, among other things, that no liability for Florida's sales and use tax would be incurred for repairs and personal use of a vessel in Florida's waters, so long as the circumstances complied with Yacht Futura. After having received the firm's advice and advice from tax advisors, Petitioner's President created and incorporated Petitioner. On August 14, 1990, Petitioner purchased a used motor vessel in international waters for $5,618,000. The vessel was a 131' Feadship with Coast Guard documentation number 623589. Petitioner named the vessel "CAMDEN." The CAMDEN was the only assest owned by Petitioner. Petitioner did not pay any Florida sales tax at the time of CAMDEN's purchase. From August 14, 1990 through October 15, 1990, the CAMDEN was outside the State of Florida. Petitioner's President had taken the vessel on a cruise. During the time period that the vessel was on the cruise, Petitioner did not pay any sales or use tax in any jurisdiction in the United States. Also, during the time period that the vessel was on the cruise, Petitioner did not license, title, or register the CAMDEN in any jurisdiction in the United States. On October 15, 1990, relying on the law firm's advice, Petitioner imported the CAMDEN into Florida waters for major repairs, with the intention of departing after the repairs and not returning to Florida waters. Petitioner obtained the services of Huckins Yacht Corporation, a registered repair facility, in Jacksonville to perform repairs to the CAMDEN, which had a dock in Huckins Marina. However, the dock at Huckins Marina was unable to accommodate a vessel the size of the CAMDEN. The vessel was docked at Southbank Marina which could accommodate the vessel and which was the closest marina to Huckins Marina. Petitioner's President was not in the State of Florida when the CAMDEN arrived in Florida waters. He did not return to Florida until October 24, 1990. Petitioner did not have a written contract with Huckins Yacht Corporation (Huckins) to perform any repairs on the CAMDEN. However, Huckins did perform some minor repairs to the CAMDEN. Also, Huckins arranged for a major repair to the CAMDEN. It arranged for Petitioner to purchase a global position satellite electronic system as a nonwarranty repair. The electronic system was to be installed by someone who was not an employee of Huckins and who did not have a contractual agreement with Huckins for the installation. The electronic system was installed on the CAMDEN at the Southbank Marina. During the time that repairs were being made to the CAMDEN, its crew remained on board. Petitioner never received any bill from Huckins for any repairs made to the CAMDEN, including the installation of the electronic system. While the vessel was docked for repairs at the Southbank Marina, it was used for personal entertainment. On October 25, 1990, Petitioner's President and his friends had an open house type of party on the CAMDEN. On October 26, 1990, Petitioner had a luncheon cruise on the CAMDEN. On October 27, 1990, Petitioner had a dinner cruise and a birthday party for the daughter of Petitioner's President. On October 28, 1990, Petitioner took the CAMDEN from Jacksonville to St. Augustine for a pleasure trip. Leaving St. Augustine, the CAMDEN traveled to Miami, Florida and docked there on October 30, 1990, to get the vessel prepared for world travel. In Miami, the CAMDEN was docked at the Moorings Yacht Services, Inc. (Moorings), a registered repair facility. In November 1990, the Moorings began repairs to the CAMDEN, and in December 1990, the vessel departed the Moorings. In November 1990, Petitioner hired a tax consultant, who was a former employee of Respondent, for advice regarding Petitioner's liability for sales and use tax of the CAMDEN in Florida. The tax consultant advised Petitioner to register the CAMDEN as a charter for sales and use tax. Further, he advised Petitioner to late-file with Respondent an Exemption Affidavit for Boats Placed in a Registered Repair Facility, referred to as a Safe Harbor Affidavit, pursuant to Subsection 212.08(7)(t), Florida Statutes. On December 19, 1990, a Safe Harbor Affidavit was executed by both Huckins and Petitioner's President. The Safe Harbor Affidavit indicated, among other things, that Huckins was a registered repair facility in Jacksonville, Florida and that, from October 16, 1990 through October 25, 1990, the CAMDEN was under the care, custody, and control of Huckins for the purpose of installing electronics, which was the electronic system. Even though the Safe Harbor Affidavit does not provide that Huckins installed the electronic system on the CAMDEN, it does infer that Huckins had installed the electronic device. Respondent interprets "care, custody, and control" as the vessel being in the "physical" care, custody, and control of the registered repair facility. Clearly shown on the Safe Harbor Affidavit is that it is to be filed with the Respondent within 72 hours after the repair facility takes possession of the vessel. Additionally, clearly shown on the Safe Harbor Affidavit is that a copy of it is to be filed with Respondent within 72 hours after the work is completed and the vessel is released to the owner. On or about December 22, 1990, the CAMDEN departed Florida waters for a pleasure cruise to the Bahamas. In early January 1991, the vessel returned to Florida. The CAMDEN remained in Florida until mid-January 1991, when it traveled to the Caribbean. Around mid-May 1991, the vessel returned to Florida. In 1990, Petitioner was not issued a permit by any agency of the United States government to use the CAMDEN in Florida waters. In April 1991, one of Respondent's representatives discovered, during a routine examination of the records of the Miami Marina, that the CAMDEN was named as a boat docked in Florida with an out-of-state hailing port. On May 13, 1991, Respondent's representative sent a Declaration for Florida Sales and Use Tax (Declaration) to Petitioner for it to complete and return to Respondent. Instead of completing the Declaration, on December 10, 1991, Petitioner's tax consultant delivered the Safe Harbor Affidavit executed on December 19, 1990, to Respondent's representative. Additionally, Petitioner's tax consultant verbally supported the Safe Harbor Affidavit by stating that the CAMDEN was docked at Southbank Marina in Jacksonville while the repairs to the vessel were being completed by Huckins and the nonemployee. The Moorings filed a Safe Harbor Affidavit with Respondent, providing that the CAMDEN entered the facility in November 1990 and departed in December 1990. The Safe Harbor Affidavit was not submitted to Respondent within 72 hours of the CAMDEN either entering the facility for repairs or departing the facility after the repairs were completed. 1/ Respondent has a practice of accepting late-filed Safe Harbor Affidavits, with the condition that all documents supporting repairs are also to be submitted. A subsequent review of all the documents submitted would determine whether a person would be responsible for sales and use tax. On December 10, 1991, based on the Safe Harbor Affidavit and the representations by Petitioner's tax consultant, Respondent's representative closed her file regarding the sales and use tax, without assessing any sales or use tax against Petitioner. However, she forwarded neither a closing letter nor a closing agreement to Petitioner. Even though Petitioner had not received a closing letter or a closing agreement from Respondent, it believed that Respondent had terminated its inquiry of any assessment against it. In or around November 1991, another of Respondent's representative (Respondent's second representative) observed, while performing a routine marina check, the CAMDEN docked at the Palm Harbor Marina in West Palm Beach, Florida. Subsequently, he opened a new file on the CAMDEN. Petitioner was unaware that Respondent's second representative had opened a new file. Respondent's second representative performed an investigation of the vessel, including reviewing the Safe Harbor Affidavit submitted to the Respondent's other representative on December 10, 1991. His investigation led to the assessment at issue. The investigation by Respondent's second representative showed, and it is determined as a finding of fact here, that the CAMDEN was not in the physical care, custody, and control of Huckins during the repairs for the period October 16, 1990 through October 25, 1990. From October 15, 1990, when the CAMDEN entered in Florida waters for repairs, the vessel remained in Florida for more than a total of 10 days. Petitioner decided to sell the CAMDEN and listed it for $6.9 million. On February 14, 1992, Petitioner sold the CAMDEN for $5.3 million, which was $1.6 million less than it was originally listed. For 1991 and 1992, Petitioner's President treated the CAMDEN as his personal second home and took a home interest deduction for federal income tax purposes. On October 10, 1992, Respondent notified Petitioner that it was assessed, as of April 10, 1992, a tax of $337,080, representing: 6 percent of the CAMDEN's purchase price of $5,618,000; $84,270 in penalty; $168,540 in specific penalty; and $59,826.60 in interest. On October 26, 1992, Respondent issued a notice of final assessment to Petitioner which included the above assessment and the facts and reasons, including legal reasons, for the assessment. Petitioner contested the assessment. On January 14, 1994, Respondent issued a notice of reconsideration of the assessment and revised final assessment, withdrawing the $168,540 in specific penalty but sustaining the remaining assessment of $503,113.02, which represented: $337,080 tax; $84,270 penalty; and $81,763.02 interest. In its notice of reconsideration, Respondent determined, among other things, that Petitioner was issued an out-of-state registration, effective December 1, 1990, as a result of Petitioner submitting an application for sales and use tax registration, listing the major business activity as rental of tangible personal property. Additionally, Respondent determined, among other things, that Petitioner, as the corporation, maintained control and use of the CAMDEN during the period December 1990 through February 1992 when the CAMDEN was sold. No tax at issue was assessed for this period of time. Petitioner protested the revised assessment. Petitioner has not paid any Florida use tax.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order affirming the assessment of use tax against the Camden Corporation in the amount of $503,113.02, plus accrued interest. DONE AND ENTERED on this 30th day of September, 1996, in Tallahassee, Leon County, Florida. ERROL H. POWELL, 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 30th day of September, 1996.
The Issue Whether Petitioners are liable for sales and use tax, penalty, and interest as assessed by the Department of Revenue (the Department)?
Findings Of Fact Salma is a Florida corporation with its principal place of business at 2231 Del Prado Boulevard, Cape Coral, Florida, 33990. Gausia is a Florida corporation with its principal place of business at 11571 Gladiolus Drive, Fort Myers, Florida, 33908. Petitioners are in the business of operating gas stations with convenience stores. The Department is an agency of the State of Florida and is authorized to administer the tax laws of the State of Florida. Petitioners were selected for audit because their reported gross sales were less than the total cost of items purchased (inventory) for the audit period. The Department issued Salma and Gausia each a Notice of Intent to Conduct a Limited Scope Audit or Self-Audit, dated April 26, 2013, for sales and use tax, for the period February 1, 2010, through January 31, 2013 (collectively referred to as the Notices). The Notices requested that Petitioners provide the Department: (a) a list of all their vendors for alcohol, tobacco, soda, chips, candy, etc.; (b) their total purchases of alcohol and tobacco, by vendor, for the period July 2010 to June 2011; (c) copies of their federal tax returns for the examination period; (d) purchase receipts for all purchases for the last complete calendar month; and (e) daily register (Z tapes) for the last complete calendar month. The Notices gave Petitioners 60 days to gather the requested documents before the audit was to commence. The Notices also requested that Petitioners complete an attached Questionnaire and Self Analysis Worksheet. In response to the Notices, Petitioners requested a 30- day extension of time until July 18, 2013, to provide the requested documents and to designate a Power of Attorney. Petitioners did not provide the Department any books and records for inspection, nor did they complete and return the questionnaire and self analysis worksheets. As a result, the Department's auditor determined the sales tax due based upon the best information available. To calculate an estimated assessment of sales tax, the Department used the purchase data of Petitioners' wholesalers and distributors of alcoholic beverages and tobacco, for July 1, 2010, through June 30, 2011; the 2010 National Association of Convenience Stores average markups and in-store sales percentages of alcoholic beverage and tobacco products; and historical audit data. After reviewing the purchase data for July 1, 2010, through June 30, 2011, and for July 1, 2011, through June 30, 2012, the Department's auditor determined that the data was missing a few vendors. As a result, the Department's auditor estimated the amount of Petitioners' cigarette purchases, based on historical audit data that shows that cigarette sales are generally 4.31 times more than beer sales. The Department's auditor and audit supervisor testified that the estimated gross sales seemed reasonable and consistent with the national averages and the purchase data for July 1, 2011, through June 30, 2012. The Department estimated gross sales (i.e., the retail sale value of the goods sold) by marking up the taxable sales and exempt sales reported on the sales and use tax returns submitted to the Department by Petitioners. For example, for July 1, 2010, through June 30, 2011, Salma purchased beer from its wholesalers and distributors for $148,826.15, and the Department marked up the purchase price by 27 percent for a retail value of $189,009.21. For July 1, 2010, through June 30, 2011, Gausia purchased beer from its wholesalers and distributors for $132,138.65, and the Department marked up the purchase price by 27 percent for a retail value of $167,816.09. The Department's markup on the alcoholic beverage and tobacco products is reasonable because the Department's auditor testified that he used a combination of 2010 National Association of Convenience Stores average markups and the competitive pricing and information from audits of other convenience stores. The Department determined that the exemption ratio reported on the sales and use tax returns submitted to the Department by Petitioners was extremely high for their industry. The Department used an exemption ratio of 15 percent, based on historical audit data for the industry, to calculate Petitioners' estimated taxable sales. A review of Petitioners' sales and use tax returns revealed that they did not apply the tax bracket system to their taxable sales transactions, as required under sections 212.12(9) and (10), Florida Statutes. Instead, Petitioners remitted sales tax on their taxable sales based on their gross receipts at a flat tax rate. The Department's auditor testified that this method of reporting tax is inappropriate and does not accurately reflect the sales activity of the business. The Department calculated the average effective tax rate of 6.0856 percent, based on historical audit data for the industry. To calculate the estimated tax due, the Department multiplied the effective tax rate by the estimated taxable sales and gave Petitioners credit for any tax remitted with their tax returns. The Department issued Salma a Notice of Intent to Make Audit Changes, dated August 8, 2013, for audit number 200149872. The Department issued Gausia a Notice of Intent to Make Audit Changes, dated August 8, 2013, for audit number 200149749. The Department assessed Petitioners sales tax on their sales of alcoholic beverages and tobacco. The Notice of Intent to Make Audit Changes gave Petitioners 30 days to request a conference with the auditor or audit supervisor, to dispute the proposed changes. Petitioners did not make such a request. The Department issued a Notice of Proposed Assessment (NOPA) to Salma on March 6, 2014, for tax in the sum of $159,282.26; for penalty in the sum of $39,820.57; and interest as of March 6, 2013, in the sum of $27,772.36. The Department issued a NOPA to Gausia on March 6, 2014, for tax in the sum of $213,754.46; for penalty in the sum of $53,438.62; and interest as of March 6, 2013, in the sum of $36,921.79. Additional interest accrues at $30.55 per day until the tax is paid. The NOPAs became final assessments on May 5, 2014. After filing a request for an administrative hearing, Petitioners completed the Questionnaire and Self Analysis Worksheet and produced the following documents to the Department: (a) a list of all of their vendors for alcohol, tobacco, soda, chips, candy, etc.; (b) a list of vendors for alcohol and tobacco, for the examination period of July 2010 to June 2011; (c) a summary of their taxable sales, for the period February 2010 through December 2012; (d) copies of their federal tax returns, for the tax years 2010 through 2013; (e) copies of its purchase receipts for the months of July 2013; and (f) copies of their daily register (Z-tapes) for the month of July 2013. The Department's auditor testified that aside from being untimely, the records and information provided by Petitioners during these proceedings were not reliable because Petitioners did not provide any source documents that would allow the Department to reconcile the reported figures and confirm the supplied information. In addition, the purchase receipts and Z- tapes were not relevant because they were from outside of the audit period. The Z-tapes are also unreliable because the manager of the convenience store testified at the final hearing that employees purposely and routinely entered taxable sales into the cash registers as tax exempt sales. Petitioners argue that the Department did not use the best information available when estimating the taxes due. Petitioners claim that because their businesses are combination gas station/convenience stores, the national data for standalone convenience stores is inapplicable. However, notably absent from Petitioners' testimony or evidence was any alternative data upon which the Department could have relied for more accurate estimates.2/
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order denying Petitioners' requests for relief and assessing, in full, the Department's assessments of sales tax, penalty, and interest against both Salma and Gausia. DONE AND ENTERED this 9th day of January, 2015, in Tallahassee, Leon County, Florida. S MARY LI CREASY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 9th day of January, 2015.
The Issue Whether Petitioner ("DEPARTMENT") is entitled to assess sales or use taxes, penalties, and interest against Respondent ("VOLPE") pursuant to Chapter 212, Florida Statutes, as set out in its Notice of Proposed Assessment dated March 20, 1980.
Findings Of Fact During 1975-1977, VOLPE was a general contractor engaged in the construction of a United States Post Office and Vehicle Maintenance Facility at Miami, Florida. In connection with that construction project, VOLPE purchased materials from numerous subcontractors, including Hardware Lighting and Emporium, and Jemco, Inc. (Testimony of Alford, Danca; P.E. 2, 3) On March 8, 1979, after audit of VOLPE's records, the DEPARTMENT proposed to assess VOLPE for delinquent sales and use tax, together with interest and penalties thereon, which it claimed were due from VOLPE's purchase of materials from various subcontractors. The DEPARTMENT's proposed assessment was based on its inability to verify, to its satisfaction, that sales and use tax due from those sales transactions was paid by VOLPE to the vendors, and subsequently remitted to the DEPARTMENT. (Testimony of Alford, P.E. 3.) With the DEPARTMENT's encouragement, VOLPE then wrote its vendors in the various sales transactions requesting proof that the requisite Florida sales or use tax had been remitted to the DEPARTMENT. In response, two vendors, Ohio Medical Products and Power Wash, remitted tax vendors, (collected from VOLPE at time of sale) to the DEPARTMENT, in the amounts of $10,070 and $1,635.50, respectively. In addition, VOLPE discovered that it had not paid the requisite tax to a vendor in one transaction and remitted a payment to the DEPARTMENT in the amount of $1,442.53. (Testimony of Danca, Alford, P.E. 1.) These late tax payments made by Ohio Medical Products, Power Wash, and VOLPE in partial satisfaction of the DEPARTMENT's March 8, 1979, proposed assessment consisted only of the tax due on the individual sales, including interest thereon. No penalty payments were made because Salvatore Danca, VOLPE's comptroller involved in collecting the sales tax from the various vendors, reasonably and in good faith believed that the DEPARTMENT would waive penalties if late tax payments were promptly submitted. Although Louis A. Crocco, the DEPARTMENT's representative, by affidavit denies making such a representation, he admits that the possibility of adjusting the penalties, otherwise due, was discussed with Danca. In the absence of more explicit evidence from the DEPARTMENT concerning those discussions, or attacking the credibility of Danca's testimony, it is determined that, based on discussions with DEPARTMENT representatives, Danca reasonably and in good faith believed penalties would be waived. (Testimony of Danca; P.E. 1, 6, R.E. 2, 3, 4, 5, 6.) As a result of partial payments and adjustments made to the DEPARTMENT's proposed sales and use tax assessment, the DEPARTMENT issued a fourth revision of the proposed assessment on March 20, 1980. By that revision, the DEPARTMENT asserts VOLPE, as of March 20, 1980, is liable for payment of tax, interest, and penalties as follows: Sales Transaction Sales And Use Tax Due Interest Penalties (25 Percent) Jemco, Inc., sale of mechanization equipment to VOLPE, per agreement dated December 5, 1975. $16,229.53 $4,047.88 Hardware, Lighting and Emporium, sale of finished hardware and accessories to VOLPE per VOLPE Purchase Order dated October 2, 1975. 1,556.10 389.02 Ohio Medical Products' Power Wash's, and unidenti- fied vendor's sale to VOLPE for which late payments of tax due and interest have been made. -0- 2,737.43 TOTAL: $17,856.10 $5,779.42 $7,174.33 (Testimony of Alford, Danca, 3.) Stipulation of Counsel; P.E. 1, 2, [AS TO JEMCO, INC./VOLPE TRANSACTION] By its standard Agreement dated December 5, 1975, VOLPE agreed to purchase from Jemco, Inc., of Fort Worth, Texas, post office mechanization equipment for the contract price of $347,900. Subsequent change orders resulted in an adjustment to $405,689.70. In order to minimize on-site installation problems, Jemco, Inc., was required to maximize assembly of the mechanization equipment at its out-of-state plant prior to shipping to the Miami job site. (Testimony of Danca; P.E. 2, R.E. 1.) The written sales Agreement, including attachments, between Jemco, Inc., and VOLPE expressly states, in three separate places, that the total contract sales price includes Florida sales tax. The DEPARTMENT admits that VOLPE has paid all monies due Jemco, Inc., under the contract. By virtue of its full payment of the contract price which expressly included sales tax, it must be concluded that VOLPE paid the requisite sales or use tax to Jemco, Inc. (Stipulation of Counsel; P.E. 2.) VOLPE's standard form, entitled "Subcontractor's Application for Payment" was used as a basis to make incremental payments to Jemco, Inc., pursuant to the Agreement. That form required the subcontractor to certify that, among other things, it had complied with state tax laws applicable to performance of the Agreement. (Testimony of Danca; R.E. 11.) VOLPE's actions in connection with the Jemco, Inc., sales transaction were consistent with its standard practice when entering contracts with vendors or subcontractors. That practice is to require that the sales price include the payment of necessary sales tax, the vendor or subcontractor is required to remit the required tax to the appropriate government entity. After performance of the contract, the subcontractor is required to certify that these requirements have been satisfied. The certification is in the form of a General Release which discharges VOLPE from all claims, debts and liabilities which the subcontractor may have against VOLPE because of the contract. In this case, Jemco, Inc., executed such a General Release in favor of VOLPE. (Testimony of Danca; R.E. 1.) The DEPARTMENT has not audited Jemco, Inc.'s records, thus, it does not know whether the tax it seeks to assess against VOLPE has already been remitted by Jemco, Inc. (Testimony of Alford.) The DEPARTMENT offered no affirmative evidence to contravene VOLPE's assertion that it had paid the requisite sales or use tax to Jemco, Inc. Its claim rests solely on the fact that VOLPE's evidence of payment does not contain a sales invoice or other documentation which itemizes, or separately states the amount of sales tax due from VOLPE. [AS TO HARDWARE AND LIGHTING EMPORIUM TRANSACTION] By purchase agreement dated October 2, 1975, VOLPE agreed to purchase finished hardware from Hardware and Lighting Emporium of Miami, Florida, for the contract price of $23,877, which expressly included Florida state sales tax. Each billing invoice issued by Hardware and Lighting Emporium separately itemizes and states the Florida sales tax due. In applying for payment under the agreement, Hardware and Lighting Emporium completed the VOLPE "Subcontractor's Application for Payment" forms certifying compliance with state sales tax laws in performing the agreement. VOLPE has fully satisfied its payment obligations under the purchase agreement. (Testimony of Danca; P.E. 3, R.E. 9, 10.)
Conclusions Conclusions: VOLPE established by a preponderance of evidence that it previously paid to its several vendors the sales and use tax which the DEPARTMENT now seeks. Accordingly, the proposed tax assessment, with penalties and interest thereon, cannot be sustained. Recommendation: That the DEPARTMENT's Notice of Proposed Assessment of Tax, Penalties, and Interest, under Chapter 212, Florida Statutes, dated March 20, 1980, be DISMISSED. Background By written notice issued on March 20, 1980, Petitioner ("DEPARTMENT") proposed to assess Respondent ("VOLPE") taxes, penalties, and interest allegedly due pursuant to Chapter 212, Florida Statutes. In response, VOLPE claimed that it had previously paid the tax in question, and requested an opportunity to submit proof at a formal hearing. On April 17, 1980, the DEPARTMENT forwarded VOLPE's request to the Division of Administrative Hearings, and asked that the requested hearing be conducted by a hearing officer. On May 15, 1980, final hearing was set for July 18, 1980. On June 17, 1980, the DEPARTMENT filed a motion to realign the parties. As grounds, it stated that VOLPE had the burden of proof, and the duty to present a prima facie case at hearing since VOLPE requested the hearing and was the party seeking relief. At the DEPARTMENT's request, ruling on its motion was withheld until presentation of arguments at final hearing. At hearing, the DEPARTMENT's motion was denied for the reasons stated in the Conclusions of Law below. In support of its proposed assessment against VOLPE, the DEPARTMENT called Marvin P. Alford, a tax examiner, as its only witness, and offered Petitioner's Exhibits 1/ 1 through 6, inclusive, each of which was received into evidence. VOLPE called Salvatore Danca, its comptroller, and Harold G. Gregory, its branch manager, as its witnesses, and offered Respondent's Exhibits 1 through 11, inclusive, each of which was received. At the conclusion of hearing, the parties were granted the opportunity to submit proposed findings of fact, conclusions of law, and memoranda within ten (10) days after filing of the transcript of hearing. The post-hearing submittals were filed by August 21, 1980. Based on the evidence submitted at hearing, the following facts are determined:
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is, RECOMMENDED: That the DEPARTMENT's Notice of Proposed Assessment of Tax, Penalties, and Interest, Under Chapter 212, Florida Statutes, dated March 20, 1980, be DISMISSED. RECOMMENDED this 25th day of September, 1980, in Tallahassee, Florida. R. L. CALEEN, JR. Hearing Officer Division of Administrative Hearings Room 101 Collins Building Tallahassee, Florida 32301 (904) 488-9675 Filed with Clerk of the Division of Administrative Hearings this 25th day of September, 1980.
The Issue This is a case in which the Petitioner seeks to suspend or revoke the Respondents' licenses, or take other disciplinary action against the Respondents, for reasons which are alleged in a five-count Administrative Complaint. All of the allegations of the Administrative Complaint arise from two transactions; a rental agreement involving property owned by Mr. and Mrs. Capraro and another rental agreement involving property owned by Ms. Supino. The Administrative Complaint alleges that as a result of the Respondents' actions in connection with these two transactions the Respondents have violated Section 475.25(1)(b), (d), and (k) Florida Statutes. The Respondents dispute some of the factual allegations and deny that there was any violation.
Findings Of Fact Based on the stipulations of the parties, on the testimony of the witnesses at the hearing, and on the exhibits received in evidence, I make the following findings of fact: 2/ At all times relevant and material, Robert H. Karn has been licensed as a real estate broker, having been issued license number 0122138. At all times relevant and material, Robert H. Karn, Inc., has been a corporation licensed as a real estate broker, having been issued license number 0214562. The street address of both Respondents is 5211 Southwest 91 Terrace, Cooper City, Florida 33328. (Tr. 6-7) Findings regarding the transaction involving the Capraro property During May of 1983, Robert H. Karn was the listing broker for the rental of a residence owned by Joseph A. Capraro and Vita M. Capraro. (T. 51, 156) Letitia Daugherty was interested in renting a residence and another broker, Lois Rutkin, showed the Capraro property to Daugherty. Negotiations followed and thereafter, on May 13, 1983, Letitia Daugherty, as prospective tenant, and Joseph A. Capraro and Vita M. Capraro, as landlords, signed a document titled Agreement To Enter Into A Lease. The Agreement required that Daugherty pay the amount of $950.00 "as an earnest money deposit and as a part of the rental price on account of offer to rent the property . . . ." The Agreement provided that the rent would be $475.00 per month, that the "pre- payments" would be $475.00 for the last month's rent, and that a security deposit in the amount of $475.00 would be paid as follows: $150.00 on June 14, 1983, $150.00 on July 14, 1983, and $175.00 on August 14, 1983. The agreement also provided that rent would be due on the 14th of each month. (Pet. Ex. #1; Tr. 21, 22, 24, 97-98) During the negotiations which led up to the agreement to enter into a lease, Daugherty was represented by Lois Rutkin, a real estate broker associated with Drew Realty, and the Capraros were represented by Robert H. Karn. All of the terms of the agreement to enter into a lease were agreed to by all parties prior to that document being signed. It was also specifically understood that the $950.00 paid by Daugherty represented the first and last month's rent. The cashier's check for the $950.00 was made payable to the order of Robert H. Karn because he specifically requested that it be made payable to him. (Tr. 21, 23- 26, 33, 49, 54, 57, 171) If a formal lease had been entered into pursuant to the terms of the Agreement To Enter Into A Lease, Daugherty's $950.00 deposit would have been applied as follows: $475.00 for the first month's rent from May 14 to June 13, 1983, and $475.00 for the last month's rent. Further, if such a lease had been entered into consistent with the Agreement, Daugherty would not have been obligated to pay any further amounts until June 14, 1983, at which time she would have been obligated to pay $475.00 for one month's rent from June 14 through August 13, 1983, plus a $150.00 payment towards the security deposit. (Pet. Ex. #1) Consistent with her obligation under the Agreement To Enter Into A Lease, and at the specific request of Robert H. Karn, Daugherty obtained a cashier's check in the amount of $950.00 payable to the order of Robert H. Karn and delivered the cashier's check to Robert H. Karn. The cashier's check was thereafter cashed by Robert H. Karn without being deposited in any trust or escrow account. (Pet. Ex. #2) Robert H. Karn prepared a formal written lease for the rental of the Capraro property by Daugherty. The lease prepared by Robert H. Karn contained several provisions which were materially different from the terms contained in the Agreement To Enter Into A Lease. Among the changes were a provision that the rent would be due on the first of each month, that the security deposit would be $950.00, that $285.00 of the money previously paid by Daugherty would be applied as rent from May 14 to May 31, 1983, that $665.00 of the money previously paid by Daugherty would be applied towards the security deposit, that additional payments of $142.50 each would be due towards the security deposit on July 1, 1983, and August 1, 1983, and that the next month's rent in the amount of $475.00 would be due on June 1, 1983. (Pet. Ex. #3, Tr. 55, 60) The written lease prepared by Robert H. Karn also contained the following provisions: Tentant (sic) will have first option to Buy said property at the end of this lease. Drew Realty will receive $142.50 on July 1, 983, for renting this property to the "Tentant (sic). Drew Realty will receive a 3 percent Real Estate Commission if Tentant (sic) buys the property. Robert H. Karn, Inc. will receive $142.50 on August 1, 1983 for the rental listing. Robert H. Karn, Inc. will receive a 3 percent Real Estate Commission if Tentant (sic) buys the property. The written lease which was prepared by Robert H. Karn was given to Daugherty on the evening of May 16, 1983. When Daugherty read the lease and saw that it contained provisions different from the provisions in the Agreement To Enter Into A Lease, she refused to sign it. That same evening she told Lois Rutkin, Dan Drew, and Robert H. Karn that she refused to sign the lease because it was different from what she had agreed to, and she demanded the return of her $950.00 deposit. The $950.00 deposit has never been returned to her. (Tr. 27- 30) On the evening of May 16, 1983, extensive discussions took place between Daugherty, Lois Rutkin, Dan Drew, and Robert H. Karn in an effort to resolve the problem. Robert H. Karn's excuse for changing the terms in the lease was that Daugherty had two dogs, but Robert H. Karn had known about the dogs before the parties signed the Agreement To Enter Into A Lease. During the discussions on the evening of May 16, 1983, Lois Rutkin told Robert H. Karn she wanted him to return the cashier's check he had received from Daugherty and Dan Drew told Robert H. Karn not to disburse the funds from that cashier's check, but to return the money to Daugherty. Robert H. Karn did not return the cashier's check nor did he otherwise make any reimbursement to Daugherty. (Tr. 40, 58-59, 85-86) By the time Lois Rutkin, Dan Drew, and Daugherty asked for the return of the $950.00 cashier's check, Robert H. Karn had already cashed the check and had spent the money. Most, if not all, of the money was spent on behalf of the Capraros to pay for such things as mortgage payments and painting on the Capraro's rental property. After Daugherty refused to sign the lease, Robert H. Karn told the Capraros to treat Daugherty's $950.00 deposit as "default money." Actually, the default was by the Capraros who, through their agent Robert H. Karn, tried to change the terms of the agreement. (Tr. 42, 84, 100, 105, 160- 161, 167, 170, 173-175) Subsequently, Daugherty sued Robert H. Karn in County Court in an attempt to collect her 950.00 deposit. On September 12, 1983, a Default And Final Judgment gas entered in Case No. 83-2532-SPH in County Court in Broward County against Robert H. Karn and in favor of Letitia Daugherty in the sum of $950.00, plus court costs in the amount of $42.00. After the judgment was entered against Robert H. Karn, Daugherty again demanded payment of the $950.00. Robert H. Karn has never paid anything to Daugherty. (Pet. Ex. #4, Tr. 30-31, 45, 47-48) Robert H. Karn never asked the Florida Real Estate Commission for an escrow disbursement order regarding the transaction involving the Capraro rental property. (Tr. 169-170) Findings regarding the transaction involving the Supino property In about the middle of July of 1983, Lucy Supino entered into an oral agreement with Robert H. Karn pursuant to which Robert H. Karn was to attempt to locate a tenant for one or more of Lucy Supino's rental units. During August of 1983 Robert H. Karn rented one of Lucy Supino's rental units to Marilyn McKelvey. Thereafter, Karn, Supino, and McKelvey had various disagreements about the transaction. (Tr. 113-116, 121, 138, 141-142) 3/
Recommendation For all the foregoing reasons, it is recommended that the Florida Real Estate Commission enter a Final Order which would (a) find the Respondents guilty of the violations charged in Counts I, II, and III, of the Administrative Complaint, (b) dismiss counts IV and V of the Administrative Complaint, (c) fine the Respondents a total of $950.00, and (d) suspend the licenses of the Respondents for a period of ninety (90) days or until such time as the judgment in Case Number 83-2532, Broward County Court, has been satisfied, whichever is later; provided that in any event the period of suspension shall not exceed ten (10) years. DONE and ORDERED this 24th day of January, 1985 at Tallahassee, Florida. MICHAEL M. PARRISH Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 FILED with the Clerk of the Division of Administrative Hearings this 24th day of January, 1985.
The Issue At issue is whether Respondent committed the offenses set forth in the Administrative Complaints and, if so, what penalty should be imposed.
Findings Of Fact The parties Petitioner, Department of Business and Professional Regulation, Construction Industry Licensing Board (Department), is a state agency charged with the duty and responsibility for regulating the practice of contracting pursuant to Section 20.165, Florida Statues, and Chapters 455 and 489, Florida Statutes. Respondent, Richard M. Golfman, was, at all times material hereto, licensed by the Department as a certified general contractor, having been issued license number CG C032860, and authorized to engage in the practice of general contracting as an individual.1 The Feinstein project (DOAH Case No. 00-0599) On or about October 30, 1998, Respondent entered into a written contract with Norman and Sheila Feinstein to furnish the materials and perform the labor necessary to enclose and remodel the screened patio, and to build a rock garden, at their home located at 5468 Northwest 20th Avenue, Boca Raton, Florida, for the sum of $5,000. At the time, the Feinsteins paid Respondent $1,500 as the initial payment (deposit) under the terms of the contract. The contract Respondent presented and the Feinsteins executed on October 30, 1998, did not include Respondent's license number, nor did it contain a statement concerning consumers' rights under the Construction Industries Recovery Fund. Following execution of the contract, Respondent made repeated promises to construct the rock garden; however, it was not until November 10, 1998, that Respondent appeared on-site and constructed the rock garden, albeit not to the Feinsteins' satisfaction. Subsequently, Respondent had some high-hat electrical fixture cans and a bundle of furring strips delivered to the home for the patio project but, thereafter, despite repeated requests, refused to perform any work on the project or refund any money to the Feinsteins. The value of the labor and materials Respondent invested in the rock garden, as well as the cost of the building materials (the high-hat fixtures and furring strips) delivered to the job-site, was $250, a sum considerably less than the $1,500 the Feinsteins had entrusted to Respondent under the terms of their agreement. The Burres/Berger project (DOAH Case No. 00-0600) On or about November 23, 1998, Respondent submitted a written proposal to Tanya Burres to furnish the materials and perform the labor necessary to replace the existing roof on her home located at 7270 Montrico Drive, Boca Raton, Florida, for the sum of $22,125. The proposal was a one-page preprinted form. In the upper left there appeared, printed immediately following Respondent's handwritten name, the following: THE GOLFMAN GROUP, INC. P.O. Box 811926 Boca Raton, Florida 33431 The proposal did not include Respondent's license number, nor did it contain a statement concerning consumers' rights under the Construction Industries Recovery Fund. At the time the proposal was submitted, Tanya Burres was under contract to sell the home to Drs. Glenn Berger and Michelle Fiorillo, husband and wife (the Bergers), and Ms. Burres had agreed to split with the Bergers the cost of a new roof for the home. At the time, Ms. Burres had suggested the Respondent as a contractor to perform the work (because he had previously done satisfactory work for Ms. Burres); however, it was understood that the employment of any contractor was subject to the Bergers' approval. That the Bergers' agreement was required before any such employment would be accepted was clearly conveyed to Respondent. On November 23, 1998, Tanya Burres signed the proposal and gave Respondent a check payable to his order in the sum of $1,106.25, representing her half of the ten percent deposit called for by the proposal. The Bergers, however, declined to accept the proposal, and refused Respondent's request for the balance of the deposit. Rather, the Bergers, having received adverse information from the Department regarding Respondent's record, preferred to employ a different contractor, and Ms. Burres accorded the Bergers a monetary credit at closing (on the purchase of the home) for one-half the cost to re-roof the home. When the Bergers informed Ms. Burres (shortly after she signed the proposal on November 23, 1998) that they would not agree to use Respondent, Ms. Burres attempted to stop payment on her check; however, the check had already been cashed. Thereafter, Ms. Burres attempted on numerous occasions to contact Respondent by telephone and by his pager, but Respondent failed to return any of her calls or messages. To date, Respondent has failed to account for or return Ms. Burres' deposit of $1,106.25. The costs of investigation and prosecution As of February 25, 2000, the Department's costs of investigation and prosecution, excluding costs associated with any attorney's time, totaled $234.85 for DOAH Case No. 00-0599 (the Feinstein project) and $195.65 for DOAH Case No. 00-0600 (the Burres/Berger project.) Previous disciplinary action At hearing, the Department offered proof that, on two prior occasions, Respondent had been subjected to disciplinary action by the Construction Industry Licensing Board (the Board). (Petitioner's Exhibit 2.) The first occasion is reflected in the terms of a Final Order of the Board, dated August 4, 1987, which found Respondent guilty of the violations alleged in the Administrative Complaint (which were not revealed at hearing beyond what may be inferred from the terms of the Final Order), and resolved that Respondent suffer the following penalty: Respondent's licensure is hereby suspended for ten (10) years. Provided, Respondent may obtain termination of said suspension at anytime, without further action by the Board, upon providing the Board's Executive Director with a certified bank check in an amount sufficient to cover and pay a fine of five hundred dollars ($500), and the bad check alleged in the Administrative Complaint, and all service charges in connection therewith, and all other fees accruing as of the date Respondent seeks said termination of supervision. The second occasion Respondent was subjected to disciplinary action is reflected in the terms of a Final Order of the Board, dated July 18, 1997, which approved a stipulated settlement of certain complaints then pending before the Board. That Final Order approved the dismissal of a number of counts contained in five Administrative Complaints then pending before the Board and, as to the remaining counts, agreed (without Respondent admitting or denying the allegations of fact contained in the Administrative Complaints) to the following penalty: 3. FINE AND COSTS: Respondent shall pay a fine of Nine Hundred dollars ($900.00) and costs of Eight Hundred fifty One dollars ($851) to the Board within thirty (30) days of the filing of the Final Order. Said payment shall be in the form of a cashier's or certified check and shall be made payable to the "Construction Industry Licensing Board." To assure payment of the fine and costs, it is further ordered that all of Respondent's licensure to practice contracting shall be suspended with the imposition of the suspension being stayed for thirty (30) days. If the ordered fine and costs are paid in compliance with the terms set forth above, the suspension imposed shall not take effect. However, should payment not be timely made, the stay shall be lifted and Respondent's license shall be immediately suspended. Upon payment of the fine and costs in full, the suspension imposed shall be lifted. Respondent apparently satisfied the fines and costs imposed by the foregoing orders. (Petitioner's Exhibit 2.)
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be rendered adopting the foregoing findings of fact and conclusions of law, and which, as a penalty for the violations found, imposes an administrative fine in the total sum of $13,500.00, revokes Respondent's licensure, orders that Respondent pay restitution to Norman and Sheila Feinstein in the sum of $1,250.00 and to Tanya Burres in the sum of $1,106.25, and assesses costs of investigation and prosecution (through February 25, 2000) in the total sum of $430.50 against Respondent. DONE AND ENTERED this 22nd day of June, 2000, in Tallahassee, Leon County, Florida. WILLIAM J. KENDRICK Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 22nd day of June, 2000.
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 Whether the Department of Revenue (DOR) has properly issued an assessment against Petitioner for sales and use tax, interest, and penalty.
Findings Of Fact Petitioner is a Florida resident. In 1996, Petitioner began doing business as a sole proprietor under the name of "Duraline Industries" and registered with DOR as a sales tax dealer. Later, this entity was called "Dura Steel." Petitioner also operated as a corporation, Steel Engineered Design Systems, Inc. Petitioner's Florida sales tax numbers are 42-11-009271-63 and 40-00-003416- For purposes of these consolidated cases, Petitioner has been audited and charged individually as "Charles R. Bielinski," because the audit revealed that no checks were made out to the corporation(s) and that the monies received were received by Mr. Bielinski as a sole proprietor in one or more "doing business as" categories. Petitioner engaged in the business of fabricating items of tangible personal property, i.e., prefabricated steel buildings, many of which later became improvements to real property in Florida. Petitioner used some of the steel buildings in the performance of real property contracts by installing the buildings as improvements to real property. Petitioner also engaged in the business of selling buildings and steel component parts such as sheets and trim in Florida. Petitioner sold buildings and component parts in over- the-counter retail sales, also. On October 7, 2002, DOR issued Petitioner a Notification of Intent to Audit Books and Records for the period of September 1, 1999 through August 31, 2002. This audit was assigned number AO226920428. In 2002, Petitioner provided DOR's auditor with his sales activity records, such as contracts and job information. A telephone conversation/interview of Petitioner was conducted by the auditor. Over a period of several months, the auditor attempted to get Petitioner to provide additional records, but none were forthcoming. DOR deemed the contracts and job information provided by Petitioner to be an incomplete record of his sales activity for the audit period. Petitioner claimed that most of his sales activity records had been lost or destroyed. Due to the absence of complete records, DOR sampled Petitioner's available records and other information related to his sales in order to conduct and complete its audit. Petitioner purchased materials used to fabricate his steel buildings. Petitioner sometimes would erect the buildings on real property. Petitioner fabricated main frames for smaller buildings at a shop that he maintained at the Bonifay Airport. Otherwise, Petitioner subcontracted with like companies to fabricate main frames for larger buildings. Petitioner made some sales to exempt buyers, such as religious institutions and government entities. When he purchased the materials he used to fabricate the buildings, Petitioner occasionally provided his vendors with his resale certificate, in lieu of paying sales tax. Petitioner did not pay sales tax on the materials he purchased to fabricate buildings when such buildings were being fabricated for exempt buyers such as churches and governmental entities. On June 23, 2003, DOR issued Petitioner a Notice of Intent to Make Audit Changes (Form DR-840), for audit number AO226920428, covering the period of November 1, 1997 through August 31, 2002. DOR has assessed Petitioner sales tax on the buildings, sheets, and trim he sold over-the-counter in Florida. DOR has assessed Petitioner use tax on sales of the materials used in performing real property contracts in Florida. The auditor calculated a method of estimating taxes based on the limited documentation that had been provided by Petitioner. She used a sampling method based on Petitioner's contract numbering system; isolated the Florida contracts; and divided the Florida contracts between the actual sale of tangible property (sale of just the buildings themselves) and real property contracts (where Petitioner not only provided the building but also provided installation or erection services). The auditor scheduled the real property contracts and assessed only the material amounts as taxable in Florida. Since she had only 19 out of 47 probable contracts, or 40 percent, she projected up to what the taxable amount should be and applied the sales tax and surtax at the rate of seven percent, as provided by law. She then divided that tax for the entire audit period by the 58 months in the audit period, to arrive at a monthly tax amount. This monthly tax amount was broken out into sales and discretionary sales tax. Florida levies a six percent State sales tax. Each county has the discretion to levy a discretionary sales tax. Counties have similar discretion as to a surtax. The auditor determined that Petitioner collected roughly $22,000.00 dollars in tax from one of his sales tax registrations which had not been remitted to DOR. During the five-year audit period, Petitioner only remitted tax in May 1998. DOR gave Petitioner credit for the taxes he did remit to DOR during the audit period. The foregoing audit processes resulted in the initial assessment(s) of August 28, 2003, which are set out in Findings of Fact 25-31, infra. On August 28, 2003, DOR issued Petitioner a Notice of Proposed Assessment (Form DR-832/833), for additional discretionary surtax, in the sum of $2,582.19; interest through August 28, 2003, in the sum of $782.55; and penalty, in the sum of $1,289.91; plus additional interest that accrues at $0.50 per day. (DOAH Case No. 04-0008) On August 28, 2003, DOR issued Petitioner a Notice of Proposed Assessment (Form DR 832/833), for additional sales and use tax in the sum of $154,653.32; interest through August 28, 2003, in the sum of $50,500.06; and penalty, in the sum of $77,324.54, plus additional interest that accrues at $31.54 per day. (DOAH Case No. 04-0009) On August 28, 2003, DOR issued Petitioner a Notice of Proposed Assessment (Form DR 832/833), for additional local governmental infrastructure surtax, in the sum of $7,001.82; interest through August 28, 2003, in the sum of $2,352.09; and penalty in the sum of $3,497.35; plus additional interest that accrues at $1.45 per day. (DOAH Case No. 04-0010) On August 28, 2003, DOR issued Petitioner a Notice of Proposed Assessment (Form DR 832/833), for additional indigent care surtax, in the sum of $513.08; interest through August 28, 2003, in the sum of $156.33; and penalty, in the sum of $256.24; plus additional interest that accrues at $0.10 per day. (DOAH Case No. 04-0011) On August 28, 2003, DOR issued Petitioner a Notice of Proposed Assessment (Form DR 832/833), for additional school capital outlay surtax in the sum of $3,084.49; interest through August 28, 2003, in the sum of $922.23; and penalty, in the sum of $1,540.98; plus additional interest that accrues at $0.60 per day. (DOAH Case No. 04-0012) On August 28, 2003, DOR issued Petitioner a Notice of Proposed Assessment (Form DR 832/833), for additional charter transit system surtax, in the sum of $2,049.22; interest through August 28, 2003, in the sum of $766.07; and penalty, in the sum of $1,023.27; plus additional interest that accrues at $0.46 per day. (DOAH Case No. 04-0013) On August 28, 2003, DOR issued Petitioner a Notice of Proposed Assessment (Form DR 832/833), additional small county surtax, in the sum of $10,544.51; interest through August 28, 2003, in the sum of $3,437.85; and penalty in the sum of $5,282.30; plus additional interest that accrues at $2.15 per day. (DOAH Case No. 04-0014) However, the auditor testified at the May 13, 2004, hearing that she attended Petitioner's deposition on March 18, 2004. At that time, Petitioner provided additional documentation which permitted the auditor to recalculate the amount of tax due. The auditor further testified that she separated out the contracts newly provided at that time and any information which clarified the prior contracts she had received. She then isolated the contracts that would affect the Florida taxes due. Despite some of the new information increasing the tax on some of Petitioner's individual Florida contracts, the result of the auditor's new review was that overall, the contracts, now totaling 33, resulted in a reduction in total tax due from Petitioner. These changes were recorded in Revision No. 1 which was attached to the old June 23, 2003, Notice of Intent to Make Audit Changes, which was sent by certified mail to Petitioner. The certified mail receipt was returned to DOR as unclaimed. The auditor's calculations reducing Petitioner's overall tax are set out in Respondent's Exhibit 16 (Revision No. 1). That exhibit appears to now show that taxes are owed by Petitioner as follows in Findings of Fact 34-40 infra. For DOAH Case No. 04-0008, discretionary surtax (tax code 013), Petitioner only owes in the amount of $1,937.37, plus penalties and interest to run on a daily basis as provided by law. For DOAH Case No. 04-0009, sales and use tax (tax code 010), Petitioner only owes in the amount of $111,811.04, plus penalties and interest to run on a daily basis as provided by law. For DOAH Case No. 04-0010, local governmental infrastructure surtax (tax code 016), Petitioner only owes in the amount of $5,211.00, plus penalties and interest to run on a daily basis as provided by law. For DOAH Case No. 04-0011, indigent care surtax (tax code 230), Petitioner only owes in the amount of $317.39, plus penalties and interest to run on a daily basis as provided by law. For DOAH Case No. 04-0012, school capital outlay tax (tax code 530), Petitioner only owes in the amount of $2,398.68, plus penalties and interest to run on a daily basis as provided by law. For DOAH Case No. 04-0013, charter transit system surtax (tax code 015), Petitioner only owes in the amount of $1,558.66, plus penalties and interest to run on a daily basis as provided by law. For DOAH Case No. 04-0014, small county surtax (tax code 270), Petitioner only owes in the amount of $7,211.83, plus penalties and interest to run on a daily basis as provided by law.
Recommendation Based on the foregoing Findings of Facts and Conclusions of Law set forth above, it is RECOMMENDED that the Department of Revenue enter a final order upholding the amount of tax calculated against Petitioner in its June 21, 2003, Notice of Intent to Make Audit Changes, Revision No. 1, in the principal amounts as set forth in Findings of Fact Nos. 34-40, plus interest and penalty accruing per day as provided by law, until such time as the tax is paid. DONE AND ENTERED this 14th day of July, 2004, in Tallahassee, Leon County, Florida. S ELLA JANE P. DAVIS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 14th day of July, 2004.
The Issue Broadly stated, the issue in this proceeding the validity of the proposed deficiency in petitioner's corporate income in the amount of $25,712.80 for the 1972 fiscal year. More specifically, the issue is whether Florida may lawfully tax for the gain it realized on the sale of securities in the of $941,418.00. Included within this issue is the question of whether the apportionment formula set forth in Florida Statutes is applicable to petitioner.
Findings Of Fact Upon consideration of the pleadings, the stipulations the parties and the record in this proceeding, the following relevant During the calendar year 1972, petitioner was a foreign " Corporation subject to the Florida Corporate Income Tax, imposed Chapter 220, Florida Statutes. Petitioner also operated a business in St. Louis, Missouri. January 1, 1972, petitioner held a 95 percent interest in Bal Harbour Joint Venture, which owned and operated the Ivanhoe Hotel and Restaurant in Bal Harbour, Florida. On December 15, 1972, petitioner was the sole owner of the Ivanhoe Hotel and Restaurant. November 16, 1972, the petitioner acquired by merger 100 percent interest in the Clearwater Beach Hilton, a motel and restaurant business located in Clearwater, Florida, and continued to own this interest on December 31, 1972. The Clearwater and Ivanhoe hotel and restaurant businesses in Florida and the petitioner's business in Missouri have separate, individual general managers. There is no central purchasing by the hotels and no centralized operating records are maintained by petitioner. There are no central reservation services available between the hotels and the hotels advertise separately and unilaterally in local publications in the cities in which they are located. No standardized product lines exist. On November 2, 1972, petitioner sold certain securities which resulted in a realized gain to petitioner for federal income tax purposes of $941,418.00. Said securities were purchased, located and sold in the State of Missouri, and had no relationship to petitioner's Florida transactions. Petitioner timely filed its 1972 Florida corporate income tax return on which it subtracted from its federal taxable income the gain realized from the sale of the securities. Its "Florida net income" and its "total tax due" were thus reported as "none." On or about May 8, 1974, respondent advised petitioner of a proposed deficiency in petitioner's 1972 tax in the amount of $29,392.00. In accordance with the provisions of Florida Statutes Sec. 214.11, petitioner timely filed with respondent its protest of the proposed deficiency assessment. After a hearing, respondent issued to petitioner its Notice of Decision in which the proposed, deficiency was reduced to $25,712.80, and the reasons therefor were set forth. Petitioner requested reconsideration by respondent. On March 11, 1975, the parties stipulated that further proceedings in this cause would be, processed under the Florida Administrative Procedures Act. The petition for hearing was forwarded by respondent to the Division of Administrative Hearings, the undersigned was duly assigned as the Hearing Officer.
Recommendation Based upon the findings of fact and conclusions of law recited above, it is recommended that: the proposed deficiency assessment in the amount of $25,712.80 be vacated and set aside; and The respondent permit petitioner to file an amended 1972 return utilizing, within the discretion of the respondent, the employment of either separate accounting, a monthly averaging formula or another method which would effectuate an equitable apportionment of petitioner's income to the State of Florida. Respectfully submitted and entered this 8th day of August, 1977, in Tallahassee, Florida. DIANE D. TREMOR, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Donald A. Pleasants Shackleford, Farrior, Stallings and Evans Post Office Box 3324 Tampa, Florida 33601 Louis de la Parte, Jr. 725 East Kennedy Boulevard Tampa, Florida 33602 Patricia S. Turner Assistant General The Capitol Tallahassee, Florida 32304 ================================================================= AGENCY FINAL ORDER =================================================================
The Issue The issue for determination is whether Petitioner is liable for the Local Option Tourist Development Tax assessment as set forth by Respondent's Notice of Reconsideration and Notice of Final Assessment, dated March 10, 2005, for the audit period October 1, 2000 through September 30, 2003.
Findings Of Fact At all times material hereto, the Resort operated as a hotel licensed under the provisions of Chapter 509, Florida Statutes, and was located at 501 East Camino Real, Boca Raton, Palm Beach County, Florida 33432. At all times material hereto, the Resort’s taxpayer identification number was 65-0762249 and Florida tax registration number was 60-03-1871843-99. No dispute exists that Palm Beach County enacted the TDT, authorized by Section 125.0204, Florida Statutes. No dispute exists that TDT is levied on room rental revenues in Palm Beach County pursuant to Section 125.0104, Florida Statutes. The Resort is subject to and is a dealer under the TDT. Pursuant to an ordinance enacted by Palm Beach County, the Resort is obligated to collect and remit to Palm Beach County the TDT due on taxable transactions. A TDT audit of the Resort’s business was performed by the Tax Collector covering the period from October 1, 2000 through September 30, 2003. The Tax Collector relied upon the information and documents provided by the Resort in performing the audit. During the audit period, guests desiring to reserve and book a room at the Resort were required to pay a deposit, which guaranteed the reservation, of one night’s room within 10 days of making the reservation. No matter what the length of stay, the deposit did not vary. The Resort did not collect any sales tax or TDT on the deposits. A deposit confirmation form (Confirmation Form) always confirmed the deposit. The front of the Confirmation Form contained the abbreviation “Guar” for guaranteed and, among other things, referred the guest to the reverse side of the Confirmation Form for important information (“PLEASE SEE REVERSE SIDE FOR IMPORTANT ADDITIONAL INFORMATION”). The guarantee, as indicated on the back of the Confirmation Form, was that the accommodations were guaranteed to the confirming-guest from the scheduled date of arrival through 2:00 a.m. of the next day. The back of the Confirmation Form provided in pertinent part: DEPOSITS – A deposit of one night’s room revenue is required within 10 days of making a reservation. Advance deposits made via credit card will be billed at the time of booking. Your deposit will hold a room until 2 A.M. of the day following your scheduled arrival date. Upon arrival, the deposit is applied to your last confirmed night of the reservation. In the event of an early departure, the deposit is non- refundable unless the Resort is notified prior to or at check-in. CANCELLATIONS – Deposits are refundable in the event of cancellation, providing notice is received at least 14 days prior to scheduled arrival date between January 4th to April 30th, 7 days between May 1st to May 27th and October 1st to December 19th, and 72 hours between May 28th to September 30th. Cancellations, without penalty, for the Holiday/Christmas period (December 19th through January 3, 2004), must be received prior to November 30, 2003 or deposit will be subject to full forfeiture, in accordance with established resort policies. Please be sure to record your cancellation number to insure proper return. ACCOMMODATIONS – We will make every effort to meet requests for specific room types, views, and bedding preferences, however, on occasion, we cannot always accomplish such requests, and reserve the right to provide alternate accommodations. For the majority of the audit period, forfeited deposits were identified as “no-show” revenue. A block of rooms may be held available and reserved for a group. Fees are charged for unused rooms within a reserved room block. These fees are “attrition fees.” The Resort was unable to separately identify no-show revenue attributable to reservations for which persons failed to check-in by the cutoff day and time, as opposed to reservations for which persons canceled but failed to cancel within the required time-period. Furthermore, the Resort was unable to separately identify the general category of no-show revenue attributable to unused rooms within a reserved room block. For the first four months of the audit period, the Resort asserted that it mistakenly included attrition fees in the no-show revenue. For the remainder of the audit period, the Resort asserts that attrition fees were not included in the no- show revenue. The Resort was unable to separately identify attrition fees in the no-show revenue. Therefore, the attrition fees could not be separately factored out of the no-show revenue. Consequently, an inference is drawn and a finding of fact is made that, as to the first four months of the audit period, all revenue shown as no-show revenue is considered as no-show revenue. During the audit period, the Resort identified no-show revenue in its monthly financial reports totaling $2,139,252.00. No TDT was collected by the Resort on the no-show revenue of $2,139,252.00 collected during the audit period. No dispute exists that, during the audit period, the TDT was due on the rental of the Resort’s rooms and that the TDT was collected and remitted to the Tax Collector by the Resort. Having conducted the audit, on March 1, 2004, the Tax Collector issued a “DRAFT” Notice of Intent to Make Audit Changes (Draft Notice). The Draft Notice indicated, among other things, that $88,775.28 in TDT was due, which included TDT in the amount of $85,570.08 on the no-show revenue of $2,139,252.00 and included denied exempt rental in the amount of $3,205.20; and that a credit in the amount of $19,583.64 was due, as an overpayment of tax, discovered by the auditor. Furthermore, the Draft Notice indicated that, as a result, a proposed total tax assessment was due in the amount of $149,252.07, which included penalties in the amount of $44,387.64 and interest in the amount of $35,672.79 as of March 31, 2004, with additional interest of $57.74 per day through the date of the Resort’s payment. After the issuance of the Draft Notice, the Tax Collector’s auditor met with a representative of the Resort. Of particular interest to the Resort was to return to its monthly financial reports and to separately indicate in the monthly financial reports the categories of no-show revenue representing failure to check-in, failure to timely cancel, and failure to use rooms in block (attrition revenue). However, the Resort was unable to identify and separately indicate these categories of revenue. Subsequently, the Resort was to provide the Tax Collector’s auditor with an eight-month sample of financial records “to address the issue of no show revenues versus cancellation fees.” The eight-month sample would “represent the transactions for the entire audit period.” However, the Resort was unable to provide data that would allow for the separation of the categories. The sample was not provided. After the sample was not provided by the Resort, the Resort took the position that none of its no-show revenue was subject to the TDT. On June 7, 2004, after the Resort changed its position, the Tax Collector issued a Notice of Intent to Make Audit Changes (Notice). The Notice indicated, among other things, that, as of June 21, 2004, the tax assessment for the audit period was in the amount of $153,986.75, which represented TDT on no-show rentals in the amount of $85,570.08, a denial of exempt rentals in the amount of $3,205.20, a credit for overpayment of TDT in the amount of $19,583.64, penalties in the amount of $44,387.64, and interest in the amount of $40,407.47, plus additional interest of $57.74 per day through the date of payment. As to no-show revenues, the Notice indicated that such revenues were taxable and also cited, as supporting authority, Florida Administrative Code Rules 12A-1.061(5)(b) and 12A- 1.061(5)(b)2. Citing Florida Administrative Code Rule 12A- 1.061(5)(b), the Notice provided the following: “Rental charges or room rates include deposits or prepayments that guarantee the guest or tenant the use or possession, or the right to the use or possession, of transient accommodations during a specified rental period under the provisions of an agreement with the owner or owner’s representatives of transient accommodations. The owner or owner’s representative is required to provide transient accommodations to any guest or tenant that enters into such an agreement and pays the required prepayment or deposit, even when the guest or tenant does not occupy the accommodation.” Citing Florida Administrative Code Rule 12A-1.061(5)(b), the Notice provided the following: “Example: A hotel guarantees that it will provide room accommodations on a designated date to potential guests that make reservations and pay a required room deposit. To receive a refund of the required room deposit, the potential guest must cancel his or her reservation by 4:00pm of the designated date. A potential guest that has made reservations and has paid the required room deposit fails to arrive at the hotel on the designated date to use the reserved room accommodations. Because the potential guest fails to cancel the reservations, the guest forfeits the room deposit. Even though the guest did not occupy a room at the hotel, the forfeited room deposit is subject to tax.” Further, the Tax Collector indicated in the Notice that the “stated policy of [the Resort] that a guest’s deposit will hold a room (which is a guarantee to the guest that they will have a room available) until the day following their scheduled arrival date. . . whether or not the guest shows up. It is irrelevant whether the guest shows up or not on the scheduled date of arrival, their deposit has paid for a room and this is a taxable transaction.” As to attrition and cancellation fees, the Notice indicated that such fees were considered "penalties" and were, therefore, "not taxable" revenue “because if a guest cancels their reservation too late, their deposit is not refunded even though a room is not held for them.” The Resort requested an audit conference. On August 6, 2004, an audit conference was held at which the parties were unable to reach an agreement. On August 9, 2004, the Tax Collector issued a Notice of Proposed Assessment (Proposed Assessment). The Proposed Assessment indicated that the total assessment, including tax, penalty and interest accrued through August 20, 2004, was in the amount of $157,451.15. Additionally, the Proposed Assessment contained, among other things, a re-citation of Florida Administrative Code Rules 12A-1.061(5)(b) and 12A-1.061(5)(b)2. The Resort protested the Proposed Assessment. By letter dated August 8, 2004, the Resort requested from the Department of Revenue (DOR) a Letter of Technical Advice (LTA) regarding the taxation of cancellations and no- shows.2 By letter dated October 27, 2004, a representative of DOR issued a LTA on the facts and circumstances presented to DOR by the Resort, providing that the LTA was “not an official statement or opinion of this Department [DOR] but, instead, represents the opinion of the writer” and that if the Resort wished “an official binding statement on the issues, you may file a written request for a Technical Assistance Advisement . . . .”3 A finding of fact is made that the LTA was not binding on the parties. The LTA was not an opinion of DOR or a statement of policy by DOR on the taxation of cancellations and no-shows. The Resort did not request a Technical Assistance Advisement from DOR. On January 4, 2005, the Tax Collector issued a Notice of Decision (Decision) denying the Resort’s protest and a Notice of Final Assessment (Final Assessment). The Decision contained, among other things, a part of the provision of Florida Administrative Code Rule 12A- 1.061(3)(a)—“Rental charges or room rates for the use or possession, or the right to the use or possession, of transient accommodations are subject to tax. . .”—and the provisions of Florida Administrative Code Rule 12A-1.061(5)(b). The Final Assessment indicated that the total assessment was in the amount of $141,515.48, plus additional interest of $19.40 per day, as of January 1, 2005, through the date of payment. The total assessment was reduced due to the Tax Collector discovering an error in the calculation of the interest. The Resort requested a reconsideration of the Final Assessment. The Tax Collector denied the request for reconsideration. The Resort requested a hearing pursuant to Chapter 120, Florida Statutes (2005).
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Palm Beach County Tax Collector enter a final order affirming the final assessment of Local Option Tourist Development Tax against Boca Raton Resort and Club, for the audit period October 1, 2000 through September 30, 2003, in the total amount of $141,515.48 (which includes tax, penalties, and interest), plus additional interest of $19.40 per day, as of January 1, 2005, through the day of payment. DONE AND ENTERED this 1st day of June, 2006, 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 1st day of June, 2006.
