The Issue At issue is whether respondent committed the offense alleged in the administrative action and, if so, what disciplinary action should be taken.
Findings Of Fact The offense At all times pertinent hereto, respondent, Rodi Enterprises Corporation d/b/a La Ferrolana Supermarket, held alcoholic beverage license number 23-00094, series 2-APS, for the premises located at 3380 N.W. 7th Street, Miami, Florida. Rolando Nunez is an owner and president of the licensee. On July 22, 1994, Leonard Del Monte, an investigator employed by the Division of Alcoholic Beverages and Tobacco, entered the licensed premises to conduct a routine inspection. At that time, Inspector Del Monte discovered nine packages of Benson & Hedges Menthol 100's cigarettes in a display rack over the counter, each of which bore a fraudulent tax indicia and on which the excise tax had not been paid as required by law. Each cigarette package contained twenty individual cigarettes, and such packages, considering their location, were obviously offered for sale to the general public. Apart from the nine packages of untaxed Benson & Hedges Menthol 100's, Inspector Del Monte discovered no other untaxed cigarettes on the premises, which, at the time, contained approximately 300 other packages of cigarettes, as well as approximately 300 cartons of cigarettes, for sale to the general public. Indeed, this is the first occasion in over fifteen years of operation that respondent has ever been cited with a violation, and the first time Inspector Del Monte has ever discovered a violation in the fourteen or fifteen years he has been inspecting the premises. The reason for the offense Ovilio Reyes is a long-time customer of respondent, and purchased a carton of Benson & Hedges Menthol 100's from a vendor who sells, among other things, cigarettes from a lunch truck outside the factory where he works. Since he did not like the menthol taste, Mr. Reyes prevailed upon Mr. Nunez, an owner and president of petitioner, to exchange the nine packages that remained from the carton he had purchased for nine packages of Winston cigarettes. Mr. Nunez noted the stamp on the bottom of the packages, assumed it was valid, and agreed to the exchange. Thereafter, Mr. Nunez placed the packages in the display rack for resale. Having considered the proof, Mr. Nunez' testimony that he believed the packages to carry an appropriate stamp and that he had no intention of selling untaxed cigarettes is credited. Indeed, had Mr. Nunez thought the stamp was a forgery, it is doubtful that he would have placed them in the display rack so that the stamp was plainly visible to a customer or, in this case, an inspector standing at the counter. Moreover, for the untrained, a cursory glance at the stamp would not raise a suspicion as to its validity. It is only when one is apprised, as through the proof in this case, that a tax indicia must be stamped in purple ink as opposed to the black ink used on the subject packages, that the stamp was not affixed evenly on the bottom of each package as it should be, that the stamps used are slightly longer than the standard stamp, that the scallops or ornamental edge around the rectangular stamp did not match the scallop of a valid indicia, and that the subject packages, upon close inspection, contained the phrase "Tax No," as opposed to the proper phrase "Tax Paid," that one would have cause to suspect the legitimacy of the stamp in question. Notable, petitioner has not shown by rule or otherwise that it has advised its licensees in general or respondent in particular of the factors that should be considered in assessing the authenticity of a tax indicia.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that a final order be rendered finding respondent guilty of the offense as charged, and directing respondent to pay a $50.00 civil penalty and the excise tax of $3.59. 1/ DONE AND ENTERED in Tallahassee, Leon County, Florida, this 4th day of January 1995. WILLIAM J. KENDRICK Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 4th day of January 1995.
The Issue The issue in the case is whether the allegations set forth in the Department's Administrative Action dated January 21, 1999, are correct.
Findings Of Fact At all times material to this case, Respondent DePaul, Inc. operated the Copper Penny Pub, 10553 Spring Hill Drive, Spring Hill, Florida (the "licensed premises"). The Respondent held license number 37-00584, Series COP4. In or before September 1998, the Petitioner selected the Respondent for audit based on the Respondent's failure to file required monthly sales reports. By letter dated September 2, 1998, the Petitioner notified the Respondent of the audit. According to the letter, the audit would occur on September 24, 1998, at the licensed premises. The letter stated that the following items would be reviewed: All alcoholic beverage purchase invoices. Petty cash records. Business checkbooks or check stubs. Records of alcoholic beverages used in cooking (if any). Any worksheets you might use to prepare the report. The enclosed Pre-Audit Questionnaire completely filled out. The Pre-Audit Questionnaire allows a licensee to identify package sales. Package sales are those in which alcoholic beverages are sold in the original sealed containers for consumption off the licensed premises. A COP4 series licensee can sell packaged alcoholic beverages for consumption off premises. Package alcohol sales are deducted from total sales during the audit, and are not included in the surcharge tax liability. The Pre-Audit Questionnaire directs the licensee to identify documents that will be used to support the package sales deduction. The Respondent did not complete or submit the Pre-Audit Questionnaire. A licensee must establish entitlement to a package sales deduction. Generally a licensee is required to maintain a log of package purchases, and support the logged transactions with daily cash register tapes, identified as "Z" tapes. The Respondent produced no package sales records to the Petitioner during the audit. Even though the Respondent did not provide records supporting a package sales deduction, the auditor allowed a two-percent credit for package sales. There are two audit methodologies used in conducting the tax audit, the "sales" method, and the "purchase" method. The choice of audit methodology is left to the licensee. The Respondent selected the purchase method audit. In a purchase method audit, the licensee is required to pay surcharge taxes based on the gallons of alcoholic beverages purchased monthly. Division Tax Auditor Maggie Herrera conducted the audit. According to Ms. Herrera, the licensed premises is a bar located in a strip shopping center. The "package store" is located outside and about thirty feet away from the bar. The "package store" is about the size of a one-car garage. In order to make a package sale, the bartender must leave the bar, walk to the package store, unlock it, retrieve the packaged goods, re-lock the door, and return to the bar. According to Ms. Herrera, the package store contained one-liter bottles of liquor on shelves with prices marked with masking tape on the bottles. The store also contained two cases of "hip flask" 375-ml size bottles, one case of 50-ml bottles, "a lot" of brandy and dust-covered bottles of mixers. During the several hours Ms. Herrera's was present at the licensed premises, only one package sale (a flask size bottle) was made. Ms. Herrera traveled to the licensed premises on two occasions to meet the Respondent. On the date of the first scheduled meeting, the Respondent did not appear. On the date of the second scheduled meeting, the Respondent presented approximately thirty distributor invoices to Ms. Herrera and told her he was leaving for his home to retrieve the remainder of the records. He left the licensed premises. She waited for several hours. The Respondent did not return and did not contact Ms. Herrera to explain his failure to return. Ms. Herrera preformed an audit of the Respondent, using standard audit procedures. Ms. Herrera utilized monthly surcharge reports filed by the Respondent for the period between January 1995 and December 1997, the distributor sales records for the Respondent's purchases, and records of tax payments made by the Respondent. According the audit, the Respondent owes remaining tax surcharge payments of $47,695.85, a penalty of $17,545.74 and interest of $5,514.60, for a total liability of $70,756.19. There is no evidence that the audit was done inappropriately, or that the audited tax liability is incorrect. The Respondent was notified of the tax liability by certified letter.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Department of Business and Professional Responsibility, Division of Alcoholic Beverages and Tobacco, enter a final order imposing a total liability of $70,756.19, including unpaid tax liability, penalties, and interest. DONE AND ENTERED this 26th day of October, 1999, in Tallahassee, Leon County, Florida. WILLIAM F. QUATTLEBAUM 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 26th day of October, 1999. COPIES FURNISHED: Miriam S. Wilkinson, Esquire Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792 William T. Charnock, President 10154 Dunkirk Road Spring Hill, Florida 34608 Joseph Martelli, Director Division of Alcoholic Beverages and Tobacco Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792 Barbara D. Auger, General Counsel Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792
Findings Of Fact On November 2, 1979, petitioner's Officer Favitta visited respondent's premises in order to notify respondent that his beverage license had been suspended for failure to pay a civil penalty. While on the premises, Officer Favitta discovered a display rack full of cigarette packages stamped in red ink with a certain meter number. He confiscated 936 packages of cigarettes so stamped from the display rack. Other packages of cigarettes in a storage room nearby were similarly imprinted. The meter number appearing on each cigarette package had been assigned to Barone Sales, a wholesale dealer in cigarettes who sells cigarettes marked in this fashion to the Seminole Indians. Red ink is used to signify that cigarette tax has not been paid and that the cigarettes are destined for the reservation. Respondent admitted to Officer Favitta buying the cigarettes on the reservation, but argued that this was lawful so long as no more than three cartons were purchased at one time.
Recommendation Upon consideration of the foregoing, it is RECOMMENDED: That respondent dismiss the notice to show cause. DONE and ENTERED this 29th day of July, 1980, in Tallahassee, Florida. ROBERT T. BENTON, II Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: James M. Watson, Jr., Esquire 725 South Bronough Street Tallahassee, Florida 32301 Michael R. Shinn 244 S.W. 3rd Place Dania, Florida 33004
The Issue Whether Respondent Department of Revenue’s (Department) January 27, 2020, Notice of Proposed Assessment to Petitioner B Century 21, Inc. (B Century 21) is incorrect.
Findings Of Fact Parties The Department is the state agency responsible for administering Florida’s sales and use tax laws, pursuant to chapter 212, Florida Statutes. B Century 21 is a Florida S-Corporation that operates two liquor stores (Al’s Liquor and Arlington Liquor), as well as a bar (Overtime Sports Bar), in Jacksonville, Florida. Mr. Altheeb is the sole owner of B Century 21 and testified that he is solely responsible for the operation of it, including the two liquor stores and bar. With respect to the operation of B Century 21, Mr. Altheeb testified, “I do all the paperwork, all the books, all the taxes. I do all the orders.” Matters Deemed Admitted and Conclusively Established2 B Century 21 received correspondence from the Department, dated August 20, 2019. That correspondence, from Ms. Pitre, stated, in part, “I will be conducting an examination of your books and records as authorized under Section 213.34, Florida Statutes.” B Century 21 received the Department’s form DR840, Notice of Intent to Audit Books and Records, dated August 20, 2019, including the Sales and Use Tax Information Checklist. The form DR-840 indicated that the Department intended to audit B Century 21 for a tax compliance audit for the period of July 1, 2016, through June 30, 2019. The Sales and Use Tax Information Checklist listed a number of categories of documents the Department intended to review as part of this audit. B Century 21 (through its accountant, power of attorney, and qualified representative, Mr. Isaac) received the Department’s October 30, 2019, correspondence, which referenced the “Audit Scope and Audit Commencement,” and an attached Records Request list. B Century 21 (through Mr. Isaac) received an email, dated October 30, 2019, from Ms. Pitre. That email references an attached Audit Commencement Letter. B Century 21 (through Mr. Isaac) received an email, dated November 12, 2019, from Ms. Pitre, which inquired of “the status of the records requested during the meeting with you and Mr. Altheeb on October 29, 2019.” B Century 21 (through Mr. Isaac) received the Department’s Notice of Intent to Make Audit Changes, form DR-1215, dated December 16, 2019. The form DR-1215 reflects a total amount of tax of $170,232.93, a penalty of $42,558.24, and interest through December 16, 2019, of $25,461.86, for a total deficiency of $238,253.04. The form DR-1215 also reflects that if B Century 2 See Order Granting Motion Declaring Matters Admitted and Setting Discovery Deadline. Fla. R. Civ. P. 1.370(b). 21 did not agree with these audit changes, or only agreed with a portion, that it had until January 15, 2020, to request a conference or submit a written request for an extension. Further, the form DR-1215 attached a Notice of Taxpayer Rights, which included additional detail on the options available to B Century 21. B Century 21 (through Mr. Isaac) received correspondence from Ms. Pitre, dated December 16, 2019, which stated that as of the date of the correspondence, the Department had not received the information previously requested on October 13, 2019, which it needed to complete the audit. The correspondence stated that B Century 21 had 30 days to review the audit changes, provided contact information to B Century 21 if it wished to discuss the findings in the form DR-1215, and noted that if the Department did not hear from B Century 21 within 30 days, it would send the audit file to the Department’s headquarters in Tallahassee, Florida. B Century 21 (through Mr. Isaac) received the Department’s Notice of Proposed Assessment, form DR-831, dated January 27, 2020. The form DR- 831 reflects a total amount of tax of $170,232.93, a penalty of $42,558.24, and interest through January 27, 2020, of $27,224.82, for a total deficiency of $240,016.00. For the time period between August 20, 2019, and January 7, 2021, B Century 21 did not provide the Department with: (a) any sales records; (b) any purchase records; or (c) any federal tax returns. For the time period between August 20, 2019, and January 7, 2021, B Century 21 did not provide any records to the Department for examination in conducting the audit. Additional Facts In 2011, for the purpose of enforcing the collection of sales tax on retail sales, the Florida Legislature enacted section 212.133, Florida Statutes, which requires every wholesale seller (wholesaler) of alcoholic beverage and tobacco products (ABT) to annually file information reports of its product sales to any retailer in Florida. See § 212.133(1)(a) and (b), Fla. Stat. Once a year, ABT wholesalers report to the State of Florida their name, beverage license or tobacco permit number, along with each Florida retailer with which they do business, the Florida retailer’s name, retailer’s beverage license or tobacco permit number, retailer’s address, the general items sold, and sales per month. See § 212.133(3), Fla. Stat. The information collected captures the 12-month period between July 1 and June 30, and is due annually, on July 1, for the preceding 12-month period. Id. ABT wholesalers file these reports electronically through the Department’s efiling website and secure file transfer protocol established through the Department’s efiling provider. § 212.133(2)(a), Fla. Stat. Ms. Baker explained this statutory process further: [W]e annually, every year in the month of May, my unit reaches out to the Florida Department of Business and Professional Regulations. We compel them to give us a list of all of the active wholesalers who were licensed to sell to retailers in the state of Florida for the prior fiscal year. Once we receive that list, we then mail a notification to all those wholesalers and state the statute and the requirements and give them a user name and a password that will allow them to then log into that portal and submit their retail—their wholesale—or their wholesale sales to retailers in the state of Florida for the prior fiscal year. Those reports are due on July 1st of each year, but they are not considered late until September 30th of that year. So that gives the wholesaler population a couple of months to compile all of their sales for the prior year, fill out their reports and submit them to the Florida Department of Revenue by the end of September. Additionally, each month, and for each retail location, B Century 21 reports gross monthly sales to the Department, and remits sales tax, utilizing the Department’s form DR-15. Ms. Baker further described the process the Department utilizes in identifying an “audit lead,” utilizing the data that ABT wholesales provide: Specifically for ABT, we have a very, actually, kind of simple comparison that we do. . . . [A]s a taxpayer, as a retailer in the state of Florida, you may purchase from multiple wholesalers. So, part of our job is we compile all of the purchases that each beverage license or tobacco license has purchased, and once we compile all the purchases for the fiscal year, then to say, you know, what were the purchases for the fiscal year versus what were the reported sales for the fiscal year. And, again, a pretty simple comparison we really look to see, did you purchase, or . . . did you report enough sales to cover the amount of purchases that we know you made as a – as a retailer. And if the sales amount does not exceed the purchase amount, then we’ll create a lead on it. The Department’s efiling provider exports the ABT wholesalers’ information to SunVisn, the Department’s database. The Department’s analysts review the ABT wholesalers’ reported data, and taxpayer information, to identify audit leads. The Department then assigns these audit leads to its service centers to conduct an audit. A tax audit period is 36 months. In conducting ABT audits, the Department has 24 months of reported data (i.e., the first 24 months of the audit period) for review. This is because the timing of section 212.133(3) requires ABT wholesalers to report annually on July 1, for the preceding 12- month period of July 1 through June 30. For the ABT reporting data examination period of July 1, 2016, through June 30, 2018 (a period of 24 months), B Century 21’s gross sales for its two liquor stores was as follows: Liquor Store Reported Gross Sales Al’s Liquor $1,051,128.56 Arlington Liquor $902,195.49 For the same 24-month time period of July 1, 2016, to June 30, 2018, B Century 21’s wholesalers reported the following ABT inventory purchases to the State, as required under section 212.133: Liquor Store ABT Inventory Purchases Al’s Liquor $1,250,055.79 Arlington Liquor $1,174,877.98 As the ABT wholesalers’ reported ABT inventory purchases by B Century 21’s retail outlets were higher than B Century 21’s reported sales, the Department issued an audit lead, which led to the audit that is at issue in this proceeding. The Audit For the 36-month audit period of July 1, 2016, through June 30, 2019 (audit period), B Century 21’s reported gross sales for each of its locations was: Location Reported Gross Sales Al’s Liquor $1,557,569.74 Arlington Liquor $1,434,551.65 Overtime Sports Bar $968,476.08 On August 20, 2019, Ms. Pitre mailed to B Century 21 (and received by Mr. Altheeb), a Notice of Intent to Audit Books and Records for the audit period. Included with the Notice of Intent to Audit Books and Records was correspondence informing B Century 21 of the audit and requesting records. On August 26, 2019, Ms. Pitre received a telephone call from Mr. Altheeb. Ms. Pitre’s case activity notes for this call state: Received a call from Baligh Altheeb and he said he will be hiring Brett Isaac as his POA [power of attorney]. I informed him to complete the POA form and to give it to Mr. Isaac for signature and send to me. He knows about ABT Data assessments and asked that I note on the case activity that he contacted me regarding the audit. He was worried that his liquor license will be suspended if he does not respond right away. I informed him that once I receive the POA, I will contact Mr. Isaac and discuss the audit. On October 18, 2019, the Department received B Century 21’s executed power of attorney (POA) form naming Mr. Isaac as its POA for the audit. The executed POA form reflects that the Department’s notices and written communications should be sent solely to Mr. Isaac, and not B Century 21. The executed POA form further reflects that “[r]eceipt by either the representative or the taxpayer will be considered receipt by both.” On October 29, 2019, Ms. Pitre met with Mr. Altheeb and Mr. Isaac at Mr. Isaac’s office, for a pre-audit interview. Ms. Pitre’s case activity notes for this meeting state: Met with the taxpayer contact person, POA Brett Isaac and owner Baligh Thaleeb [sic], at the POA’s location to conduct the pre-audit interview. Discussed the scope of the audit, records needed to conduct the audit, availability of electronic records, business organization, nature of the business, internal controls, and the time line of the audit. Discussed sampling for purchases and POA signed sampling agreement. Made appointment to review records on November 12, 2019. Toured one of the location [sic] to observe business operations, Overtime Sports Bar. On October 30, 2019, Ms. Pitre emailed Mr. Isaac a copy of the Notice of Intent to Audit Books and Records, which included a “Sales and Use Tax Information Checklist,” which requested specific taxpayer records. After receiving no response from Mr. Isaac, Ms. Pitre, on November 12, 2019, emailed Mr. Isaac concerning “the status of the records requested during the meeting with you and Mr. Altheeb on October 29, 2019.” Section 212.12(5)(b) provides that when a taxpayer fails to provide records “so that no audit or examination has been made of the books and records of” the taxpayer: [I]t shall be the duty of the department to make an assessment from an estimate based upon the best information then available to it for the taxable period of retail sales of such dealer … or of the sales or cost price of all services the sale or use of which is taxable under this chapter, together with interest, plus penalty, if such have accrued, as the case may be. Then the department shall proceed to collect such taxes, interest, and penalty on the basis of such assessment which shall be considered prima facie correct, and the burden to show the contrary shall rest upon the [taxpayer]. Section 212.12(6)(b) further provides: [I]f a dealer does not have adequate records of his or her retail sales or purchases, the department may, upon the basis of a test or sampling of the dealer’s available records or other information relating to the sales or purchases made by such dealer for a representative period, determine the proportion that taxable retail sales bear to total retail sales or the proportion that taxable purchases bear to total purchases. Mr. Collier testified that, in the absence of adequate records, the Department “estimates using best available information, and for this industry … ABT sales are a higher percentage of their taxable sales.” Because B Century 21 did not provide adequate records to Ms. Pitre, she estimated the total taxable sales for the audit period. For each liquor store that B Century 21 operated, she multiplied its total ABT purchases by average markups to calculate total ABT sales. To derive these average markups, Mr. Collier explained that the Department receives data from wholesalers, and then: [W]e take that purchase information, apply average markup to the different ABT product categories, which include cigarettes, other tobacco, beer, wine, and liquor; and then that gets us to total ABT sales number. And then we derive what we call a percentage of ABT sales, percentage of that number represents. And in this particular model, 95.66 percent represents what we believe in a liquor store industry, that this type of business, that 95.66 percent of their sales are ABT products. We derive the markups, and the percentage of ABT sales from a number of liquor store audits that the Department had performed on liquor stores that provided records. The Department utilized markup data from other ABT audits. The Department applied the following markups to these ABT categories: 6.5 percent for cigarettes; 47.5 percent for other tobacco products; 17.33 percent for beer; 29.84 percent for wine; and 24.5 percent for liquor. Applying the Department’s markup for liquor stores to the wholesalers’ reported ABT data and percentage of taxable sales, Ms. Pitre estimated taxable sales for the ABT reporting data examination period and calculated the under-reported sales error ratio as follows: Location Estimated Taxable Sales Error Ratio Al’s Liquor $1,597.544.01 1.519837 Arlington Liquor $1,516,259.34 1.680633 The Department then divided B Century 21’s estimated taxable sales for the examination period, for each liquor store, by its self-reported tax sales in its DR-15s to arrive at the under-reported rate. The Department then multiplied the under-reported rate by the reported taxable monthly sales in the DR-15s to arrive at the estimated taxable sales for the 36-month audit period. The result of this calculation was: Location Estimated Taxable Sales Al’s Liquor $2,367,252.11 Arlington Liquor $2,410,954.82 The Department then multiplied the estimated taxable sales by an effective estimated tax rate which, after giving credit for B Century 21’s remitted sales tax, resulted in tax due for the Al’s Liquor and Arlington Liquor for the audit period, as follows: Location Sales Tax Owed Al’s Liquor $58,367.01 Arlington Liquor $70,068.44 For Overtime Sports Bar, the Department could not use ABT wholesalers’ data to estimate an assessment because the Department does not have audit data averages for bars and lounges. The Department used the “Tax Due Method” in estimating under-reported taxes and calculating under- reported taxable sales. Mr. Collier explained: The Department does not have average markup and percentage of sales for a bar. Though, you know, obviously, we all know that a bar, their main product that they sell and in most cases is ABT products. So, therefore, typically, an auditor would need to get information about that specific location. Bars can vary so much in their type of business that they do, they can be like nightclubs, or they can be like bar and grill that serves a lot of food. So there’s a lot of variances there for that particular type of industry, so we haven’t really come up with average markups, average percentage of sales for bars, per se. It’s a case-by- case situation, and in this case, the auditor decided that the fair, reasonable way to estimate the bar location would be to just average the error ratios that were derived from the Al’s Liquor and the other liquor store location and apply it to the taxable sales reported for the bar. And I think that’s a very fair and reasonable estimate based on what we all know in a bar situation; their markups are significantly higher. And of course, there can be plenty of other non-ABT taxable sales occurring in a bar setting, such as prepared food, you know, just your regular cokes and drinks. So it’s certainly a fair way to estimate in this particular audit and I believe only benefits the taxpayer. The undersigned credits the Department’s methodology for estimating an assessment for Overtime Sports Bar. Further, Mr. Altheeb testified that Overtime Sports Bar operates as both a sports bar and a liquor/package store, and stated: Most of it—it’s a liquor store. I don’t know if you know the area, it’s a liquor store on the Westside. So most of it—the sport bar doesn’t really do too much business in the Westside, mostly the liquor stores. People coming in and buy package, you know, buy bottles and leave. So, most of the business is the drive-through window. The Department’s decision to average the error ratios for the other two liquor stores to derive the additional tax due average for Overtime Sports Bar is reasonable, particularly in light of Mr. Altheeb’s testimony that Overtime Sports Bar operates primarily as a liquor (package) store. The Department calculated the additional tax due average error ratio for Overtime Sports Bar by averaging the error ratios of Al’s Liquor and Arlington Liquor, and then multiplied it by B Century 21’s reported gross sales to arrive at the additional tax due for Overtime Sports Bar of $41,797.49. Ms. Pitre testified that she determined that, for the audit period, B Century 21 owed additional sales tax of $170,232.93. In addition, the Department imposed a penalty and accrued interest. On December 16, 2019, Ms. Pitre sent correspondence, the preliminary assessment, and a copy of the audit work papers to B Century 21 (through Mr. Isaac), informing B Century 21 that it had 30 days to contact the Department’s tax audit supervisor to request an audit conference or submit a written request for an extension. After receiving no response from B Century 21, Ms. Pitre forwarded the audit workpapers to the Department’s headquarters in Tallahassee, Florida, to process the Notice of Proposed Assessment. B Century 21’s Position As mentioned previously, and after initially meeting with the Department, B Century 21 failed to provide requested financial records or respond to any of the numerous letters and notices received from the Department, despite being given adequate opportunity to do so. And, after filing its Amended Petition, it failed to timely respond to discovery requests from the Department which, inter alia, resulted in numerous matters being conclusively established. Mr. Isaac served as the POA for B Century 21 during the audit, and also appeared in this proceeding as a qualified representative. However, Mr. Isaac did not appear at the final hearing, did not testify as a witness at the final hearing, and does not appear to have done anything for B Century 21 in this proceeding, other than filing the Petition and Amended Petition. After Mr. Heekin appeared in this matter, and well after the time to respond to discovery, B Century 21 provided 127 pages of documents to the Department. These documents consist of: 18 pages of summaries of daily sales that Mr. Altheeb prepared for the hearing; 41 pages of sales and use tax returns from B Century 21 locations, covering 25 months (DR-15s); 2 pages of Harbortouch’s 2016 1099K, reporting credit card sales; 43 pages of unsigned federal tax returns from 2016, 2017, and 2018, prepared by Mr. Isaac; and 17 pages of B Century 21’s untimely responses to the Department’s discovery requests. Florida Administrative Code Rule 12-3.0012(3) defines “adequate records” to include: (3) “Adequate records” means books, accounts, and other records sufficient to permit a reliable determination of a tax deficiency or overpayment. Incomplete records can be determined to be inadequate. To be sufficient to make a reliable determination, adequate records, including supporting documentation, must be: Accurate, that is, the records must be free from material error; Inclusive, that is, the records must capture transactions that are needed to determine a tax deficiency or overpayment; Authentic, that is, the records must be worthy of acceptance as based on fact; and Systematic, that is, the records must organize transactions in an orderly manner. The nature of the taxpayer’s business, the nature of the industry, materiality, third-party confirmations and other corroborating evidence such as related supporting documentation, and the audit methods that are suitable for use in the audit, will be used to establish that the taxpayer has adequate records. The undersigned finds that the summaries of daily sales are not adequate records because Mr. Altheeb prepared them for use at the final hearing, rather than in the regular course of business. The undersigned finds that the DR-15s provided by Mr. Altheeb, covering 25 months, are not adequate records because they are incomplete and are not inclusive. The audit period encompassed 36 months, for B Century 21’s three retail locations; however, Mr. Altheeb only provided 25 months of DR-15s. The 2016, 2017, and 2018 federal tax returns that B Century 21 provided are not adequate records because they are not authentic. Mr. Altheeb was unable to verify if these tax returns were correct, and they were unsigned. B Century 21 did not provide any evidence that it had filed any of these federal tax returns with the Internal Revenue Service. Ms. Pitre reviewed the 127 pages of documents that B Century 21 provided and testified that the summaries of daily sales did not provide the “source documents” for verification. The unsigned federal tax returns reflect that B Century 21 reported a cost-of-goods-sold (COGS) of $518,606.00 for 2016; $1,246,839.00 for 2017; and $796,968.00 for 2018. Additionally, the unsigned federal tax returns reflect that B Century 21 reported a beginning inventory (BI) for 2016 of $95,847.00, and a year-end inventory (EI) for 2016 of $200,556.00, EI for 2017 of $280,235.00, and EI for 2018 of $295,628.00. When comparing the unsigned federal tax returns with the ABT wholesalers’ data, the federal tax returns reflect, for 2016, total inventory purchases of $623,315.00 (which is derived from $518,606.00 (COGS) + $200,556.00 (EI) - $95,847.00 (BI)). However, the ABT wholesalers’ data for 2016 reflects that B Century 21’s ABT purchases were $1,174,997.34 – a discrepancy of more than $500,000.00. For 2017, the federal tax returns reflect total inventory purchases of $1,326,518.00 (which is derived from $1,246,839.00 (COGS) + $280,235.00 (EI) for 2017 - $200,556.00 (EI) for 2016). However, the ABT wholesalers’ data for 2016 reflects that B Century 21’s ABT purchases were $1,422,854.79 – a discrepancy of over $96,000.00. And for 2018, the unsigned federal tax returns reflect total inventory purchases of $812,361.00 (which is derived from $796,968.00 (COGS) + $295,628.00 (EI) for 2018 - $280,235.00 (BI) for 2017). However, the ABT wholesalers’ data for 2018 reflects that B Century 21’s ABT purchases were $1,335,814.00 – a discrepancy of over $500,000.00. Mr. Altheeb testified that Arlington Liquor and Overtime Sports Bar opened in 2016 – after B Century 21 began ownership and operation of Al’s Liquor. He stated that he did not purchase inventory for the openings of the newer locations, but instead transferred excess inventory from Al’s Liquor, which resulted in lower total inventory purchases for 2016. Mr. Altheeb also testified that B Century 21’s three locations experienced spoiled inventory. However, B Century 21 should include spoiled inventory in COGS reported in its federal tax returns, and further, B Century 21 provided no additional evidence of the cost of spoilage for the audit period. The undersigned finds that the ABT wholesalers’ data for 2016 through 2018 reflects similar amounts for inventory purchases between 2016 through 2018. The undersigned credits the Department’s reliance on the ABT wholesalers’ data, which reflect fairly consistent purchases for each year. The undersigned does not find the unsigned federal tax returns that B Century 21 provided to be persuasive evidence that the Department’s assessment was incorrect. Mr. Altheeb testified that he believed Mr. Isaac, who B Century 21 designated as POA for the audit, and who appears as a qualified representative in this proceeding, was actively handling the audit. Mr. Altheeb stated that the audit, and the final hearing, “kind of came out of nowhere” and that once he learned of it, he retained Mr. Heekin and provided “everything” to him. However, it is conclusively established that the Department provided correspondence and notice to B Century 21 through its designated POA, and that B Century 21 failed to respond to record requests in a timely manner. Mr. Isaac neither testified nor appeared at the final hearing to corroborate Mr. Altheeb’s claims that Mr. Isaac did not keep Mr. Altheeb or B Century 21 apprised of the status of the audit, including the failure to provide requested records or to communicate with the Department. B Century 21 also attempted to challenge the Department’s use of markup data from other ABT audits, in an attempt to argue that the markups were inflated and not representative of B Century 21’s markups. However, and as previously found, B Century 21’s failure to timely provide records—or respond in any meaningful way to the audit—undermines this attempt. The undersigned credits the Department’s methodology in using the best information available to it for the audit period in calculating the assessment. Although it became apparent during the final hearing that Mr. Altheeb did not treat the audit of B Century 21 with appropriate seriousness, and deflected blame to Mr. Isaac, and that his approach resulted in a legally appropriate and sustainable audit and assessment based on the Department’s best information available, the undersigned does not find that B Century 21, Mr. Isaac, or Mr. Heekin knew that the allegations of the Amended Petition were not supported by the material facts necessary to establish the claim or defense, or would not be supported by the application of then-existing law to those material facts. The undersigned finds that the Department made its assessment based on the best information then available, and is thus prima facie correct, pursuant to section 212.12(5)(b). The undersigned further finds that B Century 21 did not prove, by a preponderance of the evidence, that the Department’s assessment is incorrect, pursuant to section 212.12(5)(b).
Conclusions For Petitioner: Robert Andrew Heekin, Esquire The Law Office of Rob Heekin, Jr., P.A. 2223 Atlantic Boulevard Jacksonville, Florida 32207 For Respondent: Randi Ellen Dincher, Esquire Franklin David Sandrea-Rivero, Esquire Office of the Attorney General Revenue Litigation Bureau Plaza Level 1, The Capitol Tallahassee, Florida 32399
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, the undersigned hereby RECOMMENDS that the Department enter a final order sustaining the January 27, 2020, Notice of Proposed Assessment to B Century 21, Inc. DONE AND ENTERED this 21st day of October, 2021, in Tallahassee, Leon County, Florida. S ROBERT J. TELFER III Administrative Law Judge 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 21st day of October, 2021. COPIES FURNISHED: Mark S. Hamilton, General Counsel Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668 Randi Ellen Dincher, Esquire Office of the Attorney General Revenue Litigation Bureau Plaza Level 1, The Capitol Tallahassee, Florida 32399 Robert Andrew Heekin, Esquire The Law Office of Rob Heekin, Jr., P.A. 2223 Atlantic Boulevard Jacksonville, Florida 32207 Franklin David Sandrea-Rivero, Esquire Office of the Attorney General Plaza Level 1, The Capitol Tallahassee, Florida 32399 Brett J. Isaac 2151 University Boulevard South Jacksonville, Florida 32216 James A Zingale, Executive Director Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668
The Issue Whether the contested and unpaid portions of the tax, penalty and interest assessment issued against Petitioners as a result of Audit No. 9317210175 should be withdrawn as Petitioners have requested?
Findings Of Fact Based upon the evidence adduced at hearing, and the record as a whole, the following Findings of Fact are made: Shuckers is an oceanfront restaurant and lounge located at 9800 South Ocean Drive in Jensen Beach, Florida. In November of 1992, Petitioner Mesa's brother, Robert Woods, Jr., telephoned Mesa and asked her if she wanted a job as Shuckers' bookkeeper. Woods had been the owner of Shuckers since 1986 through his ownership and control of the corporate entities (initially Shuckers Oyster Bar Too of Jensen Beach, Florida, Inc., and then NAT, Inc.) that owned the business. Mesa needed a job. She therefore accepted her brother's offer of employment, notwithstanding that she had no previous experience or training as a bookkeeper. When Mesa reported for her first day of work on November 19, 1992, she learned that Woods expected her to be not only the bookkeeper, but the general manager of the business as well. Mesa agreed to perform these additional responsibilities. She managed the day-to-day activities of the business under the general direction and supervision of Woods. After a couple of weeks, Woods told Mesa that it would be best if she discharged her managerial responsibilities through an incorporated management company. Woods had his accountant draft the documents necessary to form such a corporation. Among these documents were the corporation's Articles of Incorporation. Mesa executed the Articles of Incorporation and, on December 3, 1992, filed them with the Secretary of State of the State of Florida, thereby creating Petitioner TAN, Inc. TAN, Inc.'s Articles of Incorporation provided as follows: The undersigned subscribers to these Articles of Incorporation, natural persons competent to contract, hereby form a corporation under the laws of the State of Florida. ARTICLE I- CORPORATE NAME The name of the corporation is: TAN, INC. ARTICLE II- DURATION This corporation shall exist perpetually unless dissolved according to Florida law. ARTICLE III- PURPOSE The corporation is organized for the purpose of engaging in any activities or business permitted under the laws of the United States and the State of Florida. ARTICLE IV- CAPITAL STOCK The corporation is authorized to issue One Thousand (1000) shares of One Dollar ($1.00) par value Common Stock, which shall be designated "Common Shares." Article V- INITIAL REGISTERED OFFICE AND AGENT The principal office, if known, or the mailing address of this corporation is: TAN, INC. 9800 South Ocean Drive Jensen Beach, Florida 34957 The name and address of the Initial Registered Agent of the Corporation is: Linda A. W. Mesa 9800 South Ocean Drive Jensen Beach, Florida 34957 ARTICLE VI- INITIAL BOARD OF DIRECTORS This corporation shall have one (1) director initially. The number of directors may be either increased or diminished from time to time by the By-laws, but shall never be less than one (1). The names and addresses of the initial directors of the corporation are as follows: Linda A. W. Mesa 9800 South Ocean Drive Jensen Beach, Florida 34957 ARTICLE VII- INCORPORATORS The names and addresses of the incorporators signing these Articles of Incorporation are as follows: Linda A. W. Mesa 9800 South Ocean Drive Jensen Beach, Florida 34957 On the same day it was incorporated, December 3, 1992, TAN, Inc., entered into the following lease agreement with the trust (of which Woods was the sole beneficiary) that owned the premises where Shuckers was located: I, Michael Blake, Trustee, hereby lease to Tan, Inc. the premises known as C-1, C-2, C-3, C-4, 9800 South Ocean Drive, Jensen Beach, Florida for the sum of $3,000.00 per month. This is a month to month lease with Illinois Land Trust and Michael Blake, Trustee. Mesa signed the agreement in her capacity as TAN, Inc.'s President. She did so at Woods' direction and on his behalf. No lease payments were ever made under the agreement. 3/ The execution of the lease agreement had no impact upon Shuckers. Woods remained its owner and the person who maintained ultimate control over its operations. At no time did he relinquish any part of his ownership interest in the business to either Mesa or her management company, TAN, Inc. Mesa worked approximately 70 to 80 hours a week for her brother at Shuckers doing what he told her to do, in return for which she received a modest paycheck. Woods frequently subjected his sister to verbal abuse, but Mesa nonetheless continued working for him and following his directions because she needed the income the job provided. As part of her duties, Mesa maintained the business' financial records and paid its bills. She was also required to fill out, sign and submit to Respondent the business' monthly sales and use tax returns (hereinafter referred to as "DR- 15s"). She performed this task to the best of her ability without any intention to defraud or deceive Respondent regarding the business' tax liability. The DR-15s she prepared during the audit period bore NAT, Inc.'s Florida sales and use tax registration number. On the DR-15 for the month of December, 1992, Mesa signed her name on both the "dealer" and "preparer" signature lines. Other DR-15s were co-signed by Mesa and Woods. In April of 1993, Woods told Mesa that she needed to obtain a Florida sales and use tax registration number for TAN, Inc., to use instead of NAT, Inc.'s registration number on Shuckers' DR-15s. In accordance with her brother's desires, Mesa, on or about May 14, 1993, filed an application for a Florida sales and use tax registration number for TAN, Inc., which was subsequently granted. On the application form, Mesa indicated that TAN, Inc. was the "owner" of Shuckers and that the application was being filed because of a "change of ownership" of the business. In fact, TAN, Inc. was not the "owner" of the business and there had been no such "change of ownership." By letter dated June 22, 1993, addressed to "TAN INC d/b/a Shuckers," Respondent gave notice of its intention to audit the "books and records" of the business to determine if there had been any underpayment of sales and use taxes during the five year period commencing June 1, 1988, and ending May 31, 1993. The audit period was subsequently extended to cover the six year period from June 1, 1987 to May 31, 1993. Relying in part on estimates because of the business' inadequate records, auditors discovered that there had been a substantial underpayment of sales and use taxes during the audit period. The auditors were provided with complete cash register tapes for only the following months of the audit period: June, July, August and December of 1992, and January, February, March, April and May of 1993. A comparison of these tapes with the DR-15s submitted for June, July, August and December of 1992, and January, February, March, April and May of 1993 revealed that there had been an underreporting of sales for these months. Using the information that they had obtained regarding the three pre- December, 1992, months of the audit period for which they had complete cash register tapes (June, July and August of 1992), the auditors arrived at an estimate of the amount of sales that had been underreported for the pre- December, 1992, months of the audit period for which they did not have complete cash register tapes. The auditors also determined that Shuckers' tee-shirt and souvenir sales, 4/ Sunday brunch sales, cigarette vending sales, vending/amusement machine location rentals 5/ and tiki bar sales that should have been included in the sales reported on the DR-15s submitted during the audit period were not included in these figures nor were these sales reflected on the cash register tapes that were examined. According of the "Statement of Fact" prepared by the auditors, the amount of these unreported sales were determined as follows: TEE-SHIRT SALES: Sales were determined by estimate. This was determined to be $2,000/ month. No records were available and no tax remitted through May, 1993. SUNDAY BRUNCH SALES: Sales were determined by estimate. This was determined to be 100 customers per brunch per month (4.333 weeks). No audit trail to the sales journal was found and no records were available. CIGARETTE VENDING SALES: The estimate is based on a review of a sample of purchases for the 11 available weeks. The eleven weeks were averaged to determine monthly sales at $3/pack. VENDING MACHINE LOCATION RENTAL REVENUE: The revenue estimate is based on a review of a one month sample. TIKI BAR SALES: The sales estimate is based on a review of infrequent cash register tapes of February, 1993. The daily sales was determined by an average of the sample. The number of days of operation per month was determined by estimate. In addition, the auditors determined that TAN, Inc. had not paid any tax on the lease payments it was obligated to make under its lease agreement with Illinois Land Trust and Michael Blake, Trustee, nor had any tax been paid on any of the pre-December, 1992, lease payments that had been made in connection with the business during the audit period. According to the "Statement of Fact" prepared by the auditors, the amount of these lease payments were determined as follows: The estimate is based on 1990 1120 Corporate return deduction claimed. This return is on file in the Florida CIT computer database. The 1990 amount was extended through the 6/87 - 11/92 period. For the period 12/92 - 5/93 audit period, TAN's current lease agreement of $3,000/month was the basis. No documentation was produced during the audit supporting any the sales tax exemptions that the business had claimed during the audit period on its DR-15s. 6/ Accordingly, the auditors concluded that the sales reported as exempt on the business' DR-15s were in fact taxable. Using records of sales made on a date selected at random (February 1, 1993), the auditors calculated effective tax rates for the audit period. They then used these effective tax rates to determine the total amount of tax due. An initial determination was made that a total of $201,971.71 in taxes (not including penalties and interest) was due. The amount was subsequently lowered to $200,882.28. On or about December 22, 1993, TAN, Inc., entered into the following Termination of Lease Agreement with Ocean Enterprises, Inc.: TAN, Inc., a Florida corporation, hereby consents to termination of that certain lease of the premises known as C-1, C-2, C-3 and C-4 of ISLAND BEACH CLUB, located at 9800 South Ocean Drive, Jensen Beach, Florida, dated December 3, 1992, acknowledges a landlord's lien on all assets for unpaid rent; and transfers and sets over and assigns possession of the aforesaid units and all of its right, title and interest in and to all inventory, equipment, stock and supplies located on said premises 7/ in full satisfaction of said unpaid rent; all of the foregoing effective as of this 22nd day of December, 1993. FOR AND IN CONSIDERATION of the foregoing termin- ation of lease, OCEAN ENTERPRISES, Inc., a Florida corporation, hereby agrees to pay Linda Mesa, each month all of the net revenues of the operation of the bar and restaurant located on said premises, up to the sum of $15,000.00, for sales tax liability asserted against TAN, Inc. or Linda A. W. Mesa based upon possession or ownership of said premises or any of the assets located thereon, plus attorney's fees incurred in connection with defending or negotiating settlement of any such liability. Net revenue shall mean gross revenue, less operating expenses, includ- ing, but not limited to, rent, up to the amount of $5,000.00 per month, costs of goods sold, utilities, payroll and payroll expense and insurance. OCEAN ENTERPRISES, Inc. represents that it has entered into a lease of said premises for a term of five years commencing on or about December 22, 1993, pursuant to the terms and conditions of which OCEANFRONT [sic] ENTERPRISES, Inc. was granted the right to operate a restaurant and bar business on said premises. Ocean Enterprises, Inc., leases the property from Island Beach Enterprises, which obtained the property through foreclosure. TAN, Inc., has been administratively dissolved.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Department of Revenue enter a final order withdrawing the contested and unpaid portions of the assessment issued as a result of Audit No. 9317210175, as it relates to TAN, Inc., and Linda A. W. Mesa. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 27th day of June, 1995. STUART M. LERNER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 27th day of June, 1995.
The Issue The issue in this case is whether Petitioner is liable to Respondent for fuel taxes, and, if so, whether Respondent's levy on Petitioner's bank deposits is warranted and proper.
Findings Of Fact Petitioner was at all times relevant to this proceeding an active corporation in the State of Florida. Petitioner operated as a motor fuel dealer from its inception in 1984, but in 1996, its application for licensure as a motor fuel dealer was not renewed by Respondent due to the existence of fuel tax delinquencies. Respondent is the state agency responsible for collecting taxes paid by motor fuel dealers. On July 3, 1996, Respondent issued a Notice of Final Assessment and Jeopardy Finding to Petitioner indicating taxes, penalties, and interest due to Respondent in the sum of $74,423.25; a Warrant was issued in that amount and filed with the Pasco County Clerk's Office. On July 3, 1996, Respondent issued another Notice of Final Assessment and Jeopardy Finding to Petitioner indicating taxes, penalties, and interest due to Respondent in the sum of $12,625.64; a Warrant was issued in that amount and filed with the Pasco County Clerk's Office. On July 3, 1996, Respondent issued another Notice of Final Assessment and Jeopardy Finding to Petitioner indicating taxes, penalties, and interest due to Respondent in the sum of $15,245.84; a Warrant was issued in that amount and filed with the Pasco County Clerk's Office. On June 28, 1996, Respondent issued a Notice of Assessment and Jeopardy Finding to Petitioner indicating taxes, penalties, and interest due to Respondent in the sum of $90,317.87; a Warrant was issued in that amount and filed with the Pasco County Clerk's Office. On June 28, 1996, Respondent issued another Notice of Assessment and Jeopardy Finding to Petitioner indicating taxes, penalties, and interest due to Respondent in the sum of $57,864.24; a Warrant was issued in that amount and filed with the Pasco County Clerk's Office. On November 27, 1996, Respondent issued a Notice of Final Assessment and Jeopardy Finding to Petitioner indicating taxes, penalties, and interest due to Respondent in the sum of $81,094.54; a Warrant was issued in that amount and filed with the Pasco County Clerk's Office. Another Warrant was filed in the Pasco County Clerk's Office on May 24, 1996, reflecting delinquent taxes, penalties, and interest owed Respondent due to failure of an electronic transfer by Petitioner because of insufficient funds. The amount of that Warrant was $9,918.92. (A filing fee of $32.00 was assessed for each of the filed Warrants.) The time for challenging the assessments set forth in the notices and Warrants has passed. No credible evidence was presented at final hearing to suggest the assessed amounts were incorrect. Petitioner made some payments on the assessed amounts from time to time. Payments were applied to the outstanding balance in accordance with governing statutes: Filing fees, then accrued interest, then penalties, and then the tax liabilities. After applying the payments and taking into account accruing interest, Petitioner owes Respondent $377,074.29 as of the date of the final hearing. On September 13, 1996, Petitioner wrote a letter to Respondent asking that all penalties and interest on the outstanding balance be waived. The basis of the request was that only one officer of the corporation had actual knowledge of the unpaid fuel taxes. Once the other two officers were made aware, they immediately paid the current taxes and discontinued operation of the business. All assets of the business were sold, and the proceeds provided to Respondent to apply against the outstanding balance. Some revenue was being held by the corporation to provide for orderly termination of the business and upkeep of the real property owned by the corporation. Respondent denied Petitioner's request for compromise of the outstanding debt by letter dated December 19, 1996. Respondent requested from Petitioner evidence that Petitioner had exercised "ordinary care and prudence" in complying with state revenue laws. No evidence of a response by Petitioner was identified at final hearing. On August 27, 2009, Respondent, in recognition that the Warrants would expire after a period of time, notified Petitioner of the need to satisfy all the Warrants immediately. Upon Petitioner's failure to pay, Respondent issued a Notice of Freeze on October 8, 2009, to Synovus Bank where Petitioner's funds were being held. At that time there was $52,990.21 being held by the bank for Petitioner. On November 3, 2009, Respondent issued a Notice of Intent to Levy, advising Petitioner of its intent to seize the money being held at Synovus Bank. Petitioner timely filed a contest to the Notice of Intent to Levy. Respondent notified Synovus Bank of the contest. Petitioner was formed by three individuals: Earl Radcliff, president; Robert Spence; and R. Michal Marston. Spence and Marston were merely investors; Radcliff operated and controlled the business. Neither Spence, nor Marston was involved in the payment of fuel taxes during the period the business was operating. That duty was left entirely up to Radcliff. Upon Radcliff's failure to pay the taxes that were due, Respondent began issuing notices. Finally, in 1996, Respondent refused to renew Petitioner's motor fuel dealer's license, effectively terminating the business. Spence and Marston were not immediately made aware of this fact, but upon learning that the license had not been renewed, they began attempting to make the appropriate tax payments. When it became obvious there was not enough money available to pay the tax liabilities, Spence began taking steps to protect the real estate owned by Petitioner so that it could be sold to meet the tax liabilities. The funds held by Synovus Bank are being used solely to protect the existing real property. Neither Spence, nor Marston, was ever repaid for their initial investment to the corporation. The real property has not been sold due to many reasons, including the downturn in the economy, the existence of environmental problems on the site, and general deterioration of the property. The property is in two parcels: one is an empty lot and the other is being used as an automobile dealership.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by Respondent, Department of Revenue, upholding the Notice of Intent to Levy issued by Respondent as to property owned by Petitioner, Fuel Mart, Inc. DONE AND ENTERED this 28th day of May, 2010, in Tallahassee, Leon County, Florida. R. BRUCE MCKIBBEN 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 28th day of May, 2010. COPIES FURNISHED: Lisa Echeverri, Executive Director Department of Revenue The Carlton Building, Room 104 501 South Calhoun Street Tallahassee, Florida 32399-0100 Marshall Stranburg, General Counsel Department of Revenue The Carlton Building, Room 204 501 South Calhoun Street Post Office Box 6668 Tallahassee, Florida 32314-6668 John Mika, Esquire Office of the Attorney General The Capitol - Tax Section Tallahassee, Florida 32399-1050 Robert Spence Fuel Mart, Inc. 250 North Belcher Road, No. 100 Clearwater, Florida 33765-2622
The Issue Whether or not on or about the 2nd day of April, 1976, the Respondent, Charter Distributing Company, licensed under the Cigarette Laws, did unlawfully attempt to evade or defeat the state tax by attempting to gain a cigarette tax rebate on unstamped cigarettes, contrary to s. 210.18(1), F.S.
Findings Of Fact At all times material to the Notice to Show Cause, the Respondent, Charter Distributing Company was licensed under License No. 26-106, CWD, with the State of Florida, Division of Beverage. On April 2, 1976, Mr. Jesse Bob Cooper, an Excise Auditor II, with the State of Florida, Division of Beverage went to the licensed premises at 975 Broad Street, Jacksonville, Florida to cancel certain cigarette imprints to enable the licensee to get a refund of cigarette taxes paid. Those cigarettes upon which the imprints were to be cancelled were cigarettes which were taken out of commercial circulation because they were stale. These cigarettes were part of a quantity of cigarettes which were being returned by manufacturers representatives of the various cigarette companies to Charter Distributing Company. The arrangement was to have the cigarette company representative bring the cigarettes into the warehouse area and stack those cigarettes in a "dump area" and receive credit for them. The amounts being brought in by the manufacturers representatives were from 30 to 250 cartons on each occasion. The president of the Respondent, William Moore, would then ask the manufacturers representative if the cigarettes had the appropriate stamps for cancellation. When he was prepared, he would contact the Petitioner's representative to come over and cancel the cigarettes for refund. On April 2, 1976, when Mr. Cooper arrived to cancel the Cigarettes, the cigarettes were placed on a table and examined for proper stamps. On that date, eleven (11) packs of cigarettes were discovered which had inappropriate stamps. Nine of those packs of cigarettes were meter stamped, that is, had meter imprints that were inappropriate. One pack of the eleven packs had the heat or Addco stamp and the final pack had a hand stamp. Although the latter two packs of cigarettes had the appropriate form of stamp, the cellophane wrapper around the pack had been taped there and the stamps were not correct for those two packs. The process was being conducted by having Mr. Moore cancel the packs of cigarettes that were being examined, while Mr. Cooper witnessed. There was no effort at concealing the inappropriate packages of cigarettes made on the part of Mr. Moore. The eleven packs of cigarettes had been brought in by some undisclosed manufacturer's representative and had not been discovered until the point of checking for tax refunds, which was the activity on April 2, 1976. The Respondent, after discovery of the inappropriate stamps had been made, did not make any further request for tax refund and has not received such refund. Finally, there was no showing that the Respondent had any knowledge of the impropriety of the stamps prior to the discovery on April 2, 1976 when these eleven packs and other cigarettes were being cancelled.
Recommendation It is recommended that the Respondent, Charter Distributing Company, License No. 26-106, CWB, be released from further responsibility to answer to the Notice to Show Cause herein. CHARLES C. ADAMS, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: Charles T. Collette, Esquire Division of Beverage Department of Business Regulation The Johns Building 725 Bronough Street Tallahassee, Florida 32304 Stephen D. Busey, Esquire 500 Barnett Bank Building Jacksonville, Florida 32202
Findings Of Fact In Exhibit 3 Petitioner disputes 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 164,000. 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. The Neighbor is organized into seven departments. These are: editorial, retail advertising, classified advertising, accounting, circulation, production, and printing. The editorial staff provides all items in the paper other than advertising. The editorial/advertising mix of the Neighbor is approximately 25 percent-75 percent. No 12-month breakdown of these percentages was presented. The Neighbor defines editorial content as everything except paid advertising. 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 publication 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, as defined in Finding of Fact 7 above, is comprised of local news, sporting news, local investigative reporting, an opinions section, and an entertainment section. The advertising is split into classifieds 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 nationally syndicated columnists, no state capital news, no obituaries, no book review section, and no special section such as home designs, gardening, etc. Neighbor considers its primary competition to be The Tampa Tribune. However, this competition is limited to advertising, as the Neighbor has none of the traditional newspaper functions 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 a newspaper; that the requirements of the Department of Revenue Rule 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 owner 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.
Findings Of Fact Petitioner William G. Brunet owns and operates the Music Box Lounge, a bar in Lake Worth, Florida. Mr. Brunet is homosexual as are his employees and many of the patrons of the Music Box Lounge. At no time pertinent to these proceedings did any agent or employee of either respondent take any action affecting petitioner with any motive or intent to discriminate against petitioner on account of his homosexuality. On October 25, 1977, Margaret Sager called the Music Box Lounge to arrange to see the books for the period September 1, 1974, to August 31, 1977. Two days later she visited the Music Box Lounge where she spoke to the bartender, John J. Dolan, and to petitioner. On the basis of these discussions, Ms. Sager filled out a form. This form, which petitioner signed, was received in evidence as respondents' exhibit No. 1. For the most part, the form is an abbreviated price list for beer, champagne, other wine, and liquor, covering the period 1974 through 1977. The form indicates that one ounce drinks are poured at petitioner's establishment, and the notation "1 case of beer a week personal- 5 bottles of liq. per week personal" appears at the bottom of the form. Ms. Sager compared invoices reflecting petitioner's purchases of alcoholic beverages with the entries in petitioner's general ledger purporting to represent such purchases and found no discrepancies. She inquired of petitioner's suppliers as to how much the kegs of beer they had sold petitioner contained. She made allowance for petitioner's personal weekly use of one case of beer and four or five bottles of liquor, assumed that petitioner sold 30 drinks for each quart bottle of liquor he purchased from suppliers, and projected petitioner's gross sales on these assumptions. After a conference with petitioner and his accountant, and on the advice of her supervisor, Ms. Sager substituted the figure 25 drinks per quart to arrive at a second projection. By multiplying .045 times this second estimate, and subtracting from the product the amount of sales tax petitioner had remitted for the period September 1, 1974, to August 31, 1977, Ms. Sager arrived at the figure four thousand fourteen dollars and twenty-three cents ($4,014.23), representing the alleged deficiency on account of petitioner's sales. After the audit, Ms. Sager concluded that petitioner had remitted what he probably felt was a true figure for the period in question. In estimating petitioner's gross sales, Ms. Sager made no allowance for "happy hours" or other promotions; made no allowance for theft or bartenders' drinking; and made no allowance for the sale of liquor by the bottle rather than by the drink. During the period in question, petitioner operated his bar on two shifts, from ten in the morning till six in the evening and from six till closing, at two the following morning. Prices of drinks were not stated separately from sales tax due on account of their sale. The bartender started each shift with a certain amount of money in the cash register, and was instructed to ring up each sale as it occurred. At the end of the day, the bartender put the cash register tape and the money in the cash register into a box. The following day receipts were tabulated. Petitioner's accountant used the resulting daily reports in compiling sales tax reports, which petitioner filed regularly during the audit period in question. All but the first four monthly reports petitioner made during the audit period were received as a joint composite exhibit on August 15, 1978. During the period in question, petitioner sold package goods to his employees and friends at cost; sales tax was collected on these transactions. From April of 1975, to February of 1976, ten to fifteen quarts of liquor were sold at cost each week. Bruce MacFallon, who worked for petitioner as a bartender during and about the year 1974, purchased five cases of liquor from petitioner in a year's time. Gerald P. Mooney, who worked for petitioner as a bartender during the entire audit period, bought about fifteen bottles of liquor at wholesale from petitioner in a year's time. In addition, petitioner gave Mr. Mooney two or three bottles of liquor a year as presents. There was no evidence that petitioners' employees stole from him. At least during the period from April 1975 to February 1976, there were two sets of prices for drinks at petitioner's bar, one set for each shift. From four to six in the afternoon, moreover, prices were further reduced. Respondent's exhibit No. 1 does not reflect these diurnal price fluctuations. John J. Dolan, who worked the day shift as a bartender from April 1975 to February 1976, poured an ounce and a half of liquor for most drinks, but used two ounces in each martini. Bruce MacFallon poured up to two ounces of liquor in each regular drink and more in each manhattan or martini he prepared. He never poured as little as one ounce of liquor in a drink. Gerald P. Mooney poured one and one quarter to one and one half ounces of liquor in each normal drink he mixed and two to three ounces of liquor in each martini or manhattan he prepared. Martinis were especially popular during "happy hours." Petitioner authorized his bartenders to give complimentary drinks to good customers. As a rule of thumb, Mr. Mooney gave two or three free drinks a night to any customer who regularly spent twenty-five dollars or upwards on visits to the bar. On an average day, Mr. Dolan gave away fifteen to twenty or more highballs and ten or more beers. Mr. MacFallon gave away free drinks for every so many sold to a customer and has given away as many as twenty drinks a day in this fashion. Respondent's exhibit No. 1 overstates the prices petitioner charged for beer during the audit period in question. There was testimony to the effect that bars catering to homosexuals face stiffer competition than other bars and resort to promotions involving sales of liquor at reduced prices more often. Whether or not it is true, this general proposition has no bearing on the specific matters developed in the evidence in the present case. Except insofar as they recite that Ms. Sager was inexperienced and unfamiliar with the operation of bars and that she failed to consider spillage, petitioner's proposed findings of fact have been adopted in substance, insofar as relevant and consistent with the foregoing findings of fact.
Recommendation Upon consideration of the foregoing, it is RECOMMENDED: That respondents abandon the revised notice of proposed assessment and refund all monies collected pursuant to the revised notice of proposed assessment, except for one hundred thirty-five dollars and eighty-nine cents ($135.89), together with penalty and interest thereon. DONE and ENTERED this 7th day of September, 1978, in Tallahassee, Florida. ROBERT T. BENTON, II Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 7th day of September, 1978. COPIES FURNISHED: David S. Meisel, Esquire Rogers & Meisel 400 Royal Palm Way Palm Beach, Florida 33480 E. Wilson Crump, II, Esquire Assistant Attorney General Tax Division, Northwood Mall Tallahassee, Florida 32303
Findings Of Fact Petitioner is Carl R. Glass, d/b/a Osceola Forge located at 2749 North Orange Blossom Trail, Kissimmee, Florida 34744. Petitioner is engaged in the business of manufacturing and fabricating burglar bars, steel gates, decorative plastic ornamental castings and injection moldings. Petitioner built and erected one double sided billboard on his business property at 2749 North Orange Blossom Trail, Kissimmee, Florida. It is anchored by its owns supports into the ground as a permanent improvement to Petitioner's real property. The size of the billboard is approximately 12' x 38', plus an apron that runs along the length of the bottom of the billboard. Petitioner leases the face and apron of each side of billboard to customers who are generally required to supply their own labor and material to create an advertising message. The billboard was built to provide double-sided advertising for lanes of traffic going northbound or southbound past Petitioner's place of business. Petitioner has rented the billboard to various lessees for a monthly rental fee over the relevant period. Petitioner did not charge or collect sales and use taxes on the rental fee. Respondent conducted an audit of Petitioner's entire business, for the period May 1, 1986 through April 30, 1991. There was only one item assessed as a result of the audit which was on the lease of the billboard located on Petitioner's business property. Petitioner was assessed sales and use taxes, interest and penalties totalling $6,142.38, including taxes ($4,017.76) with a per diem interest rate of $1.32 to be computed from 10/3/91 to the present. Additional interest due, as of July 1, 1993, was calculated to equal $842.16 (638 days x $1.32). The sales tax assessment was based on invoices and other information provided by the Petitioner and followed the Department of Revenue routine procedures required for all audits. From January 1987 through February 1991, Petitioner, or his secretary, made five telephone calls from Osceola Forge to the Taxpayer Assistance Number of the Department of Revenue's regional office located in Maitland, Florida, requesting assistance. On each occasion, the Department's employee advised Petitioner or his employee that they could call the Department's Tallahassee 800 taxpayer assistance number. On at least one occasion, Petitioner's secretary or Petitioner was advised that the transaction was tax exempt, and need not be collected. Petitioner was aware of the 800 taxpayer assistance number in Tallahassee and tried to call the number. However, he was unable to get through, and called the local office only. On April 9, 1992, Petitioner personally telephoned the Titusville office of the Department of Revenue. On each occasion, Petitioner inquired whether or not sales or use taxes should be collected on the rental of the billboard. A free, updated Sales and Use Tax Rules Book is available to any tax payer upon request. In addition, a taxpayer could personally appear and bring documentation relating to any questions relating to the sales and use tax at any regional office. Petitioner did not obtain an updated rules book or personally appear at a regional office. On April 30, 1992, Petitioner filed a Protest Letter with Respondent challenging the abovementioned tax assessment. Respondent issued to Petitioner a Notice of Decision dated December 1, 1992. On January 8, 1993, Petitioner filed a Request for a Formal Administrative Hearing with Respondent. To date, Petitioner has not paid any of the contested taxes, interest, and penalties to Respondent. Petitioner relied on information provided by his secretary, his accountant, and brief phone conferences with the DOR's Maitland office to determine that the rental fees were tax exempt, and did not collect the sales tax from his customers. The DOR Audit Supervisor testified that there is a clear distinction between the taxable rental of a billboard and the nontaxable services of placing an advertising message on the billboard. The rental of the face of the billboard is a taxable transaction. On the other hand, if a person rents or leases a billboard, then hires a third party to place an advertising message on the billboard, this advertising service is tax exempt.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department of Revenue enter a Final Order upholding its sales and use tax assessment, waive penalties and interest accrued prior to October 2, 1991, and assess a tax of $4,017.76, plus interst from the date due. DONE and ENTERED this 14th day of July, 1993, in Tallahassee, Florida. DANIEL M. KILBRIDE 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 14th day of July, 1993. APPENDIX The following constitutes my specific rulings, in accordance with section 120.59, Florida Statutes, on proposed findings of fact submitted by the parties. Proposed findings of fact submitted by Petitioner. Petitioner did not submit proposed findings of fact. Proposed findings of fact submitted by Respondent. Proposed findings submitted by Respondent are accepted except as noted below. Those proposed findings neither noted below nor included in the Hearing Officer's findings were deemed unnecessary to the conclusions reached. Rejected as argument: paragraphs 37, 38, 39 COPIES FURNISHED: Carl R. Glass 2749 North Orange Blossom Trail Kissimmee, Florida 34741 James McAuley, Esquire Assistant Attorney General Capitol Building Tallahassee, Florida 32399-1050 Larry Fuchs Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100 Linda Lettera General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100
