The Issue The issue is whether Petitioner, Christopher B. Scott, as the managing member of PNC, LLC (PNC), is personally liable for a penalty equal to twice the total amount of the sales and use tax owed by PNC to the State of Florida.1/
Findings Of Fact The Department is the state agency charged with administering and enforcing the laws related to the imposition and collection of sales and use taxes. PNC is a now-dissolved Florida limited liability company that did business under the name "CHEAP" at 309 South Howard Avenue, Tampa, Florida. PNC was registered as a business and filed its Articles of Organization with the Secretary of State on June 16, 2010. Until the company was dissolved by the Secretary of State in 2018 for failure to pay the 2017 annual filing fees, Mr. Scott served as its managing member and had administrative control over the collection and payment of taxes. Verna Bartlett was PNC's controller. PNC was registered with the Department as a dealer pursuant to section 212.18, Florida Statutes, and was issued Sales and Use Tax Certificate of Registration 39-8015401140-8. A certificate of registration requires the taxpayer to file sales and use tax returns and pay to the Department all taxes owed as they are received. After making numerous attempts to collect delinquent sales tax owed by PNC for tax reporting periods in 2013 and 2014, the Department filed this action seeking to impose a personal penalty assessment against Mr. Scott, the managing member of the company. Section 213.29, Florida Statutes, provides that any person who has administrative control over the collection and payment of taxes and who willfully fails to pay the tax or evades the payment of the tax shall be liable to a penalty equal to twice the amount of tax not paid. The penalty is based only on the taxes owed, and not the interest and fees that have accrued. The statute provides that if the business liability is fully paid, the personal liability assessment will be considered satisfied. On January 18, 2018, the Department issued a NAPL against Mr. Scott after PNC failed to pay the sales and use taxes owed the State for the reporting periods from February 2013 through October 2014. The outstanding taxes, exclusive of interest or penalties, total $79,325.75. The NAPL imposes a total penalty of $158,647.50, or twice the amount of sales tax owed by PNC. No payments have been made on the account since the issuance of the NAPL, and, PNC, now closed, currently has a total liability in excess of $200,000.00. During the relevant time period, Mr. Scott was personally responsible for collecting PNC's sales tax and remitting it to the Department; he had the authority to sign checks on behalf of PNC; he made financial decisions as to which creditors should be paid; he made the decision to use the sales tax collected for the business and for stipulation payments; and he made the decision not to remit the sales tax that was collected. This was confirmed by PNC's controller, Ms. Bartlett, who responded to the Department's Requests for Admissions. Mr. Scott also confirmed to a Department tax specialist that the admissions provided by Ms. Bartlett were accurate. Mr. Scott either never remitted payment or did not remit payment timely on behalf of PNC for the following reporting periods: February, April, and December 2013, and January through October 2014. Tax warrants were issued and judgment liens were recorded for the following reporting periods: February, April, and December 2013, and January, February, and April through October 2014. Resp. Ex. 5 and 6. All warrants and liens relate to reporting periods that fall within the personal liability assessment period. A Notice of Jeopardy Finding and Notice of Final Assessment (Notice of Jeopardy) dated June 18, 2014, was issued to PNC pertaining to the April 2014 reporting period. Resp. Ex. This notice was issued after Mr. Scott ceased making regular tax payments, the estimated deficiency was substantial, and the Department determined that collection of the tax would be jeopardized by further delay. A Notice of Jeopardy and Notice of Final Assessment dated August 7, 2014, also was issued to PNC pertaining to the April, May, and June 2014 reporting periods. Resp. Ex. 12. Because PNC reported more than $20,000.00 in sales tax each year, unless a waiver was obtained, Mr. Scott was required to file and pay PNC's sales tax electronically for all reporting periods within the personal liability period. See § 213.755(1), Fla. Stat.; Fla. Admin. Code R. 12-24.003. Despite having obtained no waiver, Mr. Scott never filed returns or paid PNC's sales tax electronically. And even though he never remitted a payment electronically, Mr. Scott indicated on at least six sales tax returns during the relevant time period that sales tax for the reporting period was remitted electronically. The only conclusion to draw from this action is that Mr. Scott filed or directed the filing of these returns knowing them to be false. The record shows that, dating back to 2011, Mr. Scott has a long-standing history of failing to abide by the tax laws of the state as it relates to PNC. For example, on September 15, 2011, Mr. Scott was referred for criminal investigation by the state attorney for his failure to pay taxes. Also, numerous returns were filed without a payment. This is prima facie evidence of conversion of the money due. § 212.14(3), Fla. Stat. Respondent's Exhibit 1 summarizes numerous contacts by the Department's Tampa District Office with Mr. Scott regarding collection notices, telephone calls, emails, assessment letters, warrant letters, and the like in an effort to secure compliance with tax laws. It is fair to find that Mr. Scott willfully attempted to evade or avoid paying sales and reemployment taxes during the relevant period. To prevent its Sales and Use Tax Certificate of Registration from being revoked, PNC entered into a compliance agreement on July 10, 2013, to pay past due sales tax and reemployment tax totaling $65,789.25. The agreement required PNC to: (a) accurately complete all past due tax returns and reports no later than July 10, 2013; (b) remit all past due payments in accordance with the attached schedule, which required 11 monthly payments of $4,000.00 beginning on August 10, 2013, and a final balloon payment on July 10, 2014; (c) accurately complete and file all required tax returns and reports for the next 12 months; and (d) timely remit all taxes due for the next 12 months. A $15,000.00 down payment also was required to be paid on or before July 10, 2013. An addendum to the agreement (added by Mr. Scott) provided that "[a]ll payments, including the $15,000.00 down payment, shall first be applied to Sales and Use Tax." Although the down payment was made timely, the agreement was breached the first month (August) because Mr. Scott did not make the payment electronically. However, the agreement was not voided by the Department until October 12, 2013. Therefore, any payments made on or after October 12, 2013, were not considered compliance payments and are not subject to the addendum in the agreement. A somewhat confusing aspect of this dispute concerns Mr. Scott's contention, by way of cross-examination, that contrary to the addendum, the Department incorrectly applied his $15,000.00 down payment and subsequent compliance payments to the reemployment tax account, rather than the sales tax account, and that his sales tax liability should be reduced by that amount. As noted above, the addendum governs only the payments that predate October 12, 2013, which are the down payment ($15,000.00) and the August and September payments -- $4,000.00 each month. This issue was not raised by Mr. Scott until the Department issued a NAPL on April 13, 2017. The NAPL issued on April 13, 2017, indicated that the outstanding tax owed by PNC through October 31, 2014, was $90,808.17, and the personal assessment was twice that amount. In response to Mr. Scott's request, the Department acknowledged that it incorrectly applied the down payment to the reemployment account. Also, it took a second look at the two payments made in August and September, which predate the voiding of the agreement. The August installment payment consisted of two separate checks: $3,390.00 for sales tax and $610.00 for reemployment tax, and these amounts were applied in that manner. The September payment, $4,000.00, submitted in one check, was applied in the same manner as the August payment, with $610.00 going to the reemployment tax and the remainder to sales tax. Therefore, only $1,220.00 was incorrectly applied to the reemployment tax during those two months. On July 3, 2017, the Department reapplied a total of $16,551.00 from the reemployment tax account to the sales tax account for the relevant reporting periods. Mr. Scott contends the reapplication of the $16,551.00 to sales tax should reduce the amount of sales tax due by that amount. However, section 213.75(2) dictates that if a lien or warrant has been filed against the taxpayer, as is true here, the payment shall be applied in a priority order spelled out in the statute. Thus, the Department applied that amount in the following order: against the costs to record the liens against PNC; against the administration collection processing fee, if any; against any accrued interest; against any accrued penalty; and against any tax due. Under this priority order, the penalty/interest/fees categories totaled $5,066.58, while the tax liability category totaled $11,484.42. A detailed breakdown of this allocation is found in Respondent's Exhibit 29. Therefore, the total tax liability on the 2017 NAPL ($90,808.17) is reduced by $11,484.42, resulting in a total tax liability of $79,323.75, as shown on the updated 2018 NAPL. In the same vein, in his PRO, Mr. Scott argues that he was not given credit for payments of $9,110.24, $2,688.53, $178.28, and $1,321.80, which reduce his sales tax liability to $66,024.90 and the personal assessment to $132,049.80. See Pet'r Ex. 10. However, all of these payments (some of which are bank levies) were made after the compliance agreement was voided and do not apply to the reporting periods in this case. By way of cross-examination, Mr. Scott also contends that he was never given an accounting of what PNC owes despite "multiple requests" for the same. The record shows otherwise. On April 13, 2017, the 2017 NAPL was mailed to Mr. Scott, along with a ZT09, a computer-generated form which lists, in detail, a taxpayer's outstanding taxes owed by reporting period. A second copy of a ZT09 was faxed to him the following day. In his May 3, 2017, letter protesting the 2017 NAPL, Mr. Scott alleges that payments were not applied properly. In response, the Department sent a fax to Mr. Scott on May 10, 2017, listing checks that were not honored by the bank and requesting information concerning which payments PNC contends were not applied properly. In his response on May 12, 2017, Mr. Scott did not provide the requested information. On January 17, 2018, the 2018 NAPL was mailed to Mr. Scott, along with a ZT09. Finally, on April 12, 2018, per Ms. Bartlett's request, the Department mailed a ZT09 with the outstanding amounts due. Finally, in its PRO, the Department points out that after the hearing ended, it discovered that it made an error, in Mr. Scott's favor, in calculating his sales tax liability for the relevant reporting periods. Had it correctly calculated the amount of payments made by PNC, the sales tax liability for the relevant period would be increased from $79,323.75 to $84,444.35, which in turn would increase the personal assessment. However, the Department consents to the lower tax and assessed penalty amount, as reflected on the 2018 NAPL.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order determining that Petitioner, Christopher B. Scott, is liable to the Department for a penalty of $158,647.50. DONE AND ENTERED this 22nd day of April, 2019, in Tallahassee, Leon County, Florida. S D. R. ALEXANDER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 22nd day of April, 2019.
The Issue The issue is whether Petitioner collected and remitted to Respondent the correct amount of sales and use taxes during the audit period from October 1, 2004, through September 30, 2007, and, if not, what additional amount of tax plus penalty and interest is due.
Findings Of Fact Petitioner True Blue Pools (Petitioner, taxpayer, or TBP) is a domestic corporation headquartered in Miami-Dade County, Florida. TBP services, repairs, and renovates swimming pools and constructed some pools during the audit period. Respondent, Florida Department of Revenue (Respondent or DOR), is the agency of state government authorized to administer the tax laws of the State of Florida, pursuant to section 213.05, Florida Statutes.2 DOR is authorized to prescribe the records to be kept by all persons subject to taxes under chapter 212, Florida Statutes. Such persons have a duty to keep and preserve their records, and the records shall be open to examination by DOR or its authorized agents at all reasonable hours pursuant to section 212.12(6), Florida Statutes. DOR is authorized to conduct audits of taxpayers and to request information to ascertain their tax liability, if any, pursuant to section 213.34, Florida Statutes. On November 2, 2007, DOR initiated an audit of TBP to determine whether it was properly collecting and remitting sales and use taxes to DOR. The audit period was from October 1, 2004, through September 30, 2007. On December 15, 2008, DOR sent TBP its Notice of Intent to Make Audit Changes (NOI), with schedules, showing that TBP owed to DOR additional sales and use taxes in the amount of $113,632.17, penalty in the amount of $28,406.05, and interest through December 16, 2008, in the amount of $34,546.59, making a total assessment in the amount of $176,586.81. On October 26, 2009, DOR issued its Notice of Proposed Assessment. TBP timely challenged the Notice of Proposed Assessment, filing its petition with DOR and requesting an administrative hearing. Subsequent to the petition being filed, additional documentation was provided by TBP resulting in a revision to the tax, interest, and penalty amount due. DOR's revised work papers, dated May 27, 2010, claim Petitioner owes $64,430.83 in tax, $16,107.71 in penalty, and interest through May 27, 2010, in the amount of $27,071.99, with an assessment of $107,610.53. The assessed penalty, $16,107.71, was calculated after 25% of the penalty was waived, pursuant to subsection 213.21(3)(a), Florida Statutes, based on DOR's determination that there is no evidence of willful negligence, willful neglect, or fraud. The audit was conducted to determine liability in four categories: improper sales tax exemptions, unpaid sales taxes for taxable expenses, unpaid use taxes on fixed assets, and unpaid use taxes on taxable materials used to fulfill contracts to improve real property. Sales Tax Exemptions Due to the large volume of invoices and other records, the auditor conducted a random sampling of invoices for three months during the audit period, October 2004, January 2005, and September 2007.3 If no sales tax was collected and the Petitioner claimed that the transaction was exempt from the requirement to pay taxes, the auditor looked for proof that either the TBP customer was an exempt organization, for example, a school or a church, or that TBP had provided its suppliers with a DOR Form DR-13 to exempt from taxes products acquired for resale. In the absence proof of either type of exemption, DOR assumed taxes should have been paid. Using the difference between taxes collected and taxes due for the three months, the auditor determined that the percentage of error was .016521. When .016521 was applied to total sales of $1,485,890.79 for the 36-month audit period, the results showed that an additional $24,548.41 in sales taxes should have been collected from customers, and is due from TBP. Although a business is required to pay taxes for the materials it purchases to use in its business, it is not required to collect taxes from its customers when it enters into lump sum contracts to perform a service for customers. At least one invoice for $9,500.00 that the auditor treated as an improper exemption was, in fact, a partial payment on a lump-sum contract. The invoice referenced a "shotcrete draw," which represented the collection of funds after the concrete part of pool construction was completed. TBP is not required to collect taxes when it uses lump-sum contracts. Other invoices for pool repair and services were also mischaracterized as exempt by the TBP, but it is not clear that all were payments related to lump-sum contracts. DOR's auditor, nevertheless, testified as follows: With the knowledge that I have for True Blue Pools, being a lump-sum contractor, True Blue Pools should not charge their customer any sales tax. Transcript at pages 67-68. DOR concedes that some of TBP's transactions are also exempt from taxes as improvements to real property. In its Proposed Recommended Order, DOR asserted that TBP's use of the term "improvements to real property" is overbroad, but it did not specify how or why this is the case. During cross- examination of the owner of TBP, only one invoice for $500.00 for leak detection on the Delgado property was shown to have been for a service rather than for swimming pool construction. Taxable Expenses DOR audited TBP's purchases of tangible personal property used in the daily operation of its business. The products included chlorine and other chemicals, office supplies, and vehicle parts, expenses, and repairs. The ledger for a 12- month period, calendar year 2006, showed an average monthly additional tax due of $111.18, or a total of $4,002.48 in additional taxes for the 36-month audit period. As noted in Petitioner's Proposed Recommended Order, "[t]he representative of TBP did not dispute DOR's allegation that no tax may have been paid on the purchase of all of these items " Fixed Assets TBP's list of fixed assets was taken from the depreciation schedule on Internal Revenue Service Form 4562. The items listed are computer- and software-related. TBP provided no proof that it had paid a use tax. The additional tax due equals $419.94. Petitioner's Proposed Recommended Order includes the statement that "[a]gain, the representative of TBP did not dispute DOR's allegation that no tax may have been paid on the purchase of these items " Taxable Materials Taxable materials, those purchased to fulfill a contract to improve real property, included items used to build, renovate, and repair pools. The items included concrete, meters, drains, and valves. For the 12-month sample period, calendar year 2006, TBP failed to pay taxes on material purchases in the total amount of $168,310.05, or an average of $14,078.96 a month. For the 36-month audit period, the total of the purchases was $506,842.56. With a 6 percent tax due for the state and 1 percent for the county, the total additional tax due on materials is $35,460.00. TBP conceded that it improperly used a resale exemption to purchase taxable materials from suppliers without paying taxes. The materials were used to provide services and were not resold. Acknowledging again that TBP uses lump-sum contracts, this time to support the collection of additional taxes, the auditor testified as follows: And the law states that the taxpayer's [sic] an ultimate consumer of all materials purchased to fulfill a lump-sum contract, and that's what they told me they operate under, a lump-sum contract. Transcript at page 58. At the hearing, TBP used its actual profit and loss statement to show that the cost of goods it sold (general purchases and taxable materials) in the amounts of $18,360.77 in October 2004, $8,519.22 in January 2005, and $4,818.65 in September 2007. Corresponding taxes for each of those months should have been $1,285.25, $596.35, and $337.31, or an average of $739.63 a month, or a total of $26,626.68 for 36 months. The goods that it sold were not at issue in the audit of taxable materials, rather it was TBP's purchases from vendors that should have been taxed that resulted in DOR's audit results. Total Additional Sales and Use Taxes Due The three categories of additional taxes due, $4,002.48 for taxable expenses, $419.94 for fixed assets, and $35,460.00 for taxable materials, equal $39,882.42 in additional taxes due during the audit period. Taxes Paid TBP filed DOR Forms DR-15, monthly sales and use tax reporting forms, and paid sales and use taxes during the audit period. For the sample months used by DOR to examine sales tax exemptions, TBP paid $1,839.10 in taxes in October 2004, $1,672.73 in January 2005, and $1,418.13 in September 2007. Using the three months to calculate an average, extended to 36 months, it is likely that TBP paid $59,712 in taxes. TBP asserted that DOR was required to, but did not, offset the deficiency of $39,882.42, by what appears to be an overpayment of $59,712.00 in sales and use taxes. Other than pointing out that the amount reported on the DR-15s differed, being sometimes more and sometimes less than the amount shown on the profit and loss statements, DOR did not dispute TBP's claim that it had paid sales and use taxes. TBP's representative explained that end-of-the-year adjustments for additional collections or for bad debt could cause the amounts on the DR-15s and profit and loss statements to differ. With regard to the taxes paid, DOR took the following position in its Proposed Recommended Order: Petitioner's DR-15's [sic] for the collection periods October 2004, and January 2005, [and September 2007] (Petitioner's Composite Exhibit 1) do reflect sales tax being collected and remitted to DOR. DOR does not allege that Petitioner never paid tax on its purchases, or made bona fide exempt sales for which no tax was collected. DOR's audit findings identify just those which occurred within the sample period, scheduled in the auditor's workpapers, and applied over the entire audit period. The DR-15s are taken from the sample months selected by DOR within the audit period, and DOR does not address TBP's claim that a set off for taxes paid was mandatory, pursuant to subsection 213.34(4), Florida Statutes. Using the audit schedules, DOR showed credit for taxes paid in the amounts of $20.63 for taxable expenses, $0 for fixed assets, and $24.31 in state taxes and $1.03 for county taxes on taxable materials. The amounts are far less that the $59,712.00 in sales/use taxes TBP showed that it paid during the audit period.
Recommendation Based upon the forgoing findings of fact and conclusions of law, it is recommended that the Department of Revenue issue a final order dismissing the Notice of Intent to Make Audit Changes dated December 15, 2010. DONE AND ENTERED this 20th day of January, 2011, in Tallahassee, Leon County, Florida. S ELEANOR M. HUNTER 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 20th day of January, 2011.
Findings Of Fact Petitioner purchased a used car in Florida in May of 1983 and paid 5 percent sales tax. Petitioner did not title said car in the State of Florida. When Petitioner returned to Maryland, his state of residence, Maryland imposed a 5 percent tax on said car when Petitioner titled said car. Petitioner applied for a sales tax refund to the Department of Revenue in the amount of $225.00. Respondent issued a Notice of Intent to deny said refund application on December 1, 1983. From the exhibits to which the parties stipulated, additional facts are found by the Hearing Officer. A bill of sale indicates that Petitioner purchased a 1979 Buick Regal from Eddy Auto Sales on May 14, 1983. A temporary registration and receipt issued by the State of Maryland on June 17, 1983, shows that Petitioner paid a "title tax" of $222.50 to the State of Maryland. By letter dated January 27, 1984, Agnes Stoicos of the Maryland Department of Transportation indicates that the Maryland tax is a 5 percent excise tax upon the issuance of all original and subsequent certificates of title, and the tax is used primarily for the construction and the maintenance of the Maryland highway system.
The Issue The issue in this case is whether Petitioner is liable for certain taxes and, if so, how much.
Findings Of Fact Petitioner is a Florida corporation with its principal place of business in Manatee County, Florida. Petitioner is in the printing business. Specifically, Petitioner produces, manufactures, assembles, and publishes telephone directories for mobile home parks in Florida. All of Petitioner's work in connection with these directories takes place in Florida. The directories list the names, addresses, and telephone numbers of residents of the mobile home park for which the directory is prepared. The directories also contain advertisements, which Petitioner solicits from merchants seeking to sell goods or services to the mobile home park residents. Following the production of the directories, Petitioner distributes them to the mobile home park residents, who maintain possession of the directories. However, Petitioner retains ownership of each directory, even after it is distributed. Petitioner is solely responsible for the manufacture and distribution of the directories. Petitioner owns accounts receivable reflecting monies owned it by entities for which Petitioner has performed work. Petitioner owns treasury stock. Following an audit, Respondent issued its Intent to Make Sales and Use Tax Audit Changes. The proposed changes assessed additional sales and use taxes of $44,151.77, intangible tax of $1297.08, and $194,75 of health care tax. The bases of proposed liability for the sales and use tax were for the publication and distribution of directories for which no sales or use tax had been collected and for the sale of advertising during the period of the service tax from July 1, 1986, through December 31, 1986, for which no sales tax on advertising had been collected. The basis of proposed liability for the intangible tax was for the failure to pay intangible tax on accounts receivable and treasury stock. The basis of proposed liability for the health care tax was for the failure to pay the Hillsborough County Health Care Tax and Discretionary Sales Surtax. On February 11, 1991, Petitioner protested the proposed assessments. On April 24, 1992, Respondent issued its Notice of Decision sustaining the proposed sales and use tax and intangible tax, but eliminating the proposed health care tax. On May 12, 1992, Petitioner filed a Petition for Reconsideration concerning the proposed sales and use tax. On November 24, 1992, Respondent issued its Notice of Reconsideration sustaining the proposed sales and use tax. On January 21, 1993, Petitioner timely filed its petition for a formal administration hearing. Subject to the accuracy of its legal position, Respondent's assessment is factually accurate. Petitioner will pay the assessed amount of sales and use tax, plus interest, if its position is not sustained following the conclusion of this proceeding, including judicial review.
Recommendation Based on the foregoing, it is hereby RECOMMENDED that a final order be entered determining that, for each assessed period, Petitioner is liable for the assessed corporate intangible tax plus interest, the use tax on the cost price of the materials and other covered items plus interest, the sales tax on services on the advertising revenues, but not for any sales tax apart from the period covered by the sales tax on services. ENTERED on January 25, 1994, in Tallahassee, Florida. ROBERT E. MEALE Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings on January 25, 1994. COPIES FURNISHED: David M. Carr David Michael Carr, P.A. 600 East Madison Street Tampa, Florida 33602 Eric J. Taylor Assistant Attorney General Office of the Attorney General The Capitol, Tax Section 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
The Issue The issue for determination is whether Petitioner should be assessed sales and use tax for the audit period May 1, 1997 through April 30, 2002, per the Notice of Proposed Assessment dated July 3, 2003.
Findings Of Fact Wales is a Florida S corporation. Its principal place of business is located at 2916 Southeast 6th Avenue, Fort Lauderdale, Florida. Wales' federal employee identification number is 59- 1703273. Wales' Florida sales and tax number is 16-03-095273- 26/1. By letter dated June 6, 2002, the Department issued to Wales a Notice of Intent to Audit Books and Records (Notice of Intent). The Notice of Intent identified the audit number as A0205310975. On July 10, 2002, the Department's auditor assigned to perform the audit conducted an initial interview with Wales. The auditor discussed, among other things, the audit and sample methods that would be employed during the audit. On August 13, 2002, the auditor began examining Wales' books and records at Wales' business location. Wales was cooperative during the audit. Wales provided all available books and records for the audit. The sole shareholders of Wales are Stewart Levy and Diane Levy. Wales leased its business location from Element Two Enterprises, Inc., ( Element Two) a related entity. Stewart Levy and Diane Levy are also the sole officers of Element Two, president and secretary, respectively. Element Two is the record owner of the improved real property located at 2916 Southeast 6th Avenue, Fort Lauderdale, Florida, (realty). The address for the realty is also the address for Wales' place of business. Element Two mortgaged the realty leased by Wales. Wales paid monthly monetary consideration to Element Two in lease payments, which directly correlated to the amount of the monthly mortgage payments. Ad valorem taxes and property insurance were included in the monthly mortgage payments. Wales paid the ad valorem taxes and property insurance on the leased property. The lease payments to Element Two by Wales included the amount of the ad valorem taxes, property insurance, and common areas of maintenance. Wales did not pay sales tax on any of the lease payments to Element Two. Element Two did not charge or remit sales tax to the Department on the lease payments by Wales. Element Two was not registered with the Department as a dealer. Only dealers that are registered can remit sales tax on lease payments. Consequently, Element Two could not remit sales tax on the lease payments by Wales. Wales did not utilize all of the property it leased. Wales sub-leased a portion of the leased property to an unrelated entity. A prior sales and use tax audit was conducted of the sub-lessee, which included the period May 1997 through December 1998. The Department examined the sublease audit to determine whether Wales owed additional sales tax. The Department's examination of that audit revealed that the sales and use tax on the rent paid by the sub-lessee for the period May 1997 through September 1998 was assessed and paid by the sub-lessee. For the period May 1997 through December 1998, Wales had neither charged or collected sales tax nor remitted sales tax to the Department on the sub-lessee's payments. No sales tax was charged or paid on the sublease payments for the period October 1998 through December 1998. From January 1999 through April 2002, Wales charged, collected, and remitted sales tax on the sublease payments. The Department credited Wales for sales tax already paid on the subleased portion for the period May 1997 through September 1998 and January 1999 through April 2002. On its general ledger, Wales posted the lease payments to Element Two as rent payments. Element Two posted the lease payments to its general ledger as rent income. On its federal income tax returns, Wales reported the lease payments to Element Two as rent expense. Element Two reported the lease payments on its federal income tax returns as rent income. On November 29, 2002, the Department issued to Wales a Notice of Intent to Make Audit Changes for audit number A0205310975. Wales requested and the Department agreed to hold an audit conference to discuss the audit findings. Wales claimed that rent payments made were not subject to sales tax because both Wales and Element Two signed the mortgage and promissory note on the realty leased by Wales. However, only Element Two was reflected as the borrower on the loan and only Element Two was the signatory on the mortgage even though both Wales and Element Two signed the promissory note. On January 10, 2003, Wales executed a Consent to Extend the Time to Issue an Assessment or to File a Claim for Refund (Consent). The Consent extended the statute of limitations for the period of time in which an assessment may be issued or a claim for refund may be filed to December 31, 2003. On July 3, 2003, the Department issued, by certified mail, the Notice and an Addendum to Proposed Assessment for audit number A0205310975. The Notice provided, among other things, for the assessment of sales and use tax in the amount of $17,481.73; penalty in the amount of $8,741.10; interest in the amount of $5,756.03, with additional daily interest being computed at the rate of $3.54 per day from July 3, 2003; and a total assessment in the amount $31,978.86. On September 1, 2003, the Notice became a Final Assessment for audit number A0205310975. Wales contested the Final Assessment and requested a hearing. Wales is not contesting that part of the audit which found that Wales failed to pay sales tax on certain fixed assets purchased for use in its business. At hearing, Wales contended that its federal income tax returns could be amended to reflect the payments to Element Two as mortgage payments instead of rent payments, which would, in turn, change the Department's audit to reflect the payments as mortgage not rent. To address this contention, the Department presented the testimony of an expert witness in the area of rental consideration and sales tax audits. The Department's expert testified that the consideration for rental or use of property is the payment between/to one who owns the real property and/from one who uses the property; and concluded that consideration, as rental, was provided to Wales by Element Two based on the Department's taxing statute, Section 212.031, Florida Statutes, and its rules and regulation, Florida Administrative Code Rule 12A-1.070. The expert opined that the mortgage payments were consideration for a lease or license to use the real property and that, therefore, the monthly lease payment, which equaled the monthly mortgage payment, paid by Wales to Element Two was consideration for the lease or license to use the realty. The expert's testimony is found to be credible. The evidence presented shows that the mathematical computations performed by the Department in its audit are correct. Further, the evidence shows that the mathematical computations as to tax, penalty, and interest assessed are correct.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue's assessment of sales tax, interest, and penalty against Wales Garage Corporation be sustained and that the Department of Revenue enter a final order assessing sales tax, interest, and penalty against Wales Garage Corporation for the period May 1, 1997 through April 30, 2002, consistent herewith. DONE AND ENTERED this 27th day of May, 2004, 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 27th day of May, 2004. COPIES FURNISHED: Gerald S. Schnitzer GSS Advisory Services, Inc. 2455 East Sunrise Boulevard, Suite 502 Fort Lauderdale, Florida 33304 Carrol Y. Cherry, Esquire Office of the Attorney General The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050 Bruce Hoffmann, General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 James Zingale, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100
The Issue The issue presented is whether the Department's audit assessment against Petitioner for additional insurance premium tax for the tax years 1989 and 1990 is proper.
Findings Of Fact Prior to the Final Hearing, the parties agreed to numerous facts and entered into a Joint Prehearing Statement. The Hearing Officer entitles the Findings of Fact section of the Recommended Order "Agreed Facts"; however, instead of reciting the actual stipulation facts submitted by the parties, the Hearing Officer paraphrases and adds facts that were not agreed to by the parties. The "Agreed Facts" section should only recite the facts that were actually agreed to by the parties. Accordingly, the Department substitutes the Joint Prehearing Statement for the Hearing Officer's "Agreed Facts" numbers 1 through 6 as follows: Central Dade is, and at all material times was, a Medical Malpractice Self Insurance Fund as defined in Sec. 627.357, Fla. Stat. Central Dade is a trust, not a corporation. It has been in existence and operation since 1979. Its sole purpose is to provide medical malpractice insurance for its members, i.e., approximately 100 doctors in Dade County. Central Dade has no capital and is not operated for profit. It does not and cannot, absent permission from the Department of Insurance, legally pay dividends to its members; rather it is required by law to hold one hundred percent of its premium and investment income to fund medical malpractice claims and pay its operating expenses (including taxes). Central Dade's members are individually liable or assessable for any shortfall in its trust funds. Central Dade has standing to challenge Fla. Admin. Code Rule 12B- 8.001(5) because it is substantially affected by the Rule. The Department, as an agency within the Executive Branch of the government of the State of Florida, is authorized by Chapters 213 and 624, Fla. Stat., to conduct audits and make assessments of tax pursuant to Chapter 624, Fla. Stat., (Insurance Premium Tax). The Department conducted an audit of Central Dade for the audit period of 12/31/89 through 12/31/90 for Insurance Premium Tax. After the conclusion of the audit and after administrative protest of the proposed assessment by Central Dade, an assessment was issued on July 20, 1994. The assessment became a Final Assessment on July 20, 1994. Central Dade was assessed $8,996.31 tax; $899.63 penalty; and $2,346.58 interest through March 10, 1993. Central Dade paid the entire assessment and is seeking a refund of the payment through this action. Central Dade timely filed a Petition seeking to have the tax assessment declared invalid. Additionally, Central Dade filed a Petition pursuant to Sec. 120.56, Fla. Stat. challenging Fla. Admin. Code Rule 12B-8.001(5) as invalid. Upon Motion by the Parties, the cases were consolidated for Final Hearing. Medical Malpractice Self-insurance Funds became subject to the Insurance Premium Tax beginning July 1, 1989. Ch. 88-206, ss. 6, Laws of Fla. Fla. Admin. Code Rule 12B-8.001(5) became effective March 25, 1990. The parties agree the Rule was correctly promulgated and the Petitioner is only challenging the applicability of the Rule to Petitioner and the substance of the Rule. The dispute between the parties concerns whether Petitioner is entitled to the credits contained in Sec. 624.509.(4), Fla. Stat. The parties additionally stipulated to the following: If the Department prevails in this action, the Petitioner will not be entitled to any refund for the tax years 1989 and 1990. [Joint Exhibit Two] Any overpayment made by the Petitioner will be applied to subsequent tax years. 1/ If the Petitioner prevails in this action, it will be entitled to a refund of $23,774.76 for the tax years 1989 and 1990. [Joint Exhibit Two] The Department rejects the Hearing Officer's "Agreed Fact" number 7 because it is a conclusion of law and not a finding of fact. The Department rejects the Hearing Officer's "Agreed Fact" number 8 as irrelevant to this proceeding. The Department makes the following additional findings of fact based on competent and substantial testimony and evidence presented at the Final Hearing: A premium tax on "medical malpractice self-insurance [funds]" was first imposed in 1989. Effective July 1, 1989, Chapter 88-206, ss. 6, Laws of Fla., amended Sec. 627.357, Fla. Stat. to provide: 627.357 Medical malpractice self-insurance -- (9) Premiums, contributions, and assessments received by a fund are subject to s. 624.509 (1), (2), and (3), except that the tax rate shall be 1.6 percent of the gross amount of such premiums, contributions and assessments. E.S. The premium tax imposed on medical malpractice self-insurers was, pursuant to the above-quoted statute, 1.6 percent of the gross amount of the premiums, contributions and assessments. A premium tax on "dental service plan corporations" self-insurance funds was first imposed in 1989. Effective July 1, 1989, Chapter 88-206, ss. 6, Laws of Fla., amended Sec. 627.357, Fla. Stat. to provide: 637.406 Tax on premiums, contributions, and assessments. Premiums, contributions, and assessments received by a dental service plan corporation are subject to the tax imposed by s. 624.509. The premium tax imposed on dental service plan corporations in 1988 was 2 percent of the gross amount of the premiums, contributions, and assessments pursuant to Sec. 624.509(1)(a), Fla. Stat. (1989). The Legislature in the same Bill that added the amendments to Sec. 627.357 Fla. Stat., which subjected medical malpractice self-insurers to subsections (1), (2) and (3) 2/ of Sec. 624.509, Fla. Stat., 3/ and made dental service plan self-insurers subject to "s. 624.509" in its entirety also made multiple employer welfare arrangements, 4/ Commercial self-insurance funds, 5/ professional liability self-insurance, 6/ and group self-insurer funds subject to subsections (1), (2), and (3) of Sec. 624.509, Fla. Stat.; but made other insurers, such as the continuing care contracts, 7/ subject to Sec. 624.509, Fla. Stat., in its entirety. Further, all those entities which the Legislature specifically made subject to noncredit paragraphs (1), (2) and (3) of Sec. 624.509, Fla. Stat. (Supp. 1988) were given a lower 1.6 percent tax rate by the Legislature. In contrast, those entities made subject to Sec. 624.509, Fla. Stat., in its entirety, such as the dental service plan self-insurers, without a listing of the specific paragraphs, and which are clearly entitled to the credits therein, were made subject to the higher 2 percent tax rate provided in Sec. 624.509(1), Fla. Stat. (Supp. 1988). 18. Sec. 624.509(1), (2), (3), (4), and (9), Fla. Stat. (Supp. 1988), states in pertinent part: 624.509 Premium tax; rate and computation. In addition to the license taxes provided for in this chapter, each insurer shall also annually, and on or before March 1 in each year, except as to wet marine and transportation insurance taxed under s. 624.510, pay to the Department of Revenue a tax on insurance premiums, risk premiums for title insurance, or assessments, including membership fees and policy fees and gross deposits received from subscribers to reciprocal or interinsurance agreements, and on annuity premiums or considerations, received during the preceding calendar year, the amounts thereof to be determined as set forth in this section, to wit: An amount equal to 2 percent of the gross amount of such receipts on account of life and health insurance policies covering persons resident in this state and on account of all other types of policies and contracts (except annuity policies or contracts taxable under paragraph (b)) covering property, subjects, or risks located, resident, or to be performed in this state, omitting premiums on reinsurance accepted, and less return premiums or assessments, but without deductions: For reinsurance ceded to other insurers; For moneys paid upon surrender of policies or certificates for cash surrender value; For discounts or refunds for direct or prompt payment of premiums or assessments; and On account of dividends of any nature or amount paid and credited or allowed to holders of insurance policies; certificates; or surety, indemnity, reciprocal, or interinsurance contracts or agreements; and An amount equal to 1 percent of the gross receipts on annuity policies or contracts paid by holders thereof in this state. Payment by the insurer of the license taxes and premium receipts taxes provided for in this part of this chapter is a condition precedent to doing business within this state. Notwithstanding other provisions of law, the distribution of the premium tax and any penalties or interest collected thereunder shall be made to the General Revenue Fund in accordance with rules adopted by the Department of Revenue and approved by the Administration Commission. The intangible tax imposed under chapter 199, the income tax imposed under chapter 220, and the emergency excise tax imposed under chapter 221 which are paid by any insurer shall be credited against, and to the extent thereof shall discharge, the liability for tax imposed by this section for the annual period in which such tax payments are made. As to any insurer issuing policies insuring against loss or damage from the risks of fire, tornado, and certain casualty lines, the tax imposed by this section, as intended and contemplated by this subsection, shall be construed to mean the net amount of such tax remaining after there has been credited thereon such gross premium receipts tax as may be payable by such insurer in pursuance of the imposition of such tax by any incorporated cities or towns in the state for firemen's relief and pension funds and policemen's retirement funds maintained in such cities or towns, as provided in and by relevant provisions of the Florida Statutes. For purposes of this subsection, payments of estimated income tax under chapter 220 and of estimated emergency excise tax under chapter 221 shall be deemed paid either at the time the insurer actually files its annual returns under chapter 220 or at the time such returns are required to be filed, whichever first occurs, and not at such earlier time as such payments of estimated tax are actually made. (9) As used in this section "insurer" includes any entity subject to the tax imposed by this section.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered finding that the Department's assessment issued July 20, 1994, was improper and finding Petitioner entitled to a refund in the amount of $23,774.76. DONE and ORDERED this 19th day of May, 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 19th day of May, 1995. APPENDIX TO RECOMMENDED ORDER Petitioner's proposed findings of fact numbered 4, 5 and 7 have been adopted either verbatim or in substance in this Recommended Order. Petitioner's proposed findings of fact numbered 1, 3, 6, and 8 have been rejected as not constituting findings of fact. Petitioner's proposed findings of fact numbered 2, and 9-11 have been rejected as being subordinate to the issues involved herein. Respondent's proposed findings of fact numbered 1, 4, 5 and 12 have been adopted either verbatim or in substance in this Recommended Order. Respondent's proposed findings of fact numbered 3, 6-10, 13, and 15-19 have been rejected as not constituting findings of fact. Respondent's proposed finding of fact numbered 2 has been rejected as being subordinate to the issues herein. Respondent's proposed findings of fact numbered 14, 20, and 21 have been rejected as being irrelevant to the issues in this cause. Respondent's proposed findings of fact numbered 11 and 22 have been rejected as not being supported by the weight of the competent evidence in this cause. COPIES FURNISHED: Curtis H. Sitterson, Esquire Stearns, Weaver, Miller, et al. Museum Tower 150 West Flagler Street Miami, Florida 33130 Linda Lettera, General Counsel Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668 Lisa M. Raleigh, Esquire Office of the Attorney General Tax Section, The Capitol Tallahassee, Florida 32399-1050 Larry Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100
The Issue The issue in this case is whether the Petitioner should be issued a sales tax exemption certificate either as a "church" or as a "religious organization."
Findings Of Fact The Petitioner, In His Service, is a not-for-profit organization formed to give structure to a Bible study and prayer group Shirley B. Cole leads. Cole is the Petitioner's "pastor," but she is not ordained, does not officiate at weddings or funerals, and has no formal religious training other than participation in similar study groups in the past. The Petitioner is affiliated with an organization called the Federation of Independent Churches, which has an office on East Bird Street in Tampa, Florida. (In a post-hearing submission, Cole asserted that the Petitioner's "outreach is from Greater Ministries International, basically functioning as a satellite church, but there was no evidence regarding Greater Ministries International.) Portions of the Petitioner's by-laws were admitted in evidence at the final hearing. The by-laws make reference to three officers--president, vice-president, and secretary-treasurer--but Cole testified that she was the secretary and that someone else was the treasurer, and she did not seem to know anything about a president or vice-president. In addition, while the by-laws refer to a board of directors and meetings of the board of directors, Cole does not know anything about either. The Petitioner is small (not more than 15 members). It consists primarily of Cole and her friends and neighbors and some others who hear about the meetings. The group has met in various locations, including Cole's home at 5155 20th Avenue North, St. Petersburg, Florida, and the homes of other members of the group. In addition to Bible study and prayer, the group discusses health issues and other topics of interest and shares reading materials and tapes on topics of interest. From time to time, the group collects items of donated personal property for the use of members of the group and others in need who could use the items. In late June 1998, the Petitioner applied for a sales tax exemption certificate as a church. In response to a question from a representative of the Respondent DOR Cole stated that the Petitioner held services in her home every Thursday from 7:30 to 9:30 or 10 p.m. A DOR representative attempted to confirm Cole's representation by attending a meeting in Cole's home on Thursday, October 8, 1998, but no services were being held there, and no one was home. If there was a meeting on that day, it was held somewhere else. On or about December 28, 1998, DOR issued a Notice of Intent to Deny the Petitioner's application because the Petitioner did not have "an established physical place of worship at which nonprofit religious services and activities are regularly conducted and carried on." In January 1999, Cole requested an administrative proceeding on the Petitioner's application, representing that she was holding the Petitioner's meetings at her home every Monday from 7:30 p.m. On Monday, April 5, 1999, a DOR representative visited Cole's home at 7:30 or 7:35 p.m., but no one was home. At final hearing, Cole testified that she went to pick someone up to attend the meeting and was late returning. Cole had an April 1999 newsletter admitted in evidence. It indicates that she holds weekly Bible study meetings on Mondays at her home. It also indicates: "The week of April 19th will be our maintenance [health] meeting." It also indicates that the Monday, April 26, 1999, meeting would be a "covered dish dinner with prayer and praise fellowship afterward." Cole also had a book/tape loan check-out list admitted in evidence. The list indicates that two items were checked out on January 21, one on February 8, two on February 14, one on February 15, one on March 8, one on March 21, two on March 22, one on April 4, one on April 5, and four on April 12, 1999. (Two entries dated April 13 precede two on April 12, so it is assumed that all were on April 12, 1999). Cole owns her home, pays the taxes, and pays the utility bills. Cole also claims a homestead exemption. There are no signs, no physical attributes, or anything else that would identify Cole's house as a church. No part of the home is set aside for the Petitioner's exclusive use. The Petitioner pays no rent to Cole and does not reimburse Cole for any of her expenses (such as taxes and utility bills) of home ownership. Under local City of St. Petersburg zoning ordinances, Cole would have to obtain a special exception from the Environmental Development Commission to use her home as a church. Cole has not attempted to do so. Had she tried, the special exception would be denied because her home does not meet the ordinance's minimum lot and yard size criteria for such a special exception. (It is not clear whether Cole's home would meet the ordinance's parking, maximum floor area ratio, and maximum surface ratio criteria for a special exception for a church.) In light of past discrepancies between the Petitioner's representations and the facts, it was not clear from the evidence presented in this case that meetings have taken place, are taking place, or will take place in Cole's home on a regular basis.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the DOR enter a final order denying the Petitioner's application for a tax exemption certificate. DONE AND ENTERED this 18th day of May, 1999, in Tallahassee, Leon County, Florida. J. LAWRENCE JOHNSTON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 18th day of May, 1999. COPIES FURNISHED: Shirley Cole, Pastor In His Service 5155 20th Avenue, North St. Petersburg, Florida 33710 Kevin ODonnell, Assistant General Counsel Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668 Linda Lettera, General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 Larry Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100
The Issue The issue is whether petitioner's candidacy for the office of Tax Collector would conflict or interfere with his employment as an auditor for the Department of Revenue.
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: Petitioner, Robert M. Hendrick, a career service employee, is employed with respondent, Department of Revenue (DOR), as a Tax Auditor IV in its Leesburg, Florida field office. He has been employed by DOR since September 1991. In his position, petitioner primarily audits tangible personal property assessments performed by the local Property Appraiser and, on occasion, he inspects the property which is the subject of the assessment. In March 1996, the Lake County Tax Collector publicly announced that he would not run for reelection. After learning of this decision, by letter dated March 19, 1996, petitioner requested authorization from his employer to run for that office. The letter was received by DOR's Executive Director on April 1, 1996. On April 10, 1996, the Executive Director issued a letter denying the request on the ground the candidacy would conflict with petitioner's job duties. More specifically, the letter stated in relevant part that: Under section 195.002, Florida Statutes, the Department of Revenue has supervision of the tax collection and all other aspects of the administration of such taxes. Your position with the Department may require you to review or audit the activities of the office you propose to seek. Also some of your duties in supervising other officials in the administration of property taxes may be affected by your proposed candidacy. Your job requires you to review appropriate tax returns, and other records to resolve complex issues related to taxing statutes administered by the Department of Revenue. It also requires you to identify and scrutinize transactions to ascertain whether taxpayers have escaped paying property taxes. In addition, it also requires you to review and audit procedures used by counties to identify and value tangible personal property and accomplish statutory compliance, to investigate taxpayer complaints, to conduct field review with county staff as appropriate, and to provide education and assistance to county taxing officials. Because of the Department's statutory supervision of the office of tax collector, there cannot be a certification that your candidacy would involve "no interest which conflicts or activity which interferes" with your state employment within the definitions in section 110.233(4), Florida Statutes. The letter went on to say that This letter is a specific instruction to you that you should not qualify or become a candidate for office while employed in your current position. If you wish to commence your campaign by performing the pre-filing requirements, the law requires that you first resign from the Department. Failure to do so shall result in disciplinary action to dismiss you from your position in accordance with the Department's disciplinary standards and procedures, and Rule 60K-4.010, F.A.C., on the grounds that you are in violation of the Department's Code of Conduct, Section 110.233, Florida Statutes, and Rule 60K- 13.002(3), F.A.C. After receiving the above decision, by letter dated April 15, 1996, petitioner requested that the Executive Director reconsider his decision. Thereafter, on April 24, 1996, petitioner filed a request for a formal hearing to contest the agency's decision. Both the Property Appraiser and Tax Collector play a role in the property tax program in the State of Florida. The Property Appraiser generally values or assesses property subject to taxation and applies the millage rate set by the taxing authority. After the tax roll is approved by DOR, it is certified to the Tax Collector who then collects the taxes and distributes them to the appropriate taxing authorities. It is noted that ad valorem taxes make up the lion's share of taxes at the local level while tangible personal property taxes are a very small source of revenues. DOR is charged with the duties of providing oversight to the property tax program and aid and assistance to the Property Appraiser and Tax Collector. In this regard, DOR views the two offices as an integral part of the property tax program rather than two separate entities. It characterizes the program as "a stream or process where (the) lines of delineation (between the two offices) are not as distinct as they might have been ten or fifteen years ago." Because of the highly sensitive nature of the tax program, it follows that a certain degree of trust and integrity must exist between DOR (and its employees) and the local offices. Petitioner does not interface with the office of Tax Collector in any respect, and his duties do not require that he audit any of that office's records. His only duties are to audit the tangible personal property assessments performed by the Property Appraiser. These facts were not controverted. Although he has never differed with a valuation of the Property Appraiser during his five year tenure at DOR, and no such disagreement has occurred in Lake County during the last twenty-five years, petitioner could conceivably disagree with an assessment while running for office during the next few months. If the matter could not be informally settled, the tax rolls would not be certified by DOR, and litigation against DOR could be initiated by the Property Appraiser. Under those unlikely circumstances, petitioner might be called as a witness in the case, although the general practice has always been for DOR to use personnel from the Tallahassee office in litigation matters. To the very minor extent that petitioner could affect the tax rolls by disagreeing with the Property Appraiser's valuations, this could also impact the amount of money collected by the Tax Collector. DOR cites these circumstances as potentially affecting in an adverse way the level of trust and integrity between DOR and the office of Tax Collector. However, under the facts and circumstances of this case, this potential conflict is so remote and miniscule as to be wholly immaterial. The evidence also shows that in his audit role, petitioner has the "opportunity . . . to look and have access to tax returns," some of which "are of TPP (tangible personal property) nature (and) have attached to them federal tax returns" which might be used by the Property Appraiser for establishing the value of tangible personal property. Whether petitioner has ever had access to, or reviewed such, returns is not of record. In any event, to the extent this set of circumstances would pose a potential conflict with the Property Appraiser, as to the Tax Collector, it would be no more significant than the purported conflict described in finding of fact 7. Finally, DOR suggests that if petitioner was unsuccessful in his bid for office, it would likely damage the "relationship of trust" that now exists between DOR and the Tax Collector. Again, this purported conflict is so speculative as to be deemed immaterial. The parties have stipulated that, as of the date of hearing, petitioner's only option for qualifying to run for office is to pay a $6,173.00 qualifying fee no later than noon, July 19, 1996. The opportunity for submitting an appropriate number of signatures in lieu of a filing fee expired on June 24, 1996. On the few, isolated occasions during the last twenty-five years when the Lake County Tax Collector has requested information from DOR personnel, he has spoken by telephone with DOR legal counsel in Tallahassee. Those matters of inquiry, primarily relating to ad valorem taxes, do not concern any area related to petitioner's job duties. He also pointed out that his office always cooperates with the office of the Property Appraiser, especially when "corrections" must be made due to errors by that office. Even so, he described the two offices as being separate and with entirely different duties. This testimony is accepted as being the most persuasive on this issue. At least four persons have already announced that they would run for Tax Collector for Lake County. The parties have stipulated that one of those persons is a regional administrator for the Department of Highway Safety and Motor Vehicles who was not required to resign his position in order to run for office. According to the incumbent Tax Collector, that individual supervises other state employees who occasionally audit certain aspects of his office pertaining to automobile license plates and decals. Because of the time constraints in this case, and although not legally obligated to do so, respondent has voluntarily agreed to allow petitioner to take annual leave (or presumably leave without pay) commencing on the date he qualifies for local public office, or July 19, 1996, and to remain on leave until a final order is issued by the agency. At that time, if an adverse decision is rendered, petitioner must choose between resigning or withdrawing as a candidate. These terms are embodied in a letter from DOR's counsel to petitioner dated July 3, 1996. If petitioner is allowed to run for office without resigning, he has represented that he will campaign while on leave or after regular business hours. He has also represented, without contradiction, that his campaign activities will not interfere with his regular duties. If elected, he intends to resign his position with DOR.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department of Revenue enter a final order granting petitioner's request that it certify to the Department of Management Services that his candidacy for the office of Lake County Tax Collector would involve no interest which conflicts, or activity which interferes, with his state employment. DONE AND ENTERED this 10th day of July, 1996, in Tallahassee, Florida. DONALD R. ALEXANDER, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 10th day of July, 1996. APPENDIX TO RECOMMENDED ORDER Respondent: Partially accepted in finding of fact 1. Partially accepted in findings of fact 2 and 3. 3-5. Partially accepted in finding of fact 1. 6. Partially accepted in finding of fact 5. 7-9. Partially accepted in finding of fact 4. 10-11. Partially accepted in finding of fact 7. 12. Rejected as being irrelevant since petitioner was not an employee of DOR in 1990. 13-17. Partially accepted in finding of fact 7. 18. Rejected as being unnecessary. 19-20. Partially accepted in finding of fact 5. 21. Partially accepted in finding of fact 8. 22-23. Partially accepted in finding of fact 5. Partially accepted in finding of fact 9. Rejected as being unnecessary. Note - Where a proposed finding of fact has been partially accepted, the remainder has been rejected as being irrelevant, not supported by the evidence, unnecessary, subordinate, or a conclusion of law. COPIES FURNISHED: L. H. Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100 Linda Lettera, Esquire Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 Mr. Robert M. Hendrick 5022 County Road 48 Okahumpka, Florida 34762 Peter S. Fleitman, Esquire Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: Background Petitioner, Gainesville Amateur Radio Society, Inc. (GARS or petitioner), a Florida non-profit corporation, was incorporated on December 31, 1975. Its stated purpose is to promote an interest in amateur radio operation. Among other things, GARS provides preparation for Federal Communication Commission licensing examinations, supports community activities with free communication services, and encourages public awareness of ham radio activities through the publication of a monthly newsletter called the GARS-MOUTH. Respondent, Department of Revenue (DOR), is charged with the responsibility of administering and implementing the Florida Revenue Act of 1949, as amended. It has the specific task of collecting sales taxes and enforcing the state tax code and rules. By law, certain transactions are exempt from the state sales and use tax. Among these are sales or lease transactions involving "scientific organizations." In order for an organization to be entitled to an exemption, it must make application with DOR for a consumer's certificate of exemption and demonstrate that it is a qualified scientific organization within the meaning of the law. Once the application is approved, the certificate entitles the holder to make tax exempt purchases that are otherwise taxable under Chapter 212, Florida Statutes. In the case of petitioner, a certificate would enable it to save a hundred or so dollars per year. Claiming that it was entitled to a certificate of exemption as a charitable organization, GARS filed an application with DOR on December 21, 1993. After having the application preliminarily disapproved by DOR on the ground it did not expend "in excess of 50.0 percent of the . . . organization's expenditures toward referenced charitable concerns, within (its) most recent fiscal year," a requirement imposed by DOR rule, GARS then amended its application to claim entitlement on the theory that it was a scientific organization. Although DOR never formally reviewed the amended application, it takes the position that GARS still does not qualify for a certificate under this new theory. Is GARS a Scientific Organization? Under Section 212.08(7)(o)2.c., Florida Statutes, a scientific organization is defined in relevant part as an organization which holds a current exemption from the federal income tax under section 501(c)(3) of the Internal Revenue Code. A DOR rule tracks this statute almost verbatim. Accordingly, as a matter of practice, in interpreting this statutory exemption, DOR simply defers to the final determination of the Internal Revenue Service (IRS). If the IRS grants an organization a 501(c)(3) status based on the determination that it is a scientific organization, then DOR accepts this determination at face value. DOR does not make an independent determination whether the organization is "scientific" or question the decision of the IRS. This statutory interpretation is a reasonable one and was not shown to be erroneous or impermissible. GARS received a federal income tax exemption from the IRS regional office in Atlanta, Georgia by letter dated August 12, 1993. The record shows that GARS was granted an "exempt organization" status as a "charitable organization" and as an "educational organization" under Treasury Regulation Section 1.501(c)(3). However, GARS did not receive an exempt status as a "scientific organization" nor did the IRS make that determination. Therefore, GARS does not qualify as a scientific organization within the meaning of the law. While petitioner submitted evidence to show that it engages in what it considers to be a number of scientific endeavors, these activities, while laudable, are irrelevant under Florida law in making a determination as to whether GARS qualifies for a sales tax exemption as a scientific organization. Therefore, the application must be denied.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that respondent enter a final order denying petitioner's application for a consumer certificate of exemption. DONE AND ENTERED this 23rd day of June, 1995, in Tallahassee, Florida. DONALD R. ALEXANDER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 23rd day of June, 1995. APPENDIX TO RECOMMENDED ORDER, CASE NO. 94-1200 Petitioner: 1-2. Partially accepted in finding of fact 4. 3. Partially accepted in finding of fact 6. 4. Partially accepted in finding of fact 1. 5. Rejected as being irrelevant. 6. Rejected as being unnecessary. 7. Partially accepted in finding of fact 5. 8-9. Partially accepted in finding of fact 7. 10. Partially accepted in finding of fact 5. 11. Partially accepted in finding of fact 7. 12. Partially accepted in finding of fact 6. 13. Rejected as being unnecessary. 14. Partially accepted in finding of fact 6. Respondent: 1. Partially accepted in finding of fact 1. 2. Partially accepted in finding of fact 2. 3. Rejected as being unnecessary. 4. Rejected as being cumulative. 5-12. Partially accepted in finding of fact 7. 13-14. Partially accepted in finding of fact 4. 15. Partially accepted in finding of fact 3. 16. Covered in preliminary statement. 17. Partially accepted in finding of fact 4. 18-19. Partially accepted in finding of fact 6. 20-21. Rejected as being unnecessary. 22. Partially accepted in finding of fact 5. 23-24. Partially accepted in finding of fact 6. Note - Where a proposed finding has been partially accepted, the remainder has been rejected as being irrelevant, unnecessary for a resolution of the issues, not supported by the evidence, cumulative, subordinate, or a conclusion of law. COPIES FURNISHED: Mr. Larry Fuchs Executive Director Department of Revenue 104 Carlton Building Tallahassee, FL 32399-0100 Linda Lettera, Esquire General Counsel Department of Revenue 204 Carlton Building Tallahassee, FL 32399-0100 Sidney Schmukler, Esquire 3922 N. W. 20th Lane Gainesville, Florida 32605-3565 Olivia P. Klein, Esquire Department of Legal Affairs The Capitol-Tax Section Tallahassee, Florida 32399-1050
