The Issue The issue for determination is whether Respondent committed the offenses set forth in the Administrative Complaint for Revocation of Certificate of Registration issued on November 16, 2009, and, if so, what action should be taken.
Findings Of Fact There is no dispute that the Department is the state agency charged with the responsibility of regulating, controlling, and administering the revenue laws of the State of Florida, including the laws relating to the imposition and collection of the state's sales and use tax pursuant to chapter 212, Florida Statutes. There is no dispute that Abkey is a Florida corporation whose principal address is 7800 Southwest 104th Street, Miami, Florida 33156. Abkey is a restaurant. At the time of hearing, Abkey had 33 employees and was operating at a deficit. There is no dispute that, at all times material hereto, Abkey possessed Florida sales tax certificate of registration number 23-8012096448-9, issued by the Department on April 18, 1994. There is no dispute that Abkey is a dealer as defined in section 212.06(2), Florida Statutes, and has been a dealer at all times material hereto. For the month of June 2009, Abkey failed to file a sales tax return. As a result of this failure, the Department assessed Abkey an estimated sales tax due in the amount of $9,500.00. For 2005, Abkey failed to remit its self-reported sales tax liability to the Department for the months of July, September, October, November, and December. Abkey self-reported its tax liability, by filing sales tax returns, for the said months. For 2006, Abkey failed to remit its self-reported sales tax liability to the Department for the months of January and May. Abkey self-reported its tax liability, by filing sales tax returns, for the said months. Also, for 2006, Abkey failed to timely remit its sales tax liability for the month of October for which the Department assessed a penalty and an administrative/collection/processing fee. For 2007, Abkey failed to remit its self-reported sales tax liability to the Department for the months of February and August. Abkey self-reported its tax liability, by filing sales tax returns, for the said months. Also, for 2007, Abkey failed to timely remit its sales tax liability for the month of October, for which the Department assessed a penalty and an administrative/collection/processing fee. In total, for 2005, 2006, and 2007, Abkey self- reported sales tax due and failed to remit to the Department sales tax reportedly due in the amount of $122,355.36. As a result of Abkey's failure to file the sales tax return, to remit the $122,355.36 in sales tax, and to remit timely sales tax, the Department assessed Abkey, as of October 29, 2009, $16,287.59 in interest, $4,891.73 in penalties, and $13,845.10 in administrative/collection/ processing fees. Additionally, for the month of February 2007, Abkey issued to the Department a dishonored check (electronic funds transfer) on March 23, 2007, in the amount of $18,254.00. The Department assessed a $150.00 return check fee for the dishonored check. Shortly after being notified of the dishonored check by the Department, Abkey paid the $18,254.00. Abkey has a significant history of delinquency in remitting payments to the Department. The Department made several attempts, unsuccessfully, to collect the delinquent tax liabilities, including issuing Tax Warrants. In January 2007, the Department sought to revoke Abkey's Certificate of Registration for delinquent returns and outstanding liability and engaged in an informal conference with Abkey. As a result of the informal conference, Abkey and the Department entered into a Compliance Agreement executed on February 15, 2010. The Compliance Agreement required Abkey, among other things, to remit all past due payments; for 12 months (January through December 2007), to timely file tax returns and to timely remit all sales tax due; and to make a down payment of $45,000.00 (in three monthly installments but no later than April 1, 2007), 11 monthly payments of $5,000.00 (beginning May 1, 2007), and a balloon payment of $141,982.43 on April 1, 2008. Further, regarding the balloon payment of $141,982.43, the Compliance Agreement provided that the balloon payment might be negotiated for another 12 months. However, in order for Abkey to take advantage of this provision, Abkey was required to be compliant with the terms of the Compliance Agreement and its account was required to be in good standing with the Department. In accordance with the Compliance Agreement, Abkey paid the down payment of $45,000.00 (in three monthly installments) and the 11 payments of $5,000.00 although the 11 payments were late. Additionally, for the period of January through December 2007, Abkey was late filing tax returns and remitting sales tax. Abkey requested a renewal of the Compliance Agreement. Despite the late payments, the Department approved the renewal of the Compliance Agreement. A Compliance Agreement Renewal was executed on May 1, 2008. It required Abkey, among other things, to remit all past due payments and to timely file tax returns and timely remit all sales tax due for the next 12 months (May 1, 2008 through April 30, 2009); and to make 11 monthly payments of $5,000.00 (beginning May 1, 2008), and a balloon payment of $120,749.14 on April 1, 2009. Furthermore, regarding the balloon payment of $120,749.14, the Compliance Agreement Renewal provided that the balloon payment might be negotiated for another 12 months. However, in order for Abkey to take advantage of this provision, Abkey was required to be compliant with the terms of the Compliance Agreement Renewal and its account was required to be in good standing with the Department. Under the Compliance Agreement Renewal, Abkey made four payments of $5,000.00 but the payments were late. Abkey requested a reduction in the amount of the monthly payments from $5,000.00 to $2,000.00. The Department granted Abkey's request. Abkey made 12 payments of $2,000.00 but the payments were late. Additionally, for the period of May 1, 2008 through April 30, 2009, Abkey was late filing tax returns and remitting sales tax. Further, Abkey failed to make the balloon payment of $120,749.14 that was due on April 1, 2009. Abkey did not request a renegotiation of the balloon payment. At that time, Abkey did not request another Compliance Agreement. As of September 28, 2010, Abkey owed the Department $122,355.36 in actual sales tax (per Abkey's sales tax returns), $9,500.00 in estimated tax, $4,419.73 in penalty2, $14,572.80 in administrative/collection/processing fees3, $25,032.28 in interest, and $20.00 in warrant fees; totaling $175,900.17. The Department seeks to revoke Abkey's Certificate of Registration.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order revoking the Certificate of Registration issued to and held by Abkey No. 1 Limited. DONE AND ENTERED this 18th day of February, 2011, in Tallahassee, Leon County, Florida. S ERROL H. POWELL Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 18th day of February, 2011.
The Issue The issues in this case are whether Respondent failed to remit taxes, interest, penalties, and fees pursuant to a Compliance Agreement between Respondent and Petitioner; and, if so, whether Petitioner should revoke Respondent's sales tax registration certificate in consequence thereof.
Findings Of Fact Petitioner Department of Revenue ("Department") is the agency of state government authorized to administer the tax laws of the State of Florida. Respondent Servers, Inc. ("Servers") is a Florida corporation whose principal place of business is located in Plantation, Florida. Servers sells tangible personal property at retail and consequently is required to collect from its customers, and remit to the Department, sales tax on every transaction which is taxable under Chapter 212, Florida Statutes. In connection with this responsibility, Servers is an authorized "dealer," holding a sales tax certificate of registration numbered 16-8012479332-4 (the "Certificate"), which the Department issued on May 11, 2002. On May 2, 2008, the Department issued a notice to Servers, which initiated a proceeding to revoke Servers' Certificate for failure to remit taxes. Servers was invited to appear at an informal conference with the Department on June 18, 2008. At the informal conference, Servers would have the opportunity to avoid revocation either by presenting evidence refuting the charges regarding unpaid taxes, or by entering into a compliance agreement pursuant to which the outstanding liability would be satisfied. The informal conference took place as scheduled. Bruce Drumm, Servers' president, appeared on behalf of the corporation. At the conference, the Department and Servers entered into a written compliance agreement (the "Agreement"). Under the Agreement, Servers admitted that it owed the State of Florida a grand total of $10,868.60, a sum which comprised $8,453.45 in unpaid taxes, $1,557.86 in interest, fees in the amount of $40.00, and a penalty of $817.29. Servers agreed to pay its debt in installments, in exchange for the Department's promise to forbear from revoking Servers' Certificate. The Agreement called for Servers to make a down payment of $1,500 on June 25, 2008, followed by six monthly payments in the respective amounts of $750 (July through October) and $1,200 (November and December), due on specific dates beginning July 16, 2008, and ending December 16, 2008. The balance remaining after Servers' payment of $6,900 pursuant to foregoing schedule was "to be renegotiated on December 16, 2008." The Agreement did not provide that time was of the essence with regard to Servers' duty to make the installment payments, nor was there a grace period applicable to the payment deadlines. The Agreement did, however, state as follows: E. If the certificate holder fails to comply with any obligation under this agreement, the Department has the right to initiate revocation procedures by filing an Administrative Complaint, with a copy to the certificate holder, but without further notice to the certificate holder of the default. In the event of an action to revoke the certificate the Department shall introduce this Agreement into evidence as proof of the facts recited herein. * * * G. If the certificate holder fails to perform any of the obligations under this agreement, including the timely filing of returns and payment of all taxes, penalties and interest as they become due, all amounts of the tax, interest and penalty settled under this agreement and any unpaid balance shall be immediately due and payable and collectible by all legal means. In addition to promising to pay the outstanding indebtedness, Servers agreed: To accurately complete all past due sales tax returns and file them no later than Due date. To remit all past due payments to the Department as stated in the attached payment agreement. To accurately complete and timely file all required sales tax returns for the next 12 months, beginning with the period 07/2008 through 06/2009. To timely remit all sales tax collections due for the next 12 months, associated with the periods stated above. To comply with all other provisions of Chapter 212, Florida Statutes. Servers delivered each of the seven scheduled payments to the Department, fulfilling this particular financial obligation. Two of the payments (for October and December, respectively), however, were tendered on the next day after the due date, and one payment (September) was tendered on the second day after the due date. The Department accepted these late payments. The Department claims that each of these brief delays in performance on Servers' part amounted to a substantial violation of the Agreement. It alleges also that Servers further breached the Agreement by filing late returns for July and September 2008, and by being overdue in payment of taxes for the months of October and November 2008. Of these additional alleged breaches, only one was clearly proved. Based on the evidence presented, the undersigned finds that Servers' payment of the taxes due in November 2008 was delinquent. The proof of Servers' delinquency came in the form of an admission, which was offered against Servers during the cross- examination of the Department's sole witness, Tara Teague Schaffner. The damaging testimony, in other words, was elicited not by the Department, but by Servers' representative, Mr. Drumm. The admission, moreover, was memorialized in the Department's business records, from which Ms. Schaffner (in response to Mr. Drumm's questions) read lengthy excerpts out loud, thereby "publishing" the contents of the Department's internal documents into the evidentiary record of this proceeding. The business records from which Ms. Schaffner quoted were not offered into evidence. That the Department's records constituted "business records" for purposes of the business-records exception to the hearsay rule was established through Mr. Drumm's interrogation of Ms. Schaffner. Prompted by Mr. Drumm's questioning, Ms. Schaffner testified credibly, and the undersigned finds, that the Department's file on Servers contains, among other things, notes concerning conversations with the taxpayer, which were made contemporaneously, in the performance of a regular business activity, by a person with knowledge of the conversations, and which were kept in the regular course of the Department's business. For reasons that will be discussed below, the undersigned has concluded that the contents of the Department's business records, though presented in an unusual manner, nevertheless constitute admissible evidence which clearly and convincingly proves that Servers committed at least one material breach of the Agreement, namely being delinquent with regard to payment of taxes due in November 2008. To facilitate the forthcoming analysis of the admissibility of the dispositive evidence, and to show the basis for the finding that Servers breached the Agreement, the critical testimony is quoted here: Q [by Mr. Drumm] And do you [i.e. the Department] have any comments [in your records] regarding the 12/16 payment [for which the schedule in the Agreement provided]? A [by Ms. Schaffner] We have a note on the 17th of December [2008]. It says received stip payment due December 16th, twelve hundred dollars, hand delivered on December 17th. Q Are there any comments in the notes regarding my request to negotiate the balance due at that time? A On the 21st it says that Ms. Aboite [an employee of the Department] called you. She spoke to Bruce Drumm, the owner, reference delinquency for October and November 2008. He said that the return of payment was mailed yesterday for November and December 2008, informed him about the payment for October, stated he claimed to check the records and call me back. Advised he was informed all current returns should be mailed to the Hollywood Service Center for the 12th month, informed Mr. Drumm stip payment late, was due on December 17th. T. 44-45 (emphasis added). There are, to be sure, some discrepancies in Ms. Schaffner's testimony, which might be attributable to her misreading of information contained in the Department's records, or to inaccuracies in the entries themselves. For example, the "21st" of December 2008, which is when Ms. Aboite reportedly called Mr. Drumm——assuming the referenced month was December—— fell on a Sunday. While it is possible that Ms. Aboite transacted official business on Sunday, December 21, 2008, the undersigned doubts that such occurred, and declines to so find. The undersigned does find, however, that the conversation recorded in the notes took place around (and most likely after) December 17, 2008. This much is clear from the context of the comments. Ms. Schaffner's testimony, after all, came in response to a question of Mr. Drumm's inquiring about his request to negotiate with the Department "at that time," meaning the period of December 16-17, 2008. Similarly, the comment that the payment "was due" on December 17, 2008, is not correct. The payment was due on December 16 and was received by the Department on December 17, 2008. These facts are not disputed. Either the witness, or the maker of the notes from which the witness read, was mistaken. These are minor points, however, that ultimately do not seriously discredit Ms. Schaffner's testimony that, according to the Department's records, Servers' owner, Mr. Drumm, admitted on or about December 17, 2008, having just recently (the day before) mailed the tax payment due in November 2008. That payment (as will be discussed below) was delinquent as a matter of law if it were mailed after November 20, 2008—— which Mr. Drumm plainly admitted was the case. In sum, whatever other defaults under the Agreement Servers might have committed, the established fact is——as the evidence clearly and convincingly proves——that Servers failed to timely remit all sales tax collections due in November 2008. This failure was a material and substantial breach of the Agreement.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department enter a final order revoking sales tax certificate of registration numbered 16- 8012479332-4, which the Department issued to Servers, Inc., on May 11, 2002. DONE AND ENTERED this 31st day of July, 2009, in Tallahassee, Leon County, Florida. JOHN G. VAN LANINGHAM Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 31st day of July, 2009.
The Issue Does the taxpayer owe sales tax, penalty, and interest as assessed by the Department of Revenue.
Findings Of Fact Petitioner, Department of Revenue, is an agency of the State of Florida, lawfully created and organized pursuant to Section 20.21, Florida Statutes. By law, the Department is vested with the responsibility of regulating, controlling and administering the revenue laws of the State of Florida, including, specifically, the laws relating to the imposition and collection of the state's sales and use tax, pursuant to Chapter 212, Florida Statutes. Respondent, Worldwide Equipment Group, LLC, is a Florida limited liability company, whose principal address is Post Office Box 1050, Freeport, Florida 32439. Respondent sells and leases heavy equipment. In early 2006, Petitioner, Department of Revenue, conducted an audit of the books and records of Petitioner, pursuant to statutory notice. The period covered by the audit was March 1, 2002, through February 28, 2005. The audit was conducted by Department of Revenue auditor David Collins and addressed three issues. Issue A-01 addressed misclassified exempt sales, i.e. failure to collect appropriate sales and use tax or lack of documentation to prove tax exempt status of certain sales. Issue A-03 addressed discrepancies in sales for 2003 as reported for federal income tax returns and for state sales and use tax returns. Issue A-03 addressed interest owed due to a timing difference between actual transactions and the filing of state returns: basically a manipulation of the grace period for payment of sales and use taxes. Respondent was notified of the apparent discrepancies observed by the auditor. The original Notice of Intent To Make Audit Changes was issued February 17, 2006, and started at more than $75,000.00 in taxes, penalty, and interest due. Respondent then filed amended federal income tax returns, reflecting larger sales figures covering a portion of the audit period which reduced the discrepancy. The dispute was originally referred to the Division of Administrative Hearings (DOAH) on or about August 30, 2006. The original facts in dispute surrounded an addendum to the Notice of Proposed Assessment showing a balance due of $31,434.82. This was DOAH Case No. 06-3287. The request for a disputed-fact hearing was made by David R. Johnson CPA, who has a power of attorney on file with Petitioner Agency permitting him to represent Respondent. Throughout these proceedings, Worldwide has been served through Mr. Johnson by Petitioner and by DOAH. The parties filed a Joint Motion for Provisional Closing Order in DOAH Case No. 06-3287 on November 1, 2006. On November 2, 2006, DOAH Case No. 06-3287 was closed with leave to return if the parties' proposed settlement was not finalized. Mr. Johnson met once with counsel for Petitioner during the time the case was returned to the Agency. At some point, Respondent had produced certain accounting entries and supporting documents to the auditor. These were used to adjust the assessment levied by the Department. A Revised Notice Of Intent To Make Audit Changes dated March 13, 2007, was issued with a letter of the same date. The revised, and final Notice included an assessment of tax, penalty and interest totaling $15,065.24, as of the date of issue and information that the tax accrues interest at the rate of $3.10 per diem. On April 4, 2007, Petitioner filed before DOAH its Motion to Re-open Case and Notice for Trial. No timely response in opposition was filed by Respondent. By an Order to Re-open Case File, entered April 19, 2007, the case was re-opened as the instant DOAH Case No. 07-1710. Petitioner has established that the amount of $15,065.24 as tax, penalty, and interest was due as of March 13, 2007.
Recommendation Based on the foregoing Findings of Facts and Conclusions of Law, it is RECOMMENDED that the Department of Revenue sustain the March 13, 2007, assessment of the subject sales tax, penalties and interest to Petitioner. DONE AND ENTERED this 8th day of October, 2007, in Tallahassee, Leon County, Florida. S ELLA JANE P. DAVIS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 8th day of October, 2007. COPIES FURNISHED: Warren J. Bird, Esquire Office of the Attorney General The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050 Bruce Hoffmann, General Counsel Department of Revenue The Carlton Building, Room 204 501 South Calhoun Street Tallahassee, Florida 32399-0100 Lisa Echeverri, Executive Director Department of Revenue The Carlton Building, Room 104 501 South Calhoun Street Tallahassee, Florida 32399-0100 David R. Johnson, CPA 1265 Highway 331 South Defuniak Springs, Florida 32435 Worldwide Equipment Group LLC Post Office Box 1050 Freeport, Florida 32439
The Issue The issue for determination is whether Petitioner is liable for the tax, penalty, and interest assessed.
Findings Of Fact Petitioner is a Florida corporation with its principal place of business located at 2836 North Tamiami Trial, Sarasota, Florida. Petitioner primarily engages in the business of selling classic, vintage automobiles. Petitioner sells automobiles for delivery in-state, interstate, and internationally. Petitioner also engages in the business of selling other collectible items, including jukeboxes. Respondent is the state agency responsible for the administration of the Florida sales and use tax pursuant to Sections 20.21 and 213.05, Florida Statutes (1991). (All references to Florida Statutes are to Florida Statutes 1991 unless otherwise stated.) In accordance with Section 212.34, Respondent audited Petitioner's business records for the period from May 1, 1991, through July 31, 1996 (audit period). Respondent determined a deficiency and assessed Petitioner for $114,878.68, including tax, penalty, and interest through January 26, 1999. Respondent assessed tax in the amount of $55,771.16, penalty in the amount of $26,528.02, and interest through January 26, 1999, in the amount of $32,579.50. Additional interest accrues at the daily rate of $20.97. The assessed tax is based on several alleged deficiencies. Some deficiencies involve alleged failures of Petitioner to comply with taxing provisions. Other deficiencies involve alleged failures of Petitioner to comply with the requirements of claimed exemptions. Taxing provisions are construed narrowly against the taxing authority while the provisions authorizing exemptions are construed narrowly against the person claiming the exemption. The assessment against Petitioner includes tax on $51,353.10 in under-reported retail sales for 1994. Respondent compared the gross income reported by Petitioner for the 1994 tax year with the state sales tax revenues reported by Petitioner for the same year and determined that Petitioner under-reported sales tax revenues in the amount of $51,353.10. Mr. Martin Godbey is a corporate officer for Petitioner and a controlling shareholder. Mr. Godbey testified at the hearing. Mr. Godbey testified that $45,000 of the $51,353.10 was not under-reported gross sales in 1994. According to Mr. Godbey, Petitioner's accountant over-reported gross income for purposes of the federal income tax. Petitioner derives some income from providing brokerage services as an liaison between a buyer and seller. Mr. Godbey testified that Petitioner earned $1,400 in 1994 as a broker for the sale of a 1956 Jaguar XJ140 roadster on behalf of an automobile dealership in Virginia. The testimony is that Petitioner introduced the seller and buyer but never possessed the vehicle or delivered the vehicle. The price of the vehicle was approximately $45,000. Mr. Godbey testified that Petitioner's accountant incorrectly reported $45,000 as gross income under the federal income tax law and reported the difference between $45,000 and $1,400 as the cost of goods sold. The testimony of Mr. Godbey was credible and persuasive. However, the testimony was not supported by documentary evidence of Petitioner's federal income tax return or by testimony of Petitioner's accountant. The unsupported testimony of Mr. Godbey does not rise to the level of a preponderance of the evidence. Petitioner failed to show by a preponderance of the evidence that Petitioner over-reported gross income for the purpose of the federal income tax rather than under-reported gross sales for the purpose of the state sales tax. The testimony of Mr. Godbey did not explain the difference between the $51,353.10 amount determined by Respondent and $45,000 amount testified to by Mr. Godbey. For the period from 1991 through 1993, Petitioner collected sales tax on retail sales but did not remit the tax to Respondent. Rather, Petitioner paid the tax to two automobile dealers identified in the record as International Antique Motors, Inc. (IAM) and Autohaus Kolar, Inc. (AK). Petitioner registered with Respondent as a dealer sometime in 1991. However, Petitioner did not obtain a retail dealer's license from the Department of Motor Vehicles (Department) until late in 1993. From 1991 through most of 1993, Petitioner was licensed by the Department as a wholesale dealer and was not authorized by the Department to engage in retail sales of motor vehicles. Section 320.27(2) prohibited Petitioner from selling motor vehicles at retail and made such sales unlawful. Petitioner asserts that it could not have engaged in retail sales, within the meaning of Section 212.06(2)(c) and (d), because Petitioner had no legal authority to do so. From 1991 through 1993, Petitioner engaged in retail sales within the meaning of Section 212.06(2)(c) and (d). Petitioner engaged in retail sales by selling automobiles at retail in violation of Section 320.27(2). Respondent does not dispute that Petitioner collected sales tax on each sale. Petitioner did not engage in retail sales and collect sales tax on each sale in the capacity of an agent for IAM or AK. Petitioner acted in his own behalf as a principal. IAM and AK had no actual or legal control over the sales conducted by Petitioner. IAM and AK merely processed the title work for each retail sale conducted by Petitioner. Even if Petitioner were an agent for IAM and AK, Petitioner engaged in retail sales as a dealer defined in Florida Administrative Code Rule 12A-1.0066. (All references to rules are to rules promulgated in the Florida Administrative Code during the audit period.) Petitioner registered the vehicles sold at retail from 1991 through 1993 by way of a business arrangement with IAM and AK. After Petitioner collected sales tax on each retail sale, Petitioner remitted the tax to IAM and AK. IAM and AK then registered the vehicles with the Department. Respondent does not dispute that Petitioner paid to IAM and AK the sales tax that Petitioner collected from each customer. Nor does Respondent dispute that the amount of tax Petitioner paid to IAM and AK was sufficient to pay the tax due. Section 212.06(10) requires IAM and AK to issue a receipt for sales tax with each application for title or registration. IAM obtained title or registration for 21 vehicles sold by Petitioner and at issue in this case. AK obtained title or registration for three vehicles at issue in this case. Section 212.06(10) does not operate to create a factual presumption that IAM and AK paid the sales tax due on the 24 vehicles at the time that IAM and AK applied for title or registration of each vehicle. In practice, the receipt issued by dealers with each application for title or registration contains a code indicating that the dealer has collected the tax and will pay the tax in the dealer's ensuing sales tax return. After IAM applied for title or registration for the vehicles evidenced in Petitioner's Exhibits 2, 4, 6, and 21, IAM remitted taxes to Respondent in an amount sufficient to pay the tax due on those sales by Petitioner. Respondent has no record of any tax deficiencies against IAM. Respondent's admitted policy is to avoid the collection of tax if the tax has already been paid. After IAM applied for title or registration for the vehicles evidenced in Petitioner's Exhibits 1, 3, 5, and 7 through 20, IAM remitted taxes to Respondent in an amount that was insufficient to pay the tax due on those sales. Petitioner failed to show by a preponderance of the evidence that IAM remitted to Respondent the taxes that Petitioner collected and paid to IAM in connection with the sales evidenced in Petitioner's Exhibits 1, 3, 5, and 7 through 20. Petitioner is not entitled to a set-off of the taxes remitted to Respondent by IAM after the sales evidenced in Petitioner's Exhibits 1, 3, 5, and 7 through 20. There is insufficient evidence to show that the taxes remitted by IAM were collected on the sales at issue in this case rather than other sales made by IAM. AK processed three vehicles for Petitioner that are at issue in this case. AK paid to Respondent the sales tax due on the three retail sales at issue. The relevant sales are evidenced in Petitioner's Exhibits 24 through 26. AK remitted taxes in an amount that was more than sufficient to pay the tax due on those sales by Petitioner. Respondent has no record of a tax deficiency against AK. Respondent's policy is to avoid the collection of tax if tax has already been paid. Several deficiencies are attributable to disallowed exemptions for 16 sales that include 14 vehicles and two jukeboxes. Statutory requirements for exemptions are strictly construed against the person claiming the exemption. Petitioner did not satisfy essential requirements for any of the disallowed exemptions. The exemptions asserted by Petitioner in its PRO are discussed in greater detail in the following paragraphs. During the audit period, Petitioner sold a 1972 Italia Spyder automobile, VIN: 50413414, to a Texas automobile dealership identified in the record as North American Classic Cars/Gene Ponder, of Marshall, Texas (North American). Petitioner claims that the sale to North American is exempt because it is a sale for resale to a non-resident dealer. The sale to North American is not exempt. Petitioner failed to obtain a non-resident dealer affidavit at the time of sale in violation of Section 212.08(10). During the audit, Petitioner obtained a Sales Tax Exemption Affidavit (DR-40) from North American. A DR-40 is not appropriate for a sale for resale to a non-resident dealer. The appropriate affidavit would have required the non-resident dealer to attest that "the motor vehicle will be transported outside of the State of Florida for resale and for no other purpose." Hand written notations on the bill of sale for the Italia Spyder indicate the North American representative took possession of the automobile in Florida. In addition, a hand- written letter to Petitioner indicates that the Italia Spyder was purchased for the private collection of the owner of North American rather than for resale. During the audit period, Petitioner sold a 1959 Mercedes Benz 190SL automobile, VIN: 12104-10-95012, to Mike Hiller, of Coral Springs, Florida (Hiller). Petitioner claimed, on the bill of sale, that the sale was exempt because it was a sale to a non-resident dealer for resale. The sale to Hiller is not exempt. At the time of the sale, Petitioner failed to obtain a non-resident dealer affidavit or a resale certificate. The bill of lading lists Hiller as an exporter and indicated that Hiller, as the exporter, took possession of the automobile in Florida. The bill of lading does not show unbroken, continuous transportation from the selling dealer to a common carrier or directly out of Florida as required in Section 212.06(5)(b)1. During the audit period, Petitioner sold a 1959 MGA Roadster, VIN: 54941, to Fabiana Valsecchi, of Rome, Italy. Petitioner claims the sale is exempt as a sale for export. The sale to Valsecchi is not exempt. At the time of the sale, Petitioner failed to obtain a bill of lading, or other shipping documentation that shows unbroken, continuous transportation from Petitioner to a common carrier or directly out of Florida. The bill of sale signed by the purchaser's agent shows that the agent took possession of the automobile in Florida. Petitioner failed to show that the sale was exempt because it was a sale for resale. Petitioner did not provide a resale certificate from the purchaser. During the audit period, Petitioner sold a 1961 Triumph TR3 automobile, VIN: TS753 38L, to Classic Automobile Investors, Inc., of Germany (Classic). Petitioner claims that the sale is exempt because it was a sale for export. The sale to Classic is not exempt. At the time of sale, Petitioner failed to obtain a bill of lading, or other shipping documentation which shows unbroken, continuous transportation from Petitioner to a common carrier or directly out of Florida. During the audit period, Petitioner sold a 1947 Bentley MKVI automobile, VIN: B137B, to Mr. Bob Erickson, of Palmetto, Florida. Petitioner failed to collect and remit Local Government Surtax on the sale and owes the uncollected tax. During the audit period, Petitioner sold two jukeboxes and other items of tangible personal property to Mr. C.P. Loontjens. Petitioner claims that the sales are exempt from sales tax because they were sales for export. At the time of the sale, Petitioner failed to obtain documentation from the buyer to show that items sold were delivered to a common carrier or directly delivered outside of Florida. During the audit period, Petitioner was engaged in the business of selling items of tangible personal property other than vehicles and jukeboxes. Petitioner failed to collect and remit sales tax on the sale of these items of tangible personal property. Respondent properly assessed Petitioner for sales tax due on tangible personal property other than vehicles and jukeboxes in the amount of $3,352.50. Vintage rented commercial real property for its business. Rental payments for such real property are subject to sales tax pursuant to Section 212.031. During the audit period, Petitioner failed to pay sales tax on two payments for the commercial rental of real property. Petitioner is liable for use tax on the use of real property during the audit period. Respondent properly assessed Petitioner for additional use tax in the amount of $108.00. Although Petitioner maintained some books and records of sales and purchases, Petitioner failed to maintain adequate records. Respondent properly conducted an audit by sampling Petitioner's available books and records in accordance with Section 212.12(6)(b) but limited the claimed penalty to a delinquent penalty. The trier of fact cannot determine the taxes, interest, and penalty that are due after eliminating the deficiencies found in paragraphs 21 and 24 not to exist in connection with the sales evidenced in Petitioner's Exhibits 2, 4, 6, 21, and 24 through 26. Only Respondent can make that calculation using the same sampling formula that Respondent used to calculate the tax, interest, and penalty in the assessment.
Recommendation Based upon the foregoing findings of fact and the conclusions of law, it is RECOMMENDED that Respondent enter a Final Order ordering Petitioner to pay the tax, interest, and penalty that is due after Respondent recalculates the assessment against Petitioner in accordance with the findings pertaining to Petitioner's Exhibits 2, 4, 6, 21, and 24 through 26. DONE AND ENTERED this 6th day of March, 2003, in Tallahassee, Leon County, Florida. ___________________________________ DANIEL MANRY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 6th day of March, 2003. COPIES FURNISHED: Carrol Y. Cherry, Esquire Office of the Attorney General Department of Legal Affairs The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050 Martha F. Barrera, Esquire Office of the Attorney General Department of Legal Affairs The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050 R. John Cole, II, Esquire Law Offices of R. John Cole, II 46 North Washington Boulevard, Suite 24 Sarasota, Florida 34236 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 What, if any, is Petitioner's tax liability to the State of Florida, after any legitimate tax credits are applied, for June 1998 through December 1998?
Findings Of Fact During the period of June 1998 through September 1998, Petitioner Ron Ross Meardy operated a used car lot from a location in Duval County, Florida, to wit: 1400 Mayport Road, Atlantic Beach, Florida, 32233-3440. Mr. Meardy conducted business through a sole proprietorship named Auto Liquidation Center (ALC). Mr. Meardy's business included both retail sales and wholesale sales of motor vehicles. Between June 1998 and December 1998, Mr. Meardy was a registered dealer with DOR. Mr. Meardy's sales tax registration number was 26-02-151942-23/4, which registration number pertains to the Mayport location in Duval County, Florida. Mr. Meardy filed State of Florida Sales and Use Tax returns, standard form DR-15, for each month between December 1997 through May 1998. In so doing, he relied entirely on his employees. Mr. Meardy also filed State of Florida Solid Waste returns, standard form DR-15SW, for each month between December 1997 through May 1998. In so doing, he relied entirely on his employees. In September 1998, Mr. Meardy opened a car lot in St. Augustine, St. John's County, Florida and closed the Duval County car lot. Mr. Meardy filed no DR-15 (sales tax) forms for the period of June 1998 through December 1998. Mr. Meardy filed no DR-15SW (waste tax) forms for the period of June 1998 through December 1998. Mr. Meardy asserted that he did not know that his employees had made a lot of bad loans or failed to file tax returns for June 1998 through September 1998. Mr. Meardy admitted that from September to December 1998, he deliberately filed no tax returns. First, he claimed he did not file returns because there were no taxable sales made in that period. Then, he asserted that he did not file because, in an unrelated matter, the Florida Attorney General's Office, investigating several businesses "run" by him, held necessary business documents from October 27, 1998 until December 11, 1998 (+/- 45 days). Mr. Meardy's credible testimony that he did not have his business records from October 27, 1998 to December 1998 was unrefuted. As a result of Mr. Meardy's not having filed any DR-15 and DR-15SW forms for the period of June 1998 through December 1998, DOR filed a sales and solid waste tax warrant against him dated March 30, 1999, for $11,937.86. As permitted by law, this audit/warrant merely estimated Mr. Meardy's liability. Mr. Meardy did not then file formal tax returns, file a formal request for an alleged credit (DR-95 form), or provide DOR access to his business records so that DOR could make an accurate assessment/audit/warrant for any tax, penalty, interest, and/or credit. Instead, he timely-filed a Petition for Administrative Hearing on May 28, 1999. The Petition for Administrative Hearing, dated May 21 and filed May 28, 1999, was the first written expression by which Petitioner alerted DOR that he was seeking a tax credit due to repossessions he claimed to have made on defaulted loans. The Petition only stated that DOR "owes ALC money due to repossession credits." The Petition does not contain all of the information required by rule or by the standard credit claim form DR-95B. Petitioner had, in the past, applied for credit for tax paid on repossessed items by attaching the DR-95B form to his monthly tax returns (P-3). He maintained he had relied on his employees for this function. Petitioner's credible testimony that the Attorney General again held some of his documents from the end of May 1999, until September 30, 1999 (+/-five months), due to an unrelated matter, was unrefuted. However, at no time did Petitioner ever file a formal request for credit (form DR-95B) or any tax returns for the period at issue in this proceeding. Only during the course of discovery in the instant proceeding, which discovery Petitioner resisted by every legal means, did it become clear that Petitioner was claiming a tax credit from his May 1998 sales tax return, and that the credit he sought was in excess of the tax he had paid by way of his May 1998 tax return. Only during the discovery process herein did Petitioner provide DOR with any information concerning repossession and default amounts that he was claiming. He did this by producing a "database" (DOR-4). It is unclear from the evidence at hearing when this information was provided, but the date Petitioner claims in his Proposed Findings of Fact to have first produced DOR-4 is February 10, 2000. Petitioner also claims to have given someone at DOR a computer disc with his supporting information, but no DOR witness confirmed this. Petitioner produced no such disc at hearing. Exhibit DOR-4 did not provide the vehicle registration number as part of the property description, the date the sales and use tax was paid, the purchase price less trade-in, the purchase price less cash down, or the actual date of repossession. A copy of each invoice supporting each repossession was not attached. Petitioner did not submit any tax return with DOR-4. Petitioner admits that DOR-4 does not contain all of the information required by the tax credit claim form, DR-95B. DOR revised its assessment once, based on the information Petitioner was required to produce in this proceeding. DOR revised its assessment a second time as a result of the information Mr. Meardy provided in the course of his deposition taken January 19, 2001, approximately a week-and- a-half before final hearing. As agreed-to within the Joint Pre-hearing Stipulation, the revised assessment figure in this case is now limited to $2626.31 sales tax, $1313.40 penalty, and $75.35 interest, for a total of $4735.56, as of January 31, 2001. If the foregoing base amounts are, in fact, owed, penalties and interest continue to accrue, pursuant to statute. In making the final audit/assessment/warrant, DOR's Auditor IV, Thelmesia Whitfield, used original materials supplied by Petitioner. From these, she took the actual amounts Petitioner had listed on his dated invoices and other original records as the tax he collected for June 1998 through December 1998. She then calculated the sales tax due, but not remitted, for that period. In so doing, she determined that no additional taxes were due for the months of August 1998 through December 1998. She also concluded that for Petitioner's sales in June and July 1998, a penalty should be assessed at the legal rate of 10% per month on a cumulative basis up to 50% and interest should be assessed at the legal rate of 12% per year or 1% per month on the cumulative balance that is due. Petitioner's solid waste fee liability was calculated by Ms. Whitfield on the basis of the dated sales invoices provided by Petitioner where he had charged fees for tire and battery disposal. Ms. Whitfield's calculations did not include transactions without invoices or other original records. She noted that on several transactions Petitioner had collected more solid waste tax than was required, and she concluded that once collected, those amounts should be remitted to DOR unless they had been refunded to the customer. She calculated local option taxes at the applicable rate for Duval County. Ms. Whitfield's re-calculations do not reflect credits for the repossessions shown on DOR-4, because no state tax returns were filed from June through December 1998, because all the necessary information had not been provided, and because she believed the information on DOR-4 had been provided beyond the period available to claim repossession credits, which is 13 months after the repossession takes place. Ms. Whitfield's re-calculations also do not include credits for worthless accounts orally claimed by Petitioner in the course of his January 19, 2001, deposition or which he urges that she extrapolate from DOR-4, because Petitioner did not also provide either federal tax returns or equivalent financial statements as required by law. Because Petitioner was asking for a refund of more than he said he had paid, and because the sales he was referencing took place before the period being audited, Ms. Whitfield had no way to verify that the amount of sales tax actually had been paid. Therefore, Ms. Whitfield only used DOR-4 where there was a question as to whether a sale had taken place at all. Although DOR-4 is merely a summary, because it was produced by Petitioner and listed sales dates, she used it only as his admission that certain questionable sales had, in fact, taken place. Accordingly, it is found that DOR has not relied on estimations based on prior sales outside the time frame audited, but has made its final assessment (DOR Composite Exhibit 3) upon reasonable documentation provided by Petitioner, which documentation he represented as being accurate to the best of his ability. It is further found that DOR applied defineable legal standards. Petitioner essentially challenges DOR's last assessment/audit/warrant because Ms. Whitfield did not use DOR-4 to assign him a credit or off-set. He seeks to have the undersigned relate, according to his theory of repossession/default credits, DOR's final assessment reflected in DOR's audit report and work papers (DOR Composite Exhibit 3); DOR-4, Petitioner's "database"; and Petitioner's Exhibits 1-3 so as to determine Petitioner's sales tax and solid waste liability for the June 1998 through December 1998 period, and to thereby assign him a credit against his May 1998 tax return and payment (P-3). Petitioner's theory is based on his representation that his database (DOR-4) uses the first time he received money from each sale of a vehicle as the date of the sale/transaction, even though his own invoices and other original supporting data which he provided to DOR, showed different dates as the date of each sale. Then, he asserts that where vehicles have been repossessed, or where a sale has not "gone through," or where a loan has been defaulted (presumably even without repossession, of the car, although this is unclear), a credit should be related back to his May 1998, tax return (P-3). His argument and evidence are not persuasive for the following reasons. At the outset, it is noted that Petitioner's credit claim in excess of $12,000, is more than the tax Petitioner paid in May 1998, as reflected on Exhibit P-3. Likewise, although Petitioner's invoice used in Ms. Whitfield's calculations recorded a sale on June 22, 1998, to Lori Armstrong at $1500.00, Petitioner, without any supporting evidence, asserted at hearing that this sale actually was made on June 23, 1998, and that someone stole $500.00 of the tendered price, so he should pay tax, if at all, on a sale of only $1,000. He had a similar unsupported reason for attempting to reduce, by $100.00, the sales price on another invoice amount for Randy Davis, which invoice Ms. Whitfield had utilized. Petitioner also claimed, at hearing, again with no supporting evidence, that invoices he had previously produced and which were relied upon by Ms. Whitfield for customers Crumley, Mosley, and Lebourgeois "did not go through," and therefore he should not be liable for sales tax on these invoices. He asserted that since DOR could not find any title at the Department of Highway Safety and Motor Vehicles (DHSMV) for these customers, the inference must be drawn that those sales never closed and therefore no sales tax on them is owed by him. Petitioner also claimed at hearing that the Lebourgeois sale had resulted in a repossession. At hearing, Petitioner admitted liability for a $1,000 sale to a customer Millwater, but claimed that a credit from May 1998 would cover it, without any clear explanation of how this should occur. Petitioner maintained at hearing, again only because no title in that name had been located at the DHSMV, that an invoice of September 14, 1998, to a customer Wilkerson for $200 meant that the sale to Wilkerson was an out-of-state sale, and therefore no tax was owed. In his Proposed Findings of Fact, Petitioner does not address theft as an alleged reason he did not collect the full amounts shown on his invoices (see Finding of Fact 35), but he does seek a tax credit for all sales where no title was found at DHSMV and discusses at least the Crumley, Mosley, and Lebourgeois transactions as a source of these alleged "credits," sometimes for months in which he did not file any tax return. He also addressed customers Varner, Bailey, Little, Wright, Emanual, Lanier, Maynard, Porter, Williams, Arenas, Bays, Beasley, Butt, Carvey, Catlin, Chapman, Clendenin, Cunningham, Forbes, Catina Friend, Gonzalez, Knight, Lloyd, Owens, Strickland, Daniels, Johnson, and McDade, whose names and information (except for Bailey) appear on DOR-4, Petitioner's database, as repossessions or defaulted loans. Bailey appears on DOR-4 but in a different portion of DOR-4. (See Finding of Fact 47). The two biggest problems with Petitioner's theory are that he submitted no evidence to affirmatively demonstrate that any vehicle was repossessed, and Exhibit P-3 does not allow the undersigned any way of determining which vehicle sales were included in the May 1998 tax paid. Exhibit P-3 does provide information as to the repossessions claimed in May 1998 for previous months' sales, but it does not itemize or identify May 1998 sales upon which the tax was being paid in that month. Simply testifying that a repossession or default occurred and that someone entered that information into Petitioner's database (DOR-4) is not competent and credible proof that repossession occurred. In light of Petitioner's testimony that he relied on unreliable and dishonest employees to handle both his sales and tax matters at the Duval County office and without any explanation or documentation of how repossessions or loan defaults were handled from either of his business locations, the undersigned is left with the sense that Petitioner had neither hands-on experience with the listed repossessions nor with the subsequent entries of repossessions and/or loan defaults into his database. Although Petitioner has made a logical argument for "starting at ground zero" with regard to his May 1998 tax return, without more than is in evidence here, vehicles allegedly sold prior to June 1998 cannot be related to vehicles allegedly repossessed after June 1998 by way of the May 1998 tax return (P-3). (See Findings of Fact 21 and 41.) The absence of a title of registration in a given individual's name, without more, is not sufficient to infer that a sale was not consummated or that there had been an out-of- state sale. If the buyer had the duty to transfer title, failure of title proves nothing. If the dealer had the duty to transfer title, Petitioner's failure to transfer title does not automatically translate into a tax credit. The minimal documentation underlying DOR-4 which Petitioner offered (Exhibits P-1 and P-2), also is not persuasive of Petitioner's theory of the case, including but not limited to his suggestion that DOR is required to regard the sale date as being a date when money allegedly was first received, instead of the dates of sale on his invoices or other underlying documentation. It seems undisputed that "Ralston Varner" and "Varner Dean" are the same customer, full name "Ralston Dean Varner." Petitioner's Exhibit 1 is a receipt showing a payment by Ralston Varner for an "'88 Chevy Caviler" [sic] and is dated May 1, 1998, which is the date Petitioner claims to be the completion of sale date. By Petitioner's theory, sales tax on this purchase should have been included in his May 1998 tax return, entitling him to receive a tax credit upon repossession of this or some other vehicle. This cannot be determined from the tax return (P-3). Exhibit DOR-6 is a composite exhibit concerning a sale to Ralson Varner. Those pages preceding the page titled "Certification," dated July 19, 1998, were produced by Mr. Meardy at his office. The materials following the certification constitute a DHSMV "body jacket." The first page of DOR-6 reveals "6-10-98," as the date of the used car order, but pertains to a "1989 Ford T-Bird." The twelfth page, the "Installment Sale Contract-Motor Vehicle," is dated June 10, 1998, and also relates to a 1989 Ford "T-Bird." DOR's final audit refers to a 1989 Ford Thunderbird sold to "Varner Dean," not an '88 Chevy Cavalier, as urged by Petitioner. Petitioner's Exhibit 2 shows two receipts from Dennis Bailey, one on May 26, 1998 and one on June 2, 1998. Petitioner maintained that the sale in question went through on May 26, 1998, the sales tax was remitted on his May 1998 tax return, and the car was later repossessed. The May 1998 tax return (P-3) does not help decipher this. A Dennis Bailey appears on DOR-4 as of May 26, 1998, in relation to a Ford Taurus, but it is not one of the transactions Petitioner has singled out by the hand- written notations on DOR-4 as being defaulted or repossessed. Exhibit DOR-5 is a composite exhibit concerning the sale to Dennis Bailey which Ms. Whitfield audited. Those pages preceding the page titled "Certification," dated July 19, 1999, were produced by Petitioner. The materials following the certification constitute a DHSMV "body jacket." Exhibit DOR-5, page one, shows "June 2, 1998," as the date of the used car order. DOR-5, page 10, the fourth page following the certification, reveals the date of sale as "6-2-98," as reported to the DHSMV, both related to a 1988 Taurus. Under these circumstances, Petitioner's view of this sale cannot prevail. Also, Petitioner admitted that even by his theory and calculations, his May 1998 tax return was "off" by $1,007, and he had been unable to discover the reason (TR-103). Moreover, the evidence does not clearly establish that DOR-4 was presented to DOR within either 12 or 13 months of all the repossessions in question. (See Findings of Fact 19 and 21- 22.) Lastly, Petitioner did not present any evidence of refunds to customers of solid waste tax overpayments.
Recommendation Based upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED: That the Department of Revenue enter a Final Order finding Petitioner is liable for the amounts as set out in Finding of Fact 24, without any credits or set-offs, and providing for accruing interest and penalties, pursuant to law. DONE AND ENTERED this 4th day of May, 2001, in Tallahassee, Leon County, Florida. ELLA JANE P. DAVIS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 4th day of May, 2001. COPIES FURNISHED: Ron Ross Meardy Post Office Box 1853 St. Augustine, Florida 32085 Charles Catanzaro, Esquire Office of the Attorney General The Capitol, Tax Section Tallahassee, Florida 32399-1050 Linda Lettera, 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
Findings Of Fact High-Tech Yacht & Ship, Inc. (Petitioner) is a Florida corporation engaged in the business of retail sales of marine vessels. Also, Petitioner is a registered retail dealer in the State of Florida. The President of Petitioner is its only corporate officer. On or about September 2, 1993, Petitioner, in the capacity of a broker, sold a motor yacht at retail to Regency Group, Inc. (purchaser), through its representative, for $78,000. The motor yacht is described as a 1988, 41' Amerosport Chris Craft, hull Number CCHEU075E788, and called the "Motivator". At the closing of the sale, on or about September 2, 1993, the purchaser refused to pay the sales tax on the purchase, which was $4,680. However, the purchaser agreed to pay the sales tax after being informed by Petitioner that, without the payment of the sales tax, there could be no closing. The purchaser's representative submitted, at closing, a personal check in the amount of $4,680 for the sales tax. All of the necessary documents were completed for ownership and registration to be transferred to the purchaser. Subsequently, Petitioner received notice from its bank that the check for the sales tax had been dishonored by the purchaser's bank. The purchaser's representative had stopped payment on the check. In October 1993, Petitioner submitted its sales and use tax return for the month of September 1993 to Respondent in which the sale of the yacht was reported. Respondent automatically reviews sales and use tax returns. Respondent's review of Petitioner's return revealed a shortage of sales tax collected in the amount of $4,680.. In January 1994, Respondent issued a notice of tax action for assessment of additional tax in the amount of $4,710, plus interest and penalty, to Petitioner. The $4,710 included the loss of Petitioner's collection allowance of $30, which loss resulted from Petitioner's failure to timely remit all taxes due. Having received the notice of tax action, by letter dated January 20, 1994, Petitioner generally informed Respondent of the circumstances regarding the sales tax shortage, including the dishonored check. Petitioner pointed out, among other things, that Respondent had the authority and the means to collect the tax, while it (Petitioner) had limited means, and suggested, among other things, that Respondent cancel the purchaser's Florida registration of the yacht. On or about January 31, 1994, approximately three months after the check for sales tax was dishonored, Petitioner issued a notice of dishonored check to the purchaser, in which Petitioner requested payment of the sales tax. The notice provided, among other things, that Petitioner could seek criminal prosecution and civil action if the monies were not paid to Petitioner. Having not received the $4,680, Petitioner contacted the local law enforcement agency. After investigation, the law enforcement agency informed Petitioner that a civil action would have to be instituted because the purchaser, through its representative, had indicated that it was not satisfied with the yacht. Although Petitioner engaged the services of an attorney for civil action, no civil action was commenced. Additionally, Petitioner did not engage the services of a collection agency for assistance in collecting the sales tax. Subsequent to its notice of tax action, on or about March 12, 1994, Respondent issued a notice of assessment to Petitioner. The notice of assessment provided, among other things, that Petitioner was being assessed taxes in the amount of $4,710, plus penalty and interest in the amount of $2,342.61, totalling $7,052.61. Petitioner protested the assessment. On February 8, 1995, Respondent issued its notice of reconsideration in which Respondent determined, among other things, that the assessment was appropriate and affirmed the assessment of $7,052.61, plus interest and penalty. The interest accrues at the rate of $1.55 per day. Petitioner has not remitted any of the assessed tax, including interest and penalty, to Respondent. Petitioner has not identified on its federal tax return the noncollection of the sales tax from the purchaser as a bad debt. Sales tax is part of the total sale price for an item. Respondent considers the sales tax as collectable by a seller in the same manner as any other debt owed by a purchaser to a seller. A retail dealer, who is also a seller, is considered to be an agent for the State in the collection of sales tax. The burden of collecting the sales tax is placed upon the retail dealer by Respondent. Some of Respondent's employees have been sympathetic to Petitioner's tax assessment matter. However, none of the employees indicated to or advised Petitioner that Respondent was or is in error.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order affirming the assessment of sales tax against High-Tech Yacht & Ship, Inc. in the amount of $7,052.61, plus interest and penalty. DONE AND ENTERED this 7th day of August 1996, in Tallahassee, Leon County, Florida. ERROL H. POWELL, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 7th day of August 1996.
The Issue Whether the agency has an unpromulgated statement of general applicability that imposed a requirement not specifically required by statute or by an existing rule, and which has been utilized against Petitioners to their detriment.
Findings Of Fact On March 24, 1994, the Department of Revenue (Department) issued a Notice of Reconsideration (NOR) that claimed the Petitioners, Terry and Donna Ernst, had willfully failed to collect sales tax. Petitioners' assertion of an exemption in connection with the sales tax assessment was denied. The NOR provided that the Petitioners are the president and vice- president of Hussh, Inc., a retail apparel store in Palm Beach, Florida and that such company made sales to customers for delivery in the store and for shipment outside of the State of Florida. At issue were the alleged shipments to out of state destinations. Pertinent to this case is the language in the NOR found at page two which provided: Due to the inadequacy and volume of Hussh's records, the auditor sampled the available records, and assessed Hussh for asserted out of state sales that were improperly documented. According to the auditor, many of the sales receipts or invoices of asserted out of state shipments were missing the top portion of the invoice. Significantly, this portion of the invoice would contain the names, addresses, and asserted export destination information on each sale. Other invoices were stamped, "out of state shipped," but no destination information was present on the invoice. [Emphasis added.] The Petitioners maintain that the portions of the NOR emphasized in the foregoing paragraph constitute an agency statement of general applicability and is, therefore, an unpromulgated rule. The Department does not have a rule which lists all documentation which might establish an exemption for sales tax assessment. Similarly, the Department does not have a rule that lists the type of documentation which would be inadequate to establish an exemption for sales taxes. The Department's existing rule, Rule 12A-1.064, Florida Administrative Code, provides, in part: (1)(a) Sales tax is imposed on the sales price of each item or article of tangible personal property, unless otherwise exempt, when the property is delivered to the purchaser or his representative in this state. However, the tax does not apply to tangible personal property irrevocably committed to the exportation process at the time of sale, when such process has been continuous or unbroken. (b) Intent of the seller and the purchaser that the property will be exported is not sufficient to establish the exemption; nor does delivery of the property to a point in Florida for subsequent transportation outside Florida necessarily constitute placing the property irrevocably in the exportation process. Tangible personal property shall be deemed committed to the exportation process if: The dealer is required by the terms of the sale contract to deliver the goods outside this state using his own mode of transportation. The dealer must retain in his records trip tickets, truck log records, or other documentation reflecting the specific items and export destination; The dealer is required by the terms of the sale contract to deliver the goods to a common carrier for final and certain movement of such property to its out of state destination. Sales by a Florida dealer are exempt when the dealer delivers the merchandise to the transportation terminal for shipment outside this state and secures a dock or warehouse receipt and a copy of the bill of lading. On shipments to points outside the United States, a shipper's export declaration shall also be obtained; [Emphasis added.] Rule 12A-1.093, Florida Administrative Code, requires taxpayers to maintain and preserve records. This rule provides, in part: (2) Each dealer defined in Chapter 212, F.S., each licensed wholesaler, and any other person subject to the tax imposed by Chapter 212, F.S., shall keep and preserve a complete record of all transactions, together with invoices, bills of lading, gross receipts from sales, RESALE CERTIFICATES, CONSUMER EXEMPTION CERTIFICATES and other pertinent records and papers as may be required by the Department of Revenue for the reasonable administration of Chapter 212, F.S., and such books of account as may be necessary to determine the amount of tax due thereunder. The terms "bill of lading," "dock or warehouse receipt," and "invoice" are common terms used in the business community. Each connotes that, at the minimum, certain information will be retained on the face of the document. For example, according to Petitioners' witness, the minimum information expected on a bill of lading would be: the name of the person that the item is being shipped to, the item being shipped, the cost of the shipment, and the terms of the shipment with the value of the item being shipped. Similarly, the minimum information which is expected on an "invoice" would be: a description of the item sold, the amount of the sale, and the name of the person to whom the item was sold. The terms "bill of lading," "dock or warehouse receipt," and "invoice" are not defined by rule. The Department determined whether an exemption was documented based upon the results of this audit.
Findings Of Fact Petitioner Out Island Charters, Inc., Miami, Florida is a Florida corporation engaged in the business of selling, leasing, repairing and chartering yachts in South Florida. Robert H. Anderson is president of the firm. During the tax period in question, i.e., December 1, 1973 to November 30, 1976, Petitioner sold various sailing vessels and made repairs thereon. The purchasers individually entered into a "Yacht Charter Management Agreement" with Petitioner under which the latter agreed to act as the owners' agent to obtain charters of the boats from third parties, and to maintain, repair, and dock the vessels at the owners expense. The agreement provided that Petitioner would receive a percentage of the gross bareboat charter fee. It also contained a provision that the owner could use his vessel at any time without cost provided that no charters had been booked for the particular time period. Although this was a standard provision in all of the contracts, some of the owners deleted it prior to execution of the agreement. In most cases, the owners used their vessels occasionally for the purpose of testing equipment and performing routine maintenance and repairs. At such times, some of them were accompanied by their wives, mechanics, or friends who assisted in handling the vessels or performing the routine maintenance functions. They did not use the vessels for purely personal pleasure trips. When the vessels were purchased, sales tax under Chapter 212, Florida Statutes, was neither collected from the buyers by the Petitioner nor otherwise paid to the state. Sales tax was not paid on various equipment purchases, repair parts, dockage, or other expenses incident to the management and maintenance of the vessels. However, sales tax was collected by Petitioner from the third parties who rented the vessels except for a few inadvertent omissions. At the time Petitioner sold the vessels, none of the purchasers had applied for nor received from Respondent a certificate of registration to engage in or conduct business as a "dealer" in yacht chartering under Chapter 212, Florida Statutes, nor had they provided Petitioner with a certificate of resale. Anderson believed the transactions to be exempt from sales tax because the vessels were purchased for rental purposes, and he was unaware that registration as a dealer and submission of a resale certificate were required to establish such an exemption. (Exhibits 5-7, 9, Testimony of Wolin, Witmer, Gay, Harrill, Krapf, Purdy, Anderson, McLean (Exhibit 1), Bennett (Exhibit 2)) Pursuant to an audit of Petitioner's business by Respondent's tax examiner, a proposed assessment of sales tax, penalties, and interest was issued to Petitioner in the total amount of $28,790.76. The parties met at an informal conference on March 29, 1977, and, as a result of adjustments at that time, a revised Notice of Proposed Assessment was issued on May 19, 1977, showing a total sum due of $26,646.91. Petitioner thereafter requested an administrative hearing in the matter. (Exhibit 3) In March, 1977, Petitioner's counsel advised the various purchasers of the pending tax audit and requested that they either pay the sales tax if they had used the boats for personal business, or, if the boats had been exclusively used for chartering purposes, that they execute affidavits to that effect, together with applications for certificate of registration as dealers and blanket certificates of resale. Most of the purchasers returned the executed documents and were later registered with the Respondent as dealers in the chartering business. (Testimony of Anderson, Gay, Wolin, Witmer, Harrill, Krapf, Purdy, McLean, Bennett, Exhibits 1 - 2, 4 - 14) In one particular transaction wherein James Morgan purchased a vessel from Petitioner, Anderson testified that the vessel was removed from Florida to Tennessee where Morgan lived on the day after full payment had been made under the contract. Anderson, however, did not know if Morgan provided him with an affidavit for exemption of the boat by removal from the state, and no documentary evidence concerning the transaction was presented by Petitioner at the hearing. (Testimony of Anderson, Exhibit 15) In another transaction, Anderson purchased a vessel in 1973 from Coastal Sailing Services, Inc., of Tallahassee, Florida, and paid sales tax in the amount of $1,027.40. Later, Anderson believed that he was exempt from the payment of tax because he had purchased the vessel solely for rental purposes. He communicated with Respondent's sales tax bureau through his accountant for information concerning refund procedures. Remus O. Cook, Jr., an examiner in the state sales tax bureau, advised in a letter of August 14, 1974, that a refund from Coastal Sailing Service could be secured if the vessel had been purchased solely for rental purposes, and that such request to the seller should be accompanied by a certificate of sales tax exemption utilizing a form enclosed with the letter. Although the vessel had been purchased by Anderson, the letter made reference to Out Island Charters, Inc. as the buyer and cited its sales tax registration number. Cook testified that it was departmental policy to grant an exemption if tangible personal property was purchased exclusively for rental purposes, even if the purchaser was not registered as a dealer at the time of sale. However, Henry Coe, Jr., Respondent's Executive Director, testified that registration at or a few days after the time of sale was a prerequisite to exemption in such cases. Anderson proceeded to request the refund from the seller, but the exemption form was executed in the name of Out Island Charters, Inc. He received the refund in 1975. Respondent's tax examiner assessed this sale in the current proposed tax assessment because he found no documentary evidence that Anderson intended to use the boat for charter purposes when he purchased it, and there was no evidence that Anderson was registered as a dealer at that time or furnished a resale certificate to the seller when it was purchased. No evidence was presented that Anderson had used the boat for personal purposes and he testified that he purchased it solely for rental, but conceded that he had no dealer's registration number at the time of purchase. (Testimony of Anderson, Lloyd, Exhibit 18, Depositions of Cook, Coe (Exhibits 19, 20)) Petitioner conceded at the hearing that the tax computations were correct, but contested liability therefor except for the several instances where sales tax had not been collected on boat rentals. (Testimony of Anderson)
Recommendation That the proposed tax assessment be enforced against Petitioner herein. DONE and ENTERED this 9th day of June, 1978, in Tallahassee, Florida. THOMAS C. OLDHAM Hearing Officer Division of Administrative Hearings 530 Carlton Building Tallahassee, Florida 32304 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 9th day of June, 1978. COPIES FURNISHED: Patricia S. Turner, Esquire Assistant Attorney General Department of Legal Affairs The Capitol Tallahassee, Florida 32304 Howard Hochman, Esquire 2121 Biscayne Boulevard Suite 201 Miami, Florida 33137 John D. Moriarty, Esquire Department of Revenue Room 104, Carlton Building Tallahassee, Florida 32304
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: Petitioner, a corporation headquartered in Charlotte, North Carolina, is in the business of operating movie theatres both within and without the State of Florida. At these theatres Petitioner Operates concession stands which sell both candy items and drinks in various sizes at different prices to persons who frequent the theatres. For the period of time from September, 1985 through May, 1985, Petitioner remitted to the Department of Revenue sales tax on the total taxable value of all taxable items sold at its concession stands in all of its Florida theatres, in accordance with the presumptive effective rate of tax of 5.63 percent contained in Rule 12A-1.11(37), Florida Administrative Code. As a result of an audit for a previous period dated October 1, 1982, Petitioner remitted to the Department of Revenue the amount of $10,637.00 for sales tax on taxable items sold at its concession stands during this audit period in accordance with the presumptive effective tax rate of 4.5 percent as contained in Rule 12A-1.11(37), Florida Administrative Code during the audit period. On August 15, 1985, Petitioner filed with the Department of Revenue, as agent for Respondent, two (2) applications for sales tax refund in the amount of $16,876.52 and $10,637.00. The applications were dated August 13, 1985, and were timely filed. During the refund periods at issue in this matter, the Petitioner: (a) posted and charged flat prices for the various items offered for sale, which prices included sales tax (b) kept records of daily and weekly sales of taxable items at each of its Florida theatres (c) kept records of daily attendance at each movie shown by each Florida theatre and (d) kept records of weekly calculations, through inventory analysis, of sales of drinks and candy items, including the number, size and price of each item sold at each of its Florida theatre. During the refund periods at issue in this matter, the Petitioner did not maintain cash registers at its concession stands in its Florida theatres and did not maintain records made contemporaneously with the sale of taxable items from the concession stands which separately itemized the amounts of sales tax collected on each sale transaction occurring at the theatres' concession stands. Rather, Petitioner chose, for its own convenience, to operate a "cash box" operation at each of its concession stands in its Florida theatres and willingly remitted sales tax to the Department of Revenue pursuant to the presumptive effective tax rate contained in Rule 12-1.11(37), Florida Administrative Code for the relevant periods. In April, 1985, Petitioner placed computerized cash registers in each of its Florida theatre concession stands. These cash registers provided tapes of each individual transaction each day, specifically recording each taxable and nontaxable sale and the amount of sales tax due on each taxable sale with a daily summation on each tape at each theatre. Rule 12A-1.11(37), Florida Administrative Code, requires concessionaires such as Petitioner to remit sales tax at a rate of 5.63 percent of taxable sales under the present 5 percent statutory sales tax schedule and at 4.5 percent of taxable sales under the previous statutory sales tax schedule unless a concessionaire, through its records, shows another effective rate by "proof to the contrary". Petitioner produced an effective tax rate of 5.13 percent for the month of April 1985, for all its Florida theatres by dividing the total sales tax collected during April, 1985 by the total taxable sales during April, 1985, as evidenced by the cash register tapes from all of Petitioner's concession stands in Florida. Petitioner then used that tax rate as a base to retroactively reconstruct an effective tax rate for the refund periods by assuming that the product sales mix (product mix of products sold) and the transactional sales mix (the number of items purchased together in a single transaction by a customer) experienced during the refund periods were the same as that experienced during the month of April, 1985. There was no competent evidence that the product sales mix or the transactional sales mix experienced during the refund periods were the same as that experienced during the nonth of April, 1985. There is insufficient evidence in the record to support Petitioner's reconstructed effective tax rates that were used to calculate the refunds. Therefore, Petitioner has failed to show "proof to the contrary" that its reconstructed effective tax rates are correct or that the presumptive effective tax rate contained in Rule 12A-1.11(37), Florida Administrative Code were incorrect for the refund periods at issue in this matter.
Recommendation Based on the findings of fact and conclusions of law recited herein, it is RECOMMENDED that the Comptroller enter his final order DENYING Petitioner's refund applications. Respectfully submitted and entered this 25th day of September, 1986, in Tallahassee, Leon County, Florida. WILLIAM R. CAVE Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 25th day of September, 1986.
The Issue Whether Petitioners are liable for sales and use tax, penalty, and interest as assessed by the Department of Revenue (the Department)?
Findings Of Fact Salma is a Florida corporation with its principal place of business at 2231 Del Prado Boulevard, Cape Coral, Florida, 33990. Gausia is a Florida corporation with its principal place of business at 11571 Gladiolus Drive, Fort Myers, Florida, 33908. Petitioners are in the business of operating gas stations with convenience stores. The Department is an agency of the State of Florida and is authorized to administer the tax laws of the State of Florida. Petitioners were selected for audit because their reported gross sales were less than the total cost of items purchased (inventory) for the audit period. The Department issued Salma and Gausia each a Notice of Intent to Conduct a Limited Scope Audit or Self-Audit, dated April 26, 2013, for sales and use tax, for the period February 1, 2010, through January 31, 2013 (collectively referred to as the Notices). The Notices requested that Petitioners provide the Department: (a) a list of all their vendors for alcohol, tobacco, soda, chips, candy, etc.; (b) their total purchases of alcohol and tobacco, by vendor, for the period July 2010 to June 2011; (c) copies of their federal tax returns for the examination period; (d) purchase receipts for all purchases for the last complete calendar month; and (e) daily register (Z tapes) for the last complete calendar month. The Notices gave Petitioners 60 days to gather the requested documents before the audit was to commence. The Notices also requested that Petitioners complete an attached Questionnaire and Self Analysis Worksheet. In response to the Notices, Petitioners requested a 30- day extension of time until July 18, 2013, to provide the requested documents and to designate a Power of Attorney. Petitioners did not provide the Department any books and records for inspection, nor did they complete and return the questionnaire and self analysis worksheets. As a result, the Department's auditor determined the sales tax due based upon the best information available. To calculate an estimated assessment of sales tax, the Department used the purchase data of Petitioners' wholesalers and distributors of alcoholic beverages and tobacco, for July 1, 2010, through June 30, 2011; the 2010 National Association of Convenience Stores average markups and in-store sales percentages of alcoholic beverage and tobacco products; and historical audit data. After reviewing the purchase data for July 1, 2010, through June 30, 2011, and for July 1, 2011, through June 30, 2012, the Department's auditor determined that the data was missing a few vendors. As a result, the Department's auditor estimated the amount of Petitioners' cigarette purchases, based on historical audit data that shows that cigarette sales are generally 4.31 times more than beer sales. The Department's auditor and audit supervisor testified that the estimated gross sales seemed reasonable and consistent with the national averages and the purchase data for July 1, 2011, through June 30, 2012. The Department estimated gross sales (i.e., the retail sale value of the goods sold) by marking up the taxable sales and exempt sales reported on the sales and use tax returns submitted to the Department by Petitioners. For example, for July 1, 2010, through June 30, 2011, Salma purchased beer from its wholesalers and distributors for $148,826.15, and the Department marked up the purchase price by 27 percent for a retail value of $189,009.21. For July 1, 2010, through June 30, 2011, Gausia purchased beer from its wholesalers and distributors for $132,138.65, and the Department marked up the purchase price by 27 percent for a retail value of $167,816.09. The Department's markup on the alcoholic beverage and tobacco products is reasonable because the Department's auditor testified that he used a combination of 2010 National Association of Convenience Stores average markups and the competitive pricing and information from audits of other convenience stores. The Department determined that the exemption ratio reported on the sales and use tax returns submitted to the Department by Petitioners was extremely high for their industry. The Department used an exemption ratio of 15 percent, based on historical audit data for the industry, to calculate Petitioners' estimated taxable sales. A review of Petitioners' sales and use tax returns revealed that they did not apply the tax bracket system to their taxable sales transactions, as required under sections 212.12(9) and (10), Florida Statutes. Instead, Petitioners remitted sales tax on their taxable sales based on their gross receipts at a flat tax rate. The Department's auditor testified that this method of reporting tax is inappropriate and does not accurately reflect the sales activity of the business. The Department calculated the average effective tax rate of 6.0856 percent, based on historical audit data for the industry. To calculate the estimated tax due, the Department multiplied the effective tax rate by the estimated taxable sales and gave Petitioners credit for any tax remitted with their tax returns. The Department issued Salma a Notice of Intent to Make Audit Changes, dated August 8, 2013, for audit number 200149872. The Department issued Gausia a Notice of Intent to Make Audit Changes, dated August 8, 2013, for audit number 200149749. The Department assessed Petitioners sales tax on their sales of alcoholic beverages and tobacco. The Notice of Intent to Make Audit Changes gave Petitioners 30 days to request a conference with the auditor or audit supervisor, to dispute the proposed changes. Petitioners did not make such a request. The Department issued a Notice of Proposed Assessment (NOPA) to Salma on March 6, 2014, for tax in the sum of $159,282.26; for penalty in the sum of $39,820.57; and interest as of March 6, 2013, in the sum of $27,772.36. The Department issued a NOPA to Gausia on March 6, 2014, for tax in the sum of $213,754.46; for penalty in the sum of $53,438.62; and interest as of March 6, 2013, in the sum of $36,921.79. Additional interest accrues at $30.55 per day until the tax is paid. The NOPAs became final assessments on May 5, 2014. After filing a request for an administrative hearing, Petitioners completed the Questionnaire and Self Analysis Worksheet and produced the following documents to the Department: (a) a list of all of their vendors for alcohol, tobacco, soda, chips, candy, etc.; (b) a list of vendors for alcohol and tobacco, for the examination period of July 2010 to June 2011; (c) a summary of their taxable sales, for the period February 2010 through December 2012; (d) copies of their federal tax returns, for the tax years 2010 through 2013; (e) copies of its purchase receipts for the months of July 2013; and (f) copies of their daily register (Z-tapes) for the month of July 2013. The Department's auditor testified that aside from being untimely, the records and information provided by Petitioners during these proceedings were not reliable because Petitioners did not provide any source documents that would allow the Department to reconcile the reported figures and confirm the supplied information. In addition, the purchase receipts and Z- tapes were not relevant because they were from outside of the audit period. The Z-tapes are also unreliable because the manager of the convenience store testified at the final hearing that employees purposely and routinely entered taxable sales into the cash registers as tax exempt sales. Petitioners argue that the Department did not use the best information available when estimating the taxes due. Petitioners claim that because their businesses are combination gas station/convenience stores, the national data for standalone convenience stores is inapplicable. However, notably absent from Petitioners' testimony or evidence was any alternative data upon which the Department could have relied for more accurate estimates.2/
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order denying Petitioners' requests for relief and assessing, in full, the Department's assessments of sales tax, penalty, and interest against both Salma and Gausia. DONE AND ENTERED this 9th day of January, 2015, in Tallahassee, Leon County, Florida. S MARY LI CREASY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 9th day of January, 2015.
