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 sales and use tax laws of the State of Florida. Squid is a Florida corporation whose principal place of business is located in Alachua County, Florida. At all pertinent times, Squid sold tangible personal property at retail and consequently was 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, Squid is an authorized “dealer,” holding sales tax Certificate of Registration No. 11-801-3974145-0 (Certificate), which the Department issued in February 2008. Squid has no other outstanding certificate of registration with the Department. By November 2009, Squid had a history of repeatedly writing checks to the Department that were dishonored due to insufficient funds. Squid also had a history of failing to consistently remit sales and use tax to the Department. As a result of Squid’s delinquencies, the Department began to issue warrants on the official records. On May 6, 2010, the Department issued a notice to Squid, which initiated a proceeding to revoke Squid’s Certificate for failure to remit taxes. Squid was invited to appear at an informal conference with the Department on June 22, 2010. At the informal conference, Squid 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. Janet Hobson, Squid’s president, appeared on behalf of the corporation. At the conference, the Department and Squid entered into a written compliance agreement (Agreement). Under the Agreement, Squid admitted that it owed the State of Florida a grand total of $8,625.51, which is comprised of $6,842.64 tax, $265.23 interest, $625.22 penalty and $892.42 fees. Squid agreed to pay its debt in installments, in exchange for the Department’s promise to forbear from revoking Squid’s Certificate. The Agreement called for Squid to make a down payment of $800 on or before June 22, 2010, followed by eleven installment payments ranging in amount from $400 to $600, and culminating in a twelfth payment for the balance, in a balloon. The Agreement further provided that interest would continue to accrue on the outstanding tax balance at the rate of 7% per year, and that pursuant to section 213.75, payments would be applied to the outstanding balance in the following order: fees; interest; penalty; and tax. Squid successfully made the $800 down payment as required by the Agreement. At the same time, Squid notified the Department that it would soon be relocating to a new address, but within the same county, to wit: 3709 SW 42nd Avenue, Suite 10, Gainesville, Florida 32608. The Department made note of this address change, and consistent with its normal practices and procedures, did not require Squid to obtain a separate registration number for the new location. Although the Department does require dealers who open a second retail location or who move across county lines to apply for a new registration number, this has not been required for relocations within a single county. Those types of relocations are handled by updating the address of record pertaining to the existing certificate of registration. The Agreement did not specifically provide that time was of the essence concerning Squid’s duty to make the installment payments, nor state any grace period applicable to the payment deadlines. However, the Agreement did state: E. If the certificate holder fails to comply with any obligation under this agreement, the Department has the right to pursue revocation of the certificate holder’s certificate of registration by filing an Administrative Complaint pursuant to section 120.60(5), Florida Statutes. If a revocation proceeding is pursued, the certificate holder stipulates to the admission of this agreement in any jurisdiction as proof of all matters 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, payable and collectible by all legal means. In addition to and including the promise to pay the outstanding indebtedness, the Agreement also required Squid: To accurately complete all past due sales tax returns and file them no later than 08/01/2010. 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 return due on 6/1/2010 and ending on 05/31/2011. To timely remit all sales tax collections due for the next 12 months, associated with the periods stated in paragraph “C” above. To comply with all provisions of Chapter 212, Florida Statutes. On June 17, 2011, the Department served its "First Interlocking Discovery Request" on Respondent. The discovery request included a series of requests for admissions (RFA), interrogatories, and document requests. On July 14, 2011, Janet Hobson, as authorized representative of Squid, served responses to the Department' discovery request. At final hearing, those responses were received in evidence at the request of the Department. In response to requests for admissions, Squid admitted the following: -Squid failed to make the complete schedule of payments outlined in the payment schedule that appears in the Payment Agreement Schedule of the Compliance Agreement. (RFA No. 14). -Squid failed to timely remit payment for the sales tax due for the months July through November of 2009. (RFA No. 4). -Squid filed less than all past due sales tax returns by August 1, 2010. (RFA No. 6). -Squid remitted less than all past due payments. (RFA No. 7). -Squid timely filed less than all required sales tax returns for the time period of June 1, 2010, through May 31, 2011. (RFA No. 8). -Squid remitted less than all required sales tax collections for the time period of June 1, 2010, through May 31, 2011. (RFA No. 9). -Squid failed to timely remit payment for the sales tax due for the months of February through April and August through September of 2010. (RFA No. 11). -Squid has been delinquent with past tax remittances and interest payable to the Department. (RFA No. 12). -Squid failed to abide by the terms of the Agreement, within the meaning of the acceleration clause contained in the Agreement, at paragraph “G.” (RFA No. 13). On August 2, 2011, the Department served a Notice of Taking Corporate Deposition Duces Tecum of Squid, pursuant to Florida Rule of Civil Procedure 1.310(b)(6). That deposition took place on September 13, 2011, in Gainesville, Florida. Ms. Hobson appeared at the deposition as the authorized corporate representative of Squid. During the course of the deposition, Squid admitted that it used some of the sales tax moneys that it had collected in order to pay its own business operating expenses. Squid also acknowledged that it owed approximately $9,500 in overdue sales tax as of that date. The day before the final hearing, at 4:45 p.m., Petitioner delivered additional moneys to the Department, together with additional tax returns, which are used to report additional tax due. The Department’s witness testified that Squid still owed a balance but she had not yet had an opportunity to update the revolving balance. Ms. Sevez estimated that several thousand dollars remained due, but she was uncertain as to the amount. The determination of the precise amount due would be a material fact in a tax assessment challenge under sections 72.011, and 120.80, Florida Statutes, but this is a license revocation proceeding, not a tax assessment challenge. The totality of the evidence clearly and convincingly shows that Squid defaulted under the Agreement (and that Squid remains in arrears in an undetermined amount, even to this date). It is not necessary for the undersigned to quantify the precise amount due on any given date1/, or even to determine whether an amount remains due, but only to determine whether Squid, at any pertinent time, fell into default under the compliance agreement. The Department has met its burden to clearly and convincingly prove that Squid materially failed to comply with the terms of the Agreement.
Recommendation Based on the foregoing Findings of Facts and Conclusions of Law, it is RECOMMENDED that the Department enter a final order revoking sales tax certificate of registration numbered 11-801- 3974145-0, which the Department issued in February 2008. DONE AND ENTERED this 5th day of January, 2012, in Tallahassee, Leon County, Florida. S W. DAVID WATKINS 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 5th day of January, 2012.
The Issue Whether Petitioner, Eight Hundred, Inc. (Petitioner), collected and remitted the proper amount of sales tax on its retail sales activities, and either paid or accrued use tax on its purchases.
Findings Of Fact Petitioner is a Florida corporation. Petitioner's revenues are derived, in part, through the operation of vending machine businesses throughout the State of Florida. Petitioner placed coin-operated cigarette, food and beverage, candy, and amusement vending machines in various bingo halls located throughout the state. These locations included: Pondella Hall for Hire, Inc.; Avon Plaza Bingo; Bingo Trail; Causeway Plaza Bingo; Dunnellon Bingo; Fountains Plaza Bingo; Lamirada Plaza Bingo; Northtowne Bingo; Orlando Bingo; Pondella Bingo; Sanford Bingo; Sarasota Crossings Bingo; South Belcher Bingo; and Towne Centre Bingo. Respondent is the state agency charged with the responsibility of enforcing the Florida Revenue Act of 1949 (Chapter 212, Florida Statutes (2003)), as amended. Among other things, Respondent performs audits on taxpayers to ensure that all taxes due have been correctly paid. In 1994, an audit was conducted on Petitioner covering the audit period from August 1, 1989, through July 31, 1994. After the results of the audit were obtained on June 23, 1995, Petitioner issued a NOI wherein it proposed to assess Petitioner $48,026.75 in unpaid sales tax, $18,520.05 in delinquent penalties, and $15,836.40 in accrued interest on the unpaid tax; and $4,383.13 in unpaid discretionary sales surtax, $1,875.80 in delinquent penalties, and $1,088.58 in accrued interest on the unpaid discretionary sales surtax through the date of the notice for a total of $89,730.71. By letter dated July 18, 1995, Petitioner protested the NOI and stated that (a) Petitioner was not willful in any of the errors discovered during the audit; (b) Petitioner filed and paid the tax it believed to be accurate; and (c) Petitioner has taken steps to correct the problems identified in the audit and is now filing timely in accordance with the applicable rules pertaining to the transactions in which it was engaged. Petitioner requested that the penalties and interest be abated and requested an informal conference if the letter inquiry could not be honored. For reasons unknown, the requested conference was not provided by Respondent. On November 7, 1995, under a search warrant issued at the request of the Florida statewide prosecutor, all business and banking records of Petitioner, then known as Ponderosa-for- Hire, Inc., were seized. Respondent issued its NOPA sustaining the assessment in full, which with accrued interest, then totaled $92,126.52. On March 15, 2000, Petitioner filed a letter of protest of the audit findings. On June 11, 2001, Respondent issued its NOD rejecting Petitioner's position. On July 9, 2001, a Petition for Reconsideration was filed by Petitioner. Additional letters were sent to the Respondent subsequent to the July 9, 2001, petition. Respondent issued its NOR on November 16, 2001, denying the petition. On January 15, 2002, Petitioner filed its petition with Respondent seeking an administrative hearing with DOAH. The private accounting firm of Crawford and Jones conducted a state sales and use tax audit of Petitioner under the authority of Respondent's contract audit program. The audit began on September 8, 1994, upon issuance of Respondent's Form DR-804 (DR-804). The DR-840 included a list of records which were to be produced, including federal tax returns, state sales and use tax returns, sales journals, invoices, and purchase invoices. The authorized representatives of Respondent for the audit was David L. Schultz of the accounting firm Schultz, Chaipel and Company. Representation began upon presentation to Respondent of Form DR-843, Power of Attorney and Declaration of Representation, dated January 9, 1995. Included among the records provided to Respondent's auditor were ledgers, journals, taxpayer copies of DR-15 (sales and use tax return), bank statements, tax returns, financial statements. A schedule of income earned by Petitioner, by location and category of income, was provided to Respondent by Mr. Schultz's office. This schedule of income had been created by Philip Furtney, president of Petitioner, from records he kept on his home computer. The categories of income listed on the schedules were, for each hall location: canteen, cigarette, soft drink machines, crane machines, and telephones. Beginning in fiscal year 1992, a new category titled "miscellaneous" was added; and in fiscal year 1993, the category "rent" was added. Respondent's auditor compared the data contained in these schedules, for each tax year, with other reported items, such as tax returns and financial statements, to ascertain if the figures reported were a reasonable representation of income and that reliance could be placed on the data. After determining the schedules to be reasonable, Respondent's auditor used this data to calculate the amount of sales tax due based on the income reported. The effective state sales tax rate, when sales are made through coin-operated amusement and vending machines and other devices, is found in Florida Administrative Code Rules 12A-1.044 and 12A-15.001. The effective state sales tax rate for sales involving fractions of a dollar is found in Florida Administrative Code Rules 12A-1.004 and 12A-15.002. Respondent's auditor's work papers break out the different effective tax rates for each of Petitioner's revenue activities, including the different surtax rates. Credit for taxes remitted by Petitioner was calculated from the Form DR-15 downloads. Adjustments were made to this data where the total amount reported was illogical, duplicative, or otherwise appeared incorrect. The total amount of sales tax due, as reported in the Schedule "A" sales, was determined by subtracting sales tax remitted to Respondent from the amount calculated on total retail sales made. This amount was $33,269.75 in sales tax and $3,912.95 in surtax. "Use" tax liability was calculated on two activities: First, items of tangible personal property purchased by Petitioner during the audit period for which the invoices did not affirmatively show that sales tax was paid; and secondly, on the stuffed animals contained in the crane machines which are considered concession prizes. The method for calculating the use tax on concession prizes is described in Florida Administrative Code Rule 12A-1.080. Because the operator of game concessions award tangible personal property as prizes to those who pay to play the machine, the operator is the ultimate consumer of the property (prize). The basis for determining tax liability is computed by multiplying six percent times 25 percent of the gross receipts from all such games, in this instance, the crane machines. The total amount of use tax due, as reported in the Schedule "B" purchases, was $14,757 in tax and $470.18 surtax. After the NOI was issued, the audit file was forwarded to Respondent's Tallahassee office. The preponderance of the evidence supports the conclusion that the sales activity of Petitioner included revenue received from vending and amusement machines and snack bar operations. Federal tax return for the fiscal year 1992 does not list any amount of income as being derived from rental activity. The federal returns for years 1991 and 1993 list rental income; however, no information was given to Respondent's auditor during the audit to explain what this income was and from where it was derived. Applications for Registration were filed by Petitioner when each hall location began operations. Of the 23 registration applications filed, nine of them listed the major business activity as vending-food and amusement; eight of them listed the major business activity as restaurant, snack bar or canteen service; five listed the major business activity as rental; and one gave no activity.
Recommendation Based on the foregoing Findings of Facts and Conclusions of Law, it is RECOMMENDED that a final order be entered by Respondent, Department of Revenue, upholding its assessments in the NOR dated November 16, 2001, for sales and use tax, the applicable surtax, plus applicable penalty and interest against Petitioner. DONE AND ENTERED this 26th day of April, 2005, in Tallahassee, Leon County, Florida. S DANIEL M. KILBRIDE 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 COPIES FURNISHED: John Mika, Esquire Filed with the Clerk of the Division of Administrative Hearings this 26th day of April, 2005. Office of the Attorney General The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050 Thomas F. Egan, Esquire Law Office of Thomas F. Egan, P.A. 204 Park Lake Street Orlando, Florida 32803 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 Whether Petitioner, Nick Farah, Sr., is liable for the taxes assessed under Chapter 212, Florida Statutes, for the March 1, 1989 - February 28, 1994 audit period, and to what degree, if any, the audit debt may be compromised as uncollectible.
Findings Of Fact This case involves an assessment of sales taxes and charter transit system surtaxes associated with audit number 9501539, and covering the audit period of March 1, 1989, to February 28, 1994 (audit period), for Farah's Gazebo Restaurant (the restaurant) located at 3541 University Boulevard, North, Jacksonville, Florida. Sales of food and alcoholic beverages were made at the restaurant during the audit period. Sales tax was collected and remitted to the Department on the sales of alcoholic beverages during the audit period, but not on the sales of prepared food. The assessment relates to the sale of food during the audit period. The restaurant was first opened as a sandwich shop in 1974 by both Petitioners, Nick Farah, Sr., and Sue Farah, who at all times material have been husband and wife. Mrs. Farah's middle initial is "N." Mr. Farah is now 74 years old. Mrs. Farah is 63. When the restaurant was opened in 1974, Nick Farah, Sr., opened a utility account with the City of Jacksonville in his name alone. At all times material, that same account in Nick Farah, Sr.'s name has been used by the restaurant. At all times material, Nick Farah, Sr., and Sue Farah had a checking account (number 467835202-01), in the name "Nick Farah d/b/a Farah's Gazebo Cafe, Restaurant & Lounge" with American National Bank of Florida (American National checking account). During the audit period, this account was used by Petitioners as both the restaurant's checking account and their personal checking account. During the audit period, all proceeds from sales at the restaurant were deposited into the American National checking account. All of the Petitioners' personal living expenses were paid from monies deposited into the American National checking account. During the audit period, Nick Farah, Sr., ran banking and shopping errands for the restaurant at his wife's direction, and considered it appropriate to write checks on behalf of the restaurant in his wife's absence. When their restaurant was first opened, Petitioners obtained a sales tax registration certificate from the Department of Revenue. This certificate was issued in the names of both Petitioners. In 1986, Petitioners refurbished and expanded their sandwich shop to a full restaurant serving dinner along with alcoholic beverages. During the several months in which the restaurant was being expanded, the restaurant was closed for business. Petitioners have a son, Nick Farah, Jr., who has a restaurant and lounge in Gainesville, Florida. Nick Farah, Jr., helped his parents expand their restaurant and donated certain restaurant equipment for the expansion. In 1986, Nick Farah, Jr., obtained alcoholic beverage license 26-02438SRX solely in his name for the restaurant. In 1988, Petitioners' other son, John Farah, became actively involved with the operation of the restaurant, in order to allow his father, Nick Farah, Sr., to retire. John Farah's involvement with the restaurant lasted approximately six or seven months, after which he was no longer involved. In 1988, due to numerous medical problems, including high blood pressure, prostate cancer, diabetes, and weak eyes, Nick Farah, Sr., "retired." He advised the social security office in 1988 of his retirement and filed all necessary papers in order to begin to receive his social security benefits. His social security income was "direct deposited" to a Barnett Bank account set up solely for that purpose. Nick Farah, Sr., listed himself as "retired" on the couple's joint 1989-1994 federal income tax returns. These returns include Schedule C, "Profit or Loss from Business," and listed the restaurant as solely owned by Sue Farah, as proprietor. On these returns, Sue Farah stated that she was sole owner of the business known as Farah's Gazebo Restaurant. When Nick Farah, Sr., retired, Sue Farah began paying bills and making all executive decisions concerning employees, doing the ordering, deciding on the menu, and pricing. However, since 1988, the restaurant also has had a manager who has dealt with the employees and food ordering as well. Although he considers himself retired, Nick Farah, Sr., consistently has gone to the restaurant to eat, talk with friends, and play rummy. He has also performed errands and written checks for the restaurant. (See Finding of Fact 8) In testimony, he referred to the American National account as "our Gazebo account." (TR-111) Sales Tax Registration Certificate No. 26-08-093045- 08/1 was issued in the name of Nick Farah, Sr., Sue N. Farah, and Nick Farah, Jr., until June 1, 1992. On June 1, 1992, Sales Tax Registration Certificate No. 26-08-126824-08/1 was issued in the names of Nick Farah, Sr., and Sue N. Farah. This was done to separate the restaurant from Nick Farah, Jr.'s, Gainesville restaurant. The type of business organization listed on the certificate is "partnership." On each of the sales tax registration certificates, Nick Farah, Sr.'s social security number was used as the federal identification number. In 1993, the Alcoholic Beverage License was renewed in the names of Nick Farah, Sr., and Sue Farah. Petitioners' personal residence is held jointly in their names. During the audit period, Petitioners refinanced their personal residence and obtained a home equity loan through American National Bank. The proceeds from this loan were used to pay expenses related to the restaurant. (See Finding of Fact 52). On March 24, 1994, the Department issued its DR-840 Notice of Intent to Audit Books and Records to "Nick & Sue Farah d/b/a Farah Gazebo Restaurant." Notices of Intent are usually issued in the name(s) on the current Sales Tax Registration Certificate. On April 14, 1994, the Farahs both executed a Power of Attorney appointing their attorney to represent them in matters relating to the audit. Subsequent to the audit, the Department issued its "Notice of Intent to Make Sales & Use Tax Audit Changes," under Chapter 212, Florida Statutes, on November 4, 1994, in the names of "Nick & Sue Farah d/b/a Farah Gazebo Restaurant." Taxes for the audit period March 1, 1989 - February 28, 1994, were assessed in the amount of $65,093.44. Penalties were assessed up to that point in time in the amount of $20,679.43. Interest was assessed up to that point in time in the amount of $22,678.86. The total was $108,451.73. Interest would continue to run. Also on November 4, 1994, the Department issued its "Notice of Intent to Make Charter County Transit System Surtax Changes" in the names of "Nick & Sue Farah d/b/a Farah Gazebo Restaurant." Taxes were assessed in the amount of $5,424.46; penalties were assessed in the amount of $1,723.27; and interest was assessed in the amount of $1,889.92 for a total of $9,037.65. The Department revised its audit on January 17, 1995. Two revised Notices of Intent were issued, each in the names of "Nick & Sue Farah d/b/a Farah Gazebo Restaurant," with assessment in the following amounts: $62,974.40 (sales and use taxes), $19,839.95 (penalties), and $28,373.14 (interest); and $5,247.86 (charter county surtaxes), $1,653.29 (penalties), and $2,367.18 (interest). These revised notices were issued to reflect the deduction of certain non-revenue items from the gross deposits reflected on the Petitioners' bank statement. They also show accruing interest. By their attorney's letter dated February 6, 1995, Petitioners raised the issue of Nick Farah, Sr.'s liability for the assessment, arguing that his involvement with the restaurant during the audit period was insufficient to render him a "taxpayer" as contemplated by the applicable statutes and rules, and insufficient to create such a tax liability for him. The letter from Petitioners' counsel stated that Petitioner Sue Farah "considered the restaurant to be hers, and has filed her federal income tax returns accordingly. She is willing to sign the Notice of Intent and enter into a payment arrangement." Donald Ritchie, the Department's Jacksonville tax auditor who had initiated the audit, subsequently issued a "Memo to File," dated February 7, 1995, stating, Auditor contacted atty. Jeff Dollinger in response to his letter of 2-6-95 in which he states TP's claim that Sue Farah is sole proprietor of restaurant and Nick is not a "dealer" in connection with the restaurant operation. He stated in a telephone conversation that Sue Farah wished to sign NOI indicating agreement with the proposed audit changes "with the exception of penalty" and obtain a stipulated payment schedule but only if registration and audit were changed to eliminate Nick's name. On February 7 and 8, 1995, Peggy Bowen, a Departmental superior of Mr. Ritchie, directed two memoranda by electronic mail (e-mail) to another Departmental employee, Allen Adams, located in Tallahassee. These memoranda requested guidance on how to proceed with the questions raised by Petitioners' counsel. In response to these requests, a series of e-mail memoranda were exchanged within the Tallahassee office of the Department. The first, on February 8, 1995, from George Stinson, stated, in part: What advantage would we have if we assessed "Nick's Partnership"? . . . from what Peggy said, "Nick's Partnership" doesn't even exist, but "Sue's Sole Proprietorship" does. It seems to me that it would be absurd to assess an entity ("Nick's Partnership") that, by the taxpayer's own admission, doesn't exist. Just because the registration social data on the database is erroneous doesn't mean we should issue an erroneous assessment. The second February 8, 1995, electronic mail memorandum from Allen Adams to Peggy Bowen, stated, "OK, I take this as an approval to change our NOI and get an agreed case." The final electronic mail memorandum dated February 9, 1995, from George Stinson to Allen Adams provides: Allen...While mulling this all over in my brain, it occurred to me it would not be unwise for Peggy to prepare (but hold on to for the time being) an NOI under "Nick's Partnership" in case the other one somehow goes awry. If "Sue's Sole Proprietership" [sic] tries to pull a "fast one" and reneg on their agreement and stip because they claim they weren't the "registered" or "840'd" entity, we can file off the other one to make sure all bases are covered. If the TP seems to be dragging their feet and we're getting into a jeopardy situation, we could even have both NOI's (and assessments) in existence concurrently to keep us protected. Donald Ritchie testified that he did not know of the existence of a "Nick's Partnership" or where such a term came from. However, see Findings of Fact 21, 25, and 46. A memo to file was subsequently produced by Peggy Bowen, dated February 10, 1995, which stated in part: I spoke to Allen Adams on the telephone regarding the memo from George Stinson dated 2/9/95. We agreed that our procedure would be to revise the existing NOI which is in the name Nick and Sue Farah to Sue Farah, and correct the SSN, under the existing audit number. We issued the existing NOI as a sole proprietorship, as Nick & Sue Farah, and we are only clarifying the name of the sole proprietorship to Sue Farah. There were not any partnership federal tax returns filed only joint 1040. Neither Petitioner was privy to the internal e-mail memoranda of the Department. The parties have stipulated that the Department agreed to remove Nick Farah, Sr.'s name from the Notices of Intent in exchange for Sue Farah's agreement to sign the notices as "agreed" liabilities. Accordingly, the Department's Second Revised Notices of Intent were issued on February 13, 1995. The Second Revised Notices of Intent were issued in the name "Sue Farah d/b/a Farah Gazebo Restaurant." These were issued by Donald Ritchie.1 The Second Revised Notice of Intent to make Sales and Use Tax Audit Changes (also referred to as "the second NOI") states in paragraph #1, "The Department of Revenue presents you with a Notice of Intent to make Sales and Use Tax Audit Changes for the period of time which you have been found to be liable on various transactions subject to the tax under Chapter 212, Florida Statutes, during the period 03/01/89 Through 02/28/94." It further states on the bottom of the first page, "NOTE: The execution and filing of this waiver will expedite adjustment of the tax liability as indicated above. . . . If you now agree with the tax audit changes, please sign this form and return it to the audit office indicated above." Petitioner Sue Farah signed the Second Revised Notices of Intent on March 10, 1995. Also on March 10, 1995, Petitioner Sue Farah submitted a request for compromise of taxes, penalties, and interest. The Department's representative in Jacksonville agreed to waive the penalties on the assessment. Subsequently, the Department's auditor forwarded the audit file to Tallahassee for further consideration of the Request for Compromise of Taxes and Interest. Donald Ritchie testified that during the course of the audit, it was apparent to him that it was an operation that was owned and operated by a husband and wife, Nick Farah, Sr., and Sue Farah, but that a Notice of Intent is issued in the name of the taxpayer as it is listed on the sales tax registration. It is noted, however, that the audit period covered a period in which there were two sales tax registration numbers for the restaurant in the name(s) first of Nick, Sr., Sue and Nick, Jr., until June 1, 1992, and thereafter as Nick Farah, Sr. and Sue Farah, a partnership. (See Findings of Fact 20-21.) After the audit was conducted, the audit file was forwarded to Tallahassee for review. Included within the audit file was the Standard Audit Program & Report for Sales and Use Tax form. Donald Ritchie testified that he filled out the Standard Audit Program & Report for Sales and Use Tax form listing the taxpayers as "Nick & Sue Farah d/b/a Farah's Gazebo Restaurant," and indicating that the entity was a "sole proprietorship" because he understood that a business entity run by a husband and wife did not constitute a partnership but rather a sole proprietorship in the absence of the formal procedures of organizing a partnership. Donald Ritchie further testified that he forwarded the file to Tallahassee as an "unagreed audit," because after signing the second NOI the Petitioners had asked for "additional conditions," including a request by Sue Farah for compromise of the taxes, penalties, and interest, that had not been specified at the time Sue Farah signed. However, he conceded that anyone signing an NOI could request such compromise. It is also clear that Sue Farah had always retained the right to compromise the penalties. (See Findings of Fact 30, 32 and 44-45) The Department subsequently issued its Notices of Proposed Assessment (NOPA) on September 6, 1995, in the names of both husband and wife, as "Nick & Sue Farah/Farah Gazebo Restaurant." By letter dated November 3, 1995, Petitioner Sue Farah d/b/a Farah Gazebo Restaurant protested the entire proposed assessments, on the ground of "doubt as to collectability." By letter dated January 15, 1996, Petitioner Sue Farah submitted her financial information in support of her protest. Petitioners had borrowed additional monies in order to pay off general debts and debt associated with the restaurant involved in this proceeding. They then borrowed again in order to open a second restaurant on "Mandarin" in Jacksonville. This new venture was to be run by a newly created corporation, of which Sue Farah is sole stockholder. Petitioners are agreed that if the restaurant which is at issue in this cause were sold, Sue Farah would get all the proceeds. By letter dated March 15, 1996, Kathleen Marsh, CPA and Tax Law Specialist for the Department, requested certain financial information from both Petitioners in order to consider the issues raised in the letter of protest, including but not limited to, audit papers, bank statements for the years 1995 and 1996, and various information relating to the operation and financial position of the second restaurant. By letter dated April 8, 1996, Kathleen Marsh notified Petitioners that she had not yet received the information she had requested, and was going to issue the Notice of Decision. By letter dated April 17, 1996, Petitioners' CPA responded in part to the Department's request for additional financial information, but it does not amount to a certification or audit of the Farahs' financial statements. Also on April 17, 1996, the Department issued its Notice of Decision, sustaining the assessment in its entirety, determining that doubt as to collectability had not been established by the Petitioners. The Petitioners sought reconsideration of the Department's determination, raising the additional argument that Nick Farah, Sr., was not sufficiently involved in the operation of the restaurant during the audit period so as to be liable for the tax assessment. The following information had been requested by the Department but was never received from the Petitioners: a copy of an IRS audit, bank statements for all accounts for the years 1995 and 1996, information relating to ownership of stock in the new restaurant corporation, and information relating to sales tax registration for the new restaurant. The Department issued its Notice of Reconsideration on November 5, 1996, again sustaining the assessment in its entirety and determining that doubt as to collectability still had not been established. It further determined that Nick Farah, Sr., was a registered dealer under Chapter 212, Florida Statutes, and was otherwise sufficiently involved in the operation of the restaurant so as to be liable for the assessment. Petitioners timely filed their Petition for this administrative hearing under Chapter 120, Florida Statutes. Petitioners agreed that the amount of the tax assessed by the Department is correct. Since the offer of compromise, several properties owned either jointly by husband and wife or owned solely by Nick Farah, Sr., have been foreclosed. Otherwise, the sworn financial statements in the audit file have been adopted by the Petitioners' testimony as still accurate. None of these financial statements bear a certification by a certified public accountant. Neither Mr. nor Mrs. Farah's financial situation has remained static in the ensuing two years. Sue Farah still desires to compromise the total tax bill with small monthly payments, but she could not articulate an amount she can currently pay and relied on her earlier offer.
Recommendation Upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that a Final Order be entered by the Department of Revenue that: Assesses the entire liability for the March 1, 1989 - February 28, 1994, audit period against Sue Farah for the taxes, penalties, and accruing interest; Absolves Nick Farah, Sr., of any liability for the same audit period; and Denies all compromise of the amount(s) assessed. DONE AND ENTERED this 10th day of June, 1998, 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 Filed with the Clerk of the Division of Administrative Hearings this 10th day of June, 1998.
The Issue Whether the contested and unpaid portions of the tax, penalty and interest assessment issued against Petitioners as a result of Audit No. 9317210175 should be withdrawn as Petitioners have requested?
Findings Of Fact Based upon the evidence adduced at hearing, and the record as a whole, the following Findings of Fact are made: Shuckers is an oceanfront restaurant and lounge located at 9800 South Ocean Drive in Jensen Beach, Florida. In November of 1992, Petitioner Mesa's brother, Robert Woods, Jr., telephoned Mesa and asked her if she wanted a job as Shuckers' bookkeeper. Woods had been the owner of Shuckers since 1986 through his ownership and control of the corporate entities (initially Shuckers Oyster Bar Too of Jensen Beach, Florida, Inc., and then NAT, Inc.) that owned the business. Mesa needed a job. She therefore accepted her brother's offer of employment, notwithstanding that she had no previous experience or training as a bookkeeper. When Mesa reported for her first day of work on November 19, 1992, she learned that Woods expected her to be not only the bookkeeper, but the general manager of the business as well. Mesa agreed to perform these additional responsibilities. She managed the day-to-day activities of the business under the general direction and supervision of Woods. After a couple of weeks, Woods told Mesa that it would be best if she discharged her managerial responsibilities through an incorporated management company. Woods had his accountant draft the documents necessary to form such a corporation. Among these documents were the corporation's Articles of Incorporation. Mesa executed the Articles of Incorporation and, on December 3, 1992, filed them with the Secretary of State of the State of Florida, thereby creating Petitioner TAN, Inc. TAN, Inc.'s Articles of Incorporation provided as follows: The undersigned subscribers to these Articles of Incorporation, natural persons competent to contract, hereby form a corporation under the laws of the State of Florida. ARTICLE I- CORPORATE NAME The name of the corporation is: TAN, INC. ARTICLE II- DURATION This corporation shall exist perpetually unless dissolved according to Florida law. ARTICLE III- PURPOSE The corporation is organized for the purpose of engaging in any activities or business permitted under the laws of the United States and the State of Florida. ARTICLE IV- CAPITAL STOCK The corporation is authorized to issue One Thousand (1000) shares of One Dollar ($1.00) par value Common Stock, which shall be designated "Common Shares." Article V- INITIAL REGISTERED OFFICE AND AGENT The principal office, if known, or the mailing address of this corporation is: TAN, INC. 9800 South Ocean Drive Jensen Beach, Florida 34957 The name and address of the Initial Registered Agent of the Corporation is: Linda A. W. Mesa 9800 South Ocean Drive Jensen Beach, Florida 34957 ARTICLE VI- INITIAL BOARD OF DIRECTORS This corporation shall have one (1) director initially. The number of directors may be either increased or diminished from time to time by the By-laws, but shall never be less than one (1). The names and addresses of the initial directors of the corporation are as follows: Linda A. W. Mesa 9800 South Ocean Drive Jensen Beach, Florida 34957 ARTICLE VII- INCORPORATORS The names and addresses of the incorporators signing these Articles of Incorporation are as follows: Linda A. W. Mesa 9800 South Ocean Drive Jensen Beach, Florida 34957 On the same day it was incorporated, December 3, 1992, TAN, Inc., entered into the following lease agreement with the trust (of which Woods was the sole beneficiary) that owned the premises where Shuckers was located: I, Michael Blake, Trustee, hereby lease to Tan, Inc. the premises known as C-1, C-2, C-3, C-4, 9800 South Ocean Drive, Jensen Beach, Florida for the sum of $3,000.00 per month. This is a month to month lease with Illinois Land Trust and Michael Blake, Trustee. Mesa signed the agreement in her capacity as TAN, Inc.'s President. She did so at Woods' direction and on his behalf. No lease payments were ever made under the agreement. 3/ The execution of the lease agreement had no impact upon Shuckers. Woods remained its owner and the person who maintained ultimate control over its operations. At no time did he relinquish any part of his ownership interest in the business to either Mesa or her management company, TAN, Inc. Mesa worked approximately 70 to 80 hours a week for her brother at Shuckers doing what he told her to do, in return for which she received a modest paycheck. Woods frequently subjected his sister to verbal abuse, but Mesa nonetheless continued working for him and following his directions because she needed the income the job provided. As part of her duties, Mesa maintained the business' financial records and paid its bills. She was also required to fill out, sign and submit to Respondent the business' monthly sales and use tax returns (hereinafter referred to as "DR- 15s"). She performed this task to the best of her ability without any intention to defraud or deceive Respondent regarding the business' tax liability. The DR-15s she prepared during the audit period bore NAT, Inc.'s Florida sales and use tax registration number. On the DR-15 for the month of December, 1992, Mesa signed her name on both the "dealer" and "preparer" signature lines. Other DR-15s were co-signed by Mesa and Woods. In April of 1993, Woods told Mesa that she needed to obtain a Florida sales and use tax registration number for TAN, Inc., to use instead of NAT, Inc.'s registration number on Shuckers' DR-15s. In accordance with her brother's desires, Mesa, on or about May 14, 1993, filed an application for a Florida sales and use tax registration number for TAN, Inc., which was subsequently granted. On the application form, Mesa indicated that TAN, Inc. was the "owner" of Shuckers and that the application was being filed because of a "change of ownership" of the business. In fact, TAN, Inc. was not the "owner" of the business and there had been no such "change of ownership." By letter dated June 22, 1993, addressed to "TAN INC d/b/a Shuckers," Respondent gave notice of its intention to audit the "books and records" of the business to determine if there had been any underpayment of sales and use taxes during the five year period commencing June 1, 1988, and ending May 31, 1993. The audit period was subsequently extended to cover the six year period from June 1, 1987 to May 31, 1993. Relying in part on estimates because of the business' inadequate records, auditors discovered that there had been a substantial underpayment of sales and use taxes during the audit period. The auditors were provided with complete cash register tapes for only the following months of the audit period: June, July, August and December of 1992, and January, February, March, April and May of 1993. A comparison of these tapes with the DR-15s submitted for June, July, August and December of 1992, and January, February, March, April and May of 1993 revealed that there had been an underreporting of sales for these months. Using the information that they had obtained regarding the three pre- December, 1992, months of the audit period for which they had complete cash register tapes (June, July and August of 1992), the auditors arrived at an estimate of the amount of sales that had been underreported for the pre- December, 1992, months of the audit period for which they did not have complete cash register tapes. The auditors also determined that Shuckers' tee-shirt and souvenir sales, 4/ Sunday brunch sales, cigarette vending sales, vending/amusement machine location rentals 5/ and tiki bar sales that should have been included in the sales reported on the DR-15s submitted during the audit period were not included in these figures nor were these sales reflected on the cash register tapes that were examined. According of the "Statement of Fact" prepared by the auditors, the amount of these unreported sales were determined as follows: TEE-SHIRT SALES: Sales were determined by estimate. This was determined to be $2,000/ month. No records were available and no tax remitted through May, 1993. SUNDAY BRUNCH SALES: Sales were determined by estimate. This was determined to be 100 customers per brunch per month (4.333 weeks). No audit trail to the sales journal was found and no records were available. CIGARETTE VENDING SALES: The estimate is based on a review of a sample of purchases for the 11 available weeks. The eleven weeks were averaged to determine monthly sales at $3/pack. VENDING MACHINE LOCATION RENTAL REVENUE: The revenue estimate is based on a review of a one month sample. TIKI BAR SALES: The sales estimate is based on a review of infrequent cash register tapes of February, 1993. The daily sales was determined by an average of the sample. The number of days of operation per month was determined by estimate. In addition, the auditors determined that TAN, Inc. had not paid any tax on the lease payments it was obligated to make under its lease agreement with Illinois Land Trust and Michael Blake, Trustee, nor had any tax been paid on any of the pre-December, 1992, lease payments that had been made in connection with the business during the audit period. According to the "Statement of Fact" prepared by the auditors, the amount of these lease payments were determined as follows: The estimate is based on 1990 1120 Corporate return deduction claimed. This return is on file in the Florida CIT computer database. The 1990 amount was extended through the 6/87 - 11/92 period. For the period 12/92 - 5/93 audit period, TAN's current lease agreement of $3,000/month was the basis. No documentation was produced during the audit supporting any the sales tax exemptions that the business had claimed during the audit period on its DR-15s. 6/ Accordingly, the auditors concluded that the sales reported as exempt on the business' DR-15s were in fact taxable. Using records of sales made on a date selected at random (February 1, 1993), the auditors calculated effective tax rates for the audit period. They then used these effective tax rates to determine the total amount of tax due. An initial determination was made that a total of $201,971.71 in taxes (not including penalties and interest) was due. The amount was subsequently lowered to $200,882.28. On or about December 22, 1993, TAN, Inc., entered into the following Termination of Lease Agreement with Ocean Enterprises, Inc.: TAN, Inc., a Florida corporation, hereby consents to termination of that certain lease of the premises known as C-1, C-2, C-3 and C-4 of ISLAND BEACH CLUB, located at 9800 South Ocean Drive, Jensen Beach, Florida, dated December 3, 1992, acknowledges a landlord's lien on all assets for unpaid rent; and transfers and sets over and assigns possession of the aforesaid units and all of its right, title and interest in and to all inventory, equipment, stock and supplies located on said premises 7/ in full satisfaction of said unpaid rent; all of the foregoing effective as of this 22nd day of December, 1993. FOR AND IN CONSIDERATION of the foregoing termin- ation of lease, OCEAN ENTERPRISES, Inc., a Florida corporation, hereby agrees to pay Linda Mesa, each month all of the net revenues of the operation of the bar and restaurant located on said premises, up to the sum of $15,000.00, for sales tax liability asserted against TAN, Inc. or Linda A. W. Mesa based upon possession or ownership of said premises or any of the assets located thereon, plus attorney's fees incurred in connection with defending or negotiating settlement of any such liability. Net revenue shall mean gross revenue, less operating expenses, includ- ing, but not limited to, rent, up to the amount of $5,000.00 per month, costs of goods sold, utilities, payroll and payroll expense and insurance. OCEAN ENTERPRISES, Inc. represents that it has entered into a lease of said premises for a term of five years commencing on or about December 22, 1993, pursuant to the terms and conditions of which OCEANFRONT [sic] ENTERPRISES, Inc. was granted the right to operate a restaurant and bar business on said premises. Ocean Enterprises, Inc., leases the property from Island Beach Enterprises, which obtained the property through foreclosure. TAN, Inc., has been administratively dissolved.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Department of Revenue enter a final order withdrawing the contested and unpaid portions of the assessment issued as a result of Audit No. 9317210175, as it relates to TAN, Inc., and Linda A. W. Mesa. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 27th day of June, 1995. STUART M. LERNER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 27th day of June, 1995.
The Issue Whether the Petitioner owes unpaid sales and use tax for the period extending from May 1, 1986, through April 30, 1991, and, if so, the amount owed.
Findings Of Fact Based on the oral and documentary evidence presented at the final hearing and on the entire record of this proceeding, the following findings of fact are made: Jay P. Weiss is a Florida-licensed motor vehicle dealer, and he has been licensed in Florida for 27 years. Mr. Weiss does business as Jay P. Weiss, Inc. ("Weiss"), and Weiss is, and was during the times material to this proceeding, in the business of selling cars for resale. Weiss purchases motor vehicles at auction, from banks, from leasing companies, or from other dealers; reconditions the vehicles; and sells the majority of the vehicles to other dealers for resale. During the times material to this proceeding, Weiss purchased an average of 400 to 500 vehicles each year. During the times material to this proceeding, the locations from which Weiss conducted business consisted of an office and an adjacent shop in which vehicles were reconditioned. The locations did not include a showroom or a retail car lot, and Weiss did not advertise that vehicles were offered for retail sale on the premises. Nonetheless, people often walked into the office and inquired if Weiss sold cars at retail. Occasionally, Weiss sold cars to customers at retail. Motor vehicle purchases and sales were recorded on "title jackets," which contained information regarding each vehicle purchased and sold by Weiss, including the identification of the vehicle; the date of purchase, the purchase price and the identity of the person from whom the vehicle was purchased; the date of sale, the sales price, and the identity of the person to whom the vehicle was sold; and relevant title information. Duplicate information for each vehicle was included in "police books" maintained at Weiss's offices. Mr. Weiss was in Weiss's office about nine hours per week, including weekends. Throughout the week, he traveled to various auctions throughout the state, although he routinely called his office several times each day. In addition to Mr. Weiss and the employees who worked in the shop, Weiss employed a bookkeeper that was responsible for managing the office and handling all of the accounts and records for the business, including preparation of the Florida Sales and Use Tax Return Form DR-15. The bookkeeper also provided information to Weiss's accountants from which Weiss's U.S. Income Tax Return for an S Corporation, Form 1120S, was prepared. During the times material to this proceeding, three successive bookkeepers were employed by Weiss, two of whom were employed approximately three years each. Section 212.12(5)(a), Florida Statutes (1993), grants to the Department of Revenue the authority to audit the books and records of any dealer subject to Chapter 212, Florida Statutes, Tax on Sales, Use, and Other Transactions, to determine if the dealer overpaid or underpaid Florida sales and use taxes. Pursuant to this authority, the Department conducted an audit of the books and records of Weiss, for the period extending from May 1, 1986, through April 30, 1991. The Department initially concluded that Weiss owed $115.442.57 additional tax due on sales for the audit period and $10,706.94 additional tax due on purchases for the audit period, plus delinquent penalties and interest through December 6, 1991. Weiss provided additional documentation, and these amounts were revised downward in a Notice of Intent to Make Sales & Use Tax Changes dated January 13, 1993, to reflect $79,065.07 additional tax due on sales for the audit period and $10,706.94 additional tax due on purchases for the audit period, plus delinquent penalties and interest through January 13, 1993. The schedules and work papers from which the revised assessments were derived were attached to the January 13, 1993, notice. In conducting the audit of Weiss's books and records, the Department's auditor examined books and records made available to her at Weiss's business location and at the office of Weiss's accountant on August 1, 7, and 28, 1991; September 6, 1991; January 29 and 30, 1992; and February 5, 1992. Mr. Weiss never met the Department's auditor, although he did talk with her on the telephone. He has no personal knowledge of the records requested by the auditor or whether all of the requested records were provided. According to the affidavit of the accountant who prepared Weiss's federal tax returns for 1988, 1989, and 1990, which was introduced into evidence by Weiss, the accountant became aware of inaccuracies in the bookkeeping by Weiss "because of the audit by the Florida DOR and due to the fact that all details of bookkeeping records were either lost or misplaced it was recommended to Jay P. Weiss that an outside bookkeeper be hired to recreate the books and records." Weiss followed its accountant's advice, and the Department's auditor examined, and accepted as accurate, documents entitled "Sales Reconciliation" for 1988, 1989, and 1990, which were prepared by the outside accountant hired by Weiss. These documents itemized for each month of these years the corrected income received by Weiss from taxable sales, rents, and exempt sales; corrected taxable amounts; corrected sales tax; the original amount of tax paid; and the sales tax owed or overpaid. The Department's auditor concluded that additional sales tax was due in the amount of $4,281,57, attributable to unreported rental income collected by Weiss on commercial property it owned, as reflected in Schedule A-1 of the audit papers. The auditor calculated the additional taxable amount of rental income for the years 1988 and 1989 for which no tax had been paid based on the information provided by Weiss in the sales reconciliations and identified the actual rental income for 1990 based on Weiss's records. The auditor totaled the amount of additional rental income for these three years, divided the total by 36, the number of months in the sample period, and projected this average monthly amount of additional taxable rental income for each month of the 5-year audit period. The appropriate tax rate was applied to calculate the additional sales tax owed for each month, and these amounts were totaled for the 5-year audit period. 1/ The Department's auditor concluded that additional sales tax was due on retail sales of automobiles in the amount of $20,538.31, as reflected in Schedule A-3 of the audit papers. This amount was based on a comparison of the information provided by Weiss in the Florida Sales and Use Tax Returns, Form DR-15's, that it filed with the Department for 1988 and 1989 with the corrected taxable sales included by Weiss's accountant in the sales reconciliations prepared for 1988 and 1989. The auditor first totaled the taxable sales reported on the Form DR-15's for 1988 and 1989, which was $81,736.00, and the revised taxable sales included in the sales reconciliations for 1988 and 1989, which was $131,063.00, and then calculated a weighted error ratio of approximately 1.603492, meaning that Weiss's actual taxable sales were approximately 60 percent higher than reported in the Form DR-15's submitted by Weiss to the Department. The auditor then projected the total additional taxable sales by multiplying the taxable sales reported on the Form DR-15s by .603492 to arrive at the additional taxable sales for each month of the audit period. The appropriate tax rate was applied to calculate the additional sales tax attributable to additional taxable motor vehicle sales for each month, and these amounts were totaled for the 5-year audit period. The Department's auditor concluded that additional sales tax was due on undocumented sales in the amount of $54,245.19, as reflected in Schedule A-2 of the audit papers. In reaching this conclusion, the auditor reviewed the U.S. Income Tax Returns for an S Corporation, Form 1120S's, filed by Weiss with the Internal Revenue Service for 1988, 1989, and 1990, and the Florida Sales and Use Tax Returns, Form DR-15's, filed with the Department for the same period of time. The Department routinely compares the gross sales reported on the federal income tax returns with the total sales reported to the Department on Form DR-15's to determine if there is a difference between the amounts reported. The Department considers the gross sales reported on federal income tax returns to be more reliable than the total sales reported to the Department because it is assumed that taxpayers will not over-report sales to the federal government. If the gross sales reported on the federal income tax returns are greater than the total sales reported to the Department on the Form DR-15's for the applicable period, the Department asks for documentation from the taxpayer to account for the difference. If the taxpayer is unable to provide such documentation, the Department presumes that the difference is attributable to taxable sales. In concluding that Weiss owed additional tax on undocumented sales, the auditor compared the gross sales reported by Weiss in the U.S. Income Tax Returns for an S Corporation, Form 1120S's, filed with the Internal Revenue Service for 1988, 1989, and 1990 with the revised total sales reportable on the Florida Sales and Use Tax Returns, Form DR- 15's, filed with the Department for the same years. The auditor broke down Weiss's revised total sales into revised taxable sales based on Schedule A-3 of the audit papers, revised rental income based on Schedule A-1 of the audit papers, and revised exempt sales identified in the sales reconciliations for 1988, 1989, and 1990. 2/ The total gross sales Weiss reported on the Form 1120S's for 1988, 1989, and 1990 were higher than the revised total sales reported by Weiss on the Form DR-15's for the same years. The auditor calculated the monthly difference between the gross sales and the revised total sales for 1988, 1989, and 1990, 3 and, because no documentation was provided to establish that the difference was attributable to exempt sales, the difference was attributed to taxable sales. The average monthly difference was calculated, and this amount was projected for each month of the audit period. The appropriate tax rate was applied to calculate additional sales tax owed for each month, and these amounts were totaled to determine the additional sales tax due for the 5-year audit period. Because inaccuracies in the gross sales included in the Form 1120S's filed with the Internal Revenue Service for 1988, 1989, and 1990 were discovered by Weiss's accountant as a result of the recreation of Weiss's books by the outside accountant, Weiss's accountants prepared amended Form 1120S's for those years. The amended forms were sent to Weiss for execution and filing. Mr. Weiss cannot recall whether the amended returns were filed, and the Internal Revenue Service has no record that these amended returns were filed. For this reason and because Weiss did not provide any documentation to support the revised gross sales included in the amended returns, the Department refused to consider the gross sales reported in the amended Form 1120S's. The Department's auditor concluded that additional tax in the amount of $1,334.07 was due from Weiss with respect to purchases of consumable supplies, that is, supplies that did not become a component part of a motor vehicle. This conclusion was based on the auditor's review of invoices provided by Weiss for 1990 and the auditor's determinations that, of the $6,903.86 total derived from the invoices, $4,722.07 was taxable and that Weiss had paid no tax on the purchases. The average monthly taxable amount was calculated, the appropriate tax rate was applied to determine the additional tax owed for each month, and these amounts were totaled for the 5-year audit period. The Department's auditor concluded that, based on records provided by Weiss, additional tax was owed on fixed assets in the amount of $86.34. The Department's auditor concluded that additional tax was due in the amount of $9,286.53 on amounts paid by Weiss for commercial rentals and on amounts paid by Weiss in the form of mortgage payments on property it occupied that was owned by Jay P. Weiss, individually, who was also individually obligated under the note and mortgage on the property. This determination that additional tax was due was based on documentation Weiss provided to the auditor. After the January 13, 1993, Notice of Intent to Make Sales & Use Tax Audit Changes was issued, Weiss provided additional documentation to the Department. As a result of the new information, the amount of additional tax due was revised downward in a Notice of Intent to Make Sales & Use Tax Audit Changes dated March 22, 1995, which identified $75,998.46 additional tax due on sales for the audit period and $8,382.94 additional tax due on purchases for the audit period, for a total amount due of $166,800.43, including delinquent penalties and interest accrued as of March 22, 1995. This total amount was the final sustained amount identified in the Notice of Reconsideration dated May 10, 1995, which is the subject matter of this proceeding, and the notice includes a discussion of the basis for the revisions made to the January 13, 1993, assessment. After this case was referred to the Division of Administrative Hearings, a representative of the Department met with Weiss's accountant. The Department's representative requested that Weiss provide any additional documentation that would explain the difference between the gross sales reported on the Form 1120S's and the revised total sales reportable on the Form DR-15's or that would support any further change in the sales and use tax assessment. No further documentation was provided. The evidence presented by the Department establishes that a sales and use tax audit assessment was made against Weiss, for the audit period extending from May 1, 1986, through April 30, 1991, and establishes the factual basis for that assessment. The methodology used by the Department's auditor to calculate the assessment was proper under the circumstances, and the Department's assessment for sales and use tax for the audit period, as revised in the May 10, 1995, Notice of Reconsideration, is reasonable. Weiss did not present any persuasive evidence to the contrary.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order upholding its assessment against Jay P. Weiss, Inc., in full, including all taxes, penalties, and interest statutorily due until the date of payment of the sales and use tax. DONE AND ENTERED this 2nd day of June, 2000, in Tallahassee, Leon County, Florida. PATRICIA HART MALONO 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 2nd day of June, 2000.
The Issue The issues are whether Respondent violated Chapter 212, Florida Statutes, by failing to pay sales tax and local government infrastructure surtax, and if so, what penalty should be imposed.
Recommendation Based upon the findings of fact and conclusions of law, it is RECOMMENDED: That Respondent enter a Final Order upholding its assessment against Petitioner in full, including all taxes, penalties, and interest statutorily due until date of payment for both the sales and use tax and the local government infrastructure. DONE AND ENTERED this 29th day of September, 1998, in Tallahassee, Leon County, Florida. SUZANNE F. HOOD 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 Filed with the Clerk of the Division of Administrative Hearings this 29th day of September, 1998.
Findings Of Fact Upon consideration of the Stipulation of Facts and documentation attached thereto, the following relevant facts are found: Petitioner is registered to do business in Florida and is required to collect and remit sales tax. In January of 1982, petitioner was given written notice of respondent's intent to audit petitioner's books and records for the 1979, 1980, and 1981 fiscal years. The audit apparently occurred during March and April of 1982. On June 16, 1982, the respondent, through Tax Auditor John Felton, issued a "Notice of Intent to Make Sales and Use Tax Audit Changes." Petitioner was advised that if it bias aggrieved by the proposed audit changes, it would have until July 16, 1982, "or such additional time as may be authorized by the Department in writing" to contact the office and discuss any problems. Petitioner was further advised that if it did not avail itself of the discussion privilege, the Department would issue a proposed notice of deficiency in the amount of $6,975.68 for delinquent sales taxes, penalty and interest through June 16, 1982. By a form letter dated September 9, 1982, the Department provided the Notice of Proposed Assessment of tax, penalty and interest in the amount of $6,975.68. The form letter stated that, if there were objections to the proposed assessment, petitioner would have until November 9, 1982, or such additional time as may be authorized by the Department in writing, to contest the assessment pursuant to informal protest provisions. These provisions require a written protest postmarked within 60 days of the Proposed Assessment, or a written request within that same period of time for an extension of time to file the written protest. Mr. John Felton, a Tax Auditor for the respondent in California, visited the petitioner's office on September 22, 1982, for a post-audit meeting. Petitioner apparently informed Mr. Felton of the existence of exemption certificates but did not, at that time, have the appropriate documentation for the tax credits. Mr. Felton advised petitioner of the documentation required to support any claimed tax credits. By letter dated October 1, 1982, Mr. Felton enclosed the June 16, 1982 sales tax audit, the September 9, 1982 Notice of Proposed Assessment and advised petitioner's staff accountant as follows: "... You will note that some action must be taken with respect to the Notice of Proposed Assessment by 11/9/82. As soon as you have accumulated your docu- mentation in support of any claimed tax credits, contact me and I will have a revised proposed assessment issued. If I may be of further assistance, please call me at 714-956-4311 (preferably, since I expect to be out of my Sunnyvale office most of October) or 408-737-1405." Petitioner's General Accounting Manager attempted to telephone Mr. Felton on several occasions during the last week of October and the first week of November, 1982. These attempts were unsuccessful. Petitioner does not allege that it mailed any documentation to Mr. Felton or the Department or that it filed a timely written protest or a timely request for an extension of time to file a protest. On November 16, 1982, Mr. Felton called petitioner's staff accountant, who advised Mr. Felton that he would mail documentation supporting the tax credits on or before November 24, 1982. Having received no such documentation, Felton, by inter- office memorandum dated December 10, 1982, recommended to the respondent that the original proposed assessment dated September 9, 1982, be processed. Petitioner was notified by letter dated January 31, 1983, that the prior audit had become final and requesting petitioner to forward its remittance of $7,236.56, said amount consisting of the original assessment plus updated interest.
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
