The Issue The issue is whether the Application for Registration as an Associated Person filed by Petitioner should be granted.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Respondent enter a final order denying Petitioner's application for registration as an associated person of Noble Investment Company of Palm Beach. DONE AND ORDERED in Tallahassee, Leon County, Florida, this 17th day of February 1993. WILLIAM R. DORSEY, JR. 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 17th day of February 1993. COPIES FURNISHED: Karen M. Camechis H. Richard Bisbee Assistant General Counsels Department of Banking and Finance Suite 1302 The Capitol Tallahassee, Florida 32399 Ardith H. Steele 1639 South University Drive Plantation, Florida 33324 The Honorable Gerald Lewis Comptroller, State of Florida The Capitol, Plaza Level Tallahassee, Florida 32399-0350 William G. Reeves General Counsel The Capitol Room 1302 Tallahassee, Florida 32399-0350
Findings Of Fact In Exhibit 3 Petitioner disputed the overpayment of sales tax, penalties and interest in the amount of $62,035.63. At the hearing it was stipulated that the disputed sum is $62,000.00. Petitioner is owner and publisher of a weekly paper, The Tampa/Metro Neighbor (Neighbor), published in Tampa and distributed in the Tampa metropolitan area of Hillsborough County. The Neighbor is distributed to readers free of charge. Petitioner started rack sales September 27, 1980, and has sold approximately 125 per week since that time. Its total circulation is approximately 164,009. The Neighbor has not been entered or qualified to be admitted and entered as second class mail matter at a post office in the county where it is published. The Neighbor is delivered by approximately one thousand carriers to residences and apartments in Hillsborough County each Thursday. The papers are placed in plastic bags to protect them from the weather. Petitioner claims sales tax exemption for the purchase of newsprint, ink, and plastic bags used to print and distribute the Neighbor. Newspapers such as The Tampa Tribune are exempt from sales tax on these items. Only newspapers and other periodical publications are eligible for mailing at second class rates of postage. Publications primarily designed for free circulation and/or circulation at nominal rates may not qualify for the general publications category (Exhibit 24). General publications primarily designed for advertising purposes may not qualify for second class privileges. Those not qualifying include those publications which contain more than 75 Percent advertising in more than half of the issues published during any 12- month period (Exhibit 24). Second class mail privilege is a very valuable asset for newspapers and other qualifying publications. The editorial content of the Neighbor, which they define as everything except advertisement, is comprised of local news, sporting news, local investigative reporting, an opinion section, and an entertainment section. The advertising is split into classified ads and other. The Neighbor contains no national or international news, no wire service reports, no comics, no stock market reports, no sports statistics, no weather reports, no national syndicated columnists, no state capital news, no obituaries, no book review section, and no special section such as home design, gardening, etc. Neighbor considers its primary competitor to be The Tampa Tribune. However, this competition is limited to advertising as the Neighbor has none of the traditional newspaper features above noted which are normally carried in daily newspapers. Petitioner presented two expert witnesses who opined that the Neighbor met the requirements to be classified as a newspaper because it was published in newspaper format; that it had an editorial section which provided some news as contrasted to that provided in a shopping guide; that the 75 percent - 25 percent advertising-editorial content did not make the Neighbor primarily an advertising paper; that the requirements of the U.S. Post Office for a periodical to obtain second class mail privileges is not relevant to a determination that the Neighbor is not newspaper; that the requirements of the Department of Revenue Rules 12A-1.08(3)(d) and 12A-1.08(4) Florida Administrative Code, are not relevant in determining whether the Neighbor is a newspaper; and that in a journalistic concept the Neighbor is a newspaper. The Neighbor was purchased in 1979 by North American Publications, Inc., a wholly owned subsidiary of Morris Communications Corporation. Morris Communications Corporation owns several newspapers scattered from Florida to Alaska, both daily and weekly publications. Most of these publications are sold to paid subscribers. Petitioner's testimony that sales tax was not collected from Petitioner's predecessor owners was flatly contradicted by the testimony of Respondent's witness. Since the latter witness is in a much better position to know the facts respecting sales taxes levied on the former owner of the Neighbor, this testimony is the more credible. In any event, Petitioner did not claim estoppel.
The Issue Administrative determination of Rule 12A-1.34(3), Florida Administrative Code, pursuant to Section 120.56, Florida Statutes. The parties stipulated that the bearing would be concluded on the date of receipt of the transcript of hearing by the Hearing Officer. Although the transcript of bearing held on December 14, 1977, was received on May 1, 1978, the Hearing Officer was not advised until August 15, 1978, that the court reporter had lost her notes of the bearing session conducted on October 5, 1977, in Case Number 77-259, which was continued upon petitioner's announced desire to file a rule challenge. No evidence was received at that hearing session and only rulings on procedural matters were entered at that time.
Findings Of Fact Petitioner publishes the Fort Lauderdale News and Sun Sentinel. The firm has forty departments, of which one is a letter shop on the premises that prints forms, stationery, and other such needs of the company. About ten percent of the work done in the letter shop is for outside customers. Materials used in processing the in-house work include stock paper, binders, glue, and cardboard. The shop makes letterhead stationery for each department of the company and prints "run" sheets which arc forms for reporting news stories and advertisements. It pays state sales tax on the supplies that it purchases from outside firms and collects such tax on the sales made to outside customers. The purpose of the print shop operation is to ensure that the newspaper has ample supply of forms and printed stationery and it is also cheaper than contracting the work to an outside firms. Many of the forms are used once and then destroyed, and stationery is consumed in due course of time. Some of the printed items become permanent files of the petitioner. (Testimony of Hatfield) In January, 1976, respondent's tax examiner conducted an audit of respondent's accounts and thereafter respondent, by notice of assessment, dated April 8, 1976, demanded, inter alia payment of tax, penalty and interest under Chapter 22, Florida Statutes, in the total amount of $11,222.48 based on the fabricated cost of the items produced in petitioner's letter shop for its own use. The total cost of the aforesaid items was placed at $208,596.37. This cost was arrived at by the amounts petitioner internally "charged" its various departments for the printed material. Respondent's audit supervisor testified at the hearing that the assessment was laid under Section 212.06(1)(b), Florida Statutes, and Rule 12A-1.34, Florida Administrative Code. After receipt of the assessment, representatives of both parties discussed the matter in May and certain erroneous charges were deleted from the assessment. However, these deletions had reference to taxable transactions other than those involving petitioner's print shop which appeared in Schedule C of the assessment. Additionally, the original assessed penalty was abated to a flat 5 percent of the tax. A second revised notice of proposed assessment, dated December 14, 1977, placed the petitioner's tax liability with regard to its print shop operations at $7,338.00. This was corrected after the hearing to show a total of $7,701.00 based on additional interest assessed as to Schedule C items. The assessment period is February 1, 1973 to January 31, 1976. (Testimony of Harris, George, Petitioner's Exhibits 1-3) Dealers such as the petitioner are required to submit a monthly sales and use tax report on Form DR-15 to remit any required tax. This is the only form sent on a monthly basis to dealers such as petitioner. Column D thereof is described in that form as "Purchases not for resale but for use or consumption which are subject to the 4 percent tax rate and not taxed by suppliers." (Stipulation, Petitioner's Exhibit 2) Respondent does not collect the particular tax in question from non- business entities and is unable to determine how much tax has been paid in this regard in cases of voluntary payment by taxpayers. Respondent has records as to only ten (10) cases during the period 1968-1977 in which audits were performed and taxes imposed pursuant thereto under Rule 12A-1.34(3), F.A.C. Only one of these cases involved a print shop in the Ft. Lauderdale area. However, there are approximately 150 such commercial enterprises in that area. (Stipulation, Petitioner's Exhibits 1-2)
Findings Of Fact The Agency Awards Program of the Department of Revenue (DOR) was established to recognize and reward employees who make exceptional contributions which lead to improved effectiveness and efficiency within the Department; increased revenue to the state; enhanced employee morale and teamwork; or greater ease of voluntary compliance for the taxpayer. (Ex. R-14). The Suggestion Award is a component of the Agency Awards Program. Suggestions are written proposals for procedures or ideas aimed at eliminating or reducing state expenditures, improving state government operations, or generating additional revenues to the state. (Ex. R-14). The back of the suggestion form states that "all awards are at the discretion of the agency head." The Petitioner is an employee of the Department of Revenue. On July 15, 1991, Petitioner submitted a suggestion to the Agency Awards Coordinator for the DOR. (Ex. R-1). Petitioner proposed that corporate taxpayers, who notified DOR that their corporate tax returns had been amended, be required to file amended state returns; and that, pending the aforementioned change, notifications by corporate taxpayers to DOR of changes in the taxpayer's federal returns be forwarded to the Tax Audit Section which would prepare a dummy return indicating the tax and interest due. This, in turn, would cause a bill for the taxes and interest to be generated and sent to the taxpayer. The Petitioner's suggestion was rejected by the suggestion awards committee because the committee felt that a change in the law was necessary to require taxpayers to prepare amended returns. The Petitioner requested re-evaluation of his suggestion on the basis that it was a two-part suggestion, and a portion of the suggestion did not require a legislative change. One of the evaluators, Louis Panebianco, re-evaluated Petitioner's suggestion in December 1991, and recommended non-adoption because he thought the department has both a procedure and a work flow set up to handle amended returns and collection of the taxes due. (Ex. R-3). Another of the evaluators, Rayfae Swart, re-evaluated Petitioner's suggestion in January 1992, and recommended adoption of the suggestion and a $100.00 cash award for the Petitioner. (Ex. R-4). Swart was unaware of any claims about the amount of money this suggestion would generate. Jay Friedman asked Charles Martin, Petitioner's supervisor, to implement the portion of the suggestion requiring the notifications to be sent to Martin's section where dummy returns would be generated and Petitioner's suggestion would be evaluated. Martin did as he was requested and began tracking corporate taxpayer accounts requiring adjustments because of Revenue Agent Reports (RAR's) generated by the Internal Revenue Service. (Ex. P-1). Martin identified procedures and problems in the existing system and set forth proposed procedures for handling notifications of "amended" returns with and without payments from corporate taxpayers. (Ex. P-2). Martin believed that Petitioner's suggestion had merit based upon the amount of the taxes and interests which the dummy returns recorded and billed in files which were closed. Records maintained by Martin and Petitioner indicated $881,000 of taxes and interest were billed under the system put forth by Petitioner. The committee turned over the technical evaluation of the proposal to the affected Division Directors, Glenn Bedonie and Jim Evers. On April 4, 1994, Directors Bedonie and Evers issued a memorandum discussing Petitioner's suggestion and recommending that Petitioner be awarded the sum of $100.00 for identifying a systemic weakness. (Ex. R-5). On April 11, 1994, Jim Zingale, Assistant Executive Director, signed the Evaluation Form for Adopted Suggestions. (Ex. R-6). Petitioner was offered a non-measurable award of $100.00 net, plus $55.40 for payment of taxes. The Executive Director notified Petitioner of his award (Ex. R-7), but Petitioner refused the award. (Ex. R-8). Petitioner asserted that his suggestion was responsible for the collection of $881,000, the amount of taxes tracked by Petitioner from the notices of amended federal returns, and that he was entitled to 10 percent of that amount. DOR controverts Petitioner's claim on four grounds: (1) that its procedures would have ultimately resulted in collection of the amounts due from the taxpayers; (2) that the amount of Petitioner's claim is excessive and includes one unusually large transaction which makes up a significant portion of the total; (3) that the procedures suggested by Petitioner were a reinstitution of procedures which had existed prior to institution of DOR's computerized system; and (4) the agency has absolute discretion in determining the nature and the amount of the award under the rules. In 1989, the Respondent began changing from a manual or ledger tax processing system to one that was fully automated. As a result, the procedure of setting up tax returns (dummy returns) by the audit group was discontinued. (Ex. R-12). Prior to Petitioner's suggestion, the Review & Math Audit Section corresponded with taxpayers to ensure that taxpayers notifying the Respondent of necessary changes and taxpayers affected by RAR adjustments filed amended corporate income tax returns. (Ex. R-13). Prior to July 1991, the procedures outlined in the RMA Corporate Tax Quality Check List (Ex. R-15) also ensured that the taxpayer accounts tracked by Petitioner would be flagged for the factors summarized by Marsha Lammert's research. (Ex. R-10, "Comments" column). Marsha Lammert researched the accounts tracked by Petitioner to determine the validity of his claims. (Ex. R-10, 11). For the past two years, Lammert has been the Senior Revenue Examiner in the Corporate Income Tax Section of Revenue & Math Audit, a bureau of the Division of Tax Processing. Prior to this position, Lammert served over six years as Revenue Examiner Supervisor of the Corporate Income Tax Section. At the time the suggestion was made, DOR had various tax processes in effect that were triggered by certain audit selection criteria which resulted in establishing an audit trail for collection of taxes due by the corporate taxpayers. Each of the thirty-six accounts tracked by Petitioner would have triggered between two and six individual audit selection criteria by the automated tax processing system. (Ex. R-10). This information is collected by the Review & Math Audit Section and transmitted to Audit Selection, Division of Audits through the automated tax data processing system. The purpose of the data is to accord an audit priority to be used by Audit Selection in scheduling tax auditor assignments. Rayfae Swart performed a post audit to determine if Petitioner's suggestion had resulted in additional revenues. Her audit revealed that the amounts claimed by the Petitioner were gross amounts and did not reflect any amounts due the taxpayer as refunds. Further, DOR's audit procedures would have eventually picked up the returns through audits which review even "closed" files. Her testimony indicated that these audits would have revealed the taxes due in these accounts within sufficient time for the Department to collect the taxes before the statute of limitations ran. Marsha Lammert identified in the $881,000 claimed by the Petitioner one taxpayer who received refunds of $332,566.00 and $6,619.00. (Taxpayer P, Respondent's Ex. R-11). Further, Taxpayer "O" received a refund of $73,930.00. (Ex. R-11, "O"). These amounts would have been an offset to the amounts identified by the Petitioner; however, identifying the amounts the taxpayers owed in taxes reduced the refunds which the state had to pay the taxpayers in refunds.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law set forth herein, it is, RECOMMENDED: That the Department of Revenue enter a Final Order finding that the $100 cash award to Petitioner was within the agency head's discretion under the State Awards Program. DONE and ENTERED this 23rd day of March, 1995, in Tallahassee, Florida. STEPHEN F. DEAN Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 23rd day of March, 1995. APPENDIX TO RECOMMENDED ORDER The parties submitted proposed findings which were read and considered. The following states which of their findings were adopted, and which were rejected, and why: Petitioner's Recommended Order Findings Paragraphs 1-5 Paragraphs 2-6 Paragraphs 6,7 Subsumed in paragraphs 7-10 Paragraphs 8-11 Petitioner tracked $881,000 in taxes reported on amended returns; however, there was no evidence that this would have been uncollected in the absence of the suggested changes. Paragraph 12 Rejected as being contrary to unrefuted evidence that these taxes would have been collected anyhow. Paragraph 13 Subsumed in Paragraph 3. Paragraph 14 True, but unnecessary. Paragraph 15 See comments to Paragraph 11 and 12. Paragraph 16 Conclusion of Law. Respondent's Proposed Order Findings Paragraph 1 Paragraph 1 Paragraph 2 Paragraph 3 Paragraphs 3-5 Subsumed in Paragraph 4 Paragraph 6 Subsumed in Paragraph 5 Paragraphs 6-8 The fact Martin participated in keeping track of the taxes is unnecessary to the decision. The other findings are subsumed in Paragraph 8. Paragraphs 9,10 Paragraph 9,10 Paragraph 11 Paragraph 12 Paragraph 12 Paragraph 13 Paragraph 13 Paragraph 14 Paragraph 14 Paragraph 16 Paragraph 15 Subsumed in Paragraph 17 Paragraph 16 Subsumed in Paragraph 18 COPIES FURNISHED: Gabriel Mazzeo, Esquire Post Office Box 12907 Tallahassee, FL 32317-2907 Tom Barnhart, Esquire Department of Revenue Post Office Box 6668 Tallahassee, FL 32314-6668 Linda Lettera, General Counsel Department of Revenue 204 Carlton Building Tallahassee, FL 32399-0100 Larry Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, FL 32399-0100
Findings Of Fact Petitioner is employed as a Tax Auditor IV in Respondent's Property Tax Administration Program. He is assigned to work in Respondent's Regional Office in Jacksonville, Florida. The counties within the Jacksonville Region for Property Tax Administration are: Duval, Clay, Nassau, Putnam, St. John and Flagler. In January of 1996, Petitioner wrote to John Everton, Director of Respondent's Property Tax Administration Program requesting permission to run for Tax Collector of Clay County. In February of 1996, Petitioner talked to Mr. Everton's secretary. After making this call, Petitioner understood that Respondent's attorneys had his application to run for elective office and that he would soon receive an answer. Petitioner sent Mr. Everton an E Mail message on or about March 6, 1996. In this message, Petitioner asked Mr. Everton to check on his request to run for office and to expedite it immediately because time was of the essence. That same day, Mr. Everton responded to Petitioner's request with an E mail message. Expressing his apologies, Mr. Everton advised Petitioner that Respondent's attorneys had Petitioner's initial request. Mr. Everton stated that he would request that the attorneys respond immediately to Petitioner's inquiry. On or about March 13, 1996 Mr. Everton advised Petitioner that he would have to send his request for approval to run for local office directly to the agency head pursuant to the directive contained in Rule 60K-13.0031(1), Florida Administrative Code. By letter dated March 18, 1996 Petitioner requested that Larry Fuchs, Respondent's Executive Director, grant him permission to run for Tax Collector of Clay County. Mr. Fuchs received this letter on March 29, 1996. Mr. Fuchs responded to Petitioner's request by letter dated April 5, 1996. He reminded Petitioner that Rule 60K-13.0031(1), Florida Administrative Code, requires employees to apply directly to the agency head when requesting approval to become a candidate for local office. Mr. Fuchs then gave several reasons why he could not certify to the Department of Management Services that Petitioner's candidacy would involve no interest which conflicts or activity which interferes with his state employment. More specifically, Mr. Fuchs' April 5, 1996 letter stated in relevant part that: Under section 195.002, Florida Statutes, the Department of Revenue has supervision of the tax collection and all other aspects of the administration of such taxes. Your position with the Department may require you to review or audit the activities of the office you propose to seek. Also some of your duties in supervising other officials in the administration of property taxes may be affected by your proposed candidacy. Your job requires you to review appropriate tax returns, and other records to resolve complex issues related to taxing statutes administered by the Department of Revenue. It also requires you to identify and scrutinize transactions to ascertain whether taxpayers have escaped paying property taxes. In addition, it also requires you to review and audit procedures used by counties to identify and value tangible personal property and accomplish statutory compliance, to investigate taxpayer complaints, to conduct field review with county staff as appropriate, and to provide education an assistance to county taxing officials. Because of the Department's statutory super- vision of the office of tax collector, there cannot be a certification that your candidacy would involve "no interest which conflicts or activity which interferes " with your state employment within the definitions of section 110.233(4), Florida Statutes. The letter went on to say that: This letter is a specific instruction to you that you should not qualify or become a candidate for office while employed in your current position. If you wish to commence your campaign by performing the pre-filing requirements, the law requires that you first resign from the Department. Failure to do so shall result in disciplinary action to dismiss you from your position in accordance with the Department's disciplinary standards and procedures, and Rule 60K-4.010, F.A.C., the Department's Code of Conduct, Section 110.233, Florida Statutes, and Rule 60K-13.002(3), F.A.C. After receiving the above decision, Petitioner requested a formal hearing to challenge the denial of his request to run for Tax Collector of Clay County by letter dated April 10, 1996. Respondent received this letter on April 16, 1996. Respondent referred Petitioner's request for a formal hearing to the Division of Administrative Hearings on April 26, 1996. Petitioner responded to the Division of Administrative Hearings' Initial Order on May 7, 1996 advising the undersigned that he was unavailable for hearing May 28, 1996 through June 10, 1996 and July 5, 1996. He also included an initial pleading requesting, among other things, that Respondent immediately allow him to run for office and pay his filing fee because, in his opinion, it was too late for him to qualify using the alternative method of submitting petitions. On May 21, 1996 this matter was scheduled for hearing on July 9, 1996. Respondent filed a Unilateral Response to the Initial Order and a Prehearing Statement on May 30, 1996. On June 14, 1996 Petitioner filed a letter stating that it was impossible for him to be prepared for the hearing scheduled for July 9, 1996 for two reasons: (a) he had just returned to work after two weeks of vacation; and (b) he was overwhelmed by discovery associated with his upcoming hearing. Petitioner requested that this matter be continued until sometime after August 15, 1996. He represented that Respondent had no objection to his request. An order dated June 20, 1996 rescheduled the case for hearing on August 19, 1996. On July 18, 1996, Respondent sent Petitioner a letter granting him permission to qualify and file the necessary paperwork to become a candidate for Clay County Tax Collector. The letter also advised Petitioner of the conditions under which he could begin campaign activities while on Respondent's payroll. Respondent's change in position was due in part to the pending Final Order in Hendrick v. Department of Revenue, DOAH Case No. 96-2054. Respondent faxed its July 18, 1996 letter to Petitioner's office at 2:38 p.m. Petitioner's immediate supervisor contacted Petitioner at his home later that day at approximately 3:45 p.m. Petitioner did not request annual leave for the following day so that he could take whatever steps were necessary in order to qualify as a candidate for the office of Tax Collector. Instead, he opted to follow through with his previously arranged appointments for July 19, 1996. On July 22, 1996 Petitioner faxed a letter to Respondent indicating that Respondent had not given him sufficient time in which to meet all requirements to qualify as a candidate for elective office by noon on July 19, 1996. In order to qualify as a candidate for elective office in Clay County, Petitioner had to declare a bank depository for campaign purposes and designate a campaign treasurer. If Petitioner intended to use the alternative method of qualifying by filing petitions, he had to file an alternative affidavit and obtain petition forms from the Clay County Supervisor of Elections between January 3, 1996 and June 21, 1996. He had to submit the signed petitions (Democrats-688; Republicans-990, Independent-1,873) to the Supervisor of Elections on or before June 24, 1996. Regardless of whether Petitioner intended to qualify by paying a fee (Major Party-$5,876.40; Independent-$4,309.36) or by using the alternative petition method, he had to complete all paperwork on or before noon of July 19, 1996. Petitioner did not qualify by either method.
Recommendation Based on the Findings of Fact and Conclusions of Law set forth above, it is recommended that Respondent enter a Final Order dismissing Petitioner's request for certification to the Department of Management Services that his candidacy for the office of Clay County Tax Collector would involve no interest which conflicts, or activity which interferes, with his state employment. DONE AND ENTERED this 15th day of October, 1996 in Tallahassee, Leon County, Florida. SUZANNE F. HOOD Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 15th day of October, 1996. COPIES FURNISHED: Patrick A. Loebig, Esquire Peter S. Fleitman, Esquire Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668 Floyd L. Hylton 103 Century 21 Drive, Suite 213 Jacksonville, Florida 32216 Linda Lettera, Esquire Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 Larry Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100
The Issue The issue presented is whether Respondent is guilty of the allegations contained in the Administrative Complaint filed against her, and, if so, what disciplinary action should be taken, if any.
Findings Of Fact Respondent Anne E. Carr is and has been at all times material hereto a licensed real estate broker in the State of Florida, having been issued license number 0268356. In 1988 Helen B. Moser and her husband, John J. Moser, Jr., obtained their real estate salesman licenses. In 1989 they became real estate brokers. Upon becoming licensed brokers, they decided that they would like to open their own real estate office. They began contacting various real estate brokers seeking advice on how to open and operate a real estate business. Respondent was one of the brokers the Mosers contacted for advice. She and the Mosers already knew each other from previous professional activities. At the time, Respondent was the broker and sole stockholder of Carr Real Estate, Inc. She also was spending a substantial amount of time selling luxury condominiums for a particular developer, which required her to be on-site at the development. Respondent suggested to the Mosers that they join Carr Real Estate, Inc., and run the office for her rather than opening their own office, which would give them immediate access to her listings and many clients and allow her to devote her time to sales for the large real estate development. The Mosers agreed that was a good opportunity for all concerned and joined Carr Real Estate, Inc., as broker/salesmen in October of 1989. The Mosers began running the business for Respondent at her request, providing Respondent with monthly accountings. During 1990 the Mosers earned approximately $90,000 as a result of the listings they took over from Respondent and as a result of the listings Respondent referred to them. Throughout that year Carr Real Estate, Inc., remained a major presence in the Highland Beach area where Respondent was well known both for her flamboyant fashions and her ability to list and sell luxury ocean-front and water-front properties. During the first week of December 1990 Respondent advised the Mosers that due both to financial problems she was experiencing and pressure on her from the developer to devote full time to his sales she would be closing the business on December 31 unless the Mosers wanted to purchase the company from her. They advised Respondent they were interested in doing so and that they would draft the documents for Respondent's signature. Many discussions took place between Respondent and the Mosers over the next several weeks formulating the terms of the sale of the business, and the Mosers submitted to Respondent a number of drafts of documents. While the negotiations were on-going, Respondent filled out and executed on December 12, 1990, the documents necessary for her to file for personal bankruptcy. On December 15 she faxed written instructions to her attorney to not file the bankruptcy petition because she was selling her company. On December 20, 1990, Respondent and the Mosers executed a Purchase and Sale Agreement and a Bill of Sale. It is noted that those documents also involved the sale of Respondent's interest in two other corporations to the Mosers but that portion of the transaction raises no issues involved in this proceeding. The Purchase and Sale Agreement provided that its effective date would be January 1, 1991. The Agreement specifically represented that Carr Real Estate, Inc., was being sold free of any liabilities and encumbrances and that the corporation did not own any tangible assets. The Agreement further provided that Respondent would indemnify the Mosers from all obligations and liabilities incurred by Carr Real Estate, Inc., prior to January 1, 1991. The Agreement provided for no money to change hands as a result of the Mosers' purchase of Respondent's business; rather, the purchase price for the corporation was five percent of all sales commissions received by the corporation for a period of two years. On December 29, 1990, Respondent executed the Seller's Affidavit given to her by the Mosers. The portion of the Seller's Affidavit pertinent to this dispute is that Respondent attested that there were no actions or proceedings then pending in any state or federal court in which "the Affiant or Corporations" are parties, including bankruptcy. It was very clear in Respondent's mind that what she was selling under the Purchase and Sale Agreement and the Bill of Sale and what she was attesting to in the Seller's Affidavit was in regard to the corporation and not her personally. It never occurred to Respondent that she was representing to the Mosers that she personally had no bills and no assets. Respondent had no intention of defrauding the Mosers. Supporting this intent is the clear language contained in the Purchase and Sale Agreement, the Bill of Sale, and the Seller's Affidavit that she would personally indemnify and hold harmless the Mosers from any liabilities incurred by the corporation prior to the effective date of the sale. In mid-January 1991, approximately two weeks after the effective date of the sale, the Mosers discovered that a bankruptcy petition had been filed on behalf of Respondent as an individual. Although that petition did not involve the corporation, John Moser immediately contacted Respondent who did not know that her attorney had filed the petition contrary to Respondent's instructions. On January 23, 1991, Respondent wrote to Helen Moser apologizing for the erroneous filing of her bankruptcy petition and assuring her that it would be corrected. Respondent immediately contacted her attorney to ascertain how the petition could be dismissed. She was advised by her attorney that the only way she could dismiss the petition was to not attend the first meeting of creditors which would cause the petition to automatically be dismissed. Respondent did fail to attend the first meeting of creditors. Due to her failure to attend, her bankruptcy petition was dismissed. She immediately contacted Helen Moser to advise her of the dismissal. On February 1, 1991, John Moser called Respondent to inform her that a statement for a monthly automobile lease payment in the name of Carr Real Estate had been received. Respondent immediately sent the Mosers a note indicating that she had contacted G.M.A.C. but that company refused to allow her to transfer responsibility for her automobile lease payments from the corporation to herself. She acknowledged that she was responsible for any of the lease payments and requested that the Mosers acknowledge that the automobile was not an asset of the corporation. At the time Respondent knew that she was responsible for the lease payments because she signed the lease agreement as an individual. Respondent's contact with G.M.A.C. was unnecessary since her automobile had been leased to her as an individual in June of 1988, a date which preceded the existence of Carr Real Estate, Inc. The automobile was insured in Respondent's individual name and was registered in the name of G.M.A.C. at Respondent's address. The Bill of Sale executed by Respondent and the Mosers does not list the automobile as an asset of the corporation that was conveyed. The automobile leased by Respondent was not an asset of the corporation. The only relationship between Respondent's leased automobile and Carr Real Estate, Inc., concerns the deduction of automobile expenses as business expenses on the tax return for Carr Real Estate, Inc. On February 6, 1992, Helen Moser asked Respondent for a copy of the 1990 corporate tax return for Carr Real Estate, Inc., and Respondent provided a copy to her that same day. The return had been prepared in August or September of 1991 by Mary Dorak, a person enrolled with the Internal Revenue Service. It contained an entry entitled "loan from shareholder" in the sum of $107,060. Respondent had been the sole shareholder of the corporation. On February 26, 1992, the Mosers obtained an opinion letter from an attorney advising them that the corporation was not liable to Respondent for any debts. Neither the Mosers nor their accountant ever contacted Dorak or Respondent about the information contained in that tax return. Instead, the Mosers filed an amended corporate tax return for 1990 for Carr Real Estate, Inc. They removed the automobile as a corporate asset while leaving the shareholder's loan because it benefited them tax-wise. Instead of amending the return, the Mosers could have filed a 1991 return showing Respondent's stock exchange for the basis that was left of the stock in the corporation because the transaction took effect on January 1 of that year. Doing so would have caused no adverse tax consequences to the Mosers. Respondent typically provided Dorak with a listing of Respondent's income and expenses for the year and would then simply sign the return after Dorak had prepared it without reviewing the return first. Without any input from Respondent, Dorak had listed the automobile and some personal debts of Respondent on the 1990 corporate tax return because Respondent could take advantage of certain business deductions. That action had no adverse tax consequences for the Mosers. The Mosers never requested a tangible property tax return which would have reflected if there were any assets in the corporation. Had they made this request, they would have been told that there was none in existence because the corporation had no assets. At the time that Respondent and the Mosers executed the Purchase and Sale Agreement, the Bill of Sale, and the Seller's Affidavit in December, all three believed that the corporation had no assets or liabilities and that any assets and liabilities of Respondent were hers personally. As of January 1, 1991, the effective date of the sale, the corporation had no assets or liabilities. There were no tax consequences to the Mosers because of the listing of the shareholder loan in the 1990 corporate tax return because in that Subchapter S corporation the person ultimately adversely affected by the sale would be Respondent since she owned all of the shares in 1990. On the other hand, the filing of an amended 1990 corporate tax return by the Mosers without Respondent's knowledge and consent has resulted in adverse tax consequences to her, an unnecessary result. In November 1988 Respondent was involved in the sale of a condominium unit owned by Mr. and Mrs. Roy Heinz. Due to extended negotiations, the buyer's decision to not purchase the unit, and instructions from Heinz who was her client, Respondent delayed in placing the buyer's deposit check in her escrow account. Petitioner filed an Administrative Complaint against Respondent only and not also against Carr Real Estate, Inc., since that corporation was not yet in existence. After a formal evidentiary hearing, a Hearing Officer of the Division of Administrative Hearings specifically cleared Respondent of any intentional wrongdoing and of any culpable negligence. Respondent was found guilty, however, of what was specifically characterized to be a technical violation of failure to immediately place the deposit check into her escrow account. The minimum penalty permissible was assessed against Respondent. Respondent was also dismissed from the civil lawsuit filed by Roy Heinz which emanated out of the same circumstances for which the administrative action was brought. The Mosers knew about the disciplinary action and the civil lawsuit pending against Respondent individually prior to their execution of the December 1990 documents transferring Carr Real Estate, Inc., from Respondent's ownership to theirs effective January 1, 1991. The "Roy Heinz matter" was specifically raised by John Moser during the negotiations among the Mosers and Respondent. In April of 1991 Respondent sent Helen Moser a copy of the Recommended Order finding Respondent not guilty of any dishonest conduct or culpable negligence, and Helen Moser failed to even read the entire Order since she considered it unimportant and because she knew the transaction involved occurred prior to the formation of Carr Real Estate, Inc. The Mosers continue to operate Carr Real Estate, Inc. The business has been diminishing, however, since 1991 due to the reduction in the number of salespersons affiliated with the business, John Moser's inability to attract listings and retain clients, and the amount of time the Mosers have been devoting to John Moser's computer business. Respondent's actions and/or inactions have not been the cause of the decline in Carr Real Estate, Inc.'s, business. Moreover, the Mosers have not been harmed financially or in any other way due to any statements contained in the Purchase and Sale Agreement, Bill of Sale, or Seller's Affidavit executed by Respondent. The sale of Carr Real Estate, Inc., by Respondent to the Mosers benefited all three of them. In her negotiations surrounding that sale, Respondent agreed to the terms desired by the Mosers, acted honestly, and did not knowingly or intentionally misrepresent any material fact. Those misrepresentations alleged by the Mosers and Petitioner to be contained in the closing documents, such as any statement that Respondent personally had no assets or liabilities, were not material to the sale and purchase of the corporation.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is, RECOMMENDED that a Final Order be entered finding Respondent not guilty of the allegations contained in the Administrative Complaint filed against her and dismissing that Administrative Complaint. DONE and ENTERED this 16th day of December 1994, at Tallahassee, Florida. LINDA M. RIGOT Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 16th day of December 1994. APPENDIX TO RECOMMENDED ORDER Petitioner's proposed findings of fact numbered 1-4, 6-11, 13, 15, 18, and 19 have been adopted either verbatim or in substance in this Recommended Order. Petitioner's proposed findings of fact numbered 5, 16, and 17 have been rejected as not being supported by the weight of the credible evidence. Petitioner's proposed findings of fact numbered 12 and 14 have been rejected as being subordinate. Respondent's proposed findings of fact numbered 1-29, 31, and 33-36 have been adopted either verbatim or in substance in this Recommended Order. Respondent's proposed finding of fact numbered 30 has been rejected as not being supported by the weight of the credible evidence in this cause. Respondent's proposed findings of fact numbered 32 has been rejected as not constituting a finding of fact but rather as constituting argument of counsel. COPIES FURNISHED: Jack McRay, Esquire Acting General Counsel Department of Business and Professional Regulation Northwood Centre 1940 North Monroe Street Tallahassee, Florida 32399-0792 Theodore R. Gay, Senior Attorney Department of Business and Professional Regulation 401 Northwest 2nd Avenue, Suite N-607 Miami, Florida 33128 Harold M. Braxton, P.A. Suite 400, One Datran Center 9100 South Dadeland Boulevard Miami, Florida 33156-7815
The Issue Whether the Department of Financial Services' (Department or Respondent) statement that registrations as a claimant's representative under section 717.1400, Florida Statutes,1/ are licenses subject to section 120.60(1), Florida Statutes, is an unadopted rule that may be challenged by Petitioner under section 120.56(4).
Findings Of Fact Modern Tool and Die, (MTD), is a privately held corporation engaged in manufacturing equipment. In 1965 they started the manufacture of bumper guards which required electroplating. They entered into agreements with MPC pursuant to which MTD erected two buildings adjacent to their plant which they leased to MPC in which to do the electroplating of the bumper guards. MPC is also a privately held corporation and there is no common ownership of these two companies. The two buildings built for MPC's occupancy were partitioned, compartmented and wired as desired by MPC and at its expense. Florida Power Corporation supplied electricity to the complex through the main transformer of MTD. In 1965 and to a lesser extent now, electricity rates per kilowatt-hour (kwh) were lowered with increased usage of electricity. Since both MTD and MPC are large users of electricity they obtain a cheaper rate if all electricity used is billed from the master meter serving MTD. Accordingly, and at the recommendation of the power company, additional transformers and meters were placed at the two buildings occupied by MPC and read monthly at or about the same time the master meter is read by the power company. The kw used at the two buildings is forwarded by MPC to MTD each month. The latter, upon receipt of the power company bill, computes the cost of the power per kwh and in turn bills MPC for its portion of the bill based upon the usage forwarded by MPC to MTD. Upon the commencement of this working agreement between these two companies in 1965 MPC, pursuant to an oral lease, has paid rent to MTD monthly at the rate of approximately $2,400 per month. It has also paid to MTD its pro rata cost for the electricity used each month. The rent is invoiced each month on the first of the month as in Exhibit 3 and paid by the 10th by MPC. Sales tax is added to the rent and remitted to DOR. Electricity usage is also invoiced by MTD to MPC on or about the 20th of the month and paid by MPC on or about the first of the following month. (Exhibit 4). Sales tax on the electricity used is paid by MTD to Florida Power Company who presumably remits this to DOR. During the 15 years these two companies have shared the cost of electric power they have been audited numerous times; the arrangement was made known to the auditors; and no auditor, prior to the present, suggested that the cost of electricity was part of the rent paid by MPC upon which sales tax was due. Notice of Proposed Assessment (Exhibit 1) in the amount of $9,747.34 is based upon the cost of electricity billed to MPC during the period of the audit December 1, 1976 through November 30, 1979 multiplied by 4 percent sales tax plus penalties and interest. The parties stipulated to the accuracy of this amount. They differ only as to whether the tax is owed.
The Issue The issue for determination is whether Respondent abused its discretion in failing to settle or compromise the outstanding tax assessment against Petitioner, based on Petitioner's inability to pay, pursuant to Section 213.21, Florida Statutes.
Findings Of Fact Petitioner is a Florida corporation, engaged in the business of painting and repairing damaged automobiles and other vehicles. Petitioner's principal place of business and home office is located at 100 Northwest 9th Terrace, Hallandale, Florida. Respondent is the agency charged with administering the tax laws of the State of Florida, pursuant to, among other provisions, Section 213.05, Florida Statutes. Respondent is authorized to conduct audits of taxpayers. It is further authorized to request information to ascertain the tax liability of taxpayers, if any, pursuant to Section 213.34, Florida Statutes. It is undisputed that Petitioner is a taxpayer. From September 2, 1997 through March 12, 1999, Respondent conducted an audit of Petitioner to determine whether Petitioner had been properly collecting and remitting sales and use tax and whether any additional sales and use tax amounts were due. On September 2, 1997, Respondent forwarded its form DR-840, Notice of Intent to Audit Books and Records, to Petitioner. The period of time being audited was from August 1, 1992 through July 31, 1997. For part of the audit period, Petitioner's records were inadequate. Petitioner's record keeping was poor. For the remainder of the audit period, Petitioner's records were voluminous. A higher amount of gross sales were reported on Petitioner's federal tax return than on Florida's tax return. Petitioner could not document 95 percent of its exempt sales reported to the State of Florida. Petitioner reported a ratio of 35 percent for exempt sales on its filed Florida sales and use tax returns. Because of the two factors of inadequate and voluminous records, sampling was required by Respondent. On January 12, 1998, Petitioner and Respondent entered into a written audit sampling agreement. On June 5, 1998, Respondent provided its Notice of Intent to Make Audit Changes to Petitioner. On July 21, 1998, Respondent issued its Notice of Intent to Make Audit Changes (revised), which was the first revision, to Petitioner. On January 12, 1999, Respondent issued its Notice of Intent to Make Audit Changes (revised), which was the second revision, to Petitioner. On March 12, 1999, Respondent issued its Notice of Proposed Assessment to Petitioner. This notice indicated that Petitioner owed additional sales and use tax in the amount of $166,306.93, penalty in the amount of $81,443.38, and interest through March 12, 1999, in the amount of $77,468.37. Consequently, the notice further indicated that the total amount of the assessment against Petitioner was $325,218.68. A compromise of the assessed tax, interest, or penalty can be performed at Respondent's field level after an audit is completed and the case is still in Respondent's field office. However, the field office's authority is limited in that affected taxpayer must agree to the amount of the tax assessed. In the present case, Petitioner did not agree to the amount of the tax assessed and, therefore, Respondent's field office could not compromise the assessed tax, interest, or penalty against Petitioner. On September 17, 1999, Respondent issued its Notice of Decision. Respondent notified Petitioner that the assessment would not be changed. Petitioner requested a reconsideration as to whether Respondent should compromise the tax, interest, and penalty, based on grounds of doubt of collectibility. By Notice of Reconsideration issued January 7, 2000, Respondent notified Petitioner of Petitioner's failure to establish an inability to pay the assessment in full. Petitioner timely challenged Respondent's determination of Petitioner's inability to pay the assessment and requested a hearing. It is undisputed that Respondent has the discretion to compromise an assessment. Respondent may compromise tax or interest based on doubt of collectibility of the tax or interest. The taxpayer bears the burden of providing documentation to support the taxpayer's position that it cannot pay the tax or interest. Respondent examines whether a compromise is in the best interests of the State of Florida in determining whether to compromise an assessment. Respondent considers a compromise to be in the best interests of the State and may compromise the assessment under the following circumstances: (1) on the basis of the taxpayer providing documentation of the taxpayer's inability to pay the assessment in full but having the cash flow to make payments in installments; or (2) when a taxpayer's business or the taxpayer-corporation is insolvent and the taxpayer's or corporation's assets were used to satisfy legitimate liabilities and not used to enrich any person closely related to the taxpayer or corporation; or (3) when a taxpayer is gravely ill and the cash flow of the taxpayer's business is poor. When it considers compromising any tax, interest, or penalty, Respondent reviews several factors, including the audit file, financial information, and any other factors or circumstances which may affect collectibility. The financial information considered includes positive and negative sales trends, cost of goods sold, profitability, and net worth. Additionally, any changes in assets, in particular fixed assets, and liabilities are taken into account. Other factors or circumstances considered include the fair market value of a taxpayer's assets, the future prospects of a taxpayer's business, and the solvency or insolvency of a taxpayer's business. Respondent does not consider the liquidation value of a taxpayer's business. Petitioner was, and is, not familiar with the State of Florida's sales and use tax law, as the law relates to Petitioner's business. Petitioner's president has no prior experience in maintaining the books and records of a company or in completing financial statements of a company. Petitioner's president never attended a seminar, presented or sponsored by Respondent, on Florida's sales and use tax, or read any of Respondent's pamphlets on sales and use tax. Petitioner has a New York accountant, who never provided Petitioner's president or treasurer with any instructions regarding Florida's sales and use tax. During the audit period, Petitioner never requested written advice from Respondent regarding the application of Florida's sales and use tax to its business. For the last three years, Petitioner's sales have been a little less than $1,000,000. For the years 1996 and 1997, Petitioner's federal tax returns showed cash balances at the beginning of each year even though the cash balance for 1997, $51,431, was less than for 1996, $93,497. Petitioner's federal tax returns for 1996 through 1998 indicate a loss for each year during that time period. However, a comparison between Petitioner's sales income in its federal tax returns and its state tax returns shows that Petitioner's sales income was grossly underreported. Respondent's analysis worksheet, referred to as Doubt as to Collectibility Analysis Worksheet, indicated a negative dollar figure as to cash available by Petitioner to pay Respondent. Inconsistencies existed between the information reported in Petitioner's tax returns and information provided by Petitioner during the protest period. Petitioner's sales figure as of August 31, 1999, an eight-month sales period for 1999, stated in its Petition for Reconsideration, dated October 6, 1999, was substantially less than the sales figure reported on Petitioner's sales and use tax returns filed during the same time period. Additionally, Petitioner overstated the cost of goods sold in one of its federal tax returns, which resulted in an overstated net loss. The fair market value of Petitioner's assets indicated in its Petition for Reconsideration, $30,000, was more than 100 percent of the value reflected on Petitioner's county tangible personal property return, $13,000. Also, further areas of inconsistencies existed between the information provided by Petitioner and the information reported on Petitioner's tax returns. Petitioner indicated that its former treasurer received a deferred compensation payment of $60,000, but neither Petitioner's tax returns nor financial statements reflected a payment for the expense. Petitioner showed a loss on its 1996 federal tax return, which, according to Petitioner, was a result of moving expenses and expenses in the construction business; however, no expense unique to moving or the construction business was reflected on Petitioner's tax return or financial statement. Petitioner's financial data, including federal tax returns and state wage reports, showed trends and deficiencies. A trend of an increase in gross sales for Petitioner was shown for the years 1997 through 1999, in Petitioner's federal tax returns for the same years and in Petitioner's Petition for Reconsideration, regarding its gross sales as of August 31, 1999. Additionally, the same federal tax returns showed a trend of an increase in net income for the same years in that deductions in relation to sales were less than the previous years. For the years 1994 through 1997, as reported on Petitioner's federal tax returns, Petitioner's depreciable assets increased each year. Respondent's analysis worksheet also showed a negative dollar figure as to Petitioner's adjusted net worth. As of August 31, 1999, the first eight months of 1999, Petitioner's total assets were $40,814 and its total loans, payable to banks, were $90,000. Taking into consideration the totality of the circumstances, Petitioner failed to provide Respondent with adequate and complete documentation and information in order for Respondent to make a determination of collectibility.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order sustaining the assessment of tax, penalty, and interest against Copo Paint and Body Shop, Inc., and sustaining the refusal to compromise the tax, penalty, or interest. DONE AND ENTERED this 4th day of June, 2001, in Tallahassee, Leon County, Florida. 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 4th day of June, 2001. COPIES FURNISHED: Joseph C. Moffa, Esquire Moffa & Moffa, P.A. One Financial Plaza, Suite 2202 100 Southeast Third Avenue Fort Lauderdale, Florida 33394 Nicholas Bykowsky, Esquire Office of the Attorney General The Capitol, Tax Section Tallahassee, Florida 32399-1050 Linda Lettera, General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 James Zingale, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100
The Issue As to DOAH Case No. 18-4475RX, whether Florida Administrative Code Rule 12A-1.044(5)(a) is an invalid exercise of delegated legislative authority in violation of section 120.52(8), Florida Statutes.1/ As to DOAH Case No. 18-4992RU, whether the Department of Revenue's ("Department") Standard Audit Plan, Vending and Amusement Machines--Industry Specific, section 1.1.3.3 ("SAP") is an unadopted rule in violation of sections 120.54 and 120.56, Florida Statutes.
Findings Of Fact The Parties and Audit Period GBR is a Florida corporation with its principal place of business in Miami, Florida. Gilda Rosenberg is the owner of GBR and a related entity, Gilly Vending, Inc. ("Gilly"). GBR and Gilly are in the vending machine business. At all times material hereto, Amit Biegun served as the chief financial officer of the two entities. The Department is the state agency responsible for administering Florida's sales tax laws pursuant to chapter 212, Florida Statutes. This case concerns the audit period of January 1, 2012, to December 31, 2014. GBR's Provision of Vending Machine Services Prior to the audit period, the school boards of Broward and Palm Beach County issued written solicitations through invitations to bid ("ITB"), seeking vendors to furnish, install, stock, and maintain vending machines on school property. The bids required a "full turn-key operation." The stated objectives were to obtain the best vending service and percentage commission rates that will be most advantageous to the school boards, and to provide a contract that will be most profitable to the awarded vendor. The stated goal was that student choices from beverage and snack vending machines closely align with federal dietary guidelines. GBR operates approximately 700 snack and beverage vending machines situated at 65 schools in Broward, Palm Beach, and Miami-Dade Counties. Of these 65 schools, 43 are in Broward County, 21 are in Palm Beach County, and one is in Miami-Dade County. The snack vending machines are all owned by GBR. Beverage vending machines are owned by bottling companies, such as Coca-Cola and Pepsi. Of the 700 vending machines, approximately 60 percent of the machines are for beverages and the remaining 40 percent are for snacks. GBR has written vending agreements with some schools. In these agreements, GBR is designated as a licensee, the school is designated as the licensor, and GBR is granted a license to install vending machines on school property in exchange for a commission. Furthermore, GBR is solely responsible to pay all federal, state, and local taxes in connection with the operation of the vending machines. Ownership of the vending machines does not transfer to the schools. However, in some cases the schools have keys to the machines. In addition, designated school board employees have access to the inside of the machines in order to review the meter, monitor all transactions, and reconcile the revenue from the machines. GBR places the vending machines on school property. However, the schools control the locations of the vending machines. The schools also require timers on the machines so that the schools can control the times during the day when the machines are operational and accessible to students. The schools also control the types of products to be placed in the machines to ensure that the products closely align with the federal dietary guidelines. The schools also control pricing strategies. GBR stocks, maintains, and services the vending machines. However, Coca-Cola and Pepsi may repair the beverage machines they own. GBR is solely responsible for repairing the machines it owns. The schools require that any vendor service workers seeking access to the vending machines during school hours pass background checks. GBR route drivers collect the revenue from all of the vending machines and the revenues are deposited into GBR's bank accounts. In exchange for GBR's services, the schools receive from GBR, as a commission, a percentage of the gross receipts. However, neither GBR nor the schools are guaranteed any revenue unless sales occur from the machines. On its federal income tax returns, GBR reports all sales revenue from the vending machines. For the tax year 2012, GBR's federal income tax return reflects gross receipts or sales of $5,952,270. Of this amount, GBR paid the schools $1,363,207, a percentage of the gross receipts which GBR characterized on the tax return and its general ledger as a commission and equipment space fee and cost of goods sold. For the tax year 2013, GBR's federal income tax return reflects gross receipts or sales of $6,535,362. Of this amount, GBR paid directly to the schools $1,122,211, a percentage of the gross receipts which GBR characterized on the tax return and its general ledger as a commission and equipment space fee and cost of goods sold. For the tax year 2014, GBR's federal income tax return reflects gross receipts or sales of $6,076,255. Of this amount, GBR paid directly to the schools $1,279,682, a percentage of the gross receipts which GBR characterized on the tax return and its general ledger as a commission and equipment space fee and cost of goods sold. Thus, for the audit period, and according to the federal tax returns and general ledgers, GBR's gross receipts or sales were $18,563,887. Of this amount, GBR paid directly to the schools $3,765,100, as a commission and equipment space fee and cost of goods sold. The Department's Audit and Assessment On January 27, 2015, the Department, through its tax auditor, Mary Gray, sent written notice to GBR of its intent to conduct the audit. This was Ms. Gray's first audit involving vending machines at schools. Thereafter, GBR provided Ms. Gray with its general ledger, federal returns, and bid documents. On October 28, 2015, Ms. Gray issued a draft assessment to GBR. The email transmittal by Ms. Gray to GBR's representative states that "[t]he case is being forwarded for supervisory review." In the draft, Ms. Gray determined that GBR owed additional tax in the amount of $28,589.65, but there was no mention of any purported tax on the monies paid by GBR to the schools as a license fee to use real property. However, very close to the end of the audit, within one week after issuing the draft, and after Ms. Gray did further research and conferred with her supervisor, Ms. Gray's supervisor advised her to issue the B03 assessment pursuant to section 212.031 and rule 12A-1.044, and tax the monies paid by GBR to the schools as a license fee to use real property. Thus, according to the Department, GBR was now responsible for tax in the amount of $246,230.93, plus applicable interest. Of this alleged amount, $1,218.48 was for additional sales tax (A01); $4,181.41 was for purchase expenses (B02); $13,790 was for untaxed rent (B02); and $227.041.04 was for the purported license to use real property (B03). Ms. Gray then prepared a Standard Audit Report detailing her position of the audit and forwarded the report to the Department's dispute resolution division. On January 19, 2016, the Department issued the Notice of Proposed Assessment ("NOPA") against GBR for additional tax and interest due of $288,993.31. The Department does not seek a penalty against GBR. At hearing, Ms. Gray testified that the Department's SAP is an audit planning tool or checklist which she used in conducting GBR's audit. Employees of the Department are not bound to follow the SAP, and the SAP can be modified by the auditors on a word document. The SAP was utilized by Ms. Gray during the audit, but it was not relied on in the NOD.4/
