The Issue The issue in this case is whether SNS Lakeland, Inc. (Petitioner), collected and remitted the correct amount of sales and use tax on its operations for the audit period.
Findings Of Fact DOR is the state agency charged with the responsibility of administering and enforcing the tax laws of the state of Florida. In conjunction with that duty, DOR performs audits of business entities conducting sales and use transactions. At all times material to the issue of this case, Petitioner conducted business as a convenience store located at 811 East Palmetto Street, Lakeland, Florida. Petitioner was obligated to collect and remit sales and use tax in connection with the activities of its business enterprise. Petitioner’s Federal Identification Number is 26-0412370. Petitioner is authorized to conduct business within the state and its certificate of registration number is 63-8013863272-3. In order to properly perform its audit responsibilities, DOR requires that businesses maintain and present business records to support the collection of sales and use taxes. In this case, DOR notified Petitioner that it intended to audit the business operations for the audit period, June 1, 2007, through September 30, 2009. After the appropriate pre-audit notice and exchange of information, DOR examined Petitioner’s financial records. Since Petitioner did not maintain register tapes (that would track sales information most accurately), the Department examined all records that were available: financial statements, federal and state tax returns, purchase invoices/receipts, bank records, and register tapes that were available from outside the audit period. Petitioner’s reported tax payments with the amounts and types of taxes that it remitted should have been supported by the records it maintained. Theoretically, the sums remitted to the Department should match the records of the business entity. In this case, the amount remitted by Petitioner could not be reconciled with the business records maintained by the business entity. As a result, the auditor determined the sales tax due based upon the best information available. First, the auditor looked at the actual register tapes for the period November 10, 2010, through November 29, 2010 (sample tapes). Had Petitioner kept its sales receipts, the actual receipts for the audit period would have been used. Nevertheless, the sample tapes were used to estimate (based upon the actual business history of the company) the types and volumes of sales typically made at the store. Secondly, in order to determine the mark-up on the sales, the auditor used Petitioner’s purchase invoices, worksheets, profit and loss statements, and federal and state tax returns. In this regard, the auditor could compare the inventory coming in to the store with the reported results of the sales. Third, the auditor determined what percentage of the sales typically would be considered exempt from tax at the time of acquisition, but then re-sold at a marked-up price for a taxable event. Petitioner argued that 70 percent of its gross sales were taxable, but had no documentary evidence to support that conclusion. In contrast, after sampling records from four consecutive months, the Department calculated that the items purchased for sale at retail were approximately 78 percent taxable. By multiplying the effective tax rate (calculated at 7.0816) by the amount of taxable sales, the Department computed the gross sales tax that Petitioner should have remitted to the state. That gross amount was then reduced by the taxes actually paid by Petitioner. Petitioner argued that the mark-up on beer and cigarettes used by the Department was too high (thereby yielding a higher tax). DOR specifically considered information of similar convenience stores to determine an appropriate mark-up. Nevertheless, when contested by Petitioner, DOR adjusted the beer and cigarette mark-up and revised the audit findings. Petitioner presented no evidence of what the mark-up actually was during the audit period, it simply claimed the mark-up assumed by DOR was too high. On March 30, 2011, DOR issued the Notice of Proposed Assessment for sales and use tax, penalty, and interest totaling $27,645.79. Interest on that amount accrues at the rate of $4.20, per day. In reaching these figures, DOR abated the penalty by 80 percent. The assessment was rendered on sales tax for sales of food, drink, beer, cigarettes, and tangible personal property. Petitioner continues to contest the assessment. Throughout the audit process and, subsequently, Petitioner never presented documentation to dispute the Department’s audit findings. DOR gave Petitioner every opportunity to present records that would establish that the correct amounts of sales taxes were collected and remitted. Simply stated, Petitioner did not maintain the records that might have supported its position. In the absence of such records, the Department is entitled to use the best accounting and audit methods available to it to reconcile the monies owed the state.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order sustaining the audit findings, and require Petitioner to remit the unpaid sales and use taxes, penalty, and interest as stated in the Department’s audit findings. DONE AND ENTERED this 9th day of November, 2011, in Tallahassee, Leon County, Florida. S J. D. PARRISH Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 9th day of November, 2011. COPIES FURNISHED: Marshall Stranburg, General Counsel Department of Revenue The Carlton Building, Room 204 501 South Calhoun Street Tallahassee, Florida 32314-6668 Ashraf Barakat SNS Lakeland, Inc 811 East Palmetto Street Lakeland, Florida 33801 Carrol Y. Cherry, Esquire Office of the Attorney General The Capitol, PL-01 Revenue Litigation Bureau Tallahassee, Florida 32399 Brent Hanson B and M Business Services, Inc. 6735 Conroy Road, Suite 210 Orlando, Florida 32835 Lisa Vickers, Executive Director Department of Revenue The Carlton Building, Room 104 501 South Calhoun Street Post Office Box 6668 Tallahassee, Florida 32314-6668
The Issue The issue is whether Petitioner owes the taxes, interest, and penalties assessed by the Department of Revenue based upon its audit of Petitioner for the period of August 1, 1996, through July 31, 2001.
Findings Of Fact Based upon the testimony and evidence received at the hearing, the following findings are made: Petitioner is a Florida corporation engaged in the business of selling and installing floor covering materials, such as carpet and tile. Petitioner's business is located in Hillsborough County, Tampa, Florida. Petitioner sales fall into two basic categories: "cash and carry sales" and "installation sales." The "cash and carry sales" are retail sales of floor covering materials to customers that come into Petitioner's store. These sales do not involve any installation work by Petitioner. The "installation sales" are sales in which Petitioner installs the floor covering material in the customer's home or business. These sales are performed pursuant to a lump-sum contract which incorporates the price of the installation and the price of the floor covering materials being installed. Petitioner purchases the floor covering materials from suppliers and distributors. Those purchases become part of the inventory from which Petitioner makes its "installation sales." Petitioner also makes general purchases of goods and services necessary for the day-to-day operation of its business. These purchases include items such as cleaning supplies and vehicle repairs. Petitioner made several fixed-assets purchases during the audit period for use in its business. It purchased a word processor in August 1996, and it purchased equipment and fixtures in December 1996. On those occasions that Petitioner collected sales tax from its customers on the "cash and carry sales" or paid sales tax on its inventory purchases and general purchases, it remitted or reported those amounts to the Department. However, as discussed below, Petitioner did not collect the full amount of sales tax due on each sale, nor did it pay the full amount of sales tax due on each purchase. The Department is the state agency responsible for administering Florida's sales tax laws. The Department is authorized to conduct audits of taxpayers to determine their compliance with the sales tax laws. By letter dated September 10, 2001, the Department notified Petitioner of its intent to conduct a sales tax audit of Petitioner's records for the period of August 1, 1996, through July 31, 2001. The audit was conducted by David Coleman, a tax auditor with seven years of experience with the Department. Petitioner designated its certified public accountant, P.J. Testa, as its representative for purposes of the Department's audit. That designation was memorialized through a power of attorney form executed by Petitioner on March 5, 2002. Mr. Coleman communicated with Mr. Testa throughout the course of the audit. Mr. Coleman conducted the audit using a sampling methodology agreed to by Mr. Testa on behalf of Petitioner. Pursuant to that methodology, Mr. Coleman conducted a comprehensive review of Petitioner's year-2000 purchase and sales invoices and extrapolated the results of that review to the other years in the audit period. The sampling methodology was used because of the volume of records and transactions during the audit period and because of the unavailability of all of the records for the audit period. The year 2000 was chosen as the sample period because Petitioner's records for the other years in the audit period were incomplete or unavailable. Mr. Coleman's audit of the year-2000 invoices focused on three broad types of transactions. First, he reviewed invoices of Petitioner's retail "cash and carry sales." Second, he reviewed the invoices through which Petitioner purchased the floor covering materials that it later sold as part of its "installation sales." Third, he reviewed the invoices through which Petitioner made general purchases of tangible personal property used in the day-to-day operation of its business. The sampling methodology was used for the audit of Petitioner's "cash and carry sales," the inventory purchases related to the "installation sales," and the general purchases. The methodology was not used for the audit of Petitioner's fixed-asset purchases; Mr. Coleman reviewed all of the available records for the fixed-asset purchases during each year of the audit period. Mr. Coleman's audit of Petitioner's retail "cash and carry sales" identified 29 invoices during year-2000 on which no sales tax or less than the full sales tax was paid by the customer. Those invoices amounted to $17,451.30, on which $1,178.11 in total sales tax was due, but only $552.97 was paid. As a result, Mr. Coleman's audit identified a sales tax deficiency of $625.14 for the retail sales during the sample period. Mr. Coleman's audit of Petitioner's purchases of floor covering that was later sold in the "installation sales" identified a considerable number of purchases during year-2000 on which no sales tax or less than the full sales tax was paid by Petitioner to the supplier or distributor of the materials. Those purchases amounted to $123,398.52, but only $123,397.80 of that amount was taxable. On the taxable amount, $8,330.07 in total sales tax was due, but only $6,810.68 was paid. As a result, Mr. Coleman's audit identified a sales tax deficiency of $1,519.41 for Petitioner's inventory purchases during the sample period. Mr. Coleman's audit of Petitioner's "general purchases" identified 10 sales during year-2000 on which sales tax was not paid. Those invoices amounted to $2,914.76, on which $196.77 in sales tax was due, but none of which was paid. As a result, Mr. Coleman's audit identified a sales tax deficiency of $196.77 for the general purchases during the sample period. Mr. Coleman's audit of Petitioner's fixed-asset purchases identified only two transactions during the entire audit period on which Petitioner did not pay the full sales tax. Those transactions amounted to $5,078.92, on which $330.14 in total sales tax was due, but none of which was paid. As a result, Mr. Coleman's audit identified a sales tax deficiency of $330.14 for the fixed-asset purchases during the audit period. The tax deficiencies calculated by Mr. Coleman for year-2000 for each category described above take into account any sales tax collected by Petitioner from its customers or paid by Petitioner to its vendors. After Mr. Coleman computed the tax deficiencies based upon his audit of the year-2000 records, he calculated a "percentage of error" for each category of sales/purchases. The percentage of error is the ratio used to extrapolate the results of the audit of the year-2000 records over the remainder of the audit period. No percentage of error was calculated for the fixed-asset purchases because Mr. Coleman reviewed the available records for those purchases over the entire audit period, not just year-2000. The percentage of error was calculated by dividing the sales tax deficiency identified in a particular category for the year-2000 by the total sales/purchases in that category for the year-2000. For the year-2000, Petitioner had retail sales of $1,143,182.45; general purchases of $21,254.88; and inventory purchases of $1,214,016.24. As a result, the applicable percentages of error were 0.000547 ($625.14 divided by $1,143,182.45) for the retail sales; 0.009258 ($196.77 divided by $21,254.88) for the general purchases; and 0.001252 ($1,519.41 divided by $1,214,016.24) for the inventory purchases. The percentages of error were then multiplied by the total sales in the applicable category for the entire audit period to calculate a total tax deficiency in each category. Petitioner's total retail sales over the audit period were $4,455,373.40. Therefore, the total tax deficiency calculated for that category was $2,437.12 (i.e., $4,455,373.40 multiplied by 0.000547). Petitioner's total general purchases over the audit period were $110,741.49. Therefore, the total tax deficiency calculated for that category was $1,025.25 (i.e., $110,741.49 multiplied by 0.009258). Petitioner's total inventory sales over the audit period were $3,130,882.10. Therefore, the total tax deficiency calculated for that category was $3,919.86 (i.e., $3,130,882.10 multiplied by 0.001252). Petitioner's total tax deficiency was computed by adding the deficiencies in each category, as follows: Retail Sales $2,437.12 General Purchases 1,025.25 Inventory Purchases 3,919.86 Fixed-asset purchases 330.14 TOTAL $7,712.37 Of that total, $6,863.02 reflects the state sales tax deficiency; $313.77 reflects the indigent care surtax deficiency; and $535.58 reflects the local government infrastructure surtax deficiency. The sales tax rate in effect in Hillsborough County during the audit period was 6.75 percent. The state sales tax was six percent; the remaining 0.75 percent was for county surtaxes, namely the local government infrastructure surtax and the indigent care surtax. That rate was used by Mr. Coleman in calculating the tax deficiencies described above. On October 4, 2002, Mr. Coleman hand-delivered the Notice of Intent to Make Audit Change (NOI) to Petitioner. The NOI is the end-product of Mr. Coleman's audit. The NOI identified the total tax deficiency set forth above, as well as a penalty of $3,856.26, which is the standard 50 percent of the tax deficiency amount, and interest of $2,561.63, which is calculated at a statutory rate. The NOI included copies of Mr. Coleman's audit work- papers which showed how the taxes, penalties, and interest were calculated. The NOI also included a copy of the "Taxpayers' Bill of Rights" which informed Petitioner of the procedure by which it could protest the audit results reflected on the NOI. On October 29, 2002, the Department issued three NOPAs to Petitioner. A separate NOPA was issued for each type of tax -- i.e., sales tax, indigent care surtax, and local government infrastructure surtax. The cumulative amounts reflected on the NOPAs were the same as that reflected on the NOI, except that the interest due had been updated through the date of the NOPAs. Interest continues to accrue on assessed deficiencies at a cumulative statutory rate of $1.81 per day. The NOPAs were sent to Petitioner by certified mail, and were received by Petitioner on November 1, 2002. By letter dated November 5, 2002, Petitioner protested the full amount of the taxes assessed on the NOPAs and requested a formal administrative hearing. The letter was signed by Mr. Testa on Petitioner's behalf. The protest letter does not allege that the methodology used by Mr. Coleman was improper or that the results of the audit were factually or legally erroneous. Instead, the protest letter states that Petitioner was disputing the results of the audit because it was "following procedures set forth by an agent from a previous audit who established the manner in which [Petitioner was] to compute sales tax on the items being questioned by the current auditor." Mr. Testa made similar comments to Mr. Coleman during the audit. When Mr. Coleman requested documentation from Mr. Testa to corroborate those comments about the procedures allegedly established by the prior auditor, Mr. Testa was unable to provide any such documentation. The record of this proceeding is similarly devoid of evidence to support Petitioner's allegation on this point. The record does not contain any evidence to suggest that Petitioner ever modified or revoked Mr. Testa's authority to represent it in connection with the audit or this protest, which Mr. Testa initiated on Petitioner's behalf. Petitioner, through Mr. Testa, had due notice of the date, time, and location of the final hearing in these cases. Neither Mr. Testa, nor anyone else on Petitioner's behalf, appeared at the final hearing.
Recommendation Based upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department of Revenue issue a final order imposing the taxes, interest, and penalties against Petitioner in the full amounts set forth in the three Notices of Proposed Assessment dated October 28, 2002. DONE AND ENTERED this 30th day of December, 2003, in Tallahassee, Leon County, Florida. S T. KENT WETHERELL, II 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 30th day of December, 2003.
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 The issue in this case is whether Petitioner is liable for certain taxes and, if so, how much.
Findings Of Fact Petitioner is a Florida corporation with its principal place of business in Manatee County, Florida. Petitioner is in the printing business. Specifically, Petitioner produces, manufactures, assembles, and publishes telephone directories for mobile home parks in Florida. All of Petitioner's work in connection with these directories takes place in Florida. The directories list the names, addresses, and telephone numbers of residents of the mobile home park for which the directory is prepared. The directories also contain advertisements, which Petitioner solicits from merchants seeking to sell goods or services to the mobile home park residents. Following the production of the directories, Petitioner distributes them to the mobile home park residents, who maintain possession of the directories. However, Petitioner retains ownership of each directory, even after it is distributed. Petitioner is solely responsible for the manufacture and distribution of the directories. Petitioner owns accounts receivable reflecting monies owned it by entities for which Petitioner has performed work. Petitioner owns treasury stock. Following an audit, Respondent issued its Intent to Make Sales and Use Tax Audit Changes. The proposed changes assessed additional sales and use taxes of $44,151.77, intangible tax of $1297.08, and $194,75 of health care tax. The bases of proposed liability for the sales and use tax were for the publication and distribution of directories for which no sales or use tax had been collected and for the sale of advertising during the period of the service tax from July 1, 1986, through December 31, 1986, for which no sales tax on advertising had been collected. The basis of proposed liability for the intangible tax was for the failure to pay intangible tax on accounts receivable and treasury stock. The basis of proposed liability for the health care tax was for the failure to pay the Hillsborough County Health Care Tax and Discretionary Sales Surtax. On February 11, 1991, Petitioner protested the proposed assessments. On April 24, 1992, Respondent issued its Notice of Decision sustaining the proposed sales and use tax and intangible tax, but eliminating the proposed health care tax. On May 12, 1992, Petitioner filed a Petition for Reconsideration concerning the proposed sales and use tax. On November 24, 1992, Respondent issued its Notice of Reconsideration sustaining the proposed sales and use tax. On January 21, 1993, Petitioner timely filed its petition for a formal administration hearing. Subject to the accuracy of its legal position, Respondent's assessment is factually accurate. Petitioner will pay the assessed amount of sales and use tax, plus interest, if its position is not sustained following the conclusion of this proceeding, including judicial review.
Recommendation Based on the foregoing, it is hereby RECOMMENDED that a final order be entered determining that, for each assessed period, Petitioner is liable for the assessed corporate intangible tax plus interest, the use tax on the cost price of the materials and other covered items plus interest, the sales tax on services on the advertising revenues, but not for any sales tax apart from the period covered by the sales tax on services. ENTERED on January 25, 1994, in Tallahassee, Florida. ROBERT E. MEALE Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, FL 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings on January 25, 1994. COPIES FURNISHED: David M. Carr David Michael Carr, P.A. 600 East Madison Street Tampa, Florida 33602 Eric J. Taylor Assistant Attorney General Office of the Attorney General The Capitol, Tax Section Tallahassee, Florida 32399-1050 Larry Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100 Linda Lettera, General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100
Findings Of Fact Petitioner is Carl R. Glass, d/b/a Osceola Forge located at 2749 North Orange Blossom Trail, Kissimmee, Florida 34744. Petitioner is engaged in the business of manufacturing and fabricating burglar bars, steel gates, decorative plastic ornamental castings and injection moldings. Petitioner built and erected one double sided billboard on his business property at 2749 North Orange Blossom Trail, Kissimmee, Florida. It is anchored by its owns supports into the ground as a permanent improvement to Petitioner's real property. The size of the billboard is approximately 12' x 38', plus an apron that runs along the length of the bottom of the billboard. Petitioner leases the face and apron of each side of billboard to customers who are generally required to supply their own labor and material to create an advertising message. The billboard was built to provide double-sided advertising for lanes of traffic going northbound or southbound past Petitioner's place of business. Petitioner has rented the billboard to various lessees for a monthly rental fee over the relevant period. Petitioner did not charge or collect sales and use taxes on the rental fee. Respondent conducted an audit of Petitioner's entire business, for the period May 1, 1986 through April 30, 1991. There was only one item assessed as a result of the audit which was on the lease of the billboard located on Petitioner's business property. Petitioner was assessed sales and use taxes, interest and penalties totalling $6,142.38, including taxes ($4,017.76) with a per diem interest rate of $1.32 to be computed from 10/3/91 to the present. Additional interest due, as of July 1, 1993, was calculated to equal $842.16 (638 days x $1.32). The sales tax assessment was based on invoices and other information provided by the Petitioner and followed the Department of Revenue routine procedures required for all audits. From January 1987 through February 1991, Petitioner, or his secretary, made five telephone calls from Osceola Forge to the Taxpayer Assistance Number of the Department of Revenue's regional office located in Maitland, Florida, requesting assistance. On each occasion, the Department's employee advised Petitioner or his employee that they could call the Department's Tallahassee 800 taxpayer assistance number. On at least one occasion, Petitioner's secretary or Petitioner was advised that the transaction was tax exempt, and need not be collected. Petitioner was aware of the 800 taxpayer assistance number in Tallahassee and tried to call the number. However, he was unable to get through, and called the local office only. On April 9, 1992, Petitioner personally telephoned the Titusville office of the Department of Revenue. On each occasion, Petitioner inquired whether or not sales or use taxes should be collected on the rental of the billboard. A free, updated Sales and Use Tax Rules Book is available to any tax payer upon request. In addition, a taxpayer could personally appear and bring documentation relating to any questions relating to the sales and use tax at any regional office. Petitioner did not obtain an updated rules book or personally appear at a regional office. On April 30, 1992, Petitioner filed a Protest Letter with Respondent challenging the abovementioned tax assessment. Respondent issued to Petitioner a Notice of Decision dated December 1, 1992. On January 8, 1993, Petitioner filed a Request for a Formal Administrative Hearing with Respondent. To date, Petitioner has not paid any of the contested taxes, interest, and penalties to Respondent. Petitioner relied on information provided by his secretary, his accountant, and brief phone conferences with the DOR's Maitland office to determine that the rental fees were tax exempt, and did not collect the sales tax from his customers. The DOR Audit Supervisor testified that there is a clear distinction between the taxable rental of a billboard and the nontaxable services of placing an advertising message on the billboard. The rental of the face of the billboard is a taxable transaction. On the other hand, if a person rents or leases a billboard, then hires a third party to place an advertising message on the billboard, this advertising service is tax exempt.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department of Revenue enter a Final Order upholding its sales and use tax assessment, waive penalties and interest accrued prior to October 2, 1991, and assess a tax of $4,017.76, plus interst from the date due. DONE and ENTERED this 14th day of July, 1993, in Tallahassee, Florida. DANIEL M. KILBRIDE Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 14th day of July, 1993. APPENDIX The following constitutes my specific rulings, in accordance with section 120.59, Florida Statutes, on proposed findings of fact submitted by the parties. Proposed findings of fact submitted by Petitioner. Petitioner did not submit proposed findings of fact. Proposed findings of fact submitted by Respondent. Proposed findings submitted by Respondent are accepted except as noted below. Those proposed findings neither noted below nor included in the Hearing Officer's findings were deemed unnecessary to the conclusions reached. Rejected as argument: paragraphs 37, 38, 39 COPIES FURNISHED: Carl R. Glass 2749 North Orange Blossom Trail Kissimmee, Florida 34741 James McAuley, Esquire Assistant Attorney General Capitol Building Tallahassee, Florida 32399-1050 Larry Fuchs Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100 Linda Lettera General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100
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.
Findings Of Fact The parties stipulated to certain facts, legal issues, and their respective contentions, as follow: "1. At all times pertinent to this action, Petitioner Lawrence Nali Construction Company, Inc., was a Florida Corporation licensed and doing business in the State of Florida. At all times pertinent to this action, Respondent Department of Revenue, State of Florida, was an agency of the State of Florida exercising duties relating to the assessment and collection of sales and use taxes pursuant to Chapter 212, Florida Statutes. Respondent conducted an audit of tran- sactions involving Petitioner for the period November 1, 1972, through October 31, 1975. As a result of that audit, Respondent claims that as of September 17, 1976, the Petitioner had a balance due to the Depart- ment of Revenue of $17,383.58 in taxes, interest and penalties. The assessment indicating the above amount is attached as Exhibit A. Petitioner is in agreement that if the assessment is upheld, Petitioner owes to the Respondent the amount of $17,383.58 plus interest calculated to date of payment to Respondent. The tax assessment in this case is based upon two factual situations: Petitioner, manufactured and installed asphaltic concrete from raw material at a rate certain per ton determined by bid, as an improvement to the real property of political entities consisting of cities, towns, municipalities, counties, school boards, junior colleges and others. Petitioner also hauled the asphalt to the job cite (sic) at a fixed ton/mile rate determined by bid. Petitioner, as a subcontractor, manu- factured and installed asphaltic concrete from raw material at a rate certain per ton determined by bid, as an improvement to the real property of political entities above described. The general contractor contracted with the political entities in various fashions but the Petitioner's duties were always the same and included manufacture, installation and hauling of asphaltic concrete based on a rate certain per ton and per ton mile. The issue in this case is whether the Respondent is correct in contending that the Petitioner must pay a sales and use tax on the produced asphalt which it uses in the performance of the construction contract jobs described in paragraph 6. It is agreed by the parties that no sales or use tax was remitted, by the Petitioner on the produced asphalt. It is agreed by the parties that no sales or use tax was paid by the instant customers to the Petitioner. It is Respondent's contention that, pursuant to the above-cited rules, the Peti- tioner is required to pay sales or use tax on the produced asphalt which is used to construct real property pursuant to a con- tract described in Rule 12A-1.51(2)(a), F.A.C. It is Petitioner's contention that the above-cited rules do not apply in the instant case since the customers involved in the instant fact situations are political subdivision or because the transaction was of the type described by Rule 12A-1.51(2)(d), F.A.C. Petitioner is entitled to rely on the earlier 1967 audit by Respondent because neither Petitioner's method of doing business, nor the law, has changed materially since 1967. Respondent agrees that this is an issue but fails to agree that Petitioner is so entitled to rely." All purchase orders or invitations for bid received by petitioner from political subdivisions stated that the entity was exempt from federal and state sales taxes and that such taxes should not be included in the bid. Typical bid forms entitled "Specifications for Asphaltic Concrete" called for a lump-sum price per ton for delivery and placement of the material by the vendor plus a sum per ton per mile for transportation costs. No breakdown of amounts for the cost of materials and cost of installation is reflected in the bid documents. (Testimony of Cowan, Cook, Exhibits 3, 7 (late filed)) Respondent audited petitioner's operations in 1967 and, although it had had previous transactions with governmental entities prior to that date, no assessment for back taxes was issued for failure to pay sales tax on such transactions nor was petitioner advised to do so in the future by state officials. After 1967, petitioner did not seek information from respondent concerning the subject of sales tax. As a consequence of the 1967 audit, petitioner believed that it was unnecessary to charge or pay sales tax on such transactions with political subdivisions. (Testimony of Cowan, Cook) As of April 1, 1977, Brevard County had a population of over 250,000. Although it is a large county in terms of size, respondent has only two auditors in the sales tax division to cover the entire county. (Testimony of Alberto, Cowan, Exhibit 4)
Recommendation That the petitioner Lawrence Nali Construction Company, Inc. be held liable for sales tax, penalty, and interest under Chapter 212, Florida Statutes, as set forth in respondent's proposed assessment. DONE and ENTERED this 9th day of September, 1977, in Tallahassee, Florida. THOMAS C. OLDHAM Hearing Officer Division of Administrative Hearings 530 Carlton Building Tallahassee, Florida 32304 COPIES FURNISHED: Daniel Brown, Esquire Department of Legal Affairs The Capitol Tallahassee, Florida 32304 Andrew A. Graham, Esquire Post Office Box 1657 Cocoa, Florida 32922
The Issue The issue is whether Respondent's Certificate of Registration 46-8015920490-4 should be revoked for the reasons stated in an Administrative Complaint for Revocation of Certificate of Registration (Administrative Complaint) issued by the Department of Revenue (Department) on July 17, 2015.
Findings Of Fact The Department is the state agency charged with administering and enforcing the state revenue laws, including the laws related to the imposition and collection of sales and use taxes pursuant to chapter 212. Respondent is an active for-profit Florida corporation and a licensed motor vehicle dealer located at 613 Southwest Pine Island Road, Suite 14, Cape Coral, Florida. For purposes of collecting and remitting taxes, Respondent is a dealer as defined in section 212.06(2) and is required to comply with chapter 212. Annais German is the president and agent of the corporation. Respondent holds Certificate of Registration number 46- 8015920490-4. A certificate of registration is required in order to do business in the state and requires its holder to collect and remit sales tax pursuant to chapter 212. See § 212.05(1), Fla. Stat. A dealer must file with the Department sales tax returns and remit the tax collected on a monthly basis. See § 212.15(1), Fla. Stat. The Department is authorized to revoke a dealer's certificate of registration for failure to comply with state tax laws. See § 212.18(3)(e), Fla. Stat. Before revoking a certificate of registration, the Department must convene an informal conference that the dealer is required to attend. See § 213.692(1)(a), Fla. Stat. At the conference, the dealer may either present evidence to refute the Department's allegations of noncompliance or enter into a compliance agreement with the Department to resolve the dealer's failure to comply with chapter 212. Id. After a compliance agreement is executed by the dealer, the Department may revoke the certificate of registration if the dealer fails to comply with its terms and conditions. If a breach occurs, the entire amount is due and payable immediately. After Respondent failed to remit taxes that were due, the Department issued tax warrants and rendered judgment liens against Respondent in March, April, and December 2014 and April 2015. An informal conference was conducted with the taxpayer on April 7, 2015. Respondent was represented at the conference by Orlando German, who was given power of attorney by Annais German to represent the corporation. He signed an agreement, which required the entire balance to be paid by the end of the month. Two weeks later, Annais German requested that a new agreement be executed which allowed her to pay the delinquent taxes over a longer period of time. The Department agreed with her request. On April 23, 2015, Ms. German executed an Agreement reflecting that her corporation owes $7,297.52. See Pet'r Ex. 2, p. 1. The Agreement required Respondent to make a down payment of $2,500.00 on or before April 28, 2015, followed by ten monthly payments of 375.00 on the 28th of each month, and a final payment of $671.52 on April 28, 2016. Id. at p. 3. The Agreement required these payments to be made at the Fort Myers Service Center. Id. Payments required under a compliance agreement are always remitted to the local district office, rather than Tallahassee, to allow the Department to track the payment and ensure that it is being made in a timely fashion. The Agreement also required Respondent to "timely remit payment in full for all types of taxes, returns, and reports due from the Taxpayer for the duration of this agreement (and any extensions hereof) or for the next 12 months following the date of this agreement, whichever is longer." Id. at p. 1. In other words, besides making payments for past due taxes, interest, penalties, and fees, Respondent was required to timely file returns and pay current obligations as they became due during the life of the Agreement. The Agreement specifically provides that if the taxpayer fails to comply with the Agreement, revocation proceedings will be initiated without further notice. Respondent paid the $2,500.00 down payment one day late, but as of the date of the hearing in this case, no other payments for past or current obligations have been made. Returns for April and May 2015 were not timely filed. Respondent admits that in April 2015, at least three vehicles were sold, but its April return, when eventually filed, reported that no sales were made. Since filing its June and July 2015 returns, Respondent has filed no other returns. By failing to pay the monthly obligations required by the Agreement or any current obligations, Respondent has violated the Agreement.
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 Respondent's Certificate of Registration 46- 8015920490-4. DONE AND ENTERED this 25th day of February, 2016 in Tallahassee, Leon County, Florida. S D. R. ALEXANDER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 25th day of February, 2016. COPIES FURNISHED: Stephen M. Masterson, Esquire Office of the Attorney General Revenue Litigation Bureau The Capitol, PL-01 Tallahassee, Florida 32399-1050 (eServed) Annais German World Champions Auto, Inc. 429 Northwest 38th Place Cape Coral, Florida 33993-5536 Annais German World Champions Auto, Inc. 613 Southwest Pine Island Road, Suite 14 Cape Coral, Florida 33991-1950 George C. Hamm, Acting General Counsel Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668 (eServed) Marshall C. Stranburg, Executive Director Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668 (eServed)
The Issue The issue is whether Petitioner is liable for the sales and use tax assessment issued by Respondent on February 21, 1995.
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: In this proceeding, Respondent, Department of Revenue (DOR), has issued a proposed sales and use tax assessment in the amount of $24,546.54, plus $6,640.12 in penalties, plus interest from the date of the assessment, against Petitioner, Florida Truck Dock Company (Petitioner or taxpayer). As of March 20, 1997, the assessment totaled $55,195.27, and it continues to increase by $8.07 each day. The assessment constitutes taxes, penalties, and interest allegedly due from Petitioner for various materials and supplies purchased by Petitioner for use in the performance of real property contracts for Petitioner's customers. In its response to the assessment, Petitioner denied that it owed the money. Petitioner's business activities consisted primarily of purchasing truck loading dock equipment from suppliers, principally Kelly Company, Inc. (Kelly), and then installing such equipment as an improvement to real estate. Its records indicate that purchased equipment was generally brought into Florida and installed in real property in the state under a contract whereby parts and labor were furnished for one lump sum contract price. The foregoing contracts were Class A or lump sum contracts within the meaning of Rule 12A-1.051(2)(a), Florida Administrative Code. Class A contracts are considered contracts for the improvement of real estate, not contracts for the resale of tangible personal property. In addition, when the equipment was purchased, Petitioner had not issued resale certificates to its vendors. Under these circumstances, Petitioner was properly treated as an end-user of the equipment in question and owed use taxes on all such purchases of tangible personal property. This controversy began on March 30, 1992, when DOR issued a Notification of Intent to Audit Books and Records of the taxpayer in conjunction with a routine audit. The notice requested that Petitioner make available various corporate records pertaining to its sales and use tax and intangible tax liability. However, only the sales and use tax is in issue here. DOR later advised the taxpayer that the audit period would run from March 1, 1987, through February 29, 1992, and that instead of a detailed audit, only a three-month sampling of the full audit period would be necessary. An initial audit revealed that Petitioner was entitled to a refund. None was given, however, because of information supplied by an employee of the taxpayer regarding the possible destruction and alteration of certain records by the taxpayer, and the auditor's conclusion that a three-month sampling of the records was not representative for the full five-year audit period. In addition, the auditor concluded that the results of the sample period were not reasonable. For these reasons, the scope of the audit was expanded. The auditor then requested, among other things, that copies of all sales (summary) journals for the entire five-year period be produced. Although Petitioner has always contended that these journals were merely "commission" journals for transactions between its vendors and customers, the auditor's finding that they are records of cash transactions is consistent with the language on the face of the journals, referring to "deposits" and "total deposits." Further, a comparison of the journals with Petitioner's own bank statements confirms this finding. At least twelve months of the records were missing, and the taxpayer agreed to recreate the missing records. Once a copy of all journals (both original and recreated) was produced, the auditor tested their validity and then made various audit adjustments, which are reflected on Schedule A-2 of Exhibit 5. In those instances where inadequate cost price information concerning equipment purchases was provided by the taxpayer, the auditor properly used estimates in making his adjustments. The tax liability for each taxable transaction was recorded by the taxpayer under Account 367 on the sales journals. The auditor then examined the source documents (original invoices) to verify the accuracy of the recorded amounts. These numbers were then compared with the taxes paid by the taxpayer on its monthly tax returns filed with DOR. This comparison produced a deficiency which represents approximately 75 percent of the total assessment. However, in those instances where Petitioner collected sales tax from its customers, and remitted the same to DOR, Petitioner was not assessed with a tax for those same items. A sampling of the audit period established that Petitioner also had a number of lump-sum contracts with various governmental customers on which it neither paid taxes to the vendor when the equipment was purchased, nor did it collect taxes from the end-user when the equipment was resold. Thus, it was responsible for the use taxes on these transactions. The deficiency is detailed on Schedule B-3 of the final audit report (Exhibit 6), and it accounts for approximately 14 percent of the total assessment. The remaining part of the assessment is related to four miscellaneous transactions which are unrelated to the sales journals. Two of the transactions occurred during the short period of time when the service tax was in effect in 1987, while the remaining two relate to small purchases of equipment and supplies by the taxpayer for its own consumption. There was no evidence that the taxpayer paid the taxes due on these transactions. DOR met with the taxpayer, its accountant, and its original counsel on various occasions in an effort to obtain more documentation favorable to the taxpayer's position. In most cases, the taxpayer refused to provide more records. At one meeting, however, the taxpayer produced additional source documents (invoices) that appeared to be altered from the original invoices previously given to the auditor. These are shown in Exhibit 7 received in evidence. When asked by the auditor for copies of the same invoices sent to customers so that the discrepancy could be resolved, the taxpayer refused to comply with this request. During the audit process, the taxpayer contended that its primary supplier, Kelly, had already paid taxes on a number of the transactions. No documentation was produced, however, to support this contention. It also complained that there was bias on the part of DOR's auditor. As to this contention, the record shows that the auditor had no relationship with the taxpayer prior to this audit, and for the intangible personal property tax, the auditor's field work actually resulted in a refund for Petitioner. Finally, the taxpayer contended that rather than using the originally supplied records, the auditor should have used Petitioner's recreated or altered records in making the audit adjustments. This latter contention has been rejected.
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 its original assessment against Petitioner. DONE AND ENTERED this 13th day of November, 1998, in Tallahassee, Leon County, Florida. DONALD R. ALEXANDER 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 13th day of November, 1998. COPIES FURNISHED: Linda Lettera, Esquire Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 Jeffrey M. Dikman, Esquire Department of Legal Affairs The Capitol, Tax Section Tallahassee, Florida 32399-1050 Benjamin K. Phipps, Esquire Post Office Box 1351 Tallahassee, Florida 32302 L. H. Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100
