The Issue Whether the Department of Revenue's ("Department") assessment of tax, penalty, and interest against American Import Car Sales, Inc., is valid and correct.
Findings Of Fact The Department is the agency responsible for administering the revenue laws of the State of Florida, including the imposition and collection of the state's sales and use taxes. Petitioner, American Import Car Sales, Inc., is a Florida S-corporation with its principle place of business and mailing address in Hollywood, Florida. Petitioner, during the period of June 1, 2007, through May 31, 2010 ("assessment period"), was in the business of selling and financing new and used motor vehicles. On June 29, 2010, the Department issued to Petitioner a Notice of Intent to Audit Books and Records (form DR-840) for sales and use tax for the assessment period. Said notice informed Petitioner that the audit would begin on or around 60 days from the date of the notice and included an attachment identifying the records and information that would be reviewed and should be available when the audit commenced. Specifically, the Sales and Use Tax Information Checklist attachment requested the following: chart of accounts, general ledgers, cash receipts journals, cash disbursement journals, federal income tax returns, county tangible property returns, Florida Sales and Use Tax returns, sales journals, sales tax exemption certificates (resale certificates), sales invoices, purchase invoices, purchase journals, lease agreements for real or tangible property, depreciation schedules, bank and financial statements, detail of fixed asset purchases, and other documents as needed. On the same date, in addition to the Notice of Intent, the Department issued to Petitioner, inter alia, an Electronic Audit Survey, and a Pre-Audit Questionnaire and Request for Information. On September 17, 2010, the auditor requested the following records to review by October 4, 2010: (1) general ledger for the assessment period; (2) federal returns for 2007, 2008, and 2009; (3) lease agreement for the business location; (4) deal folders for the assessment period; (5) all expense purchase invoices for the assessment period; (6) all purchase invoices relating to assets added to the Depreciation Schedule during the assessment period; (7) resale/exemption certificates, shipping documents, and any other exempt sales documentation to support exempt sales during the assessment period; (8) bank statements for the assessment periods; and (9) all worksheets used to prepare monthly sales tax returns for the assessment period. On October 5, 2010, the auditor met with Petitioner's President Joe Levy, Petitioner's Secretary Joanne Clements, and Petitioner's Certified Public Accountant, Steve Levy. At that time, Petitioner provided a hard copy of the 2007 and 2008 general ledger and profit and loss statements. At that time, the auditor again advised Petitioner that the Department needed the federal returns, as well as the completed electronic audit survey and pre-audit questionnaire. On October 5, 2010, the Department and Petitioner signed a Consent to Extend the Time to Issue an Assessment or to File a Claim for Refund (form DR-872). The consent provided that assessments or claims for refunds may be filed at any time on or before the extended statute of limitations, December 31, 2011. On October 18, 2010, Petitioner provided the Department with the completed electronic audit survey and pre-audit questionnaire. Thereafter, Petitioner provided the Department with the following books and records: (1) 2009 "deal folders;" Petitioner's general ledger in Excel format for June 1, 2007, through December 31, 2010; (3) January 2009 through May 2010 bank statements; (4) a listing of exempt sales; and (5) lease agreements with attendant invoices. On August 25, 2011, the Department issued its assessment, entitled a Notice of Intent to Make Audit Changes (form DR-1215)("NOI"). Said notice provided that Respondent owed $2,324,298.42 in tax, $581,074.61 in penalties, and $515,117.04 in interest through August 25, 2011. The NOI addressed Petitioner's alleged failure to collect and remit tax on: (1) certain vehicle sales (audit Exhibit A01-Sales Tax Collected and Not Remitted)1/; (2) vehicle sales with no documentation regarding its exempt status (audit Exhibit A02-Disallowed Exempt Sales)2/; (3) motor vehicle sales where no discretionary tax was assessed (audit Exhibit A03- Discretionary Surtax)3/; and (4) unreported sales (audit Exhibit A04-Unreported Sales). The assessment also related to Petitioner's alleged failure to pay/accrue tax on: (1) taxable purchases (audit Exhibit B01-Taxable Purchases); (2) fixed assets (audit Exhibit B02-Fixed Assets); and (3) commercial rent (Exhibit B03-Commercial Realty). At hearing, Petitioner stipulated that the only component of the NOI remaining at issue pertains to audit Exhibit A04-Unreported Sales, as Petitioner has conceded A01, A02, A03, and all fee schedules. An understanding of audit Exhibit A04, and the assessment methodology employed by the auditor, is articulated in the Department's Exhibit MM, entitled Explanation of Items, which is set forth, in pertinent part, as follows: Reason for Exhibit: The records received for the audit were inadequate. The taxpayer provided bank statements for the period of January 2009 through May 2010. This period was deemed the test period for unreported sales. A review of the bank statements for the test period revealed that sales were underreported. This exhibit was created to assess for sales tax on unreported sales. Source of Information: Sales tax returns and Bank of America bank statements for the test period of January 2009 through May 2010; The Department of Motor Vehicles (DMV) [sic] was acquired for the period of June 2007 through May 2010. Description of Mathematical Adjustments: The bank statements were reviewed for the period of January 2009 through May 2010. Taxable Sales on sales tax returns, sales tax on sales tax returns, taxable sales on Exhibit on [sic] Exhibit A01, sales tax Exhibit A01 and Exempt Sales on Exhibit A02 was subtracted from Bank Deposits to arrive at unreported sales. See calculations on page 53. Unreported sales for the period of January 2009 through May 2010 were scheduled into this exhibit. A rate analysis of the DMV database resulted in an effective tax rate of 6.2689. Scheduled transactions were multiplied by the effective tax rate of 6.2689 to determine the tax due on the test period. A percentage of error was calculated by dividing the tax due by the taxable sales for each test period. The percentage of error was applied to taxable sales for each month of the audit period which resulted in additional tax due. The auditor's analysis of the test period, applied to the entire assessment period, resulted in a determination that Petitioner owed $1,599,056.23 in tax for unreported sales. On August 25, 2011, the auditor met with Joe and Steve Levy to discuss and present the NOI. At that time, Joe and Steve Levy were advised that Petitioner had 30 days to provide additional documents to revise the NOI. On September 28, 2011, the Department issued correspondence to Petitioner advising that since a response to the NOI had not been received, the case was being forwarded to Tallahassee for issuance of the Notice of Proposed Assessment ("NOPA")(form DR-831). On October 7, 2011, the Department issued the NOPA, which identified the deficiency resulting from an audit of Petitioner's books and records for the assessment period. Pursuant to the NOPA, Petitioner was assessed $2,324,298.42 in tax, $31,332.46 in penalty, and $534,284.54 in interest through October 7, 2011. The NOPA provided Petitioner with its rights to an informal written protest, an administrative hearing, or a judicial proceeding. On December 5, 2011, Petitioner filed its Informal Written Protest to the October 7, 2011, NOPA. The protest noted that the NOPA was "not correct and substantially overstated." The protest raised several issues: (1) that the calculation was primarily based upon bank statement deposits; (2) not all deposits are sales and sources of income; and (3) a substantial amount of the deposits were exempt sales and loans. The protest further requested a personal conference with a Department specialist. On January 10, 2013, Martha Gregory, a tax law specialist and technical assistance dispute resolution employee of the Department, issued correspondence to Petitioner. The documented purpose of the correspondence was to request additional information regarding Petitioner's protest of the NOPA. Among other items, Ms. Gregory requested Petitioner provide the following: [D]ocumentation and explanations regarding the source of income—vehicle sales, loan payments, etc.—for each deposit. For vehicle sales deposits, provide the customer name, vehicle identification number and amount; for loan payments, provide proof of an existing loan and the amount received from the borrower; and for any other deposits, provide documentation of the source of this income. A conference was held with Petitioner on February 7, 2013. At the conference, Ms. Gregory discussed the January 10, 2013, correspondence including the request for information. The Department did not receive the requested information. Following the conference, the Department provided the Petitioner an additional 105 days to provide documentation to support the protest. Again, Petitioner failed to provide the information requested. On June 14, 2013, the Department issued its Notice of Decision ("NOD"). The NOD concluded that Petitioner had failed to demonstrate that it was not liable for the tax, plus penalty and interest, on unreported sales as scheduled in audit Exhibit A04, Unreported Sales, as assessed within the compliance audit for the assessment period. Accordingly, the protested assessment was sustained. On July 15, 2013, Petitioner filed a Petition for Reconsideration to appeal the Notice of Decision ("POR"). The POR advanced the following issues: (1) the records examined were not the books and records of Petitioner; (2) the audit should be reduced because the auditor's methodology was incorrect; and the Petitioner should be allowed a credit for bad debts taken during the audit period. At Petitioner's request, on October 22, 2013, Petitioner and Ms. Gregory participated in a conference regarding the POR. At the conference, Petitioner requested a 30-day extension to provide documentation in support of Petitioner's POR. No additional documentation was subsequently provided by Petitioner. On April 29, 2014, the Department issued its Notice of Reconsideration ("NOR"). The NOR sustained the protested assessment. Petitioner, on June 30, 2014, filed its Petition for Chapter 120 Hearing to contest the NOR. Petitioner did not file its federal tax returns for the years 2008, 2009, and 2010 until after the Department issued the NOR. Indeed, the federal returns were not filed until June 3, 2014.4/ Ms. Kruse conceded that the auditor's assessment utilized Petitioner's bank statements to determine unreported sales; however, the auditor did not make any adjustments for "unusual items that would have been on the face of the bank statements." Ms. Kruse further acknowledged that the auditor's assessment does not reference Petitioner's general ledger information. Ms. Kruse acknowledged that, for several representative months, the general ledger accurately reported the deposits for the bank statements provided. When presented with a limited comparison of the bank statement and the general ledger, Ms. Kruse further agreed that, on several occasions, deposits noted on the bank statements were probably not taxable transactions; however, the same were included as taxable sales in the auditor's analysis. Ms. Kruse credibly testified that the same appeared to be transfers of funds from one account into another; however, because the Department only possessed the bank statements from one account, and never received the requested "back up information" concerning the other account, the Department could not discern the original source of the funds.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that The Department conduct a new assessment of Petitioner's sales and use tax based on a test or sampling of Petitioner's available records or other information relating to the sales or purchases made by Petitioner for a representative period, giving due consideration to Petitioner's available records, including Petitioner's general ledger, to determine the proportion that taxable retail sales bear to total retail sales. DONE AND ENTERED this 17th day of April, 2015, in Tallahassee, Leon County, Florida. S TODD P. RESAVAGE 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 17th day of April, 2015.
The Issue Whether the Respondent, Holiday Inn Oceanside/Cleveland Caribbean, Inc., is liable for the payment of $10,176.18, together with a penalty of 5 percent and interest accruing daily as claimed in the audit by the Petitioner, State of Florida, Department of Revenue, for the period September 1, 1975, through August 31, 1970.
Findings Of Fact This cause comes on for consideration based upon the Respondent, Holiday Inn Oceanside/Cleveland Caribbean, Inc.`s challenge to the tax audit conducted by the Petitioner, State of Florida, Department of Revenue, covering the period September 1, 1975, through August 31, 1978. The claim of the audit is for sales tax due pursuant to Chapter 212, Florida Statutes, and its supporting rules found in the Florida Administrative Code. The audit document showing the Proposed Notice of Assessment of Tax, Penalties and Interest may be found as the Petitioner's Exhibit A admitted into evidence. Although the audit document originally claimed tax in the amount of $29,600.37, at the commencement of the hearing the amount remaining in dispute was $15,288.75, together with a penalty of 5 percent and interest accruing until date of payment. During the hearing, a stipulation was entered into between the parties to the effect that, of the remaining disputed tax, penalty and interest, $5,112.57, together with the applicable penalty and interest was acknowledged to be owed by the Respondent. Therefore, there remains in dispute the amount of $10,176.18, with a 5 percent penalty and interest accruing until date of payment. This amount of tax, penalty and interest claimed represents the difference between the tax rate which the Petitioner has applied in this assessment process and the tax rate that the Respondent claims to be applicable. The Petitioner claims that a tax rate of 4.5 percent against total receipts, in keeping with the authority of Rule 12A-1.57(3), Florida Administrative Code. The Respondent counters that position by offering its own formula arrived at in view of the nature of its prices charged its customers, and that tax rate is 4.1666667 percent. The sales in question during the audit period pertain to sales of alcoholic and malt beverage in the lounges of the Respondent's licensed premises located in Dade County, Florida. The facts reveal that the sale of all alcoholic beverages in the time period at issue were made in increments of a quarter dollar ($.25). These quarter-dollar increments included the imposition of sales tax. As example: SALES PRICE TAX TOTAL $ .48 $.02 $ .50 .72 .03 .75 .96 .04 1.00 1.20 .05 1.25 1.44 .06 1.50 1.68 .07 1.75 Although the tax was computed on the sales price and this system was made known to the public by prominently displaying the price list, which list indicated that the beverage prices included tax; the Respondent did not separate the increment of the total price into categories of sales price and tax at the time of each transaction. Consequently, the books audited in the process of making the claim for assessment only demonstrated the total sales price of a given day's alcoholic beverage sales as an aggregate and did not reflect the tax as a separate item from the sales price. To this aggregate amount the Respondent applied its tax rate formula of 4.166667 by taking the amount of total receipts for the day and dividing by 1.04666667 to get gross sales. The gross sales were then subtracted from the amount of total receipts to obtain the figure for tax collected. This method was rounded off to the nearest penny on each day of computation. The Petitioner, as stated before, relies on Rule 12A-1.57(3), Florida Administrative Code, as a basis for its claim that the rate of tax should be 4.5 percent. That provision states: (3) Dealers in alcoholic and malt beverages are required to remit the actual tax collected to the State. In some instances, however, it may be impractical for such dealers to separately record the sales price of the beverage and the tax collected thereon. In such cases, dealers may elect to report tax on the following basis. Package stores who sell no mixed drinks should remit the tax at 4.3 percent of total receipts and dealers who sell mixed drinks or a combination of mixed drinks and packaged goods should remit the tax at the rate of 4.5 percent of total receipts. In those instances where the sales price and the tax have not been separately recorded but where it can be demonstrated that the public has been put on notice by means of price lists posted prominently throughout the establishment that the total charge includes tax, the dealer may deduct the tax from the total receipts to arrive at the appropriate tax and gross sales figures using the method shown below: Total receipts divided by the tax rate = gross sales. For example, a package store which sells no mixed drinks and whose total receipts are $2,000 would compute sales as follows: $2,000 divided by 1.043 percent = gross sales $1,917.54 tax collected 82.46 A dealer who sells drinks or a combination of drinks and package goods and whose total receipts are $2,000 would compute sales as follows: $2,000 divided by 1.045 percent = gross sales $1,913.87 tax collected 86.12 When the public has hot been put on notice through the posting of price lists that tax is included in the total charge, tax shall be computed by multiplying total receipts by the applicable rates referred to in this rule. In the mind of the Petitioner, by failing to segregate the total amounts collected into the categories of sales price and tax and then to remit the tax collected as a separate item, the Respondent is relegated to the utilization of Rule 12A-1.57(3), Florida Administrative Code, in remitting its tax. Under its theory, the Petitioner has taken the total receipts recorded in the Respondent's work sheets and divided those total receipts by the formula 1.045 percent to get gross sales and then subtracted the gross sales from the amount of total receipts to get the amount of tax that should have been collected, and then made a further subtraction of the tax which the Respondent remitted, from the tax formula which the Petitioner claims to be due on the transactions to arrive at the tax presently outstanding. This amount being the figure referenced above. From that computation, the amount of penalty and interest has been claimed. (By its position the Petitioner does not seem to question the fact that the public has been put on notice by price lists posted throughout the establishment that the total charge reflected on the price lists includes tax, as referred to in the subject Rule 12A-1.57(3), Florida Administrative Code.) According to the Respondent, the reason for the utilization of the rate of 4.1666667 percent was the fact that all beverages having a break in price increments of a quarter-dollar ($.25), it is mathematically impossible for the proper effective rate being charged on all beverages sold in the lounges to vary from their tax rate of 4.1666667 percent because each increment of increase has the same ratio of sales price to tax. The Respondent argues that to claim a rate of 4.5 percent causes the collection in excess of the amount allowed by Chapter 212, Florida Statutes. After considering the position of the parties, the Respondent is found to be correct in its position. The overall scheme of Chapter 212, Florida Statutes, calls for the taxation of sales of tangible personal property at a rate of 4 percent, see Section 212.05, Florida Statutes. A further refinement of that theory is found in Subsection 212.12(10), Florida Statutes, which creates a bracketing system for sales representing the various fractions of a dollar in amount. This bracketing system thereby causes imposition of a sales tax greater than 4 percent in some transactions. The Petitioner is granted further authority to refine the system of taxation by those provisions of Subsections 212.17(6) and 212.18(2), Florida Statutes, which state in turn: 212.17(6) The department shall have the power to make, prescribe and publish reasonable rules and regulations not inconsistent with this chapter, or the other laws, or the constitution of this state, or the United States, for the enforcement of the provisions of this chapter and the collection of revenue hereunder, and such rules and regulations shall when enforced be deemed to be reasonable and just. 212.18(2) The department shall administer and enforce the assessment and collection of the taxes, interest, and penalties imposed by this chapter. It is authorized to make and publish such rules and regulations not inconsistent with this chapter, as it may deem necessary in enforcing its provisions in order that there shall not be collected on the average more than the rate levied herein. The department is authorized to and it shall provide by rule and regulation a method for accomplishing this end. It shall prepare instructions to all persons required by this chapter to collect and remit the tax to guide such persons in the proper collection and remission of such tax and to instruct such persons in the practices that may be necessary for the purpose of enforcement of this chapter and the collection of the tax imposed hereby. The use of tokens in the collection of this tax is hereby expressly forbidden and prohibited. It can be seen that the Petitioner has the authority to promulgate the necessary rules for the accomplishment of the purpose of Chapter 212, Florida Statutes, but is restricted in this task by being prohibited from making rules and regulations which are inconsistent with this chapter or other statutes within the laws of the State of Florida or the Constitution of the United States or the Constitution of the State of Florida and it is further restricted from imposing rules or regulations which cause the tax to be collected on the average more than the rate levied in Chapter 212, Florida Statutes. While it is clear that the legislature intended to keep the effective rate of tax as near the 4 percent level as possible, it is also evident that the system contemplated a segregation of the amount collected in a sale as sales price, and the amount of tax applied to the sale at the point of the transaction. This is a means of accountability that helps insure that the proper remittance of tax due on each and every retail sales occurs. However, the preeminent charge to the Petitioner is the duty to collect the tax at a rate which most closely approximates the 4 percent called for, without abandoning responsibility or the close monitoring of the records of a given taxpayer. When considered in the overall context of the purpose of Chapter 212, Florida Statutes, the method which the Respondent used to collect and remit tax, does not violate the conditions of Chapter 212, Florida Statutes, nor the rules designed to enforce that chapter. The tax rate of 4.1666667 percent has been proven to be correct, in the sense of more closely approximating the 4 percent tax rate called for than the application of a tax rate of 4.5 percent. The correctness is established because the increments charged for alcoholic beverages are always in the amount of a quarter-dollar ($.25) and each increment of increase carries the same tax rate. This fact, when considered with the additional fact that the break-out of the tax in the price structure as established by the Respondent, is in keeping with the tables of the bracket system found in Subsection 212.12(10), Florida Statutes, is sufficiently convincing to demonstrate the propriety of the Respondent's position. Nonetheless, a further examination of the Petitioner's argument is indicated. The focus of the Petitioner's position is Rule 12A-1.57(3), Florida Administrative Code, and a detailed reading of this rule reveals that dealers who have properly put the public on notice that their sales prices include tax, "may" elect to remit tax by using the formula of the rate of 4.5 percent of total receipts as the tax due. The use of the word "may" in this instance creates an option on the part of the Respondent, an option which it has elected not to proceed under and by the facts of this case, the alternate method which the Respondent used in computing this tax, i.e., the rate 4.1666667 percent is efficacious. Finally, the Petitioner has advanced the argument that the formula found in Rule 12A-1.57(3), Florida Administrative Code, is unique to that rule and may not be utilized unless the prerequisite factors are shown and unless the tax rate factor 4.5 percent is part of the formula. Even though the formula as expressed in Rule 12A-1.57(3), Florida Administrative Code, may have legitimate application to some cases, it is not preemptive in its scope and it would not prohibit the Respondent in this case from using the formula and substituting the rate of tax of 4.1666667 percent for the rate of 4.5 percent in that part of the formula. In summary, the Petitioner has failed to demonstrate its entitlement to the tax, penalty and interest under its claim founded on Rule 12A-1.57(3), Florida Administrative Code. (Petitioner in this cause had submitted Proposed Findings of Fact, Conclusions of Law and a Recommendation in the case styled, Holiday Inn Oceanside/Cleveland Caribbean, Inc., Petitioner, vs. State of Florida, Department of Revenue, Respondent, D.O.A.H. Case No. 70-1003R, and in doing so made reference to matters which have been considered in the present case. Therefore, to the extent that those matters are not inconsistent with this Recommended Order they have been utilized. To the extent that those proposals are inconsistent with this Recommended Order they are specifically rejected. The Respondent has also submitted Proposed Findings of Fact, Conclusions of Law and a Recommended Order and to the extent that those matters are not inconsistent with this Recommended Order they have been utilized. To the extent that those proposals are inconsistent with this Recommended Order they are specifically rejected.)
Recommendation It is recommended that the Respondent, Holiday Inn Oceanside/Cleveland Caribbean, Inc., be relieved from further responsibility to pay the amount of tax, $10,176.18 and the 5 percent penalty and interest accruing on that amount of tax. DONE AND ENTERED this 29th day of June, 1979, in Tallahassee, Florida. CHARLES C. ADAMS, Hearing Officer Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301 (904) 488-9675 COPIES FURNISHED: Martha J. Cook, Esquire Department of Revenue Room 422, Fletcher Building Tallahassee, Florida 32301 Richard Watson, Esquire c/o Spieth, Bell, McCurdy & Newell 1190 Union Commerce Building Cleveland, Ohio 44115 Mark J. Wolff, Esquire and Howard E. Roskin, Esquire First Federal Building, 30th Floor One Southeast Third Avenue Miami, Florida 33131
The Issue Whether the Department of Revenue's ("Department") assessment of tax, penalty, and interest against Nation Auto Sales of South Florida, Inc., is valid and correct.
Findings Of Fact The Department is the agency responsible for administering the revenue laws of the State of Florida, including the imposition and collection of the state's sales and use taxes. Petitioner, during the period of October 1, 2005, through March 31, 2010 ("assessment period"), was engaged in the business of selling used motor vehicles at retail in Broward County, Florida.1/ Arie Abecasis was Petitioner's president and sole corporate officer. Petitioner was continuously registered with the Department as a "dealer," pursuant to chapter 212, Florida Statutes. Petitioner was continuously licensed by the State of Florida Department of Highway Safety and Motor Vehicles ("DMV") as an independent motor vehicle dealer, pursuant to chapter 320, Florida Statutes. On September 3, 2008, the Department issued correspondence to Petitioner advising that the Criminal Investigations process had received a referral from the Department's collection sub process, concerning Petitioner's possible failure to remit all of the sales tax collected from its customers. In order to determine if a discrepancy existed, the Department requested Petitioner to provide: (1) sales invoices/ buyer's orders; (2) sales journals; (3) cash receipt and disbursement journal; (4) general ledger; and (5) bank statements for all depository accounts. On September 9, 2008, Mr. Abecasis met with Robert Taft, a criminal investigator for the Department. Mr. Taft advised Mr. Abecasis that there were two areas of concern: (1) Petitioner's failure to file returns and remit collected sales tax over several collection periods; and (2) that a comparison of the Department and DMV records appeared to reveal a substantial and repeated underreporting and under-remitting of collected sales tax. Mr. Abecasis advised that he would fully cooperate and provide records from 2005 on or before September 17, 2008. Thereafter, Petitioner provided some 2005 records, which Mr. Taft compared with DMV records. After completing a review of the same, on November 7, 2008, Mr. Taft issued correspondence to Petitioner advising that Petitioner's license was used to transfer vehicles for which Petitioner had failed to provide documentation. The same records indicated sales tax collected but never remitted to the Department. Accordingly, Mr. Taft requested all of the documentation originally requested to be produced on or before December 5, 2008. The Department did not receive the requested documentation. Thereafter, Mr. Taft obtained additional records from the DMV regarding a listing of all vehicles titled during the period from October 1, 2005, through March 31, 2010, using Petitioner's motor vehicle dealer's license numbers. Additionally, certified title applications for each of the title transfer transactions were reviewed. From the documents obtained, the Department was able to determine the following information regarding vehicles sold by Petitioner: the acquisition month, dealer number, acquisition date, title number, owner's last name, vehicle make, vehicle body, vehicle ID, and tax credit. The Department established that Petitioner filed with the Department Sales and Use Tax Returns, Form DR-15, that were not accompanied by payment of the tax due, for the following months: April through July, 2008; and February through August 2009. The Department established that Petitioner did not file with the Department Sales and Use Tax Returns, Form DR-15, for February and March, 2010. Petitioner collected at least $810,063.15 in sales tax. Petitioner remitted to the Department $509,735.53 in sales tax. Petitioner failed to remit to the Department at least $300,327.62 in sales tax collected from its customers. On or about November 1, 2010, the Department referred the matter to the Office of the State Attorney for the Seventeenth Judicial Circuit of Florida for criminal prosecution. On October 31, 2012, in the case styled State v. Abecasis, Case No. 11-0002423 CF 10A, Mr. Abecasis entered a plea of no contest to the criminal charge of theft of state funds in an amount of $20,000 or more, a second-degree felony. As a special condition of his probation, Mr. Abecasis was ordered to make restitution to the Department in the amount of $50,000.00. It is undisputed that, on or before April 10, 2014, Petitioner satisfied the restitution ordered. On April 17, 2014, the Department issued to Petitioner a Notice of Jeopardy Finding and a Notice of Final Assessment. The Notice of Final Assessment notified Petitioner that $192,501.80 in tax, $20,190.35 in penalty, and $66,031.36 in interest were due.2/ The Notice of Jeopardy Finding averred that the Department found "one or more of the jeopardy conditions provided in Rule 12-21.005, Florida Administrative Code, which tend to prejudice or render wholly or partly ineffectual the normal conditions for collection of tax, penalty, or interest." The stated jeopardy condition was delay. On April 21, 2014, the Department recorded a warrant for collection of delinquent sales and use tax against Petitioner in the amount contained in the Notice of Final Assessment. Petitioner testified that, due to the nature of his business, it was a frequent occurrence that potential vehicle purchasers would require financing. Petitioner testified that it was Petitioner's practice to allow the customer to obtain the vehicle prior to financial approval from the lending institution. Accordingly, when the customer was not ultimately approved for financing or when the vehicle was repossessed, a true "sale" did not occur, and, therefore, sales taxes were not collected and remitted. The undersigned finds Petitioner's testimony not credible and not otherwise supported by the record evidence.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that The Department of Revenue enter a final order that validates the assessment against Nation Auto Sales of South Florida, Inc. DONE AND ENTERED this 26th day of November, 2014, in Tallahassee, Leon County, Florida. S TODD P. RESAVAGE 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 26th day of November, 2014.
The Issue The issue in this case is whether the Petitioner, A.L.S.S., Inc. (Petitioner), is entitled to a refund in the amount of $3,261.47, for sales tax paid on the purchase of a new automobile.
Findings Of Fact The Respondent is the state agency charged with the responsibility of collecting sales and use tax owed to the State of Florida. See § 213.05, Fla. Stat. (2006). At all times material to the allegations of this case, the Petitioner was a registered export dealer. The Petitioner routinely purchases new motor vehicles for export to foreign buyers. In this case, the Petitioner purchased a new motor vehicle and subsequently exported it to a buyer in Brazil. More specifically, on or about May 24, 2004, the Petitioner purchased a new 2004 Hummer from Williamson Cadillac- Hummer in Miami, Florida. At the time of the purchase, the Petitioner paid the sales tax associated with the purchase of the vehicle. The total sales tax paid was $3,261.47. The sale of the vehicle resulted in the Florida registration of the vehicle and issuance of a Florida title in the name of the Petitioner. From the automobile dealership the subject vehicle was loaded on a flatbed wrecker and transported to a warehouse at or near the Port of Miami. In anticipation of its shipment to Brazil, the vehicle was drained and prepared for exportation in accordance with applicable laws and regulations. The Petitioner never drove the vehicle on the streets of Miami-Dade County and it was not insured. It is undisputed that the subject vehicle was exported to an individual in Brazil. Thereafter, the Petitioner sought a refund of the sales tax paid on the subject vehicle. The Petitioner contacted the Department to seek the refund and maintains that a sales tax was inappropriate in this case as the purchased item was bought for exportation. The Department offered to refund the sales tax upon receipt of an assignment of rights from the new vehicle dealer (Williamson Cadillac-Hummer). When the Petitioner contacted Williamson Cadillac-Hummer for assistance in obtaining the refund, the automobile dealer refused to aide the Petitioner. Williamson Cadillac-Hummer is precluded by its contractual agreement with General Motors from making sales for exportation. The Petitioner knew this at the time of the purchase of the new Hummer. Under its contractual agreement, Williamson Cadillac-Hummer may not directly or indirectly sell new motor vehicles for export. As the transaction was deemed a new car sale to the Petitioner (with the Florida title of the vehicle being put in the Petitioner’s name), the Department declined to refund the sales tax even though the vehicle was in fact exported to Brazil. It is the Department’s position that a taxable transaction occurred when the new motor vehicle was sold and registered in this state. In this case, the transaction could not have occurred (per the dealer’s agreement with General Motors) as a new motor vehicle sale for export.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a Final Order denying the refund sought by Petitioner. DONE AND ENTERED this 24th day of August, 2007, 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 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 24th day of August, 2007. COPIES FURNISHED: Darlot A. Veloso, Jr., President A.L.S.S., Inc. 995 Northwest 72nd Street Miami, Florida 33150 Warren J. Bird, Esquire Assistant Attorney General Office of the Attorney General Revenue Litigation Section The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050 Bruce Hoffmann, General Counsel Department of Revenue The Carlton Building, Room 204 501 South Calhoun Street Tallahassee, Florida 32399-0100 James Zingale, Executive Director Department of Revenue The Carlton Building, Room 104 501 South Calhoun Street Tallahassee, Florida 32399-0100
The Issue The issue is whether a proposed sales tax assessment should become final agency action.
Findings Of Fact Respondent is the agency responsible for administering the state sales tax imposed in Chapter 212, Florida Statutes (2001).1 From May 1, 2002, through April 30, 2005 (the audit period), Petitioner was a dealer, defined in Subsection 212.06(2), and was required to collect and remit sales tax to the state. Petitioner is a closely held Florida corporation located at 2802 Thomasson Drive, Naples, Florida 34112. Petitioner is engaged in the business of retail sales, including the sale of tangible personal property such as food, beer, beverages, and fishing bait (goods). Petitioner uses the accrual method of accounting. Petitioner elects, under Subchapter S of the Internal Revenue Code, to report income and deductions for purpose of the federal income tax on form 1120S. Sometime in June 2005, Respondent sent Petitioner a Notification of Intent to Audit Books and Records identified in the record by audit number A200015450. Upon completion of the audit, Respondent concluded that Petitioner had not reported all of the gross sales that occurred during the audit period (unreported sales) and assessed tax, penalty, and interest, through July 13, 2006, in the amount of $163,914.16. During the audit period, it is undisputed that Petitioner did not maintain cash register receipts identified in the record as Z-tapes (Z-tapes).2 Respondent claims the absence of Z-tapes deprives Respondent of adequate records to determine the amount of a tax deficiency, if any. Respondent defines adequate records in Florida Administrative Code Rule (Rule) 12-3.0012(3). The definition of adequate records does not include a requirement for Z-tapes. The trier of fact finds the evidence from Petitioner concerning the adequacy of its records to be credible and persuasive. Petitioner maintained adequate records within the meaning of Rule 12-3.0012(3). The records include books, accounts, and other records that are sufficient for Respondent's auditors (the auditors) to reliably determine a tax deficiency. The available records are accurate within the meaning of Rule 12-3.0012(3)(a)1. The records are adequate for the auditors to reconcile differences between gross sales reported for federal and state tax purposes. The available records are inclusive within the meaning of Rule 12-3.0012(3)(a)2. The records capture the transactions necessary to determine a tax deficiency. The available records include a breakdown of individual suppliers for all products that Petitioner sold during the audit period. The amount charged by each vendor ties into the total claimed for federal tax purposes on Petitioner's 1120S tax returns. The available records are authentic within the meaning of Rule 12-3.0012(a)3. It is undisputed that the available records are authentic. The available records are systematic within the meaning of Rule 12-3.0012(a)4. Available records include: daily summary tapes for each shift, spread sheets, and quarterly summaries, each of which is maintained by Petitioner, and journals and general ledgers, which are maintained by Petitioner's accountants. During the audit period, each shift operator manually prepared a worksheet for daily sales and reconciled those numbers with the corresponding bank deposit. Petitioner maintained working papers supported by summary tapes. The summary tapes document totals for each day's operations. Each summary tape is proofed against two of three tapes prepared by different employees. The daily totals are entered on a monthly spreadsheet and submitted to Petitioner's accountants quarterly for preparation of sales tax returns. The auditors were not satisfied with the records Petitioner maintained during the audit period. The cost of goods sold exceeded gross sales (operating losses) for two federal tax years during the three-year audit period (operating loss years).3 The auditors regarded the operating loss years as evidence of unreported sales. As Respondent explains: The controversy regarding the true amount of total sales made by Petitioner arose because [Respondent] could not accept as correct Petitioner's assertion that for two of the three years under audit, Petitioner's reported costs of goods sold were greater than its reported gross receipts [operating losses]. . . . The question puzzling the . . . auditors was - how could a business continue to operate if its costs were greater than its revenue? [Respondent] concluded unreported sales were indicated. . . . Respondent's PRO, paragraph 8, page 6. Respondent knew, or should have known, that unusual facts and circumstances existed during the audit period which answered the auditor's questions concerning the operating loss years. During a substantial part of the audit period, the road fronting the store, which provided virtually all practical access to the store, was closed for construction by the county government. The road closure depressed sales substantially and required Petitioner to sell some goods for less than cost and to offer customer incentives and promotions in an effort to maintain the customer base. The owner and her mother financed the operating losses with annual shareholder loans of approximately $200,000 for each of the two operating loss years. Petitioner provided the auditors with material information, including documentation of the road construction and shareholder loans. That information concerned the nature of the taxpayer's business and included information authorized in Rule 12-3.00112(3) such as third-party confirmations, corroborating evidence, and related supporting documentation. The auditors were not satisfied. They concluded that available records were not adequate. When records are inadequate, Respondent has statutory authority to conduct an audit on the basis of: test or sampling of the dealer's available records or other information relating to the sales or purchases made by such dealer for a representative period. (Emphasis supplied) § 212.12(6)(b). Subsection 212.12(6)(b) is the statutory basis for the proposed agency action. The Notice of Decision, in relevant part, cites Subsection 212.12(6)(b) as statutory authority for the proposed assessment. The available records were adequate for the auditors to use sampling authorized in Subsection 212.12(6)(b) based on Petitioner's federal tax information.4 For example, the auditors could have used the gross profit percentage reported for the federal tax year during the audit period in which Petitioner reported a profit (the profit year) to increase either: the cost of goods sold reported for federal tax purposes during the operating loss years, or the undisputed purchase invoice costs that Petitioner provided to Respondent. Respondent does not assert in its PRO that the proposed assessment is authorized by Subsection 212.12(6)(b). Rather, Respondent reasons at paragraph 23, page 9, of the PRO that the proposed assessment is based on an estimate authorized in Subsection 212.12(5)(b). Subsection 212.12(5)(b) would have authorized Respondent to "make an assessment" against Petitioner "based on an estimate from the best information then available" (emphasis supplied) if it were shown that Petitioner failed or refused to make records available, Respondent suspected fraud, or any of the other statutory prerequisites for an estimate existed. However, it is undisputed that none of the statutory prerequisites for an estimate authorized in Subsection 212.12(5)(b) exist in this proceeding. The Notice of Decision does not reference Subsection 212.12(5)(b), much less cite Subsection 212.12(5)(b) as authority for the proposed assessment. Nevertheless, the auditors estimated unreported gross sales for state tax purposes (unreported sales) based on three field visits to the store.5 In the first field visit, an auditor walked through the store with one of Petitioner's employees and compared the sale price marked on selected goods with costs recorded in the purchase invoices for those goods. The auditor estimated that Petitioner marked up purchase invoice costs for all goods by 50 percent (the 50 percent markup). The auditor estimated sales tax due on unreported sales in four steps. First, the auditor estimated gross sales by marking up the cost of goods sold on Petitioner's federal tax returns by 50 percent. Second, the auditor multiplied the estimated gross sales by 33.33 percent; a percentage derived from the ratio of taxable sales to gross sales (taxable sales ratio) reported by Petitioner. The auditor used the mathematical product of that calculation as the estimated taxable sales. In the third step, the auditor multiplied estimated taxable sales by the effective tax rate to estimate the total tax. Finally, the auditor estimated that the tax due on unreported sales was equal to the difference between the estimated total tax and the amount of taxes paid. The auditors were not satisfied. The auditors believed the taxable sales ratio reported by Petitioner was lower than the actual taxable sales ratio. The parties reached an audit agreement during a meeting conducted on December 8, 2005, subject to Petitioner's objection to an assessment based on any sampling or estimate. Each party determined a taxable sales ratio based on Z-tapes that were available from July 16 through November 2005 (the representative period) and applied the taxable sales ratio back over the entire audit period. Prior to the representative period, an auditor made a second field visit and identified certain goods, including potato chips, which he believed employees were incorrectly selling as non-taxable items. The auditor asked the employees to keep register tapes for the representative period in accordance with his instructions. After the second visit to the store, store employees kept Z-tapes during 141 shifts. The Z-tapes for the 141 shifts provide a "sample . . . for a representative period" within the meaning of Subsection 212.12(6)(b). Respondent determined the applicable taxable sales ratio to be 55.2 percent.6 A certified public accountant (CPA) retained by Petitioner determined that the taxable sales ratio during the representative period was 43 percent. The auditors were not satisfied. They conducted a third "field visit" to the store prior to March 1, 2006. In the third field visit, auditors again viewed goods for sale on store shelves. The auditors estimated the taxable sales ratio to be 75 percent and retained the 50 percent markup. Based on selected goods the auditors viewed on store shelves, the proposed assessment incorrectly estimates unreported sales using a taxable sales ratio and markup of 75 and 50 percent.7 The 50 percent markup lacks economic reality. The markup is necessarily limited to selected items and does not accurately reflect actual markup for all goods sold. Nor does the markup accurately reflect the impact of construction on Petitioner's business within the meaning of Rule 12-.0012(3)(b). Petitioner presented credible and persuasive testimony that the correct markup is 23 percent. That testimony is consistent with evidence sanctioned in Rule 12-3.0012(3)(b) that the industry operates on a markup of only 20 percent. A taxable sales ratio of 55.2 percent is reasonable and accurately reflects economic reality. The taxable sales ratio of 55.2 percent was correctly determined by a sampling method authorized in Subsection 212.12(6)(b). The sampling method used to determine a taxable sales ratio of 55.2 percent is consistent with the legislative description of sampling in Subsection 212.12(6)(c) that the Legislature authorizes when available records are adequate but voluminous.8 If the proposed assessment were correct, Respondent should not assess any penalties against Petitioner. It is undisputed that an alleged failure to maintain adequate records was unintentional and that Petitioner fully cooperated in the audit. On July 10, 2007, Petitioner paid Respondent an additional $47,727.41; comprised of additional tax totaling $35,589 and accrued interest of $12,138.41.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent enter a final order assessing sales tax based on the available records maintained by Petitioner, and, if sampling is authorized, using a taxable sales ratio and markup that do not exceed 55.2 and 23 percent, respectively. DONE AND ENTERED this 4th day of March 2008, in Tallahassee, Leon County, Florida. S DANIEL MANRY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 4th day of March, 2008.
The Issue The issue for determination is whether Petitioner is liable for the tax, penalty, and interest assessed.
Findings Of Fact Petitioner is a Florida corporation with its principal place of business located at 2836 North Tamiami Trial, Sarasota, Florida. Petitioner primarily engages in the business of selling classic, vintage automobiles. Petitioner sells automobiles for delivery in-state, interstate, and internationally. Petitioner also engages in the business of selling other collectible items, including jukeboxes. Respondent is the state agency responsible for the administration of the Florida sales and use tax pursuant to Sections 20.21 and 213.05, Florida Statutes (1991). (All references to Florida Statutes are to Florida Statutes 1991 unless otherwise stated.) In accordance with Section 212.34, Respondent audited Petitioner's business records for the period from May 1, 1991, through July 31, 1996 (audit period). Respondent determined a deficiency and assessed Petitioner for $114,878.68, including tax, penalty, and interest through January 26, 1999. Respondent assessed tax in the amount of $55,771.16, penalty in the amount of $26,528.02, and interest through January 26, 1999, in the amount of $32,579.50. Additional interest accrues at the daily rate of $20.97. The assessed tax is based on several alleged deficiencies. Some deficiencies involve alleged failures of Petitioner to comply with taxing provisions. Other deficiencies involve alleged failures of Petitioner to comply with the requirements of claimed exemptions. Taxing provisions are construed narrowly against the taxing authority while the provisions authorizing exemptions are construed narrowly against the person claiming the exemption. The assessment against Petitioner includes tax on $51,353.10 in under-reported retail sales for 1994. Respondent compared the gross income reported by Petitioner for the 1994 tax year with the state sales tax revenues reported by Petitioner for the same year and determined that Petitioner under-reported sales tax revenues in the amount of $51,353.10. Mr. Martin Godbey is a corporate officer for Petitioner and a controlling shareholder. Mr. Godbey testified at the hearing. Mr. Godbey testified that $45,000 of the $51,353.10 was not under-reported gross sales in 1994. According to Mr. Godbey, Petitioner's accountant over-reported gross income for purposes of the federal income tax. Petitioner derives some income from providing brokerage services as an liaison between a buyer and seller. Mr. Godbey testified that Petitioner earned $1,400 in 1994 as a broker for the sale of a 1956 Jaguar XJ140 roadster on behalf of an automobile dealership in Virginia. The testimony is that Petitioner introduced the seller and buyer but never possessed the vehicle or delivered the vehicle. The price of the vehicle was approximately $45,000. Mr. Godbey testified that Petitioner's accountant incorrectly reported $45,000 as gross income under the federal income tax law and reported the difference between $45,000 and $1,400 as the cost of goods sold. The testimony of Mr. Godbey was credible and persuasive. However, the testimony was not supported by documentary evidence of Petitioner's federal income tax return or by testimony of Petitioner's accountant. The unsupported testimony of Mr. Godbey does not rise to the level of a preponderance of the evidence. Petitioner failed to show by a preponderance of the evidence that Petitioner over-reported gross income for the purpose of the federal income tax rather than under-reported gross sales for the purpose of the state sales tax. The testimony of Mr. Godbey did not explain the difference between the $51,353.10 amount determined by Respondent and $45,000 amount testified to by Mr. Godbey. For the period from 1991 through 1993, Petitioner collected sales tax on retail sales but did not remit the tax to Respondent. Rather, Petitioner paid the tax to two automobile dealers identified in the record as International Antique Motors, Inc. (IAM) and Autohaus Kolar, Inc. (AK). Petitioner registered with Respondent as a dealer sometime in 1991. However, Petitioner did not obtain a retail dealer's license from the Department of Motor Vehicles (Department) until late in 1993. From 1991 through most of 1993, Petitioner was licensed by the Department as a wholesale dealer and was not authorized by the Department to engage in retail sales of motor vehicles. Section 320.27(2) prohibited Petitioner from selling motor vehicles at retail and made such sales unlawful. Petitioner asserts that it could not have engaged in retail sales, within the meaning of Section 212.06(2)(c) and (d), because Petitioner had no legal authority to do so. From 1991 through 1993, Petitioner engaged in retail sales within the meaning of Section 212.06(2)(c) and (d). Petitioner engaged in retail sales by selling automobiles at retail in violation of Section 320.27(2). Respondent does not dispute that Petitioner collected sales tax on each sale. Petitioner did not engage in retail sales and collect sales tax on each sale in the capacity of an agent for IAM or AK. Petitioner acted in his own behalf as a principal. IAM and AK had no actual or legal control over the sales conducted by Petitioner. IAM and AK merely processed the title work for each retail sale conducted by Petitioner. Even if Petitioner were an agent for IAM and AK, Petitioner engaged in retail sales as a dealer defined in Florida Administrative Code Rule 12A-1.0066. (All references to rules are to rules promulgated in the Florida Administrative Code during the audit period.) Petitioner registered the vehicles sold at retail from 1991 through 1993 by way of a business arrangement with IAM and AK. After Petitioner collected sales tax on each retail sale, Petitioner remitted the tax to IAM and AK. IAM and AK then registered the vehicles with the Department. Respondent does not dispute that Petitioner paid to IAM and AK the sales tax that Petitioner collected from each customer. Nor does Respondent dispute that the amount of tax Petitioner paid to IAM and AK was sufficient to pay the tax due. Section 212.06(10) requires IAM and AK to issue a receipt for sales tax with each application for title or registration. IAM obtained title or registration for 21 vehicles sold by Petitioner and at issue in this case. AK obtained title or registration for three vehicles at issue in this case. Section 212.06(10) does not operate to create a factual presumption that IAM and AK paid the sales tax due on the 24 vehicles at the time that IAM and AK applied for title or registration of each vehicle. In practice, the receipt issued by dealers with each application for title or registration contains a code indicating that the dealer has collected the tax and will pay the tax in the dealer's ensuing sales tax return. After IAM applied for title or registration for the vehicles evidenced in Petitioner's Exhibits 2, 4, 6, and 21, IAM remitted taxes to Respondent in an amount sufficient to pay the tax due on those sales by Petitioner. Respondent has no record of any tax deficiencies against IAM. Respondent's admitted policy is to avoid the collection of tax if the tax has already been paid. After IAM applied for title or registration for the vehicles evidenced in Petitioner's Exhibits 1, 3, 5, and 7 through 20, IAM remitted taxes to Respondent in an amount that was insufficient to pay the tax due on those sales. Petitioner failed to show by a preponderance of the evidence that IAM remitted to Respondent the taxes that Petitioner collected and paid to IAM in connection with the sales evidenced in Petitioner's Exhibits 1, 3, 5, and 7 through 20. Petitioner is not entitled to a set-off of the taxes remitted to Respondent by IAM after the sales evidenced in Petitioner's Exhibits 1, 3, 5, and 7 through 20. There is insufficient evidence to show that the taxes remitted by IAM were collected on the sales at issue in this case rather than other sales made by IAM. AK processed three vehicles for Petitioner that are at issue in this case. AK paid to Respondent the sales tax due on the three retail sales at issue. The relevant sales are evidenced in Petitioner's Exhibits 24 through 26. AK remitted taxes in an amount that was more than sufficient to pay the tax due on those sales by Petitioner. Respondent has no record of a tax deficiency against AK. Respondent's policy is to avoid the collection of tax if tax has already been paid. Several deficiencies are attributable to disallowed exemptions for 16 sales that include 14 vehicles and two jukeboxes. Statutory requirements for exemptions are strictly construed against the person claiming the exemption. Petitioner did not satisfy essential requirements for any of the disallowed exemptions. The exemptions asserted by Petitioner in its PRO are discussed in greater detail in the following paragraphs. During the audit period, Petitioner sold a 1972 Italia Spyder automobile, VIN: 50413414, to a Texas automobile dealership identified in the record as North American Classic Cars/Gene Ponder, of Marshall, Texas (North American). Petitioner claims that the sale to North American is exempt because it is a sale for resale to a non-resident dealer. The sale to North American is not exempt. Petitioner failed to obtain a non-resident dealer affidavit at the time of sale in violation of Section 212.08(10). During the audit, Petitioner obtained a Sales Tax Exemption Affidavit (DR-40) from North American. A DR-40 is not appropriate for a sale for resale to a non-resident dealer. The appropriate affidavit would have required the non-resident dealer to attest that "the motor vehicle will be transported outside of the State of Florida for resale and for no other purpose." Hand written notations on the bill of sale for the Italia Spyder indicate the North American representative took possession of the automobile in Florida. In addition, a hand- written letter to Petitioner indicates that the Italia Spyder was purchased for the private collection of the owner of North American rather than for resale. During the audit period, Petitioner sold a 1959 Mercedes Benz 190SL automobile, VIN: 12104-10-95012, to Mike Hiller, of Coral Springs, Florida (Hiller). Petitioner claimed, on the bill of sale, that the sale was exempt because it was a sale to a non-resident dealer for resale. The sale to Hiller is not exempt. At the time of the sale, Petitioner failed to obtain a non-resident dealer affidavit or a resale certificate. The bill of lading lists Hiller as an exporter and indicated that Hiller, as the exporter, took possession of the automobile in Florida. The bill of lading does not show unbroken, continuous transportation from the selling dealer to a common carrier or directly out of Florida as required in Section 212.06(5)(b)1. During the audit period, Petitioner sold a 1959 MGA Roadster, VIN: 54941, to Fabiana Valsecchi, of Rome, Italy. Petitioner claims the sale is exempt as a sale for export. The sale to Valsecchi is not exempt. At the time of the sale, Petitioner failed to obtain a bill of lading, or other shipping documentation that shows unbroken, continuous transportation from Petitioner to a common carrier or directly out of Florida. The bill of sale signed by the purchaser's agent shows that the agent took possession of the automobile in Florida. Petitioner failed to show that the sale was exempt because it was a sale for resale. Petitioner did not provide a resale certificate from the purchaser. During the audit period, Petitioner sold a 1961 Triumph TR3 automobile, VIN: TS753 38L, to Classic Automobile Investors, Inc., of Germany (Classic). Petitioner claims that the sale is exempt because it was a sale for export. The sale to Classic is not exempt. At the time of sale, Petitioner failed to obtain a bill of lading, or other shipping documentation which shows unbroken, continuous transportation from Petitioner to a common carrier or directly out of Florida. During the audit period, Petitioner sold a 1947 Bentley MKVI automobile, VIN: B137B, to Mr. Bob Erickson, of Palmetto, Florida. Petitioner failed to collect and remit Local Government Surtax on the sale and owes the uncollected tax. During the audit period, Petitioner sold two jukeboxes and other items of tangible personal property to Mr. C.P. Loontjens. Petitioner claims that the sales are exempt from sales tax because they were sales for export. At the time of the sale, Petitioner failed to obtain documentation from the buyer to show that items sold were delivered to a common carrier or directly delivered outside of Florida. During the audit period, Petitioner was engaged in the business of selling items of tangible personal property other than vehicles and jukeboxes. Petitioner failed to collect and remit sales tax on the sale of these items of tangible personal property. Respondent properly assessed Petitioner for sales tax due on tangible personal property other than vehicles and jukeboxes in the amount of $3,352.50. Vintage rented commercial real property for its business. Rental payments for such real property are subject to sales tax pursuant to Section 212.031. During the audit period, Petitioner failed to pay sales tax on two payments for the commercial rental of real property. Petitioner is liable for use tax on the use of real property during the audit period. Respondent properly assessed Petitioner for additional use tax in the amount of $108.00. Although Petitioner maintained some books and records of sales and purchases, Petitioner failed to maintain adequate records. Respondent properly conducted an audit by sampling Petitioner's available books and records in accordance with Section 212.12(6)(b) but limited the claimed penalty to a delinquent penalty. The trier of fact cannot determine the taxes, interest, and penalty that are due after eliminating the deficiencies found in paragraphs 21 and 24 not to exist in connection with the sales evidenced in Petitioner's Exhibits 2, 4, 6, 21, and 24 through 26. Only Respondent can make that calculation using the same sampling formula that Respondent used to calculate the tax, interest, and penalty in the assessment.
Recommendation Based upon the foregoing findings of fact and the conclusions of law, it is RECOMMENDED that Respondent enter a Final Order ordering Petitioner to pay the tax, interest, and penalty that is due after Respondent recalculates the assessment against Petitioner in accordance with the findings pertaining to Petitioner's Exhibits 2, 4, 6, 21, and 24 through 26. DONE AND ENTERED this 6th day of March, 2003, in Tallahassee, Leon County, Florida. ___________________________________ DANIEL MANRY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 6th day of March, 2003. COPIES FURNISHED: Carrol Y. Cherry, Esquire Office of the Attorney General Department of Legal Affairs The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050 Martha F. Barrera, Esquire Office of the Attorney General Department of Legal Affairs The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050 R. John Cole, II, Esquire Law Offices of R. John Cole, II 46 North Washington Boulevard, Suite 24 Sarasota, Florida 34236 Bruce Hoffmann, General Counsel Department of Revenue 204 Carlton Building Tallahassee, Florida 32399-0100 James Zingale, Executive Director Department of Revenue 104 Carlton Building Tallahassee, Florida 32399-0100
The Issue There is little controversy as to the facts in this cause. The issue is essentially a legal issue and is stated as follows: When parties act in reliance and in conformity to a prior construction by an agency of a statute or rule, should the rights gained and positions taken by said parties be impaired by a different construction of said statute by the agency? Both parties submitted post hearing proposed findings of fact in the form of proposed recommended orders filed March 17 and 18, 1983. To the extent the proposed findings of fact have not been included in the factual findings in this order, they are specifically rejected as being irrelevant, not being based on the most credible evidence, or not being a finding of fact.
Findings Of Fact The Petitioner, Vanguard Investment Company, is a Florida corporation with its principal offices at 440 Northeast 92nd Street, Miami Shores, Florida 33138. On or about March 3, 1981, Vanguard purchased an aircraft described as a Turbo Commander, serial number N9RN, from Thunderbird Aviation, Inc., for a purchase price of $120,000 plus $4,800 in sales tax. The sale price plus the sales tax was paid by Vanguard to Thunderbird, which remitted the $4,800 in sales tax to the Department of Revenue (DOR) less a three percent discount as authorized by law. On February 27, 1981, Vanguard had executed a lease of said aircraft to General Development Corporation for a term of two years commencing on March 1, 1981, contingent upon Vanguard's purchase of said aircraft from Thunderbird. Prior to March 1, 1981, General Development had leased said aircraft from Thunderbird, and the least terminated on February 28, 1981. Vanguard purchased said aircraft for the sole purpose and in anticipation of continuing its lease to General Development. Vanguard never took possession or control of said aircraft, which remained in General Development's possession at Opa-locka Airport in Dade County, Florida. No controversy exists that all sales tax payable under General Development's lease of the aircraft, both with Thunderbird and subsequently with Vanguard, had been remitted to DOR with no break in continuity of the lease as a result of the change in ownership of the aircraft on or about March 1, 1981. At the time Vanguard purchased the aircraft from Thunderbird, Vanguard had not applied for or received a sales and use tax registration number pursuant to Rule 12A-1.38, Florida Administrative Code. Vanguard applied for said sales and use tax registration number on or about April 2, 1981, approximately 30 days after the purchase of said aircraft. The sales and use tax registration number was granted by DOR on or about April 23, 1981. Shortly thereafter, Vanguard inquired of DOR concerning a refund of the $4,800 in sales tax paid on the aircraft plus the three percent discount taken by Thunderbird. In lieu of Vanguard's providing Thunderbird a resale certificate and having Thunderbird apply for the sales tax refund, it was suggested that Vanguard obtain an assignment of rights from Thunderbird and apply directly for the refund because Thunderbird had been dissolved immediately after the sale of the aircraft to Vanguard. Acquisition of the assignment of rights from Thunderbird by Vanguard was delayed by the dissolution of Thunderbird and the death of Thunderbird's principal officer. Vanguard received the assignment of rights from Thunderbird on or about July 1, 1982, and immediately applied for a refund of the sales tax. Said application for refund was well within the three years permitted by Florida law to apply for a sales tax refund. On November 22, 1982, the Office of Comptroller (OOC) notified Vanguard of its intent to deny Vanguard's application for the sales tax refund because Vanguard had failed to obtain a sales and use tax registration number prior to purchasing the aircraft from Thunderbird. At the time of the purchase, it was the policy of DOR to permit individuals to apply late for a sales and use tax registration number and not to deny refunds on the basis that the applicant did not have the sales and use tax registration number at the time of the taxable purchase. On or about July 1, 1982, this policy of DOR was altered to conform with the decision of the Florida Supreme Court in State Department of Revenue v. Robert N. Anderson, 403 So.2d 297 (Fla. 1981). Vanguard was aware of the DOR policy at the time of the sale, relied on that policy, and conformed to that policy. It was clearly stated that had Vanguard applied for its refund even a month earlier, in June of 1982, the refund would have been approved under the then-existing policy.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the application of Vanguard Investment Company for refund of sales tax be approved, and that said refund be paid by the Office of Comptroller. DONE and RECOMMENDED this 25th day of April, 1983, in Tallahassee, Leon County, Florida. STEPHEN F. DEAN, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 25th day of April, 1983. COPIES FURNISHED: Edward S. Kaplan, Esquire 907 DuPont Plaza Center Miami, Florida 33131 William G. Capko, Esquire Assistant Attorney General Office of Comptroller The Capitol, Suite 203 Tallahassee, Florida 32301 Thomas L. Barnhart, Esquire Assistant Attorney General Department of Legal Affairs The Capitol, LL04 Tallahassee, Florida 32301 The Honorable Gerald A. Lewis Office of Comptroller The Capitol Tallahassee, Florida 32301
Findings Of Fact High-Tech Yacht & Ship, Inc. (Petitioner) is a Florida corporation engaged in the business of retail sales of marine vessels. Also, Petitioner is a registered retail dealer in the State of Florida. The President of Petitioner is its only corporate officer. On or about September 2, 1993, Petitioner, in the capacity of a broker, sold a motor yacht at retail to Regency Group, Inc. (purchaser), through its representative, for $78,000. The motor yacht is described as a 1988, 41' Amerosport Chris Craft, hull Number CCHEU075E788, and called the "Motivator". At the closing of the sale, on or about September 2, 1993, the purchaser refused to pay the sales tax on the purchase, which was $4,680. However, the purchaser agreed to pay the sales tax after being informed by Petitioner that, without the payment of the sales tax, there could be no closing. The purchaser's representative submitted, at closing, a personal check in the amount of $4,680 for the sales tax. All of the necessary documents were completed for ownership and registration to be transferred to the purchaser. Subsequently, Petitioner received notice from its bank that the check for the sales tax had been dishonored by the purchaser's bank. The purchaser's representative had stopped payment on the check. In October 1993, Petitioner submitted its sales and use tax return for the month of September 1993 to Respondent in which the sale of the yacht was reported. Respondent automatically reviews sales and use tax returns. Respondent's review of Petitioner's return revealed a shortage of sales tax collected in the amount of $4,680.. In January 1994, Respondent issued a notice of tax action for assessment of additional tax in the amount of $4,710, plus interest and penalty, to Petitioner. The $4,710 included the loss of Petitioner's collection allowance of $30, which loss resulted from Petitioner's failure to timely remit all taxes due. Having received the notice of tax action, by letter dated January 20, 1994, Petitioner generally informed Respondent of the circumstances regarding the sales tax shortage, including the dishonored check. Petitioner pointed out, among other things, that Respondent had the authority and the means to collect the tax, while it (Petitioner) had limited means, and suggested, among other things, that Respondent cancel the purchaser's Florida registration of the yacht. On or about January 31, 1994, approximately three months after the check for sales tax was dishonored, Petitioner issued a notice of dishonored check to the purchaser, in which Petitioner requested payment of the sales tax. The notice provided, among other things, that Petitioner could seek criminal prosecution and civil action if the monies were not paid to Petitioner. Having not received the $4,680, Petitioner contacted the local law enforcement agency. After investigation, the law enforcement agency informed Petitioner that a civil action would have to be instituted because the purchaser, through its representative, had indicated that it was not satisfied with the yacht. Although Petitioner engaged the services of an attorney for civil action, no civil action was commenced. Additionally, Petitioner did not engage the services of a collection agency for assistance in collecting the sales tax. Subsequent to its notice of tax action, on or about March 12, 1994, Respondent issued a notice of assessment to Petitioner. The notice of assessment provided, among other things, that Petitioner was being assessed taxes in the amount of $4,710, plus penalty and interest in the amount of $2,342.61, totalling $7,052.61. Petitioner protested the assessment. On February 8, 1995, Respondent issued its notice of reconsideration in which Respondent determined, among other things, that the assessment was appropriate and affirmed the assessment of $7,052.61, plus interest and penalty. The interest accrues at the rate of $1.55 per day. Petitioner has not remitted any of the assessed tax, including interest and penalty, to Respondent. Petitioner has not identified on its federal tax return the noncollection of the sales tax from the purchaser as a bad debt. Sales tax is part of the total sale price for an item. Respondent considers the sales tax as collectable by a seller in the same manner as any other debt owed by a purchaser to a seller. A retail dealer, who is also a seller, is considered to be an agent for the State in the collection of sales tax. The burden of collecting the sales tax is placed upon the retail dealer by Respondent. Some of Respondent's employees have been sympathetic to Petitioner's tax assessment matter. However, none of the employees indicated to or advised Petitioner that Respondent was or is in error.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order affirming the assessment of sales tax against High-Tech Yacht & Ship, Inc. in the amount of $7,052.61, plus interest and penalty. DONE AND ENTERED this 7th day of August 1996, in Tallahassee, Leon County, Florida. ERROL H. POWELL, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 7th day of August 1996.
Findings Of Fact Petitioner Schooley Cadillac, Inc. is a dealer in Cadillac automobiles in West Palm Beach, Florida. The firm requires its salesmen to purchase a new Cadillac automobile each year. When a salesman decides to acquire the new automobile, an order is placed with the Cadillac Motor Car Division and delivery is made some eight to ten weeks thereafter. During the interim period, the salesman's used automobile is placed in petitioner's used car department and sold to a customer. State sales tax is collected by petitioner and remitted to respondent based on sales of the used cars. Title to the used car is transferred from the salesman to petitioner at the time it is resold. Although there is no contract or purchase agreement executed between the salesman and petitioner for the purchase of the new automobile, he is credited with the sale price of the used car on the books of the petitioner at the time the used car is sold. When the salesman's new car arrives, an invoice is prepared that reflects the amount credited to the salesman for the used car on the purchase price of the new car as a "previous trade." State sales tax is collected by petitioner and paid to the state on the price of the new automobile, less the amount credited for the used automobile. Petitioner handles a lesser number of transactions for General Motors retirees and a few winter residents using basically the same procedures involving purchases of new automobiles and prior sale of the individual's used car. In such cases, however, title to the used car is normally transferred to petitioner prior to its sale. (Testimony of Eichhorn) Respondent's tax examiner examined the books of petitioner in 1977 and determined that credit should not have been allowed for the price of the used automobiles in determining the amount of sales tax payable to the state because he viewed the amounts credited for the used automobiles as "down payments" rather than "trade-ins." Based upon 33 such transactions which took place between May 1, 1974 through April 30, 1977, a Notice of Proposed Assessment was prepared and sent to petitioner on August 2, 1977, in which delinquent sales tax in the amount of $9,814.44 was claimed, together with a penalty in the amount of $2,367.19, and interest through June 23, 1977, in the amount of $1,703.79, for a total assessment of $13,885.39. A prior Notice of Proposed Assessment in a somewhat larger amount had been scaled down after certain credits had been allowed to the petitioner. The 33 transactions in question involved 24 sales to petitioner's salesmen and the remainder to General Motors retirees or regular customers. As a result of the proposed assessment, petitioner filed its petition for an Administrative Hearing in the matter. At the hearing, petitioner conceded that tax was payable on three of the transactions in which used vehicles were not sold by the petitioner. These three transactions involved the purchase of new automobiles for the price of $7,500 and $5,200 respectively, and the purchase of a motorcycle for $375, thus making a total of $13,075 upon which petitioner acknowledges sales tax in the amount of 4 percent is due. Such tax amounts to $523, plus applicable interest and penalties thereon. (Testimony of Eichhorn, Elliot, Exhibits 1-2)
Recommendation That petitioner Schooley Cadillac, Inc. be held liable for sales tax under Chapter 212, Florida Statutes, in the amount of $523, plus an appropriate amount for penalty and interest thereon. Done and Entered this 7th day of December, 1977, in Tallahassee, Florida. THOMAS C. OLDHAM Hearing Officer Division of Administrative Hearings 530 Carlton Building Tallahassee, Florida 32304 COPIES FURNISHED: Robert W. Jensen and James Adams, Esquires 186 Southeast 13th Street Miami, Florida 33130 Edwin J. Stacker, Esquire Assistant Attorney General Department of Legal Affairs The Capitol Tallahassee, Florida 32304
