The Issue Is the purchase or use of tangible personal property by a contractor who purchases material and supplies for use in performing non-public works contracts taxable under Chapter 212, Florida Statutes, and Rule 12A-1.051, Florida Administrative Code?
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant findings of fact are made. Petitioner is a Florida Corporation having its principal place of business located at 560 Highway 27 North, Sebring, Florida 33820, and is subject to the taxes imposed under Chapter 212, Florida Statutes. The Department is the agency authorized to administer the tax laws of the State of Florida, pursuant to Section 213.05, Florida Statutes. The Department is authorized to prescribe the records to be kept by all persons subject to taxes under Chapter 212, Florida Statutes. Such persons have a duty to keep and preserve their records, and the records shall be open to examination by the Department or its authorized agents at all reasonable hours pursuant to Section 212.12(6), Florida Statutes. The Department is authorized to conduct audits of taxpayers and to request information to ascertain their tax liability, if any, pursuant to Section 213.34, Florida Statutes. The Department conducted an audit of Petitioner to determine if Petitioner was properly collecting and remitting sales and use tax to the Department. The audit covers the period from November 1, 1992, through October 31, 1997. Petitioner is a retail carpet store, selling carpet and other flooring material, both installed and non-installed, in Sebring, Florida, and the surrounding areas. An invoice is prepared for each sales transaction. Petitioner rents the building in which its business is conducted and where Petitioner’s inventory and supplies are stored. Petitioner pays rent monthly. During the audit period, tax was neither paid nor collected on the rent payments. Petitioner purchases carpet samples from out-of-state vendors for use in its business. During the audit period, sales tax was not paid on all purchases. Petitioner collected tax on the price of the carpet or other flooring materials, as reflected on the invoice, where the customer was a taxpaying entity and collected tax on the total price on the invoice when the invoice specified installation. Petitioner did not collect tax on the price of the carpet or other flooring material, as reflected on the invoice, for tax-exempt entities, whether the invoice reflected the carpet or other flooring material as installed or non-installed. On May 18, 1998, a Notice of Intent to Make Audit Changes was presented to Petitioner. Additional sales and use tax and infrastructure surtax were determined to be due for the following taxable events: (a) rental expenses; (b) taxable purchases of samples; and, (c) sales to tax-exempt entities where the sale of carpet or other flooring materials included installation to real property. On May 18, 1998, Petitioner paid the additional tax assessed for taxable rental expenses and taxable purchases of samples and has been given credit for such payment. Petitioner protests the tax assessed on the cost price of carpeting used where the customer was a tax-exempt entity and the sales price included installation. On July 16, 1998, the Department sent to Petitioner its Notice of Proposed Assessment showing that Petitioner owed additional sales and use tax and infrastructure surtax in the amount of $13,569.15 and $2,188.01, respectively. Added to the tax owed by Petitioner were penalties in the amount of $6,730.78 and $1,085.02, respectively, and interest through July 16, 1998, in the amount of $4,627.66 and $736.95, respectively. The total assessment was $24,927.59 and $4,009.98, respectively. Credits in the amount of $8,233.87 and $1,372.30 respectively, have been applied against the taxes assessed and reflect the payments made by Petitioner on May 18, 1998. The amount of taxable rental expenses reported on the audit work paper Schedule B010 is consistent with Petitioner’s monthly reports. The amount of taxable sample expenses reported on the audit work paper Schedule B020 is consistent with Petitioner’s monthly reports. 18 The amount of exempt sales reported on the audit work paper Schedule B030 is consistent with Petitioner’s monthly reports. Petitioner timely filed a written protest of the Department’s proposed assessment. On October 25, 1998, the Department issued its Notice of Decision as to the protest of Petitioner. The proposed assessment was sustained by the Department. All invoices in the Department’s Composite Exhibit numbered 2, with the exception of invoices numbered 68, 197, 262, 432, 481, 482, 497, and 498, which are related to transactions that do not involve real property, are records of contracts between Petitioner and the tax-exempt entity to furnish and install wall-to-wall carpet or other flooring materials on real property. There is no retained title provision in any of these contracts. With the exception of invoices numbered 68, 197, 262, 432, 481, 482, 497, and 498, the invoices contained in the Department’s Composite Exhibit numbered 2 reflect an improvement being made to real property. Each of the invoices in the Department’s Composite Exhibit numbered 2 corresponds to a specific entry in Schedule B030 of the audit work papers and which is included under Tab 7a, pages 19 through 32, of the Department’s Composite Exhibit numbered 1. When Petitioner installed, or subcontracted the installation of carpet, the carpet was affixed to the floor by glue, nails, or other means and became the finished floor. Although tack strips, glue, nails, seaming tape, and other items were not listed on the invoice, these items are commonly used in the industry to complete performance of contracts such as those involved in this proceeding. In providing for the installation of carpet or other flooring materials involved in this proceeding, Petitioner engaged subcontractors and paid the subcontractor by the square yard. The square yard price included all materials and labor. With some exceptions, such as metal strips, materials used in the installation of the carpet or other flooring materials were not reflected on the invoices. Since there was no itemization of parts and labor, the invoices contained in the Department’s Composite Exhibit numbered 2, with the exception of invoices numbered 68, 197, 262, 432, 481, 482, 497, and 498, are lump-sum contracts. During his testimony at the hearing, John T. Griffin described Petitioner’s invoices as lump-sum contracts. Petitioner argued that the Department had failed to provide the proper information and training concerning the Department’s position on the imposition of the tax. However, based on the testimony of the Department’s witnesses concerning this matter it appears that sufficient information and sufficient training concerning the Department’s position on the imposition of the tax was readily available to Petitioner or its employees. The noncompliance by Petitioner with the applicable sales and use tax rules was not due to willful negligence, willful neglect, or fraud. It is the recommendation of the Department’s employees that the penalty assessed in this matter be waived. As of January 18, 2000, the total sales and use tax, penalty, and interest was $17,658.80. The local governmental infrastructure total surtax, penalty, and interest was $2,786.58. These totals do not reflect a downward adjustment for the taxes, penalty, and interest assessed against invoices numbered 68, 197, 262, 432, 481, 482, 497, and 498. For these invoices, the adjustment for taxes assessed, penalty, and interest shall be calculated from the date of each specific invoice and Petitioner given credit for any taxes, penalty, or interest charged against it for invoices numbered 68, 197, 262, 432, 481, 482, 497, and 498. The interest that has been assessed for the taxes that were not paid on the rent of the building or the carpet samples is appropriate. Petitioner does not disagree with this interest.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Department enter a final order upholding its assessments dated October 25, 1998, of sales and use tax, the local infrastructure surtax, plus applicable interest against Griffin Carpet Mart, Inc., with credit being provided for any payments made and for the assessments related to invoices numbered 68, 197, 262, 432, 481, 482, 497, and 498. It is further recommended after considering all the circumstances surrounding this case, that all penalties be waived. DONE AND ENTERED this 7th day of April, 2000, in Tallahassee, Leon County, Florida. WILLIAM R. CAVE 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) 921-6947 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 7th day of April, 2000. COPIES FURNISHED: James F. McCollum, Esquire Law Offices of James F. McCollum, P.A. 129 South Commerce Avenue Sebring, Florida 33870-3698 John Mika, Esquire Nicholas Bykosky, Esquire Office of the Attorney General Department of Legal Affairs 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 Post Office Box 6668 Tallahassee, Florida 32314-6668
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 Whether the Petitioner owes unpaid sales and use tax for the period extending from May 1, 1986, through April 30, 1991, and, if so, the amount owed.
Findings Of Fact Based on the oral and documentary evidence presented at the final hearing and on the entire record of this proceeding, the following findings of fact are made: Jay P. Weiss is a Florida-licensed motor vehicle dealer, and he has been licensed in Florida for 27 years. Mr. Weiss does business as Jay P. Weiss, Inc. ("Weiss"), and Weiss is, and was during the times material to this proceeding, in the business of selling cars for resale. Weiss purchases motor vehicles at auction, from banks, from leasing companies, or from other dealers; reconditions the vehicles; and sells the majority of the vehicles to other dealers for resale. During the times material to this proceeding, Weiss purchased an average of 400 to 500 vehicles each year. During the times material to this proceeding, the locations from which Weiss conducted business consisted of an office and an adjacent shop in which vehicles were reconditioned. The locations did not include a showroom or a retail car lot, and Weiss did not advertise that vehicles were offered for retail sale on the premises. Nonetheless, people often walked into the office and inquired if Weiss sold cars at retail. Occasionally, Weiss sold cars to customers at retail. Motor vehicle purchases and sales were recorded on "title jackets," which contained information regarding each vehicle purchased and sold by Weiss, including the identification of the vehicle; the date of purchase, the purchase price and the identity of the person from whom the vehicle was purchased; the date of sale, the sales price, and the identity of the person to whom the vehicle was sold; and relevant title information. Duplicate information for each vehicle was included in "police books" maintained at Weiss's offices. Mr. Weiss was in Weiss's office about nine hours per week, including weekends. Throughout the week, he traveled to various auctions throughout the state, although he routinely called his office several times each day. In addition to Mr. Weiss and the employees who worked in the shop, Weiss employed a bookkeeper that was responsible for managing the office and handling all of the accounts and records for the business, including preparation of the Florida Sales and Use Tax Return Form DR-15. The bookkeeper also provided information to Weiss's accountants from which Weiss's U.S. Income Tax Return for an S Corporation, Form 1120S, was prepared. During the times material to this proceeding, three successive bookkeepers were employed by Weiss, two of whom were employed approximately three years each. Section 212.12(5)(a), Florida Statutes (1993), grants to the Department of Revenue the authority to audit the books and records of any dealer subject to Chapter 212, Florida Statutes, Tax on Sales, Use, and Other Transactions, to determine if the dealer overpaid or underpaid Florida sales and use taxes. Pursuant to this authority, the Department conducted an audit of the books and records of Weiss, for the period extending from May 1, 1986, through April 30, 1991. The Department initially concluded that Weiss owed $115.442.57 additional tax due on sales for the audit period and $10,706.94 additional tax due on purchases for the audit period, plus delinquent penalties and interest through December 6, 1991. Weiss provided additional documentation, and these amounts were revised downward in a Notice of Intent to Make Sales & Use Tax Changes dated January 13, 1993, to reflect $79,065.07 additional tax due on sales for the audit period and $10,706.94 additional tax due on purchases for the audit period, plus delinquent penalties and interest through January 13, 1993. The schedules and work papers from which the revised assessments were derived were attached to the January 13, 1993, notice. In conducting the audit of Weiss's books and records, the Department's auditor examined books and records made available to her at Weiss's business location and at the office of Weiss's accountant on August 1, 7, and 28, 1991; September 6, 1991; January 29 and 30, 1992; and February 5, 1992. Mr. Weiss never met the Department's auditor, although he did talk with her on the telephone. He has no personal knowledge of the records requested by the auditor or whether all of the requested records were provided. According to the affidavit of the accountant who prepared Weiss's federal tax returns for 1988, 1989, and 1990, which was introduced into evidence by Weiss, the accountant became aware of inaccuracies in the bookkeeping by Weiss "because of the audit by the Florida DOR and due to the fact that all details of bookkeeping records were either lost or misplaced it was recommended to Jay P. Weiss that an outside bookkeeper be hired to recreate the books and records." Weiss followed its accountant's advice, and the Department's auditor examined, and accepted as accurate, documents entitled "Sales Reconciliation" for 1988, 1989, and 1990, which were prepared by the outside accountant hired by Weiss. These documents itemized for each month of these years the corrected income received by Weiss from taxable sales, rents, and exempt sales; corrected taxable amounts; corrected sales tax; the original amount of tax paid; and the sales tax owed or overpaid. The Department's auditor concluded that additional sales tax was due in the amount of $4,281,57, attributable to unreported rental income collected by Weiss on commercial property it owned, as reflected in Schedule A-1 of the audit papers. The auditor calculated the additional taxable amount of rental income for the years 1988 and 1989 for which no tax had been paid based on the information provided by Weiss in the sales reconciliations and identified the actual rental income for 1990 based on Weiss's records. The auditor totaled the amount of additional rental income for these three years, divided the total by 36, the number of months in the sample period, and projected this average monthly amount of additional taxable rental income for each month of the 5-year audit period. The appropriate tax rate was applied to calculate the additional sales tax owed for each month, and these amounts were totaled for the 5-year audit period. 1/ The Department's auditor concluded that additional sales tax was due on retail sales of automobiles in the amount of $20,538.31, as reflected in Schedule A-3 of the audit papers. This amount was based on a comparison of the information provided by Weiss in the Florida Sales and Use Tax Returns, Form DR-15's, that it filed with the Department for 1988 and 1989 with the corrected taxable sales included by Weiss's accountant in the sales reconciliations prepared for 1988 and 1989. The auditor first totaled the taxable sales reported on the Form DR-15's for 1988 and 1989, which was $81,736.00, and the revised taxable sales included in the sales reconciliations for 1988 and 1989, which was $131,063.00, and then calculated a weighted error ratio of approximately 1.603492, meaning that Weiss's actual taxable sales were approximately 60 percent higher than reported in the Form DR-15's submitted by Weiss to the Department. The auditor then projected the total additional taxable sales by multiplying the taxable sales reported on the Form DR-15s by .603492 to arrive at the additional taxable sales for each month of the audit period. The appropriate tax rate was applied to calculate the additional sales tax attributable to additional taxable motor vehicle sales for each month, and these amounts were totaled for the 5-year audit period. The Department's auditor concluded that additional sales tax was due on undocumented sales in the amount of $54,245.19, as reflected in Schedule A-2 of the audit papers. In reaching this conclusion, the auditor reviewed the U.S. Income Tax Returns for an S Corporation, Form 1120S's, filed by Weiss with the Internal Revenue Service for 1988, 1989, and 1990, and the Florida Sales and Use Tax Returns, Form DR-15's, filed with the Department for the same period of time. The Department routinely compares the gross sales reported on the federal income tax returns with the total sales reported to the Department on Form DR-15's to determine if there is a difference between the amounts reported. The Department considers the gross sales reported on federal income tax returns to be more reliable than the total sales reported to the Department because it is assumed that taxpayers will not over-report sales to the federal government. If the gross sales reported on the federal income tax returns are greater than the total sales reported to the Department on the Form DR-15's for the applicable period, the Department asks for documentation from the taxpayer to account for the difference. If the taxpayer is unable to provide such documentation, the Department presumes that the difference is attributable to taxable sales. In concluding that Weiss owed additional tax on undocumented sales, the auditor compared the gross sales reported by Weiss in the U.S. Income Tax Returns for an S Corporation, Form 1120S's, filed with the Internal Revenue Service for 1988, 1989, and 1990 with the revised total sales reportable on the Florida Sales and Use Tax Returns, Form DR- 15's, filed with the Department for the same years. The auditor broke down Weiss's revised total sales into revised taxable sales based on Schedule A-3 of the audit papers, revised rental income based on Schedule A-1 of the audit papers, and revised exempt sales identified in the sales reconciliations for 1988, 1989, and 1990. 2/ The total gross sales Weiss reported on the Form 1120S's for 1988, 1989, and 1990 were higher than the revised total sales reported by Weiss on the Form DR-15's for the same years. The auditor calculated the monthly difference between the gross sales and the revised total sales for 1988, 1989, and 1990, 3 and, because no documentation was provided to establish that the difference was attributable to exempt sales, the difference was attributed to taxable sales. The average monthly difference was calculated, and this amount was projected for each month of the audit period. The appropriate tax rate was applied to calculate additional sales tax owed for each month, and these amounts were totaled to determine the additional sales tax due for the 5-year audit period. Because inaccuracies in the gross sales included in the Form 1120S's filed with the Internal Revenue Service for 1988, 1989, and 1990 were discovered by Weiss's accountant as a result of the recreation of Weiss's books by the outside accountant, Weiss's accountants prepared amended Form 1120S's for those years. The amended forms were sent to Weiss for execution and filing. Mr. Weiss cannot recall whether the amended returns were filed, and the Internal Revenue Service has no record that these amended returns were filed. For this reason and because Weiss did not provide any documentation to support the revised gross sales included in the amended returns, the Department refused to consider the gross sales reported in the amended Form 1120S's. The Department's auditor concluded that additional tax in the amount of $1,334.07 was due from Weiss with respect to purchases of consumable supplies, that is, supplies that did not become a component part of a motor vehicle. This conclusion was based on the auditor's review of invoices provided by Weiss for 1990 and the auditor's determinations that, of the $6,903.86 total derived from the invoices, $4,722.07 was taxable and that Weiss had paid no tax on the purchases. The average monthly taxable amount was calculated, the appropriate tax rate was applied to determine the additional tax owed for each month, and these amounts were totaled for the 5-year audit period. The Department's auditor concluded that, based on records provided by Weiss, additional tax was owed on fixed assets in the amount of $86.34. The Department's auditor concluded that additional tax was due in the amount of $9,286.53 on amounts paid by Weiss for commercial rentals and on amounts paid by Weiss in the form of mortgage payments on property it occupied that was owned by Jay P. Weiss, individually, who was also individually obligated under the note and mortgage on the property. This determination that additional tax was due was based on documentation Weiss provided to the auditor. After the January 13, 1993, Notice of Intent to Make Sales & Use Tax Audit Changes was issued, Weiss provided additional documentation to the Department. As a result of the new information, the amount of additional tax due was revised downward in a Notice of Intent to Make Sales & Use Tax Audit Changes dated March 22, 1995, which identified $75,998.46 additional tax due on sales for the audit period and $8,382.94 additional tax due on purchases for the audit period, for a total amount due of $166,800.43, including delinquent penalties and interest accrued as of March 22, 1995. This total amount was the final sustained amount identified in the Notice of Reconsideration dated May 10, 1995, which is the subject matter of this proceeding, and the notice includes a discussion of the basis for the revisions made to the January 13, 1993, assessment. After this case was referred to the Division of Administrative Hearings, a representative of the Department met with Weiss's accountant. The Department's representative requested that Weiss provide any additional documentation that would explain the difference between the gross sales reported on the Form 1120S's and the revised total sales reportable on the Form DR-15's or that would support any further change in the sales and use tax assessment. No further documentation was provided. The evidence presented by the Department establishes that a sales and use tax audit assessment was made against Weiss, for the audit period extending from May 1, 1986, through April 30, 1991, and establishes the factual basis for that assessment. The methodology used by the Department's auditor to calculate the assessment was proper under the circumstances, and the Department's assessment for sales and use tax for the audit period, as revised in the May 10, 1995, Notice of Reconsideration, is reasonable. Weiss did not present any persuasive evidence to the contrary.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order upholding its assessment against Jay P. Weiss, Inc., in full, including all taxes, penalties, and interest statutorily due until the date of payment of the sales and use tax. DONE AND ENTERED this 2nd day of June, 2000, in Tallahassee, Leon County, Florida. PATRICIA HART MALONO Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 2nd day of June, 2000.
The Issue The issue is whether Respondent properly assessed a civil penalty against Petitioner, pursuant to Section 213.29, Florida Statutes (2007),1 after Respondent was adjudicated and sentenced in a criminal proceeding for the offense of theft of state funds.
Findings Of Fact Integrated Copy Systems failed to file sales tax returns or failed to remit sales tax, or both, to the Department during the periods July 2003 through April 2005. In an attempt to secure compliance, on May 12, 2005, the Department recorded a tax warrant with the clerk of court for Hillsborough County in the amount of $24,060.95. The amount of tax due listed on the warrant was $18,400.29, an amount which included, in part, an estimate of tax liability. This estimate was appropriate since Integrated Copy Systems had not filed sales tax returns for certain periods, and Respondent had no information as to the amount of taxable sales made for those periods. Petitioner was subsequently arrested and charged with the offense of theft of state funds, a third-degree felony, in State of Florida v. Michael Maynard, Case No. 05-22960, in the Thirteenth Judicial Circuit in and for Hillsborough County, Florida. On December 13, 2007, Petitioner entered a plea to the criminal charge and was sentenced to probation, with conditions which included the payment of restitution,3 and adjudication was withheld. Petitioner testified that as part of an agreement in his criminal case, he paid the outstanding taxes and that "zero" taxes were due. Petitioner also testified that pursuant to an agreement with the prosecuting attorney, he was assessed and paid a civil fine $1,000.00. Petitioner made some payments to the Department for the sales taxes which he failed to remit for the periods of July 2003 through April 2005. However, Petitioner has not paid all the outstanding sales taxes owed for the subject time period, despite his belief to the contrary. The records generated and/or produced by Petitioner, which purport to reflect the payments made to the Department, do not take into account the accrual of interest and other penalties. The Department properly applied Petitioner's payments to the outstanding sales taxes owed by Integrated Copy Systems. To calculate the amount of sales and use tax owed by Integrated Copy Systems, the Department applied all payments made towards the tax liability of the company. The Department also removed the estimated amount of tax from the total amount of taxes due upon receipt of the company's sale tax returns for the missing periods. The Department accurately determined that as of December 21, 2007, Integrated Copy Systems still owed $7,075.48 in sales tax. On March 19, 2008, the Department issued a Notice of Final Assessment Sales or Use Tax, Penalty and Interest. The amount of the penalty assessed against Petitioner, in his capacity as corporate officer or responsible party, is $14,150.96, which is 200 percent of Integrated Copy Systems' tax liability.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent, Department of Revenue, enter a final order sustaining the sales tax assessment of $7,075.48; and the penalty assessment of $14,150.96 45. DONE AND ENTERED this 31st day of March, 2010, in Tallahassee, Leon County, Florida. S CAROLYN S. HOLIFIELD 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 31st day of March, 2010.
Findings Of Fact Petitioner purchased a used car in Florida in May of 1983 and paid 5 percent sales tax. Petitioner did not title said car in the State of Florida. When Petitioner returned to Maryland, his state of residence, Maryland imposed a 5 percent tax on said car when Petitioner titled said car. Petitioner applied for a sales tax refund to the Department of Revenue in the amount of $225.00. Respondent issued a Notice of Intent to deny said refund application on December 1, 1983. From the exhibits to which the parties stipulated, additional facts are found by the Hearing Officer. A bill of sale indicates that Petitioner purchased a 1979 Buick Regal from Eddy Auto Sales on May 14, 1983. A temporary registration and receipt issued by the State of Maryland on June 17, 1983, shows that Petitioner paid a "title tax" of $222.50 to the State of Maryland. By letter dated January 27, 1984, Agnes Stoicos of the Maryland Department of Transportation indicates that the Maryland tax is a 5 percent excise tax upon the issuance of all original and subsequent certificates of title, and the tax is used primarily for the construction and the maintenance of the Maryland highway system.
The Issue The issue for determination is whether Petitioner should be assessed sales and use tax for the audit period May 1, 1997 through April 30, 2002, per the Notice of Proposed Assessment dated July 3, 2003.
Findings Of Fact Wales is a Florida S corporation. Its principal place of business is located at 2916 Southeast 6th Avenue, Fort Lauderdale, Florida. Wales' federal employee identification number is 59- 1703273. Wales' Florida sales and tax number is 16-03-095273- 26/1. By letter dated June 6, 2002, the Department issued to Wales a Notice of Intent to Audit Books and Records (Notice of Intent). The Notice of Intent identified the audit number as A0205310975. On July 10, 2002, the Department's auditor assigned to perform the audit conducted an initial interview with Wales. The auditor discussed, among other things, the audit and sample methods that would be employed during the audit. On August 13, 2002, the auditor began examining Wales' books and records at Wales' business location. Wales was cooperative during the audit. Wales provided all available books and records for the audit. The sole shareholders of Wales are Stewart Levy and Diane Levy. Wales leased its business location from Element Two Enterprises, Inc., ( Element Two) a related entity. Stewart Levy and Diane Levy are also the sole officers of Element Two, president and secretary, respectively. Element Two is the record owner of the improved real property located at 2916 Southeast 6th Avenue, Fort Lauderdale, Florida, (realty). The address for the realty is also the address for Wales' place of business. Element Two mortgaged the realty leased by Wales. Wales paid monthly monetary consideration to Element Two in lease payments, which directly correlated to the amount of the monthly mortgage payments. Ad valorem taxes and property insurance were included in the monthly mortgage payments. Wales paid the ad valorem taxes and property insurance on the leased property. The lease payments to Element Two by Wales included the amount of the ad valorem taxes, property insurance, and common areas of maintenance. Wales did not pay sales tax on any of the lease payments to Element Two. Element Two did not charge or remit sales tax to the Department on the lease payments by Wales. Element Two was not registered with the Department as a dealer. Only dealers that are registered can remit sales tax on lease payments. Consequently, Element Two could not remit sales tax on the lease payments by Wales. Wales did not utilize all of the property it leased. Wales sub-leased a portion of the leased property to an unrelated entity. A prior sales and use tax audit was conducted of the sub-lessee, which included the period May 1997 through December 1998. The Department examined the sublease audit to determine whether Wales owed additional sales tax. The Department's examination of that audit revealed that the sales and use tax on the rent paid by the sub-lessee for the period May 1997 through September 1998 was assessed and paid by the sub-lessee. For the period May 1997 through December 1998, Wales had neither charged or collected sales tax nor remitted sales tax to the Department on the sub-lessee's payments. No sales tax was charged or paid on the sublease payments for the period October 1998 through December 1998. From January 1999 through April 2002, Wales charged, collected, and remitted sales tax on the sublease payments. The Department credited Wales for sales tax already paid on the subleased portion for the period May 1997 through September 1998 and January 1999 through April 2002. On its general ledger, Wales posted the lease payments to Element Two as rent payments. Element Two posted the lease payments to its general ledger as rent income. On its federal income tax returns, Wales reported the lease payments to Element Two as rent expense. Element Two reported the lease payments on its federal income tax returns as rent income. On November 29, 2002, the Department issued to Wales a Notice of Intent to Make Audit Changes for audit number A0205310975. Wales requested and the Department agreed to hold an audit conference to discuss the audit findings. Wales claimed that rent payments made were not subject to sales tax because both Wales and Element Two signed the mortgage and promissory note on the realty leased by Wales. However, only Element Two was reflected as the borrower on the loan and only Element Two was the signatory on the mortgage even though both Wales and Element Two signed the promissory note. On January 10, 2003, Wales executed a Consent to Extend the Time to Issue an Assessment or to File a Claim for Refund (Consent). The Consent extended the statute of limitations for the period of time in which an assessment may be issued or a claim for refund may be filed to December 31, 2003. On July 3, 2003, the Department issued, by certified mail, the Notice and an Addendum to Proposed Assessment for audit number A0205310975. The Notice provided, among other things, for the assessment of sales and use tax in the amount of $17,481.73; penalty in the amount of $8,741.10; interest in the amount of $5,756.03, with additional daily interest being computed at the rate of $3.54 per day from July 3, 2003; and a total assessment in the amount $31,978.86. On September 1, 2003, the Notice became a Final Assessment for audit number A0205310975. Wales contested the Final Assessment and requested a hearing. Wales is not contesting that part of the audit which found that Wales failed to pay sales tax on certain fixed assets purchased for use in its business. At hearing, Wales contended that its federal income tax returns could be amended to reflect the payments to Element Two as mortgage payments instead of rent payments, which would, in turn, change the Department's audit to reflect the payments as mortgage not rent. To address this contention, the Department presented the testimony of an expert witness in the area of rental consideration and sales tax audits. The Department's expert testified that the consideration for rental or use of property is the payment between/to one who owns the real property and/from one who uses the property; and concluded that consideration, as rental, was provided to Wales by Element Two based on the Department's taxing statute, Section 212.031, Florida Statutes, and its rules and regulation, Florida Administrative Code Rule 12A-1.070. The expert opined that the mortgage payments were consideration for a lease or license to use the real property and that, therefore, the monthly lease payment, which equaled the monthly mortgage payment, paid by Wales to Element Two was consideration for the lease or license to use the realty. The expert's testimony is found to be credible. The evidence presented shows that the mathematical computations performed by the Department in its audit are correct. Further, the evidence shows that the mathematical computations as to tax, penalty, and interest assessed are correct.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue's assessment of sales tax, interest, and penalty against Wales Garage Corporation be sustained and that the Department of Revenue enter a final order assessing sales tax, interest, and penalty against Wales Garage Corporation for the period May 1, 1997 through April 30, 2002, consistent herewith. DONE AND ENTERED this 27th day of May, 2004, in Tallahassee, Leon County, Florida. S ERROL H. POWELL Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 27th day of May, 2004. COPIES FURNISHED: Gerald S. Schnitzer GSS Advisory Services, Inc. 2455 East Sunrise Boulevard, Suite 502 Fort Lauderdale, Florida 33304 Carrol Y. Cherry, Esquire Office of the Attorney General The Capitol, Plaza Level 01 Tallahassee, Florida 32399-1050 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 issues are whether Respondent violated Chapter 212, Florida Statutes, by failing to pay sales tax and local government infrastructure surtax, and if so, what penalty should be imposed.
Recommendation Based upon the findings of fact and conclusions of law, it is RECOMMENDED: That Respondent enter a Final Order upholding its assessment against Petitioner in full, including all taxes, penalties, and interest statutorily due until date of payment for both the sales and use tax and the local government infrastructure. DONE AND ENTERED this 29th day of September, 1998, in Tallahassee, Leon County, Florida. SUZANNE F. HOOD Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 29th day of September, 1998.
The Issue The issue in this case is whether Petitioner performed nontaxable services as a decorating contractor, as he maintains, or, rather, whether he leased tangible personal property and thereby incurred sales tax liability, as Respondent alleges.
Findings Of Fact The Parties At all relevant times, Petitioner Philip E. Hancock ("Hancock") was a sole proprietor doing business in and around Fort Lauderdale, Florida, under the names "Action Plant Rental" and "Action Plants." Respondent Department of Revenue ("Department"), an agency of the State of Florida, is authorized to administer the state's tax laws. An Overview of Hancock's Businesses In 1980, Hancock and his then-wife purchased a nursery and, as proprietors, started a business called "Landscape Concepts." Initially, the couple's business activities involved landscaping and (b) sales of plants and nursery stock at wholesale (mostly) and retail. Sometime in 1983, Landscape Concepts began "renting" plants and trees for special events, such as weddings, banquets, and charity fundraisers.2 In time, this plant rental business eclipsed the original landscaping and sales operations, and by the late 1980's the ascendant enterprise was dubbed "Action Plant Rental."3 In 1990, having established Action Plant Rental, the Hancocks sold their nursery, whereupon Landscape Concepts stopped selling plants on a regular basis. The landscaping business, in contrast, tapered off gradually, continuing for several more years until being discontinued completely at the end of 1993. As of January 1994, plant rental was Petitioner's sole vocation. A Closer Look At the Plant Rental Business The evidence concerning the details of how Hancock's plant rental business operated during the audit period is relatively sparse, consisting of little, if anything, other than Hancock's testimony, which is generally credible as far as it goes, but not comprehensive. Hancock's clients, for the most part, were not the individuals who hosted or sponsored the events for which Action Plant Rental supplied "green décor" (to use Hancock's phrase), but rather were the event planners, designers, florists, and hotels (which frequently acted as planners in connection with events held on their premises) who had been hired by the hosts or sponsors to make their events happen. Thus, Hancock usually did not deal directly with, for example, the bride, but with the bride's wedding planner. In effect, he was a subcontractor. Hancock did not enter into written contracts with his clients. When a client retained Hancock, the client informed Hancock when and where the event would be held, and told Hancock (or asked him for an opinion about) which plants would be appropriate. The evidence is ambiguous as to the degree of Hancock's input and discretion in selecting the particular plants to bring to a given event. While the undersigned is persuaded that Hancock had some involvement in choosing the plants at least some of the time, it cannot be found that this service, to the extent provided, added substantial value to the transaction——or was one for which clients specifically and knowingly paid. When the time came for Hancock to perform the agreement, he delivered the plants and trees to the site and, at a time before the event was to begin, set them up in the hall or ballroom. Setting up the plants to create a pleasing and appropriate environment no doubt required decorating skill. It is undisputed, moreover, that Hancock commonly added decorating touches, such as lights and decorative containers, to his plants and trees, which made the display more attractive. What is less clear, however, is whether clients purchased Hancock's decorating expertise——or if, instead, Hancock executed the commands of someone else who decided how to arrange and present the plants. On this point, as others, it might have been helpful to hear from some clients. As it is, Hancock's own testimony is somewhat ambiguous. While the question is extremely close, the undersigned is persuaded, on the evidence presented, that Hancock usually operated under the direction of his client and had relatively little control over the design and arrangement of his plants and trees at the event site. Thus, the undersigned is unable to find that Hancock's decorating services provided the ultimate value to Hancock's clients. Once the plants were set in place and Hancock was assured that the arrangement satisfied his client, Hancock left the event site. (This meant, of course, that someone——the client, the host, or even a guest——could have moved the plants around.4 The Department contends that Hancock's absence from the premises demonstrates decisively that possession and control of the plants was surrendered to his client. The undersigned has given this fact some weight, but not a great deal. For one thing, there is no persuasive evidence that the client typically remained on-site with the plants. Further, since the plants were generally set up in a "public" place (as opposed to a personal space such as an office) over which neither the client, nor the host, nor the guests had exclusive control,5 the undersigned is not persuaded that the client or others attending the event had possession and control of the plants in any meaningful sense. Indeed, under the Department's theory, the plants apparently would have been in the constructive possession, at least, of everyone present at the party——a conclusion that runs counter to common sense and ordinary experience. The opportunity to move a plant is not, in the undersigned’s mind, equivalent to having a possessory right or power over the plant.) When the event was over, Hancock returned to the site to retrieve and remove his plants. Later, Hancock sent the client an invoice for his "services." As far as the evidence shows, Hancock did not bill his clients separately for delivery, set up, removal, or design, but rather he charged a lump sum for the plants, which price included these associated services as part of the total package. Petitioner's History As a Sales Tax-Paying Dealer From at least 1985, and continuing through the middle of 1994, Landscape Concepts, as a registered dealer having identification number 16-03-109301-76, collected and remitted sales taxes on the revenues generated through retail plant sales and plant rentals, filing monthly sales tax returns as legally required.6 If a client gave Petitioner a resale certificate, however, Petitioner did not collect sales tax from that client. Because most of Petitioner's plant rental customers were other businesses (e.g. event planners, florists, and hotels) that provided resale certificates to Petitioner, a relatively small percentage of these transactions were taxed. In mid-1994, while in one of the Department's regional offices attending to some since forgotten sales tax-related matter, Hancock was shown Rule 12A-1.071 of the Florida Administrative Code. This Rule then contained the following provision: (35)(a) A decorating contractor who uses materials and supplies such as bunting, streamers, colored paper, wreaths, pennants, lights, rope, etc., in fulfilling a contract which requires the furnishing of arrangements and decorations to, and their subsequent removal from, hotels, offices, public buildings, etc., is the consumer of such materials and supplies and shall pay tax on their acquisition. The contractor's charge under such contract is a service charge and is exempt. Fla. Admin. Code R. 12A-1.071(35)(a).7 Hancock concluded that he was entitled to the benefit of the foregoing "decorator's exemption." Hancock asked a local employee of the Department whether he could claim the exemption, and she advised him to write a letter to the Department's main office in Tallahassee. Hancock sent the Department a letter announcing his intent to stop filing monthly sales tax returns. Enclosed with this letter was Hancock's sales tax certificate, which Hancock purported to "relinquish." The Department did not respond to Hancock's letter. Hancock did not file another sales tax return.8 The Audit and Protest In January 2001, the Department commenced a sales and use tax audit of Hancock's plant rental business, initially concentrating on the five-year period from December 1, 1995 through November 30, 2000. The Department later enlarged the audit period to span 16 years, reaching all the way back to June 1, 1985, and continuing through June 30, 2001. This expansion was based on the Department's belief that Hancock had never filed any sales tax returns respecting his business——a belief that, as found above, would prove to be incorrect. After concluding that Hancock's tax records were "adequate but voluminous," the Department used a sampling method to calculate the amount of tax allegedly owed.9 To determine the total amount of revenue subject to sales tax, the Department used as a starting point the gross receipts figures as reported on Hancock's federal income tax returns for the years 1995 through 2000, inclusive.10 From these figures, the Department calculated the average monthly receipts for each of the six years in question (by dividing 12 into each respective year's gross sales revenue). It also computed an average annual gross sales figure (by dividing 6 into the sum of the known annual gross receipts), along with an average average-monthly sales amount (by dividing 6 into the sum of the average monthly receipts). Year Here are the relevant Gross Sales numbers: Avg. Monthly Sales 1995 $ 99,045 $ 8,253.75 1996 $113,973 $ 9,497.75 1997 $171,721 $14,310.08 1998 $169,961 $14,163.42 1999 $126,306 $10,525.50 2000 $154,253 $12,854.42 Average Annual Gross Sales: $139,210.00 Average Average-Monthly Sales: $ 11,600.82 The Department apparently acquired more specific information regarding monthly receipts for the 11-month period from January through November 2000. During this period, Hancock's gross receipts totaled $113,661.00.11 The Department determined, based on these figures, that the total tax due for this particular period was $6,861.41. Dividing 113,661 into 6,861.41, the Department derived a "percentage of error" of .060367. This "percentage of error" was effectively the tax rate because, as we have seen, the Department believed that Hancock had paid no taxes whatsoever. The "percentage of error" slightly exceeded 6 percent (the present state sales tax rate) due to the inclusion of some county taxes.12 The Department computed the total sales tax allegedly due and owing as follows. To determine the tax due per month for the 121 months comprising the periods from (a) June 1985 through December 1994 and (b) January through June 2001, for which there were no "known-sales" numbers, the Department applied the "percentage of error" (=tax rate) against the average average-monthly sales figure of $11,600.82. To determine the tax due per month for the years 1995 through 2000, the Department applied the "percentage of error" against each respective year's average monthly sales figure. The sum of these monthly figures equaled the total alleged tax liability. Here are the numbers: Period Average Monthly Sales Tax Rate Tax Due Per Month Tax Due For Period Jun 1985 — Dec 1994 (115 months) 11,600.82 0.060367 700.31 80,535.65 Jan (12 — Dec 1995 months) 8,253.75 0.060367 498.25 5,979.00 Jan (12 — Dec 1996 months) 9,497.7613 0.060367 573.35 6,880.20 Jan (12 — Dec 1997 months) 14,310.08 0.060367 863.86 10,366.32 Jan (12 — Dec 1998 months) 14,163.42 0.060367 855.00 10,260.00 Jan (12 — Dec 1999 months) 10,525.50 0.060367 635.39 7,624.68 Jan (12 — Dec 2000 months) 12,854.4314 0.060367 775.98 9,311.76 Jan — Jun 2001 (6 months) $11,600.82 0.060367 700.31 4,201.86 135,159.47 In sum, the Department found that Hancock was liable for $134,337.17 in state sales taxes and $822.30 in County Taxes, see endnote 12, which amounts, when added together, equaled $135,159.47. Additionally, the Department found that Hancock owed small amounts of state use taxes in connection with several fixed assets. This aspect of the case received little attention, if any, at final hearing and accordingly will not be examined in great detail here. The following table summarizes the amounts that the Department claims are due and owing: Asset Transaction Date Tax Due Computer September 1995 229.12 Office refrigerator April 1997 24.00 Computer October 1998 72.00 Office Furniture December 1998 21.62 Printer May 1999 24.66 371.40 In January 2002, the Department notified Hancock that it intended to collect the alleged tax deficiencies just described, in the total principal amount of $135,530.87. In addition, the Department claimed $135,666.86 in interest through January 2, 2002, together with a total of $52,359.05 in penalties, making a grand total of $323,556.78. Hancock disputed the assessments and timely requested a formal administrative hearing. Ultimate Factual Determinations The factual question whether Hancock performed nontaxable services as a decorating contractor, as he maintains, or leased tangible personal property and thereby incurred sales tax liability, as the Department contends, is very close, at least based on the evidence presented. On a better record it might have been possible to answer this question with greater confidence——and, indeed, to obtain a different result. On this relatively limited record, however, the undersigned finds that the weight of the evidence tips ever so slightly in the Department's favor, primarily because it appears more likely than not that Hancock's clients were given a meaningful right to direct the use of the material personal property involved, namely the live plants and trees. Thus, while reasonable minds could differ, the undersigned finds that Hancock was engaging in the taxable business activity of leasing personal property. The evidence does not establish, however, and hence the undersigned does not find, that Hancock filed a grossly false or substantially incorrect return or made a substantial underpayment of tax. Likewise, Hancock did not file any fraudulent returns. Rather, Hancock properly filed returns through mid-1994, paying all of the sales and use taxes then due and owing. What Hancock failed to do was make all required tax payments after May 1994——a significant default, to be sure, but one that leaves him less liable, in fact, for back-taxes than the Department has contended. Hancock's decision to stop collecting and remitting sales taxes, moreover, was based not upon an intent to defraud but upon an honest, if mistaken, belief that the business of Action Plant Rental fell within the "decorator's exemption."15 Apart from any question of liability, the Department's assessment of the amount of state sales taxes and County Taxes allegedly due and owing for the period from June 1985 through December 1993 is clearly erroneous, for at least three reasons. First, the state sales tax was not six percent during that entire period, yet the Department has computed Hancock's alleged tax liability as if it were.16 Second, the Department did not make any adjustments to account for the time-value of money when it projected sales figures from 1995-2000 back as many as 15 years. It is commonly known, however, that dollars earned in the year 2000, for example, had less purchasing power than, say, 1985 dollars; thus, sales figures from 2000 must be discounted if a fair and reasonable comparison to 1985 is to be made. The Department's failure to reduce recent earnings to the then- present value of income derived from plant rentals in the earlier years of the audit period is tantamount to charging interest——which, of course, the Department has also assessed, separately. Finally, the Department's calculation assumed, incorrectly, that (a) Hancock's business had not changed during the entire 16-year audit period and (b) Hancock had never paid any sales taxes. In fact, until the end of 1993, Hancock derived income not only from his plant rental business but also from landscaping and plant sales; not only that, he paid sales taxes on the receipts from these activities, through May 1994. In sum, then, even if Hancock were liable for the taxes that allegedly accrued before 1994, the Department's figures for that period of the audit are simply too unreliable to be credited. Period Average Monthly Sales Tax Rate Tax Due Per Month Tax Due For Period Jun 1994 — Dec 1994 (7 months) 11,600.82 0.060367 700.31 4,902.17 Jan — Dec 1995 (12 months) 8,253.75 0.060367 498.25 5,979.00 Jan — Dec 1996 (12 months) 9,497.7617 0.060367 573.35 6,880.20 Jan — Dec 1997 (12 months) 14,310.08 0.060367 863.86 10,366.32 Jan — Dec 1998 (12 months) 14,163.42 0.060367 855.00 10,260.00 Jan — Dec 1999 (12 months) 10,525.50 0.060367 635.39 7,624.68 Jan — Dec 2000 (12 months) 12,854.4318 0.060367 775.98 9,311.76 Jan — Jun 2001 (6 months) $11,600.82 0.060367 700.31 4,201.86 59,525.99 It is found, therefore, that Hancock owes state sales taxes and County Taxes in the following sums: Additionally Hancock must pay use taxes amounting to $371.40, bringing to $59,897.39 the total principal amount of taxes proved to be due.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department enter a final order directing Hancock to pay state sales taxes and County Taxes in the total amount of $59,525.99, plus state use taxes in the amount of $371.40, bringing to $59,897.39 the principal sum of back-taxes due and owing. In addition, Hancock should be ordered to pay interest and penalties on the unpaid taxes, in amounts to be determined by the Department in accordance with the methodologies reflected in the audit work papers that are included in the evidentiary record of this case. DONE AND ENTERED this 7th day of January, 2004, in Tallahassee, Leon County, Florida. S JOHN G. VAN LANINGHAM Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 7th day of January, 2004.
The Issue The issue is whether Respondent's Certificate of Registration 39-8011930243-9 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 June 5, 2014.
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 a Florida limited liability corporation doing business as The Hyde Park Cafe at 1806 West Platt Street, Tampa, Florida. For purposes of collecting and remitting sales and use taxes, it is a dealer as defined in section 212.06(2) and is required to comply with chapter 212. Respondent holds Certificate of Registration number 39- 8011930243-9, which became effective on July 27, 2000. 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. Respondent is also an employing unit as defined in section 443.036(20) and is subject to the unemployment compensation tax (UCT) provisions of chapter 443, as provided in section 443.1215. Through an interagency agreement with the Department of Economic Opportunity, the Department provides collection services for UCTs. See § 443.1316(1), Fla. Stat. In doing so, the Department is considered to be administering a revenue law of the state. See § 443.1316(2), 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. Also, an employment unit must remit payment to the Department for UCTs due and owing on a quarterly basis. 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. If the Department files a warrant, notice of lien, or judgment lien certificate against the property of a dealer, it may also revoke a certificate of registration. See § 213.692(1), 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. See Pet'r Ex. 6, p. 2, ¶ E. If a breach occurs, the entire amount is due and payable immediately. Id. at ¶ G. An informal conference can be characterized as the Department's last administrative remedy to collect delinquent taxes before beginning revocation proceedings. A dealer can also enter into a diversion program with the State Attorney's Office to resolve liabilities, but the record shows that Respondent defaulted on that arrangement. According to the Department, collection problems with this dealer first began in 2003. Department records show that Respondent failed to remit required sales taxes for the months of January 2012, August through December 2012, January through December 2013, and January and February 2014. In addition, Respondent failed to remit UCTs for the calendar quarters ending September 2010, December 2010, March 2011, June 2011, September 2011, December 2011, March 2012, June 2012, September 2012, December 2012, and March 2013. Respondent does not dispute that it failed to timely remit and pay the foregoing taxes for the time periods listed above. For the purpose of collecting the delinquent taxes, the Department issued and filed against Respondent delinquent tax warrants, notices of lien, or judgment lien certificates in the Hillsborough County public records. See Pet'r Ex. 3. Before seeking revocation of Respondent's certificate of registration, on February 5, 2014, the Department's Tampa Service Center served on Respondent a Notice of Conference on Revocation of Certificate of Registration (Notice). See Pet'r Ex. 4. The Notice scheduled an informal conference on March 21, 2014. It listed 16 periods of sales and use tax noncompliance and 11 periods of re-employment tax noncompliance and provided the total tax liability as of that date. This number was necessarily fluid, as the taxes owed were accruing interest, penalties, and/or fees on a daily basis. The purpose of the informal conference was to give Respondent a final opportunity to make full payment of all delinquent taxes, or to demonstrate why the Department should not revoke its Certificate of Registration. As pointed out by the Department, an informal conference allows a dealer to bring up "any concerns" that it has regarding its obligations. Respondent's manager and registered agent, Christopher Scott, appeared at the conference on behalf of Respondent.1/ At the meeting, he acknowledged that the dealer had not timely paid the taxes listed in the Notice and that the money was used instead to keep the business afloat. However, Mr. Scott presented paperwork representing that sales and use tax returns and payments for the months of November 2013 through February 2014 had just been filed online, and checks in the amount of $8,101.41 and $9,493.99 were recently sent to Tallahassee. It takes 24 hours for online payments to show up in the system, and even more time for checks to be processed in Tallahassee. Accordingly, the Department agreed that Mr. Scott could have a few more days before signing a compliance agreement. This would allow the Department to verify that the payments were posted and recalculate the amount of taxes still owed. Also, before entering a compliance agreement, Respondent was required to make a down payment of around $20,000.00. Mr. Scott had insufficient cash, and a delay of a few days would hopefully allow him to secure the necessary money for a down payment. When none of the payments had posted by March 25, 2014, the Department calculated a total liability of $113,448.13, consisting of sales and use taxes and UCTs, penalties, interest, and fees. As of that date, none of the taxes listed in Finding of Fact 9 had been paid. On March 25, 2014, Respondent's controller, who did not attend the informal conference, sent an email to the Department requesting a breakdown on the new tax liability. In response to her request, the Department faxed a copy of the requested information. See Resp. Ex. 4. After getting this information, the controller continued to take the position that the Department's calculations overstate Respondent's tax liability. On March 31, 2014, Mr. Scott signed the compliance agreement. See Pet'r Ex. 6. Despite the controller testifying that she did not agree with the numbers, no question was raised by Mr. Scott when he signed the agreement. By then, the check in the amount of $8,101.41 had cleared and been credited to Respondent's account. Along with other funds, it was used towards the down payment of $20,000.00. The record does not show the status of the other payments that Mr. Scott claimed were mailed or filed online prior to the informal conference; however, on March 31, 2014, except for the one check, none had yet posted. The compliance agreement required scheduled payments for 12 months, with the final payment, a balloon payment in an undisclosed amount, being subject to renegotiation in the last month. Payments one and two were $1,500.00, while payments three through 11 were $2,900.00. The compliance agreement reflected a balance owed of $95,887.36, consisting of $60,504.34 in sales taxes and $35,347.02 in UCTs.2/ In return for the Department refraining from pursuing revocation proceedings, the compliance agreement required Respondent to "remit all past due amounts to the Department as stated in the attached payment agreement," "accurately complete and timely file all required tax returns and reports for the next 12 months," and "timely remit all taxes due for the next 12 months." Pet'r Ex. 1, p. 1. In other words, the compliance agreement addressed both delinquent taxes and current taxes that would be due during the following 12-month period, and it required that both categories of taxes be timely paid in the manner prescribed by the agreement. To summarize the salient points of the agreement, all taxes were to be timely paid; delinquent taxes were to be paid by certified check, money order, or cash and were to be mailed or hand delivered to the Tampa Service Center and not Tallahassee; and while not specifically addressed in the agreement, the dealer was instructed to pay all current obligations electronically, as required by law. Otherwise, Respondent was in violation of the compliance agreement. A Payment Agreement Schedule for past due taxes was incorporated into the compliance agreement and provided that the first payment was due April 30, 2014, payable to: Florida Department of Revenue, Tampa Service Center, 6302 East Dr. Martin Luther King, Jr. Boulevard, Suite 100, Tampa, Florida 33619. Payments 2 through 12 were to be mailed or hand delivered to the same address. This meant, with no ambiguity, that money should not be sent to Tallahassee. There is no credible evidence that these instructions were misunderstood. Unless a waiver is granted, Respondent is required by statute and rule to electronically file sales and use tax returns and UCT reports. See § 213.755, Fla. Stat.; Fla. Admin. Code R. 12-24.009 (where a taxpayer has paid its taxes in the prior state fiscal year in an amount of $20,000.00 or more, subsequent payments shall be made electronically). No waivers have been approved. In 2003, the Department notified Respondent of these requirements and Respondent complied with this directive until 2009. For reasons not disclosed, in 2009 Respondent voluntarily quit filing electronically. The record is silent on why this was allowed.3/ In any event, at the informal conference, Mr. Scott was specifically told that all current returns, reports, and taxes must be filed electronically, and not by mail, and that no money should be sent to Tallahassee. There is no credible evidence that he misunderstood these instructions. In its PRO, Respondent correctly points out that the requirement to file current returns electronically was not specifically addressed in the compliance agreement. This is because the compliance agreement does not set forth every statutory and rule requirement that applies to a dealer. If this amount of detail were required, a dealer could ignore any otherwise applicable rule or statute not found in the compliance agreement. This contention has no merit. Respondent failed to electronically file the current sales and use tax return and payment for the month of March 2014, due no later than April 21, 2014. Instead, it sent a paper check, which was returned by the bank for insufficient funds. This constituted a breach of the compliance agreement. Despite repeated instructions on how and where to pay the delinquent taxes, payment 1, due on April 30, 2014, was paid by regular check and sent to Tallahassee, rather than the Tampa office. This contravened the compliance agreement. When payment was not timely received by the Tampa Service Center, Respondent was told that a check must be delivered to the Tampa office by May 9. Respondent hand delivered a second check, this one certified, to the Tampa Service Center on May 9, 2014, or after the April 30 due date. The second check was treated as payment 1. Respondent points out that on May 7 the Tampa Service Center granted its request for an extension of time until May 9 in which to deliver the certified check. While this is true, the extension was allowed in an effort to "work with" the Respondent on the condition that the account would be brought current by that date; otherwise, revocation proceedings would begin. Even if the extra ten days is construed as a grace period for payment 1, there were other violations of the compliance agreement set forth below. Payment 2 for delinquent taxes, due on May 30, 2014, was paid by regular check and sent by mail to Tallahassee rather than the Tampa Service Center.4/ This contravened the compliance agreement. After the May 30, 2014 payment, Respondent made no further payments pursuant to the Payment Agreement Schedule. This constituted a violation of the compliance agreement. Respondent did not remit payment with its current sales and use return for the month of August 2014. This contravened the compliance agreement. Respondent did not file any current sales and use tax returns or remit payment for the months of July 2014 or September through January 2015. This contravened the compliance agreement. Beginning in March 2014, Respondent filed current reemployment tax returns and payments using the incorrect tax rate on every return. This delayed their processing and resulted in penalties being imposed. In addition, even though Respondent was repeatedly told that such returns must be filed electronically, none were filed in that manner, as required by statute and rule. This contravened the compliance agreement. In its PRO, Respondent contends the compliance agreement cannot be enforced because there was no "meeting of the minds" by the parties on all essential terms of the agreement. Specifically, it argues that the total amount of taxes owed was still in dispute -- the dealer contended that it owed $23,000.00 less than was shown in the agreement; the Payment Schedule Agreement did not specify the amount of the final balloon payment; the compliance agreement failed to state when payments are due if the due date falls on a weekend or holiday; the compliance agreement did not specify how the dealer's payments would be allocated between UCTs and sales and use taxes; and the compliance agreement failed to address the issue of filing electronically. Although some of these issues were not raised in the parties' Joint Pre-hearing Stipulation, or even addressed by testimony at hearing, they are all found to be without merit for the reasons expressed below. First, Mr. Scott did not dispute the amount of taxes owed when he signed the agreement, and he brought no evidence to the conference to support a different amount. Second, as explained to Mr. Scott at the informal conference, the precise amount of the balloon payment can only be established in the 12th month. This is because the exact amount depends on the dealer's compliance with the agreement over the preceding 11 months, and the amount of interest, penalties, and/or other fees that may have accrued during the preceding year. Third, there is no evidence that the dealer was confused when a due date for a payment fell on a weekend or holiday. Even if it was confused, reference to section 212.11(1)(e) and (f) would answer this question. Fourth, there is no statute or rule that requires the Department to specify how the delinquent payments are allocated. Moreover, neither Mr. Scott nor the controller requested that such an allocation be incorporated into the agreement before it was signed. Finally, the issue of filing electronically already has been addressed in Finding of Fact 22 and Endnote 3. At hearing, Respondent's controller testified that she was out of town when the conference was held, suggesting that Mr. Scott, who is not an accountant, was at a disadvantage when he attended the informal conference. However, Respondent had six weeks' notice before the conference, and there is no evidence that Respondent requested that the meeting be rescheduled to a more convenient day. Also, Respondent does not dispute that Mr. Scott was authorized to represent its interests at the conference, or that he could have been briefed by the controller before attending the informal conference or signing the compliance agreement. See also Endnote 1. Notably, at hearing, the controller testified that she "was involved in actually negotiating the agreement both before and after it was actually signed" even though she did not attend the conference. Tr. at 89. Respondent also contends that after the Department considered the compliance agreement to be breached, the dealer had no further obligation to make payments pursuant to the agreement or state law until the parties negotiated a new agreement. Aside from Respondent's failure to cite any authority to support this proposition, nothing in the compliance agreement comports with this assertion. To the contrary, the compliance agreement specifically provides that if a breach occurs, the entire tax liability becomes due immediately. See Pet'r Ex. 6, p. 2, ¶ G. Thus, Respondent is obligated to pay the entire tax liability, which now exceeds $200,000.00. All other arguments raised by Respondent have been carefully considered and are rejected as being without merit.
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 39- 8011930243-9. DONE AND ENTERED this 11th day of June, 2015, 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 11th day of June, 2015.
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
