The Issue Whether Petitioner, Nick Farah, Sr., is liable for the taxes assessed under Chapter 212, Florida Statutes, for the March 1, 1989 - February 28, 1994 audit period, and to what degree, if any, the audit debt may be compromised as uncollectible.
Findings Of Fact This case involves an assessment of sales taxes and charter transit system surtaxes associated with audit number 9501539, and covering the audit period of March 1, 1989, to February 28, 1994 (audit period), for Farah's Gazebo Restaurant (the restaurant) located at 3541 University Boulevard, North, Jacksonville, Florida. Sales of food and alcoholic beverages were made at the restaurant during the audit period. Sales tax was collected and remitted to the Department on the sales of alcoholic beverages during the audit period, but not on the sales of prepared food. The assessment relates to the sale of food during the audit period. The restaurant was first opened as a sandwich shop in 1974 by both Petitioners, Nick Farah, Sr., and Sue Farah, who at all times material have been husband and wife. Mrs. Farah's middle initial is "N." Mr. Farah is now 74 years old. Mrs. Farah is 63. When the restaurant was opened in 1974, Nick Farah, Sr., opened a utility account with the City of Jacksonville in his name alone. At all times material, that same account in Nick Farah, Sr.'s name has been used by the restaurant. At all times material, Nick Farah, Sr., and Sue Farah had a checking account (number 467835202-01), in the name "Nick Farah d/b/a Farah's Gazebo Cafe, Restaurant & Lounge" with American National Bank of Florida (American National checking account). During the audit period, this account was used by Petitioners as both the restaurant's checking account and their personal checking account. During the audit period, all proceeds from sales at the restaurant were deposited into the American National checking account. All of the Petitioners' personal living expenses were paid from monies deposited into the American National checking account. During the audit period, Nick Farah, Sr., ran banking and shopping errands for the restaurant at his wife's direction, and considered it appropriate to write checks on behalf of the restaurant in his wife's absence. When their restaurant was first opened, Petitioners obtained a sales tax registration certificate from the Department of Revenue. This certificate was issued in the names of both Petitioners. In 1986, Petitioners refurbished and expanded their sandwich shop to a full restaurant serving dinner along with alcoholic beverages. During the several months in which the restaurant was being expanded, the restaurant was closed for business. Petitioners have a son, Nick Farah, Jr., who has a restaurant and lounge in Gainesville, Florida. Nick Farah, Jr., helped his parents expand their restaurant and donated certain restaurant equipment for the expansion. In 1986, Nick Farah, Jr., obtained alcoholic beverage license 26-02438SRX solely in his name for the restaurant. In 1988, Petitioners' other son, John Farah, became actively involved with the operation of the restaurant, in order to allow his father, Nick Farah, Sr., to retire. John Farah's involvement with the restaurant lasted approximately six or seven months, after which he was no longer involved. In 1988, due to numerous medical problems, including high blood pressure, prostate cancer, diabetes, and weak eyes, Nick Farah, Sr., "retired." He advised the social security office in 1988 of his retirement and filed all necessary papers in order to begin to receive his social security benefits. His social security income was "direct deposited" to a Barnett Bank account set up solely for that purpose. Nick Farah, Sr., listed himself as "retired" on the couple's joint 1989-1994 federal income tax returns. These returns include Schedule C, "Profit or Loss from Business," and listed the restaurant as solely owned by Sue Farah, as proprietor. On these returns, Sue Farah stated that she was sole owner of the business known as Farah's Gazebo Restaurant. When Nick Farah, Sr., retired, Sue Farah began paying bills and making all executive decisions concerning employees, doing the ordering, deciding on the menu, and pricing. However, since 1988, the restaurant also has had a manager who has dealt with the employees and food ordering as well. Although he considers himself retired, Nick Farah, Sr., consistently has gone to the restaurant to eat, talk with friends, and play rummy. He has also performed errands and written checks for the restaurant. (See Finding of Fact 8) In testimony, he referred to the American National account as "our Gazebo account." (TR-111) Sales Tax Registration Certificate No. 26-08-093045- 08/1 was issued in the name of Nick Farah, Sr., Sue N. Farah, and Nick Farah, Jr., until June 1, 1992. On June 1, 1992, Sales Tax Registration Certificate No. 26-08-126824-08/1 was issued in the names of Nick Farah, Sr., and Sue N. Farah. This was done to separate the restaurant from Nick Farah, Jr.'s, Gainesville restaurant. The type of business organization listed on the certificate is "partnership." On each of the sales tax registration certificates, Nick Farah, Sr.'s social security number was used as the federal identification number. In 1993, the Alcoholic Beverage License was renewed in the names of Nick Farah, Sr., and Sue Farah. Petitioners' personal residence is held jointly in their names. During the audit period, Petitioners refinanced their personal residence and obtained a home equity loan through American National Bank. The proceeds from this loan were used to pay expenses related to the restaurant. (See Finding of Fact 52). On March 24, 1994, the Department issued its DR-840 Notice of Intent to Audit Books and Records to "Nick & Sue Farah d/b/a Farah Gazebo Restaurant." Notices of Intent are usually issued in the name(s) on the current Sales Tax Registration Certificate. On April 14, 1994, the Farahs both executed a Power of Attorney appointing their attorney to represent them in matters relating to the audit. Subsequent to the audit, the Department issued its "Notice of Intent to Make Sales & Use Tax Audit Changes," under Chapter 212, Florida Statutes, on November 4, 1994, in the names of "Nick & Sue Farah d/b/a Farah Gazebo Restaurant." Taxes for the audit period March 1, 1989 - February 28, 1994, were assessed in the amount of $65,093.44. Penalties were assessed up to that point in time in the amount of $20,679.43. Interest was assessed up to that point in time in the amount of $22,678.86. The total was $108,451.73. Interest would continue to run. Also on November 4, 1994, the Department issued its "Notice of Intent to Make Charter County Transit System Surtax Changes" in the names of "Nick & Sue Farah d/b/a Farah Gazebo Restaurant." Taxes were assessed in the amount of $5,424.46; penalties were assessed in the amount of $1,723.27; and interest was assessed in the amount of $1,889.92 for a total of $9,037.65. The Department revised its audit on January 17, 1995. Two revised Notices of Intent were issued, each in the names of "Nick & Sue Farah d/b/a Farah Gazebo Restaurant," with assessment in the following amounts: $62,974.40 (sales and use taxes), $19,839.95 (penalties), and $28,373.14 (interest); and $5,247.86 (charter county surtaxes), $1,653.29 (penalties), and $2,367.18 (interest). These revised notices were issued to reflect the deduction of certain non-revenue items from the gross deposits reflected on the Petitioners' bank statement. They also show accruing interest. By their attorney's letter dated February 6, 1995, Petitioners raised the issue of Nick Farah, Sr.'s liability for the assessment, arguing that his involvement with the restaurant during the audit period was insufficient to render him a "taxpayer" as contemplated by the applicable statutes and rules, and insufficient to create such a tax liability for him. The letter from Petitioners' counsel stated that Petitioner Sue Farah "considered the restaurant to be hers, and has filed her federal income tax returns accordingly. She is willing to sign the Notice of Intent and enter into a payment arrangement." Donald Ritchie, the Department's Jacksonville tax auditor who had initiated the audit, subsequently issued a "Memo to File," dated February 7, 1995, stating, Auditor contacted atty. Jeff Dollinger in response to his letter of 2-6-95 in which he states TP's claim that Sue Farah is sole proprietor of restaurant and Nick is not a "dealer" in connection with the restaurant operation. He stated in a telephone conversation that Sue Farah wished to sign NOI indicating agreement with the proposed audit changes "with the exception of penalty" and obtain a stipulated payment schedule but only if registration and audit were changed to eliminate Nick's name. On February 7 and 8, 1995, Peggy Bowen, a Departmental superior of Mr. Ritchie, directed two memoranda by electronic mail (e-mail) to another Departmental employee, Allen Adams, located in Tallahassee. These memoranda requested guidance on how to proceed with the questions raised by Petitioners' counsel. In response to these requests, a series of e-mail memoranda were exchanged within the Tallahassee office of the Department. The first, on February 8, 1995, from George Stinson, stated, in part: What advantage would we have if we assessed "Nick's Partnership"? . . . from what Peggy said, "Nick's Partnership" doesn't even exist, but "Sue's Sole Proprietorship" does. It seems to me that it would be absurd to assess an entity ("Nick's Partnership") that, by the taxpayer's own admission, doesn't exist. Just because the registration social data on the database is erroneous doesn't mean we should issue an erroneous assessment. The second February 8, 1995, electronic mail memorandum from Allen Adams to Peggy Bowen, stated, "OK, I take this as an approval to change our NOI and get an agreed case." The final electronic mail memorandum dated February 9, 1995, from George Stinson to Allen Adams provides: Allen...While mulling this all over in my brain, it occurred to me it would not be unwise for Peggy to prepare (but hold on to for the time being) an NOI under "Nick's Partnership" in case the other one somehow goes awry. If "Sue's Sole Proprietership" [sic] tries to pull a "fast one" and reneg on their agreement and stip because they claim they weren't the "registered" or "840'd" entity, we can file off the other one to make sure all bases are covered. If the TP seems to be dragging their feet and we're getting into a jeopardy situation, we could even have both NOI's (and assessments) in existence concurrently to keep us protected. Donald Ritchie testified that he did not know of the existence of a "Nick's Partnership" or where such a term came from. However, see Findings of Fact 21, 25, and 46. A memo to file was subsequently produced by Peggy Bowen, dated February 10, 1995, which stated in part: I spoke to Allen Adams on the telephone regarding the memo from George Stinson dated 2/9/95. We agreed that our procedure would be to revise the existing NOI which is in the name Nick and Sue Farah to Sue Farah, and correct the SSN, under the existing audit number. We issued the existing NOI as a sole proprietorship, as Nick & Sue Farah, and we are only clarifying the name of the sole proprietorship to Sue Farah. There were not any partnership federal tax returns filed only joint 1040. Neither Petitioner was privy to the internal e-mail memoranda of the Department. The parties have stipulated that the Department agreed to remove Nick Farah, Sr.'s name from the Notices of Intent in exchange for Sue Farah's agreement to sign the notices as "agreed" liabilities. Accordingly, the Department's Second Revised Notices of Intent were issued on February 13, 1995. The Second Revised Notices of Intent were issued in the name "Sue Farah d/b/a Farah Gazebo Restaurant." These were issued by Donald Ritchie.1 The Second Revised Notice of Intent to make Sales and Use Tax Audit Changes (also referred to as "the second NOI") states in paragraph #1, "The Department of Revenue presents you with a Notice of Intent to make Sales and Use Tax Audit Changes for the period of time which you have been found to be liable on various transactions subject to the tax under Chapter 212, Florida Statutes, during the period 03/01/89 Through 02/28/94." It further states on the bottom of the first page, "NOTE: The execution and filing of this waiver will expedite adjustment of the tax liability as indicated above. . . . If you now agree with the tax audit changes, please sign this form and return it to the audit office indicated above." Petitioner Sue Farah signed the Second Revised Notices of Intent on March 10, 1995. Also on March 10, 1995, Petitioner Sue Farah submitted a request for compromise of taxes, penalties, and interest. The Department's representative in Jacksonville agreed to waive the penalties on the assessment. Subsequently, the Department's auditor forwarded the audit file to Tallahassee for further consideration of the Request for Compromise of Taxes and Interest. Donald Ritchie testified that during the course of the audit, it was apparent to him that it was an operation that was owned and operated by a husband and wife, Nick Farah, Sr., and Sue Farah, but that a Notice of Intent is issued in the name of the taxpayer as it is listed on the sales tax registration. It is noted, however, that the audit period covered a period in which there were two sales tax registration numbers for the restaurant in the name(s) first of Nick, Sr., Sue and Nick, Jr., until June 1, 1992, and thereafter as Nick Farah, Sr. and Sue Farah, a partnership. (See Findings of Fact 20-21.) After the audit was conducted, the audit file was forwarded to Tallahassee for review. Included within the audit file was the Standard Audit Program & Report for Sales and Use Tax form. Donald Ritchie testified that he filled out the Standard Audit Program & Report for Sales and Use Tax form listing the taxpayers as "Nick & Sue Farah d/b/a Farah's Gazebo Restaurant," and indicating that the entity was a "sole proprietorship" because he understood that a business entity run by a husband and wife did not constitute a partnership but rather a sole proprietorship in the absence of the formal procedures of organizing a partnership. Donald Ritchie further testified that he forwarded the file to Tallahassee as an "unagreed audit," because after signing the second NOI the Petitioners had asked for "additional conditions," including a request by Sue Farah for compromise of the taxes, penalties, and interest, that had not been specified at the time Sue Farah signed. However, he conceded that anyone signing an NOI could request such compromise. It is also clear that Sue Farah had always retained the right to compromise the penalties. (See Findings of Fact 30, 32 and 44-45) The Department subsequently issued its Notices of Proposed Assessment (NOPA) on September 6, 1995, in the names of both husband and wife, as "Nick & Sue Farah/Farah Gazebo Restaurant." By letter dated November 3, 1995, Petitioner Sue Farah d/b/a Farah Gazebo Restaurant protested the entire proposed assessments, on the ground of "doubt as to collectability." By letter dated January 15, 1996, Petitioner Sue Farah submitted her financial information in support of her protest. Petitioners had borrowed additional monies in order to pay off general debts and debt associated with the restaurant involved in this proceeding. They then borrowed again in order to open a second restaurant on "Mandarin" in Jacksonville. This new venture was to be run by a newly created corporation, of which Sue Farah is sole stockholder. Petitioners are agreed that if the restaurant which is at issue in this cause were sold, Sue Farah would get all the proceeds. By letter dated March 15, 1996, Kathleen Marsh, CPA and Tax Law Specialist for the Department, requested certain financial information from both Petitioners in order to consider the issues raised in the letter of protest, including but not limited to, audit papers, bank statements for the years 1995 and 1996, and various information relating to the operation and financial position of the second restaurant. By letter dated April 8, 1996, Kathleen Marsh notified Petitioners that she had not yet received the information she had requested, and was going to issue the Notice of Decision. By letter dated April 17, 1996, Petitioners' CPA responded in part to the Department's request for additional financial information, but it does not amount to a certification or audit of the Farahs' financial statements. Also on April 17, 1996, the Department issued its Notice of Decision, sustaining the assessment in its entirety, determining that doubt as to collectability had not been established by the Petitioners. The Petitioners sought reconsideration of the Department's determination, raising the additional argument that Nick Farah, Sr., was not sufficiently involved in the operation of the restaurant during the audit period so as to be liable for the tax assessment. The following information had been requested by the Department but was never received from the Petitioners: a copy of an IRS audit, bank statements for all accounts for the years 1995 and 1996, information relating to ownership of stock in the new restaurant corporation, and information relating to sales tax registration for the new restaurant. The Department issued its Notice of Reconsideration on November 5, 1996, again sustaining the assessment in its entirety and determining that doubt as to collectability still had not been established. It further determined that Nick Farah, Sr., was a registered dealer under Chapter 212, Florida Statutes, and was otherwise sufficiently involved in the operation of the restaurant so as to be liable for the assessment. Petitioners timely filed their Petition for this administrative hearing under Chapter 120, Florida Statutes. Petitioners agreed that the amount of the tax assessed by the Department is correct. Since the offer of compromise, several properties owned either jointly by husband and wife or owned solely by Nick Farah, Sr., have been foreclosed. Otherwise, the sworn financial statements in the audit file have been adopted by the Petitioners' testimony as still accurate. None of these financial statements bear a certification by a certified public accountant. Neither Mr. nor Mrs. Farah's financial situation has remained static in the ensuing two years. Sue Farah still desires to compromise the total tax bill with small monthly payments, but she could not articulate an amount she can currently pay and relied on her earlier offer.
Recommendation Upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that a Final Order be entered by the Department of Revenue that: Assesses the entire liability for the March 1, 1989 - February 28, 1994, audit period against Sue Farah for the taxes, penalties, and accruing interest; Absolves Nick Farah, Sr., of any liability for the same audit period; and Denies all compromise of the amount(s) assessed. DONE AND ENTERED this 10th day of June, 1998, in Tallahassee, Leon County, Florida. ELLA JANE P. DAVIS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 10th day of June, 1998.
The Issue Whether the Department of Revenue can levy on petitioner's bank accounts where the petitioner failed to challenge the final sales tax assessment and failed to remit the tax, penalties, and interest due pursuant to the assessment.
Findings Of Fact Based on the oral and documentary evidence presented at the final hearing and the entire record of this proceeding, the following findings of fact are made: Petitioner, Forest Hill Convenience, Inc., is a Florida corporation. It owns one convenience store in Palm Beach County, Kwik Stop number 320, and owned a second convenience store in Palm Beach County, One-Stop Food Mart, during the time relevant to this proceeding. Samson Abraham Francis is Forest Hill's President and only corporate officer. In December 1993, at the request of Forest Hill and a third party which was interested in purchasing the convenience stores, Van T. Ho, a Tax Auditor IV with the Department, performed an audit of Forest Hill's books and records for the period October 1, 1992 through November 31, 1993. As a result of the audit, the Department identified sales tax deficiencies. Forest Hill was notified on January 10, 1994, that the audit had revealed a tax deficiency of $1,046.78, exclusive of penalties and interest. On January 11, 1994, Mr. Francis met with Ms. Ho to go over the audit results. On January 13, 1994, Ms. Ho telephoned Mr. Francis and notified him that she had discovered an error in the initial audit and that Forest Hill's sales tax deficiency was $5,217.45, for a total tax liability of $7,354.86, with penalties and accrued interest. Mr. Francis did not object to the revision during this telephone conversation, and Ms. Ho sent Forest Hill the revised audit papers, together with a Notice of Intent to Make Audit Changes dated January 18, 1994. In this Notice, Forest Hill was advised that it must submit any objections to the proposed audit changes, in writing, by February 17, 1994, and that, if no objections were filed, a Proposed Notice of Deficiency would issue on March 21, 1994. In a letter dated February 22, 1994, Mr. Francis requested an extension of time to allow Forest Hill's accountant time to review the Notice and the audit papers. Mr. Francis did not register a protest to the tax deficiency identified in the revised audit papers in this letter. A two-week extension was granted. Even though the Department did not receive an objection to the proposed audit changes, it offered, in a letter dated March 25, 1994, to schedule a meeting to resolve any objections Mr. Francis might have to the proposed tax liability. The Department did not receive a response to this letter, and, in a letter dated September 9, 1994, Mr. Francis was advised that the audit file was being forwarded to Tallahassee. A Notice of Proposed Assessment dated October 6, 1994, was sent to Forest Hill via certified United States mail to Mr. Francis's then-current home address. In the Notice, the Department advised Forest Hill that it owed the Department $8,320.21, consisting of $5,217.45 in sales tax, $2,284.02 in penalties, and $818.74 in interest, with additional interest accruing at the rate of $1.72 per day. The Department further advised Forest Hill that, if it did not request informal proceedings, the assessment would become final on December 5, 1995, and that no relief could be granted by the Department, the Division of Administrative Hearings, or the courts beyond sixty days from the date the assessment became final, that is, by February 3, 1995. The Notice was returned to the Department unclaimed after two attempts at delivery. Forest Hill did not timely file a request for informal proceedings to challenge the proposed assessment, and the proposed assessment became a final assessment on December 5, 1994. On January 24, 1995, a Tax Warrant was filed by the Department with the Clerk of Court in Palm Beach County, Florida, and Forest Hill was so advised in a letter dated January 24, 1995. Forest Hill did not challenge the final assessment in circuit court or by petition to the Division Administrative Hearings by the date specified in the Notice of Proposed Assessment. The Department issued a Notice of Delinquent Tax dated March 24, 1995, to Forest Hill's bank. On April 13, 1995, the Department received a letter from Mr. Francis, dated March 9, 1995, protesting the amount of the assessment. In a letter dated May 4, 1995, Linda Howe, the Department's West Palm Beach Collection and Enforcement Administrator, notified Forest Hill that the audit could not be reopened because all protest rights had expired. Ms. Howe advised Forest Hill that it could pursue a compromise with the Department, and she stated that a written request for such relief had to be filed with the Department within fourteen days, during which time she would suspend collection and enforcement action on the warrant. Forest Hill failed to respond to the Department's letter of May 4, 1995, and a Notice to Freeze, dated May 31, 1995, was sent to Great Western Bank in Delray Beach, Florida, freezing Forest Hill's assets in the amount of $9,050.25. Forest Hill did not satisfy the warrant, and, on June 13, 1995, the Department sent the Notice of Intent to Levy via certified United States mail to Forest Hill at its business address. The only basis on which Forest Hill challenges the Notice of Intent to Levy is that the amount of the assessment is incorrect and unfair. Forest Hill has, however, waived any right to contest the correctness or validity of the assessment. The Department followed the procedures established by statute and rule in proceeding to issue a final tax assessment against Forest Hill. Mr. Francis did not participate on Forest Hill's behalf in the informal proceedings offered by the Department to resolve his objections to the correctness of the tax deficiency, nor did he timely request a hearing to contest either the proposed assessment or the final assessment. The Department has met its burden of showing by a preponderance of the evidence that Forest Hill has an outstanding tax liability in the amount shown on the Notice of Intent to Levy. Forest Hill has failed to prove any ground upon which the Department's proposed levy is defective or illegal. It has, therefore, failed to establish that the Department cannot properly levy on the bank accounts and certificates of deposit subject to the Notice of Freeze and the Notice of Intent to Levy.
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 the Department's Notice of Intent to Levy and allowing it to proceed with the garnishment of the bank accounts and certificates of deposit owned by Forest Hill Convenience, Inc., in the amount of $8,320.21, including tax, penalties, and interest, together with such interest as has accrued since October 7, 1994. DONE AND ORDERED in Tallahassee, Leon County, Florida, this 12th day of March 1996. PATRICIA HART MALONO 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 12th day of March 1996.
The Issue The issue is whether Respondent's Certificate of Registration 46-8015920490-4 should be revoked for the reasons stated in an Administrative Complaint for Revocation of Certificate of Registration (Administrative Complaint) issued by the Department of Revenue (Department) on July 17, 2015.
Findings Of Fact The Department is the state agency charged with administering and enforcing the state revenue laws, including the laws related to the imposition and collection of sales and use taxes pursuant to chapter 212. Respondent is an active for-profit Florida corporation and a licensed motor vehicle dealer located at 613 Southwest Pine Island Road, Suite 14, Cape Coral, Florida. For purposes of collecting and remitting taxes, Respondent is a dealer as defined in section 212.06(2) and is required to comply with chapter 212. Annais German is the president and agent of the corporation. Respondent holds Certificate of Registration number 46- 8015920490-4. A certificate of registration is required in order to do business in the state and requires its holder to collect and remit sales tax pursuant to chapter 212. See § 212.05(1), Fla. Stat. A dealer must file with the Department sales tax returns and remit the tax collected on a monthly basis. See § 212.15(1), Fla. Stat. The Department is authorized to revoke a dealer's certificate of registration for failure to comply with state tax laws. See § 212.18(3)(e), Fla. Stat. Before revoking a certificate of registration, the Department must convene an informal conference that the dealer is required to attend. See § 213.692(1)(a), Fla. Stat. At the conference, the dealer may either present evidence to refute the Department's allegations of noncompliance or enter into a compliance agreement with the Department to resolve the dealer's failure to comply with chapter 212. Id. After a compliance agreement is executed by the dealer, the Department may revoke the certificate of registration if the dealer fails to comply with its terms and conditions. If a breach occurs, the entire amount is due and payable immediately. After Respondent failed to remit taxes that were due, the Department issued tax warrants and rendered judgment liens against Respondent in March, April, and December 2014 and April 2015. An informal conference was conducted with the taxpayer on April 7, 2015. Respondent was represented at the conference by Orlando German, who was given power of attorney by Annais German to represent the corporation. He signed an agreement, which required the entire balance to be paid by the end of the month. Two weeks later, Annais German requested that a new agreement be executed which allowed her to pay the delinquent taxes over a longer period of time. The Department agreed with her request. On April 23, 2015, Ms. German executed an Agreement reflecting that her corporation owes $7,297.52. See Pet'r Ex. 2, p. 1. The Agreement required Respondent to make a down payment of $2,500.00 on or before April 28, 2015, followed by ten monthly payments of 375.00 on the 28th of each month, and a final payment of $671.52 on April 28, 2016. Id. at p. 3. The Agreement required these payments to be made at the Fort Myers Service Center. Id. Payments required under a compliance agreement are always remitted to the local district office, rather than Tallahassee, to allow the Department to track the payment and ensure that it is being made in a timely fashion. The Agreement also required Respondent to "timely remit payment in full for all types of taxes, returns, and reports due from the Taxpayer for the duration of this agreement (and any extensions hereof) or for the next 12 months following the date of this agreement, whichever is longer." Id. at p. 1. In other words, besides making payments for past due taxes, interest, penalties, and fees, Respondent was required to timely file returns and pay current obligations as they became due during the life of the Agreement. The Agreement specifically provides that if the taxpayer fails to comply with the Agreement, revocation proceedings will be initiated without further notice. Respondent paid the $2,500.00 down payment one day late, but as of the date of the hearing in this case, no other payments for past or current obligations have been made. Returns for April and May 2015 were not timely filed. Respondent admits that in April 2015, at least three vehicles were sold, but its April return, when eventually filed, reported that no sales were made. Since filing its June and July 2015 returns, Respondent has filed no other returns. By failing to pay the monthly obligations required by the Agreement or any current obligations, Respondent has violated the Agreement.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Department of Revenue enter a final order revoking Respondent's Certificate of Registration 46- 8015920490-4. DONE AND ENTERED this 25th day of February, 2016 in Tallahassee, Leon County, Florida. S D. R. ALEXANDER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 25th day of February, 2016. COPIES FURNISHED: Stephen M. Masterson, Esquire Office of the Attorney General Revenue Litigation Bureau The Capitol, PL-01 Tallahassee, Florida 32399-1050 (eServed) Annais German World Champions Auto, Inc. 429 Northwest 38th Place Cape Coral, Florida 33993-5536 Annais German World Champions Auto, Inc. 613 Southwest Pine Island Road, Suite 14 Cape Coral, Florida 33991-1950 George C. Hamm, Acting General Counsel Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668 (eServed) Marshall C. Stranburg, Executive Director Department of Revenue Post Office Box 6668 Tallahassee, Florida 32314-6668 (eServed)
The Issue The issue in this case is whether the Respondent's certificate of registration to collect sales tax should be revoked.
Findings Of Fact In 1996, the Respondent and Lance Arnette were engaged in a dissolution of marriage action in the circuit court, Case No. 96-1185-FD. On June 20, 1997, the business known as Giff’s Sub Shop was awarded to Respondent, Linda Arnette. The circuit court transferred the business to Respondent free of any and all liabilities. Later, Respondent discovered that there was an undisclosed sales tax liability. The amount of that liability was not clear from the record. However, the Department was not a party to the Arnette’s dissolution of marriage action. On March 3, 1998, Respondent filed an application for a certificate of registration with the Department. The reason for the application was due to the change of ownership from Respondent’s ex-husband to Respondent. The application reflected an opening date for the business of June 1, 1997. Linda Arnette was reflected as the owner of the business. Respondent was the only person who signed the application. No other person was listed as having an interest in the sub shop. The certificate of registration was issued to Respondent and she became the registered dealer for the sub shop. As such, she was under a legal duty to collect and remit all taxes collected by the sub shop to the Department. She was also responsible to file tax returns for the business with the Department. Her first return would have been due on July 20, 1997. A tax warrant or lien for unpaid taxes was filed against Respondent on October 26, 2005. It is unclear what happened with the 2005 warrant. Department records reflect that the sub shop did not file returns for November 2006, December 2006, January 2007, and February 2007. A second tax warrant for unpaid taxes was filed against Respondent on April 4, 2007. The warrant covered the period from August 2003 to February 2007. The amount of tax due under the warrant was $14,658.07, plus interest and penalties. The 2003 date was well after Respondent had taken over operation of the sub shop from her ex-husband. The evidence did not show that the amount included any taxes which may have been due prior to her award of the sub shop in 1997 or prior to the August 2003 date. Moreover, the warrant did not include months for which Respondent had timely paid the tax due. Data from the Department revocation worksheet showed that Respondent owed only interest for the months of August 2003 and March through August, 2006. The fact she owed only interest in those months indicates that the taxes were paid late. The Department’s data showed the month of December 2005 with zero tax due and zero interest due. It is not clear from the evidence why the Department claimed the month of December 2005 was out of compliance. However, even without the month of December 2005, the Department’s data showed 30 months of noncompliance by Respondent either by not filing timely or not paying the tax. On March 2, 2007, the Department sent Respondent a notice of its intent to revoke her certificate of registration. An informal meeting was scheduled for April 17, 2007. The purpose of the meeting was to permit Respondent to present evidence on why her certificate of registration should not be revoked and to show that the amount of taxes due was incorrect. Respondent attended the meeting on April 17, 2007. The Department waived the penalties due on her tax liability. Interest due totaled $2,857.68. Respondent did not raise any issue regarding her ex-husband’s past tax liability or any payments she had allegedly made thereon. Indeed, Respondent’s argument regarding payment on her ex-husband’s past tax liability did not make sense and was not borne out by the evidence. Respondent did file her tax returns for November 2006, December 2006, January 2007, and February 2007. It was unclear, if Respondent brought her account books for the sub shop to the meeting. Respondent’s own books reflect that she reported tax liability for the period August 2003 through August, 2006 in the amount of $25,133.97, and through December 2006, she owed $27,620.97. Respondent’s records did not reflect the return amounts for 2007. Her records also reflect that for the period August 2003 through August 2006, she paid $13,311.68 and through December 2006, she paid $16,029.68 to the Department. Returns filed with the Department for 2007 totaled $1,379.78 though February 2007. In 2007, Respondent’s records reflect that through April 2007, she paid $1,912.08 to the Department. In short, Respondent’s own records reflect that for the period August 2003 through August 2006, she owed past due taxes in the amount of $11,822.19 and through December 2006, she owed past due taxes in the amount of $11,591.29. Her own records reflect she had repeatedly not complied with the requirements of Chapter 212, Florida Statutes, to timely remit and pay taxes. More importantly, Respondent entered into a compliance agreement with the Department at the April 17, 2007, meeting. In the agreement, Respondent admitted she owed taxes in the amount of $14,658.07, plus interest in the amount of $2,857.68, for a total of $17,515.75, to the Department. She admitted she had not complied with Sections 212.14(1), 212.14(2) and 212.15(1), Florida Statutes, regarding timely filing of returns and timely payment of taxes. These failures were repeated. Additionally, Respondent agreed to timely file all tax returns for the period April 2007 through March 2008, timely pay all tax due for the same period, as well as, comply with the payment schedule for the past due amount referenced above. Failure to abide by the terms of the compliance agreement would permit the Department to initiate revocation of the Respondent’s certificate of registration and the use of the compliance agreement to establish the facts of the earlier noncompliance with Chapter 212, Florida Statutes. Respondent made the payments required under the payment schedule in the compliance agreement, but did not make such payments timely. Her most current return was late. Respondent also paid the current taxes due each month, but did not timely pay those taxes. Thus, Respondent has accrued $2,519.96 in interest and $214.22 in penalties through July 18, 2007, in addition to the amount she agreed was due in the compliance agreement. Given this history, Respondent has clearly not complied with the requirements of Chapter 212, Florida Statutes, and her certificate of registration should be revoked.
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 pursuant to Section 212.18, Florida Statutes. DONE AND ENTERED this 14th day of March, 2008, in Tallahassee, Leon County, Florida. S DIANE CLEAVINGER 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 14th day of March, 2008. COPIES FURNISHED: Warren J. Bird, Esquire Office of the Attorney General The Capitol, Plaza Level 101 Revenue Litigation Bureau Tallahassee, Florida 32399-1050 Glen M. Swiatek, Esquire 5 Clifford Drive Shalimar, Florida 32579 Marshall Stranburg, General Counsel Department of Revenue The Carlton Building, Room 204 501 South Calhoun Street Post Office Box 6668 Tallahassee, Florida 32314-6668 Lisa Echeverri, Executive Director Department of Revenue The Carlton Building, Room 104 501 South Calhoun Street Tallahassee, Florida 32399-0100
The Issue The issue is whether Petitioner owes the taxes, interest, and penalties assessed by the Department of Revenue based upon its audit of Petitioner for the period of August 1, 1996, through July 31, 2001.
Findings Of Fact Based upon the testimony and evidence received at the hearing, the following findings are made: Petitioner is a Florida corporation engaged in the business of selling and installing floor covering materials, such as carpet and tile. Petitioner's business is located in Hillsborough County, Tampa, Florida. Petitioner sales fall into two basic categories: "cash and carry sales" and "installation sales." The "cash and carry sales" are retail sales of floor covering materials to customers that come into Petitioner's store. These sales do not involve any installation work by Petitioner. The "installation sales" are sales in which Petitioner installs the floor covering material in the customer's home or business. These sales are performed pursuant to a lump-sum contract which incorporates the price of the installation and the price of the floor covering materials being installed. Petitioner purchases the floor covering materials from suppliers and distributors. Those purchases become part of the inventory from which Petitioner makes its "installation sales." Petitioner also makes general purchases of goods and services necessary for the day-to-day operation of its business. These purchases include items such as cleaning supplies and vehicle repairs. Petitioner made several fixed-assets purchases during the audit period for use in its business. It purchased a word processor in August 1996, and it purchased equipment and fixtures in December 1996. On those occasions that Petitioner collected sales tax from its customers on the "cash and carry sales" or paid sales tax on its inventory purchases and general purchases, it remitted or reported those amounts to the Department. However, as discussed below, Petitioner did not collect the full amount of sales tax due on each sale, nor did it pay the full amount of sales tax due on each purchase. The Department is the state agency responsible for administering Florida's sales tax laws. The Department is authorized to conduct audits of taxpayers to determine their compliance with the sales tax laws. By letter dated September 10, 2001, the Department notified Petitioner of its intent to conduct a sales tax audit of Petitioner's records for the period of August 1, 1996, through July 31, 2001. The audit was conducted by David Coleman, a tax auditor with seven years of experience with the Department. Petitioner designated its certified public accountant, P.J. Testa, as its representative for purposes of the Department's audit. That designation was memorialized through a power of attorney form executed by Petitioner on March 5, 2002. Mr. Coleman communicated with Mr. Testa throughout the course of the audit. Mr. Coleman conducted the audit using a sampling methodology agreed to by Mr. Testa on behalf of Petitioner. Pursuant to that methodology, Mr. Coleman conducted a comprehensive review of Petitioner's year-2000 purchase and sales invoices and extrapolated the results of that review to the other years in the audit period. The sampling methodology was used because of the volume of records and transactions during the audit period and because of the unavailability of all of the records for the audit period. The year 2000 was chosen as the sample period because Petitioner's records for the other years in the audit period were incomplete or unavailable. Mr. Coleman's audit of the year-2000 invoices focused on three broad types of transactions. First, he reviewed invoices of Petitioner's retail "cash and carry sales." Second, he reviewed the invoices through which Petitioner purchased the floor covering materials that it later sold as part of its "installation sales." Third, he reviewed the invoices through which Petitioner made general purchases of tangible personal property used in the day-to-day operation of its business. The sampling methodology was used for the audit of Petitioner's "cash and carry sales," the inventory purchases related to the "installation sales," and the general purchases. The methodology was not used for the audit of Petitioner's fixed-asset purchases; Mr. Coleman reviewed all of the available records for the fixed-asset purchases during each year of the audit period. Mr. Coleman's audit of Petitioner's retail "cash and carry sales" identified 29 invoices during year-2000 on which no sales tax or less than the full sales tax was paid by the customer. Those invoices amounted to $17,451.30, on which $1,178.11 in total sales tax was due, but only $552.97 was paid. As a result, Mr. Coleman's audit identified a sales tax deficiency of $625.14 for the retail sales during the sample period. Mr. Coleman's audit of Petitioner's purchases of floor covering that was later sold in the "installation sales" identified a considerable number of purchases during year-2000 on which no sales tax or less than the full sales tax was paid by Petitioner to the supplier or distributor of the materials. Those purchases amounted to $123,398.52, but only $123,397.80 of that amount was taxable. On the taxable amount, $8,330.07 in total sales tax was due, but only $6,810.68 was paid. As a result, Mr. Coleman's audit identified a sales tax deficiency of $1,519.41 for Petitioner's inventory purchases during the sample period. Mr. Coleman's audit of Petitioner's "general purchases" identified 10 sales during year-2000 on which sales tax was not paid. Those invoices amounted to $2,914.76, on which $196.77 in sales tax was due, but none of which was paid. As a result, Mr. Coleman's audit identified a sales tax deficiency of $196.77 for the general purchases during the sample period. Mr. Coleman's audit of Petitioner's fixed-asset purchases identified only two transactions during the entire audit period on which Petitioner did not pay the full sales tax. Those transactions amounted to $5,078.92, on which $330.14 in total sales tax was due, but none of which was paid. As a result, Mr. Coleman's audit identified a sales tax deficiency of $330.14 for the fixed-asset purchases during the audit period. The tax deficiencies calculated by Mr. Coleman for year-2000 for each category described above take into account any sales tax collected by Petitioner from its customers or paid by Petitioner to its vendors. After Mr. Coleman computed the tax deficiencies based upon his audit of the year-2000 records, he calculated a "percentage of error" for each category of sales/purchases. The percentage of error is the ratio used to extrapolate the results of the audit of the year-2000 records over the remainder of the audit period. No percentage of error was calculated for the fixed-asset purchases because Mr. Coleman reviewed the available records for those purchases over the entire audit period, not just year-2000. The percentage of error was calculated by dividing the sales tax deficiency identified in a particular category for the year-2000 by the total sales/purchases in that category for the year-2000. For the year-2000, Petitioner had retail sales of $1,143,182.45; general purchases of $21,254.88; and inventory purchases of $1,214,016.24. As a result, the applicable percentages of error were 0.000547 ($625.14 divided by $1,143,182.45) for the retail sales; 0.009258 ($196.77 divided by $21,254.88) for the general purchases; and 0.001252 ($1,519.41 divided by $1,214,016.24) for the inventory purchases. The percentages of error were then multiplied by the total sales in the applicable category for the entire audit period to calculate a total tax deficiency in each category. Petitioner's total retail sales over the audit period were $4,455,373.40. Therefore, the total tax deficiency calculated for that category was $2,437.12 (i.e., $4,455,373.40 multiplied by 0.000547). Petitioner's total general purchases over the audit period were $110,741.49. Therefore, the total tax deficiency calculated for that category was $1,025.25 (i.e., $110,741.49 multiplied by 0.009258). Petitioner's total inventory sales over the audit period were $3,130,882.10. Therefore, the total tax deficiency calculated for that category was $3,919.86 (i.e., $3,130,882.10 multiplied by 0.001252). Petitioner's total tax deficiency was computed by adding the deficiencies in each category, as follows: Retail Sales $2,437.12 General Purchases 1,025.25 Inventory Purchases 3,919.86 Fixed-asset purchases 330.14 TOTAL $7,712.37 Of that total, $6,863.02 reflects the state sales tax deficiency; $313.77 reflects the indigent care surtax deficiency; and $535.58 reflects the local government infrastructure surtax deficiency. The sales tax rate in effect in Hillsborough County during the audit period was 6.75 percent. The state sales tax was six percent; the remaining 0.75 percent was for county surtaxes, namely the local government infrastructure surtax and the indigent care surtax. That rate was used by Mr. Coleman in calculating the tax deficiencies described above. On October 4, 2002, Mr. Coleman hand-delivered the Notice of Intent to Make Audit Change (NOI) to Petitioner. The NOI is the end-product of Mr. Coleman's audit. The NOI identified the total tax deficiency set forth above, as well as a penalty of $3,856.26, which is the standard 50 percent of the tax deficiency amount, and interest of $2,561.63, which is calculated at a statutory rate. The NOI included copies of Mr. Coleman's audit work- papers which showed how the taxes, penalties, and interest were calculated. The NOI also included a copy of the "Taxpayers' Bill of Rights" which informed Petitioner of the procedure by which it could protest the audit results reflected on the NOI. On October 29, 2002, the Department issued three NOPAs to Petitioner. A separate NOPA was issued for each type of tax -- i.e., sales tax, indigent care surtax, and local government infrastructure surtax. The cumulative amounts reflected on the NOPAs were the same as that reflected on the NOI, except that the interest due had been updated through the date of the NOPAs. Interest continues to accrue on assessed deficiencies at a cumulative statutory rate of $1.81 per day. The NOPAs were sent to Petitioner by certified mail, and were received by Petitioner on November 1, 2002. By letter dated November 5, 2002, Petitioner protested the full amount of the taxes assessed on the NOPAs and requested a formal administrative hearing. The letter was signed by Mr. Testa on Petitioner's behalf. The protest letter does not allege that the methodology used by Mr. Coleman was improper or that the results of the audit were factually or legally erroneous. Instead, the protest letter states that Petitioner was disputing the results of the audit because it was "following procedures set forth by an agent from a previous audit who established the manner in which [Petitioner was] to compute sales tax on the items being questioned by the current auditor." Mr. Testa made similar comments to Mr. Coleman during the audit. When Mr. Coleman requested documentation from Mr. Testa to corroborate those comments about the procedures allegedly established by the prior auditor, Mr. Testa was unable to provide any such documentation. The record of this proceeding is similarly devoid of evidence to support Petitioner's allegation on this point. The record does not contain any evidence to suggest that Petitioner ever modified or revoked Mr. Testa's authority to represent it in connection with the audit or this protest, which Mr. Testa initiated on Petitioner's behalf. Petitioner, through Mr. Testa, had due notice of the date, time, and location of the final hearing in these cases. Neither Mr. Testa, nor anyone else on Petitioner's behalf, appeared at the final hearing.
Recommendation Based upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Department of Revenue issue a final order imposing the taxes, interest, and penalties against Petitioner in the full amounts set forth in the three Notices of Proposed Assessment dated October 28, 2002. DONE AND ENTERED this 30th day of December, 2003, in Tallahassee, Leon County, Florida. S T. KENT WETHERELL, II Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 30th day of December, 2003.
Findings Of Fact The Respondent, Diamond Lil's Saloon, Inc., is the holder of license number 39-889, series 4-COP. This license is held with the State of Florida, Division of Alcoholic Beverages and Tobacco, for doing business as Diamond Lil's in a premises located at 9700 North Nebraska Avenue, Tampa, Florida. At the commencement of the hearing, the parties stipulated to the propriety of the allegations contained in the notice to show cause. By that stipulation it was established that on or about September 20, 1977, investigation revealed that Diamond Lil's Saloon, Inc., licensed under the beverage laws, failed to file its monthly State Sales Tax Report and pay said sales tax for the above described premises for months of October, 1976 through March, 1977, in violation of Chapter 212, F.S., and s. 561.29, F.S. It was also established that although the taxes are still delinquent, a plan has been entered into between the licensee corporation and the State of Florida, Department of Revenue, for the purpose of paying the delinquent taxes owed. The conditions of that agreement may be found in Respondent's Exhibit #1, admitted into evidence. By stipulating to the factual accuracy of the allegation in the notice to show cause, which establishes the nonpayment of taxes, which are required to be paid under Chapter 212, F.S., the Respondent has subjected itself to the penalties found in s. 561.29, F.S. This violation established in this cause subjects the Respondent to possible revocation, suspension or fine.
Recommendation It has been shown that the Respondent corporation was in violation of Chapter 212, F.S., and thereby is subject to the penalties found in 561.29, F.S. An opportunity was afforded the parties to present matters in aggravation and mitigation, and the Respondent availed itself of the opportunity to present mitigation. As shown in the recitation of the facts, restitution has been agreed to and is being made, to the extent that all restitution payments are current. It is also demonstrated that the licensee has had no previous violations of the beverage laws. Premised upon the consideration of the facts in this matter and the evidence in mitigation, and in keeping with the authority of s. 561.29(6), F.S., it is RECOMMENDED: that the Respondent's license be suspended for a period of 20 days, but that that action be suspended in its effect pending the satisfactory completion of a one year probationary term, in which the licensee shall commit no violations of the laws pertaining to its license held under the authority of the Division of Alcoholic Beverages and Tobacco. Should such a violation occur in the period of the probation, then a suspension of 20 days shall take effect. DONE and ENTERED this 16th day of December, 1977, in Tallahassee, Florida. CHARLES C. ADAMS, Hearing Officer Division of Administrative Hearings Room 530, Carlton Building Tallahassee, Florida 32304 (904) 488-9675 COPIES FURNISHED: William Hatch, Esquire 725 South Bronough Street Tallahassee, Florida 32304 Robert R. Carbanell, Esquire Smith and Carbanell, Law Offices 2907 South Dale Mabry Tampa, Florida 33609
The Issue The issue for determination is whether Petitioner owes sales tax of $15,230.15 plus interest from October 15, 1993.
Findings Of Fact Petitioner is a sole proprietorship organized in this state and doing business at 851 Monterey Road, Stuart, Florida. Respondent is the governmental agency responsible for administering the state sales tax in accordance with Chapter 212, Florida Statutes.1 In 1992, other businesses located at Petitioner's address reported to Respondent that they paid rent to Petitioner. However, Petitioner did not collect and remit sales tax on the rental income and was not registered as a dealer. On February 3, 1992, Respondent mailed a Notice of Intent to Audit Petitioner's books and records ("Notice of Intent to Audit") for the tax period February 1, 1987, through January 31, 1992. The Notice of Intent to Audit included a detailed list of the books and records needed for Respondent to conduct a detailed audit. The Notice also requested that Petitioner provide Respondent with a date on which it would be convenient to begin the audit. On February 11, 1992, Respondent had not heard from Petitioner. The auditor contacted Petitioner to schedule a date on which the audit could begin. At that time, Petitioner stated that he would not provide the auditor with any books and records. Petitioner refused to make available the books and records for 1990 through 1992 because Petitioner incorrectly suspected that Respondent maintained a secret "blacklist." Petitioner based his suspicion, in part, on the fact that he had refused to respond to a questionnaire Respondent had mailed to taxpayers throughout the state prior to the Notice of Intent to Audit. Petitioner also based his suspicion on the erroneous assumption that Respondent's audit was part of a criminal investigation by the Internal Revenue Service ("IRS") into Petitioner's federal taxes for 1987 and 1988. Petitioner refused to make available the books and records for 1987 through 1989 because those records were in the possession of the IRS. Petitioner maintained that the proposed audit was illegal. Respondent sent Petitioner copies of its statutory authority to audit Petitioner and made numerous attempts to arrange a mutually convenient time to begin the audit. Respondent did not commence the audit until March 10, 1993. On March 10, 1993, the auditor and audit group supervisor met with Petitioner and Mr. Eugene Nail, Petitioner's paralegal. Petitioner stated that he did not have the books and records Respondent needed to conduct a detailed audit because the IRS had confiscated them in connection with the pending criminal case. Respondent conducted the audit using the information Petitioner made available to the auditor. Petitioner made available: sales invoices for 1990 and 1991 and one month in 1992 grouped together by calendar month; sales and use tax return booklets; resale and exemption certificates; and commercial lease agreements. No journals and ledgers were available. Respondent determined Petitioner's tax deficiency by sampling the available information. Pursuant to Petitioner's request, the auditor used a six month sample period. The auditor explained to Petitioner that she would use Petitioner's invoices during the sample period to determine tax- exempt sales. She compared the invoices to resale certificates and calculated an error ratio based on discrepancies between the sales invoices and the resale certificates. Respondent determined the actual deficiency in sales tax during the six month sample period based on actual invoices that did not have a resale certificate and for which no sales tax was remitted. Respondent estimated the additional deficiency in sales tax by applying the error ratio to the balance of the audit period. Respondent examined only those invoices provided by Petitioner and previous sales tax returns filed by Petitioner. On April 9, 1993, the auditor conducted a meeting with Petitioner and discussed the audit procedures, results, applicable law, and abatement rules. On June 15, 1993, Respondent issued a Notice of Intent to Make Sales and Use Tax Changes in the amount of $45,469.05 ("Notice of Intent"). The Notice of Intent included a copy of all audit exhibits and workpapers. On August 30, 1993, Petitioner provided additional invoices to Respondent in a meeting with the auditor and audit group supervisor. On October 15, 1993, the auditor adjusted certain items in the audit file, reduced the proposed assessment, and issued a Revised Notice of Intent to Make Sales and Use Tax Changes in the amount of $37,417.45 ("Revised Notice of Intent"). Petitioner requested additional time to provide more information, including additional resale certificates. However, Petitioner failed to provide the additional information. By letter dated December 9, 1993, the audit group supervisor notified Petitioner that she was closing the case and sending it to the Tallahassee office as a contested case. On December 23, 1993, Respondent issued a Notice of Proposed Assessment to Petitioner assessing Petitioner for $37,417.45 in tax, penalty, and interest through October 15, 1993. On February 21, 1994, Respondent received Petitioner's written protest dated February 10, 1994. Respondent revised the audit figures again. On January 20, 1995, Respondent issued its Notice of Decision reducing the assessment against Petitioner to $15,230.15. The Notice of Decision assessed Petitioner for taxes of $8,900.55, penalties of $2,225.14, and interest of $4,104.46 through October 15, 1993. Interest accrues at the per diem rate of $2.93 until paid. On March 16, 1995, Petitioner timely appealed the Notice of Decision by filing a Petition for Formal Hearing with Respondent. Inadequate Records Petitioner failed to maintain adequate books and records within the meaning of Sections 212.12(6), 212.13(2), 212.35, and Florida Administrative Code Rules 12A-1.093(2) and (5).2 Petitioner failed to maintain adequate books and records for the five year audit period prescribed in Section 213.34(2). Petitioner failed to maintain general ledgers and journals for the five year audit period. The only records Petitioner maintained were sales invoices for 1990 and 1991 and one month in 1992. Petitioner was unable to produce adequate records for 1987 through 1989. Petitioner asserted that the IRS had those records and that Petitioner could not obtain the records required by Florida law. The federal tax case has been pending against Petitioner since 1990.3 During those seven years, Petitioner was unable to obtain copies of any records in the possession of the IRS. The journals and ledgers for 1987 and 1988 were maintained on computer floppy disks. Petitioner asserts that the floppy disks were lost. Petitioner asserts that his attorney kept the books and records for 1989 in an out-of-state location to avoid producing those records for the IRS. The journals and ledgers for 1990 though 1992 are in the possession of Petitioner's accountants. Petitioner did not produce those records during the audit or at the administrative hearing. Petitioner could have requested the journals and ledgers for 1989 through 1991 from his attorney and accountants, respectively, but chose not to do so. Petitioner made available to Respondent only sales invoices for 1990 and 1991 and one month in 1992. Without the general ledgers and cash journals to cross- reference the sales invoices, Respondent could not corroborate the financial records available for audit. Respondent was required by applicable law to conduct the audit by sampling Petitioner's available records. Exempt Sales: Resale Certificates Certain exempt sales claimed by Petitioner during the six month sample period were not supported by resale certificates. Respondent disallowed the exempt sales that were not supported by resale certificates and allowed the invoices that were supported by resale certificates. For the six month sample period, Respondent assessed an actual sales tax deficiency for those sales that did not have a corresponding resale certificate.4 Respondent prepared audit schedules for the six month sample period that listed the invoices with a sales tax deficiency due to the lack of a resale certificate. Based on the audit schedules, Respondent determined an error ratio and applied the error ratio over the five year audit period to determine the estimated tax deficiency.5 Respondent conducted the audit in accordance with generally accepted audit procedures and with applicable state law. Disallowed exempt sales were listed individually by invoice, name of vendor, and the date and amount of the sale. Disallowed exempt sales were listed for each of the six months in the sample period. Additional Taxable Sales Sales invoices for the six month sample period showed that Petitioner collected more sales tax than he reported to Respondent on his monthly sales tax returns. Respondent treated the collected, but unremitted, sales tax as "additional taxable sales" rather than as an unremitted sales tax. Respondent assessed Petitioner for the sales tax paid on Petitioner's invoices but not remitted to Respondent by Petitioner. The deficiency existed for May and June, 1990, and for January and February, 1991. Taxable Rent Respondent reviewed lease agreements relating to property rented by Petitioner at his business address. Respondent determined that Petitioner failed to collect and remit sales tax on the rental of his property. Respondent assessed Petitioner for sales tax Petitioner failed to collect and remit on taxable rent. Petitioner does not contest that portion of the assessment.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that Respondent enter a Final Order and therein UPHOLD Respondent's assessment of $15,230.15 plus interest statutorily due from October 15, 1993, until paid.RECOMMENDED this 17th day of February, 1997, in Tallahassee, Florida. DANIEL MANRY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 17th day of February, 1997.
The Issue As to DOAH Case No. 18-4475RX, whether Florida Administrative Code Rule 12A-1.044(5)(a) is an invalid exercise of delegated legislative authority in violation of section 120.52(8), Florida Statutes.1/ As to DOAH Case No. 18-4992RU, whether the Department of Revenue's ("Department") Standard Audit Plan, Vending and Amusement Machines--Industry Specific, section 1.1.3.3 ("SAP") is an unadopted rule in violation of sections 120.54 and 120.56, Florida Statutes.
Findings Of Fact The Parties and Audit Period GBR is a Florida corporation with its principal place of business in Miami, Florida. Gilda Rosenberg is the owner of GBR and a related entity, Gilly Vending, Inc. ("Gilly"). GBR and Gilly are in the vending machine business. At all times material hereto, Amit Biegun served as the chief financial officer of the two entities. The Department is the state agency responsible for administering Florida's sales tax laws pursuant to chapter 212, Florida Statutes. This case concerns the audit period of January 1, 2012, to December 31, 2014. GBR's Provision of Vending Machine Services Prior to the audit period, the school boards of Broward and Palm Beach County issued written solicitations through invitations to bid ("ITB"), seeking vendors to furnish, install, stock, and maintain vending machines on school property. The bids required a "full turn-key operation." The stated objectives were to obtain the best vending service and percentage commission rates that will be most advantageous to the school boards, and to provide a contract that will be most profitable to the awarded vendor. The stated goal was that student choices from beverage and snack vending machines closely align with federal dietary guidelines. GBR operates approximately 700 snack and beverage vending machines situated at 65 schools in Broward, Palm Beach, and Miami-Dade Counties. Of these 65 schools, 43 are in Broward County, 21 are in Palm Beach County, and one is in Miami-Dade County. The snack vending machines are all owned by GBR. Beverage vending machines are owned by bottling companies, such as Coca-Cola and Pepsi. Of the 700 vending machines, approximately 60 percent of the machines are for beverages and the remaining 40 percent are for snacks. GBR has written vending agreements with some schools. In these agreements, GBR is designated as a licensee, the school is designated as the licensor, and GBR is granted a license to install vending machines on school property in exchange for a commission. Furthermore, GBR is solely responsible to pay all federal, state, and local taxes in connection with the operation of the vending machines. Ownership of the vending machines does not transfer to the schools. However, in some cases the schools have keys to the machines. In addition, designated school board employees have access to the inside of the machines in order to review the meter, monitor all transactions, and reconcile the revenue from the machines. GBR places the vending machines on school property. However, the schools control the locations of the vending machines. The schools also require timers on the machines so that the schools can control the times during the day when the machines are operational and accessible to students. The schools also control the types of products to be placed in the machines to ensure that the products closely align with the federal dietary guidelines. The schools also control pricing strategies. GBR stocks, maintains, and services the vending machines. However, Coca-Cola and Pepsi may repair the beverage machines they own. GBR is solely responsible for repairing the machines it owns. The schools require that any vendor service workers seeking access to the vending machines during school hours pass background checks. GBR route drivers collect the revenue from all of the vending machines and the revenues are deposited into GBR's bank accounts. In exchange for GBR's services, the schools receive from GBR, as a commission, a percentage of the gross receipts. However, neither GBR nor the schools are guaranteed any revenue unless sales occur from the machines. On its federal income tax returns, GBR reports all sales revenue from the vending machines. For the tax year 2012, GBR's federal income tax return reflects gross receipts or sales of $5,952,270. Of this amount, GBR paid the schools $1,363,207, a percentage of the gross receipts which GBR characterized on the tax return and its general ledger as a commission and equipment space fee and cost of goods sold. For the tax year 2013, GBR's federal income tax return reflects gross receipts or sales of $6,535,362. Of this amount, GBR paid directly to the schools $1,122,211, a percentage of the gross receipts which GBR characterized on the tax return and its general ledger as a commission and equipment space fee and cost of goods sold. For the tax year 2014, GBR's federal income tax return reflects gross receipts or sales of $6,076,255. Of this amount, GBR paid directly to the schools $1,279,682, a percentage of the gross receipts which GBR characterized on the tax return and its general ledger as a commission and equipment space fee and cost of goods sold. Thus, for the audit period, and according to the federal tax returns and general ledgers, GBR's gross receipts or sales were $18,563,887. Of this amount, GBR paid directly to the schools $3,765,100, as a commission and equipment space fee and cost of goods sold. The Department's Audit and Assessment On January 27, 2015, the Department, through its tax auditor, Mary Gray, sent written notice to GBR of its intent to conduct the audit. This was Ms. Gray's first audit involving vending machines at schools. Thereafter, GBR provided Ms. Gray with its general ledger, federal returns, and bid documents. On October 28, 2015, Ms. Gray issued a draft assessment to GBR. The email transmittal by Ms. Gray to GBR's representative states that "[t]he case is being forwarded for supervisory review." In the draft, Ms. Gray determined that GBR owed additional tax in the amount of $28,589.65, but there was no mention of any purported tax on the monies paid by GBR to the schools as a license fee to use real property. However, very close to the end of the audit, within one week after issuing the draft, and after Ms. Gray did further research and conferred with her supervisor, Ms. Gray's supervisor advised her to issue the B03 assessment pursuant to section 212.031 and rule 12A-1.044, and tax the monies paid by GBR to the schools as a license fee to use real property. Thus, according to the Department, GBR was now responsible for tax in the amount of $246,230.93, plus applicable interest. Of this alleged amount, $1,218.48 was for additional sales tax (A01); $4,181.41 was for purchase expenses (B02); $13,790 was for untaxed rent (B02); and $227.041.04 was for the purported license to use real property (B03). Ms. Gray then prepared a Standard Audit Report detailing her position of the audit and forwarded the report to the Department's dispute resolution division. On January 19, 2016, the Department issued the Notice of Proposed Assessment ("NOPA") against GBR for additional tax and interest due of $288,993.31. The Department does not seek a penalty against GBR. At hearing, Ms. Gray testified that the Department's SAP is an audit planning tool or checklist which she used in conducting GBR's audit. Employees of the Department are not bound to follow the SAP, and the SAP can be modified by the auditors on a word document. The SAP was utilized by Ms. Gray during the audit, but it was not relied on in the NOD.4/
The Issue Whether the Department of Revenue's (Department) assessment of tax and interest against American Business USA Corp. (Taxpayer) 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 pursuant to chapter 212, Florida Statutes. The Taxpayer is an active for-profit corporation with its principal address and mailing address at 12805 Newton Place, Wellington, Florida 33414-6226. The Taxpayer is a "dealer" as that term is defined by section 212.06(2). The Taxpayer has a federal employer identification number and a certificate of registration number.1/ The Taxpayer began doing business in Florida in January 2001, but did not register with the Department as a sales tax dealer until February 19, 2004. The Taxpayer does business as "1Vende.com." The Department audited the Taxpayer for sales and use tax compliance. The audit period was April 1, 2008, through March 31, 2011. FACTS RELATED TO THE AUDIT PERIOD Mr. Gomez and Ms. Niño, who are husband and wife, each hold 50 percent of the shares in the Taxpayer. There were two principal aspects of the Taxpayer's business during the audit period. First, the Taxpayer specialized in the sale of flowers, gift baskets, and other items of tangible personal property. Second, the Taxpayer specialized in the sale of "prepaid calling arrangements," within the meaning of section 212.05(1)(l). All of the Taxpayer's sales were initiated online. The Taxpayer sold to customers throughout Latin America, in Spain, and in the United States (including Florida). All payments to the Taxpayer were made by credit card or wire transfer. The Taxpayer generated electronic invoices for all its sales. The Taxpayer marketed itself to the public on its website as a company that sells flowers. The Taxpayer did not maintain any inventory of flowers, gift baskets, or other items of tangible personal property. When the Taxpayer received an order over the Internet for items of tangible personal property, the Taxpayer relayed the order to a florist in the vicinity of the customer (the local florist). The Taxpayer utilized the Internet or telephone to relay an order. The Taxpayer did not use telegraph. The Taxpayer used a local florist to fill the order it had received for flowers, gift baskets, and other items of tangible personal property. The Taxpayer charged its customers sales tax on sales of flowers, gift baskets, and other items of tangible personal property delivered in Florida. The Taxpayer did not charge its customers sales tax on sales of flowers, gift baskets, and other items of tangible personal property delivered outside of Florida. The Taxpayer did not charge sales tax on the delivery fee it charged its customers on orders of flowers, gift baskets, and other items of tangible personal property. The Taxpayer primarily sold prepaid calling arrangements in $2.00, $5.00, $10.00, and $20.00 increments. When customers purchased prepaid calling arrangements, the Taxpayer sent them an authorization number by email. The Taxpayer did not charge its customers sales tax on the prepaid calling arrangements it sold. THE AUDIT The Taxpayer filed its federal tax returns on an accrual basis with the fiscal year ending December 31. The taxpayer's accountant recorded sales on the federal tax returns (form IRS 1120) based on the deposits recorded on the bank statements. Mr. Gomez prepared the Florida sales and use tax returns (form DR-15) for the Taxpayer and calculated the tax due by multiplying its taxable sales by the applicable tax rate. On May 9, 2011, the Department mailed the Taxpayer a Notice of Intent to Audit Books and Records, form DR-840, for audit 200105422. The Department requested Mr. Gomez provide for audit the Taxpayer's chart of accounts, general ledgers, cash receipt journals, sales journals, resale certificates, general journals, federal tax returns, state sales tax returns, shipping documents, and bank statements. Along with the DR-840, the Department mailed the Taxpayer a Pre-audit Questionnaire and Request for Information and Electronic Audit Survey. On May 23, 2011, the Taxpayer returned to the Department the completed Pre-audit Questionnaire and Request for Information and Electronic Audit Survey. On June 15, 2011, the Department's auditor and Mr. Gomez had a pre-audit interview, in which they discussed auditing techniques and records available for audit. Mr. Gomez provided for audit a download of the Taxpayer's electronic records, including its sales database, bank statements, and federal tax returns. The Taxpayer did not keep for audit books and records that would allow the Department to reconcile the sales in the electronic database to the deposits on the bank statement. The Department determined that the Taxpayer's books and records were inadequate for audit and relied upon the "best information then available" of the Taxpayers' sales tax liability, in accordance with section 212.12(5)(b). The Taxpayer did not maintain sales invoices, sales journals, or general ledgers. On August 8, 2011, the Department's auditor met with Mr. Gomez and discussed the audit findings regarding sales. On August 18, 2011, the Department's auditor met with Mr. Gomez and discussed the taxability of the prepaid calling arrangements. On October 31, 2011, the Department mailed the Taxpayer a Notice of Intent to Make Audit Changes, form DR-1215, for audit number 200105422. Prior to issuing the DR-1215, the Department compromised in full the assessed penalty. On February 16, 2012, the Department mailed the Taxpayer a Notice of Proposed Assessment for audit number 200105422. The Department assessed the Taxpayer $102,508.28 in sales tax and interest through February 16, 2012, in the amount of $18,097.52. Interest accrues at $19.62 per day until the tax is paid in full.2/ ESTOPPEL In its Amended Petition, the Taxpayer asserts that it "relied on advice and instruction from [the Department] when it failed to collect Telecommunication tax and should not be subject to any taxes or penalties as a result of their [sic] reasonable reliance." Mr. Gomez and Ms. Niño made three visits to the Department's service centers, but only one of those three visits pre-dated the audit period. The other two visits were after the audit period. In February 2001 they visited the service center in Miami, Florida, where they talked to someone named "Maria" about the taxability of their new business. Both Mr. Gomez and Ms. Niño testified that as a result of the first visit with "Maria" in 2001, the Taxpayer only charged customers sales tax on the sales of flowers, gift baskets, and other items of tangible personal property delivered in Florida. The owners testified that they relied on advice given to them by "Maria." "Maria" did not testify at the formal hearing. There was no written confirmation of the advice given by "Maria." After the audit period while the audit was ongoing (between August 8 and August 18, 2011) they visited the service center in Coral Springs, Florida, where they spoke to someone named "Paula" about the ongoing audit. The third and final visit was on August 18, 2011, when they met with Everald Thomas at the service center in West Palm Beach. Mr. Thomas was the Department's auditor in this case. The owners talked to him about the taxability of the prepaid calling arrangements. The Taxpayer timely filed its Amended Petition for Administrative Hearing. The Taxpayer continues to dispute the assessment.
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 American Business USA Corp. DONE AND ENTERED this 27th day of February, 2013, in Tallahassee, Leon County, Florida. CLAUDE B. ARRINGTON 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 27th day of February, 2013.
