STATE OF FLORIDA DIVISION OF ADMINISTRATIVE HEARING. :YO R q5-2- F"D F FINAL ORDER

Transcription

1 STATE OF FLORIDA DIVISION OF ADMINISTRATIVE HEARING BIDDERS, INC. vs. Petitioner, DEPARTMENT OF REVENUE CASE NO :YO R q5-2- F"D F Respondent / FINAL ORDER This cause came before the Department of Revenue for the purpose of issuing a final order. The hearing officer assigned by the Division of Administrative Hearings heard this cause and issued a Recommended Order. A copy of the Recommended Order is attached to this Final Order. RULINGS ON EXCEPTIONS Petiti-snef has submitted exceptions to paragraphs 5, 11, and 13 of the Findings of Fact and paragraphs 26, 27, and 28 of the Conclusions of Law Hearing Officer's Recommended Order. 1. Paragraph 5 - The Hearing Officer found that Petitioner did not keep adequate records. This finding is support by substantial competent evidence. Therefore petitioner's exception to paragraph 5 is rejected. 2. Paragraph 11 - The Hearing Officer found that failed to collect and remit applicable sales tax. This supported by substantial competent evidence. Petitioner's exception to paragraph II is rejected. Petitioner finding is Therefore, 3. Paragraph 13 - The hearing Officer found that Petitioner failed to pay sales tax due on numerous items it purchased for its business and is therefore liable for use tax on those purchases. This finding is supported by substantial competent evidence. Therefore, Petitioner's exception to paragraph 13 is rejected. 4. Paragraphs 26, 27 and 28 - The Hearing Officer based his conclusion that the Respondent's assessment of tax was proper on the authority of Florida Hotel & Motel Assoc., Inc., v. DOR, ~35 SO.2d l044(fla.lst DCA, Petitioner takes exception and argues that this case was decided after the audit period and is

2 therefore inapplicable. The Hotel decision affirmed existing rules and the long standing legal position of the Respondent. Therefore, Petitioner's exceptions to paragraphs 26, 27, and 28 are rejected. 5. Petitioner further takes exception with the imposition of penalty and interest. There is no statutory basis for abating interest and no evidence was presented supporting waiving penalty. Therefore, Petitioner's exception to the imposition of penalty and interest is rejected. 6. Petitioner further takes exception with Respondent's use of a 5 year audit period and the requirement that taxpayer's keep their books and records for 5 years. The Hearing Officer properly concluded that applicable law provides or 5 year audit periods and taxpayer record keepirig. Therefore, Petitioner's exceptions to the audit period are rejected. 7. Petitioner's exceptions with the time, place, and responses to discovery are not material and are therefore rejected FINDINGS OF FACT The Department hereby adopts and incorporates by reference the findings of fact set forth in the Recommended Order. CONCLUSION OF LAW The Department hereby adopts and incorporates by reference the conclusions of law set forth in the Recommended Order. Based on the foregoing, it is, ORDERED, that the Respondent adopts and incorporates the Recommended Order filed herein, and upholds the subject assessment of tax, penalty, and interest. Any party to this Final Order has the right to seek judicial review of the Final Order as piovided in Section , Florida Statutes, by the filing of a Notice of Appeal is provided in Rule 9.110, Florida Rules of Appellate Procedure, with the Clerk of the Department in the Office of General Counsel, Post Office Box 6668, Tallahassee, Florida and by filing a copy of the Notice of Appeal, accompanied by the applicable filing fees,with the appropriate District Court of Appeal. The Notice of Appeal must be filed within 30 days from the date this Final Order is filed with the Clerk of the Department.

3 Q ENTERED in Tallahassee, Leon County, Florida this ~~day of January, state of Florida DEPART NT F REVENUE I HEREBY CERTIFY that the foregoing FINAL ORDER has been filed in the official records of the Florida Department of Revenue this ~, day of January, Copies furnished to: Daniel Manry Hearing Officer Division of Administrative Hearing The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida Francisco M. Negron, Esquire Asst. Attorney General Dept. of Legal Affairs The Capitol-Tax Section Tallahassee, Florida Thomas C. Birkhead, President Bidders, Inc N. 1 Atlantic Avenue Cocoa Beach, Florida (

4 STATE OF FLORIDA DIVISION OF ADMINISTRATIVE HEARINGS BIDDERS r INC. r Petitioner, vs. DEPARTMENT OF REVENUE r Respondent RECOMMENDED ORDER CAS E NO A formal hearing was conducted in this proceeding before Daniel Manry, a duly designated Hearing Officer of the Division of Administrative Hearings, on August 26,. 1994, in Cocoa Beach, Florida. APPEARANCES For Petitioner: Mr. Thomas C. Birkhead, President Bidders, Inc North Atlantic Avenue Cocoa Beach, Florida For Respondent: Francisco M. Negron, Esquire Assistant Attorney General Department of Legal Affairs, Tax Section The Capitol Tallahassee, Florida STATEMENT or THE ISSUES The issues for determination in this proceeding are whether c sales and use ~ax audit was properly conducted, and, if so, whether Petitioner is liable for the tax, penalty, and interest assessed.

5 o PRELIMINARY STATEMENT Respondent assessed Petitioner for sales and use tax in the amount of $15,373.62, including penalty and interest. Petitioner denied liability and requested a formal hearing. At the formal hearing, Petitioner called six witnesses and submitted 11 exhibits. submitted two exhibits. Respondent called one witness and Testimony, exhibits, and rulings are reported in the transcript of the formal hearing filed with the undersigned on September 14, The parties timely filed proposed recommended orders on September 26, Petitioner's proposed findings of fact are addressed in the Appendix to this Recommended Order. Respondent's proposed findings of fact are accepted in substance. o 1. Petitioner isa Florida corporation wholly owned by Mr. FINDINGS OF FACT Thomas C. Birkhead, president. Petitioner owns and operates the Satellite Motel in Cocoa Beach, Florida. 1. The Audit 2. R~spuDden~ conducted a sales and use tax audit of Petitioner's business records for the period September 1, 1985, through August 31, Respondent determined a deficiency and assessed Petitioner for $15,373.62, including tax, penalty, and i~terest through May 13, The assessment is for $1,922.4i in sales tax, $7, ~ n+-e,-es... L. -L.' h'-ouah'.m;ov _13, 100 /J" '~J l amount of $3.15. Interest accrues daily in the in use tax, $2, in delinquent penalty, and $3, in 2

6 4. Respondent made a prima facie showing of the factual and legal basis for the assessment. Petitioner failed to produce credible and persuasive evidence to overcome the prima facie showing. The audit and assessment are procedurally correct. Tax, interest, and penalty are correctly computed Sampling 5. Petitioner failed to maintain adequate records of its sales and purchases. Respondent properly conducted an audit by sampling Petitioner's available books and records in accordance with Section (6 (b, Florida Statutes. 6. Although Petitioner's records of sales and purchases C were inadequate, Petitioner produced some books and records for the entire audit period. Respondent properly limited the applicable penalty to a delinquent penalty Audit Period I. Respondent is authorized to audit Petitioner for the period September I, 1985, through August 31, Effective July I, 198/, the period for which taxpayers are" subject to audi~ 1 was extended from three ~o five years. When Respondent conduc~ed the audit, Respondent was authorized to conduct an audit ""it.hin five years of the date tax was 2 due. 8. Tax owed by Petitioner for the period beginning Sept.ember 1, 1985, was not due until the 20th day of the month,following its collection. 3 Therefore, Respondent was authorized to audit. Petitioner's records anyt.ime before October 20, 1990.' ( 9. On September 13, 1990, Respondent issued a Notice Of "--- Intent To Audit Books ~~d Records of the Petitioner (the "Notice 3 "

7 _ Of Intent". The Notice Of Intent tolled the running of the five ( d', d f t t 5 R d t ltd 't ~/ year au lt perla or up 0 wo years. espon en comp eel s audit and issued its Notice Of Intent To Make Sales And Use Tax Audit Changes on May 13, Sales Tax 10. Petitioner sells snacks and beverages over the counter at the Satellite Motel. The sale of such tangible personal property is subject to sales tax. As a dealer, Petitioner must collect the applicable sales tax and remit it to Respondent. 11. During the audit period, Petitioner failed to collect and remit applicable sales tax. As a dealer, Petitioner is liable for the uncollected sales tax. Respondent properly o 3. Use Tax assessed Petitioner for $1, in'uncollected sales tax. 12. Petitioner rents televisions and linens and purchases business forms from Florida vendors. The rental and se.le of such te.ngible personal proper~y is subject to sales tax. 13. During the audit period, Petitioner failed to pay sales tax to Flo~ida business forms vendors and used the televisions, linens, and in its business at the Satellite Motel. Petitioner is liable for use tax on the use of those it.ems during the audit. period. Respondent properly assessed Petitioner for use tax in the amount of $7, CONCLUSIONS OF LAW 14. The Division of Administrative Hee.rings has jurisdiction (jover t.he subject. me.tter and parties to this proceeding. Sect.ion (1. The parties were duly noticed for the formal hearing. 4

8 15. Petitioner has the burden of proof in this proceeding. (~ Section (2. Petitioner must show by a preponderance of evidence that Respondent departed from the requirements of law or that the assessment was not supported by any reasonable hypothesis of legality. Cf. Straughn v. TucK, 354 So.2d 368, 371 (Fla (involving property tax assessments under Chapter 193; Harris v. State, Department of Revenue, 563 So.2d 97, 99 (Fla. 1st DCA 1990 (citing Strauahn for assessments under Chapter The Audit 16. Respondent made a prima facie showing of the factual and legal basis for the sales. and use tax assessment. Section (2, Florida Statutes. Petitioner failed to produce ~ credible and persuasive evidence to overcome the prima facie sho\-"ing. 17. Sampling is an appropriate method for conducting an audit when a taxpayer fails to maintain adequate records of sales and purchases. Section (6 (b, Florida Statutes. Pe~itioner failed to maintain adequate records of its sales and pu=chases. Respondent properly conducted the audit by sampling Pe~i~ioner's available books and records. 18. Respondent properly audited Petitioner's records for the period September I, 1985, through Augus~ 31, Responden~ is au~horized to conduct an audit within five years after the date "i:.ax is due. Sec"i:.ion (3, Florida Statutes. Sales ta:>: ( due until the 20th day of the following month. Section imposed on transactions conducted during Sep~ember, 1985, was not 5

9 ..._ Respondent could have audited Petitioner's records any time (-before October 20, The Notice Of Intent issued by Respondent on September 13, 1990, tolled the running of the five year audit period for up to two years. Section (3(b, Florida Statutes. Respondent completed its audit and issued its Notice Of Intent To Make Sales And Use Tax Audit Changes on May 13, 1991; well before the two year tolling period expired. 5. Sales Tax 5.01 Snacks And Beverages 20. Food and drink are generally exempt from sales tax. Section (1(a, Florida Statutes. However, food and drink sold by hotels and motels are specifically excepted from the ~general exemption for food and drink. Section (1 (a1. ( Therefore; snacks and beverages sold in the Satellite Motel are subject to sales tax. Section Petitioner sells snacks and beverages at the Satellite Motel and is a "dealer" for sales tax purposes. Sections 2:2.06(2 (e end (0, Florida S~a~utes. Sales ~ax is collectible :~om the dealer irrespec~ive of whether the dealer actually collects ~he tax from purchasers. Sections and Du~ing the audit period, Petitioner failed to collect sales tax on the sale of snacks and beverages at the Satellite ~~otel. As a dealer, Petitioner is liable for sales tax in the amount of $1, Section (2. 6

10 (J 5.02 Televisions, Linens, And Business Forms 23. Business forms sold to Petitioner are tangible personal property subject to sales tax. Section (1 (a, Florida Statutes. Unlike food and drink, business forms do not enjoy an exemption from sales tax. 24. The term "sale" includes any rental of tangible personal property. Sections (16, (1(c and (d, Florida Statutes. Unless specifically exempt, the rental of televisions and linens to Petitioner is subject to sales tax. 25. Petitioner argues that rentals of televisions and linens are purchases for resale and exempt from sales tax. Petitioner argues that the televisions and linens are "re-rented" to gue"sts of the Satellite Motel. o 26. Rentals of televisions and linens are not exempt from sales tax as purchases for resale. Petitioner rented televisions and linens for use in exercising the taxable privilege of rent~ng rooms at the Satellite Motel and not 0::::- "resale" to motel guest::s. See, Florida Hotel and Motel Association r Inc. v. Stater DeDartment of Revenue, 635 So.2d J.044 I 1047 (Fla. 1st:: DCp In Florida Hotel and Motel Association, the petitioner sought:: a declaratory stat::ement th~t items of tangible personal property placed in a guest room, including televisions and linens, are purchased for resale and exempt from sales tax. In rejecting t::hat contention, the court noted: Those jurisdictions which have addressed t::he issue have routinely held that:: furnit::ure, furnishings and consurnables purchased for use in guest rooms are purchased for use as part of the business of operating a hotel or motel, rather than for "resale" and 7

11 ,, (. accordingly, the purchases are not exempt from sales tax. [citations omitted. Florida Hotel and Motel Association, 635 So.2d at The tax imposed on the rental of televisions and linens and the tax imposed on the rental of rooms at the Satellite Motel do not constitute double taxation. In Florida Hotel and Motel o Association, the court held: We likewise agree. that no duplicate taxation occurs because the taxes at issue are levied on two separate taxable privileges. The tax imposed upon the purchase of tangible personal property used to furnish guest rooms is imposed upon the privilege of selling tangible personal property at retail, pursuant to section (1 (al.a. r Florida Statutes (1991; whereas the tax imposed upon the rental of ouest rooms is imposed upon the privil~ge of operating ~ hotel-or motel, pursuant to section ?lorida Hotel and Mote i AssoCiation, 635 So.2d at Use Tax 29. The primary function of the use tax is to complement the seles tax so as to ma}~e uniform the taxetion of transactions subject to tax. United Stetes G\~sum Company v. Green, 110 So.2d 409, 412 (FIe. 1959; Gore Newspaper Company v. Department Of Revenue, 398 So.2d 945, 946 (Fla. 4"'ch DCA Use tax applies to the use of "'cangible personal property in Florida when the purcheser can not prove "'chat applicable sales tax was collected a~c remitted by "'che vendor. c:--~ ~ 6 ~~al.ul.es. Sec"'cion (9 I Florida 30. During the audit period, Petitioner used televisions, linens, and business forms within "'che meaning of Section 8

12 -~ (21, Florida Statutes. Petitioner can not prove that applicable sales tax was paid at the time Petitioner rented or purchased those items of tangible personal property from Florida vendors. Petitioner is liable for the applicable use tax. Section ( Use tax is imposed on the cost price of each item of tangible personal property without deduction for the cost of labor, service, transportation, or similar services. Sections (4 and (1(a. The use tax due from Petitioner is properly computed based on the total charges paid by Petitioner for televisions, linens, and business forms. Respondent properly assessed use tax against Respondent in the amount of $7, C Law, RECOM:MENDATION Based upon the foregoing Findings of Fact and Conclusions of it is RECOMMENDED that Respondent enter a Final Order upholding the assessment of tax, penalty, and interest through the date of payment. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 25th day of October, i 994. nal\if"el MANRY Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida ( o Filed ~ith the Clerk of the Division of Adrninistra~ive Hearings this 25th day of October,

13 ENDNOTES Fla. 1 Ch. 87-6, Laws of Fla., as amended by Ch , Laws of 2 Sec (3, Fla. Stat. 3 Sec , Fla. Stat. 4 Sec (3, Fla. Stat. 5 Sec (3(b, Fla. Stat. 6 The manner in which use tax complements the sales tax can be illustrated in the following four examples. First, as in this proceeding, use tax applies to the use of tangible personal property ("property" inside the state when the property is sold inside the state by a Florida vendor to a Florida purchaser, and the purchaser can not prove that applicable sales tax was paid. Sec (9, Fla. Stat. Second, use tax applies to the use of property insid~ the state when the property is not sold but is manufactured or produced and used inside the state. Sees (1 (b and (4 i Gore Newspaper CompanY v. Department Of Revenue, 398 So.2d 945, 946 (Fla. 4th DCA Third, use tax applies to the use of property inside the state when the f}:'operty is sold by an out-of-state vendor to a Florida "'-_../,:l1.~rchaser, and the purchaser can not prove that the out-of-state ~endor collected and remitted sales tax eaual to or Qreater than the Florida use tax. Sees (1 (b, i , 2i2.06(4, and 2l2.06(7; D.H. Holmes Company, Ltd. v. McNamara, 486 U.S. 24, 108 S.Ct. 1619(1988; United Stal:es Gypsum Company v. Green, 110 So.2d 409, 412 (Fla Finally, use tax applies to the use of property inside the state when the property is sold by an outof-state vendor to an oul:-of-state purchaser who uses the p~operty in the other state for less than six months and can not p~ove that salee tax in an amou~~ equal to or greater than the Florida use tax was paid to the Etate in which the sale took place. Sees (l(b, (4, (6, and (7 and (8. ( 7 Petitioner may also be liable for use tax as a "dealer." The term "dealer" is defined in Section (2(d, Fla. Stat., to mean: any person who has. used in "'c.his state.. tangible personal property and who cannot prove that the tax levied by this chapter has been paid on the sale at retail. [or ~se.. of such tangible personal property. (emphasis supplied 10

14 , " CJ Petitioner used televisions, linens, and business forms and can not prove that either the sales or use tax was paid on those items. Sec (l(a, Fla. Stat., provides that use tax "shall be collectible from all dealers.. on the.. use.. in this state of tangible personal property." See also, Secs (2 and (2. A dealer who fails to collect and remit use tax must itself pay the ~ax to the state. Secs (2 and (3. APPENDIX TO RECOMMENDED ORDER, CASE NO Petitioner's Proposed Findings of Fact n.~ Accepted in substance Rejected as not supported by credible and persuasive evidence 11. Rejected as legal argument 12. Rejected as recited testimony 13. Rejected as legal argument 14. Rejected as not supported by credible and persuasive evidence 15. Rejected as not supported by credible and persuasive evidence Rejected as legal argument. 19. Rejected as not supported by credible and persuasive evidence 20. Rejected as irrelevant and imrna~erial and as reci~ed testimony 21. Rejected as irrelevant and immaterial ( 11

15 :, 1 :1:" COPIES FURNISHED: (j-:"inda Lettera, Esquire ~~/General Counsel Department of Revenue 104 Carlton Building Tallahassee, FL Larry Fuchs, Executive Director Department of Revenue 104 Carlton Building Tallahassee, FL Francisco M. Negron, Esquire Asst. Attorney General Dept. of Legal Affairs The Capitol-Tax Sec~ion Tallahassee, FL Thomas C. Birkhead, President Bidders, Inc N.1 Atlantic Avenue Cocoa Beach, Florida NOTICE OF RIGHT TO SUBMIT EXCEPTIONS: c=j1i parties have the right to submit written exceptions to this Recommended Order. All agencies allow each party at least 10 days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should contact the aqency that will issue the final order in this case concerning aqency rules on the deadline for filino exceptions to this Recommended Order. Any exceptions to this Recommended Order should be filed wi~h the agency that will issue the firial order in this case. C 12