06-001927 Department Of Business And Professional Regulation, Division Of Alcoholic Beverages And Tobacco vs. Lauderdale Copa, Inc., D/B/A The Copa Status: Closed Recommended Order on Wednesday, December 6, 2006.

Summary: Respondent failed to keep or maintain records and surcharges computed from an inventory audit that substantiates the amount due to Petitioner.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND )

PROFESSIONAL REGULATION, )

DIVISION OF ALCOHOLIC BEVERAGES )

AND TOBACCO, )

)

Petitioner, )

)

vs. ) Case No. 06-1927

)

LAUDERDALE COPA, INC., d/b/a )

THE COPA, )

)

Respondent. )

_________________________________)

RECOMMENDED ORDER

Pursuant to notice a formal hearing was held on August 4,

2006, by video teleconference with the parties appearing from

Lauderdale Lakes, Florida, before J. D. Parrish, a designated

Administrative Law Judge of the Division of Administrative

Hearings.

APPEARANCES

For Petitioner: Michael Wheeler, Esquire

Department of Business and

Professional Regulation

Northwood Centre, Suite 6

1940 North Monroe Street

Tallahassee, Florida 32399-2202

For Respondent: Gregg Bernard, pro se

Lauderdale Copa, Inc., d/b/a The Copa

Post Office Box 22961

Fort Lauderdale, Florida 33335

STATEMENT OF THE ISSUE

The issue in this case is whether the Respondent, Lauderdale

Copa, Inc., d/b/a The Copa (Respondent or The Copa) should pay an

alcoholic beverage surcharge in the amount of $18,960.48 as

alleged by the Administrative Complaint dated March 27, 2006.

The Petitioner, Department of Business and Professional

Regulation, Division of Alcoholic Beverages and Tobacco

(Petitioner or Department) claims that the surcharge is owed and

due pursuant to Sections 561.502(2) and 561.29, Florida Statutes

(2005).

PRELIMINARY STATEMENT

This case began on March 27, 2006, when the Petitioner

issued an Administrative Complaint that alleged that the

Respondent had failed to remit appropriate surcharges on

alcoholic beverages for The Copa for the period of November 1,

2002, through October 31, 2005 (the period). The Administrative

Complaint was based upon the results of an audit for the period

that had been conducted on or about January 25, 2006. The audit

concluded that The Copa owed $11,257.52 in surcharge payments,

$5,425.04 in penalties, and $2,277.92 in interest. The results

of the audit were forwarded to The Copa by certified mail which

was returned unsigned.

The Administrative Complaint was forwarded to the Respondent

by certified mail. The Respondent claimed that he did not

receive a copy of the audit report and findings until April 10,

2006. Thereafter, on May 30, 2006, the Respondent requested a

formal hearing in connection with the Administrative Complaint

and the matter was immediately forwarded to the Division of

Administrative Hearings for formal proceedings. On June 2, 2006,

the Petitioner filed a Response to Initial Order and the case was

scheduled for hearing on the first available date requested by

the party.

At the hearing, the Petitioner presented testimony from Alma

Cortez, an auditor employed by the Department; and J. Cesar

Torres, a senior tax audit administrator for the Department. The

Petitioner’s Exhibits 1 and 2 were admitted into evidence. Gregg

Bernard, owner and president of Lauderdale Copa, Inc., testified

on behalf of the Respondent. Respondent’s Exhibits 1-5 were

admitted into evidence.

Following the hearing the parties were afforded ten days

from the filing of the transcript to file Proposed Recommended

Orders. According to the docket maintained in this matter, the

transcript was not filed until September 20, 2006.

Notwithstanding that date, the parties had filed their Proposed

Recommended Orders on September 1, 2006 (the Petitioner) and

September 13, 2006 (the Respondent). The undersigned was unaware

of the transcript until September 20, 2006. On or about

October 12, 2006, the undersigned requested the original

transcript from the court reporter as it was to contain the

exhibits as an addendum. By letter entered the same date the

parties were apprised that the exhibits had not been filed. The

parties were directed to provide copies of the exhibits no later

than October 31, 2006.

The original transcript of the proceeding (together with the

exhibits) has not been filed. Petitioner’s counsel filed copies

of the exhibits on October 20, 2006. Curiously, the transcript

previously filed by the Petitioner bears the stamped ORIGINAL on

its face but is not an original transcript and did not contain

the exhibits. The Proposed Recommended Orders filed by the

parties have been considered in the preparation of this

Recommended Order.

FINDINGS OF FACT

1. The Petitioner is the state agency charged with the

responsibility of regulating the alcoholic beverage industry

within Florida. § 561.501 Fla. Stat. (2005).

2. At all times material to the allegations of this case,

the Respondent was a licensed entity authorized to sell alcoholic

beverages pursuant to its license number 16-00516, Series 4-COP.

The Copa was authorized to sell liquor, wine, and beer at its

licensed premises for on-site consumption.

3. Alcoholic beverage sales are subject to a surcharge.

§ 561.501 Fla. Stat. (2005). In addition to other sales taxes

that may be imposed on the sale of the product, an alcoholic

beverages licensee (such as the Respondent) must also collect and

remit to the Department a surcharge on the sale of the alcoholic

beverage. The amount of the surcharge remittance is computed

pursuant to the guidelines set forth in the laws and regulations.

To confirm accurate reporting and remittance of the surcharge,

the Department conducts after-the-fact audits of licensees.

4. In this case, the Department audited The Copa’s

alcoholic beverage sales for period from November 1, 2002,

through October 31, 2005 (the audit period).

5. There are two methods to review or audit the sales of

alcoholic beverages. The inventory method directs the Department

to take the beginning inventory plus purchases for the period and

subtract the ending inventory (and a spillage allowance) to

calculate the sales for the period. The calculated sales volume

is then used to derive the surcharge obligation.

6. The second method is based on the actual sales incurred

during the audit period. The sales method requires that the

licensee keep records to verify the volume of actual sales. The

surcharge is due based on the on-premise consumer’s purchase of

the alcoholic beverage at the licensed site.

7. Both of the methods described require that the licensee

keep and maintain records.

8. The inventory method is verifiable since licensees

purchase their stock from vendors also regulated by the

Department.

9. On or about October 24, 2005, Hurricane Wilma struck

Florida and crossed to the Atlantic Ocean from the west coast.

The storm caused extensive damage to the Respondent's property.

The Respondent claims that its beverage records were lost in the

storm.

10. The audit in this case used the inventory method to

compute the surcharge. By using the distributors’ sales reports

the Department calculated a surcharge owed in the amount of

$11,257.52. To that amount the Petitioner seeks interest and

penalties.

11. The Respondent does not acknowledge that any surcharge

is owed. The Respondent maintains that its inventory, records,

and package sales information (alcoholic beverages not consumed

on the premises) were lost in the storm.

12. The Department gave the Petitioner over five months to

obtain records from other sources to refute the audit findings.

As of the date of the formal hearing in this case, the Respondent

did not have any records to refute the audit findings.

CONCLUSIONS OF LAW

13. The Division of Administrative Hearings has

jurisdiction over the parties to, and the subject matter of,

these proceedings. § 120.57(1), Fla. Stat. (2006).

14. The Petitioner bears the burden of proof in this matter

to establish that a surcharge for the sale of alcoholic beverages

is owed by the Respondent. See Department of Banking and

Finance, Division of Securities and Investor Protection v.

Osborne Stern and Company , 670 So. 2d 932 (Fla. 1996); and

Florida Department of Transportation v. J.W.C. Company, Inc. , 396

So. 2d 778 (Fla. 1st DCA 1981). It has met that burden.

15. Section 561.501(1), Florida Statutes (2005) imposes a

surcharge on alcoholic beverages sold at retail for consumption

on the licensed premises. That provision states:

(1) Notwithstanding s. 561.50 or any other

provision of the Beverage Law, a surcharge of

3.34 cents is imposed upon each ounce of

liquor and each 4 ounces of wine, a surcharge

of 2 cents is imposed on each 12 ounces of

cider, and a surcharge of 1.34 cents is

imposed on each 12 ounces of beer sold at

retail for consumption on premises licensed

by the division as an alcoholic beverage

vendor. However, the surcharges imposed

under this subsection need not be paid upon

such beverages when they are sold by an

organization that is licensed by the division

under s. 561.422 or s. 565.02(4) as an

alcoholic beverage vendor and that is

determined by the Internal Revenue Service to

be currently exempt from federal income tax

under s. 501(c)(3), (4), (5), (6), (7), (8),

or (19) of the Internal Revenue Code of 1986,

as amended.

16. Section 561.501(2), Florida Statutes (2005), requires

that a licensee report and pay the alcoholic beverages surcharge

in the month following the sale of the beverage. If it is

determined the licensee remitted an incorrect surcharge amount,

the Department is authorized to assess a late penalty on the

unpaid surcharge amount. Section 561.501(2), Florida Statutes

(2005), provides:

(2) The vendor shall report and remit

payments to the division each month by the

15th of the month following the month in

which the surcharges are imposed. For

purposes of compensating the retailer for the

keeping of prescribed records and the proper

accounting and remitting of surcharges

imposed under this section, the retailer

shall be allowed to deduct from the payment

due the state 1 percent of the amount of the

surcharge due. Retail records shall be kept

on the quantities of all liquor, wine, and

beer purchased, inventories, and sales.

However, a collection allowance is not

allowed on any collections that are not

timely remitted. If by the 20th of the month

following the month in which the surcharges

are imposed, reports and remittances are not

made, the division shall assess a late

penalty in the amount of 10 percent of the

amount due per month for each 30 days, or

fraction thereof, after the 20th of the

month, not to exceed a total penalty of 50

percent, in the aggregate, of any unpaid

surcharges. The division shall establish, by

rule, the required reporting, collection, and

accounting procedures. Records must be

maintained for 3 years. Failure to

accurately and timely remit surcharges

imposed under this section is a violation of

the Beverage Law.

17. Florida Administrative Code Rule 61A-4.063(8) also

requires that licensees keep complete and accurate records of the

quantities of alcoholic beverages purchased, sold, and

inventoried on the licensed premises. The rule also mandates

that licensee records be kept and maintained for a period of

three years.

18. Section 561.501(3), Florida Statutes (2005), authorizes

the Petitioner to compromise a licensee’s liability for the

surcharge if there is doubt as to the liability for, or

collectibility of, the tax. The Petitioner may also compromise a

taxpayer’s liability for penalties if the noncompliance is due to

reasonable cause and not to willful negligence, willful neglect,

or fraud. Section 561.501(3), Florida Statutes (2005), states:

(3)(a) The division may compromise a

taxpayer's liability for the surcharge

imposed by this section upon the grounds of

doubt as to liability for or collectibility

of such tax. A taxpayer's liability for

penalties as prescribed by this section may

be settled or compromised if the division

finds that the noncompliance is due to

reasonable cause and not to willful

negligence, willful neglect, or fraud. The

division shall maintain records of all

compromises, and the records must state the

basis for the compromise.

(b) The division may enter into agreements

for scheduling payments of taxes, interest,

and penalties prescribed in this section.

(c) The division shall establish by rule

guidelines and procedures for administering

this section.

19. The Respondent did not have any records to refute the

accuracy of the audit findings. The comments of the Respondent

in connection with The Copa’s inability to obtain copies of

records or to secure records (in anticipation of the storm) have

not been deemed credible or persuasive.

20. Section 561.501(4) and (5), Florida Statutes (2005),

provide:

(4) If any vendor fails to remit the

surcharge, or any portion thereof, by the

20th of the month following the month in

which the surcharges are imposed, there shall

be added to the amount due interest at the

rate of 1 percent per month of the amount due

from the date due until paid. Interest on

the delinquent tax shall be calculated

beginning on the 21st day of the month

following the month for which the surcharge

is due.

(5) All penalties and interest imposed by

this section are payable to and collectible

by the division in the same manner as if they

were a part of the tax imposed. The division

may settle or compromise any such interest or

penalty under paragraph (3)(a).

21. According to the audited records of third-party

vendors, from whom the Respondent purchased alcoholic beverages,

The Copa owed a surcharge for the audit period. The Respondent

has not demonstrated that it paid any of the claimed surcharge

for the audit period or that the surcharge now claimed is

incorrect.

22. In this case, the Department has demonstrated by clear

and convincing evidence that the audit calculated an unpaid

surcharge in the amount of $11,257.52. The statutory penalty on

that amount is $5,425.04. The interest on the unpaid surcharge

is $2,277.92. The total surcharge liability owed by the

Respondent is $18,960.48.

23. The Respondent has, however, established that its

ability to remit the surcharge liability has been compromised

since it has not re-opened following the hurricane. Should the

Respondent accept responsibility for the surcharge liability,

some accommodation or compromise for the repayment may be

appropriate, given the condition of the business entity.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is RECOMMENDED that the Department of Business and

Professional Regulation, Division of Alcoholic Beverages and

Tobacco, enter a Final Order sustaining the surcharge liability

in the amount of $18,960.48.

DONE AND ENTERED this 6th day of December, 2006, in

Tallahassee, Leon County, Florida.

S

___________________________________

J. D. Parrish

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone] SUNCOM 278-9675

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 6th day of December, 2006.

COPIES FURNISHED :

Gregg Bernard

Lauderdale Copa, Inc., d/b/a The Copa

Post Office Box 22961

Fort Lauderdale, Florida 33335

Michael J. Wheeler, Esquire

Department of Business and

Professional Regulation

Northwood Centre, Suite 6

1940 North Monroe Street

Tallahassee, Florida 32399-2202

Steven M. Hougland, Ph.D., Director

Division of Alcoholic Beverages

And Tobacco

Department of Business and

Professional Regulation

Northwood Centre

1940 North Monroe Street

Tallahassee, Florida 32399-0792

Josefina Tamayo, General Counsel

Department of Business and

Professional Regulation

Northwood Centre

1940 North Monroe Street

Tallahassee, Florida 32399-0792

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within 15

days from the date of this Recommended Order. Any exceptions to

this Recommended Order should be filed with the agency that will

issue the Final Order in this case.