11-004681 Astrid Sarmentero As President For Bella Donna Couture, Inc. vs. Department Of Revenue Status: Closed Recommended Order on Tuesday, November 27, 2012.

Summary: Respondent met prima facie burden regarding sales tax assessment against taxpayer. Petitioner failed to carry burden of persuasion showing that assessment was incorrect. Respondent proved Petitioner's willful avoidance of Taxpayer's sales tax obligation.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

ASTRID SARMENTERO AS PRESIDENT ) )

FOR BELLA DONNA COUTURE, INC., )

)

Petitioner, )

vs. ) Case No. 11-4681

)

DEPARTMENT OF REVENUE, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, a hearing was conducted in this case

pursuant to sections 120.569 and 120.57(1), Florida Statutes

(2011), 1 / before Cathy M. Sellers, an Administrative Law Judge of

the Division of Administrative Hearings, on November 22, 2011,

April 25, 2012, and July 30, 2012, by video teleconference at

sites in Miami and Tallahassee, Florida.

APPEARANCES

For Petitioner: Carrol Y. Cherry, Esquire

Office of the Attorney General

The Capitol, PL-01

Revenue Litigation Bureau

Tallahassee, Florida 32399

For Respondent: Carlos M. Samlut

Samlut & Company

Mezzanine – Suite 200

550 Biltmore Way

Coral Gables, Florida 33134

STATEMENT OF THE ISSUE

Whether Petitioner, as President of Bella Donna Couture,

Inc., is liable for a penalty equal to twice the total amount of

the sales and use tax owed by that entity to the State of

Florida.

PRELIMINARY STATEMENT

By agency action letter da ted June 20, 20 11, Respondent,

Florida Departme nt of Revenue, notifi ed Petition er, Astrid

Sarmentero, th at it was assess ing a penalty in the amount of

$18,345.14 against her, as the Presid ent of Bella Do nna Couture,

Inc., for that entity's failure to remit sale s taxes to the State

of Florida. Pe titioner timely requested a hearin g pursuant to

sections 120.569 and 12 0.57(1) and the matter was refe rred to the

Division of Ad ministrative Hearings for assignme nt of an

Administrative Law Judge an d conduct of the hearing.

Mr. Carlos M. Sa mlut, Certifie d Public Accountant, was

accepted as a qu alified repres entative for Petiti oner pursuant to

Florida Admini strative Code Rule 28-106.106.

The final hearin g was held on No vember 22, 2011 , February 8,

2012, and July 30, 2011 . Petitioner presen ted the test imony of

Astrid Sarmentero, So nia Kings, and Genevi eve Cockfield, and

offered Petiti oner's Exhibits 1 throug h 22 for admi ssion into

evidence. Petitioner's Exhibits 2 through 12 , 15, 16, 18 and 19

were admitted into evidence without obje ction; Petitioner's

Exhibits 1, 13, 14, 17, and 20 through 22 were admitted into

evidence over objection. Respon dent presented th e testimony of

Barbara Chin and Merc edes Fajardo, and of fered Resp ondent's

Exhibits 1 through 17 for admission in to evidence. Respondent's

Exhibits 1 through 5, 7, and 9 through 17 were admitted into

evidence without object ion; Respondent's Ex hibits 6 and 8 were

admitted into evidence over objection. Additional ly, Respondent's

First Requests for Admi ssion were admitted in to evidence pursuant

to Florida Rule of Ci vil Procedur e 1.370(a). 2 /

Volumes I and II of the four-vol ume Transcript were filed on

May 15, 2012, and May 22, 2012, re spectively, and volumes III and

IV were filed on Augu st 16, 2012. The part ies were given until

August 27, 2012, to fi le Proposed Recommende d Orders. Petitioner

requested an extension of time to file its Proposed Recommended

Order due to circumstan ces beyond its contro l (i.e., the impacts

of Tropical Storm Isaac) so an extens ion of time wa s granted until

September 4, 2012. The parties ti mely filed th eir Proposed

Recommended Orde rs on September 4, 2012; both were considered in

preparing this Reco mmended Or der.

FINDINGS OF FACT

I. The Parties

1. Respondent is the agency charged with administering the

revenue laws of the State of Florida, including chapter 212,

which imposes and authorizes the collection of sales and use tax

in Florida.

2. Petitioner was President of Bella Donna Couture, Inc.

("Taxpayer"), a women's clothing store formerly located at 5819

Sunset Drive, South Miami, Florida.

3. Taxpayer is registered with Respondent as a dealer

pursuant to section 212.18 and was issued Sales and Use Tax

Certificate of Registration Number 23-8012167329-8.

II. Events Giving Rise to the Notice of Assessment

4. Taxpayer did not remit sales tax for November 2003,

January 2004, June 2005, September 2005, January 2006, July

2006, September 2006, and November 2006, and so was delinquent

in its statutory obligation to remit sales tax for these

reporting periods.

5. To collect these outstanding tax liabilities, on

January 17, 2007, Respondent issued Warrant No. 40490. The

warrant stated that Taxpayer owed $11,471.59 in taxes, $2,060.00

in penalties, $1,623.22 in interest, and a filing fee of $20.00,

for a total liability of $15,174.81. The warrant was recorded

in the public records of Miami-Dade County on January 24, 2007.

6. In an effort to compromise and resolve Taxpayer's

outstanding tax liabilities, on April 25, 2008, Respondent

entered into a Stipulated Time Payment Agreement ("STPA") with

Taxpayer. The STPA was executed by Petitioner, as Taxpayer's

President. 3 / Under the STPA, Taxpayer committed to pay

$13,526.72, consisting of $9,078.36 in taxes, $1,220.70 in

penalties, $3,187.66 in interest, and $40.00 in fees. The STPA

established an amortization schedule under which Taxpayer would

pay a specified amount per month for a 13-month period.

7. Pursuant to the STPA's terms, Taxpayer, by entering

into the STPA, waived any and all rights to challenge the taxes

and other liabilities assessed under the warrant giving rise to

the STPA. Other key terms were that interest accrued at a rate

of 12% per annum until the tax liability was paid; that Taxpayer

agreed to meet each payment term on the amortization schedule;

and that the STPA would become void if Taxpayer failed to follow

the payment terms, file all tax returns that became due, or

remit all taxes that became due and payable. The STPA further

provided that Respondent was authorized to assess the

responsible corporate officer a 200% penalty for failure to pay

the taxes due.

8. In accordance with the STPA's terms, Taxpayer made a

$2,000 downpayment and three $450 monthly payments, for a total

payment of $3,350.00.

9. However, Taxpayer failed to make the stipulated monthly

payment due on August 25, 2008. Thus, pursuant to the STPA's

terms, it became void, and all taxes, penalties, interest, and

fees owed under Warrant No. 40490 became due and payable as of

that date.

10. Section 213.75(2) establishes the order of priority

for applying payments toward outstanding tax and other

liabilities when a warrant has been filed and recorded.

Specifically, payments are applied in the following order, with

any remaining amounts applied to the subsequent obligation: (1)

costs of recording the warrant; (2) administrative collection

processing fee; (3) accrued interest; (4) accrued penalty; and

(5) taxes due.

11. Once Taxpayer breached the STPA, all payments made

under the STPA were applied as payments on Warrant No. 40490 in

accordance with section 213.75(2).

12. After the $3,350.00 paid under the STPA was applied

toward Warrant No. 40490, and $434.44 was paid on the warrant

from a bank levy, Taxpayer continued to owe $9,172.57 in taxes,

as well as interest and penalties from its outstanding

obligations for November 2003, January 2004, June 2005,

September 2005, January 2006, July 2006, September 2006, and

November 2006. Pursuant to the terms of the warrant, interest

on the amount of taxes due continued to accrue at a rate of 12%

per annum.

13. Taxpayer subsequently failed to remit its sales tax

for December 2008. In response, Respondent levied Taxpayer's

MetroBank account in the amount of $4,000.00 on February 18,

2009. Portions of this levy were applied toward previously-

issued Warrant No. 110461 and toward Notices of Liability for

outstanding taxes due for the December 2008 and September 2008

sales tax collection periods.

14. In early 2009, Taxpayer and Respondent attempted to

negotiate another STPA to again compromise the amount of taxes,

interest, penalties, and fees that Taxpayer owed for the

November 2003, January 2004, September 2005, January 2006, July

2006, September 2006, and November 2006 sales tax collection

periods. However, the parties were unable to reach agreement,

so Respondent continued its collection efforts.

15. In March 2011, Respondent again attempted to work with

Taxpayer to resolve its outstanding tax and other liabilities.

To that end, Barbara Chin, a revenue specialist with Respondent,

attempted to contact Petitioner by telephone. Her telephone

messages went unanswered, so on March 22, 2011, Ms. Chin sent

Petitioner a Demand to Appear, informing Petitioner that an

appointment had been set with Respondent for April 4, 2011, for

her to discuss Taxpayer's outstanding liabilities. The Demand

to Appear specifically informed Petitioner that failure to

comply with the letter would result in issuance of a tax warrant

and any other legal action Respondent deemed necessary to

collect the outstanding taxes. Petitioner failed to appear, so

Ms. Chin made a follow-up telephone call to Petitioner, which

also went unanswered.

16. Taxpayer failed to remit its sales tax or file a

return for April 2011. In response, Respondent issued Warrant

No. 219580, for the amount of $1,500.00 due in taxes. The

warrant was recorded in the Miami-Dade County public records on

June 14, 2011.

17. Petitioner subsequently contacted Ms. Chin to discuss

Taxpayer's outstanding liabilities. At this time, Petitioner

informed Ms. Chin that she was going to file for bankruptcy of

Taxpayer.

18. In response, Ms. Chin sent a letter to the NAFH Bank,

with which Taxpayer had an account, freezing the transfer of

Taxpayer's credits, debts, and personal property in the bank's

control.

19. On June 6, 2011, Petitioner sent Respondent a

completed Closing or Sale of Business form, dated May 30, 2011,

indicating that Taxpayer's business had been closed.

20. Ms. Chin made two site visits to Taxpayer's location

in or about May 2011. On her first visit, Ms. Chin discovered

that a business bearing the name "Alexis Nicolette Design Studio

and Boutique" was operating at this location, and that

Petitioner was working there. Ms. Chin informed Petitioner that

this entity needed to obtain its own sales tax number.

21. On Ms. Chin's second visit, Petitioner showed her a

certificate of registration for Alexis Nicolette Design Studio

and Boutique having the same sales tax number but showing a

different business location. 4 / Ms. Chin again informed

Petitioner that the owner of this entity needed to obtain a new

sales tax number for the entity for the new location.

22. Ms. Chin reviewed the Articles of Incorporation for

Alexis Nicolette Design Studio and Boutique; this document

showed this entity's business address as being the same as

Taxpayer's address.

23. Ms. Chin surmised that Petitioner was attempting to

avoid Taxpayer's sales tax liabilities and obligations by

operating Taxpayer's business under a new name.

24. Respondent sent Petitioner a Notice of Assessment

("NOA") dated June 20, 2011, setting forth Taxpayer's

outstanding tax liabilities and notifying her that Respondent

was personally assessing a penalty against her for double the

amount of tax owed by the Taxpayer. The NOA included the taxes

owed under Warrant Nos. 40490 and 219580, and specifically

stated that the penalty being assessed was for the period from

November 2003 through April 2011.

25. It is undisputed that between November 2003 and April

2011, Petitioner was the President of Taxpayer, and thus was the

person having administrative control over the collection and

payment of sales tax by Taxpayer for purposes of section 213.29.

III. Petitioner's Defenses Against the Notice of Assessment

26. The parties disagree on the amount of taxes that

Taxpayer owes. Petitioner claims that Taxpayer owes

approximately $194.00 in taxes, while Respondent claims that

Taxpayer owes $9,182.60 in taxes.

27. Petitioner claims that pursuant to section 213.29(1),

Respondent incorrectly applied Taxpayer's payments made under

the STPA, and that all payments Taxpayer made should have been

applied first toward outstanding taxes, then interest, then

penalties, then toward any applicable fees. This argument is

the linchpin of Petitioner's position that the assessments in

the June 20, 2011, NOA are incorrect.

28. Petitioner also asserts that the April 2008 STPA is

defective because it does not contain a detailed amortization

schedule.

29. Petitioner further claims that subsections 95.091(2)

and (3)(a)1.a. time-bar Respondent from bringing an action to

collect taxes that were due before June 21, 2006.

30. Finally, Petitioner argues that under any

circumstances, Respondent did not establish that she sought to

willfully evade or defeat Taxpayer's tax liabilities, so she

cannot be held personally liable for the penalty assessed under

the NOA.

IV. Findings of Ultimate Fact

31. In this proceeding, Respondent has the initial burden

under section 120.80(14)(b)2., to establish a prima facie case

showing that an assessment was made against Taxpayer, and that

the assessment was factually and legally correct. Once

Respondent meets this burden, the ultimate burden of persuasion

shifts to Petitioner to prove, by a preponderance of the

evidence, that Respondent's assessment is incorrect, departs

from the requirements of law, or is not supported by any

reasonable hypothesis of legality.

32. Upon consideration of the credible and persuasive

evidence in the record, it is determined that Respondent met its

prima facie burden and that Petitioner failed to meet its

ultimate burden of persuasion in this proceeding.

33. Petitioner's position that all payments made by

Taxpayer under the STPA, as well as payments made toward other

warrants, should first have been applied toward its tax

liability lacks merit. That argument may have had force if

warrants against Taxpayer had not been filed and recorded.

However, in this case, by the time Taxpayer began making

payments toward its outstanding tax liabilities, those

liabilities were the subject of Warrant No. 40490 and other

warrants. Once Taxpayer breached the STPA, it became void and

all liabilities under Warrant No. 40490 became immediately due.

The payments under the STPA were applied to Warrant No. 40490,

and other payments toward liabilities not addressed in the STPA

made were applied to Warrant No. 40490 and other outstanding

warrants, all in accordance with section 213.75(2). Thus, the

payments were allocated first toward fees, then penalties, then

interest, and, finally, taxes. Respondent established the

correctness of amounts assessed, and Petitioner did not show

that Respondent incorrectly applied the payments pursuant to

section 213.75(2) or that the taxes and other liabilities set

forth in the June 20, 2011, NOA were inaccurate.

34. Petitioner's argument that the STPA was "defective" as

lacking a detailed amortization schedule also lacks merit. The

STPA contained a "Stipulation Amortization Table" that

established a detailed 13-month repayment schedule specifying

the date on which each payment was due and the specific amount

due for each payment. 5 /

35. The NOA is not time-barred by section 95.091(2). That

statute imposes a five-year limitation period for filing an

action to collect taxes if a lien to secure the payment is not

provided by law. However, this proceeding was brought against

Petitioner to impose penalties for willful nonpayment of

Taxpayer's tax liabilities; it is not an action against Taxpayer

to collect taxes. Thus, by its plain terms, section 95.091(2)

does not apply to this proceeding.

36. Section 95.091(3)(a)1.a. also does not time-bar the

NOA. That statute authorizes Respondent to determine and assess

the amount of tax, penalty, or interest with respect to sales

tax within three years after the date that the tax is due, any

return with respect to such tax is due, or such return is filed.

Here, Respondent filed warrants and assessments as far back as

January 2003 to collect taxes owed by Taxpayer; all were filed

well within any applicable three-year limitation period.

37. The greater weight of the evidence also supports the

determination that Petitioner, as the corporate officer required

to collect and pay sales tax on behalf of Taxpayer, willfully

attempted to evade or defeat payment of Taxpayer's tax

obligations. Of particular significance is Petitioner's lack of

responsiveness to Ms. Chin's multiple attempts to communicate

with her to resolve Taxpayer's obligations, and her evasiveness

regarding the relationship between Taxpayer and the business

entity operating under a new name at Taxpayer's business address

and using Taxpayer's sales tax collection number. The evidence

gives rise to the inference that Petitioner was attempting to

operate the same business under a new name to evade or defeat

Taxpayer's outstanding tax liabilities. 6 /

CONCLUSIONS OF LAW

38. The Division of Administrative Hearings has

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

proceeding pursuant to sections 120.569 and 120.57(1).

39. Every person who engages in the business of selling

tangible personal property at retail exercises privilege that is

taxable under Florida law. See § 212.05, Fla. Stat. Taxes

imposed pursuant to chapter 212 become state funds at the moment

of collection and are required to be remitted on a monthly

basis. Failure to timely remit sales taxes owed renders them

delinquent. See § 212.15(1), Fla. Stat.

40. In this proceeding, Respondent has the initial burden

to show that an assessment was made against Taxpayer, and that

the factual and legal grounds for the assessment are correct.

See § 120.80(14)(b)2. The burden of persuasion then shifts to

Petitioner, who must prove, by a preponderance of the evidence,

that the factual and legal bases for Respondent's assessment

were incorrect or unreasonable. See Latin Express Serv. v.

Dep't of Revenue , 687 So. 2d 1342 (Fla. 1st DCA 1997); see also

Southern Bell Tel. and Tel. Co. v. Broward County , 665 So. 2d

272 (Fla. 4th DCA 1995) (taxpayer challenging an assessment has

burden to show it could not be sustained under any reasonable

hypothesis of legal assessment).

41. Section 213.21 authorizes Respondent to enter into

STPAs to compromise the amount of taxes, interest, and penalties

due and to schedule the repayment of these obligations.

42. To implement this authority, Respondent has adopted

rule 12-17.008 which sets forth the specific items that must be

included in STPAs. Among these is that the STPA must address is

how Respondent "will allocate each payment to reduce the

outstanding debt of tax, penalty, or interest as provided by

section 213.75 ." Fla. Admin. Code R. 12-17.008(1)(e)(emphasis

added).

43. Section 213.75(2) provides:

If a warrant or lien has been filed and

recorded by the department , a payment shall

be applied in priority order as follows:

(a) First, against the costs to record the

warrant or lien, if any;

(b) The remaining amount, if any, shall be

credited against the administrative

collection processing fee;

(c) The remaining amount, if any, shall be

applied to accrued interest;

(d) The remaining amount, if any, shall be

credited against any accrued penalty; and

(e) The remaining amount, if any, shall be

credited to any tax due.

§ 213.75(2), Fla. Stat. (emphasis added).

44. Rule 12-17.008(3)(b) further provides that execution

of an STPA does not invalidate or withdraw a warrant covered by

the STPA, and rule 12-17.008(3)(c) states that an STPA becomes

void if the taxpayer fails to comply with its conditions, submit

all tax returns, and pay all taxes in full that become due

during the term of the STPA.

45. As previously discussed, Respondent demonstrated, by a

preponderance of the evidence, that Taxpayer owed taxes,

interest, and penalties for nonpayment of sales tax for numerous

reporting periods. Respondent issued and recorded several

warrants in an effort to collect on the outstanding taxes.

Respondent established the correctness of the assessed amounts,

and Petitioner did not show that these amounts were incorrect,

departed from the requirements of law, or were unsupported by

any reasonable hypothesis of legality.

46. Section 213.29 provides:

Any person who is required to collect,

truthfully account for, and pay over any tax

enumerated in chapter 201, chapter 206, or

chapter 212 and who willfully fails to

collect such tax or truthfully account for

and pay over such tax or willfully attempts

in any manner to evade or defeat such tax or

the payment thereof; or any officer or

director of a corporation who has

administrative control over the collection

and payment of such tax and who willfully

directs any employee of the corporation to

fail to collect or pay over, evade, defeat,

or truthfully account for such tax shall, in

addition to other penalties provided by law,

be liable to a penalty equal to twice the

total amount of the tax evaded or not

accounted for or paid over. The filing of a

protest based upon doubt as to liability or

collection of a tax shall not be determined

to be an attempt to evade tax under this

section. The penalty imposed hereunder

shall be in addition to any other penalty

imposed or that should have been imposed

under the revenue laws of this state, but

shall be abated to the extent that the tax

is paid. Any penalty may be compromised by

the executive director of the Department of

Revenue as set forth in s. 213.21. An

assessment of penalty made pursuant to this

section shall be deemed prima facie correct

in any judicial or quasi-judicial proceeding

brought to collect this penalty.

47. Respondent presented evidence sufficient to establish

Petitioner's willful attempt to evade or defeat her

responsibility, as President of Taxpayer, to collect and pay

sale tax on behalf of Taxpayer; Petitioner did not present

sufficiently persuasive evidence to counter this showing.

48. Accordingly, for the reasons set forth herein and

pursuant to the foregoing statutes and rules, it is determined

that Petitioner, as President of Taxpayer, is liable to

Respondent for a penalty of $18,345.14, which is twice the total

amount of the sales and use tax owed by Taxpayer to the State of

Florida.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions

of Law, it is hereby RECOMMENDED that Respondent, the Department

of Revenue, enter a Final Order determining that Petitioner,

Astrid Sarmentero, is liable for to Respondent for a penalty of

$18,345.14.

DONE AND ENTERED this 27th day of November, 2012 , in

Tallahassee, Leon County, Florida.

S

CATHY M. SELLERS

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone]

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 27th day of November, 2012.

ENDNOTES

1/ Unless otherwise stated, all references are to 2011 Florida

Statutes.

2 / Petitioner failed to timely respond to Respondent's First

Requests for Admission, which therefore were deemed admitted.

3/ Petitioner testified that she entered into the STPA under the

threat of her business being closed, and argues that under these

circumstances, she should not be strictly held to the terms of

the April 2008 STPA——specifically, with respect to the provision

that establishes the priority order for payments pursuant to

statute in the event of Taxpayer's breach of the STPA. However,

the evidence does not show that Petitioner was forced to execute

the STPA; to the contrary, the evidence establishes that

Petitioner chose to enter into the STPA——albeit under less than

ideal circumstances——in an effort to save her business.

4/ During Ms. Chin's visits to the business location, Petitioner

was the only person working at the business.

5/ The STPA in this case consists of a completed form agreement.

Respondent has adopted the form, Form DR-68, as a rule, to

implement rule 12-17.007, Florida Administrative Code, which

prescribes the requirements for STPAs. Petitioner has not

challenged either rule 12-17.007 or Form DR-68 pursuant to

section 120.56.

6/ Further, by failing to timely respond to Respondent's First

Requests for Admission, Petitioner is deemed to have admitted

the statement that "Petitioner willfully did not remit sales and

use tax to the Department."

COPIES FURNISHED

:

Joseph Mellichamp, Esquire

Office of the Attorney General

The Capitol, PL-01

Tallahassee, Florida 32399

Carlos M. Samlut

550 Biltmore Way

Suite 200

Coral Gables, Florida 33134

Carrol Y. Cherry, Esquire

Office of the Attorney General

The Capitol, Plaza Level 01

Revenue Litigation Bureau

Tallahassee, Florida 32399

Nancy Terrel, General Counsel

Department of Revenue

Post Office Box 6668

Tallahassee, Florida 32314-6668

Marshall Stranburg, Interim Executive Director

Department of Revenue

Post Office Box 6668

Tallahassee, Florida 32314-6668

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.