88-005236 Florida Hi-Lift Corporation vs. Department Of Revenue Status: Closed Recommended Order on Friday, April 7, 1989.

Summary: Sales tax on transportation not chargeable when customer take delivery for plant even though owner transports leased equipment to job site.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FLORIDA HIGH LIFT, )

)

Petitioner, )

)

vs. ) CASE NO. 88-5236

)

DEPARTMENT OF REVENUE, )

)

Respondent. )

___________________________________)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly

designated Hearing Officer, K. N. Ayers, held a public hearing in the above

styled case on February 21, 1989 at Tampa, Florida

APPEARANCES

For Petitioner: Richard C. Ballak, Esquire

101 North Monroe Street

Tallahassee, Florida 32301

For Respondent: Lee R. Rohe, Esquire and

Lealand L. McCharen, Esquire

The Capitol

Tallahassee, Florida 32399-1050

ISSUES

By letter dated September 27, 1988, Florida Hi-Lift, Petitioner, requested

an administrative hearing to contest the decision by the Department of Revenue

that Florida Hi-Lift owes sales taxes in excess of $15,000 plus penalties and

interest on amount collected by Florida Hi-Lift from customers as charges for

transporting equipment leased by Florida Hi-Lift to these customers.

At the commencement of the hearing, the parties stipulated to the first

four findings of fact below.

Thereafter Petitioner called one witness, Respondent called one witness and

nine exhibits were admitted into evidence. Since there is no dispute regarding

the factual issues in this case, proposed findings of both parties are accepted.

FINDINGS OF FACT

1. Florida Hi-Lift, Petitioner, is in the business of selling, leasing,

repairing and transporting aerial lift equipment.

2. Petitioner enters into rental agreements with customers who rent

specific equipment F.O.B. Petitioner's location.

3. The lease agreement sets a fixed price for the rental of the equipment

and allows the customer to pick up the equipment with the customer's own

conveyance, hire a carrier to pick up the equipment, or request the equipment be

picked up and delivered by Petitioner's conveyance. The customer pays for the

transportation of the equipment by whichever method of transportation is

selected. The rental charge is unaffected by the mode of transportation

selected by the lessee.

4. Petitioner charged the customer sales tax on the rental of the

equipment but not on the charges for transporting the equipment with

Petitioner's conveyances.

5. The audit here involved covers the period February 1, 1984, through

January 31, 1987, and assesses a total tax, penalty and interest through

September 11, 1987 of $23,727.59 with interest at $5.29 per day until paid

(Exhibit 2). The major portion of this tax and the only part contested herein

is assessed on Petitioner's charges to its lessees for transportation of the

equipment.

6. The equipment rental contract/invoice (Exhibit 9) under charges lists

options, Damage Waiver nine per cent, Fuel, Delivery Pickup, and Other, with tax

which Petitioner computed only on the rental charge for the equipment.

7. The Damage Waiver charge of nine percent was based on the rental price

but no evidence was submitted regarding the basis for this charge. Regardless,

no sales tax was added to this charge and a sales tax on this charge is not an

issue.

8. Petitioner's sole witness, the auditor who initially assessed the sales

tax on the transportation charge, testified that his decision to assess sales

tax for this charge was influenced by the fact that charges for leasing and

transportation were included on the same invoice.

9. Petitioner has a separate liability policy to cover equipment being

transported on Petitioner's vehicles apart from the coverage of the equipment

while not in transit.

CONCLUSIONS OF LAW

10. The Division of Administrative Hearings has jurisdiction over the

parties to, and the subject matter of, these proceedings.

11. Section 212.05, Florida Statutes (1985), provides in pertinent part:

It is hereby declared to be the legislative

intent that every person is exercising a

taxable privilege who engages in the business

of selling tangible personal property at

retail in this state, or who rents or

furnishes any of the things or services

taxable under this Chapter, or who stores for

use or consumption in this state any item of

tangible personal property as defined herein

and who leases or rents such property within

the state.

(1) For the exercise of such privilege, a

tax is levied on each transaction or incident,

which tax is due and payable as follows:

* * *

(d) At the rate of 5 per cent of the lease

or rental price paid by a lessee or rentee or

contracted or agreed to be paid by a lessee or

rentee, to the owner of the tangible personal

property.

12. Section 212.02(4) Florida Statutes (1985), defines sales price as:

. . . the total amount paid for tangible personal

property, including any services that are part

of the sale, valued in money, whether paid in

money or otherwise, and includes any amount

for which credit is given to the purchaser by

the seller, without any deduction therefrom on

account of the cost of property sold, the cost

of materials used, labor or service cost,

interest charged, losses or any other expense

whatsoever. "Sales price" also includes the

consideration for a transaction which requires

both labor and material to alter, remodel,

maintain, adjust or repair tangible, personal

property.

13. Rule 12A-1.045, Florida Administrative Code, (formerly 12A-1.45)

provides Respondent's interpretation of Chapter 212 as it relates to

transportation charges. This rules provides:

(1) In those instances where the seller

contracts to deliver tangible personal

property to some designated place or is

obligated under the contract to pay

transportation charges to some designated

place the transportation services are

rendered to the seller and the taxable

selling price of the tangible personal

property so transported must include the

amount of the transportation charge.

(2) If the seller contracts to sell

tangible personal property f.o.b. origin, the

title to the property passes to the buyer and

the buyer pays the transportation charges,

the transportation services are rendered to

the buyer and are not a part of the taxable

selling price. However, where the

transportation charges are billed by the

seller but documentation is inadequate to

establish the point at which the title passes

to the buyer, such charges shall be

considered a part of the taxable selling

price.

(3) When the purchaser of tangible

personal property pays delivery or

transportation charges thereon direct to the

carrier and does not deduct same from the

amount due the seller, such delivery or

transportation charges are exempt.

14. Respondent contends that since there was no sale, title never passed

to the buyer but rather there was transfer of possession only; and the

"documentation is inadequate" to establish the point at which title passes to

the buyer because title does not actually transfer.

15. This somewhat ingenious approach seems to take the position that

although the lease provided possession by lessee was taken at lessor's premises,

if the lessor subsequently transported the equipment under contract to the

lessee, then the lessor did not transfer possession until the equipment reached

the lessee's premises or job site and was unloaded from the lessor's conveyance.

16. In this connection, it is perhaps significant that the Uniform

Commercial Code in Section 672.319, Florida Statutes, (1985) provides:

(1) Unless otherwise agreed the term

"F.O.B." (which means "free on board") at a

named place, even though used only in

connection with the stated price, is a

delivery term under which:

(a) When the term is "F.O.B. the place of

shipment," the seller must at that place ship

the goods in the manner provided in this

Chapter (s. 672.504) and bear the risk and

expense of putting them into the possession

of the carrier;

(b) When the term is "F.O.B. the place of

destination," the seller must at his own

expense and risk transfer the goods to that

place and there tender delivery of them in

the manner provided in this Chapter (s.

672.503)

17. Here there is no dispute that the terms of the lease provide that the

lease is f.o.b lessor's premises and, therefore, possession is transferred at

lessor's place of business. When the lessee contracts with the Petitioner to

transport the leased equipment to lessee's job site, Petitioner is performing

the service as a contract carrier employed by the lessee who at this point in

time is the shipper.

18. The fact that the Petitioner is performing two roles tends to muddy

the waters unless these roles are kept separate. As lessor he transfers

possession of the equipment at lessor's place of business to the lessee who then

contracts with Petitioner to transport the equipment to lessee's job site.

During this transportation period the lessee has responsibility for the safety

of the equipment vis a vis the lessor and the carrier has responsibility for the

safety of the equipment until it reaches its destination vis a vis the shipper.

(lessee).

19. Petitioner maintains a separate insurance policy to protect itself

from liability for damages to the equipment it is transporting in its role of

carrier.

20. From the evidence presented it is concluded that possession of the

equipment being leased is transferred to the lessee when the equipment is loaded

on the carrier's vehicle at the premises of the lessor whether the carrier is

Petitioner, some other carrier or the lessee. As carrier Petitioner, contracts

with the lessee to transport the equipment from the premises of the lessor to

the site selected by the lessee. Since this transpotation charge is separate

and apart from the lease charges and legal possession of the property is in the

lessee the minute it is loaded on the carrier's vehicle, the charges for the

transportation are not subject to sales tax. This is exactly what Rule 12A-

1.045(2), Florida Administrative Code, above quoted states. Respondent must

honor its own rules until they are amended or abrogated. Gadsden State Bank v.

Lewis, 348 So.2d 343 (Fla 1 DCA 1977).

21. The mere fact that Petitioner charged the lessee both rental fees and

transportation fees on the same invoice is not determinative of the propriety of

assessing a sales tax on the transportation charges, although this appears to

have been a major factor insofar as the auditor was concerned.

22. From the foregoing, it is concluded that the transportation charges

here involved are not a part of the lease price, that Petitioner transports the

equipment for the lessee in Petitioner's role as carrier and this transportation

charge is not subject to a sales tax. It is

RECOMMENDED that the assessment for sales taxes on transportation services

provided by Florida Hi-Lift to its lessees during the period February 1, 1984,

through January 31, 1987, in the amount of $15,705.24 plus penalty and interest

be withdrawn.

DONE and ENTERED this 7th day of April, 1989, in Tallahassee, Leon County,

Florida.

___________________________________

K. N. AYERS

Hearing Officer

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

[phone]

FILED with the Clerk of the

Division of Administrative Hearings

this 7th day of April, 1989

COPIES FURNISHED:

Katie D. Tucker

Executive Director

Department of Revenue

102 Carlton Building

Tallahassee, Florida 32399-0100

Richard C. Bellak, Esquire

101 North Monroe Street

Tallahassee, Florida 32301

Lee R. Rohe, Esquire and

Lealand L. NcCharen, Esquire

The Capitol

Tallahassee, Florida 32399-1050

William D. Townsend

General Counsel

Department of Revenue

203 Carlton Building

Tallahassee, Florida 32399-0100

=================================================================

AGENCY FINAL ORDER

=================================================================

STATE OF FLORIDA, DEPARTMENT OF REVENUE

TALLAHASSEE, FLORIDA

FLORIDA HI-LIFT,

Petitioner,

vs. CASE NO. 88-5236

DEPARTMENT OF REVENUE,

Respondent.

________________________/

FINAL ORDER

This case came before me for entry of a final order following entry of a

recommended order by the Division of Administrative Hearings. A hearing was

held on June 8, 1989 to consider the entry of a final order at which both

parties appeared and submitted oral argument.

APPEARANCES

The following appearances were entered:

For Petitioner: Richard C. Bellak, Esquire

Fowler, White & Gillen

Attorneys at Law

101 N. Monroe Street

Tallahassee, Florida 32301

For Respondent: Lee R. Rohe, Esquire

Lealand L. McCharen, Esquire

Assistant Attorneys General

Department of Legal Affairs

The Capitol, Tax Section

Tallahassee, Florida 32399-1050

ISSUE

The issue in this case is whether Petitioner was properly assessed tax on

the delivery fee of rental equipment as part of the "gross proceeds" of the

rental operation.

FINDINGS OF FACT

1 through 9. Findings of Fact numbers 1 through 9 set forth in the

Recommended Order are adopted and incorporated by reference in this Final Order

as if fully set forth.

CONCLUSIONS OF LAW

1. Conclusions of Law numbers 1 through 3, 5, 10, and 12 set forth in the

Recommended Order are adopted and incorporated by reference in this Final Order

as if fully set forth.

2. Conclusion of Law number 4 set forth in the Recommended Order is

modified so that the first sentence reads as follows.

Rule 12A-1.045 Florida Administrative

Code (formerly 12A-1.45) provides

the Department's interpretation of

chapter 212 as it relates to

transportation charges where a sale of

tangible personal property is involved.

In all other respects, Conclusion of Law number 4 is adopted and incorporated by

reference in this Final Order as if fully set forth.

3. Conclusions of Law numbers 6 through 9, 11, and 13 set forth in the

Recommended Order are rejected and the following Conclusions of Law are set

forth in their place.

4. Section 212.02(2), Florida Statutes (1985), defines "sale" as:

Any transfer of title or possession, or

both, exchange, barter, license, lease, or

rental, conditioned or otherwise, in any

manner or by any means whatsoever, of

tangible personal property for a

consideration [Emphasis added.]

5. This case does not involve the transfer of title to the equipment;

therefore, the provisions of the Uniform Commercial Code, "Sales, do not apply.

Section 672.106, Florida Statutes provides:

A "sale" consists in the passing of title

from the seller to the buyer for a price.

This statute indicates that in this case the Uniform Commercial Code's

provisions relating to sales do not control over the provisions of the Sales and

Use Tax Law, Chapter 212, particularly where the latter contains specific

provisions defining a sale to include the transfer of possession in section

212.02(2), Florida Statutes. The Uniform Commercial Code contains no such

provision.

6. This construction of the UCC is supported by the case law. See Sellers

v. Frank Griffin AMC Jeep, Inc., 526 So.2d 147 (Fla. 1st DCA 1989). In that

case the court stated that a closed end lease of a vehicle is not a "transaction

in goods" for purposes of the UCC where there was no provision for the passage

of title.

7. Section 212.02(21), Florida Statutes (1987) provides the definition of

"sales price" to mean

the total amount paid for tangible

personal property ... including any

services that are part of the sale ..

This definition is also in Rule 12A-1.016(2), F.A.C.

8. Section 212.05, Florida Statutes declares the legislative intent that

anyone who engages in the business of renting things is "exercising a taxable

privilege".

9. Section 212.05(1)(c) and (d), Florida Statutes states:

For the exercise of such privilege, a tax

is levied on each taxable transaction or

incident, which tax is due and payable as

follows:

(c) At the rate of 5 percent of the

gross proceeds derived from the lease or

rental of tangible personal property

(d) At the rate of 5 percent of the

lease or rental price paid by a lessee or

rentee, or contracted or agreed to be

paid by a lessee or rentee, to the owner

of the tangible personal property.

10. No exemptions for the above statutory provisions, as applied to

Petitioner, can be found within section 212.08, Florida Statutes.

11. Rule 12A-1.071(1)(a), F.A.C., defines "lease" to include:

any rental or license to use

tangible personal property, unless a

different meaning is clearly indicated by

the context in which it is used. The

term refers to all transactions that are

not bailments in which there is a

transfer of possession of tangible

personal property, without regard to

limitations upon the use, for a

consideration, without a transfer

of title to the property. It is not

essential for a transfer of possession of

tangible personal property to include the

right to move the tangible personal

property. It includes a transaction

under which a person secures for a

consideration the temporary use of

tangible personal property which although

not on his premises, is operated by or

under the direction or control of the

person or his employees. All leases

of tangible personal property other than

capital leases, sales-type leases, or

direct financing leases are operating

leases. Whether a transaction is a

"sale" or a "rental, lease, or license to

use" shall be determined in accordance

with the provisions of the agreement.

(b) Transfer of possession with respect

to an operating lease means that one of

the following attributes of tangible

personal property ownership has been

transferred:

1. Custody or possession of the

property, actual or constructive;

2. The right to custody or possession of

the property; or,

3. The right to use and control or

direct the use of the property.

(c) For am operating lease, tax applies

to the gross proceeds derived from the

lease of tangible personal property for

the entire term of the lease when the

lessor of such property is an established

business, part of an established

business, or leasing tangible personal

property is incidental or germane to the

lessor's business. Gross proceeds for

purposes of this section include any

interest charges whether or not

separately stated, unless the interest

charges are clearly imposed for late or

other defaults under the lease.

12. Rule 12A-1.071(10)(b), F.A.C., further delineates what constitutes a

rental:

(b) When the operator of the equipment

is on the payroll of the lessee, the

contract constitutes a rental of tangible

personal property and is subject to the

tax.

On the other hand, a service transaction is distinguished from rental

transaction by Rule 12A-1.071(10)(d):

When the owner of equipment furnishes the

operator and all operating supplies, and

contracts for their use to perform

certain work under his direction and

according to his customer's

specifications, and the customer does

not take possession or have any direction

or control over the physical operation,

the contract constitutes a service

transaction and not the rental of

tangible personal property, and no tax is

due on the transaction.

13. Generally, the Florida Legislature has declared its intent to make a

rental a taxable transaction. Section 212.05, Florida Statutes. Case law has

been to this effect for quite some time. Kirk v. Western Contracting

Corporation, 216 So.2d 503 (Fla. 1st DCA 1968)("Anyone engaging in business of

renting tangible personal property...") See also; Crane Rental of Orlando v.

Hausman, 518 So.2d 395, 396 (Fla. 5th DCA 1987).

14. No specific or express exemption exists for Petitioner under Chapter

212, Florida Statutes. Even were one to be found, it would be strictly

construed against the party claiming such exemption. Adams Const. Equipment Co.

v. Hausman, 472 So.2d 467 (Fla. 5th DCA 1985).

15. The issue in this case involves the taxability of the pickup and

delivery charges alone. (The fee for equipment rental has been taxed, the taxes

having been collected by Petitioner.) The Department considers the pickup and

delivery charges to be part of the "gross proceeds" of Petitioner's rental

income from rental contracts through application of section 212.05(1)(c) and

(d), Florida Statutes, and Rule 12A-1.071, F.A.C.

16. The mere fact that Petitioner charged the lessee both rental and

pickup and delivery fees on the same invoice is not determinative that the

delivery charges were for services separately rendered to the lessee by the

lessor. Nor is the fact that the pickup and delivery is separately or

additionally insured. Pickup and delivery charges were considered by the

Department to be part of the "total consideration that the lessee or buyer is

obligated to pay."

17. Petitioner has failed to identify any exemption or clearly demonstrate

why pickup and delivery charges for a rental operation are not part of the

"gross proceeds" derived from the business of renting tangible personal

property. The pickup and delivery charges are part of the contract with the

lessee and the possession of the equipment does not transfer until the equipment

is delivered. Nor has Petitioner demonstrated that the Department's

interpretation of the statute and rule "is clearly erroneous or unauthorized."

A mere difference of opinion, standing alone without more, over interpretation

of the applicable statute and rule will not suffice. See Humhosco, Inc. v.

Department of H & R Services, 476 So.2d 258 (Fla. 1st DCA 1985).

18. It is noted that Petitioner focused upon Rule 12A-1.045 for its legal

basis. This rule does not apply because it concerns itself with delivery of

items in a sales transaction and the associated transportation charges. Rule

12A-1.071, not Rule 12A-1.045, applies to rental transactions. It is Rule 12A-

1.071 which the Department applied to the rental contracts, including pickup and

delivery charges.

19. Without more from the Petitioner, the rule in Austin v. Austin, 350

So.2d 102 (Fla. 1st DCA 1977) applies:

The law is well settled that long-

standing statutory interpretations made

by officials charged with the

administration of the statutes are given

great weight by the Court. Id. at 104.

CONCLUSION

On the basis of the foregoing, it is hereby ordered that the assessment in

this case is upheld.

DONE AND ORDERED this 6th day of July, 1989 in Tallahassee Florida.

______________________________

KATIE TUCKER

Executive Director

Department of Revenue

Rm. 102, Carlton Building

Tallahassee, Florida 32399-1550

APPEAL RIGHTS

Any Party to this Order has the right to seek judicial review of the Order

pursuant to Section 120.68, F.S., by the filing of a Notice of Appeal pursuant

to 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 32314-6668 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 Order is filed

with the Agency Clerk of the Department.

____________________________

Filed with the Clerks the

Department of Revenue, State of

Florida, this 6th day of

July, 1989.

COPIES FURNISHED:

Mr. Richard Bellak, Esquire

Lee Rohe & Lealand McCharen, Esquires

William D. Moore, Esquire

K. N. Ayers, Hearing Officer

=================================================================

DISTRICT COURT OPINION

=================================================================

IN THE DISTRICT COURT OF APPEAL

FIRST DISTRICT, STATE OF FLORIDA

FLORIDA HI-LIFT, NOT FINAL UNTIL TIME EXPIRES TO

FILE MOTION FOR REHEARING AND

Appellant, DISPOSITION THEREOF IF FILED.

vs. CASE NO. 89-1947

DOAH CASE NO. 88-5236

DEPARTMENT OF REVENUE,

Appellee.

______________________________/

Opinion filed December 10, 1990.

An Appeal from an Order of the Depart.ment of Revenue.

Richard C. Bellak and Hala Mary Ayoub of Fowler, White, Gillen, Boggs, Villareal

& Banker, P.A., Tallahassee, for Appellant.

Robert A. Butterworth, Attorney General, and Lealand L. McCharen and Lee R.

Roche, Assistant Attorneys General, Tallahassee, for Appellee.

Benjamin K. Phipps, Tallahassee, for Heede Southeast, Inc., Amious Curiae.

BOOTH, J.

This cause is before us on appeal from an order of the Department of

Revenue (DOR) upholding the assessment of tax on pickup and delivery charges on

rental equipment.

The facts, as found by the hearing officer and adopted by DOR, are as

follows:

Florida Hi-Lift, Petitioner, is in the

business of selling, leasing, repairing and

transporting aerial lift equipment.

Petitioner enters into rental agreements with

customers who rent specific equipment F.O.B.

Petitioner's location.

The lease agreement sets a fixed price for the

rental of the equipment and allows the customer to

pick up the equipment with the customer's own

conveyance, hire a carrier to pick up the

equipment, or request the equipment be picked up

and delivered by Petitioner's conveyance. The

customer pays for the transportation of the

equipment by whichever method of transportation is

selected. The rental charge is unaffected by the

mode of transportation selected by the lessee.

Petitioner charged the customer sales tax on

the rental of the equipment but not on the charges

for transporting the equipment with Petitioner's

conveyances.

The audit here involved covers the period

February 1, 1984 through January 31, 1987 and

assesses a total tax, penalty and interest through

September 11, 1987 of $23,727.59 with interest at

$5.29 per day until paid (Exhibit 2). The major

portion of this tax and the only part contested

herein is assessed on Petitioner's charges to its

lessees for transportation of the equipment.

The equipment rental contract/invoice (Exhibit

9) under charges lists Options, Damage Waiver nine

per cent, Fuel, Delivery Pickup, and Other, with

tax which Petitioner computed only on the rental

charge for the equipment.

The Damage Waiver charge of nine percent was

based on the rental price but no evidence was

submitted regarding the basis for this charge.

Regardless, no sales tax was added to this charge

and a sales tax on this charge is not an issue.

Petitioner's sole witness, the auditor who

initially assessed the sales tax on the

transportation charge, testified that his decision

to assess sales tax for this charge was influenced

by the fact that charges for leasing and

transportation were included on the same invoice.

Petitioner has a separate liability policy to

cover equipment being transported on Petitioner's

vehicles apart from the coverage of the equipment

while not in transit.

The hearing officer recommended that the sales tax assessment on

transportation services provided by Florida Hi-Lift to its lessees during the

period of February 1, 1984, through January 31, 1987, be withdrawn. The

recommended order quotes Section 212.05, Florida Statutes (1985), 1/ which

provides for a five-percent tax on the lease or rental price paid by a lessee or

rentee to the owner of the tangible property, and cites Rule 12A- 1.045(2) and

(3), Florida Administrative Code, which provides:

(2) If the seller contracts to sell tangible

personal property F. O. B. origin, the title to

the property passes to the buyer and the buyer

pays the transportation charges, the

transportation services are rendered to the buyer

and are not a part of the taxable selling price.

However, where the transportation charges are

billed by the seller but documentation is

inadequate to establish the point at which title

passed to the buyer, such charges shall be

considered a part of the taxable selling price.

(3) When the purchaser of taxable tangible

personal property pays delivery or transportation

charges thereon direct to the carrier and does not

deduct same from the amount due the seller, such

delivery or transportation charges are exempt.

In his conclusions of law, the hearing officer held:

Here there is no dispute that the terms of

the lease provide that the lease is f.o.b.

lessor's premises and, therefore, possession is

transferred to lessor's place of business. When

the lessee contracts with the Petitioner to

transport the leased equipment to lessee's job

site, Petitioner is performing the service as a

contract carrier employed by the lessee who at

this point in time is the shipper.

The fact that the Petitioner is performing

two roles tends to muddy the waters unless these

roles are kept separate. As lessor he transfers

possession of the equipment at lessor's place of

business to the lessee who then contracts with

Petitioner to transport the equipment to lessee's

job site. During this transportation period the

lessee has responsibility for the safety of the

equipment vis a vis the lessor and the carrier has

responsibility for the safety of the equipment

until it reaches it destination vis a vis the

shipper. (lessee).

Petitioner maintains a separate insurance

policy to protect itself from liability for

damages to the equipment it is transporting in its

role of carrier.

From the evidence presented it is concluded

that possession of the equipment being leased is

transferred to the lessee when the equipment is

loaded on the carrier's vehicle at the premises of

the lessor whether the carrier is Petitioner, some

other carrier or the lessee. As carrier

Petitioner contracts with the lessee to transport

the equipment from the premises of the lessor to

the site selected by the lessee. Since this

transporting charge is separate and apart from the

lease charges and legal possession of the property

is in the lessee the minute it is loaded on the

carrier's vehicle, the charges for the

transportation are not subject to sales tax. This

is exactly what Rule 12A-1.045(2) Florida

Administrative Code above quoted states.

Respondent must honor its own rules until they are

amended or abrogated. Gadsden State Bank v. Lewis

348 So.2d 343 (Fla. 1 DCA 1977).

The mere fact that Petitioner charged the

lessee both rental fees and transportation fees on

the same invoice is not determinative of the

propriety of assessing a sales tax on the

transportation charges, although this appears to

have been a major factor insofar as the auditor

was concerned.

DOR accepted the hearing officer's findings of fact but rejected his

reasoning and conclusions. DOR ruled that appellant's pickup and delivery

charges were part of the "gross proceeds" of a rental transaction and were

therefore taxable pursuant to Rule 12A-1.071, Florida Administrative Code, 2/

and Sections 212.05(1)(c) and (d), Florida Statutes. 3/ DOR also ruled that

Rule 12A-1l.045, entitled "Transportation Charges," was inapplicable. The final

order holds, in part, as follows:

The issue in this case involves the

taxability of the pickup and delivery charges

alone. (The fee for equipment rental has been

taxed, the taxes having been collected by

Petitioner.) The Department considers the pickup

and delivery charges to be part of the "gross

proceeds" of Petitioner's rental income from

rental contracts through application of section

212.05(1)(c) and (d), Florida Statutes, and Rule

12A-1.071, F.A.C.

The mere fact that Petitioner charged the

lessee both rental and pickup and delivery fees on

the same invoice is not determinative that

delivery charges were for services separately

rendered to the lessee by the lessor. Nor is the

fact that the pickup and delivery is separately or

additionally insured. Pickup and delivery charges

were considered by the Department to be part of

the "total consideration that the lessee or buyer

is obligated to pay."

Petitioner has failed to identify any

exemption or clearly demonstrate why pickup and

delivery charges for a rental operation are not

part of the "gross proceeds" derived from the

business of renting tangible personal property.

The pickup and delivery charges are part of the

contract with the lessee and the possession of the

equipment does not transfer until the equipment is

delivered. Nor has Petitioner demonstrated that

the Department's interpretation of the statute and

rule "is clearly erroneous or unauthorized."

It is noted that Petitioner focused upon Rule

12A-1.045 for its legal basis. This rule does not

apply because it concerns itself with delivery of

items In a sales transaction and the associated

transportation charges. Rule 12A-1.071, not Rule

12A-1.045, applies to rental transactions. It is

Rule 12A-1.071 which the Department applied to the

rental contracts, including pickup and delivery

charges.

We hold that the transportation charges in question were incident to a

"sale," defined under Section 212.02(2) (a), Florida Statutes (1983) 4/ , as

"any transfer of title or possession or both, exchange, barter, license, lease

or rental, conditional or otherwise, in any manner or by any means whatsoever of

tangible personal property for a consideration." The foregoing provision was

interpreted in Richard Bertram & Co. V. Green, 132 So.2d 24, 26 (Fla. 3d DCA

1961), cert. denied, 135 So.2d 743 (Fla. 1961), appeal dismissed, 136 So.2d 343

(Fla. 1961), wherein the court held:

It is apparent from a reading of the definition of

"sale" that a lease of tangible personal property

is, in fact, a sale. When a statute contains a

definition of a word or phrase, that meaning must

be ascribed to the word or phrase whenever

repeated in the same statute unless a contrary

intent clearly appears.... The language of the

sections involved being clear and the legislative

intent determinable from the definitions given in

the statute, the comptroller has no power to go

outside the statutory definitions and give a

different meaning to the words used in the

statute, even though the comptroller's

construction, in his mind, would increase the

revenue of the State of Florida. [footnotes

omitted]

In the instant case, the terms of the lease provide that the lease is

f.o.b. lessor's premises, and therefore, possession is transferred at lessor's

place of business. The customer selects the means of transportation, is

responsible for the transportation charges, separate and apart from the rental

price, and those charges are not deducted from the rental amount. Therefore,

pursuant to Section 212.02(2) (a), Florida Statutes, and Rules 12A-1.045 and

12A-1.016, Florida Administrative Code,

the transportation charges are not taxable.

We find no statutory authority for DOR's imposition of sales tax on

transportation charges as part of the gross proceeds of these rental

transactions. The case is not, as contended by DOR, one of the taxpayer seeking

an exemption from a lawful tax, but is rather a challenge to the validity of the

tax. The rule governing here requires strict construction of taxing statutes

against the taxing authority. Any ambiguity in the provisions of the tax

statute must be resolved in favor of the taxpayer. Mikos v. Ringling Bros.-

Barnum & Bailey Combined Shows, Inc., 497 So.2d 630, 632 (Fla. 1986); Harbor

Ventures, Inc., v. Hutches, 366 So.2d 1173, 1174 (Fla. 1979); Florida S & L

Services, Inc. v. Department of Revenue, 443 So.2d 120, 122 (Fla. 1st DCA 1983);

Indian River Orange Groves, Inc. v. Dickinson, 238 So.2d 125, 127 (Fla. 1st DCA

1970).

Accordingly, DOR's order assessing tax on appellant's transportation

charges is reversed.

MINER AND ALLEN, JJ., CONCUR.

ENDNOTES

1/ Section 212.05, Florida Statutes, was amended in 1986 1987, but remains

unchanged as to the issue before us.

2/ Rule 12A-1.071, Florida Administrative Code, defines "lease" to include:

(1)(a)... [A]ny rental or license to use tangible

personal property, unless a different meaning is

clearly indicated by the context in which it is used.

The term refers to all transactions that are not

bailments in which there is a transfer of possession

of tangible personal property, without regard to

limitations upon the use, for a consideration, without

a transfer of title to the property....

(c) For an operating lease, tax applies to the

gross proceeds derived from the lease of tangible

personal property for the entire term of the lease

when the lessor of such property is an established

business, part of an established business, or leasing

tangible personal property is incidental or germane to

the lessor's business....

3/ Section 212.05, Florida Statutes, states:

(1) For the exercise of such privilege, a tax is

levied on each taxable transaction or incident, which

tax is due and payable as follows:

(c) At the rate of 5 percent of the gross

proceeds derived from the lease or rental of tangible

personal property

(d) At the rate of 5 percent of the lease or

rental price paid by a lessee or rentee, or contracted

or agreed to be paid by a lessee or rentee, to the

owner of the tangible personal property.