89-000136 Latin America Sales International, Inc. vs. Department Of Revenue Status: Closed Recommended Order on Tuesday, October 30, 1990.

Summary: Taxpayers engaged in import/export failed to register as dealer in sales tax so could not extend a resale certificate to its suppliers. Must pay use tax

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

LATIN AMERICA SALES )

INTERNATIONAL, INC., )

)

)

Petitioner, )

)

vs. ) CASE NO. 89-0136

)

DEPARTMENT OF REVENUE, )

)

)

Respondent. )

___________________________________)

RECOMMENDED ORDER

This matter was heard by William R. Dorsey, Jr., the Hearing Officer

designated by the Division of Administrative Hearings, on September 29, 1989, in

Miami, Florida.

APPEARANCES

For Petitioner: Mark R. Vogel, Esquire

201 South Biscayne Boulevard

Miami Center, Suite 880

Miami, FL 33131

and

Matt Goldman, Esquire

1001 South Bayshore Drive

Suite 1712

Miami, FL 33131

For Respondent: Linda Miklowitz, Esquire

Lealand L. McCharen, Esquire

Mark T. Aliff, Esquire

Assistant Attorneys General

Department of Legal Affairs

Tax Section, The Capitol

Tallahassee, FL 32399-1050

STATEMENT OF THE ISSUES

The issues are:

Whether Latin America Sales made unreported sales which became subject to

sales tax because they went unreported?

Are purchases of inventory by Latin America Sales from overseas vendors

subject to state use tax while temporarily warehoused in Miami and before

export?

Are purchases of inventory of Latin America Sales subject to state use tax

because of its failure to register as a dealer, although its purchases would be

exempt had it registered?

PRELIMINARY STATEMENT

Latin America Sales International, Inc., called four witnesses, Ricardo

Miranda, Elsie Miranda, the owners of Latin America Sales, Eugene Drascher, the

certified public accountant for the company and Jacqueline Randall, an auditor

who prepared most of the Department's audit report. The Department called two

witnesses, Trina Mungin, a tax auditor and Carmen Cordoba, an audit supervisor

for Ms. Randall and Ms. Mungin. The following exhibits were entered into

evidence:

Petitioner's tax returns for 1975, 1976, 1977, 1978, 1979 and a schedule of

gross sales for a company known as Richards Sewing Machines Co. derived from

State DR-15 sales and use tax forms.

The Department submitted its Revised Notice of Proposed Assessment for the

period February 1, 1985 - June 30, 1987, a Revised Notice of Proposed Assessment

for the period July 1, 1987 - January 31, 1988 and its audit report. The

revision was made at the opening of the hearing. Petitioner's exhibit 7 - 10

were withdrawn at the hearing.

A transcript of the hearing was filed, and the parties submitted proposed

recommended orders. Rulings on proposed findings of fact are made in the

Appendix to this Recommended Order.

FINDINGS OF FACT

The Assessments

1. The Department of Revenue assessed sales and use tax against Latin

America Sales International for the period February 1, 1985 to June 30, 1987, in

the amount of $114,682.88, a penalty of $28,670.72, and interest of $19,704.39,

for a total of $163,057.99.

2. It also assessed sales and use tax against the taxpayer for the period

July 1, 1987 to January 31, 1988, in the amount of $72,374.71, a penalty of

$18,093.68, and interest of $4,655.37, for a total of $95,123.76.

3. These taxes were assessed for three reasons, failure to pay sales tax,

failure to pay use tax and failure to pay tax due on rentals of space used to

store sewing machine inventory in Florida.

Sales Tax

4. Latin America Sales International, Inc., is a Florida Corporation

organized in 1975 by Cuban immigrants Ricardo and Elsie Miranda. It was formed

to avail itself of a benefit created by the Internal Revenue Code for companies

which qualified as western hemisphere trading corporations. Under 26 U.S.C.

Section 921, a substantial tax reduction was available to United States

corporations which made at least 95% of their sales to buyers outside of the

United States, and within the western hemisphere.

5. Mr. and Mrs. Miranda and a Mr. Ricardo Gomez had been operating a

business known as Richards Sewing Machines Company, which sold industrial sewing

machines both domestically and in Central American countries such as Guatemala,

El Salvador, the Dominican Republic, Haiti and in Jamaica. They bought the

industrial sewing machines in Taiwan and Italy. To take advantage of the

deduction available to a western hemisphere trading corporation, Mr. and Mrs.

Miranda incorporated Latin America Sales International, Inc. (Latin America).

6. On its federal corporate income tax returns which were prepared by its

certified public accountant, Eugene Drascher, Latin America obtained a deduction

for its activities as a western hemisphere trading corporation for its fiscal

years ending October 31, 1976, 1977, 1978, 1979 and 1980. Ultimately, this

federal deduction was phased out.

7. Richards Sewing Machines had been registered properly with the Florida

Department of Revenue as a dealer and a payor of sales and use taxes, but no

similar registration was filed for Latin America when it was formed. Mr.

Drascher advised Mr. and Mrs. Miranda that the sales by Latin America would be

made outside the United States, and consequently Florida was not entitled to

collect sales tax from the foreign buyer, and that Latin America was only

involved in importing and exporting industrial sewing machine inventory for

resale, so the corporation was not responsible to pay use tax to the State of

Florida on those sewing machines in its inventory. In essence, the CPA advised

Mr. and Mrs. Miranda that there were no reports concerning sales and use tax to

be filed and no reportable sales or use tax due from Latin America. This advice

about reports was erroneous, and the failure of Latin America to register as a

dealer has serious financial consequences with respect to liability for use tax.

To allow persons claiming to engage in tax exempt sales to file no returns or to

avoid registration entirely would provide a means of tax evasion which could be

easily abused. All vendors must register and file tax returns so the Department

of Revenue will be aware the vendor is in business and so the Department can

audit to verify claims that sales are made in a way which is tax exempt. Some

accomodations are made for tax exempt export sales; for instance, vendors may

apply to file their returns semi-annually or annually rather than monthly.

8. After the tax deduction available to western hemisphere trading

corporations was phased out, Mr. and Mrs. Miranda continued to use Latin America

to make foreign sales because the corporation had made a name for itself in the

export market. In essence, Latin America had built up good will with its

foreign customers. Latin America continued to engage only in export sales; it

made no domestic sales within the United States or the State of Florida, except

sales to other exporters. On those few occasions, Latin America obtained an

appropriate resale certificate from the buyer/exporter.

9. Latin America never filed any returns with the Florida Department of

Revenue with respect to its inventory purchased from overseas vendors in Taiwan

or Italy. Even if exempt, these purchases should have been reported as property

held for export on schedule B of an annual sales tax return, under a dealer

registration number Latin America should have obtained. (Tr. 118)

10. Latin America received shipments of containers of sewing machines at

the Miami free port, but because rent there was so expensive, Latin America

transferred the inventory to a warehouse in Miami, after a customs broker paid

the applicable federal customs duties on behalf of Latin America. Latin America

never registered as an exporter with the State of Florida. Latin America never

filed any returns with respect to gross sales made of its inventory stored in

Miami which it exported to customers in the Caribbean or Central America. These

sales should have been reported to the Department of Revenue under a dealer

registration number as exempt sales. (Tr. 118)

11. Richards Sewing Machines Company, which handled domestic sales and

which was appropriately registered with the Department of Revenue, made proper

and timely filings of all Florida Department of Revenue sales tax returns, Forms

DR-15.

12. The Department of Revenue initially audited the sales tax payments of

Richards Sewing Machines, and the results of that audit are not at issue here

directly.

13. The Mirandas maintained their invoices in alphabetical order by

vendor, so that invoices for Richards Sewing Machines and Latin America were

physically located in the same file cabinet, although it would be obvious to the

Mirandas from the face of the invoice whether the sale was one made by Richards

Sewing Machine (a domestic sale), or Latin America (an export sale).1

Similarly, a single journal was used by Ms. Miranda to record the dollar amount

of sales by both corporations. Each entry contained the purchaser, the sale

date, the invoice number, the total amount of the sale, and if tax were

collected on that sale, the amount of tax. Mrs. Miranda then used that journal

to file on Form DR-15 with the Department of Revenue the gross amount of sales,

taxable sales, and remit the tax collected by Richards Sewing Machines. No such

filings were made by Latin America because the Mirandas had been advised by

their accountant that no sales tax was due on export sales and none had been

collected. Actually, returns showing that all sales were exempt should have

been filed. See, Finding 7, above.

14. In performing the audit of Richards Sewing Machines, the Department's

auditors used that corporation's United States Corporate Income Tax Return, IRS

Form 1120, for the applicable years, and compared the gross sales reported on

those forms to the federal government with the amount of gross sales Richards

Sewing Machines had reported monthly to the State of Florida on its Florida

Sales and Use Tax Form, Form DR-15.

15. The gross sales shown on the federal returns, Form 1120, for Richards

Sewing Machines were 7.49 million dollars over the three years of the audit

(1984, 1985 and 1986). Over the same period, Richards Sewing Machines had shown

gross sales on Florida Department of Revenue Forms DR-15 of 7.46 million

dollars. There was a $33,000 discrepancy, amounting to less than 1/2 of one

percent.

16. The Department's auditor never found any evidence that any sales made

by Latin America failed to have attached a resale certificate, or a bill of

lading showing that the machinery or parts sold were shipped outside the United

States (Tr. 45, 110-11, 126, 129-30). The actual invoices, resale certificates

and bills of lading have been destroyed. After the completion of the audit on

Richards Sewing Machines, the auditor told Mrs. Miranda there was no further

need to keep those records, and relying on that advice, Mrs. Miranda disposed of

the records (Tr. 84-5). The Department never contested that this advice was

given to Mrs. Miranda.

17. Due to the commingling of the invoices and the sales journal for

Richards Sewing Machines and Latin America, the auditor for the Florida

Department of Revenue decided to audit Latin America, and received authorization

to do so. The auditor believed that the total sales tax owed by these two

separate legal entities had been combined and reported together on one Florida

Department of Revenue Form DR-15, but separate Federal Income Tax Returns, Form

1120, had been filed for each of the two companies. She believed that the total

gross sales for both companies on the federal tax returns should have equalled

the amount shown on the DR-15s filed with Florida by Richards Sewing Machines.

18. The auditor then determined that a percentage of sales should be

computed for each year in order to prorate the sales reported on the DR-15s for

each company, Richards Sewing Machines and Latin America. The methodology used

was that the total sales reported on the Federal Forms 1120 filed by Richard

Sewing Machines and Latin America for each of their fiscal years was prorated to

a calendar year, to derive a monthly average gross sales for each entity.

(Richards and Latin America had different fiscal years). The average was then

multiplied by the applicable number of months in each calendar year to arrive at

the annual sales total for each company. The estimated sales for each company

were then divided by the total sales for both companies to obtain the percentage

of sales for each company. Latin America's percentage was then applied to the

gross sales report of the monthly DR-15s to determine its estimated gross sales

for each month. (Department Exhibit 1, Audit Report, Page 9.) The monthly

average of gross sales derived from Latin America's IRS Form 1120, was compared

with its estimated monthly gross sales reported on the DR-15. For each month

Latin America reported higher gross sales based on its IRS form, the difference

was treated as unreported Florida sales and taxed at 5%.

19. There is no logical reason for the Department to have engaged in its

proration calculations. There is no credible evidence that any sales by Latin

America to its export customers were subject to sales tax in Florida. Mrs.

Miranda had prepared a list for the auditor which separated all invoices to

demonstrate that all sales by Latin America were export sales. Appropriate

bills of lading or certificates of resale for sales by Latin America were in the

files.

20. There is no reasonable basis to accept the Department's contention

that State Form DR-15s filed by Richards Sewing Machines reflect combined sales

figures for both Latin America and Richards Sewing Machines. The Department

makes its argument because using the sales journal kept by Mrs. Miranda, the

amount of sales tax due according to the journal is the same amount recorded on

the DR-15s, but Richards Sewing Machines reported $33,000 more in sales to the

federal government. From that the Department's witnesses somehow infer that the

DR-15s reflected sales from both companies. The more reasonable inference here,

however, is that the figures in the sales journal and DR-15 forms match because

all sales by Latin America were foreign sales on which no tax was due, no tax

was collected, and no tax was carried on the sales journal. When the amount of

sales tax collected was computed from the sales journal, and reported by Mrs.

Miranda on the State DR-15, that figure dealt solely with sales by Richards

Sewing Machines. To the extent there is any discrepancy in the total sales

Richards Sewing Machines reported to the State of Florida and to the Federal

Government on Federal Form 1120, that discrepancy is due to a bookkeeping error.

A small amount of additional tax was due on sales by Richards Sewing Machines in

the years 1984 to 1986 ($33,000 times 5% or about $1,500). The evidence does

not support an inference that taxable sales from both corporations were combined

in the sales journal kept by Mrs. Miranda, and were then reported as a lump sum

figure on the DR-15 filed by Richards Sewing Machines.

21. The Department argues that its proration process did not tax Latin

America for sales which were reported, because the Department agreed to

recognize proper bills of lading or certificates of resale from customers of

Latin America as justification for not collecting sales tax. It does, however,

believe that tax should be assessed against Latin America for unreported sales,

i.e., on the gross sales derived from its IRS Form 1120. Because the evidence

is persuasive that Latin America made no sales which were taxable in Florida,

the Department's argument is rejected as lacking a factual basis. All sales by

Latin America were to exporters who gave a resale certificate to Latin America,

or to foreign purchasers who provided an appropriate bill of lading showing that

the material was exported from the State of Florida.

22. It is true, however, that Latin America was required to file

information returns reporting all of its sales, both gross and exempt. Its

report would have shown all sales were exempt, and no tax was due. The mere

failure to have filed the report does not make those export sales taxable.

Use Tax

23. Use tax is due for two reasons. Latin America made purchases of

sewing machines and equipment from foreign manufacturers in Taiwan and Italy.

It imported those machines and parts into the United States to an airport free

zone. The machines and parts then cleared customs and were moved to a warehouse

in Miami at 2303 Northwest 2nd Avenue, which interrupted the export process.

Secondly, the failure of Latin America to have registered as a dealer has an

important affect on its liability for use tax. Because it was never registered

as a dealer during the audit period, it was impossible for Latin America to

execute and deliver a certificate of resale to its Taiwanese and Italian

suppliers of the industrial sewing machines it received and warehoused in Miami.

24. Latin America introduced no proof that it was already contractually

obligated to sell its inventory overseas at the time it was delivered to the

free zone, or when it was removed from the free zone. Therefore, when Latin

America removed the industrial sewing machines or parts from the airport free

zone and stored them in its warehouse at 2303 Northwest 2nd Avenue in Miami, it

engaged in a taxable event. The bills of lading showing eventual export of its

inventory are insufficient to avoid the use tax, for "tax will apply if the

property is diverted in transit to the purchaser," Rule 12A-1.064(1)(c), Florida

Administrative Code. Under use tax law, removing those sewing machines from the

stream of international commerce subjected them to use tax, even though Latin

America may have harbored a subjective intent of ultimately reselling them to

foreign purchasers in the Caribbean and Central America.

25. Moreover, by failing to file as a dealer, Latin America also failed to

report its purchases from its Taiwanese and Italian suppliers as exempt sales

for which use tax was not due on schedule B of an annual return. It should have

filed as a dealer engaged in resale. That failure to file a return is not the

reason use tax is due, however. Latin America may be assessed use tax because

it was not a registered dealer, took possessions of the sewing machines in

Florida, and was unable to give a valid dealer's certificate of resale to its

Taiwanese and Italian suppliers because it had never registered as a dealer.

The tax is due at the rate of 5% on purchases made from its suppliers beginning

February 1, 1985 to January 31, 1988, plus interest. See audit report, page 16-

17, Schedule B.

Penalty

26. There is no reason to assess any penalty on the use tax due in this

case. The tax payer's failure to register as a dealer or to file information

returns was based on the advice of a CPA, and that advice was facially

reasonable. The Department is not required to impose a penalty if the

applicable penalty, here 25% of the tax due, "would be too severe or unjust."

Rule 12A-1.056(9)(a), Florida Administrative Code. Had Latin America registered

as a dealer and given its suppliers a certificate of resale, no tax at all may

have been due. There is no indication of some intent to evade a tax. Rather,

laxness of the tax payer has rendered a transaction otherwise tax free fully

taxable. Payment of the tax and interest is penalty enough.

Commercial Rental

27. Latin America offered no evidence with respect to the assessment the

Department made for taxes due on commercial rentals. The amount involved is

small, for the period November 1985 through June 1987, the tax due is $184.16.

CONCLUSIONS OF LAW

28. The Division of Administrative Hearings has jurisdiction over this

matter. Sections 120.57(1) and 120.575, Florida Statutes.

Sales Tax

29. Latin America was required by Section 212.18(3), Florida Statutes

(1985) to file an application for certificate of registration as a dealer. The

registration is simple, and the fee is nominal, $5.00. In addition, Rule 12A-

1.60(1)(b), Florida Administrative Code (1985) required a person desiring to

engage in business as an importer to apply to the Department of Revenue for a

dealer certificate of registration. A sale of property may be exempted

statutorily from sales tax as an export, but in that case the goods must be

delivered to a licensed exporter or common carrier for shipment outside Florida.

Section 212.06(5)(a), Florida Statutes (1985). If not, the seller bears the

burden of proving that the sale was for export on a case by case basis. The

mere intention of the seller and purchaser that the property be exported is not

sufficient to establish the exemption. Rule 12A-1.064(1)(b), Florida

Administrative Code. According to both Mrs. Miranda and the witnesses for the

Department, there were valid certificates of resale given to Latin America by

purchasers of those industrial sewing machines, or Latin America received valid

bills of lading. Section 212.06(5)(b)2., Florida Statutes (1985) specifically

allocates the burden of proof to the seller to retain proper documentation to

support the tax exemption of a sale, which is subject to verification by the

Department. The Department did verify those documents during the course of the

audit, even though they no longer exist and could not be placed into evidence at

the hearing. On this matter the tax payer has met its burden. Thus, all sales

made by Latin America were for export and are not subject to sales tax.

30. The Department relies on Section 212.12(6)(b), Florida Statutes (1985)

for the proposition that if a dealer does not have adequate records of retail

sales the Department may, upon the basis of sampling of the dealer's available

records or other information relating to sales made by the dealer, determine the

proportion that taxable retail sales bears to total retail sales. The sales by

Latin America were all for export; there was a sales journal which listed all

sales by Richards Sewing Machines as taxable; that journal was used to file

Department form DR-15 for Richards Sewing Machines, and the appropriate taxes

were paid. There is simply no reason for the Department to engage in any

reconstruction under Section 212.12(6)(b), Florida Statutes, to determine a

taxable percentage of retail sales for Latin America. No tax was due.

Commercial Rentals

31. Latin America presented no evidence to refute that part of the

assessment pertaining to commercial rentals (exhibit B-2 of the audit report).

No argument about it is found in Latin America's proposed order. The entire

amount of the tax and interest should stand, for an uncontroverted assessment

is, by statute, presumed correct. Section 120.575(2), Florida Statutes (1985).

Use Tax

32. Sales and use tax attaches at the moment of purchase or at the moment

of commingling property with the general mass of property in this state. The

industrial sewing machines settled into the mass of property in Florida because

they were diverted into the domestic market when they were removed from the

airport free zone to Latin America's Miami warehouse at 2303 Northwest 2nd

Avenue. Section 212.06(1)(a), Florida Statutes (1985); Rule 12A-1.091(7),

Florida Administrative Code; Great Lakes Dredge and Dock Company v. Department

of Revenue, 381 So.2d 1078 (Fla. 1st DCA) cert denied, 381 So.2d 765 (Fla.

1979). The tax applies to the retail sale, the use, the consumption, the

distribution and storage for use or consumption in Florida. Section

212.06(1)(a), Florida Statutes (1985). Latin America exercised control over the

industrial sewing machines and parts by placing them in storage in its own Miami

warehouse. "Use" is defined to include any exercise of a right or power over

tangible property incident to the ownership thereof by Section 212.02(8),

Florida Statutes (1985). There is no proof here, as there was in Great Lake

Dredge, that the tax payer was under a subsisting contractual obligation to

export the tangible property from Florida at the time it was imported into

Florida. Great Lakes, supra, at 1079-80. The evidence fails to establish that

from the time the machines left Italy or Taiwan until exported to Central

America they already were in a continuing process of export. They became part

of Latin America's Florida inventory held for resale.

33. All tangible personal property imported into Florida from foreign

countries is subject to the payment of Florida use tax "the same as if such

articles had been sold at retail for use or consumption in this state." Section

212.06(4), Florida Statutes (1985). There is a statutory presumption made in

the final sentence of Section 212.06(5)(a), Florida Statutes (1985), that retail

sales made to persons who are physically present in Florida at the time of sale

have been delivered in Florida, and are thereby subject to tax. An exemption

from use tax is available, however, for tangible personal property when the

taxpayer can demonstrate that the property was "irrevocably committed to the

exportation process at the time of importation and that the exportation process

was continuous and unbroken while such property was within this state." Rule

12A-1.064(1)(b )5, Florida Administrative Code. The process of exportation was

broken when Latin America removed the goods from the airport free zone. Those

goods were not irrevocably committed in any objective way to exportation, for

nothing in the evidence shows they could not have been sold domestically or that

Latin America was already under a contract duty to sell them to foreign

customers. Thus, for all property which Latin America received in its Miami

warehouse and subsequently sold and exported in the audit period of February

1985 to January 1988, it was required to pay Florida use tax. The amounts due

are found in schedule B of the audit report, and are derived from Latin

America's U.S. Corporate Income Tax Return. 2/ Had Latin America left the

property in the free port, it would have had some objective proof that the goods

were irrevocably committed to the exportation process when received in Miami,

when coupled with later bills of lading to foreign ports. Its evidence would be

even stronger if it could show contracts to deliver the machines in Central

America were already in hand when the machines arrived in Miami.

34. Most significantly, Latin America also had failed to register as a

dealer with the Department. It could not provide to its Taiwanese or Italian

suppliers of sewing machinery a dealer's resale certificate exempting that sale

to Latin America from tax. If Latin America was not a dealer purchasing those

goods for resale, the acquisition was one at retail, on which use tax was due,

and Latin America would become the dealer responsible to pay the tax under

Section 212.06(2)(d), Florida Statutes (1985). Purchases for resale must be

done in strict compliance with statutes and rules, and any sale for resale which

fails to comply with the law strictly is taxable. State Department of Revenue

v. Anderson, 403 So.2d 397 (Fla. 1981); Section 212.02(3)(a), Florida Statutes

(1985); 1 Florida State and Local Taxes, Paragraph 14.04 [2][a] (The Florida Bar

1984). The applicable law is Rule 12A-1.038, Florida Administrative Code,

(formerly Rule 12A-1.38). It requires that the entity buying for resale have a

dealer's certificate of registration, that the effective date of the resale

certificate "shall be the postmark date of the Application for Registration" and

that "[a]ny purchases made prior to the effective date of the certificate are

subject to tax" Id, at (1) and (2).

Conclusion

35. The Department's finding of "unreported" sales by Latin America which

are subject to sales tax is erroneous. All sales taxes due were paid by the

sister corporation, Richards Sewing Machines. None were due from Latin America.

With respect to use tax, however, Latin America is liable for the payment of use

tax, computed based upon the cost of the sewing machines and other parts it

imported, as derived from its U.S. Corporation Income Tax Returns in the audit

report, without penalty but with interest. The full amount of the assessment

for commercial rentals must also be paid.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions of Law, it is

RECOMMENDED that a Final Order be entered assessing use tax on inventory

imported into Florida, plus interest and for tax due on commercial rentals, with

interest.

DONE and ENTERED this __30th__ day of October, 1990, at Tallahassee,

Florida.

___________________________________

WILLIAM R. DORSEY, JR.

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 __30th__ day of October, 1990.

APPENDIX TO RECOMMENDED ORDER

DOAH CASE NO. 89-0136

Rulings on proposals by Latin America:

1. Discussed in Findings 4, 22 and 25. There is no c redible evidence

that Latin America ever actually sold sewing machines to Richards Sewing

Machines for resale in the domestic market. There was, however, no legal

impediment to doing so.

2. Covered in paragraph 7, 8 and 11.

3. Covered in Findings 17-19.

4. Covered in Finding 10. The proposed findings based on materials which

may have been produced in response to the Department's first request for

production of documents have no bearing on this case, for they were not

introduced into evidence at the final hearing. The testimony that all sales by

Latin America were for export or to other exporters has been accepted.

Rulings on proposals by the Department:

1. Covered in Finding 1.

2. Covered in Finding 2.

3. Rejected as unnecessary.

4. Rejected in Finding 17, although both corporations did file their own

Form 1120s.

5. The methodology is described in Finding 18.

6. The methodology is described in Finding 18.

7. Rejected because State Form DR-15 did not reflect combined sales

figures. See, Findings 19 and 20.

8. Rejected. See, Finding 21, although it is true that Latin America was

not registered as a dealer, see, Finding 7.

9. Adopted in Finding 25.

10. Adopted in Finding 25.

11. Adopted in Finding 27.

12. Adopted in Findings 9 and 10.

13. Adopted in Findings 9, 24 and 25.

14. Adopted in Finding 24.

Copies furnished:

Mark R. Vogel, Esquire

201 South Biscayne Boulevard

Miami Center, Suite 880

Miami, FL 33131

Matt Goldman, Esquire

1001 South Bayshore Drive

Suite 1712

Miami, FL 33131

Linda Miklowitz, Esquire

Lealand L. McCharen, Esquire

Mark T. Aliff, Esquire

Assistant Attorneys General

Department of Legal Affairs

Tax Section, The Capitol

Tallahassee, FL 32399-1050

William D. Moore, General Counsel

Department of Revenue

203 Carlton Building

Tallahassee, FL 32399-0100

J. Thomas Herndon, Executive Director

Department of Revenue

104 Carlton Building

Tallahassee, FL 32399-0100

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS:

All 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 agency that will issue the final

order in this case concerning agency rules on the deadline for filing exceptions

to this Recommended Order. Any exceptions to this Recommended Order should be

filed with the agency that will issue the final order in this case.