89-005744 Vogue Fashion Shoppe vs. Department Of Revenue Status: Closed Recommended Order on Monday, July 16, 1990.

Summary: Recommend compromise of assessment penalties due to circumstances surrounding late reporting department without statute to file the warrant placed in public record.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

VOGUE FASHION SHOPPE, )

)

Petitioner, )

)

vs. ) CASE NO. 89-5744

)

DEPARTMENT OF REVENUE, )

)

Respondent. )

___________________________________)

RECOMMENDED ORDER

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

designated Hearing Officer, Veronica E. Donnelly, held a formal hearing in the

above-styled case on April 12, 1990, in Naples, Florida.

APPEARANCES

For Petitioner: William H. Kaverman, Qualified

Representative

3115 Gulfshore Boulevard North

Apartment #709

Naples, Florida 33940

For Respondent: Vern D. Calloway, Jr.

Assistant Attorney General

Department of Legal Affairs

The Capitol

Tallahassee, Florida 32399

STATEMENT OF THE ISSUES

Whether the interest and penalty assessed against the Petitioner for

failure to timely pay the corporate intangible property tax due for 1987 and

1988 should be sustained.

PRELIMINARY STATEMENT

On August 31, 1989, the Respondent, Department of Revenue (the Department)

issued a Notice of Decision that required Petitioner, Vogue Fashion Shoppe

(Vogue) to pay a delinquency penalty and interest on corporate intangible

property taxes that had not been timely paid in 1987 and 1988.

By letter dated October 16, 1989, the Petitioner requested a formal

administrative hearing to contest the assessment of penalties and interest on

the tax payments. It was the Petitioner's contention that the failure to

timely pay the taxes was due to reasonable cause and not willful neglect or

fraud. Based upon the circumstances surrounding the late payments, the

Petitioner seeks a compromise or settlement of the assessment.

During the hearing, the Petitioner presented one witness, Mr. Kaverman, who

testified on behalf of the corporation. An exhibit, marked Petitioner's Exhibit

#1, was rejected as hearsay. The Petitioner was allowed to proffer the exhibit

into evidence. The Department called one witness and filed one exhibit, which

was admitted into evidence.

The transcript of the proceedings was filed on June 7, 1990. A proposed

recommenced order was timely filed by the Department on June 15, 1990. The

Petitioner waived the right to present proposed findings of fact in addition to

the case presented at hearing. Rulings on the proposed findings of fact

submitted by the Department are in the Appendix of the Recommended Order.

STATEMENT OF FACTS

1. s , V o g u e F a s h i o n S h o p p e h a s o p e r a t r e a y  F o r a p p r o x i m a t e l y t w e n t y - e i g h t e d

in Naples, Florida. It has been owned and operated by Wilmar, Inc., a small

private corporation that has had the same shareholders and corporate officers

since its inception.

2. , W i l l i a m H . K a v s e m a n , P r e s i d e n t r o s n  D u r i n g t h e o p e e r t i o n o f t h e b u s i a f

Wilmar, Inc., has continuously taken pride in promptly paying all bills and any

tax assessments the corporation has receivedaditionally, the corporation

has paid its corporate intangible property taxes in January of each year, six

months before the taxes are due.

3. i d n o t m a i l V o d g e t h e c o r p o r a u t n e  I n 1 9 8 7 a n d 1 9 8 8 , t h e D e p a r t m t e

intangible property tax forms as it had done since 1962. When Mr. Kaverman did

not receive the forms, he assumed a tax payments were not required in these

particular years. As all of the other forms for various local, state and

federal taxes continued to arrive, Mr. Kaverman did not seek further information

to either confirm to refute his assumption.

4. a r n e d t h a t t h e e o r p o r a t i o n w c a l u  D u r i n g a n a u e d t i n 1 9 8 9 , V o g i s

required to pay corporate intangible property taxes in 1987 and 1988. Once it

was established that taxes were due, they were promptly paid. However, the

Petitioner, through Mr. Kaverman, believed the penalty and interest of $564.02

was too severe under the circumstances. Mr. Kaverman, who is eighty years old,

has always paid taxes promptly. The failure to pay the taxes in question was an

error of omission. Based upon his long-standing reputation and payment habits,

a penalty of five percent per month and interest of one percent per month

appeared unreasonable to Mr. Kaverman.

5. c o m p r o m i s e o a f h e i n t e r e s t a t r o f  I n g o o d f a i t h , V o g u e a p p l i e d n d

penalty assessed based upon a long record of compliance and the fact that

nonpayment was inadvertent.

6. e p e n a l t y a n d i n t e r e s t s h o u l d h t t o  W h i l e t h e i s s b u o f w h e t h e r o r n e e

assessed was pending within the Division of Administrative Hearings, the

Department filed a tax warrant in the Public Records of Collier County. This

warrant stated that $584.02 was due and unpaid, is now delinquent, and is

subject to collection, as provided by law.

7. s s e s s m e n t o f a n a d d i t i o n a l $ 2 2 . a n a s  C o n t a i n e d w i t 0 h n t h e w a r r a n t w a i 0

for the filing of the warrant. The warrant commanded the Clerks of the Circuit

Courts and the Sheriffs of the State to levy upon, and sell the corporation's

real and personal property, and to pay the Department the money collected from

the proceeds. The costs of executing the warrant and the forced sale were also

ordered to be paid from the sale of the property.

CONCLUSIONS OF LAW

8. The Division of Administrative Hearings has jurisdiction over the

parties and the subject matter of this proceeding pursuant to Sections 120.57(1)

and 72.01, Florida Statutes.

Section 214.40(1), Florida Statutes states:

(1) In case of failure to file any tax return

required under laws made applicable to this chapter

. s a p e n a l t a y o t h e a m o u t d e d  .  .  t h e r e s h a l l b e a d n t

of tax due with such return 5 percent of the amount of

such tax, if the failure is not more than 1 mo

an additional 5 percent for each month or

thereof during which such failure conti

exceeding 25 percent in the aggregate. The d

may settle or compromise such penalties pu

s.213.21 .  .  .

Section 213.21, Florida Statutes provides as follows,

in pertinent part:

(3) o r a n y .  .  .  i n t e r e f y t i  A t a x p a y s e ' s l i a b i l r t

. t h e d e p a r y t e n t u p o n t m h b e  .  . m a y b d e o m p r o m i s c e

grounds of doubt as to liability for or collecting of

such . y e r ' s l i a b i l i t y f a o p a  .  . i n t e r e s t . A t x r

penalties . o m p r o m c i e d i f i t s r o d  .  . m a y b e s e t t l e i s

determined by the department that the noncompliance is

due to reasonable cause and not to willful negligence,

willful neglect, or fraud.

(5) l e s t a b l l s h b y r u i l a s  T h e d e h p r t m e n t a e

guidelines and procedures for implementation of this

section.

9. The rules promulgated by the Department which provide guidelines for

the settlement or compromise of interest and penalties are found in Chapter 12-

13, Florida Administrative Code.

10. Rule 12-13.005, Florida Administrative Code, sets forth grounds for

finding doubt as to liability for interest payments on taxes owed. A review of

the grounds demonstrates that Vogue is not eligible for a compromise of the

interest payment under Rule 12-13.005(1)(b), Florida Administrative Code, which

reads:

Ignorance of the law or an erroneous belief as to the

need to comply with a revenue law does not constitute a

reasonable construction or interpretation of the

revenue law or rules of the Department unless there are

facts and circumstances which indicate ordinary care

and prudence were exercised by the taxpayer and there

is reasonable doubt as to whether compliance is

required in view of conflicting rulings, decisions, or

ambiguities in the law.

11. In this case, the evidence presented did not demonstrate that Vogue

exercised ordinary care and prudence when the corporation relied on the

Department's mailing of forms to indicate that a filing and tax payment were

required. Accordingly, the interest assessed on the tax should be sustained.

12. Rule 12-13.007, Florida Administrative Code, sets forth the grounds

for reasonable cause for compromise of penalties. The burden upon a taxpayer to

show that penalties should be compromised is a lesser burden than the one set

forth in the rule regarding the possible compromise of interest. Rule 12-

13.007(2), Florida Administrative Code, provides as follows, in pertinent part:

Reasonable cause is indicated by the existence of

facts and circumstances which support the exercise of

ordinary care and prudence on the part of the taxpayer

in complying with the revenue laws of this state.

Depending upon the circumstances, reasonable cause may

exist even though the circumstances indicate that

slight negligence, inadvertence, mistake or error

resulted in noncompliance.

13. The facts indicate that Vogue relied on the Department to advise the

corporation of the deadlines on filings and tax payments. Although this type of

shifting of responsibilities is erroneous, it is clear that this slight

negligence by the corporation's eighty-year old president resulted in

noncompliance by Vogue. The company's long-standing reputation as a taxpayer

who promptly pays all its taxes, and the twenty-five year course of dealings

that contributed to the taxpayer's reliance on the Department, should be

considered under the particular circumstances of this case. Such factors are

allowed to be considered by the Department under Rule 12-13.008(5), Florida

Administrative Code, which sets forth the procedures for compromise and

settlement. Accordingly, the late reporting penalty of five percent per month,

which has been assessed against Vogue, should be compromised. The Hearing

Officer recommends a compromise of $100.00 for each year because this amount is

the late reporting penalty charged under Section 199.282(6)(a), Florida

Statutes, and it appears fair under the circumstances.

14. Under the circumstances proved at hearing, Vogue should not be

responsible for the $22.00 filing fee on the warrant filed in the Public Records

of Collier County, Florida. At hearing, the Petitioner proved that the

administrative hearing had been undertaken to review the payment of interest and

penalties. Section 214.51(1), Florida Statutes, which relates to collection

procedures, provides:

. n p a i d f o r 1 0 d a y s a f t u s n i  .  .  I f s e u h t a x r e m a c r

. n o p r o c e e d i n g s h a v e b e d n a e  .  . d e m a n e d a s b e e n m a d h n

taken to review the same, the department may issue a

warrant directed to any sheriff . a s g n i d n i a m o c .  .  m d

sheriff . e r e h t l l e s d n a a n p u y v e l o t .  .  o l

and personal property of the taxpayer found within his

jurisdiction for the payment of the amount thereof

including penalties, interest, and the cost of

executing the warrant. d e d d a s i s . a p m E [ .  .  h ]

Prior to the resolution of this case through the formal administrative

hearing process, the Department was without jurisdiction to issue the warrant.

RECOMMENDATION

Based upon the foregoing, it is RECOMMENDED:

1. e r e s t a s s e s s e d o n t h e c o r p o r a t i t n i e  T h a t V o g u e b e o o b i g a t e d t o p a y t h l n

for failure to timely pay the corporate intangible property tax due for 1987 and

1988.

2. r e d u c e d b y $ 2 0 0 . 0 0 a s a c o m p r o m i e s b n  T h a t V o g u e ' s p e n a l t y a s s e s s m e t e

of assessment penalties due to the circumstances surrounding the corporation's

late reporting. This reduction reflects the removal of the late reporting

penalty by $100.00 for each year.

3. $ 2 2 . 0 0 f i l i n g e f e f o r t h e w a r r a e h t y  T h a t V o g u e n o t b e r e q u i r e d t o p a n t

that was filed by the Department, without statutory authority to do so, the

Public Records of Collier County. Any other costs surrounding the warrant,

including its removal from the public records, should not be borne by the

Petitioner.

DONE and ENTERED this __16th__ day of July, 1990, in Tallahassee, Leon

County, Florida.

___________________________________

VERONICA E. DONNELLY

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 __16th__ day of July,

1990.

APPENDIX TO RECOMMENDED ORDER

IN CASE NO. 89-5744

The Respondent's proposed findings of fact are addressed as follows:

1. # d n a 1 # O H e e S . d e t t i m d A  2 .

2. # d n a 3 # O H e e S . d e t c e j e R  4 .

3. Accepted. See HO #4.

4. Rejected. Irrelevant in these proceedings.

Copies furnished:

William H. Kaverman, Qualified

Representative

3115 Gulfshore Boulevard North

Apartment #709

Naples, Florida 33940

Vern D. Calloway, Jr., Esquire

Assistant Attorney General

Department of Legal Affairs

The Capitol

Tallahassee, Florida 32399

Lealand L. McCharen, Esquire

Assistant Attorney General

Tax Section, Capitol Building

Tallahassee, Florida 32399-1050

William D. Moore, Esquire

General Counsel

Department of Revenue

203 Carlton Building

Tallahassee, Florida 32399

J. Thomas Herndon

Executive Director

Department of Revenue

104 Carlton Building

Tallahassee, Florida 32399-1000