91-005338RP Family Arcade Alliance vs. Department Of Revenue Status: Closed DOAH Final Order on Tuesday, March 17, 1992.

Summary: Rule challenge for failure to prepare economic impact statements, unconstitutionally impairing oral contracts and exceeding authority dismissed.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FAMILY ARCADE ALLIANCE, )

)

Petitioner, )

)

vs. ) CASE NOS. 91- 5338RP

) 91- 5339RP

DEPARTMENT OF REVENUE, ) 91- 5340RP

)

Respondent. )

_________________________________)

FINAL ORDER

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

designated by the Division of Administrative Hearings, on December 18, 1991, in

Tallahassee, Florida.

APPEARANCES

For Petitioner: Juana M. Rojas, Esquire

Richard A. Nielsen, Esquire

Salem, Saxon & Nielsen

101 East Kennedy Boulevard, Suite 3200

Post Office Box 3399

Tampa, Florida 33601

For Respondent: James McAuley, Esquire

Ralph Jaeger, Esquire

Office of the Attorney General

Tax Section, Capitol Building

Tallahassee, Florida 32399-1550

STATEMENT OF THE ISSUES

The issues are whether proposed rules 12-18.008, 12A-15.001 and 12A-1.044,

Florida Administrative Code, are valid exercises of delegated legislative

authority.

PRELIMINARY STATEMENT

These proceedings were filed to challenge three proposed rules of the

Department of Revenue and were consolidated. The proposed rules amend current

Rules 12A-15.011 and 12A-1.044, and create Rule 12A-18.008. Together they set

up procedures which will govern the collection of sales tax on use of a broad

range of coin-operated amusement machines. The tax was imposed by the

Legislature with the enactment of Chapter 91-112, Laws of Florida. Sections 170

and 171 of that Act created or amended Section 212.02 and 212.05(1)(j)1, Florida

Statutes (1991). The term "coin-operated amusement machine" is defined in

Section 170 of the Act, and was codified as Section 212.02(25), Florida Statutes

(1991).

The issue Petitioners press most strongly is whether the rules are invalid

because the Department failed to prepare adequate economic impact statements for

them. The next issues are whether subsections 9 and 10 of proposed Rule 12A-

1.044, Florida Administrative Code, are constitutionally invalid because they

impair obligations of oral contracts, and whether subsection 10 exceeds the

scope of the Department's rulemaking authority by characterizing agreements to

place machines on real property as leases or licenses to use real property. The

third group of issues are whether changes to the proposed rules, which were

published on October 18, 1991, themselves are invalid exercises of delegated

legislative authority because they impose unreasonable recordkeeping burdens.

The final issue is whether the failure to define the term "coin-operated

amusement machine" the same way in all three proposed rules renders the rules

invalid.

The parties filed a prehearing stipulation on December 17, 1992. The mixed

issues of law and fact in dispute were framed in part 3(g) of the prehearing

stipulation in this way:

1. Whether the Department of Revenue

considered the impact of Rules 12A-15.011,

12-18.008, and 12A-1.044, on small business

as defined in the Florida Small and Minority

Business Assistance Act of 1985 pursuant to

section 120.54(2)(a).

2. Whether the Department of Revenue,

pursuant to section 120.54(2)(a), tiered

the rules to reduce disproportionate impact

on small business and considered the

following methods for reducing the impact

of the proposed rules on small businesses:

(a) Establishing less stringent compliance

or reporting in the rule for small businesses.

(b) Establishing less stringent schedules or

deadlines in the rule for compliance or

reporting requirements for small businesses.

(c) Consolidating or simplifying the rules'

compliance or reporting requirements for small

businesses.

(d) Establishing performance standards to

replace design or operational standards in the

rules for small businesses.

(e) Exempting small businesses from any or

all requirements of the rule.

3. Whether the Department of Revenue prepared

and provided in its proposed action an economic

impact statement which complies with section

120.54(2)(b), Fla. Stat.

4. Whether proposed Rules 12A-1.044, 12-18.008,

12A-15.011 are an invalid exercise of delegated

legislative authority pursuant to sections

120.52(8) and 120.54(4)(a) in their failure to

include the same definition of "coin-operated

amusement machine." Proposed Rule 12A-1.004(1)(b)1.

defines "coin-operated amusement machine" as follows:

Any machine operated by coin, slug, token,

coupon or similar device for the purposes of

entertainment or amusement. Amusement machines

include but are not limited to, coin-operated

radio and televisions, telescopes, pinball

machines, music machines, juke boxes, mechanical

games, video games, arcade games, billiard tables,

moving picture viewers, shooting galleries,

mechanical rides and all other similar amusement

devices.

Rule 12-18.008, however, in its definition of

"coin-operated amusement machine" excludes

radio, television and telescopes. That definition

states as follows: (1)(b) for the purposes of

these Rules, "coin-operated amusement machine"

means any machine operated by coin, slug, token,

coupon or similar device for the purpose of

entertainment or amusement. The term includes, but

is not limited to, coin-operated pinball machines,

music machines, juke boxes, mechanical games, video

games, arcade games, billiard tables, moving picture

viewers, shooting galleries and all other similar

amusement devices.

Rules 12A-15.011 provides no definition at all of

"coin-operated amusement machines".

The above failures in the proposed rules to

consistently, fully, and adequately define

"coin-operated amusement machine" present an

issue as to whether the rules are arbitrary

and capricious, vague, fail to establish

adequate standards for agency decisions, and

evidence an invalid exercise of delegated

legislative authority pursuant to sections

120.52(8) and 120.54(4)(a), Fla. Stat.

Additional legal issues were identified in part 3(h) of the Prehearing

Stipulation and are discussed in the Conclusions of Law.

Twenty-six exhibits including some depositions were received in evidence.

Petitioners presented during the hearing the testimony of Brian McGavin, Ph.D.,

Buzz McKown, Scott Neslund, Tom Poplar and Elton Scott, Ph.D. Dr. Scott

testified as an expert in financial economics. Mr. Neslund testified as an

expert about the nature and structure of the coin-operated amusement industry.

The Department presented testimony from Buzz McKown, Brian McGavin, Ph.D., and

James Francis, Ph.D.

The transcript of the hearing was filed on January 23, 1992, and the

parties filed their proposed final orders thirty days later. Rulings on

proposed findings of fact are made in the appendix to this final order.

FINDINGS OF FACT

A. The Parties

1. The Family Arcade Alliance (Alliance) is a group composed primarily of

businesses that operate amusement game machines in the State of Florida which

are activated either by token or coin. The parties agree that the Alliance is a

substantially affected person as that term is defined in Section 120.54(4)(a),

Florida Statutes (1991), and has standing to maintain these proceedings.

2. The Department of Revenue (Department) is the entity of state

government charged with the administration of the revenue laws.

B. The Tax and the Implementing Rules

3. Except for the period the services tax was in force, no sales tax had

been imposed on charges made for the use of coin-operated amusement machines

before the enactment of Chapter 91-112, Laws of Florida, which became effective

on July 1, 1991. The Act imposed a 6 percent sales tax on each taxable

transaction. Coin-operated amusement machines found in Florida are typical of

those machines throughout the United States. The charges for consumer use of

the machines are multiples of twenty-five-cent coins, i.e., 25 cents, 50 cents,

75 cents, and one dollar.

4. The sales tax is most often added to the sale price of goods, but it is

not practicable for the sellers of all products or services to separately state

and collect sales tax from consumers. For example, there is no convenient way

separately to collect and account for the sales tax on items purchased from

vending machines such as snacks or beverages, or from newspaper racks.

5. For these types of items, a seller reduces the price of the object or

service sold, so that the tax is included in the receipts in the vending

machine, newspaper rack or here, the coin-operated amusement machine.

6. There are subtleties in the administration of the sales tax which are

rarely noticed. The sales tax due on the purchase of goods or services is

calculated at the rate of 6 percent only where the purchase price is a round

dollar amount. For that portion of the sales price which is less than a dollar,

the statute imposes not a 6 percent tax, but rather a tax computed according to

a specific statutory schedule:

Amount above or below Sales tax

whole dollar amount statutorily imposed

1-9 0

10-16 1

17-33 2

34-50 3

51-66 4

67-83 5

84-100 6

Section 212.12(9)(a) through (h), Florida Statutes (1991). In most transactions

the effect of the schedule is negligible and the consumer never realizes that

the tax rate is greater than 6 percent for the portion of the sales price that

is not a round dollar amount.

7. Where a very large percentage of sales come from transactions of less

than a dollar, the statutory schedule for the imposition of the sales tax takes

on a greater significance. For those transactions between 9 cents up to a

dollar the schedule's effective tax rate is never below the nominal tax rate of

6 percent, and may be as high as 11.76 percent. For example, the 1 cent sales

tax on a 10 cent transaction yields an effective tax rate of 10 percent, not 6

percent.

8. Where it is impracticable for businesses in an industry to separately

state the tax for each sale, the statutes permit sellers (who are called

"dealers" in the language of the statute) to file their tax returns on a gross

receipts basis. Rather than add the amount of the tax to each transaction,

taxes are presumed to be included in all the transactions and the dealer

calculates the tax based on his gross receipts by using the effective tax rate

promulgated by the Department in a rule. See Section 212.07(2), Florida

Statutes (1991). Businesses also have the option to prove to the Department

that in their specific situation the tax due is actually lower than a rule's

effective tax rate for the industry, but those businesses must demonstrate the

accuracy of their contentions that a lower tax is due.

9. Applying the statutory tax schedule to sales prices which are typical

in the amusement game machine industry (which are sometimes referred to as

"price points") the following effective tax rates are generated at each price

point:

Total Sales Presumed Presumed Effective

Price Selling Price Sales Tax Tax Rate

25 cents 23 cents 2 cents 8.7%

50 cents 47 cents 3 cents 6.38%

75 cents 70 cents 5 cents 7.14%

$1.00 94 cents 6 cents 6.38%

10. The determination of an effective tax rate for an industry as a whole

also requires the identification of industry gross receipts from each of the

price points. Once that effective tax rate is adopted as a rule, the Department

treats dealers who pay tax using the effective tax rate as if they had remitted

tax on each individual transaction.

11. Proposed Rule 12A-1.044 establishes an industry-wide effective tax

rate for monies inserted into coin-operated amusement machines or token

dispensing machines of 7.81 percent. For counties with a one half or one

percent surtax, the effective tax rates are 8.38 percent and 8.46 percent

respectively. These rates include allowances for multiple plays, i.e., where

the consumer deposits multiple coins to activate the machine.

12. Proposed Rule 12A-1.044(1)(b) defines coin-operated amusement machines

as:

Any machine operated by coin, slug, token, coupon or

similar device for the purpose of entertainment or

amusement. Amusement machines include, but are not

limited to, coin-operated radio and televisions,

telescopes, pinball machines, music machines, juke

boxes, mechanical games, video games, arcade games,

billiard tables, moving picture viewers, shooting

galleries, mechanical rides and all similar amusement

devices.

13. Proposed Rule 12-18.008 contained a definition of "coin-operated

amusement machines" when the rule was first published which was essentially

similar, but that rule's nonexclusive list of amusement machines did not include

radios, televisions or telescopes. The Department has prepared a notice to be

filed with the Joint Administrative Procedures Committee conforming the

definitions so they will be identical. The current differences found in the

nonexclusive descriptive lists are so slight as to be inconsequential. The

Petitioners have failed to prove any confusion or ambiguity resulting from the

differences that would impede evenhanded enforcement of the rule.

14. Proposed Rule 12A-15.011 did not contain a separate definition of

coin-operated amusement machines.

15. Owners of amusement machines do not always own locations on which to

place them. Machine owners may go to landowners and lease the right to place

their machines on the landowner's property. The transaction becomes a lease of

real property or a license to use real property. Sometimes owners of locations

suitable for the placement of amusement machines lease machines from machine

owners. Those transactions become leases of tangible personal property. Both

transactions are subject to sales tax after July 1, 1991. Proposed rules 12A-

1.044(9)(c), (d) and 10(a), (c) prescribe which party to the leases of real

estate or personal property will be responsible to collect, report and remit the

tax.

16. Under subsection 9(d) of proposed rule 12A-1.044, sales tax will not

be due on any payment made to an owner of an amusement machine by the owner of

the location where that machine is placed if: a) the lease of tangible

personalty is written, b) the lease was executed prior to July 1, 1991, and c)

the machine involved was purchased by the lessor prior to July 1, 1991. The tax

will be effective only upon the expiration or renewal of the written lease.

Similarly, proposed 12A-1.044(10)(d) provides that sales tax will not be due on

written agreements for the lease of locations to owners of amusement machines

if: a) the agreement to rent the space to the machine owner is in writing, and

b) was entered into before July 1, 1991. At the termination of the lease

agreement, the transaction becomes taxable.

C. Changes to the proposed rules

17. The Department published changes to the proposed rule 12A-1.044(3)(e)

on October 18, 1991, which prescribed additional bookkeeping requirements on

any amusement machine operators who wished to avoid the effective tax rate

established in the proposed rule, and demonstrate instead a lower effective tax

rate for their machines. The significant portions of the amendments read:

1. In order to substantiate a lower effective tax

rate, an operator is required to maintain books and

records which contain the following information:

* * *

b. For an amusement machine operator, a list

identifying each machine by name and serial number, the

cost per play on each machine, the total receipts from

each machine and the date the receipts are removed from

each machine.

2. If an operator establishes a lower effective tax

rate on a per vending or amusement machine basis, the

operator must also establish an effective tax rate for

any machine which produces a higher rate than that

prescribed in this rule.

3. Operators using an effective rate other than the

applicable tax rate prescribed within this rule must

recompute the rate on a monthly basis. (Exhibit 6, pg.

4-5)

There was also a change noticed to subsection (e) of

the proposed rule 12A-1.044, which reads:

(e) For the purposes of this rule, possession of an

amusement or vending machine means either actual or

constructive possession and control. To determine if a

person has constructive possession and control, the

following indicia shall be considered: right of access

to the machine; duty to repair; title to the machine;

risk of loss from damages to the machine; and the party

possessing the keys to the money box. If, based on the

indicia set out above, the owner of the machine has

constructive possession and control, but the location

owner has physical possession of the machine, then the

operator shall be determined by who has the key to the

money box and is responsible for removing the receipts.

If both the owner of the machine and the location owner

have keys to the money box and are responsible for

removing the receipts, then they shall designate in

writing who shall be considered the operator. Absent

such designation, the owner of the machine shall be

deemed to be the operator. (Exhibit 6, pg. 1-2)

D. The Amusement Game Machine Industry

18. All operators must be aware of how much money an amusement machine

produces in order to determine whether it should be replaced or rotated to

another location when that is possible, for if games are not changed over time,

patrons become bored and go elsewhere to play games on machines which are new to

them. The sophistication with which operators track machine production varies.

It is in the economic self interest of all operators to keep track of the

revenues produced by each machine in some way.

19. In general, amusement game machine businesses fall into one of three

categories: free standing independent operators, route vendors, and mall

operators. Free standing independent operators have game arcades located in

detached buildings, and offer patrons the use of amusement machines much in the

same way that bowling alleys are usually freestanding amusement businesses.

Like bowling alleys, they are designed to be destinations to which patrons

travel with the specific purpose of recreation or amusement. They are usually

independent businesses, not franchises or chains. Route operators place

machines individually or in small numbers at other businesses, such as bars or

convenience stores. People who use the machines are usually at the location for

some other purpose. Those games are maintained on a regular basis by an

operator who travels a route from game location to game location. The route

operator or the location owner may empty the machine's money box. Mall operators

tend to be parts of large chains of amusement game operators who rent store

space in regional shopping malls. The mall is the patron's destination, and the

game parlor is just one of the stores in the mall.

20. Amusement machines are operated by either coin or by token. About 75

percent of independent amusement game operators use coin-operated machines.

About 75 percent of the large chain operators found in malls use tokens. The

cost of converting a coin-activated amusement machine to a token-activated

amusement machine is about thirty dollars per machine. The mechanism costs $10

to $12, the rest of the cost comes from labor. Token operators must buy an

original supply of tokens and periodically replenish that supply. The use of

tokens enhances security because it gives the operator better control over their

cash and permits the operator to run "promotions," for example, offering 5

rather than 4 tokens for a dollar for a specific period in an attempt to

increase traffic in the store. Depending on the number purchased, tokens cost

operators between 5 and 10 cents each.

21. Token-activated machines accept only tokens. Coin-operated machines

only accept a single denomination of coin. Change machines generally accept

quarters and one, five and ten dollar bills. A change machine may be used

either to provide players with quarters, which can be used to activate coin-

operated machines, or they can be filled with tokens rather than quarters, and

become a token dispenser. In a token-operated amusement location, the only

machines which contain money are the change machines used to dispense tokens.

The game machines will contain only tokens.

22. Token machines record the insertion of each coin and bill by an

internal meter as a domination of coin or currency is inserted. Token

dispensing machines record their receivables as follows: when one quarter is

inserted, the machine records one transaction. When a fifty-cent piece is

inserted, the machine records one transaction. When three quarters are

inserted, the machine records three transactions. When a dollar bill is

inserted, the machine records one transaction. When a five dollar bill is

inserted, the machine records one transaction. When a ten dollar bill is

inserted, the machine records one transaction. Token machine meters record

separately for each domination the total number of times coins or currency of

each domination are deposited in the machine.

23. The internal meters of token dispensing machines do not distinguish

between insertion of several coins or bills by one person and the insertion of

singular coins or bills by several persons. Token dispensing machines cannot

distinguish the insertion of four quarters by one person on a single occasion

from the insertion of one quarter by each of four persons at four different

times.

24. Similarly, the internal meters of amusement machines activated by coin

rather than by token do not distinguish between insertion of several coins or

bills by one person and the insertion of single coins or bills by several

persons. Machines which are coin-activated also do not distinguish between the

insertion of four quarters by one person at one time or the insertion of one

quarter by each of four persons at different times.

25. Coin-operation has certain cost advantages. The operator avoids the

cost of switching the machine from coin to token operation, for machines are

manufactured to use coins, and avoids the cost of purchasing and replenishing a

supply of tokens. The operator does not risk activation of his machine by

tokens purchased at another arcade, which have no value to him, and can better

take advantage of impulse spending.

26. Coin-operated machines do not have a separate device for collecting

tax and it is not possible for an operator to fit games with machinery to

collect an additional two cents on a transaction initiated by depositing a

quarter in a machine.

27. There are alternative methods available to operators of amusement game

machines to recapture the amount of the new sales tax they may otherwise

absorb.1 One is to raise the price of games. This can be done either by

setting the machines to produce a shorter play time, or to require more quarters

or tokens to activate the machines. Raising the prices will not necessarily

increase an operator's revenues, because customers of coin-operated amusement

businesses usually have a set amount of money budgeted to spend and will stop

playing when they have spent that money. In economic terms, consumer demand for

amusement play is inelastic. Amusement businesses could also sell tokens over-

the-counter, and collect sales tax as an additional charge, much as they would

if they sold small foods items over the counter such as candy bars. Over-the-

counter sales systems significantly increase labor costs. An amusement business

open for 90 hours per week might well incur an additional $30,000-a-year in

operating costs by switching to an over-the-counter token sales system.

28. In a small coin-operated business, the operator often removes the

receipts by emptying the contents of each machine into a larger cup or

container, without counting the receipts from each machine separately because it

is too time consuming to do so. But see Finding 17 above.

29. With a token-operated business, the operator can determine the

percentage of revenue derived from twenty-five cent transactions, as distinct

from token sales initiated by the insertion of one, five or ten dollar bills

into token dispensing machines. The proposed rule has the effect (although it

is unintended) of placing the coin-operated amusement operators at a relative

disadvantage in computing sales tax when compared to the token-operated

businesses. Token operators can establish that they are responsible for paying

a tax rate lower than the 7.81 percent effective rate set in the rule because

many of their sales are for one dollar, five dollars or ten dollars. The

smaller businesses using coin-operated machines do not have the technological

capacity to demonstrate that customers are spending dollars rather than single

quarters. Consequently, coin operators will have an incentive to shift to token

sales rather than pay the proposed rule's higher effective tax rate if a large

percentage of their patrons spend dollars rather than single quarters. For

example, Mr. Scott Neslund is an owner of a small business which has 80

amusement machines at a freestanding token-operated location. He is atypical of

small amusement game operators because 75 percent of them use coin-operated

machines rather than token-operated machines. Mr.  Neslund can demonstrate that

92 percent of his sales are for one dollar or more. By applying the tax rate of

six percent to those transactions, he pays substantially less than the proposed

rule's effective tax rate of 7.81 percent. This is very significant to Mr.

Neslund because over the nine years from 1982 to 1990, his average profit margin

was 7.77 percent. Although a flat 6 percent tax would have consumed 73 percent

of that profit margin, if his businesses were on a coin-operated basis he would

have been required to pay the proposed rule's 7.81 percent effective tax rate,

which would have consumed 93 percent of his profit margin, leaving him with a

very thin profit margin of 1/2 of 1 percent. The difference between a 1/2 of 1

percent profit margin and 2 percent profit margin, on a percentage basis, is a

four hundred percent difference. Mr. Neslund's average profit annually had been

$24,000. The effective tax rate of 7.81 percent would take $22,7000 of that

amount, leaving an average annual profit of only $1,700. It is impossible to

extrapolate from this single example and have confidence in the accuracy of the

extrapolation, however.

E. The Department's Effective Tax Rate Study

30. There is no data for the amusement game industry specific to Florida

concerning the number of transactions occurring at specified price points, but

there is national data available which the Department considered. There is no

reason to believe that the Florida amusement game industry is significantly

different from the national industry. Nationally approximately 80 percent of

all plays and 60 percent of all revenues come from single quarter (twenty-five-

cent) plays.

31. The Department's study used the typical sale prices charged in the

industry and the categories of coin-operated amusement games reported in the

national survey. Using them the Department derived an estimate of revenues by

type of game for Florida.

32. The effective tax rate the Department derived is the Department's best

estimate of the price mix of transactions which occur through amusement

machines. It is not itself an issue in this proceeding. Petitioners' counsel

specifically agreed that they were not contesting the setting of the effective

tax rate at 7.81 percent and presented no evidence that any other effective tax

rate should have been set.

F. The Department's Economic Impact Statement

33. Dr. Brian McGavin of the Department prepared in July 1991 paragraphs

2, 3 and 5 of the economic impact statement for the proposed rules (Exhibits 14,

15 and 16), which concluded that proposed rules 12A-15.001, 12-18.008 and 12A-

1.044 would have no effect on small businesses. The economic impact statements

for all three proposed rules contain identical information and involve the same

issues concerning economic impact. Before drafting the economic impact

statement published with these rules, Dr. McGavin had completed one other

economic impact statement, had used a small manual which gave a general

description of the process for developing economic impact statements and had

discussed the process with another economist, Al Friesen, and his supervisor,

Dr. e c t o r o f t a x r e s e a r c h . D r . F r a n c r i d s  J a m e s F r a n c i s i , h e D e p a r t m e n t ' t s

prepares or reviews more than a dozen economic impact statements annually, and

is well aware of the definition of small businesses found in Section 288.703(1),

Florida Statutes. Dr. Francis reviewed Dr.  McGavin's work and agreed with

Dr.  McGavin's conclusions.

34. Paragraphs 2, 3 and 5 of the economic impact statements for these

rules state:

2. Estimated cost or economic benefits to persons

directly affected by the proposed rule.

The rule establishes effective tax rates for two

categories of machines - 1) amusement machines, 2)

vending machines. Amusement machines were not

previously taxable (except during the Services tax

period).

* * *

The costs of this rule are primarily compliance costs.

The rules establishe several compliance provisions.

1) quarterly sale and use tax reports.

2) submission of supporting information for these

reports on electronic media.

3) affixation of registration certifi-cates to

machines.

4) presentation of certificates by operators to

wholesale dealers.

The filing requirement is obviously an integral and

necessary part of the sales tax collection

process p l y i n g w i l l b e b o r n e m o c f  .  .  .  . b  h e c o s t s o T y

operators. If the operators have previously

computerized their records, the marginal compliance

costs will be negligible. For a small operator who has

not computerized his operations, the costs of minimally

configured PC systems - including software and

training - would be roughly $2,000. This could be a

major expense for a small operator n o d e W  o . .  .  .   t

have data which will permit us to estimate the

proportion of non-computerized operators in this

industry.

3. Effect of the proposed action on competition and on

the open market for employment.

* * *

Given the low labor-intensity of this industry the

overall effect should be very small.

* * *

5. Impact of the proposed action on small business

firms. Small business firms are not affected by the

proposed action. (Exhibits 14, 15 and 16)

35. The Petitioners demonstrated that before Dr.  McGavin prepared the

economic impact statement he did not read section 120.54 on rulemaking and he

did not conduct any industry research or refer to any sources of information on

the amusement game industry in Florida or nationally. He did not use any data

to calculate or measure economic impact, consult text books, or refer to any

outside sources or statistical information, nor did he talk with any industry

experts or representatives. He did not obtain any information about the

industry by distributing questionnaires to those in the industry, nor did he

know whether there were differences in day-to-day operations between large and

small amusement businesses or the different types of accounting and bookkeeping

systems used by small businesses. He had not read Section 288.073, Florida

Statutes, which defines a small business. He did not know the impact the 7.81

percent effective tax rate established by the rule would have on small business,

and he did not analyze the cost difference businesses experienced between the

sale of tokens by machine and the sale of tokens over-the-counter by an

employee.

36. To the extent it even entered into Dr. McGavin's thought process, Dr.

McGavin made the general assumption that token sales would either be made over

the counter, in which case the sales tax could be separately collected, or

possibly by selling fewer tokens per unit of currency.

37. When the Legislature enacted Chapter 91-112, Laws of Florida, and

imposed the tax on the use of coin operated amusement machines, it did not

provide for any phasing in of the tax, nor for any tiering of the tax based on

the size of the taxpayers. Nothing in the language of the statute imposing the

tax indicates that the Legislature believed that there was a distinction to be

made in the taxation of larger and smaller businesses which provide the same

service, viz, use of amusement machines.

38. The Department does permit certain accommodations to businesses which

have a small volume of sales. A business may report quarterly rather than

monthly if its tax liability is less than $100 for the preceding quarter, and if

the tax liability is less than $200 for the previous six months, a dealer may

request semiannual reporting periods. Regardless of size, a business with more

than one location in a county may file one return. Both of these provisions may

lessen the burden of complying with the tax imposed on the use of coin-operated

amusement machines.

G. The Economic Impact Analysis Performed

For The Challengers By Dr. Elton Scott

39. Dr. Elton Scott is an economist and a professor at the Florida State

University. The Petitioners engaged him to evaluate the economic impact

statement the Department had prepared when these proposed rules were published.

After conducting his own analysis, Dr. h c i h w n i t r o p e r a e t o r w t t o c S  h e

determined that the Department's economic impact statement was deficient.

According to Dr. Scott, one must understand an industry to determine whether an

economic impact flows from a regulation and to determine the magnitude of any

impact or the differential impact the regulation may have on large and small

businesses. To prepare his own economic impact analysis, Dr. Scott first

obtained information about the operational characteristics of the industry by

speaking directly with a handful of industry members. He developed a

questionnaire that tested the experience and background of operators so that he

could evaluate the reliability or accuracy of information he received from them.

He then asked additional questions about the operators' individual businesses

and questions about differences between large and small operators within the

industry.

40. Dr. Scott's testimony outlines the factors which should be used to

make an economic impact statement as useful as possible, but his testimony does

not, and cannot, establish minimum standards for what an economic impact

analysis should contain. Those factors are controlled by the Legislature, and

no doubt the requirements imposed on agencies could be more onerous, and if

faithfully followed could produce more useful economic impact statements.

41. The economic impact small businesses will bear is caused by the

statute, not by the implementing rule, with the possible exception of the

electronic filing requirement, which has not been challenged in any of the three

proceedings consolidated here. Large businesses have several advantages over

smaller ones. Large businesses have sophisticated accounting systems, whether

they use token or coin-operated machines, which allow tracking not only of gross

receipts but kinds of plays, which enhance the operator's ability to establish

that the tax due is lower than the effective tax rate, while the less

sophisticated systems of metering receipts in coin-operated small businesses

require reliance on the effective tax rates. (Exhibit 9 pg. 4) Large businesses

may extend the useful life of a game machine by rotating the machine from one

location to another, may deal directly with manufactures in purchasing a larger

number of games or machines and therefore obtain more favorable discounts.

Small businesses cannot rotate games if they have only one location, and

purchase at higher prices from manufactures. In general, smaller businesses

have lower profit margins than larger businesses. All of these advantages exist

independently of any rule implementing the sales tax statute.

CONCLUSIONS OF LAW

42. The Division of Administrative Hearings has jurisdiction over this

matter. Section 120.54(4), Florida Statutes (1991).

43. The Florida Legislature imposed a tax on charges for the use of coin-

operated amusement machines when it enacted Chapter 91-112, Laws of Florida, and

created Section 212.05(1)(j), Florida Statutes (1991). The tax is levied on

each transaction, whenever a customer activates a machine through the use of

coins or currency or purchases tokens from a token dispensing machine (which in

reality is nothing more than a change machine).

44. The sales tax statutes permit establishment of effective tax rates as

a practical accommodation to the difficulty presented where a seller cannot

state and collect separately the tax for each transaction. The promulgation of

a rule setting an effective tax rate furthers the purpose of the legislation

imposing a sales tax upon the use of coin-operated amusement machines, and is

authorized by Section 212.05(1)(j)6. and 212.07(2), Florida Statutes (1991).

Tax on Coin Operation

45. The Petitioners' argument that Section 212.05(1)(j)1.authorizes the

sales tax on charges only "when a machine is activated by a slug, token, coupon

or any similar device which has been purchased" but does not authorize the

imposition of sales tax if the machine is activated by coin is not well taken.

One must read the statutory definition of "coin-operated amusement machine" in

Section 170 of Chapter 91-112, Laws of Florida, with the quoted language

Petitioners rely upon. The definition of coin-operated amusement machine found

in Section 212.02(25), Florida Statutes, includes "any machine operated by

coin h i n e s i s t a x e d u n d e r t h e s t a t u t o c r a d  .  .  . " T h e u s e o f c o i n - o p e r a t e m y

language found in the first sentence of Section 212.05(1)(j)1, Florida Statutes

(1991), which reads "effective July 1, 1991, a tax is imposed at the rate of six

percent on the charges for the use of coin-operated amusement machines."

Economic Impact Statement

46. Section 120.54(2)(a), Florida Statutes (1991), requires that when

enacting a rule, the agency consider the impact of the proposed action on small

businesses as defined in the Small and Minority Business Assistance Act of 1985,

Section 288.703(1), Florida Statutes (1991). The businesses defined are those

which employ 25 for fewer permanent, full-time employees, and which have a net

worth of not more than 1 million dollars. With respect to sole proprietorships,

the 1 million dollar net worth requirement includes both personal and business

investments.

47. Dr. McGavin may not have been aware of the requirements of the Florida

Small and Minority Business Assistance Act, but his supervisor, Dr. Francis,

was. The requirement was considered by the agency through the review by Dr.

Francis. The rulemaking statute sets out specific factors which the agency must

address in its economic impact statement. See Section 120.54(2)(b)1.-5. Each

factor is specifically addressed in the three economic impact statements which

the Department included with its filings at the time the proposed rules were

published by the Department of State in the Florida Administrative Weekly. See

Finding 33.

48. An agency is not always required to provide accommodations to small

businesses. Section 120.54(2)(a) instructs the agency to consider tiering the

rule "to reduce disproportionate impacts on small businesses." That tiering has

no place in a tax implementation rule where the Legislature itself drew no

distinction between large and small businesses but taxed both equally. Neither

are there performance standards involved here which the Department could adjust

for small businesses. Section 120.54(2)(a)4. It certainly could not exempt

small businesses from the tax. See Section 120.54(2)(a)5. The agency did make

an attempt to accommodate the needs of small businesses when it adopted the

provision which permits businesses which owe a small amount of tax to file

reports quarterly or semiannually rather than monthly. See Finding 37. These

accommodations apply to all sales tax dealers, and while not developed solely

for the benefit of small businesses which provide coin-operated amusement

services, they do enjoy the benefit of those accommodations. The Department

thus has adequately addressed the factors found in Section 120.54(2)(b) 1, 2 and

3, Florida Statutes (1991).

49. The standard of review applicable to economic impact statements is a

rather limited one. The question is whether it addresses all areas Section

120.54(2)(b) requires the agency to address. Florida League of Cities, Inc. vs.

Department of Environmental Regulation, ___ So.2d ___, 16 FLW D 1933, 1934 (Fla.

1st DCA July 25, 1991) (rehearing pending).

50. This is not a case where the Department wholly failed to take into

consideration in its economic impact statements ongoing reporting costs the

Department was imposing upon small businesses. To the extent the rule

originally required small businesses to purchase computer equipment to make the

filings required on magnetic media, the matter has been fully considered, not

ignored, in the agency's economic statement. See proposed rule 12A-

1.044(4)(a)4. and 5. (Exhibit 2, p. 8), as amended by the notice of change

(Exhibit 6, p. 7). The decision of the District Court of Appeal in Cataract

Surgery Center vs. Health Care Cost Containment Board, 581 So.2d 1359 (Fla. 1st

DCA 1991), therefore, is not in point.

51. While it may be technically difficult for the Petitioners to account

for the taxes imposed, because of the small sales price of the transactions, and

their mechanical inability to separately collect the tax, those difficulties

arise from the unusual aspects of the way Petitioners do business, not from the

rule. The rule provides an effective tax rate for Petitioners to use, and thus

relieve themselves from the burden otherwise placed on them to add the sales tax

to the sales price and to remit that tax to the Department. The whole concept

of establishing an effective tax rate is an accommodation to businesses such as

the Petitioners'. Section 212.07(2), Florida Statutes (1991), gives the

Department the authority to establish an effective tax rate for an industry

"where it is impracticable, due to the nature of the business practices within

an industry, to separately state Florida tax on any charge  .  .  .  . " A f t e r

adoption of the effective tax rate, operators utilizing coin-activated equipment

will have to consider whether it is in their economic interest to convert to

token-activated machinery rather than pay the effective tax rate the Department

has established, but no business is obliged by law to do so. Petitioners have

not shown that there is any meaningful alternative to use of an effective tax

rate that the Department could have considered. The Petitioners could incur the

labor costs for selling tokens over-the-counter to separately collect the tax,

but the evidence demonstrated (see Finding 26) that could cost an operator

$30,000 per year each year into the future. If the Department's rule had

imposed such a requirement, the decision in Cataract Surgery Center, supra, 481

So.2d 1359, would have required it to discuss those costs in the economic impact

statement, for nothing in the text of the statute imposing the sales tax on

coin-operated amusement machines required operators to activate their machines

by tokens, or to sell those tokens over-the-counter. Here the Department has

taken the industry as it exists, and given operators the option to use the

effective tax rate established under Section 212.07(2) or to bear the burden of

keeping the records necessary to establish the actual tax due. This does not

violate the holding in Cataract Surgery Center.

52. It is not surprising that the bookeeping alterative to the rule's

effective tax rate is onerous, because effective tax rates are established for

an industry only "where it is impracticable, due to the nature of the business

practices within an industry, to separately state Florida tax." Section

212.07(2), Florida Statutes (1991). The reporting requirements imposed are

designed to insure that the tax paid by a particular operator is representative

of all machines in that business, not just of some machines, and prevents a

taxpayer from skewing an average. The rule does not impose any requirement to

change from coin-operated to token-operated systems, and thus, there is no

reason for the Department to have considered the $30 cost per machine of

converting a business to tokens or the cost of acquiring and replacing tokens as

they may become lost. Had such a requirement been imposed, then the decision in

Department of Health and Rehabilitative Services vs. Wright, 439 So.2d 937 (Fla.

1st DCA 1983) would be in point. In Wright the Department had expanded upon a

statute which limited adult congregate living facilities (ACLFs) to providing

personal services, and the statute defined personal services to exclude nursing

services. The Department's rule expanded that general statutory prohibition

against providing "nursing services" into a specific, textual prohibition

against 1) use of physical restraints such as jacket restraints, body or limb

restraints at ACLFs, and 2) use of full bedside rails on the beds of residents.

The rule itself had important economic consequences because ACLF residents who

needed restraints or bed rails could no longer have them provided by the ACLF.

The rule forced them to move into more expensive nursing homes or to contract

with third parties for nursing services which the ACLF could not itself provide.

The operators of the ACLFs lost a number of residents who required those nursing

services, and that number was a calculable percentage of ACLF patients. In that

circumstance, the court held the rule invalid because the economic impact

statement wholly ignored the economic effect of the rule's new requirements, and

held the failure to address the economic impact of the new requirements was not

harmless error. The critical distinction is that these rules do not, in express

terms, forbid any manner of doing business, or require any operator to switch

from coin operation to token operation, or to incur the labor costs involved in

selling tokens over-the-counter in order to collect the sales tax separately.

53. The Petitioners also rely on the decision in Department of Health and

Rehabilitative Services vs. Framat Realty, Inc., 407 So.2d 238 (Fla. 1st DCA

1981), in support of its argument that the economic impact statement is

insufficient. They emphasize that portion of that decision which affirmed the

Hearing Officer's ruling that the economic impact statement in that case was

insufficient because the methodology employed by the agency and the data it used

were not "sufficiently explicated so as to attach any credibility to the

conclusions reached in the [economic impact] statement." 407 So.2d at 242. The

Petitioners have misapprehended the holding in Framat. The question is not

whether the amanuensis drafting the economic impact statement is well

experienced or whether the data relied upon is stated in detail on the face of

the economic impact statement. As long as personnel in the agency, whether the

initial author, a supervisor, or the agency head personally, have given adequate

attention to the economic impact statement, if the statement published contains

entries on all required topics, the statement is sufficient even if the entries

are brief. The "explication" of entries may take place during a 120.54(4) rule

challenge hearing.

54. Whether Dr. McGavin personally knew about the definition of small

business in Section 288.073 or had read Section 120.54 is not determinative.

His supervisor, Dr. t h b o t h f r o m p a s t e x p e r i e n c i e w e  F r a n c i s , i s w e l l a c q u a i n t d ,

and his review of the adequacy of the economic impact statement before it was

published carried with it the necessary understanding of the requirements of the

statutes. The core question is whether the Department and Dr. Francis

incorrectly answered question 5 of the economic impact statement. They did not.

There is no special or different impact on small businesses which arises from

the rule. This is not to say that there will not be impacts from the imposition

of the tax which may cause economically rational small businesses to reconsider

whether they should continue to operate as coin-operated businesses, but the

same is true for large mall operators who had returned to coin operation after

doing business on a token basis, because of a significant influx of bogus tokens

(Tr. 144).

Contract Impairment

55. The Petitioners have also claimed that subsections 9 and 10 of

proposed rule 12A-1.044 are invalid because they violate the constitutional

provision forbidding the impairment of contract obligations, Article I, Section

10 of the Florida Constitution. The State of Florida now will tax agreements

giving amusement machine owners the right to place game machines on real

property owned by others. These agreements can be cast in one of two ways: as

a lease of real property or as a license to use real property. Under Florida's

strict view of the constitutional duty to avoid the impairment of contract

obligations, the state cannot tax agreements which pre-date the effective date

of a new tax. In re Advisory Opinion to the Governor, 509 So.2d 292, 314 (Fla.

1987); Florida Department of Revenue v. Florida Home Builders Ass'n., 564 So.2d

173 (Fla. 1st DCA 1990). Those agreements may be taxed when they are renewed.

The Department will "recognize" licenses or leases, and not tax them, so long as

those leases or licenses were in writing, and were entered into before July 1,

1991. Rule 12A-1.044(10)(d). The same is true where the transaction was

structured as a landowner's lease of a game machine. Rule 12A-1.044(9)(d).

56. Petitioners object because the language of the rule only "recognizes,"

i.e., protects, written agreements from the imposition of the sales tax, and

would seemingly tax oral ones. The rule actually is silent on taxation of oral

contracts. Like written contracts, oral contracts are entitled to protection.

But it does not make sense to invalidate the rule because of what it does not

say. The provisions which do appear, exempting unexpired written contracts from

tax, are constitutionally sound.

57. The rule can be validated by giving it a limiting construction. Cf.,

Florida Education Association/United v. Florida Public Employees Relations

Commission, 346 So.2d 551 (Fla. 1st DCA 1977). The constitutional protection

accorded to the obligation of contracts only extends to valid contracts.

Apparently the Department is concerned that taxpayers will yield to the

temptation to engage in fraud and assert nonexistent oral agreements in order to

avoid tax. The period of temptation is a brief one. Oral contracts for leases

of real property cannot be for periods of more than one year, Section 689.01,

Florida Statutes (1991). Similarly, "any agreement that is not to be performed

within the space of one year from the making thereof.  .  .  s h a l l b e i n

writing t u t e s ( 1 9 9 1 ) . V a a i d o r a l c o n t r a c l t S a  .  .  .  . " S e c t i o n 7 2 5 . 0 1 , F l o r i d t s

will be expiring throughout the year which begins on the effective date of the

tax, July 1, 1991. The Department must also exempt from tax the unexpired term

of oral agreements entered into before July 1, 1991, but they all become taxable

during the course of the year as they are renewed.

Bookkeeping Alternatives To Avoid The Effective Tax Rate

58. The changes to subparagraphs 1, 2 and 3 of paragraphs (e) of

subsection (3) rule 12A-1.044 (Exhibit 6, p. 4) are not invalid exercises of

delegated legislative authority. Those paragraphs describe how an operator must

maintain books and records in order to establish a lower sales tax rate than the

industry-wide effective tax rate. The operator must identify each machine by

name and serial number, the cost per play on each machine, the total receipts

for each machine and the dates the receipts are removed from each machine. More

importantly, whenever an operator establishes a lower tax rate on an individual

amusement machine, the operator must also establish the effective tax rates for

all other machines he owns which produces a tax rate higher than the effective

tax rate prescribed in the rule. All these computations must done on a monthly

basis. These provisions are rational and necessary so that a taxpayer cannot

skew his tax rate by tracking only machines which produce a lower tax rate while

relying on the industry-wide effective tax rate of 7.81 percent for any machines

whose actual operations would result in a higher rate.2 It is irrelevant that

the cost of keeping these records could outweigh the savings to the taxpayer.

As noted above, an effective tax rate is established for an industry when it is

impractical, due to the nature of the business practices in the industry, to

separately state the tax at the time of the transaction. That it would be

burdensome to keep records necessary to establish that the tax due is lower than

that calculated using the effective tax rate is not a surprise, it is a

tautology.

The Presumption As To Real Property Matters

59. Proposed rule 12A-1.004(10) characterizes arrangements between a

machine owner placing his machine on the property of another as a lease or

license to use real property. Petitioners contend this provision impermissibly

enlarges or modifies the statute implemented. Section 212.05(1)(j)2.a, Florida

Statutes (1991), says a machine owner who is also an operator cannot deduct from

the sales tax due any rent or license fee paid to the location owner. The

statutory language implicitly treats the arrangement as a lease or license to

use real property. The statutory language is sufficient authority for the rule's

presumption, when coupled with the language of Section 212.031, Florida Statutes

(1991), which imposes sales tax on the business of leasing or granting a license

to use real property. Both sections are cited in the portion of the rule

disclosing the statutes the rule implements.

The Presumption About Possession Of Game Machines

60. Proposed rule 12A-1.044(1)(e) defines who has possession of the

amusement machine when the machine is owned by one person, but placed on the

real property of another. One person becomes responsible for collecting,

reporting and paying over the sales tax. Petitioners argue that the rule is

invalid because it "completely ignore[s] in its criteria which party receives

the revenue from the machine" (proposed final order at 44). To the contrary,

the rule focuses on who "receives" the receipts by collecting them. The

"operator" of the machine who must collect and pay over the tax is determined by

"who has the key to the money box and is responsible for removing the receipts."

If both the owner of the machine and the location owner have keys and are

responsible for removing receipts they must designate in writing who will be the

operator. If they fail to do so, a presumption is created and the owner of the

machine is deemed to be the operator. The rule's provisions are logical. The

party with the keys to the money box has his hands on the cash, and must pay the

tax. How the parties decide among themselves to divide the cash after the tax

is paid is up to them.

ORDER

Based on the foregoing, it is

ORDERED that the proposed rules do not constitute invalid exercises of

delegated legislative authority, and the challenges filed by Petitioners to

rules 12A-18.008, 12A-1.044 and 12A-15.001 are dismissed.

DONE AND ORDERED in Tallahassee, Leon County, Florida, this 17th day of

March 1992.

__________________________________

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 17th day of March 1992.

ENDNOTES

1/ The operator's tax payments do not necessarily come out of profits. An

operator will seek to maintain profit levels by reducing the cost of labor,

supplies, rent or maintenance first.

2/ These would be machines in which substantially all of the plays were for

single quarters, and the sales price is assumed to be 23 cents with 2 cents of

tax, producing an effective tax rate of 8.7 percent. See Finding 9.

APPENDIX TO FINAL ORDER, CASE NOS.

91- 5338RP, 91- 5339RP AND 91- 5340RP

Rulings on findings proposed by the Petitioners:

1 & 2. Adopted in Finding 1.

3. Rejected as unnecessary.

4. Adopted in Finding 2.

5. Adopted in Finding 3.

6. Adopted in Preliminary Statement.

7. Implicit in Finding 3.

8. Adopted in Finding 31.

9. Adopted in Finding 3.

10. Irrelevant as the services tax was not a rule and

therefore required no economic impact statement under

Section 120.54.

11. See Finding 26.

12. Adopted in Finding 9.

13. Adopted in Findings 8 and 9.

14. Adopted in Finding 11.

15. Adopted in Findings 12, 13 and 14.

16. Adopted in Findings 15 and 16.

17. Adopted in Finding 13.

18. Adopted in Finding 16.

19. Adopted in Finding 16.

20. Rejected because it is not a finding of fact, see the

conclusions of law.

21. Adopted in Finding 16.

22. Rejected because the 7.81 percent figure includes an

allowance for multiple plays, see Finding 11, but see

Finding 21.

23. Adopted in Finding 18.

24 & 25. Adopted in Finding 21.

26 & 27 Adopted in Finding 22.

28 & 29. Adopted in Finding 20.

30. Adopted in Finding 19.

31 & 32. Adopted in Finding 20.

33 & 34. Adopted in Finding 19.

35. Rejected as unnecessary.

36 - 38. Adopted in Finding 19.

39. Adopted in Finding 25.

40 - 42. Adopted in Finding 26.

43. Adopted in Finding 28.

44. Adopted in Finding 20.

45. Adopted in Finding 27.

46 - 48. Adopted in Finding 28.

49. Rejected, see Exhibit 9, page 4.

50. Rejected as irrelevant.

51 & 52. Adopted in Finding 28.

53. Explicit in Findings 19 and 28.

54. Rejected as unnecessary and implicit in the finding of

standing.

55. Adopted in Finding 40.

56. Adopted in Finding 32.

57 & 58. Adopted in Finding 11.

59. Adopted in Finding 33.

60. Adopted in Finding 34.

61. Adopted in Finding 35.

62. Rejected as unnecessary.

63. Adopted in Finding 35.

64 - 68. Rejected, but discussed in Finding 38. The findings

proposed are based on the testimony of Dr. Scott,

which was not accepted with respect to what must be

contained in an economic impact statement. Certainly

the rigor he would require would be helpful, but it is

not required by the statute.

69. Rejected as irrelevant.

70. Adopted in Finding 10.

Rulings on findings proposed by the Department of Revenue:

1. Adopted in Finding 3.

2. Adopted in Findings 6, 7 and 8.

3. Adopted in Finding 7.

4. Adopted in Finding 8.

5. Adopted in Findings 8 and 9.

6 & 7. Adopted in Finding 10.

8. Adopted in Finding 29.

9. Adopted in Findings 11 and 28.

10. Adopted in Finding 29.

11. Rejected as unnecessary.

12. Adopted in Finding 30.

13. Adopted in Finding 31.

14. Rejected as subordinate to Finding 17.

15 & 16. Adopted in Finding 11.

17. Adopted in Finding 19.

18 & 19. Rejected as subordinate to Finding 19.

20. Adopted in Finding 19.

21. Adopted in Finding 16.

22 - 27. Adopted in Finding 32.

28. Adopted in Finding 3.

29. Adopted in Finding 36.

30 & 31. Adopted in Finding 37.

32. Adopted in Finding 38.

33. Adopted in Finding 35.

34. Rejected as unnecessary.

35. Adopted in Finding 40.

36. Rejected as subordinate to Finding 40.

37. Adopted in Finding 40.

38. Adopted in Finding 13.

39. Adopted in Finding 40.

40. Adopted in Finding 19.

41. Adopted in Finding 24.

42. Rejected as unnecessary because Dr. Francis' work did

not relate to the rule, but to the statute imposing

the tax -- obviously Dr. Francis "knew" that same

information when reviewing the economic impact

statements prepared by Dr. McGavin.

COPIES FURNISHED:

Juana M. Rojas, Esquire

Richard A. Nielsen, Esquire

Salem, Saxon & Nielsen

Suite 3200

101 East Kennedy Boulevard

Post Office Box 3399

Tampa, Florida 33601

James McAuley, Esquire

Ralph Jaeger, Esquire

Office of the Attorney General

Tax Section, Capitol Building

Tallahassee, Florida 32399-1550

J. Thomas Herndon

Executive Director

Department of Revenue

104 Carlton Building

Tallahassee, Florida 32399-0100

Vicki Weber

General Counsel

Department of Revenue

204 Carlton Building

Tallahassee, Florida 32399-0100

Carroll Webb, Executive Director

Administrative Procedures Committee

120 Holland Building

Tallahassee, Florida 32399-1300

Liz Cloud, Chief

Bureau of Administrative Code

Room 1802, The Capitol

Tallahassee, Florida 32399-0250

NOTICE OF RIGHT TO JUDICIAL REVIEW

A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO JUDICIAL

REVIEW PURSUANT TO SECTION 120.68. FLORIDA STATUTES. REVIEW PROCEEDINGS ARE

GOVERNED BY THE FLORIDA RULES OF APPELLATE PROCEDURE. SUCH PROCEEDINGS ARE

COMMENCED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH THE AGENCY CLERK OF THE

DIVISION OF ADMINISTRATIVE HEARINGS AND A SECOND COPY, ACCOMPANIED BY FILING

FEES PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL, FIRST DISTRICT, OR

WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT WHERE THE PARTY

RESIDES. THE NOTICE OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE

ORDER TO BE REVIEWED.