95-004771 Daytona Wheels, Inc. vs. Department Of Revenue Status: Closed Recommended Order on Monday, December 14, 1998.

Summary: Used tire fee constitutes a "tax" to which general revenue laws, including Section 213.756, Florida Statutes, apply and undistinguished collections are to be remitted.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DAYTONA WHEELS, INC., )

)

Petitioner, )

)

vs. ) Case No. 95-4771

)

STATE OF FLORIDA, )

DEPARTMENT OF REVENUE, )

)

Respondent. )

________________________________)

RECOMMENDED ORDER

Upon due notice, this cause came on for formal hearing on

August 6, 1998, in Daytona Beach, Florida, before Ella Jane P.

Davis, a duly assigned Administrative Law Judge of the Division

of Administrative Hearings.

APPEARANCES

For Petitioner: Edgar M. Dunn, Jr., Esquire

Post Office Drawer 2600

Daytona Beach, Florida 32115-2600

For Respondent: James McAuley, Esquire

Scott M. Covell, Esquire

Department of Legal Affairs

The Capitol, Tax Section

Tallahassee, Florida 32399-1050

STATEMENT OF THE ISSUE

Whether Respondent Florida Department of Revenue (FDOR) is

entitled to further remittance as a result of a waste tire fee

audit of Petitioner Daytona Wheels covering the period of

January 1, 1989 to December 31, 1992 (the "audit period").

PRELIMINARY STATEMENT

FDOR conducted a sales tax compliance audit and a waste tire

fee audit of Petitioner taxpayer Daytona Wheels, covering the

same period from January 1, 1989 to December 31, 1992 (the "audit

period").

Petitioner timely paid the minimal sales tax assessed. For

purposes of this proceeding, it was agreed that Daytona Wheels

timely remitted the statutory amount of waste tire fees due on

the number of new tires sold during the audit period, but FDOR

alleges that Daytona Wheels owes $32,961.82 in waste tire fees as

"tax," plus a civil non-fraud penalty of $8,133.43, plus interest

of $6,764.53, for a total of $47,859.78, plus interest accruing

on the $32,961.82 since February 12, 1993, at the rate of $10.89

per day, totaling another $20,650.20.

Petitioner timely requested formal hearing.

Motions for continuance or abeyance were granted by orders

entered on February 13, 1996; April 12, 1996; August 20, 1996;

December 18, 1996; March 12, 1997; and October 30, 1997. Due to

the parties' failure to fully comply with repeated orders of

prehearing instruction, formal hearing scheduled for

February 19-20, 1998, was cancelled. On March 6, 1998, an Order

of Continuance to Date Certain was mailed, rescheduling formal

hearing for June 24-25, 1998. On April 16, 1998, a Renotice of

Hearing rescheduled this cause for August 5-7, 1998. Ultimately,

formal hearing was conducted solely on August 6, 1998.

At formal hearing, Petitioner filed a Trial Memorandum of

Law. The Prehearing Stipulation was admitted in evidence as

Exhibit ALJ-A. Respondent FDOR presented the oral testimony of

Marvin Cook, Samuel B. Eckhardt, Melody Stevens, and Stephen J.

Brown. FDOR's Exhibits 1 and 2 and Joint Exhibits 1-17 were

admitted in evidence. Petitioner presented the oral testimony of

Melody Stevens, Paul Stevens, and Samuel B. Eckhardt.

The parties having agreed that FDOR should go first in the

order of proof, Petitioner moved to dismiss at the close of

FDOR's case-in-chief. After oral argument, this motion was

treated as a Motion for Summary Recommended Order and denied.

Petitioner's motion was renewed at the close of all evidence and

was taken under advisement for resolution within this Recommended

Order.

A transcript of proceedings was filed with the Division of

Administrative Hearings on August 27, 1998. After agreed

extensions of time, the parties filed their respective Proposed

Recommended Orders on October 14, 1998.

FINDINGS OF FACT

1. Petitioner Daytona Wheels, d/b/a as Stevens' Oil Co. &

Tire Warehouse, is a family-owned, retail tire dealer with two

stores located in Daytona Beach, Florida.

2. FDOR conducted a sales tax compliance audit and a waste

tire fee audit covering the same period from January 1, 1989, to

December 31, 1992 (the "audit period"). The sales tax audit

resulted in an assessment of only $220.64, plus interest. The

increase in tax resulted from Petitioner's failure to charge

sales tax for materials used in making small repairs and

adjustments (i.e., fixing flat tires, wheel balancing, etc.).

Only a nominal civil penalty of $5.00 was imposed because the

taxpayer's "overall error ratio . . . [was] very small." The

sales tax audit of Daytona Wheels further showed that the

taxpayer was generally compliant with the state sales tax law.

3. The audit of waste tire fees showed that during the

audit period, Daytona Wheels correctly reported the number of

tires sold each month on the proper FDOR form (a sales tax form)

and remitted in a timely fashion the correct amount of waste tire

fees due based on the number of new tires sold and the waste tire

fee shown on the return.

4. During the audit period, two waste tire fee amounts were

in use. Prior to January 1, 1990, the waste tire fee was 50

cents per tire. After January 1, 1990, the waste tire fee

increased to $1.00 per tire.

5. The waste tire fee audit determined that Daytona Wheels

accurately reported the number of new tires sold each month on

its waste tire return and remitted a waste tire fee equal to the

total number of new tires sold. However, FDOR asserts that

Daytona Wheels had collected and retained an amount in excess of

the statutorily imposed and authorized fee. FDOR's Notice of

Proposed Assessment was based upon its determination that in

addition to charging the statutory rate of waste tire fee per new

tire (e.g. 50 cents or $1.00 in the respective periods of time),

the taxpayer also had collected 75 cents or $1.50 per tire

without distinguishing on its invoices the state fee from the

additional charges. FDOR's position was that if Daytona Wheels

had simply lumped together both fees on the same line of each

invoice as part of the same total, the state was entitled to

recoup those additional amounts as waste tire fees because all

funds lumped together as a waste tire fee were required to be

remitted.

6. Effective July 1, 1989, Subsection 403.718(1) was

amended by Chapter 89-171, Laws of Florida, to include the

requirement that "the fee imposed under this section shall be

stated separately on the invoice to the purchaser." This

language implicitly requires that the waste tire fee be

identified as a state fee on a separate line of each customer's

invoice and that the amount of the fee be stated on that line of

the invoice. However, during the applicable period, there was no

statutory or rule sanction or penalty for non-compliance.

7. During the applicable period there was no rule,

guideline, audit standard, audit procedure, or other official

policy of FDOR which specifically interpreted the statutory

phrase, "stated separately." Determination of compliance with

the "stated separately" statutory requirement was based on the

discretion of each auditor.

8. However, FDOR has adopted rules based on Section 403.717

and 403.718, Florida Statutes, at Chapter 12A-12, Florida

Administrative Code - Solid Waste Fees. Effective January 1,

1989, Rule 12A-12.001(2), Florida Administrative Code provided,

in part,

. . . The fee is imposed upon the dealer selling the

tire and not upon the purchaser. However, there is

nothing to preclude the dealer from passing the

additional cost on to the purchaser by separately

stating the fee on the dealer's sales invoice or

reflecting the fee in the sales price of the tire . . .

Effective October 16, 1989, pursuant to the statutory amendment,

FDOR revised its rule. The revised Rule 12A-12.001(4), stated:

For sales on or after July 1, 1989, the fee is required

to be stated separately on the sales invoice or other

tangible evidence of sale to the purchaser.

For sales before July 1, 1989, the dealer was free to choose

whether to separately state the fee. FDOR did not include in

Daytona Wheels' assessment, any fee charged prior to the

amendment requiring a separate statement.

9. FDOR did not conduct the new tire fee audit in this case

in accordance with any rule, guideline, audit standard, audit

procedure, or other official policy of the Department of

Environmental Protection f/k/a the Department of Environmental

Regulation. Indeed, the environmental agency has not established

any rules, guidelines, standards, or procedures for waste tire

fee audits.

10. FDOR's auditor, who died before the date of formal

hearing and therefore was unable to testify, was presumed by FDOR

to have conducted the waste tire fee audit in this case by

sampling invoices, matching the invoice amounts to the amounts

reflected on the taxpayer's daily sales logs, and matching the

daily sales logs to the taxpayer's monthly case summaries. FDOR

further presumed that its deceased auditor utilized the amounts

reflected on the monthly summaries as the total "new tire fees"

collected by Petitioner. There is no suggestion that the

deceased auditor reviewed each and every invoice during the audit

period.

11. After the issue became disputed, Mr. Marvin Cook, an

FDOR auditor with 28 years of general audit experience and with

previous waste tire audit experience, reviewed the previous

auditor's work papers. He confirmed the accuracy of the totals

in his predecessor's audit work papers by visiting Petitioner's

two places of business, where he interviewed Melody Stevens

C.P.A., the accountant for Petitioner, and reached an agreement

with her as to the records (months) to be used in his review. He

examined Petitioner's records, including invoices, daily sales

summaries, and monthly summaries of sales from each of

Petitioner's two business locations for the agreed sample months.

12. Like his predecessor, Mr. Cook did not examine every

sales record of Petitioner, but his review spanned six quarters

(six three-month periods) from 1990 to 1992. Within these

periods, he randomly chose dates to conduct a detailed

examination of daily sales by examining each invoice (sales

transaction) for the date(s) selected. These invoices were

totaled and verified to the daily sales records. As a result of

his examination, Mr. Cook verified, within his education,

training and experience, the accuracy of the prior auditor's

work.

13. Upon Mr. Cook's evidence and that of Melody Stevens, I

find that the Petitioner's daily sales sheets were accurately

carried forward to the monthly summaries of sales for the

company; that the prior auditor's work papers were accurate as to

total sales reported for the monthly sales from each store; and

that FDOR's assessment in this case was mathematically accurate

in terms of what was presented in the taxpayer's sales records

and FDOR's audit work papers.

14. FDOR's original auditor assessed Petitioner at

$32,961.82 in "tax" plus a civil non-fraud penalty of $8,133.43,

plus interest of $6,764.53 for a total of $47,859.79 plus

interest accruing on the $32,961.82 since February 12, 1993, at

the rate of $10.89 per day.

15. After review and negotiation, FDOR sustained the

assessment but in its Notice of Decision revised the assessment

to reflect $28,095.07 in tax due, penalty of $6,932.57 and

interest of $5,765.76 for a total assessment amount of

$40,793.40.

16. Mr. Cook's testimony was that the original amount

assessed was accurate. Mr. Eckhardt, supervisor for both

auditors, testified that he approved the revised amounts.

17. The revised amounts appear to have been in the nature

of a negotiated, but unconsummated, "comprise and satisfaction of

debt," not "enforceable" in this proceeding. Nonetheless, I

accept the other representations of fact arising from this review

process that Petitioner's books and records were adequate;

Petitioner was entirely cooperative; Petitioner used reasonable

care and relied on the advice of a tax adviser; and Petitioner

and the industry in general were unaware of the law.

18. Daytona Wheels' salespersons contemporaneously prepared

an invoice each time a new tire was sold. The vast majority of

the invoices were paid by cash. Invoices were validated by a

corresponding transaction on the cash register. At the end of

each day, the totals of the cash register and the cash drawer

were reconciled. Then, each invoice was entered into a daily

summary record book. At the bottom of each page of the daily

summary record book, there is a place for "monthly running total"

of the dollar amounts of all tires sold, environmental fee

collected, disposal fee collected, labor costs collected, parts

costs collected, and sales tax collected.

19. Consistently during the audit period, Petitioner

collected from its customers two fees or charges. It collected

the state waste tire fee, imposed by statute, for each new motor

vehicle tire sold at retail. This amount was timely remitted to

the state on prescribed sales tax forms. Petitioner also

simultaneously charged a disposal fee for each used tire removed

from a vehicle (in order for the newly purchased tire to be

placed on the vehicle) if the used tire was left with Petitioner

for disposal.

20. If a customer chose to retain a used tire, Petitioner

did not charge a disposal fee. However, if the customer left

used tires with Petitioner for disposal, Petitioner charged that

customer a disposal fee ($.75 or $1.50) based on the number of

used tires left, to defray the amounts a scrap hauler charged

Petitioner for disposing of the used tires in an environmentally

safe and approved manner.

21. Petitioner's contemporaneously-prepared business

records and the testimony of Mr. and Ms. Stevens credibly

establish that Petitioner paid such a disposal fee to a scrap

hauler. Petitioner's failure to introduce a Volusia County

Ordinance to demonstrate a reason Petitioner was "required to" or

would want to pay for environmentally safe disposal of used tires

is not controlling.

22. In the course of his review of the prior auditor's

work, Mr. Cook did a "judgmental sample" of approximately 35

invoices. He found that the following words or descriptive

phrases added to a single line on Petitioner's invoices did not

identify the state waste tire fee sufficiently to comply with the

"stated separately" requirement: "scrap," "surcharge," "waste

tax," "waste charge," "waste," "scrap tire disposal,"

"environmental/surcharge," and "scrap tire removal." He

considered a blank space also to be insufficient disclosure. Mr.

Cook's sample indicated that 30.24% of the 35 invoices he

reviewed for the months selected charged a single, commingled

total on the invoices labeled as "waste tax."

23. All concerned acknowledge that Mr. Cook's judgmental

sample did not accurately reflect the entire universe of invoices

for the audit period.

24. The auditor who prepared the assessment initially and

Mr. Cook considered all of the monies collected by Petitioner

under the separate line item on its invoice (regardless of what

was specifically stated on the invoice and regardless of what

words or phrase were utilized in describing the state waste tire

fee) as constituting a consistent overcharge of the state waste

tire fee, because Petitioner had lumped together in one total, on

a single line, the statutory waste tire fee with an additional

undisclosed charge.

25. Melody Stevens, Petitioner's accountant, reviewed

16,600 invoices applicable to the audit period. She conceded

that some invoices were missing. However, the total discrepancy

in dollar amount was under $6,000. This means that very, very

few invoices proportionate to the universe of invoices for the

audit period were missing from Ms. Stevens's review. Her review

constitutes a much larger sample than that conducted by Mr. Cook,

and accordingly, her review of the actual language used on almost

the whole of the universe of invoices for the audit period is

deemed to be more accurate than any other sample.

26. Ms. Stevens' review determined that Petitioner used 17

different words or descriptive phrases in its attempt to identify

on its invoices either the state imposed waste tire fee for new

tires, or its own disposal fee for used tires, or a combination

of the two fees. These words or descriptive phrases and the

frequency of their use in the 16,600 invoices examined are

summarized as follows: (1) blank line, 238 invoices; (2)

"state fee" 5 invoices; (3) "environmental," 75 invoices; (4)

"ENV fee," 41 invoices; (5) "disposal tax/waste tax" 6,662

invoices; (6) "waste fee or disposal fee," 417 invoices; (7)

"waste charge," 163 invoices; (8) "waste," 2,598 invoices; (9)

"surcharge," 3,868 invoices, (10) "scrap tire removal", 2

invoices; (11) "scrap tire disposal," 16 invoices; (12)

"scrap," 12 invoices; (13) "environmental/tire waste fee" (pre-

printed) 361 invoices; (14) "tire waste fee" (pre-printed),

1,735 invoices; (15) "disposal," 301 invoices; (16) "waste

tax," included in (5) above; (17) "disposal fee," included in

(6) above; and (18) "waste/disposal," 112 invoices.

27. At no time were the terms "waste tire fee," "new tire

fee," or "used tire fee" used on Petitioner's invoices to refer

to the state new tire fee, but also at no time was the state-

required fee distinguished from the local scrap hauler's fee.

28. During the audit period, Stephen J. Brown was a

customer of Petitioner's Daytona Mall location. When he bought

new tires there, he observed that the invoice presented to him

charged more than the $1.00 per tire state fee. He complained to

the manager that he was being overcharged for the state fee. The

manager made no oral distinction between any state and local fee

but told him he had to pay the total line item charge.

Mr. Brown, who was also an FDOR auditor, suggested that

Petitioner be audited, and the audit in this case resulted. Upon

the credible evidence as a whole, I am unable to find that

Petitioner posted a separate notice enumerating both fees during

the audit period, but I find that such a notice was posted at

some time after the audit period.

29. Mr. Stevens, Petitioner's owner testified credibly that

some retailers confused the waste tire fee issue by charging a

single price for four new tires, which included all taxes, fees,

and charges. FDOR witnesses supported Mr. Stevens further

testimony that many tire retailers were unaware of the

requirement to state the waste tire fee separately or were

confused by it.

30. Petitioner attempted in good faith to comply with the

law during the audit period, and after the audit period it even

posted signs. Petitioner did not inflate the amount collected as

a state fee for direct profit. Petitioner's additional charges

were solely to cover and pass-on its used tire disposal costs, a

legitimate cost-of-doing-business, so as to indirectly achieve a

profit.

CONCLUSIONS OF LAW

31. The Division of Administrative Hearings has

jurisdiction over the parties and subject matter of this cause,

pursuant to Section 120.57(1), Florida Statutes.

32. The facts are largely undisputed. No part of FDOR's

bill to Petitioner relates to the taxpayer's failure to timely

remit the state's waste tire fee or state sales tax. The

assessment herein seeks only to collect the money Petitioner

received from consumers in excess of the remitted state waste

tire fee on the basis that Petitioner lumped together on a single

line with the state waste tire fee the amount the taxpayer

charged as a "pass-through" of $.75 - $1.50 per tire to pay a

scrap hauler to dispose-of the used tires removed to make way for

the newly-purchased tires, without a notation distinguishing the

two amounts from each other as required by a July 1, 1989

amendment to Section 403.718(1), Florida Statutes, providing

that, "The fee imposed under this section (the waste tire fee)

shall be stated separately on the invoice to the purchaser."

33. FDOR's assessment and legal analysis of state

entitlement to all amounts collected on the single line, also

applies Section 213.756, Florida Statutes, which provides as

follows:

Funds collected from a purchaser under the

representation that they are taxes provided

for under the state revenue laws are state

funds from the moment of collection and are

not subject to refund absent proof that such

funds have been refunded previously to the

purchaser.

34. The other statutes pertinent to this case are Sections

403.717 and 403.718, Florida Statutes, cited here as they

appeared prior to July 1, 1989's "line item" amendment:

Subsection 403.717, Waste tire requirements.

(1) For purposes of this section and ss.

403.718 and 403.719 . . . .

(a) 'Department' means the Department of

Environmental Regulation.

* * *

(d) 'Waste tire' means a whole tire that is

no longer suitable for its original intended

purpose because of wear, damage, or defect.

* * *

(4) By January 1, 1989, the department shall

adopt rules to carry out the provisions of

this section and ss. 403.718 and 403.719.

Such rules shall:

(a) Provide for the administration of a

waste tire processing facility permit, which

may not exceed $250 annually;

(b) Provide for the administration of waste

tire collector and collection center permits,

which may not exceed $250 annually;

(c) Set standards for waste tire processing

facilities and associated waste tire sites,

waste tire collection centers, and waste tire

collectors;

(d) Establish procedures for administering

the waste tire grants program and issuing

grants;

(e) Authorize the final disposal of waste

tires at a permitted solid waste disposal

facility provided the tires have been cut

into sufficiently small parts to assure their

proper disposal; and

(f) Allow waste tire material which has been

cut into sufficiently small parts to be used

as daily cover material for a landfill.

* * *

Subsection 403.718 Waste tire fees-–

(1) For the privilege of engaging in

business, a fee for each new motor vehicle

tire sold at retail is imposed on any person

engaging the business of making retail sales

of new motor vehicle tires within this state.

For the period January 1, 1989, through

December 31, 1989, such fee shall be imposed

at the rate of 50 cents for each new tire

sold. Beginning January 1, 1990, and

thereafter, such fee shall be imposed at the

rate of $1 for each new tire sold. The fee

imposed shall be paid to the Department of

Revenue on or before the 20th day of the

month following the calendar quarter in which

the sale occurs. The terms 'sold at retail'

and 'retail sales' do not include the sale of

new motor vehicle tires to a person solely

for the purpose of resale provided the

subsequent retail sale in this state is

subject to the fee. The fee does not apply

to recapped tires. Such fee shall be subject

to general sales tax pursuant to s. 212.05.

The provisions of s. 212.07(4) shall not

apply to the provisions of this section.

(2) The fee imposed by this section shall be

reported to the Department of Revenue. The

payment shall be accompanied by such form as

the Department of Revenue may prescribe. The

proceeds of the new tire fee, less

administrative costs, shall be transferred by

the Department of Revenue into the waste tire

account within the Solid Waste Management

Trust Fund. For the purposes of this

section, 'proceeds' of the fee shall mean all

funds collected and received by the

department hereunder, including interest and

penalties on delinquent fees. The amount

deducted for the costs of administration

shall not exceed 3 percent of the total

revenues collected hereunder and shall be

only those costs solely and directly

attributed to the fee.

(3)(a) The Department of Revenue shall

administer, collect and enforce the fee

authorized under this section pursuant to the

same procedures used in the administration,

collection, and enforcement of the general

state sales tax imposed under chapter 212,

except as provided in this section. The

provisions of this section regarding the

authority to audit and make assessments,

keeping of books and records, and interest

and penalties on delinquent fees shall apply.

The fee shall not be included in the

computation of estimated taxes pursuant to s.

212.11(1)(a) nor shall the dealer's credit

for collecting taxes or fees in s. 212.12

apply to this fee.

(b) The Department of Revenue, under the

applicable rules of the Career Service

Commission, is authorized to employ persons

and incur other expenses for which funds are

appropriated by the Legislature. The

department is empowered to adopt such rules

and shall prescribe and publish such forms as

may be necessary to effectuate the purposes

of this section. The department is

authorized to establish audit procedures and

to assess delinquent fees.

35. The taxpayer contends first, that FDOR has not made out

a prima facie case of taxes due if Section 213.756, Florida

Statutes, is not applicable. Petitioner further asserts that

Section 213.756 is inapplicable because the state waste tire fee

constitutes "neither a tax nor an imposition under the 'revenue

laws' of Florida," and because the proof of assessment accuracy

is flawed.

36. Ignoring for a moment Petitioner's confusion over the

springing burdens of proof in revenue cases, I reject the latter

contention upon the facts as found, supra . Neither party

contends that the sales tax provisions specifically excluded by

Chapter 403 have been applied. The assessment is mathematically

acceptable and complies with Florida revenue laws generally and

applies Chapter 12A-12, Florida Administrative Code,

specifically.

37. As to whether or not Florida's "revenue laws" apply,

the Florida Supreme Court has long defined a tax as:

an enforced burden of contribution imposed by

sovereign right for the support of

government, the administration of the law,

and to execute the various functions the

sovereign is called on to perform.

Klemm v. Davenport , 100 Fla. 627, 129 So. 904, 907 (Fla. 1930).

See also Coy v. Florida Birth-Related Neurological Injury

Compensation Plan , 595 So. 2d 943, 945 (Fla. 1992); City of

Orlando v. State , 67 So. 2d 673, 674 (Fla. 1953). If the effect

of the legislation is to raise revenue, it is a general tax no

matter what name it is given. Cf. , American Can Co. v. City of

Tampa , 152 Fla. 798, 14 So. 2d 203, 210 (Fla. 1943). Florida law

recognizes that a true fee, imposed as part of a regulatory

process, has to be directly related to the actual costs of the

regulatory process or the services rendered. See Finlayson v.

Conner , 167 So. 2d 569, 573 (Fla. 1964). The waste tire fee is,

in actuality, a "tax," because the amount collected from the tire

purchaser has no relationship to any regulation of tires.

Additionally, since the purpose of the fee is to raise revenue

for the disposal of tires, the raising of revenue makes the fee,

a "tax." Therefore, Section 213.756, Florida Statutes, may be

applied.

38. The foregoing conclusions implicitly deny Petitioner's

renewed Motion for Summary Recommended Order.

39. Secondly, Petitioner contends that FDOR lacked

authority to make the assessment and to impose penalties because

if Sections 403.717(4) and 403.718(3)(a) are read together, only

the environmental agency (not FDOR) is authorized to establish

audit procedures, and since the environmental agency has not

established such audit procedures, FDOR has no authority to

assess waste tire fees, civil penalties, or delinquent tire fees.

40. Chapter 89-171, Laws of Florida, Section 14, permitting

FDOR "to enact emergency rules for purposes of implementing the

applicable provisions of this act," together with unchallenged

Chapter 12A-12, Florida Administrative Code, is enough reason to

reject Petitioner's second argument. (Sections 7 and 8 of that

Chapter also amended the waste tire fee provisions,

specifically). However, I also reject Petitioner's construction

of the statute for the following reasons.

41. Subsection 403.717(1)(a), Florida Statutes, specifies

that "Department" shall refer to the environmental agency when

that word is used in Subsections 403.717, 403.718 and 403.719,

Florida Statutes, but Subsections (4)(a-f), Florida Statutes, are

very explicit about which types of rules the environmental agency

may promulgate. All of these subsections relate to environmental

permitting expertise. None of these subsections relate to waste

tire fee administration, collection or enforcement procedures,

authority for which devolves upon the Department of Revenue by

equally specific language in Section 403.718, particularly

Subsection (3).

42. A statute will ordinarily be construed, under the

doctrine of expressio unius est exclusio alterius , as excluding

from its operation all things not expressly mentioned, where the

statute enumerates things on which it is to operate. DeSisto

College, Inc. v. Town of Howey-in-the-Hills , 706 F.Supp. 1479

(M.D. Fla. 1989), affirmed 888 F.2d 766 (11th Cir. Fla. 1989).

Indeed, the type of specificity for the environmental agency

rules set out in Subsections 403.717(4)(a-f), is precisely the

type of limited rule-making grant now contemplated by 1996's "New

APA," Chapter 120, Florida Statutes. Under the doctrine of

inclusio unius est exclusio alterius , when a law expressly

describes a particular situation in which something should apply,

an inference can be drawn that what is not included by specific

reference was intended to be omitted or excluded. Gay v.

Singletary , 700 So. 2d 1220 (Fla. 1997). Further, when general

language is limited by subsequent specific language, the

Legislature is presumed to have intended its specific

afterthought.

43. Subsections 403.718(1), (2) and (3), clearly are

concerned with FDOR's exclusive authority to "administer,

collect, and enforce" the waste tire fee and FDOR's exclusive

authority to place the ultimate proceeds (defined as all funds

collected and received) into the environmental agency's Solid

Waste Management Trust Fund. Section 403.718(2) also

specifically provides that the taxpayer's fee payment shall be

accompanied by such form as FDOR, not the environmental agency,

may prescribe. Pursuant to Subsection 403.718(3)(a), FDOR is

clearly charged to "administer, collect, and enforce" the waste

tire fee using the "same procedures used in the administration,

collection, and enforcement of the general state sales tax

imposed under Chapter 212, except as provided in this section."

The provisions of this section regarding the authority to audit

and make assessments, keeping of books and records, and interest

and penalties on delinquent fees shall apply." Reading the

entire statute in context, "general state sales tax procedures"

logically includes Chapter 213, Florida Statutes, and FDOR's

rules for audits and assessments.

44. Then Subsection 403.718(3)(b), Florida Statutes, goes

on to specify:

The Department of Revenue , under the

applicable rules of the Career Service

Commission, is authorized to employ persons

and incur other expenses for which funds are

appropriated by the Legislature. The

department is empowered to adopt such rules

and shall prescribe and publish such forms as

may be necessary to effectuate the purposes

of this section. The department is

authorized to establish audit procedures and

to assess delinquent fees. (Emphasis

supplied)

Read in context for obvious intent of the drafters, or in para

materia with Subsection 403.718(2), clearly specifying the use of

FDOR reporting and remittance forms, it appears that audits and

assessments of waste tire fees by FDOR within its own statutes

and rules is affirmatively authorized, or at least is acceptable

in the absence of any contrary rules enacted by the environmental

agency.

45. FDOR's promulgation of Chapter 12A-12, Florida

Administrative Code, providing forms and requirements for waste

tire fees, and the environmental agency's forbearance in not

enacting any rules concerning such audit procedures and

assessment of delinquent fees express each agency's understanding

of their respective authority and roles under Chapter 403,

Florida Statutes. The agencies' mutual construction of "their"

statute is entitled to great weight. Dept. of Revenue v. First

Florida Nat. Bank of Florida , 513 So. 2d 114 (Fla. 1987), appeal

dismissed 108 S. Ct. 253, 485 U.S. 949, 99 L.Ed. 408 (1988).

46. It is essential that statutes be construed in context,

and not piecemeal. Chrysler Plymouth Jeep Eagle, Inc. v.

Chrysler Corp. , 898 F.Supp. 858 (M.D. Fla. 1995). All parts of a

statute must be read together in order to achieve a consistent

whole, read to give meaning to all the statute's constituent

subparts, and read harmoniously so as to give effect to each

section. Tefel v. Reno , 972 F.Supp. 623 (S.D. Fla. 1997), T.R.

v. State , 677 So. 2d 270 (Fla. 1996); Reyf v. Reyf , 620 So. 2d

218 (Fla. 3d DCA 1993); Forsythe v. Longboat Key Beach Erosion

Control District , 604 So. 2d 452 (Fla. 1992). Under the doctrine

of noscitur a sociis , words take meaning based on their context

or their association with other words in the same statute.

Desisto College, Inc. v. Town of Howey-in-the-Hills , supra . A

statute should be construed so as to suppress the mischief and

advance the remedy (intended by the legislature) and to suppress

subtle inventions and evasions for continuance of the mischief.

U.S. v. Second National Bank of North Miami , 502 F.2d 535 (5th

Cir. 1974). cert den. 95 S.Ct. 1567, 421 U.S. 912, 43 L.Ed. 2d

777 (1975); Miller v. Lykes Bros. v. S.S. Co., Inc. , 467 F.2d 464

(5th Cir. 1972). Placing audits and assessments for waste tire

fees under the Respondent FDOR was the clear intent of the

statute.

47. Thirdly, Petitioner contends that FDOR cannot

legitimately apply Section 213.756, Florida Statutes, to new tire

fees, because it is a "state revenue law" which applies only to

taxes imposed under the revenue laws covered in Chapters 192-221,

Florida Statutes, and because none of its 16,600 invoices either

clearly represented that the new tire fee was a tax provided for

under the state revenue laws or mislead consumers into believing

they were required by state law to pay the combined fees.

Fourthly, Petitioner asserts that because Petitioner failed to

comply with the Section 403.718(1) requirement to "state

separately," Petitioner also has not represented that the $.75 -

$1.50 disposal fee for used tire disposal was imposed under

Section 403.718.

48. As previously discussed, Section 213.756, Florida

Statutes, may be applied because the waste tire fee is a "tax."

However, Petitioner's third and fourth defenses raise a

significant issue as to how that statute is to be applied.

49. Section 403.718(1), imposes the waste tire fee on the

retailer "for the privilege of engaging in business," but permits

and provides for the method by which the retailer can pass the

fee on to the new tire purchaser (consumer). The purpose of the

single line disclosure requirement is to advise the new tire

purchaser of the governmental purpose he is paying for and that

the retailer is passing on that fee to the consumer. The

separate line also serves the public purposes of not permitting

retailers to inflate the state fee for a fraudulent direct profit

or pass on other charges (such as a hauling and disposal fee)

disguised as the state-imposed fee/tax. While the statute does

not prohibit the retailer passing on costs or fees such as the

hauling and disposal fee here, the statute's "separate line"

provision's main thrust is to inhibit misleading the consumer. A

consumer may not resist paying what is represented as a state-

imposed fee or tax on new tires, but he may elect to dispose of

his own used tires if he knows a retailer is passing on another,

private fee. 1 A side-effect is that the "separate line"

provision makes audits easier for the agency.

50. Admittedly, the statute provides no penalty or sanction

for a retailer's failure to "line item." However, it follows

from the foregoing conclusion that in order to address any amount

"overcollected" by the retailer, FDOR must not just establish

that the retailer "overcollected" but that he overcollected by

somehow representing that the amount he was collecting was, in

fact, the state-imposed waste tire fee. This concept is

enunciated best in Section 213.756, relied upon by FDOR, because

that statute states that only "funds collected from a purchaser

under the representation that they are taxes provided for under

the state revenue laws" become state funds by virtue of a

misleading representation, collection, and commingling.

51. Mr. Cook, the review auditor, only examined 35 out of

over 16,600 invoices and came up with 30.24 percent labeled as

"waste tax." Both he and his superior, Mr. Eckhardt conceded

that there was nothing to suggest that this percentage carried

over to invoices he did not see. Therefore, Ms. Stevens'

extensive review of all 16,600 invoices is more reliable and more

representative.

52. The problem with commingling of funds is that, once

commingled, they are indistinguishable. The method this retailer

taxpayer chose to use to notify consumers did not distinguish the

state waste tire fee or the retailer's used tire disposal fee.

The method this retailer used to notify consumers that it was

collecting both a state tax and a cost-of-doing business expense

did not clearly distinguish the tax. Reasonable consumers could

not have determined they were being charged two separate fees,

with two different motivations, purposes, and destinations, from

any of Petitioner's single line totals, blank or otherwise. Use

of the terms, "state fee," "disposal tax/waste tax," "waste fee

or disposal fee," "waste charge," "surcharge,"

"environmental/tire waste fee," "tire waste fee," "waste tax" and

"disposal fee," are clearly commingling and actively suggest a

taxation imprimitur . The remaining categories misrepresent

passively or merely by failure to inform. In addition, the

testimony of Mr. Brown suggests that customers who questioned the

confusing line item charge were misled by uninformed or confused

sales personnel.

53. The purposes of the statute would be circumvented if

Petitioner prevailed herein. Petitioner's prevailing would

encourage other retailers in the mischief Section 403.718(1) was

designed to prevent. While I conclude that there was no active

criminal fraud in Petitioner's dealings either with consumers or

FDOR, I also conclude that Petitioner's local used tire disposal

fees were collected from consumers under color of a required

state tax, and therefore, Petitioner may not retain them. See

Blackshears II Aluminum, Inc. v. Department of Revenue , 641 So.

2d 928 (Fla. 5th DCA 1994), holding that it is appropriate to

discourage fraudulent collection of bogus taxes by sale tax

licensees, who have little to lose by retaining the wrongful

collection and using them for their own purposes.

54. Based on the cooperation of Petitioner throughout the

audit process, the absence of any criminal intent or direct

profit motive, and the fact that this is a case of first

impression which presented valid and complex legal issues for

determination, I also conclude that FDOR should waive all

penalties and, for the reasons cited in its own Notice of

Decision, assesses only the revised amount, plus interest.

RECOMMENDATION

Upon the foregoing findings of fact and conclusions of law,

it is

RECOMMENDED that the Florida Department of Revenue enter a

Final Order validating the original assessment in every respect,

assessing the revised amount of $28,095.07 plus accruing interest

and waiving all penalties.

DONE AND ENTERED this 14th day of December, 1998, in

Tallahassee, Leon County, Florida.

___________________________________

ELLA JANE P. DAVIS

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone] SUNCOM 278-9675

Fax Filing [phone]

Filed with the Clerk of the

Division of Administrative Hearings

this 14th day of December, 1998.

ENDNOTE

1 / The separate line provision certainly would have competitive

consumer choice implications for the "one inclusive for 4 tire"

scenario described by Mr. Stevens.

COPIES FURNISHED:

Edgar M. Dunn, Jr., Esquire

Post Office Drawer 2600

Daytona Beach, Florida 32115-2600

James McAuley, Esquire

Scott M. Covell, Esquire

Department of Legal Affairs

The Capitol, Tax Section

Tallahassee, Florida 32399-1050

Linda Lettera, Esquire

Department of Revenue

Post Office Box 6668

Tallahassee, Florida 32314-6668

Larry Fuchs, Executive Director

Department of Revenue

104 Carlton Building

Tallahassee, Florida 32399-0100

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within 15

days from the date of this Recommended Order. Any exceptions to

this Recommended Order should be filed with the agency that will

issue the final order in this case.