97-002905 Eagle Aircraft Corporation And Centurion Aviation Corporation vs. Department Of Revenue Status: Closed Recommended Order on Tuesday, June 16, 1998.

Summary: Petitioner Centurion Aviation was not a registered dealer. Centurion's purchase of an aircraft therefore required assessment of sales tax notwithstanding subsequent use of the aircraft by Petitioner Eagle Aircraft, the parent corporation of Centurion.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

EAGLE AIRCRAFT CORP. and )

CENTURION AVIATION COMPANY, )

)

Petitioners, )

)

vs. ) Case No. 97-2905

)

DEPARTMENT OF REVENUE, )

)

Respondent. )

______________________________)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was conducted in this

case on April 21, 1998, in Tallahassee, Florida, by Don W. Davis,

an Administrative Law Judge for the Division of Administrative

Hearings.

APPEARANCES

For Petitioners: J. B. Curasi, Esquire

Eagle Aircraft Corp. and

Centurion Aviation Company

3240 Capital Circle Southwest

Tallahassee, Florida 32310

For Respondent: Jeffrey M. Dikman, Esquire

Department of Legal Affairs

Tax Section

The Capitol, Plaza Level 01

Tallahassee, Florida 32399-1050

STATEMENT OF THE ISSUE

Whether Petitioners should be permitted to purchase an

aircraft for leasing purposes without paying sales tax.

PRELIMINARY STATEMENT

By letter dated April 18, 1997, Respondent’s representative

notified Petitioner Centurion Aviation Company (Centurion) that

its request for sales tax exemption with regard to purchase of an

aircraft was denied.

By Petition For Formal Proceedings filed June 16, 1997,

Centurion and Eagle Aircraft Corp., (Eagle), jointly challenged

Respondent’s assessment of sales/use taxes against Centurion.

The matter was transferred to the Division of Administrative

Hearings for formal proceedings on June 20, 1997. By order of

Administrative Law Judge Donald R. Alexander, Respondent’s motion

to abate the scheduling of a final hearing was granted pending a

status report to be filed on or before December 26, 1997. Upon

conclusion of the abatement period, Judge Alexander set the

matter for final hearing on April 21, 1998.

The case was transferred to the undersigned for purpose of

conducting the final hearing. At the final hearing, Respondent

presented testimony of one witnesses, and offered two exhibits in

evidence. Petitioners presented testimony of one witness and one

exhibit.

The parties were granted leave to file proposed recommended

orders more than ten days following the filing of the transcript.

That transcript was filed on May 6, 1998. Proposed recommended

orders submitted by the parties have been reviewed in the course

of preparation of this Recommended Order.

FINDINGS OF FACT

1. Centurion, as a legal entity, was first incorporated

under the laws of the State of Florida on or about May 23, 1996.

Eagle, the parent corporation of Centurion, is a separate legal

entity, also incorporated under the laws of the State of Florida.

Both entities have their headquarters in Tallahassee, Florida.

2. An assessment of sales/use taxes, and associated

interest, was issued by Respondent against Centurion and

reflected in a Notice of Reconsideration (NOR), dated April 18,

1997.

3. No tax assessment has been issued against Eagle.

4. The assessment was based upon the purchase by Centurion,

of a 1968 Cessna Aircraft, Model #210H, Serial #21059002, in

Florida, from Frank A. Tillman, for $30,000.

5. Centurion, the sole purchaser, took title to the

aircraft when it was purchased from Frank Tillman. No sales tax

was collected on the transaction. However, tax was remitted by

Eagle on the subsequent re-leasing of the aircraft in Florida.

6. At the time of the sale, Centurion, the purchaser, was

not registered as a dealer. However, Eagle, the parent

corporation, was registered as a dealer.

7. Evidence is in conflict concerning the exact date of

purchase of the aircraft, 1 but the parties are in agreement and

the evidence supports the finding that the aircraft was purchased

before Centurion obtained a dealership registration on

October 24, 1996.

8. Centurion did not seek to register as a dealer until

Respondent later launched inquiries about the purchase.

9. On August 21, 1996, Respondent issued a tax

assessment/billing against Centurion based upon an estimated

aircraft purchase price of $60,000. However, based upon

additional information provided by Eagle, Respondent learned that

the purchase price was only $30,000 and the assessment was

reduced. Respondent’s NOR reflects the computation of the

assessment based upon the purchase price of $30,000.

10. Petitioners did not act as a “joint venture” or “unit”

in that they did not register jointly as a “dealer” at the time

of purchase; they did not acquire joint title to the aircraft;

and they did not jointly issue a certificate of resale at the

time of purchase.

11. The following elements of joint venture were not

evidenced by Petitioners at the time of sale: (1) a community of

interest in the performance of the common purpose; (2) joint

control or right of control; (3) a joint proprietary interest in

the subject matter; (4) a right to share in the profits and (5) a

duty to share in any losses which may be sustained.

12. Testimony by James B. Curasi on behalf of Petitioners

that a joint venture was established contradicts statements made

by him previously to Respondent. In a letter dated September 19,

1996, Petitioners’ representative and witness, James B. Curasi,

informed the Department of Revenue that the aircraft was leased

by Centurion to Eagle Aircraft. He stated that the relationship

between Eagle and Centurion was that of lessor and lessee, rather

than that of joint venture partners. Specifically, Curasi stated

the following in the letter:

Please be advised that this aircraft was

purchased by Centurion Aviation Company, a

related company, and leased to Eagle

Aircraft . (emphasis supplied.)

Testimony by Curasi to the contrary is not credited.

13. Additionally, a blanket certificate of resale,

presented to Respondent after this formal administrative

proceeding commenced, is signed only in the name of Eagle

Aircraft as “purchaser,” and states that “all material,

merchandise, or goods purchased by the undersigned from Frank

Tillman” shall be for exempt resale purposes.

CONCLUSIONS OF LAW

14. The Division of Administrative Hearings has

jurisdiction over the parties and the subject matter.

Section 120.57(1), Florida Statutes.

15. The gravamen of Petitioners’ protest is that the

issuance of a certificate of resale by Eagle, a registered dealer

at the time of sale, to the seller of the aircraft, was

sufficient to exempt the sale from taxation, even though

Centurion, the purchaser, was not registered as a dealer at the

time of sale. Additionally, neither Centurion nor Eagle were

registered as a dealer as part of a joint venture “at the time of

sale.” Rather, Eagle was registered in its own name alone.

16. Petitioners’ argument is not persuasive. By

registering one corporation as a dealer (i.e., “Eagle”), then

taking title of the aircraft in the name of a different

corporation (i.e., “Centurion”), Petitioners did not act as a

“unit” or “joint venture,” in the ways that are material to

obtaining a resale exemption.

17. Under Florida Administrative Code Rule 12A-1.038(4) and

(5)(a), only a dealer who is the “ purchaser ” of tangible personal

property may issue a valid certificate of resale. Regardless of

whether a “joint venture” existed, neither Eagle nor a “joint

venture” were the “purchaser” of the aircraft. Rather, the

aircraft was acquired in the name of Centurion alone, which was

not a registered dealer at the time of sale.

18. A taxpayer’s burden of proof, in a tax exemption

dispute, includes a burden to show clear entitlement to the

exemption. Anderson v. State Department of Revenue , 403 So. 2d

397 (Fla. 1981).

19. In the case of the resale exemption, partial or even

substantial compliance with tax exemption requirements is

insufficient. A taxpayer must demonstrate strict compliance.

See , Section 212.07(1)(b), Florida Statutes and Anderson , id.

20. Section 212.07(1)(b), Florida Statutes, specifically

provides:

(b) A resale must be in strict compliance

with the rules and regulations , and any

dealer who makes a sale for resale which is

not in strict compliance with the rules and

regulations shall himself or herself be

liable for and pay the tax. A dealer may,

through the informal protest provided for in

s. 213.21 and the rules of the Department of

Revenue, provide the department with evidence

of the exempt status of a sale. The

Department of Revenue shall adopt rules which

provide that valid resale certificates and

consumer certificates of exemption executed

by those dealers or exempt entities which

were registered with the department at the

time of sale shall be accepted by the

department when submitted during the protest

period but may not be accepted in any

proceeding under chapter 120 or any circuit

court action instituted under chapter 72.

(Emphasis supplied).

21. The evidence shows that Centurion purchased the

aircraft, not Eagle and not a “joint venture.” Under Florida

Administrative Code Rule 12A-1.038(4) and (5)(a), the “purchaser”

must be a registered dealer at the time of sale and the

“purchaser” must issue a certificate of resale. This was not

done in the case at hand.

22. Additionally, contrary to Petitioners' assertions,

imposing a tax on the purchase or sale of tangible personal

property does not result in “pyramiding” or double taxation

merely because tax is collected and remitted on the subsequent

rental of the aircraft. The sale or purchase of an aircraft is a

separate taxable event from the leasing of the aircraft. Ryder

Truck Rental v. Bryant , 170 So. 2d 822, 825 (Fla. 1964).

23. While registered “dealers” are permitted by law to

purchase tangible personal property for resale purposes without

paying tax on the purchase, requirements for obtaining the resale

exemption must be strictly met. Those strict requirements were

simply not met in this case.

RECOMMENDATION

Based upon the findings of fact and the conclusions of law,

reached, it is, recommended that a final order be entered

sustaining Respondent’s assessment.

DONE AND ENTERED this 16th day of June, 1998, in

Tallahassee, Leon County, Florida.

___________________________________

DON W. 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 16th day of June, 1998.

ENDNOTE

1 / The copy of the cancelled check for the purchase price

reflected a May 22, 1996, purchase date and the bill of sale bore

a May 23, 1996, purchase date. Furthermore, the Petitioner

admitted, in response to requests for admission, that the bill of

sale was signed on or about May 23, 1996. On the other hand, the

NOR referenced a July 16, 1996, purchase date, as did the

Department's witness.

COPIES FURNISHED:

J.B. Curasi, Esquire

Eagle Aircraft Corp.

and Centurion Aviation Company

3240 Capital Circle Southwest

Tallahassee, Florida 32310

Jeffrey M. Dikman, Esquire

Department of Legal Affairs

Tax Section

The Capitol, Plaza Level 01

Tallahassee, Florida 32399-1050

Linda Lettera, Esquire

Department of Revenue

204 Carlton Building

Tallahassee, Florida 32399-0100

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.