98-004152 Action Boatworks, Inc. vs. Department Of Revenue Status: Closed Recommended Order on Wednesday, May 5, 1999.

Summary: Yacht brought into Florida for resale and repairs is subject to use tax.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

ACTION BOATWORKS, INC., )

)

Petitioner, )

)

vs. ) Case No. 98-4152

)

DEPARTMENT OF REVENUE, )

)

Respondent. )

__________________________________)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was held in this case

on January 28, 1999, by video teleconference with the Petitioner

appearing from Miami, Florida, before J. D. Parrish, a designated

Administrative Law Judge of the Division of Administrative

Hearings.

APPEARANCES

For Petitioner: Jack Stein, Esquire

Arthur Rosenberg, Esquire

Stein, Rosenberg & Winikoff

Seventh Floor

4875 North Federal Highway

Fort Lauderdale, Florida 33308

For Respondent: Eric Taylor, Assistant Attorney General

401 Northwest Second Avenue, N607

Miami, Florida 33128

STATEMENT OF THE ISSUES

Whether Petitioner owes the assessment for sales and use tax

as alleged by the Department of Revenue.

PRELIMINARY STATEMENT

This case began on July 13, 1998, when the Department of

Revenue (Department) issued a use tax notice to Petitioner,

Action Boatworks, Inc. Such notice claimed a tax in the amount

of $34,294.56 was past due for a vessel known as the "Action

Lady." Such notice further alleged a penalty in the amount of

$17,147.28 with interest at $8,129.21 to be also due for such

vessel. The total amount of the use tax claim was $59,571.05.

Thereafter, Petitioner filed a challenge to the claim and

requested an administrative hearing as to the matter. The case

was forwarded to the Division of Administrative Hearings for

formal proceedings on September 22, 1998.

At the hearing, Petitioner presented testimony from George

Schoenrock, a principal with the company Action Boatworks, Inc.

Petitioner's composite Exhibit 1 was admitted into evidence.

Respondent's Exhibits A, B, C, and D have also been received into

evidence.

The Transcript of the proceedings was filed on March 15,

1999. The parties were granted ten days' leave from such date to

file their proposed recommended orders. To date, neither party

has filed a proposed order.

FINDINGS OF FACT

1. George Schoenrock is a resident of the State of Florida.

His address is 7600 Miami View Drive, Northgate Village, Miami,

Florida.

2. Mr. Schoenrock is the owner of a company known as Action

Marine. This company is located in the State of Florida and

manufactures and sells new boats.

3. In 1996 Mr. Schoenrock also formed a company in North

Carolina called Action Boatworks. This company, Action

Boatworks, is the Petitioner in this cause.

4. In 1996 Petitioner purchased a boat made in Wanchese,

North Carolina and named it the "Action Lady."

5. The boat was purchased to re-sell for profit by

Petitioner, a dealer in North Carolina. Action Boatworks is not

registered in Florida to sell boats nor does it possess a Florida

sales tax dealer's license or a tax number from the Florida

Department of Revenue.

6. At the time of purchase Mr. Schoenrock considered the

"Action Lady" unfinished as it lacked canvas, fishing equipment,

chair rigging, and electronic equipment for navigation.

7. The total paid to Davis Boatworks, Inc. (the

manufacturer) for the "Action Lady" was in excess of $571,000.00.

The invoice for this purchase, dated May 21, 1996, did not list

Petitioner as the purchaser of the vessel but identified a

"Barney Schoenrock."

8. After the purchase of the boat, Mr. Schoenrock brought

the "Action Lady" to South Florida where he intended to complete

the installation of the items noted above and re-sell it. The

vessel entered the State of Florida by the end of May 1996, and

proceeded down the coast to a dock at Mr. Schoenrock's residence.

9. One deterrent to the re-sale of the "Action Lady" was

immediately discovered by Mr. Schoenrock. That is, the diesel

engines did not pass a "P.I.D." inspection required for the

warranty to be effective. This inspection required Detroit

Diesel to complete the P.I.D. test and to certify the engines

were acceptable.

10. The vessel eventually passed this inspection some eight

or nine months after Mr. Schoenrock had received the boat. The

first effort to repair the vessel in order to pass the P.I.D.

test was in June of 1996 when it was taken to a repair facility

known as Safety Harbor. The "Action Lady" remained at Safety

Harbor until August 7, 1996, when it returned to Mr. Schoenrock's

residence.

11. Thereafter, on or about October 24, 1996, the vessel

went back to Safety Harbor for additional repairs which lasted

approximately two weeks.

12. After the repairs were completed, sometime in November

1996, the boat was returned to Mr. Schoenrock's residence.

13. In October 1996 Mr. Schoenrock listed the "Action Lady"

for sale with Walsh Yachts. The asking price was noted at

$695,520.00. Also at this time it was placed in the Fort

Lauderdale boat show.

14. Except for the time the boat was in repairs or on

exhibition during the October boat show, the "Action Lady"

remained docked at Mr. Schoenrock's residence.

15. Eventually, Petitioner sold the vessel in South Florida

to Joseph Gregory in March of 1997.

16. According to Mr. Schoenrock the boat was not used for

his own personal use. It was not used by others for personal

use. It was subject to repairs, testing, and demonstration the

entire time it was in Florida prior to its sale.

17. According to Mr. Schoenrock, when he purchased the boat

in North Carolina, he paid sales tax in that state totaling

$2500.00.

18. Mr. Schoenrock's company, Action Marine, was never in

any way an owner of the "Action Lady."

19. Mr. Schoenrock insured the vessel for its value and was

the beneficiary of the policy.

20. From June 1, 1996, through its resale in March 1997,

the "Action Lady" did not leave the State of Florida.

CONCLUSIONS OF LAW

21. The Division of Administrative Hearings has

jurisdiction over the parties to, and the subject matter of,

these proceedings.

22. Section 212.05, Florida Statutes, provides, in

pertinent part:

It is hereby declared to be the legislative

intent that every person is exercising a

taxable privilege who engages in the business

of selling tangible personal property at

retail in this state, including the business

of making mail order sales, or who rents or

furnishes any of the things or services

taxable under this chapter, or who stores for

use or consumption in this state any item or

article of tangible personal property as

defined herein and who leases or rents such

property within the state.

23. Section 212.08(7)(t), Florida Statutes, provides:

1. Notwiths tanding the provisions of

chapters 327 and 328, pertaining to the

registration of vessels, a boat upon which

the state sales or use tax has not been paid

is exempt from the use tax under this chapter

if it enters and remains in this state for a

period not to exceed a total of 20 days in

any calendar year calculated from the date of

first dockage or slippage at a facility,

registered with the department, that rents

dockage or slippage space in this state. If

a boat brought into this state for use under

this paragraph is placed in a facility,

registered with the department, for repairs,

alterations, refitting, or modifications and

such repairs, alternations, refitting, or

modifications are supported by written

documentation, the 20-day period shall be

tolled during the time the boat is physically

in the care, custody, and control of the

repair facility, including the time spent on

sea trials conducted by the facility. The

20-day time period may be tolled only once

within a calendar year when a boat is placed

for the first time that year in the physical

care, custody, and control of a registered

repair facility; however, the owner may

request and the department may grant an

additional tolling of the 20-day period for

purposes of repairs that arise from a written

guarantee given by the registered repair

facility, which guarantee covers only those

repairs or modifications made during the

first tolled period. Within 72 hours after

the date upon which the registered repair

facility took possession of the boat, the

facility must have in its possession, on

forms prescribed by the department, an

affidavit which states that the boat is under

its care, custody, and control and that the

owner does not use the boat while in the

facility. Upon completion of the repairs,

alternations, refitting, or modifications,

the registered repair facility must, within

72 hours after the date of release, have in

its possession a copy of the release form

which shows the date of release and any other

information the department requires. The

repair facility shall maintain a log that

documents all alternations, additions,

repairs, and sea trials during the time the

boat is under the care, custody, and control

of the facility. The affidavit shall be

maintained by the registered repair facility

as part of its records for as long as

required by s. 213.35. When, within 6 months

after the date of its purchase, a boat is

brought into this state under this paragraph,

the 6-month period provided in s.

212.05(1)(a)2. or s. 212.06(8) shall be

tolled.

2. During the period of repairs,

alternations, refitting, or modifications and

during the 20-day period referred to in

subparagraph 1., the boat may be listed for

sale, contracted for sale, or sold

exclusively by a broker or dealer registered

with the department without incurring a use

tax under this part; however, the sales tax

levied under this part applies to such sale.

3. The mere storage of a boat at a

registered repair facility does not qualify

as a tax-exempt use in this state.

4. As used in this paragraph,

"registered repair facility" means:

a. A full-service facility that:

(I) Is located on a navigable body of

water;

(II) Has haulout capability such as a

dry dock, travel lift, railway, or similar

equipment to service craft under the care,

custody, and control of the facility.

(III) Has adequate piers and storage

facilities to provide safe berthing of

vessels in its care, custody, and control;

and

b. A marina that:

(I) Is located on a navigable body of

water;

(II) Has adequate piers and storage

facilities to provide safe berthing of

vessels in its care, custody, and control;

and

(III) Has necessary shops and equipment

to provide repairs or warranty on vessels; or

c. A shoreside facility that:

(I) Is located o n a navigable body of

water;

(II) Has adequate piers and storage

facilities to provide safe berthing of

vessels in its care, custody, and control;

and

(III) Has necessary shops and equipment

to provide repairs or warranty work.

24. Rule 12A-1.0071, Florida Administrative Code, provides

guidelines for boats temporarily docked in Florida. Petitioner

did not comply with any of the provisions of this rule in order

to secure an exemption from use tax provisions. In fact,

Petitioner did not maintain it was entitled to an exemption until

after inquiries were made into the dockage history of the vessel.

25. In this case Petitioner bears the burden to challenge

the accuracy of the use tax assessment issued by the Department.

The Petitioner has not contested the amount of the tax, the

penalty assessed, nor the interest due on the assessment.

Instead, the Petitioner maintains that a use tax is not owed as

the vessel was purchased and brought to the State of Florida

merely for repairs and resale, and not for the personal use of

the taxpayer. Mr. Schoenrock, a Florida resident, maintains he

did not use the vessel but that it was stored at his residence.

Petitioner maintains it spent the entire time repairing or

installing improvements to the boat, and that the boat P.I.D.

test was not completed and successful until February of 1997, one

month before the boat was sold. Petitioner cites the case of

Department of Revenue v. Yacht Futura Corporation , 510 So. 2d

1047 (Fla. 1st DCA 1987) in support of its position.

26. In the Futura case the yacht was purchased elsewhere

and brought to Florida for warranty repairs. The vessel arrived

in Florida in October of 1984 and was ready to leave the state in

January 1985. The court found that the act of "sailing the

Futura into Florida waters and docking it at various marinas in

Florida for the purpose of effectuating extensive repairs and

alterations upon it did not constitute a use or storage so as to

activate Florida's taxing statutes." Futura at 1049.

27. Unlike the Futura vessel which was required to be

repaired in Florida, the "Action Lady" was brought to Florida for

the owner's convenience. The vessel was never reported or

registered for repair in a facility designated by statute or

rule. Moreover, the repairs and testing performed for the

"Action Lady" were done to enhance its resale value. Without the

P.I.D. approval the warranty would not have been available for

the engines. Nothing in this record demonstrates that the P.I.D.

could not be completed in North Carolina, the state of original

manufacture. Further, unlike the Futura, the "Action Lady" was

docked at the owner's residence for extensive periods. It was

not in marinas receiving repairs on a continuous basis. Of the

ten months it was owned by Petitioner and within Florida

(primarily at Mr. Schoenrock's personal residence), the "Action

Lady" was being repaired, at best, 117 days. The remainder of

the time it was available for use and was stored on the

Intracoastal Waterway.

28. Additionally, unlike the Futura case cited by

Petitioner, the beneficiary of this boat transaction was a

resident of Florida. Mr. Schoenrock acquired the boat with the

intent of bringing it to Florida for resale. He made

improvements to the vessel to increase its value. He did not

follow the exemption criteria to seek an exemption under the

repairs provision for boats temporarily docked in Florida. His

North Carolina company (who it is claimed was the purchaser of

the vessel) did not document, by any of the appropriate

affidavits, the repair information cited by the rule.

29. Despite the delays in obtaining the P.I.D.

certification, Mr. Schoenrock did not submit any documentation

regarding the necessity for such repairs in Florida. In fact,

if, as he claims, the P.I.D. was needed for warranty purposes, it

is curious that he accepted the vessel from its manufacturer in

North Carolina without such certification.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is RECOMMENDED that the Department of Revenue enter a

Final Order affirming the use tax assessment.

DONE AND ENTERED this 5th day of May, 1999, in Tallahassee,

Leon County, Florida.

___________________________________

J. D. PARRISH

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone] SUNCOM 278-9675

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 5th day of May, 1999.

COPIES FURNISHED:

Eric J. Taylor, Assistant Attorney General

Office of the Attorney General

The Capitol, Tax Section

Tallahassee, Florida 32399-1050

Eric Taylor, Assistant Attorney General

401 Northwest Second Avenue, N607

Miami, Florida 33128

Jack Stein, Esquire

Arthur Rosenberg, Esquire

Stein, Rosenberg & Winikoff

Seventh Floor

4875 North Federal Highway

Fort Lauderdale, Florida 33308

Linda Lettera, General Counsel

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.