99-001679RX Associated Marine Institutes, Inc. vs. Department Of Revenue Status: Closed DOAH Final Order on Monday, September 13, 1999.

Summary: Department rule invalid exercise of delegated legislative authority because it modifies or contravenes statute exempting certain organizations from Ch. 212, F.S. Statutory exemption covers sales and purchases by organization; rule exempts only purchases.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

ASSOCIATED MARINE INSTITUTES, )

INC., )

)

Petitioner, )

)

vs. ) Case No. 99-1679RX

)

DEPARTMENT OF REVENUE, )

)

Respondent. )

______________________________)

SUMMARY FINAL ORDER

After waiving the requirement to hold the hearing within

30 days after the assignment of the case, the parties, on

September 8, 1999, presented this case for disposition by

Robert E. Meale, Administrative Law Judge of the Division of

Administrative Hearings, based upon opposing motions for a

summary final order. By Joint Motion to Abate Final Hearing

Pending Entry of Order on Motions for Final Summary Order filed

September 8, 1999, the parties agreed that there were no factual

issues.

APPEARANCES

For Petitioner: Emily S. Waugh

Ausley & McMullen

Post Office Box 391

Tallahassee, Florida 32302-0391

For Respondent: Kevin J. ODonnell

Ruth Ann Smith

Assistant General Counsel

Department of Revenue

Post Office Box 6668

Tallahassee, Florida 32399-6668

STATEMENT OF THE ISSUE

The issue is whether portions of Rules 12A-1.001(3)(b) and

12A-1.001(3)(q), Florida Administrative Code, are invalid

exercises of delegated legislative authority.

PRELIMINARY STATEMENT

By Petition for A dministrative Determination of Invalidity

of Rule filed April 8, 1999, Petitioner alleged that portions of

Rules 12A-1.001(3)(b) and 12A-1.001(3)(q), Florida Administrative

Code, are invalid exercises of delegated legislative authority.

The petition alleges that Section 212.08(7)(n), Florida

Statutes, exempts from the Florida sales and use tax certain

organizations that provide certain benefits to minors. The

petition alleges that Rule 12A-1.001(3)(a), Florida

Administrative Code, exempts the purchases of these

organizations, but Rule 12A -1.001(3)(b) taxes the sales by such

organizations.

The petition alleges that Rule 12A-1.001(3)(q), Florida

Administrative Code, conditions the exemption extended to

organizations providing benefits to minors upon the receipt by

such organizations of a consumer certificate of exemption. The

petition alleges that this is an additional example of

Respondent's improper limitation of the exemption to the

purchases, rather than purchases and sales, of organizations

providing benefits to minors.

Each of the parties has filed a motion for summary final

order. As the parties concede, there are no factual issues, so a

summary final order is appropriate. The parties have offered

oral argument on their motions, but the Administrative Law Judge

has determined that oral argument is unnecessary.

On August 12, 1999, Petitioner filed a Motion to Strike

Documents Filed for Judicial Notice. The Administrative Law

Judge denies this motion.

CONCLUSIONS OF LAW

1. The Division of Administrative Hearings has jurisdiction

over the subject matter. Sections 120.56 and 120.57(1), Florida

Statutes. (All references to Sections and Chapters are to

Florida Statutes. All references to Rules are to the Florida

Administrative Code.)

2. Section 120.56(1)(a) authorizes the invalidation of a

rule on the ground that it is an invalid exercise of delegated

legislative authority. Section 120.52(8) defines an "invalid

exercise of delegated legislative authority" to include a rule

that "enlarges, modifies, or contravenes the specific provisions

of law implemented."

3. Section 212.08(7)(n) provides that "[t]here shall be

exempt from the tax imposed by this chapter" certain

organizations providing certain services to minors

(Organizations). This case does not raise an issue concerning

the type of qualifying organizations or services; this case

raises only the issue of whether the exemption attaches to sales

by Organizations. The parties agree that the exemption attaches

to purchases by Organizations.

4. Pursuant to Section 212.08(7)(n), Respondent promulgated

two subsections of Rule 12A-1.001(3)(b) and (q):

(b) Sales or rentals of tangible personal

property, rentals or leases of transient

rental accommodations, rentals or leases of

real property, rentals or leases of parking,

docking, or tie down spaces, admissions, or

other transactions subject to the tax imposed

by Chapter 212, F.S., made by exempt

entities, with the exception of sales or

leases of tangible personal property by

churches, are taxable. Such entities are

required to register in the same manner as

other dealers and collect and remit tax on

transactions which are subject to the tax

imposed by Chapter 212, F.S. For admission

charges imposed by not -for -profit sponsoring

organizations qualifying under the provisions

of s. 501(c)(3) of the U.S. Internal Revenue

Code, see Rule 12A -1.005(3)(g), F.A.C.

(q) Nonprofit organizations providing

special educational, cultural, recreational,

and social benefits to minors which are

incorporated pursuant to Chapter 617, F.S.,

or which hold a current exemption from

federal corporate income tax pursuant to

s. 501(c)(3) of the United States Internal

Revenue Code whose primary purpose is

providing activities which contribute to the

development of good character, good

sportsmanship, or to the educational or

cultural development of minors are exempt

from the tax imposed by Chapter 212, F.S.,

providing such organizations hold a

consumer's certificate of exemption. (See

Rules 12A -1.038 and 12A -1.039, F.A.C.) This

exemption is extended only to that level of

the organization that has a salaried

executive officer or an elected non -salaried

executive officer.

5. Rule 12A-1.001(3)(a) exempts Organizations from the tax

imposed by Chapter 212, but Respondent obviously interprets this

rule to be limited to purchases by Organizations.

6. Chapter 212 is the Florida Revenue Act of 1949. Section

212.01. In general, the Florida Revenue Act of 1949 imposes a

sale or use tax on taxable transactions involving the sale of

taxable property when the sale is in Florida (sales tax) or, in

the case of an out-of-state sale into Florida, the use or

consumption is in Florida (use tax). Section 212.05.

7. Section 212.06(1)(a) imposes upon the dealer the

responsibility of collecting the sales or use tax. Section

212.07(1)(a) states that the dealer is to collect the sales or

use tax from the purchaser or consumer. However, Section

212.07(3) imposes upon the noncollecting dealer the

responsibility of paying a penalty equal to the uncollected sales

or use tax. And Section 212.07(8) imposes upon the purchaser or

consumer direct liability for uncollected sales or use tax, if

the purchaser or consumer cannot prove that the purchaser or

consumer paid the tax to the vendor.

8. The structure of Section 212.08 assists in the

interpretation of Section 212.08(7)(n). The first five

subsections create exemptions of certain items (Item Exemptions)

from the sales and use tax. The sixth subsection creates an

exemption for certain entities (Entity Exemptions) from the sale

and use tax.

9. Section 212.08(7) is well named, "Miscellaneous

Exemptions." These exemptions are a mixture of Item Exemptions,

Entity Exemptions, and three other types of exemptions. The

first two additional types of exemption are exemptions extended

to certain purchases, which are typically distinguished by some

attribute of the purchaser (Purchase Exemptions), and exemptions

extended to certain sales, which are typically distinguished by

some attribute of the seller (Sale Exemptions). The third type

of exemption is an Entity Exemption that extends to all

transactions in which the entity is either a seller or a

purchaser (Blanket Entity Exemption).

10. For example, Section 212.08(7)(a) exempts from the

sales and use tax sales of artificial commemorative flowers by

bona fide nationally chartered veterans' organizations. This is

a Sale Exemption because the exemption is driven by the identity

of the seller and does not extend to any purchases by such

organizations. It is also an Item Exemption and Entity Exemption

because the exemption extends to only certain items--i.e.,

artificial commemorative flowers--in which only certain

entities --i.e., bona fide nationally chartered veterans'

organizations--participate in the transaction.

11. Among Section 212.08(7) exemptions, Section

212.08(7)(a) is unusual in one respect: it is a Sale Exemption.

Most of the exemptions in Section 212.08(7) are Purchase

Exemptions. For instance, Section 212.08(7)(c) exempts the

purchase of certain bait by commercial fishers intending to trap

certain crustaceans; Section 212.08(7)(g) exempts the purchase of

office supplies, equipment, and publications by the Florida

Retired Educators Association; and Section 212.08(7)(l) exempts

purchases by certain military museums.

12. However, there are numerous other Sale Exemptions.

Section 212.08(7)(i) exempts the sales of residents' meals by

facilities caring for the ill, aged, or disabled; Section

212.08(7)(o)1.b exempts sales by churches; Section 212.08(7)(ll)

exempts admission sales by the Florida Folk Festival; Section

212.08(7)(pp) exempts sales by nonprofit corporations conducting

correctional work programs; and Section 212.08(7)(vv) exempts

sales by owner-breeders of racing dogs.

13. Section 212.08(7) also contains a Sale/Purchase

Exemption, in which certain attributes of both the seller and

buyer must exist for the exemption to attach. Section

212.08(7)(j) exempts the sales of utilities to residents by

companies paying the gross receipts tax.

14. Another form of Sales/Purchase Exemption, which, but

for the statutory language, more closely resembles the Blanket

Entity Exemption discussed below, is found at Section

212.08(7)(jj), which exempts the sales to or by a fair

association. Instead of focusing on the attributes of the

purchasers, this exemption focuses solely on the identity of the

selling or purchasing entity--i.e., a fair association--and then

extends a blanket exemption to all purchases and sales by such an

organization.

15. Blanket Entity Exemptions occur at Section 212.08(7)(m)

(nursing homes), Section 212.08(7)(n) (Organizations), Section

212.08(7)(r) (State Theater organizations), Section 212.08(7)(cc)

(Coast Guard auxiliaries), Section 212.08(7)(kk) (citizen support

organizations), and Section 212.08(7)(mm) (nonprofit cooperative

hospital laundries). In contrast to all of the previously

described exemptions, these seven exemptions, using identical,

comprehensive statutory language, provide the identified entity

with an exemption from the tax imposed by Chapter 212. Blanket

Entity Exemptions are thus unlike Entity Exemptions because

Blanket Entity Exemptions do not contain limiting language in

terms of purchases, sales, or items.

16. As already noted, Chapter 212 requires the purchaser or

consumer to pay the sales or use tax to the dealer or vendor, who

then remits the tax to Respondent. If the dealer or vendor fails

to collect the tax, though, Chapter 212 requires the dealer or

vendor to pay the tax (by requiring the dealer or vendor to pay a

penalty equal to the uncollected tax). Thus, neither nonexempted

party to a sale is relieved from the economic burden of the sales

and use tax. Given this dual exposure, an effective Blanket

Entity Exemption must necessarily cover purchases and sales by

the exempted entity.

17. Respondent contends that Section 212.08(7)(n) is

ambiguous and requires careful construction. To the contrary,

the statute's meaning is plain. On its face, Section

212.08(7)(n) exempts Organizations from the sales and use tax.

There is no reason not to extend the more broadly phrased Blanket

Entity Exemption to sales, as well as purchases, by a covered

entity. Section 212.08(7) contains numerous Sale Exemptions.

Also, Respondent has already interpreted, in Rule

12A -1.001(3)(i), the identical statutory exemption language that

applies to Organizations as extending an exemption to nursing

homes for their sales, as well as purchases.

18. Rule 12A-1.001(3)(b) is thus invalid because it

modifies or contravenes the legislative direction, contained in

Section 212.08(7)(n), to provide Organizations a Blanket Entity

Exemption from the sales and use tax for its purchases and sales.

19. Rule 12A-1.001(3)(q) is partly invalid because of the

language requiring that Organizations seeking the benefit of

their statutory Blanket Entity Exemption obtain a consumer's

certificate of exemption. Associated with an exemption for

purchases, this certificate is irrelevant to the exemption

legislatively extended Organizations for their sales.

ORDER

It is

ORDERED that:

1. Rule 12A-1.001(3)(b) is invalid in its entirety.

2. Rule 1 2A-1.001(3)(q) is invalid to the extent that it

requires that Organizations hold consumer's certificates of

exemption for sales by Organizations.

3. The Administrative Law Judge reserves jurisdiction

regarding Petitioner's request for attorneys' fees and costs.

Petitioner shall have 20 days from the date of this order to file

a motion with supporting documents, or else it shall be deemed to

have waived its request.

DONE AND ORDERED this 13th day of September, 1999, in

Tallahassee, Leon County, Florida.

___________________________________

ROBERT E. MEALE

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 13th day of September, 1999.

COPIES FURNISHED:

Emily S. Waugh

Ausley & McMullen

Post Office Box 391

Tallahassee, Florida 32302-0391

Kevin J. ODonnell

Ruth Ann Smith

Assistant General Counsel

Department of Revenue

Post Office Box 6668

Tallahassee, Florida 32314-6668

Linda Lettera, General Counsel

Department of Revenue

Post Office Box 6668

Tallahassee, Florida 32314-6668

Larry Fuchs, Executive Director

Department of Revenue

Post Office Box 6668

Tallahassee, Florida 32314-6668

Carroll Webb, Executive Director

Joint Administrative Procedures Committee

Holland Building, Room 120

Tallahassee, Florida 32399-1300

Liz Cloud, Chief

Bureau of Administrative Code

The Elliott Building

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 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.