05-001752 Best Day Charters, Inc. vs. Department Of Revenue Status: Closed Recommended Order on Thursday, September 22, 2005.

Summary: Florida Corp that purchased catamaran and inflatible tender was liable for sales tax, despite the fact that the vessels were removed from FL and used in the Virgin Isl. Penalty can be compromised for good faith reliance on erroneous advice.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

BEST DAY CHARTERS, INC., )

)

Petitioner, )

)

vs. ) Case No. 05-1752

)

DEPARTMENT OF REVENUE, )

)

Respondent. )

)

RECOMMENDED ORDER

On August 23, 2005, a final hearing was held in Tampa,

Florida, before Bram D. E. Canter, Administrative Law Judge of

the Division of Administrative Hearings.

APPEARANCES

For Petitioner: Brenda J. Dohring, pro se

Best Day Charters, Inc.

518 North Tampa Street, Suite 300

Tampa, Florida 33602

For Respondent: John Mika, Esquire

Office of the Attorney General

The Capitol, Plaza Level 01

Tallahassee, Florida 32399-1050

STATEMENT OF THE ISSUE

Whether the Petitioner is liable for sales tax, interest,

and penalties as alleged by the Department of Revenue

(Department).

PRELIMINARY STATEMENT

On February 23, 2005, the Department issued a "Notice of

Final Assessment for Sales or Use Tax, Penalty, and Interest Due

on a Boat" (Final Assessment) to the Petitioner, pertaining to

the Petitioner's purchase of a catamaran sailboat and an

inflatable "tender." The Petitioner protested the Final

Assessment and the case was referred to the Division of

Administrative Hearings for an evidentiary hearing.

At the final hearing, the Department presented the

testimony of John Isaacs. The Department's Composite Exhibit 1

was admitted into evidence. The Petitioner presented the

testimony of Brenda Dohring, Joshua Dohring, and David Erdman.

The Petitioner's Exhibits 1 through 5 and 7 were admitted into

evidence.

The one-volume Transcript of the hearing was filed on

September 8, 2005. The Department filed a Proposed Recommended

Order on September 16, 2005, and it was considered in the

preparation of this Recommended Order. No post-hearing papers

were submitted by the Petitioner.

FINDINGS OF FACT

Based on the oral and documentary evidence presented at the

final hearing, the following Findings of Fact are made:

1. The Petitioner is a Florida corporation formed in

October 2004. The principal office and mailing address of the

Petitioner is 518 North Tampa Street, Suite 300, Tampa, Florida

33602.

2. The directors of the corporation are Brenda Dohring and

Robert Hicks (husband and wife), and Joshua Dohring (their son).

3. Brenda Dohring and Robert Hicks are residents of Tampa,

Florida, and registered voters in Hillsborough County.

4. Brenda Dohring and Robert Hicks hold Florida driver's

licenses.

5. Joshua Dohring is a resident of the United States

Virgin Islands, where he operates a charter boat business.

6. On November 8, 2004, the Petitioner purchased, in

St. Petersburg, Florida, a 36-foot catamaran sailboat (hull

No. QPQ0000D089) for $113,000.

7. On November 15, 2004, the Petitioner purchased, in

St. Petersburg, Florida, an inflatable tender with outboard

motor and accessories (hull No. XMO18119G405) for $4,865.

8. The catamaran and tender were purchased for the use of

Joshua Dohring in his charter boat business in the Virgin

Islands. They were to replace his previous boat that was

destroyed by Hurricane Ivan.

9. Because Joshua Dohring did not have sufficient

financial resources or credit, Brenda Dohring and Robert Hicks

decided to make the purchases for him. They created the

Petitioner corporation to purchase and own the catamaran and

tender because they wanted protection from personal liability

that might arise from Joshua Dohring's use of the vessels in the

Virgin Islands.

10. At the time of each purchase, Joshua Dohring was

provided a Department affidavit form to be completed and filed

with the Department to claim exemption from sales tax. Joshua

Dohring indicated the name of the Petitioner corporation on the

affidavit forms along with the names of the corporation's

directors.

11. The Department's affidavit form for sales tax

exemption includes several statements that the affiant must

attest to, including the following:

4. I represent a corporation which has no

officer or director who is a resident of, or

makes his or her permanent place of abode in

Florida.

12. David Erdman, a licensed yacht broker in Florida who

assisted Joshua Dohring in the purchase of the catamaran and

tender, believed that the purchases were exempt from Florida

sales tax because Joshua Dohring was not a Florida resident and

was going to remove the vessels from Florida. Mr. Erdman did

not understand that, because the purchaser was not Joshua

Dohring, but a Florida corporation, the sales tax exemption did

not apply. Mr. Erdman advised Joshua Dohring that the purchases

were exempt from Florida sales tax.

13. There is no evidence in the record, and the Department

did not allege, that the Petitioner intended to defraud the

State. On this record, it is clear that the Petitioner's

directors were simply mistaken in their belief that the

purchases of the boats were exempt from Florida sales tax, based

primarily on the erroneous advice of Mr. Erdman.

14. The Department made a routine investigation after its

receipt of the sales tax exemption affidavits signed by

Mr. Dohring and determined that the exemption did not apply

because the Petitioner is a Florida corporation with directors

who are residents of Florida.

15. In January 2005, the Department notified the

Petitioner of its billing for the sales tax due on the boat

purchases, plus penalty and interest, totaling $8,474.67. An

informal conference regarding the billing was requested by the

Petitioner, and a conference was held in an attempt to resolve

the matter.

16. Subsequently, the Department's Final Assessment was

issued on January 23, 2005, indicating tax, penalty, and

interest totaling $9,229.26.

17. Because of the circumstances indicating that the

Petitioner's failure to pay was due to a mistake and bad advice,

the Department proposes to eliminate the penalty.

CONCLUSIONS OF LAW

18. The Division of Administrative Hearings has

jurisdiction over the subject matter and the parties hereto

pursuant to Sections 120.569 and 120.57, and Subsection

72.011(1)(a), Florida Statutes (2004). 1

19. Subsection 120.80(14)(b), Florida Statutes, provides

in pertinent part:

1. In any administrative proceeding brought

pursuant to this chapter as authorized by s.

72.011(1), the taxpayer shall be designated

the "petitioner" and the Department of

Revenue shall be designated the

"respondent". . . .

2. In any such administrative proceeding,

the applicable department's burden of proof,

except as otherwise specifically provided by

general law, shall be limited to a showing

that an assessment has been made against the

taxpayer and the factual and legal grounds

upon which the applicable department made

the assessment.

20. The Legislature has declared its intention in

Subsection 212.21(2), Florida Statutes, to tax each and every

sale of tangible property in Florida, subject only to the

specific exemptions within Chapter 212, Florida Statutes.

21. Subsection 212.05(1)(a)1.a., Florida Statutes,

imposes a six percent sales tax on the sales price of each

article of tangible personal property when sold in retail in

this state, unless specifically exempt. Subsection

212.05(1)(a)2., Florida Statutes, creates an exemption from

sales tax for the sale of boats to nonresident purchasers, when

other specific statutory criteria for the exemption are met.

22. Subsection 212.05(1)(a)2., Florida Statutes, provides

in pertinent part:

This paragraph does not apply to the sale of

a boat or airplane by or through a

registered dealer under this chapter to a

purchaser, who, at the time of taking

delivery, is a nonresident of this state,

does not make his or her permanent place of

abode in this state, and is not engaged in

carrying on in this state any employment,

trade, business, or profession in which the

boat will be used in this state, or is a

corporation none of the officers or

directors of which is a resident of, or

makes his or her permanent place of abode

in, this state.

The statements in the Department's sales tax exemption affidavit

forms are derived from this statute.

23. Florida Administrative Code Rule 12A-1.007(9) provides

that Florida residency in this context can be established by

place of abode in Florida, voter registration in Florida, or by

possession of a Florida driver's license.

24. Exemptions to the taxing statutes are to be strictly

construed against the taxpayer. State ex rel. Szabo Food

Service of North Carolina, Inc. v. Dickinson , 286 So. 2d 529

(Fla. 1973).

25. Because the Petitioner is a Florida corporation with

two directors who reside in Florida, are registered voters in

Florida, and possess Florida driver's licenses, the Petitioner

did not qualify for the statutory exemption from sales tax on

the purchase of the catamaran and tender.

26. Pursuant to Subsection 212.12(4), Florida Statutes,

when interest and penalty are imposed, they are payable in the

same manner as if they were part of the tax imposed.

27. A taxpayer's liability for interest can be

"compromised" if there are grounds for doubt as to the liability

for the tax, or if there is a delay in the determination of the

amount due attributable to the action or inaction of the

Department. § 213.21(3)(a), Fla. Stat. No circumstances exist

in this case for compromising the interest imposed.

28. A taxpayer's liability for a penalty may be settled or

compromised if noncompliance is due to reasonable cause and not

to willful negligence, willful neglect, or fraud. Id.

29. Florida Administrative Code Rule 12-13.007(4) makes

good faith reliance on erroneous advice a basis for finding

reasonable cause for noncompliance.

30. Although the Petitioner's directors were mistaken in

their belief that the purchases of the catamaran and tender were

exempt from sales tax, there is no statutory basis for excusing

the tax. The directors realized a benefit from the use of a

corporation to purchase and own the vessels, and the value of

that benefit could easily exceed the sales tax.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is

RECOMMENDED that the Department issue an final order:

1. finding that the Petitioner's purchases of the

catamaran and inflatable tender are subject to sales tax; and

2. assessing sales tax of six percent on the purchases;

and

3. imposing interest on the taxes until paid; and

4. imposing no penalty.

DONE AND ENTERED this 22nd day of September, 2005, in

Tallahassee, Leon County, Florida.

BRAM D. E. CANTER

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 22nd day of September, 2005.

ENDNOTE

1/ All references to the Florida Statutes are to Florida

Statutes (2004).

COPIES FURNISHED :

John Mika, Esquire

Office of the Attorney General

The Capitol, Plaza Level 01

Tallahassee, Florida 32399-1050

Brenda J. Dohring

Best Day Charters, Inc.

518 North Tampa Street, Suite 300

Tampa, Florida 33602

Bruce Hoffmann, General Counsel

Department of Revenue

204 Carlton Building

Tallahassee, Florida 32399-0100

James Zingale, 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.