05-003278 Department Of Business And Professional Regulation, Division Of Alcoholic Beverages And Tobacco vs. Beer: 30 Grill And Pub, Inc., D/B/A Beer: 30 Grill And Pub Status: Closed Recommended Order on Tuesday, January 24, 2006.

Summary: Respondent failed to keep an accounting of the tax incurred on the alcoholic beverages sold. An audit of the distributor`s sales to Respondent reflect a surcharge debt and a statutory penalty of $12,746.97 due and owing.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND )

PROFESSIONAL REGULATION, )

DIVISION OF ALCOHOLIC BEVERAGES )

AND TOBACCO, )

)

Petitioner, )

)

vs. ) Case No. 05 - 3278

)

BEER: 30 GRILL AND PUB, INC., )

d/b/a BEER: 30 GRILL AND PUB, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice and in accordance with Section 120.57,

Florida Statutes (2005), a f inal hearing was held in this case

on October 31, 2005, in Orland o, Florida, before Fred L.

Buckine, the designated Administrative Law Judge of the Division

of Administrative Hearings.

APPEARANCES

For Petitioner: Sorin Ardelean, Esquire

Department of Business and

Profession al Regulation

1940 North Monroe Street

Tallahassee, Florida 32399 - 2202

For Respondent: John W. Aitcheson, pro se

1602 West Airport Boulevard

Sanford, Florida 32773

STATEMENT OF THE ISSUE

Whether Respondent has incurred and failed to pay

Petitioner 's surcharge tax in the amount of $12,746.97,

including statutory interest and statutory penalty, in violation

of Section 561.501, Florida Statutes ( 2005 ), and Florida

Adm inistrative Code Rule 61A - 4 . 063(8).

PRELIMINARY STATEMENT

By Administrative Compliant dated April 27, 2005,

Petitioner alleged that from February 1, 2000 , through

February 28, 2003, 1 Respondent incurred and failed to pay

surcharge tax in the amount of $7, 433.66, plus interest in the

amount of $1,693.85 , and a statutory penalty in the amount of

$3,619.46 for total surcharge liability in the amount of

$12,746.97, in violation of Section 561.501, Florida Statutes

(2005).

Respondent denied the allegation and r equested a f inal

hearing to contest the preliminary action. The cause was

referred by Petitioner to the Division of Administrative

Hearings on September 12, 2005, with a request that an

Administrative Law Judge be assigned to conduct a f inal hearing.

By N otice of Hearing dated September 20, 2005, a final

hearing was scheduled on October 31, 2005 , in Orlando, Florida.

At the final hearing, Petitioner presented the testimony of

Gerald Russo, Division of Alcoholic Beverages and Tobacco ; John

Aitchenson, (tra nscript of deposition) owner of license number

69 - 02225, 4 - COP ; Ms. Cristin Dunbar of Southern Wine and Spirits

(wholesale distributor) ; Alan Schlagter of Wayne Densch ; Willie

Hodges of National Distributing Company ; and Ms. Beverly Hicks

of the Schenk Com pany (wholesale distributor). Petitioner

offered E xhibits 1 through 3, all of which were received in

evidence. Respondent did not call any witnesses nor submit any

exhibits into evidence.

On November 14, 2005, the one - volume Tr anscript was filed ,

and , on November 28, 2005, Petitioner filed a Proposed

Recommended Order , which was considered in preparation of this

Recommended Order. Respondent chose not to file a p roposed

r ecommended o rder.

FINDINGS OF FACTS

Based upon observation of the witnesses' demeanor while

testifying, character of the testimony, internal consistency,

and recall ability ; documentary materials received in evidence ;

stipulations by the parties ; and evidentiary rulings during the

proceedings , the following relevant an d material facts are

determined:

1. Petitioner, Department of Business and Professional

Regulation, Division of Alcoholic Beverages and Tobacco

(Division) , is the state agency charged with the responsibility

of administering and enforcing the beverage law in Florida.

Chapter s 5 61 through 5 68, Florida Statutes (2005) . In this

disciplinary action, the Division seeks to impose sanctions on

the license of Respondent, Beer: 30 Grill & Pub, Inc., d /b/a

Beer: 30 Grill & Pub, on the grounds that Respondent failed to

pay to the Sta te of Florida the surcharge tax owed for on -

premise sales of alcoholic beverages made during the period

February 2000 through March 2003. Respondent denied the charge

and requested a f inal hear ing to contest this allegation.

2. Respondent is subject to t he regulatory jurisdiction of

the Division, having been issued beverage license number 69 -

0222 5 , 4 - COP , by the Division . That license allows R espondent

to make sales of beer, wine , and liquor for consumption on

premises at the restaurant located at 1602 W est Airport

Boulevard, Sanford, F lorida 32771.

3. At all times material to t his proceeding, Respondent ,

by its corporate officer John Aitcheson , applied for and was

holding license number 69 - 0222 5 , 4 - COP.

4. In Florida, a licensee must keep records of a ll

purchases and other acquisitions and sales of alcoholic

beverages for a period of three years to comply with Section

5 61. 5 01 , Florida Statutes (2005) . This requirement applies to

any beverage license holder in Florida.

5. In addition to selling alcoh olic beverages for on -

premise consumption, Respondent also sells packaged alcoholic

beverage for off - site consumption.

6. Surcharge tax in the amount of $0.14 per gallon of

beer, $1.07 per gallon of wine , and $4.28 per gallon of liquor

is assessed for ea ch and every drink sold by Respondent for on -

premise consumption, but no such surcharge tax is owed for off -

premise package sales.

7. The surcharge tax is paid by the on - premise consumers

(patrons) to the state, and the vendor only collects and remits

th is surcharge to the state. As a reward for their effort to

timely report and remit the surcharge to the state, the vendors

are allowed to keep monthly , as an allowance , one percent of the

total surcharge owed for the alcoholic beverages sold during

that m onth.

8. Respondent testified that he has a very simple method

of keeping sales records. He makes handwritten records of each

and every off - premise sale and also collects and keeps the

distributors ' invoices for the purchase of his alcohol supplies.

9. Every month, Respondent subtracts the off - premise sold

alcoholic beverage s from the total quantity bought as reflected

by the invoices from distributors, obtaining through this

indirect method the total on - premise sales. Then Respondent

multiplies th e resulting quantity of alcohol sold on - premise

that month with the applicable tax rate, obtaining thus his

surcharge liability for that particular month.

10. Respondent provided the Division with handwritten off -

premise sales records. With the exceptio n of the records

mentioned above, the Division does not have in the file any

other records submitted by Respondent. As well, Respondent did

not offer any evidence to substantiate his claim that he indeed

provided the Division with any additional records.

11. However , Respondent testified that he neither

maintained on - premise sales records, as required by Section

5 61. 5 01 , Florida Statutes ( 2005 ), nor was he able at the hearing

to offer any proof whatsoever that would corroborate his claim

that during the audited period he actually made more off - premise

sales than reflected in his handwritten records.

12. To enforce the surcharge tax provisions, the Division

performs periodic audits of all licensees who sell alcoholic

beverages for on - premise consumptio n. As part of the audit

process, the Auditing Bureau of the Division requests and

receives monthly reports from alcohol distributors detailing all

the sales made by each distributor to each particular licensee.

An exception to the automatic monthly distr ibutor reporting

procedure is made for the Schenk Company, a beer distributor,

which reports its sales to different vendors only when expre ssly

requested by the Division.

13. After receiving all the sales data concerning a

particular vendor from the distr ibutors, the Auditing Bureau

uses a computer program to calculate the gross surcharge

liability of that particular licensee. Special deductions are

then allowed for off - premise sales, employee drinks , etc.

14. The burden is on the holder of the license to

demonstrate that such person qualifies for a deduction by

providing accurate records of off - premise sales, giving employee

drinks , etc. Fl a. Admin . Code R . 61A - 4.063(4) - 61A - 4.063 (9).

15. It is each licensee’s obligation to accurately report

all on - premise monthly sales and to pay the tax collected from

customers. There is a penalty and interest surcharge for late

reporting and late paying. In addition to the penalty and

interest mentioned above, the Division is statutorily required

to assess inte rest and penalties for any underreporting and/or

underpayment of the tax due for the period of the audit.

16. If underreporting/underpayment penalties and interest

are assessed, they are applied only to the period of the audit.

No penalty or interest i s applied to any period over the end of

the audit.

17. In the present case, the Auditing Bureau calculated

Respondent’s surcharge liability based on the data provided by

the distributors. The audit allowed Respondent deductions for

all off - premise sales recorded in Respondent 's handwritten off -

premise sales records. At no material time did Respondent

request any other deductions nor did he provide any evidence

that he would be entitled to any other deductions.

18. It is incumbent to Respondent to carefu lly keep

records of all sales that would entitle him to receive

deductions. The Division cannot allow surcharge tax deductions

that are not corroborated by any records. Fla. Admin. Code

R. 61A - 4.063(9). Moreover, Respondent did not even advance any

amo unt of any additional deduction ; his position being only that

he should have been allowed more deductions because he made more

off - premise sales. Absent evidence that more alcoholic

beverages were sold off - premise than recorded in the records

already take n into consideration by the audit, no additional

deductions may be allowed to Respondent. Fla. Admin. Code

R. 61A - 4.063(9).

19. The audit found that Respondent understated his tax

reports and underpaid $7,433.66 in surcharge tax. For the

failure to tim ely report and remit the entire surcharge tax due

for the period February 1, 2000 , through February 28, 2003 , the

Division assessed statutory interest of $1,693.8 5 and a

statutory penalty of $3,619.46 for a total surcharge liability

of $12,746.97.

CONCLUS IONS OF LAW

2 0. The Division of Administrative Hearings has

jurisdiction over the subject matter of and the parties t o this

proceeding, pursuant to Section 120. 5 69 and Subsection

120. 5 7(1), Florida Statutes (2005) .

21. S ubs ection 5 61.5 01(1), Florida Stat utes (2005) ,

imposes a surcharge on the sale by licensed vendors of specified

volumes of alcoholic beverages " sold at retail for consumption

on premises. " S ubs ection 5 61. 5 01(2) , Florida Statutes, require s

that a vendor pay the surcharge in the following m onth to

Petitioner and requires the imposition of a penalty for late

payments. S ubs ection 5 61. 5 01(2) , Florida Statutes, require s

Petitioner to " assess a late penalty in the amount of 10 percent

of the amount due per month, not to exceed a total penalty of

5 0 percent, in the aggregate, of any unpaid surcharges. "

22. Florida Administrative Code Rule 61A - 4.063(8)

pr ovides:

Each vendor licensed in any manner for

consumption on premises shall maintain

complete and accurate records on the

quantities of all a lcoholic beverage

purchases, inventories, and sales. Records

include purchase invoices, inventory

records, receiving records, cash register

tapes, computer records generated from

automatic dispensing devices, and any other

records used in determining sale s. In the

event a licensee maintains an active

consumption - on - premises license but has no

surcharge sales for a specific period of

time, the licensee must file monthly

surcharge report DBR Form 44 - 00 5, RETAIL

SURCHARGE REPORT , showing no activity.

Record s may be maintained on optical or

visual storage retrieval systems capable of

being viewed, retrieved and reproduced upon

request by the division. All records must

be maintained for a period of 3 years.

23. Florida Administrative Code Rule 61A - 4.063(9)

provides , in relevant part:

In order to determine whether the monthly

reports submitted by the vendor are

accurate, the division shall use the formula

of beginning inventory plus purchases for

the period, less ending inventory, less the

spillage allowance, to ascertain sales for

the period. Adjustments made to this

formula in favor of the licensee will be

based on factual , substantiated evidence.

The results of the formula will represent

sales transactions as define d herein and in

S ection 5 61.01(9), Flori da Statute s, for the

period under review.

24. Florida Administrative Code Rule 61A - 4.063(4) (c)

provides:

If the vendor chooses the sales method, the

vendor will bear the burden of proof that

the method used accurately reflects actual

sales. If the vend or use s the purchases

method, the vendor will bear the burden of

proof that purc hases are accurately

recorded.

25. The Division relies on the independent data from non -

interested third - party distributors to calculate the surcharge

liability of R esponden t for the audited period. Not only was

Respondent not able to show in any manner that the data relied

upon by the Division was incorrect, but Respondent also did not

even attempt to contact his distributors to verify the amounts

of alcoho l purchased by Re spondent.

26. Respondent’s theory that the results of the audit are

flawed is based solely on his claim that he sold more alcohol

off - premise and that there were more off - premise sales records.

Respondent produced no evidence to back - up his claim that th e

Division did not return or even took his records. In its normal

course of business , Respondent would have a receipt for his

claimed lost records, as the Division’s special agents are

required and always issue a receipt for any p roperty seized from

licen sees.

27. The only off - premise sales records of which the

Division has any knowledge are contained in what was marked as

Petitioner’s Exhibit 2. Those records, broken down by month,

are respondent’s handwritten records of off - premise sales. 2

28. Except for the records incorporated in the

Petitioner’s E xhibit 2 mentioned above, Respondent did not

provide any evidence whatsoever of any his off - premise sales.

It was his legal obligation under the beverage law to keep these

records to support each claim of surcharge tax deductions.

29. The Division allowed Respondent tax deductions for the

entire quantity of alcoholic beverages recorded by Respondent in

the off - premise records Respondent provided to the Division.

The Division is without authority to grant additional deductions

that are in an unspecified amount and , also , are not backed up

by any records.

30. Petitioner has therefore shown by clear and convincing

evidence the accuracy of its audit establishing that Respondent

owes surcharge tax in the am ount of $7,43 3.66, plus interest of

$1,693.85 and a statutory penalty of $3,619.46 for a total

surcharge liability of $12,746.97. Because the burden to

demonstrate compliance with the surcharge tax reporting and

payment requirements is on Respondent, his failure to provide

additional off - premise sales records should result in Respondent

being found to be liable for the entire surcharge t ax as

determined by the audit.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is

RECOM MENDED that t he Department of Business and

Professional Regulation, Division of Alcoholic Beverages and

Tobacco , enter a final order finding Respondent liable and

ordering payment for the surcharge tax principal of $7,433.66,

plus interest of $1,693.85 and a statutory penalty of $3,619.46

for a total surcharge liability of $12,746.97.

DONE AND ENTERED this 24th day of January , 2006 , in

Tallahassee, Leon County, Florida.

S

FRED L. BUCKINE

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675 SUNCOM 278 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 24t h day of January , 2006 .

ENDNOTES

1/ This references the specific time period for which

Respondent's tax debt obligation was computed by Petitioner.

References to Florida Statutes (2005) references the law at the

time this action was brought forth for consideration and

imposition of tax and interest obligations.

2/ Of note, during his testimony, Respondent alleged an

inability to read, asserting, as an example, that he kept his

off - premises records of beverages sold by (kegs of beer for

instance) mark s on a sheet of paper, 1/2 mark = half a keg of

beer, 3/4= three - fourth s of a keg of beer, etc.

COPIES FURNISHED :

Sorin Ardelean, Esquire

Department of Business and

Professional Regulation

1940 North Monroe Street

Tallahassee, Florida 32399 - 2202

Ca pt. German Garzon

Department of Business and

Professional Regulation

North Tower, Hurston Building

400 West Robinson Street, Room 709

Orlando, Florida 32801

John W. Aitcheson

1602 West Airport Boulevard

Sanford, Florida 32773

Josefina Tamayo, General Counsel

Department of Business and

Professional Regulation

Northwood Centre

1940 North Monroe Street

Tallahassee, Florida 32399 - 2202

Jack Tuter, Director

Division of Alcoholic Beverages and Tobacco

Department of Business and

Professional Regulation

1940 North Monroe Street

Tallahassee, Florida 32399 - 0792

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 shoul d be filed with the agency that

will issue the final order in this case.