08-003938 Times Publishing, Co. vs. Department Of Revenue
 Status: Closed
Recommended Order on Tuesday, October 20, 2009.


View Dockets  
Summary: Exemptions in Subsections 212.08(5)(b) and 212.08(5)(1)(g), Florida Statutes, are properly read in pari materia to treat inserts as component parts of a newspaper rather than separate production to satisfy the 10% requirement in Subsection 212.08(5)(b).

1STATE OF FLORIDA

4DIVISION OF ADMINISTRATIVE HEARINGS

8TIMES PUBLISHING, CO., )

12)

13Petitioner, )

15)

16vs. ) Case Nos. 08-3938

21) 08-3939

23DEPARTMENT OF REVENUE, )

27)

28Respondent. )

30)

31RECOMMENDED ORDER

33Administrative Law Judge (ALJ) Daniel Manry conducted the

41final hearing of this case for the Division of Administrative

51Hearings (DOAH) on June 10 and 11, 2009, in Tampa, Florida.

62APPEARANCES

63For Petitioner: Wilson Jerry Foster, Esquire

691342 Timberlane Road, Suite 102-A

74Tallahassee, Florida 32312

77For Respondent: John Mika, Esquire

82Office of the Attorney General

87The Capitol - Tax Section

92Tallahassee, Florida 32399-1050

95STATEMENT OF THE ISSUE

99The issue is whether Petitioner showed by a preponderance

108of the evidence that it is entitled to a refund of $1,500,216.60

122in sales and use tax paid during the period from January 2005

134through January 2007 to purchase industrial printing machinery

142that allegedly satisfied the statutory requirement for a 10

151percent increase in productive output for printing facilities

159that manufacture, process, compound or produce tangible personal

167property at fixed locations in the state within the meaning of

178Subsection 212.08(5)(b), Florida Statutes (2005), and Florida

185Administrative Rule 12A-1.096. 1/

189PRELIMINARY STATEMENT

191This proceeding has a long procedural history. Material

199portions of the procedural history of this case are discussed in

210the Findings of Fact. At this juncture in the Recommended

220Order, it is sufficient to say that Petitioner requested an

230administrative hearing to contest the proposed denial of a

239refund. Respondent referred the request for hearing to DOAH to

249assign an Administrative Law Judge to conduct the hearing.

258At the hearing, Petitioner presented the testimony of two

267witnesses and submitted 10 exhibits for admission into evidence.

276Respondent presented the testimony of six witnesses and

284submitted 28 exhibits.

287The identity of the witness and exhibits, and the rulings

297regarding each, are reported in the four-volume Transcript of

306the hearing filed with DOAH on July 16, 2009 and September 21,

3182009. The ALJ granted the unopposed request to keep the record

329open to allow Respondent an opportunity to present rebuttal

338testimony. The ALJ conducted a telephone hearing on August 21,

3482009, concerning the request for rebuttal testimony. At the

357conclusion of the hearing, Respondent withdrew its request for

366rebuttal testimony.

368The transcript of the motion hearing was filed with DOAH on

379September 21, 2009. Petitioner and Respondent filed their

387respective PROs on October 1, 2009.

393FINDINGS OF FACT

3961. Respondent is the agency responsible for administering

404the state sales tax imposed in Chapter 212. Petitioner is a

"415for profit" Florida corporation located in St. Petersburg,

423Florida. Petitioner is engaged in the business of publishing

432newspapers and commercial printing. Petitioner derives

438approximately 85 percent of its revenue from advertising and

447approximately 15 percent of its revenue from circulation

455subscriptions.

4562. In April, 2007, Petitioner requested a refund of

465$403,780.05 in sales and use taxes paid for the purchase of

477industrial machinery and equipment during the period from

485January, 2005, to January, 2006. In October, 2007, Petitioner

494requested a refund of $1,096,436.61 in sales and use taxes paid

507for the purchase of industrial machinery and equipment for the

517period from January, 2006, to January, 2007.

5243. The first refund request in April, 2007, became DOAH

534Case Number 08-3938, and the second refund request in October,

5442007, became DOAH Case Number 08-3939. The two cases were

554consolidated into this proceeding pursuant to the joint motion

563of the parties.

5664. The parties stipulated that the only issue for

575determination in this consolidated proceeding is whether

582Petitioner satisfied the requirement for a 10 percent increase

591in productive output in Subsection 212.08(5)(b) and Rule 12A-

6001.096. If a finding were to be made that Petitioner satisfied

611the 10 percent requirement, the parties stipulate that the file

621will be returned to Respondent for a determination of whether

631the items purchased are qualifying machinery and equipment

639defined in Subsection 212.08(5)(b) and Rule 12A-1.096.

6465. The issue of whether Petitioner satisfied the statutory

655requirement for a 10 percent increase in productive output in

665Subsection 212.08(5)(b) and Rule 12A-1.096 is a mixed question

674of law and fact. The ALJ concludes as a matter of law that

687Petitioner did not satisfy the 10 percent requirement. The ALJ

697discusses that conclusion briefly, for context, in paragraphs 6

706and 7 of the Findings of Fact, and explains the conclusion and

718the supporting legal authority more fully in the Conclusions of

728Law.

7296. It is an undisputed fact that Petitioner counts items

739identified in the record as "preprints," "custom inserts," and

"748circulation inserts" separately from the "newspaper" as a means

757of exceeding the 10 percent requirement in Subsection

765212.08(5)(b). Respondent construes the 10 percent exemption

772authorized in Subsection 212.08(5)(b) in pari materia with the

781exemption authorized in Subsection 212.08(5)(1)(g) for

"787preprints," "custom inserts," and "circulation inserts"

793(hereinafter "inserts"). The latter statutory exemption treats

801inserts as a "component part of the newspaper" which are not to

813be treated separately for tax purposes.

8197. For reasons stated more fully in the Conclusions of

829Law, the ALJ agrees with the statutory construction adopted by

839Respondent. That conclusion of law renders moot and, therefore,

848irrelevant and immaterial, the bulk of the evidence put forth by

859the parties during the two-day hearing because the evidence

868assumed arguendo that Petitioner's statutory interpretation

874would be adopted by the ALJ, i.e. , inserts would be counted

885separately from the newspaper for purposes of satisfying the 10

895percent requirement in Subsection 212.08(5)(b).

9008. In an abundance of caution, the fact-finder made

909findings of fact based on the legal assumption that inserts are

920statutorily required to be counted separately for purposes of

929the 10 percent requirement in Subsection 212.08(5)(b). Those

937findings are set forth in paragraphs 9 through 11.

9469. The verification audit by Respondent's field office was

955able to verify an output increase of only 4.27 percent for 2005

967and only 8.72 percent for 2006. A preponderance of evidence in

978this de novo proceeding did not overcome those findings.

98710. The trier of fact finds the evidence from Petitioner

997during this de novo proceeding to be inconsistent and

1006unpersuasive. For example, Petitioner inflated production

1012totals by counting materials printed for its own use, and

1022materials in which the unit of measurement was inconsistent. In

1032other instances, production totals for printing presses

1039identified in the record as Didde and Ryobi presses varied

1049dramatically with circulation. In other instances, Petitioner's

1056reporting positions changed during the course of the proceeding.

106511. There is scant evidence that the alleged increase in

1075production created jobs in the local market in a manner

1085consistent with legislative intent. Rather, a preponderance of

1093evidence shows that when Petitioner placed the equipment in

1102service it was job neutral or perhaps reduced jobs.

1111CONCLUSIONS OF LAW

111412. DOAH has jurisdiction over the subject matter and

1123Fla. Stat. (2009). DOAH provided the parties with adequate

1132notice of the administrative hearing.

113713. Respondent has the initial burden of proof.

1145Respondent must make a prima facie showing of the factual and

1156legal sufficiency of the denial of refund. § 120.80(14)(b)2.

1165The burden of proof then shifts to Petitioner to show by a

1177preponderance of the evidence that Petitioner is entitled to a

1187refund of tax. IPC Sports v. Department of Revenue , 829 So. 2d

1199330, 332 (Fla. 3d DCA 2002).

120514. Respondent made a prima facie showing of the factual

1215and legal sufficiency of the denial of refund . The proposed

1226denial of refund was appropriate based on the verification audit

1236performed by the field office.

124115. Petitioner failed to show by a preponderance of the

1251evidence that Petitioner is entitled to a refund. Subsection

1260212.08(5)(b) provides an exemption from sales tax, in relevant

1269part, for industrial machinery and equipment purchased for use

1278in expanding manufacturing facilities or plant units. The

1286statute requires an affirmative showing by the taxpayer, to the

1296satisfaction of the Department of Revenue (DOR), that the items

1306purchased are used to increase productive output by not less

1316than 10 percent (hereinafter, the "10 percent exemption").

132516. Tax exemption statutes are matters of legislative

1333grace. They must be strictly construed against the taxpayer.

1342State Department of Revenue v. Anderson , 403 So. 2d 397, 399

1353(Fla. 1981); Department of Revenue v. Bank of America, N.A. , 752

1364So. 2d 637, 641 (Fla. 1st DCA 2000); Asphalt Pavers, Inc. v.

1376Department of Revenue , 584 So. 2d 55, 57 (Fla. 1st DCA 1991).

138817. Respondent construes the 10 percent exemption

1395authorized in Subsection 212.08(5)(b) in pari materia with the

1404exemption authorized in Subsection 212.08(5)(1)(g) for

"1410preprints," "custom inserts," and "circulation inserts"

1416(hereinafter "inserts"). The latter statutory exemption treats

1424inserts as a "component part of the newspaper".

143318. Respondent's statutory construction is reasonable

1439under the facts in this case. Petitioner cited no legal

1449authority supporting a different statutory authority or showing

1457that Respondent's statutory construction is erroneous.

146319. A statutory subsection, such as the 10 percent

1472exemption in Subsection 212.08(5)(b), cannot be read in

1480isolation. The 10 percent exemption must be read "within the

1490context of the entire section", and due regard must be given to

1502the contextual interrelationship between its parts. See Lamar

1510Outdoor Advertising-Lakeland v. Florida Department of

1516Advertising , Case No. 1D08-5369 (Fla. 1st DCA Aug. 19, 2009)

1526(citing Florida Department of Environmental Protection v.

1533ContractPoint Florida Parks, LLC, 986 So. 2d 1286, 1265 (Fla.

15432008)). The doctrine of in pari materia requires statutes

1552relating to the same subject or object to be construed together

1563to harmonize them and give effect to legislative intent.

1572Florida Department of State, Division of Elections v. Martin ,

1581916 So. 2d 763, 768 (Fla. 2005).

158820. The parties spent much time and evidence on the issue

1599of whether Respondent's statutory interpretation in this

1606proceeding deviates from its statutory interpretation in the two

1615previous cases. Petitioner argues that Respondent is bound by

1624the interpretation in the earlier two cases under the doctrine

1634of administrative stare decisis pursuant to the decision in

1643Gessler v. Department of Business and Professional Regulation ,

1651627 So. 2d 501, 503 (Fla. 4th DCA 1993).

166021. As a threshold matter, the fact-finder finds that the

1670two previous cases do not deviate from Respondent's statutory

1679interpretation in this proceeding. Moreover, the Legislature

1686may authorize administrative agencies such as Respondent to

1694interpret, but never to alter statutes. Carver v. State of

1704Florida, Division of Retirement , 848 So. 2d 1203, 1206 (Fla. 1st

1715DCA 2003) ( citing Cortez v. State Board of Regents , 655 So. 2d

1728132, 136 (Fla. 1st DCA 1995)). An administrative agency has

1738statutory authority to propose only that agency action that

1747implements or interprets the specific powers and duties granted

1756by the enabling statute. § 120.52(8). The judicial doctrine in

1766Gessler cannot be interpreted to require Respondent to take

1775agency action in this proceeding that is inconsistent with

1784Legislative authority in Subsection 212.08(5)(b).

178922. Even if one or more of Respondent's rules were to

1800authorize Respondent to deviate from the statutory authority in

1809Subsection 212.08(5)(b), rulemaking is authorized in furtherance

1816of statutory authority and not to amend, expand, or enlarge

1826statutory authority. Willette v. Air Products and Bassett and

1835Department of Labor and Employment Security, Division of

1843Workers' Compensation , 700 So. 2d 397, 399 (Fla. 1st DCA 1997).

1854In Willette , the court wrote:

1859Executive branch rulemaking is authorized in

1865furtherance of, not in opposition to,

1871legislative policy. Just as a court cannot

1878give effect to a statute (or administrative

1885rule) in a manner repugnant to a

1892constitutional provision, so a duly

1897promulgated rule, although "presumptively

1901valid until invalidated in a section 120.56

1908rule challenge [citations omitted]," must

1913give way in judicial proceedings to any

1920contradictory statute that applies.

1924Id.

192523. The separation of powers doctrine provides that no

1934branch of government may encroach upon the powers of another and

1945that no branch may delegate its power to another branch. Fla.

1956Const. , Art. II, § 3. The second prohibition is the non-

1967delegation doctrine. Chiles v. Children A, B, C, D, E, and F ,

1979589 So. 2d 260, 264-266 (Fla. 1991). Respondent must administer

1989legislative programs pursuant to minimal standards and

1996guidelines ascertainable by reference to statutory terms enacted

2004by the Legislature. Id.

2008RECOMMENDATION

2009Based on the foregoing Findings of Fact and Conclusions of

2019Law, it is

2022RECOMMENDED that Respondent enter a final order finding

2030that Petitioner did not satisfy the requirement for a 10 percent

2041increase in productive output defined in Subsection 212.08(5)(b)

2049and Rule 12A-1.096, and denying Petitioner's request for a

2058refund.

2059DONE AND ENTERED this 20th day of October 2009, in

2069Tallahassee, Leon County, Florida.

2073S

2074DANIEL MANRY

2076Administrative Law Judge

2079Division of Administrative Hearings

2083The DeSoto Building

20861230 Apalachee Parkway

2089Tallahassee, Florida 32399-3060

2092(850) 488-9675 SUNCOM 278-9675

2096Fax Filing (850) 921-6847

2100www.doah.state.fl.us

2101Filed with the Clerk of the

2107Division of Administrative Hearings

2111this 20th day of October, 2009.

2117ENDNOTE

21181/ References to chapters, sections, and subsections are to

2127Florida Statutes (2005) unless otherwise stated. References to

2135rules are to rules promulgated in the Florida Administrative

2144Code in effect on April 1, 2008).

2151COPIES FURNISHED :

2154John Mika, Esquire

2157Office of the Attorney General

2162The Capitol - Tax Section

2167Tallahassee, Florida 32399-1050

2170Wilson Jerry Foster, Esquire

21741342 Timberlane Road, Suite 102A

2179Tallahassee, Florida 32312

2182Marshall Stranburg, General Counsel

2186Department of Revenue

2189The Carlton Building, Room 204

2194501 South Calhoun Street

2198Post Office Box 6668

2202Tallahassee, Florida 32314-6668

2205Lisa Echeverri, Executive Director

2209Department of Revenue

2212The Carlton Building, Room 104

2217501 South Calhoun Street

2221Tallahassee, Florida 32399-0100

2224NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

2230All parties have the right to submit written exceptions within

224015 days from the date of this Recommended Order. Any exceptions

2251to this Recommended Order should be filed with the agency that

2262will issue the Final Order in this case.

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PDF
Date
Proceedings
PDF:
Date: 02/11/2010
Proceedings: Agency Final Order
PDF:
Date: 02/11/2010
Proceedings: Agency Final Order filed.
PDF:
Date: 02/11/2010
Proceedings: Respondent`s Exceptions to Recommended Order filed.
PDF:
Date: 10/22/2009
Proceedings: Transmittal letter from Claudia Llado forwarding the one-volume Transcript of the Telephonic Hearing held on August 18,2009, to the agency.
PDF:
Date: 10/20/2009
Proceedings: Recommended Order
PDF:
Date: 10/20/2009
Proceedings: Recommended Order (hearing held June 10-11 and August 21, 2009). CASE CLOSED.
PDF:
Date: 10/20/2009
Proceedings: Recommended Order cover letter identifying the hearing record referred to the Agency.
Date: 10/02/2009
Proceedings: Transcript filed.
PDF:
Date: 10/02/2009
Proceedings: Notice of Filing Transcript of Motion Hearing filed.
PDF:
Date: 10/01/2009
Proceedings: Petitioner's Proposed Recommended Order filed.
PDF:
Date: 10/01/2009
Proceedings: Respondent's Proposed Recommended Order filed.
Date: 09/21/2009
Proceedings: Transcript of Proceedings (Volume IV) filed.
Date: 08/21/2009
Proceedings: CASE STATUS: Hearing Held.
PDF:
Date: 08/19/2009
Proceedings: Order Allowing Testimony by Telephone.
Date: 08/18/2009
Proceedings: CASE STATUS: Motion Hearing Held.
PDF:
Date: 08/18/2009
Proceedings: Petitioner's Response to DOR's Motion to Quash and Petitioner's Motion in Limine filed.
PDF:
Date: 08/14/2009
Proceedings: Respondent Emergency Motion for Protective Order and to Quash Petitioner's Subpoena Duces Tecum Served on the Custodian of Records for the Department of Revenue filed.
PDF:
Date: 08/07/2009
Proceedings: Motion to Allow Appearance at the Final Hearing and Testimony by Telephone filed.
PDF:
Date: 08/04/2009
Proceedings: Notice of Hearing (hearing set for August 21, 2009; 10:00 a.m.; Tallahassee, FL).
PDF:
Date: 08/03/2009
Proceedings: Response to Amended Order Cancelling Hearing filed.
PDF:
Date: 07/28/2009
Proceedings: Amended Order Canceling Hearing (parties shall advise the undersigned in writing no later than August 3, 2009, of mutually agreeable dates in August 2009 for re-scheduling the final hearing).
PDF:
Date: 07/22/2009
Proceedings: Order Canceling Hearing (parties to advise status by August 3, 2009).
PDF:
Date: 07/16/2009
Proceedings: Index of Exhibits (exhibits not available for viewing) filed.
Date: 07/16/2009
Proceedings: Transcript of Proceedings (Volumes I-III) filed.
PDF:
Date: 07/08/2009
Proceedings: Notice of Hearing (hearing set for July 31, 2009; 9:30 a.m.; Tallahassee, FL).
PDF:
Date: 07/02/2009
Proceedings: Petitioner's Supplemental Response to Motion to Resume Administrative Hearing filed.
PDF:
Date: 06/30/2009
Proceedings: Motion to Resume Administrative Hearing filed.
PDF:
Date: 06/18/2009
Proceedings: Order Granting Joint Motion to Supplement Petitioner`s Exhibit No. 4.
PDF:
Date: 06/18/2009
Proceedings: Notice of Filing; Exhibits (exhibits not available for viewing) filed.
PDF:
Date: 06/18/2009
Proceedings: Joint Motion to Supplement Petitioner's Exhibit #4 filed.
Date: 06/10/2009
Proceedings: CASE STATUS: Hearing Partially Held; continued to date not certain.
PDF:
Date: 06/08/2009
Proceedings: Notice of Transfer.
PDF:
Date: 06/04/2009
Proceedings: Petitioner's Prehearing Statement filed.
PDF:
Date: 06/04/2009
Proceedings: Respondent's Pre-hearing Statement filed.
PDF:
Date: 06/03/2009
Proceedings: Joint Motion to Extend by One Day the Time for Both Parties to File Pre-hearing Statements filed.
PDF:
Date: 04/17/2009
Proceedings: Petitioner`s Motion to Amend Petition Involving Disputed Issues of Material Fact (filed in case no. 08-3938) filed.
PDF:
Date: 04/17/2009
Proceedings: First Amended Petition Involving Disputed Issues of Material Fact (filed in case no. 08-3938) filed.
PDF:
Date: 04/17/2009
Proceedings: Petitioner`s Motion to Amend Petition Involving Disputed Issues of Material Fact (filed in case no. 08-3939) filed.
PDF:
Date: 04/17/2009
Proceedings: First Amended Petition Involving Disputed Issues of Material Fact (filed in case no. 08-3939) filed.
PDF:
Date: 04/16/2009
Proceedings: Correction, Objection, and Request for Status Conference filed.
PDF:
Date: 04/15/2009
Proceedings: Petitioner`s Opposed Motion to Extend Time to Respond to Respondent`s First Request for Production of Documents filed.
PDF:
Date: 04/15/2009
Proceedings: Second Order of Pre-hearing Instructions.
PDF:
Date: 04/15/2009
Proceedings: Notice of Hearing (hearing set for June 10 and 11, 2009; 9:30 a.m.; Tampa, FL).
PDF:
Date: 04/15/2009
Proceedings: Order Granting Extension of Time (response to First Request for Production to be filed by April 15, 2009).
PDF:
Date: 04/07/2009
Proceedings: Response to Order Placing Case in Abeyance filed.
PDF:
Date: 04/07/2009
Proceedings: Petitioner`s Response to Order filed.
PDF:
Date: 04/07/2009
Proceedings: Petitioner`s Opposed Motion to Extend Time to Respond to Respondent`s First Request for Production of Documents filed.
PDF:
Date: 03/23/2009
Proceedings: Agreement to Extend Time filed.
PDF:
Date: 02/20/2009
Proceedings: Respondent`s First Request for Production of Documents filed.
PDF:
Date: 02/11/2009
Proceedings: Order Placing Case in Abeyance (parties to advise status by April 7, 2009).
PDF:
Date: 02/06/2009
Proceedings: Joint Motion for Continuance of Final Hearing filed.
PDF:
Date: 01/20/2009
Proceedings: Order Granting Continuance (parties to advise status by February 6, 2009).
PDF:
Date: 01/16/2009
Proceedings: Joint Motion for Continuance of Final Hearing filed.
PDF:
Date: 11/12/2008
Proceedings: Order Granting Continuance and Re-scheduling Hearing (hearing set for February 10, 2009; 9:30 a.m.; Tampa, FL).
PDF:
Date: 11/04/2008
Proceedings: Joint Motion to Continue and Reschedule Final Hearing filed.
PDF:
Date: 09/24/2008
Proceedings: Order of Pre-hearing Instructions.
PDF:
Date: 09/24/2008
Proceedings: Notice of Hearing (hearing set for December 9, 2008; 9:30 a.m.; Tampa, FL).
Date: 09/24/2008
Proceedings: CASE STATUS: Pre-Hearing Conference Held.
PDF:
Date: 09/18/2008
Proceedings: Order of Consolidation (DOAH Case Nos. 08-3938 and 08-3939).
PDF:
Date: 09/16/2008
Proceedings: Stipulation of Disputed Issues of Material Fact filed.
PDF:
Date: 09/09/2008
Proceedings: Joint Response to Initial Order and Motion to Consolidate filed.
PDF:
Date: 09/08/2008
Proceedings: Third Joint Motion to Extend Time to Respond to the Initial Order filed.
PDF:
Date: 08/28/2008
Proceedings: Order Granting Extension of Time (response to the Initial Order to be filed by September 8, 2008).
PDF:
Date: 08/28/2008
Proceedings: Joint Motion for Extension of Time to Respond to Initial Order filed.
PDF:
Date: 08/22/2008
Proceedings: Order Granting Extension of Time (response to the Initial Order to be filed by August 28, 2008).
PDF:
Date: 08/20/2008
Proceedings: Joint Motion to Extend Time to Respond to the Initial Order filed.
PDF:
Date: 08/15/2008
Proceedings: Notice of Appearance filed.
PDF:
Date: 08/14/2008
Proceedings: Initial Order.
PDF:
Date: 08/14/2008
Proceedings: Notice of Proposed Refund Denial filed.
PDF:
Date: 08/14/2008
Proceedings: Notice of Intent to Make Tax Refund Claim Changes filed.
PDF:
Date: 08/14/2008
Proceedings: Letter to J. Timmes from J. Soff regarding receipt application for temporary tax exemption permit filed.
PDF:
Date: 08/14/2008
Proceedings: Letter to Dept. of Revenue from J. Times regarding refund of Florida Sales and Use Tax filed.
PDF:
Date: 08/14/2008
Proceedings: Petition Involving Disputed Issues of Material Fact filed.
PDF:
Date: 08/14/2008
Proceedings: Agency referral filed.

Case Information

Judge:
DANIEL MANRY
Date Filed:
08/14/2008
Date Assignment:
06/08/2009
Last Docket Entry:
02/11/2010
Location:
Tallahassee, Florida
District:
Northern
Agency:
ADOPTED IN PART OR MODIFIED
 

Counsels

Related Florida Statute(s) (3):

Related Florida Rule(s) (1):