09-000403 Wells Fargo Bank Northwest N.A. Trustee vs. Department Of Revenue Status: Closed Recommended Order on Wednesday, August 19, 2009.

Summary: Respondent should rescind use tax assessment against Petitioner because Petitioner was not the purchaser of the aircraft at issue, and the evidence fails to establish that the aircraft returned to Florida within six months after initial departure.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

WELLS FARGO BANK NORTHWEST N.A. )

TRUSTEE, )

)

Petitioner, )

)

vs. ) Case No. 09-0403

)

DEPARTMENT OF REVENUE, )

)

Respondent. )

)

RECOMMENDED ORDER

A duly-noticed final hearing was held in this case by

Administrative Law Judge T. Kent Wetherell, II, on June 4, 2009,

in Tallahassee, Florida.

APPEARANCES

For Petitioner: M. Stephen Turner, Esquire

David K. Miller, Esquire

Broad & Cassel, P.A.

215 South Monroe Street, Suite 400

Post Office Box 11300

Tallahassee, Florida 32302

For Respondent: Nicholas Bykowsky, Esquire

Office of the Attorney General

The Capitol, Plaza Level 01

Revenue Litigation Bureau

Tallahassee, Florida 32399-1050

STATEMENT OF THE ISSUE

The issue is whether Petitioner owes tax, penalty, and interest under Section 212.05(1)(a)2., Florida Statutes,

1 / for an

aircraft that it allegedly purchased and used in Florida.

PRELIMINARY STATEMENT

On January 29, 2008, the Department of Revenue (Department)

gave notice of its intent to assess tax, penalty, and interest

against Petitioner based upon its alleged purchase and use of an

aircraft in Florida. Petitioner protested the assessment, and

the Department’s review of this matter culminated in a Notice of

Reconsideration dated November 4, 2008, which determined that

Petitioner owes tax, penalty, and interest of approximately

$476,000 pursuant to Section 212.05(1)(a)2., Florida Statutes.

On December 31, 2008, Petitioner timely filed a Petition

for Formal Administrative Hearing with the Department contesting

the assessment. The petition alleges that the assessment is not

supported by the facts or the law, and that the assessment is

unconstitutional under the circumstances.

On January 23, 2009, the Department referred this matter to

the Division of Administrative Hearings (DOAH) to conduct the

hearing requested by Petitioner. The referral was received by

DOAH on January 26, 2009. Over the Department’s objection, the

final hearing was scheduled for June 4-5, 2009, in order to give

the parties ample time to conduct discovery.

At the final hearing, the Department presented the

testimony of Rebecca Burdick and Matt Crockett, and Petitioner

presented the testimony of Jon Croasmun. The Department’s

Exhibits A, B, 1 through 5, 7 through 12, 15, and 16, were

received into evidence, as were Petitioner’s Exhibits 1, 2, 3,

7, and 8. The Department’s Exhibit 14 and Petitioner’s Exhibit

12 were offered, but not received. Petitioner’s Exhibit 13 was

received after the hearing without objection. See Order on

Post-hearing Motions, entered July 16, 2009.

Petitioner’s requests for official recognition of certain

flight distances and Venezuelan tax laws were denied in an Order

entered on June 3, 2009. Reconsideration of that Order was

denied at the final hearing. See Transcript, at 24-37.

The two-volume Transcript of the final hearing was filed on

June 18, 2009. The parties initially requested and were given

28 days from that date to file proposed recommended orders

(PROs), but the deadline was subsequently extended to July 24,

2009, upon the Department’s unopposed motion. The PROs were

timely filed and have been given due consideration.

FINDINGS OF FACT

1. Petitioner is a national banking and trust company

headquartered in Utah. It does not have any operations or

personnel in Florida.

2. Petitioner routinely serves as “owner trustee” for non-

U.S. citizens who want to register aircraft with the Federal

Aviation Administration (FAA). Petitioner charges a fee

(typically $4,000) to set up the trust, as well as an annual fee

(typically $2,000) for its services as “owner trustee.”

3. Petitioner holds legal title to the aircraft in its

capacity as “owner trustee” because the FAA regulations do not

allow non-U.S. citizens to register aircraft.

4. Petitioner does not have any operational control over

the aircraft even though it holds legal title.

5. The tax assessment at issue in this case relates to a

Cessna Citation 650 jet, tail number N385EM (hereafter “the

aircraft”), which Petitioner holds legal title to as “owner

trustee” pursuant to a Trust Agreement dated April 28, 2007.

6. The trustor and beneficiary under the Trust Agreement

is MAW.ZC, LLC, which is a Delaware limited liability company,

controlled by a non-U.S. citizen, Nelson Ceballos.

7. The sole purpose of the trust was to “ensure the

eligibility of the Aircraft for United States registration with

the [FAA].”

8. The aircraft was purchased from Southern Jet Center

(SJC) in Sanford, Florida, on May 3, 2007, for $3.74 million.

9. The “purchaser” identified on the Bill of Sale was

“Wells Fargo Bank Northwest, NA as Owner Trustee under Trust

Agreement dated 4/28/07.” MAW.ZC, LLC, was not mentioned on the

Bill of Sale.

10. Petitioner’s witness, Jon Croasman, testified that

MAW.ZC, LLC, negotiated the purchase of the aircraft with SJC,

and then assigned the purchase right to Petitioner as “owner

trustee” so that the aircraft would not lose its tail number and

it would be easier to register the aircraft with the FAA.

11. The record does not contain a written purchase

agreement between MAW.ZC, LLC, and SJC or a written assignment

of the purchase right from MAW.ZC, LLC, to Petitioner.

According to Mr. Croasman, SJC was “kind of an unsophisticated

seller” and it did not require these documents.

12. Mr. Croasman was the only witness with personal

knowledge of the events surrounding the purchase of the aircraft

who testified at the final hearing. His testimony was logical

and persuasive and is accepted as credible despite the absence

of corroborating documentation.

13. Petitioner did not pay anything to SJC for the

purchase of the aircraft. The entire $3.74 million purchase

price was paid by MAW.ZC, LLC.

14. Petitioner was the purchaser of the aircraft in name

only. The real purchaser was MAW.ZC, LLC.

15. On May 4, 2007, Petitioner filed an application to

register the aircraft with the FAA. The applicant listed on the

application form was “Wells Fargo Bank Northwest, National

Association, not in its individual capacity but solely as Owner

Trustee under a Trust Agreement dated as of 4/28/07.”

16. On the same day, the FAA issued a certificate of

registration for the aircraft. The certificate was issued to

“Wells Fargo Bank Northwest NA Trustee.”

17. Registration of an aircraft with the FAA has no

bearing on its ownership. Indeed, the official registration

document for the aircraft issued by the FAA states: “This

certificate is issued for registration purposes only and is not

a certificate of title. The Federal Aviation Administration

does not determine rights of ownership as between private

parties.”

18. On May 7, 2007, Petitioner filed with the Department

an Affidavit for Exemption of Aircraft Sold for Removal from the

State of Florida by a Nonresident Purchaser (hereafter “the

Removal Affidavit”). The affidavit identified the purchaser of

the aircraft as “Wells Fargo bank Northwest, NA, not in its

individual capacity but solely as Owner Trustee for MAW.ZC,

LLC.”

19. The aircraft remained in Florida undergoing repairs at

SJC from the date of purchase until July 2, 2007, when it was

flown to Venezuela where it was based.

20. It is undisputed that the aircraft left Florida within

20 days after the initial repairs were completed and, therefore,

the sale was exempt from the sales tax.

21. The Department informed Petitioner in a letter dated

July 13, 2007, that the aircraft could not be brought back into

Florida for a period of six months without its becoming subject

to Florida’s use tax.

22. Petitioner forwarded this letter to Mr. Ceballos,

since he and MAW.ZC, LLC, were responsible for the operation of

the aircraft.

23. Petitioner did not exercise any control over the

operation of the aircraft after its purchase.

24. In April 2007, prior to the purchase of the aircraft,

Petitioner and MAW.ZC, LLC, entered into an Aircraft Operating

Agreement. This agreement was executed in conjunction with the

Trust Agreement in anticipation of the purchase of the aircraft.

25. The Aircraft Operating Agreement gave MAW.ZC, LLC, “an

exclusive right to possess, use and operate the Aircraft.” The

agreement required MAW.ZC, LLC, to pay all costs associated with

the operation and maintenance of the aircraft. And, with

respect to the operation of the aircraft, the agreement required

only that MAW.ZC, LLC, cause the Aircraft to be operated by

competent personnel in accordance with the manufacturer’s

manuals and FAA and other government regulations.

26. On June 15, 2007, Petitioner authorized Captain

Alexander Nunez to pilot the aircraft “wherever necessary and

specifically including but not limited to Venezuelan air space.”

27. Petitioner interprets the Trust Agreement and the

Aircraft Operating Agreement to preclude it from exercising any

control over the operation of the aircraft even though Section

9.01(a) of the Trust Agreement gives Petitioner “absolute and

complete discretion” in connection with matters involving the

ownership and operation of the aircraft so as to protect the

interests of the United States.

28. According to Mr. Croasman, the language in Section

9.01 is required verbatim by the FAA for the sole purpose of

ensuring that Petitioner, as “owner trustee,” will be able to

operate the aircraft without violating its obligations under the

Trust Agreement in the unlikely event that the U.S. government

needs to use the aircraft for some reason. 2 / And, as

Mr. Croasman pointed out, Section 9.01(a) requires Petitioner to

“exercise this discretion in all matters involving ownership and

operation of the Aircraft by the Owner Trustee with due regard

for the interests of the Trustor.”

29. The Trust Agreement and the Aircraft Operating

Agreement provided that MAW.ZC, LLC, was responsible for keeping

records concerning the use of the aircraft. MAW.ZC, LLC, was

also responsible for paying any taxes or expenses related to

purchase or use of the aircraft.

30. The aircraft crashed in Venezuela on February 18,

2008, killing Mr. Ceballos, Captain Nunez, and the copilot.

31. The original flight records for the aircraft were

destroyed in the crash, and no copies of those records were

presented at the final hearing.

32. No witness with personal knowledge regarding the

operation of the aircraft was presented at the final hearing.

33. The only evidence presented concerning the operation

of the aircraft was flight data obtained from two Internet

sources, FlightAware and fboweb.com .

34. The FlightAware data was obtained by Department staff

as part of their monitoring of the aircraft’s operation during

the six-month period after its initial departure from Florida.

35. The fboweb.com data was provided to the Department by

David McDonald, the attorney for MAW.ZC, LLC, and Mr. Ceballos,

who was acting as Petitioner’s authorized representative during

the investigation and protest phase of this case.

36. There is no evidence that Mr. McDonald had any

personal knowledge of the information contained in the

fboweb.com data, and he did not present it to the Department as

his understanding of the aircraft’s operation. Indeed, the

letter by which Mr. McDonald transmitted the fboweb.com data to

the Department stated that he was “having trouble trying to

decipher the information provided by fboweb.com” and that he was

providing it to the Department because it appeared to be

inconsistent with the FlightAware data conveyed to him by the

Department staff.

37. Mr. McDonald never expressly contested the assertion

by the Department staff that the aircraft returned to Florida

within the six months after it initial departure. His failure

to do so was not, under the circumstances, an admission or

acquiescence to the Department’s position that the aircraft did

return to Florida within that period. Indeed, he informed the

Department staff on several occasions that he had not been able

to obtain information concerning the aircraft’s operation

because the aircraft’s flight records were destroyed in the

crash.

38. No credible evidence was presented as to what the

FlightAware or fboweb.com services are, or how they obtain the

flight data included in their records. For example, when asked

to explain her “understanding of what Flight Aware is,” the

Department witness used to introduce the data testified only

that “[i]t’s a service that the Department subscribes to to

track the flights for the aircraft.”

39. The FlightAware data indicates that the aircraft made

eleven flights into Florida between September 2007 and

January 2008:

F l i g h t D a t e D e s t i n a t i o n

1 9/22/07 from Arturo Michelena International Airport

(Arturo) in Venezuela to Kendall-Tamiami

Executive Airport, and then to Simon Bolívar

International Airport in Venezuela by way of

Ft. Lauderdale Executive Airport on the same

day

2 9/29/07 from Arturo to Hollywood International

Airport (FLL), and then to Simon Bolivar

International Airport the following day

3 10/1/07 from Arturo to FLL, and then back to Arturo

the same day

4 10/4/07 from Arturo to FLL, then to Orlando Sanford

International Airport (SFB) the following

day, with a return to Arturo by way of FLL

and Nassau International Airport on October

14

5 10/15/07 from Arturo to FLL, then to SFB on the same

day

6 12/16/07 from Arturo to FLL, then to SFB the same day,

with a return to Arturo on December 20

7 12/21/07 from Arturo to FLL, and then back to Arturo

on the same day

8 12/23/07 from Arturo to FLL, and then back to Arturo

on the same day

9 1/3/08 from Punta Cara International Airport to FLL,

then to SFB on the same day, with a return to

Arturo by way of FLL on January 6

10 1/10/08 from Arturo to FLL, and then back to Arturo

on January 12

11 1/13/08 from Arturo to FLL, and then back to Arturo

on the same day

40. The fboweb.com data is, as Mr. McDonald noted,

difficult to decipher. However, it appears to include most, if

not all, of the flights that were listed in the FlightAware

data.

41. The fboweb.com data also lists flights on September 8-

9, 2007, between Arturo, FLL, and SFB. Those flights were not

listed in the FlightAware data.

42. No findings can be made as to whether the aircraft was

indeed in Florida on the dates reflected in the FlightAware or

fboweb.com data because that data is uncorroborated hearsay.

43. Even if the FlightAware and fboweb.com data could be

relied upon to establish that the aircraft was in Florida on the

dates referenced above, only the September 8-9 flights listed in

the fboweb.com data and the first eight flights listed in the

FlightAware data would be relevant. The other three flights

listed in the FlightAware data -– 1/3/08, 1/10/08, and 1/13/08 -

– occurred more than six months after the aircraft’s initial

departure from Florida on July 2, 2007.

44. Mr. McDonald was able to locate and provide to the

Department repair invoices related to only four of the nine

relevant flights listed in the FlightAware and fboweb.com data –

- 9/8/07, 10/4/07, 10/15/07, and 12/16/07. On each of those

occasions, there is documentation showing that the aircraft

underwent repairs at SJC in Sanford.

45. There is no evidence that the aircraft underwent

repairs in connection with the other five flights listed in the

FlightAware data -– 9/22/07, 9/29/07, 10/1/07, 12/21/07, and

12/23/07.

46. Mr. McDonald provided an invoice for a part that was

purchased for the aircraft at FLL on September 29, 2007, but

there is no evidence that the part was installed in Florida on

that trip.

47. No sales or use tax was paid on the aircraft by

Petitioner or any other entity or person to Florida or to any

other state or country.

48. Petitioner does not dispute the amount of the tax,

penalty, or interest calculated by the Department in the Notice

of Reconsideration. The tax is $224,400, which is six percent

of the sales price of the aircraft; the penalty is $224,400,

which is 100 percent of the tax as required by Section

212.05(1)(a)2., Florida Statutes; and interest is accruing at a

rate of $67.44 per day, with $27,273.10 of interest having

accrued through the date of the Notice of Reconsideration.

49. These amounts were assessed against Petitioner in its

capacity as “owner trustee,” not its individual capacity.

CONCLUSIONS OF LAW

50. DOAH has jurisdiction over the parties to and subject

matter of this proceeding pursuant to Sections 72.011(1),

51. The Department is the state agency responsible for

administering and enforcing the sales and use taxes imposed by

Chapter 212, Florida Statutes. See § 213.05, Fla. Stat.

52. Section 212.05(1), Florida Statutes, imposes a six

percent tax on the retail sale or use of tangible personal

property in Florida.

53. The retail sale of an aircraft to an out-of-state

resident or business is exempt from the sales tax under certain,

limited circumstances. See § 212.05(1)(a)2., Fla. Stat.

54. The relevant terms of the exemption are as follows:

2. [The sales tax] does not apply to the

sale of a[n] . . . aircraft 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

. . . aircraft 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, or is a noncorporate entity

that has no individual vested with authority

to participate in the management, direction,

or control of the entity's affairs who is a

resident of, or makes his or her permanent

abode in, this state. . . . . This

exemption shall not be allowed unless:

a. The purchaser removes . . . [the]

aircraft from this state within 10 days

after the date of purchase or, when the . .

. aircraft is repaired or altered, within 20

days after completion of the repairs or

alterations;

b. The purchaser, within 30 days from the

date of departure, shall provide the

department with written proof that the

purchaser licensed, registered, titled, or

documented the . . . aircraft outside the

state. If such written proof is

unavailable, within 30 days the purchaser

shall provide proof that the purchaser

applied for such license, title,

registration, or documentation. The

purchaser shall forward to the department

proof of title, license, registration, or

documentation upon receipt.

c. The purchaser, within 10 days of

removing the . . . aircraft from Florida,

shall furnish the department with proof of

removal in the form of receipts for fuel,

dockage, slippage, tie-down, or hangaring

from outside of Florida. The information so

provided must clearly and specifically

identify the . . . aircraft;

d. The selling dealer, within 5 days of

the date of sale, shall provide to the

department a copy of the sales invoice,

closing statement, bills of sale, and the

original affidavit signed by the purchaser

attesting that he or she has read the

provisions of this section;

e. The seller makes a copy of the

affidavit a part of his or her record for as

long as required by s. 212.35; and

* * *

If the purchaser fails to remove . . .

aircraft from this state within 10 days

after purchase or, when the . . . aircraft

is repaired or altered, within 20 days after

completion of such repairs or alterations,

or permits the . . . aircraft to return to

this state within 6 months from the date of

departure , or if the purchaser fails to

furnish the department with any of the

documentation required by this subparagraph

within the prescribed time period, the

purchaser shall be liable for use tax on the

cost price of the . . . aircraft and, in

addition thereto, payment of a penalty to

the Department of Revenue equal to the tax

payable . This penalty shall be in lieu of

the penalty imposed by s. 212.12(2) and is

mandatory and shall not be waived by the

department. . . . . Notwithstanding other

provisions of this paragraph to the

contrary, an aircraft purchased in this

state under the provisions of this paragraph

may be returned to this state for repairs

within 6 months after the date of its

departure without being in violation of the

law and without incurring liability for the

payment of tax or penalty on the purchase

price of the aircraft if the aircraft is

removed from this state within 20 days after

the completion of the repairs and if such

removal can be demonstrated by invoices for

fuel, tie-down, hangar charges issued by

out-of-state vendors or suppliers, or

similar documentation .

§ 212.05(1)(a)2., Fla. Stat. (emphasis supplied).

55. It is undisputed that the initial sale of the aircraft

was exempt from the sales tax under the terms of this statute.

The dispute is whether the aircraft is subject to use tax based

upon the language emphasized above, and if so, whether

Petitioner is the entity responsible for paying the tax and the

related penalty and interest.

56. The Department has the initial burden of “showing that

an assessment has been made against the taxpayer and the factual

and legal grounds upon which the . . . department made the

Department meets this burden, Petitioner then has the burden to

prove by a preponderance of the evidence that the assessment is

incorrect. See IPC Sports, Inc. v. Dept. of Revenue , 829 So. 2d

330, 332 (Fla. 3rd DCA 2002).

57. The Department’s initial burden is akin to the

presentation of a prima facie case with competent substantial

evidence.

58. It is undisputed that the Department made an

assessment against Petitioner in its capacity as “owner

trustee.” There is no basis to tax Petitioner in its individual

capacity, and the Department has not argued that there is.

59. In order to show the factual and legal grounds for the

assessment in this case, the Department must present competent

substantial evidence to show (1) that Petitioner was the

purchaser of the aircraft, and (2) that Petitioner permitted the

aircraft to return to Florida within six months after the date

of its initial departure for purposes other than repairs.

60. With respect to the first issue, Section

and, therefore, the term must be given its plain and ordinary

meaning by reference to the dictionary.

61. “Purchase” means “to obtain by paying money or its

equivalent.” See Merriam-Webster’s Online Dictionary, at www.m-

w.com . Therefore, a purchaser is one who obtains by paying

money or its equivalent. Accord Black’s Law Dictionary (6th ed.

either real or personal property by buying it for a price in

money; a buyer; vendee” and noting that the term “may be

employed in the broad sense to include anyone who obtains title

otherwise than by decent and distribution but is more commonly

used to refer to a vendee or buyer who has purchased property

for valuable consideration ” (emphasis supplied)).

62. The Department met its initial burden to show the

basis for its assessment against Petitioner as the “purchaser”

of the aircraft. Specifically, the Department presented

competent substantial evidence showing that in making the

assessment, it reasonably relied on the Bill of Sale, the

Removal Affidavit, and FAA registration executed by Petitioner,

which, on their face, identify Petitioner as the “purchaser” and

registrant of the aircraft.

63. Thus, the burden shifted to Petitioner to prove that

the factual and legal basis for the assessment are incorrect.

64. Petitioner met its burden of proof because, as a

matter of fact and law, MAW.ZC, LLC, was the “purchaser” of the

aircraft, not Petitioner.

65. The documents relied on by the Department do not refer

to Petitioner in its individual capacity. Rather, they refer to

Petitioner in its capacity as “owner trustee under a Trust

Agreement dated 4/28/07” (Bill of Sale and FAA registration) and

“owner trustee for MAW.ZC, LLC” (Removal Affidavit). This

qualification, which was essentially ignored by the Department

in making the assessment, is significant because the greater

weight of the evidence establishes that, as “owner trustee,”

Petitioner had essentially no control over the aircraft and, as

a result, the true owner of the aircraft was MAW.ZC, LLC, not

Petitioner.

66. Moreover, as detailed in the Findings of Fact, the

more persuasive evidence establishes that notwithstanding the

reference to Petitioner on the Bill of Sale and other documents,

MAW.ZC, LLC, was the actual “purchaser” of the aircraft. First,

the evidence establishes that the purchase/sale transaction was

between SJC and MAW.ZC, LLC, not SJC and Petitioner. Second,

the evidence establishes that MAW.ZC, LLC, and not Petitioner,

paid the purchase price to SJC. Third, as Mr. Croasman credibly

explained, the sole reason that Petitioner (rather than MAW.ZC,

LLC) was listed as the “purchaser” on the Bill of Sale was to

facilitate registration of the aircraft with the FAA.

67. In light of this conclusion, it is not necessary

consider the second issue as to whether Petitioner permitted the

aircraft to return to Florida for purposes other than repairs

within six months after the aircraft’s initial departure from

the state. Nevertheless, that issue will be addressed in the

event that the Department or an appellate court concludes that

Petitioner was indeed the “purchaser” of the aircraft.

68. Section 212.05(1)(a)2., Florida Statutes, does not

define “permits,” and, therefore, that term must be given its

plain and ordinary meaning by reference to the dictionary.

69. “Permit” means “to consent to expressly or formally,”

opportunity: ALLOW.” See Merriam-Webster’s Online Dictionary,

at www.m-w.com . Accord Allstate Ins. Co. v. TIG Ins. Co. , 711

So. 2d 84, 85 (Fla. 1st DCA 1998) (noting that that term

“permit” is susceptible of two meanings: (1) to expressly or

formally consent, or (2) not to prohibit).

70. Petitioner argues that it could not have, and did not,

“permit” the aircraft to return to Florida because it had no

control over the operation of the aircraft. This argument is

rejected.

71. The evidence establishes that Petitioner expressly

allowed MAW.ZC, LLC, to operate the aircraft anywhere without

any oversight or supervision by Petitioner through the terms of

the Aircraft Operating Agreement and the separate authorization

issued to Captain Nunez. And, because Petitioner did not in any

way limit that authority to exclude operating the aircraft in

Florida during the six-month period after the aircraft was

initially removed from the state (even after receiving the

letter from the Department regarding the tax consequences if the

aircraft returned to Florida during that period), the evidence

the aircraft to return to Florida.

72. That said, it is not enough for Petitioner to have

permitted the aircraft to return to Florida within six months

after its initial departure. It must also be shown that the

aircraft did, in fact, return to the state during that period

for purposes other than repairs.

73. The Department failed to meet its initial burden on

this issue.

74. The Department did not present any competent

substantial evidence showing that the aircraft returned to

Florida for purposes other than repairs during the six-month

period after its initial departure on July 2, 2007. The only

evidence presented on this issue was the FlightAware and

fboweb.com data, which are hearsay to the extent they are being

offered for the truth of the matter asserted in the data, i.e. ,

that the aircraft was in the locations reflected in the data.

75. Hearsay is admissible in this proceeding, but it is

not competent substantial evidence that can support a finding of

fact unless it is corroborated by other, non-hearsay evidence.

See §§ 120.569(2)(g), 120.57(1)(c), Fla. Stat.

76. The Department argues in its PRO that the FlightAware

data was admitted without objection as part of its enforcement

file under the business record exception to the hearsay rule.

This argument was rejected in the Order on Post-hearing Motions,

entered July 16, 2009.

77. The fact that the enforcement file was received as a

business record did not cure the hearsay nature of the

FlightAware data. As explained by Professor Ehrhardt,

[w]hen a business record contains a hearsay

statement, the admissibility of the record

depends on whether the hearsay statement in

the record would itself be admissible under

some exception to the hearsay rule. In

other words, if the person who prepared the

record could not testify in court concerning

the recorded information, the information

does not become admissible as evidence

merely because it has been recorded in the

regular course of business.

Ehrhardt, Florida Evidence , at § 805.1, n.3 (2002) (discussing

“hearsay within hearsay”). Accord Harris v. Fla. Game & Fresh

Water Fish Comm’n , 495 So. 2d 806, 808-09 (Fla. 1st DCA 1986).

78. Next, the Department argues that the FlightAware data

is corroborated by the fboweb.com data, which was provided to

the Department by Petitioner’s authorized representative.

79. The fboweb.com data, like the FlightAware data, is

hearsay to the extent it is being offered to show that the

aircraft returned to Florida on the dates reflected in the data.

Thus, even though the fboweb.com data appears to be materially

consistent with the information in the FlightAware data, 3 / it is

not corroborating evidence upon which findings of fact can be

made. Simply put, hearsay corroborated by other hearsay is not

competent substantial evidence upon which findings of fact can

be made.

80. The fact that the fboweb.com data was provided to the

Department by Petitioner’s authorized representative does not,

as the Department argues, make the data an “admission” or

“statement against interest” that can be relied upon to make

findings of fact, either by itself or in conjunction with the

FlightAware data. See §§ 90.803(18) (providing an exception to

the hearsay rule for admissions and 90.804(2)(c), Florida

Statutes (providing an exception to the hearsay rule for

statements against interest made by an unavailable declarant).

81. First, the fboweb.com data itself is not a statement

of Petitioner or Mr. McDonald. Second, even though the data was

provided to the Department by Mr. McDonald in his capacity as

Petitioner’s representative, he did not “manifest[] his adoption

or belief in its truth” ( see § 90.803 (18)(b), Fla. Stat.), but

rather he informed the Department that he could not decipher the

data. Third, there is no evidence that Mr. McDonald was

unavailable at the time of the final hearing, so even if his

presentation of the fboweb.com data to the Department were

considered a statement against Petitioner’s interest, it would

not be admissible under Section 90.804(2)(c), Florida Statutes.

82. Arguably, the FlightAware and fboweb.com data are

corroborated by the repair invoices from SJC (which Petitioner

does not argue are hearsay), but only as to the flight dates

that correspond to the dates in the invoices. The fact that

certain aspects in FlightAware and fboweb.com data are

corroborated by non-hearsay evidence does not mean that findings

can be made based upon other uncorroborated aspects of the

flight data. Each entry in the flight data is a separate

statement for purposes of the hearsay rule because each entry

asserts a different fact ( e.g. , that the aircraft traveled from

Arturo to FLL on December 21, 2007, and that it traveled back to

Arturo from FLL later that day).

83. In light of the conclusion that the Department failed

to present competent substantial evidence showing that the

aircraft returned to Florida within six months after its initial

departure, it is not necessary to consider whether Petitioner

met its burden to prove that the Department’s assessment on that

basis was incorrect. Nevertheless, that issue will be addressed

below in the event that an appellate court reverses these

evidentiary rulings.

84. To the extent that the FlightAware data and/or the

fboweb.com data were determined to be sufficient to support

findings of fact, the preponderance of the evidence would

establish that the aircraft returned to Florida for purposes

other than repairs five times -- 9/22/07, 9/29/07, 10/1/07,

12/21/07, and 12/23/07 -- in the six-month period after its

initial departure.

85. Petitioner’s argument that the FlightAware data would

not support a tax assessment even if it were not hearsay since

it showed only de minimus use of the aircraft in Florida is

rejected. See Petitioner’s PRO, at 21-22. The case relied upon

by Petitioner in support of this argument -- Department of

Revenue v. Yacht Futura Corporation , 510 So. 2d 1047 (Fla. 1st

DCA 1987) -- is distinguishable because that case involved a

single five-day use of a yacht in the state, whereas the

FlightAware data shows a more routine and frequent use of the

aircraft in the state over a period of several months.

86. Also rejected is Petitioner’s argument that the five

trips would not trigger tax under Section 212.05(1)(a)2.,

Florida Statutes, because each occurred within 20 days of a

documented repair. See Petitioner’s PRO, at ¶¶ 69-70. On this

issue, the undersigned agrees with the Department that the 20-

day period in the statute is not a “safe harbor” during which

the aircraft can return to Florida for non-repair reasons.

Rather, that is the period within which the aircraft must be

removed from the state after the completion of repairs, and once

removed, any return trips to the state (even those within the

20-day period) must be for repairs.

87. Finally, Petitioner’s constitutional arguments ( see ,

e.g. , Petitioner’s PRO, at 23-24) need not be addressed in light

of the determinations above, and in any event, DOAH and the

Department do not have the authority to adjudicate

constitutional issues.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions

of Law, it is

RECOMMENDED that the Department issue a final order

rescinding the assessment at issue in this case.

DONE AND ENTERED this 19th day of August, 2009, in

Tallahassee, Leon County, Florida.

S

T. KENT WETHERELL, II

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone]

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 19th day of August, 2009.

ENDNOTES

1 / Unless otherwise indicated, all statutory references are to

the 2006 version of the Florida Statutes in effect at the time

of the events giving rise to this case.

2 / It is not necessary to determine whether Mr. Croasman’s

hearsay-based understanding is correct, but paragraph (c) of

Section 9.01 suggests that it is not. That paragraph provides:

(c) Purpose . The purpose of Section 9.01

is to give the Owner Trustee the power to

manage and control the Aircraft with respect

to matters involving the ownership and

operation of the Aircraft by the Owner

Trustee so as to assure that (i) the

Aircraft shall be controlled with respect to

such matters by a Citizen of the United

States and (ii) the Trustor shall have no

power to influence or control the exercise

of the Owner Trustee’s authority with

respect to such matters and (iii) the Owner

Trustee shall be able to give the affidavit

required by [FAA regulations]. Section 9.01

shall be construed in furtherance of the

foregoing purpose.

3 / Petitioner correctly points out in its PRO (at paragraph 47)

that there are gaps and other inconsistencies in FlightAware and

fboweb.com data. Those issues affect the weight that would be

given to the data if it were not hearsay, but it does not

completely undermine the reliability of the data.

COPIES FURNISHED :

M. Stephen Turner, Esquire

Broad & Cassel, P.A.

215 South Monroe Street, Suite 400

Post Office Box 11300

Tallahassee, Florida 32302

Nicholas Bykowsky, Esquire

Office of the Attorney General

The Capitol, Plaza Level 01

Revenue Litigation Bureau

Tallahassee, Florida 32399-1050

Marshall Stranburg, General Counsel

Department of Revenue

The Carlton Building, Room 204

501 South Calhoun Street

Tallahassee, Florida 32399-0100

Lisa Echeverri, Executive Director

Department of Revenue

The Carlton Building, Room 104

501 South Calhoun Street

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.