14-003133
Salma Petroleum, Inc. vs.
Department Of Revenue
Status: Closed
Recommended Order on Friday, January 9, 2015.
Recommended Order on Friday, January 9, 2015.
1STATE OF FLORIDA
4DIVISION OF ADMINISTRATIVE HEARINGS
8SALMA PETROLEUM, INC. ,
11Petitioner,
12vs. Case No. 14 - 3133
18DEPARTMENT OF REVENUE,
21Respondent.
22_______________________________/
23GAUSIA PETROLEUM, INC.,
26Petitioner,
27vs. Case No. 14 - 3134
33DEPARTME NT OF REVENUE,
37Respondent.
38_______________________________/
39RECOMMENDED ORDER
41Pursuant to notice, a formal administrative hearing was
49conducted before Administrative Law Judge Mary Li Creasy by video
59teleconference at sites in Tallahassee and Lauderdale Lakes,
67Florida, on October 29, 2014.
72APPEARANCES
73For Petitioner s : Zersis Minocher , pro se
8112217 Northwest 35th Street
85Coral Springs, Florida 33065
89For Respondent: Carrol Y. Cherry, Esqu ire
96Office of the Attorney General
101P laza L evel 01, The Capitol
108Revenue Litigation Bureau
111Tallahassee, Florida 32399 - 1050
116STATEMENT OF THE ISSUE
120Whether Petitioners are liable for sale s and use tax,
130penalt y, and interest as assessed by the Department of R evenue
142( the Department) ?
145PRELIMINARY STATEMENT
147These are consolidated cases involving the Department and
155audit assessments against two corporate taxpayers: Salma
162Petroleum, Inc. (Audit Number 200149872) (Salma), and Gausia
170Petroleum, Inc. (Audit Number 200149749) (Gausia). These cases
178were consolidated at hearing due to common witnesses, common
187exhibits (except for the figures) , and similar testimony of the
197management of both taxpayers .
202On March 6, 2014, t he Department issued Petitioners each a
213Notice of Proposed Assessment (NOPA) assessing Salma additional
221sales and use tax in the sum of $159,282.26, plus penalty , and
234interest. The Department assessed Gausia additional sales and
242use t ax in the sum of $213,754.46, plus penalty , and interest.
255Petitioners denied liability and requested formal hearings to
263contest the assessments.
266The Department referred the cases to the Division of
275Administrative Hearings on July 9, 2014, and the matters were
285assigned to Administrative Law Judge D. R. Alexander. The final
295hearing s were originally scheduled for October 14, 2014.
304Respondent ' s a mended m otions for c ontinuance were granted on
317August 1 3 , 2014, and the final hearings were re - scheduled for
330Octob er 29, 2014. The case s w ere transferred to the undersigned
343on October 17, 2014, and proceeded to final hearing as scheduled
354on October 29, 2014, at which time the cases were consolidated.
365Petitioners called Arif Ahmed, manager of both entities , and
374submit ted no exhibits. 1/ Respondent called two witnesses: Ron
384Collier, Tax Audit Supervisor, and Richard Lawhon, Senior Tax
393Specialist with Compliance Campaigns. Respondent ' s Exhibits 1
402through 8 pertaining to Salma, and Exhibits 1 through 8
412pertaining to Gau sia, were admitted.
418Neither party ordered a transcript of the final hearing.
427Both parties timely submitted p roposed r ecommended o rders which
438were considered in the drafting of this Recommended Order.
447Unless otherwise noted, all statutory references are to
455Florida Statutes (2013).
458FINDING S OF FACT
4621. Salma is a Florida corporation with its principal place
472of business at 2231 Del Prado Boulevard, Cape Coral, Florida ,
48233990. Gausia is a Florida corporation with its principal place
492of business at 11571 Gladi olus Drive, Fort Myers, Florida , 3390 8 .
5052. Petitioners are in the business of operating gas
514stations with convenience stores.
5183. The Department is an agency of the State of Florida and
530is authorized to administer the tax laws of the State of Florida.
5424 . Petitioners were selected for audit because their
551reported gross sales were less than the total cost of items
562purchased (inventory) for the audit period.
5685. The Department issued Salma and Gausia each a Notice of
579Intent to Conduct a Limited Scope Audit or Se lf - Audit , dated
592April 26, 2013, for sales and use tax, for the period February 1,
6052010, through January 31, 2013 (collectively referred to as the
615Notices).
6166. The Notices requested that Petitioners provide the
624Department: (a) a list of all their ve ndors for alcohol,
635tobacco, soda, chips, candy, etc.; (b) their total purchases
644of alcohol and tobacco, by vendor, for the period July 2010 to
656June 2011; (c) copies of their federal tax returns for the
667examination period; (d) purchase receipts for all purc hases
676for the last complete calendar month; and (e) daily register
686(Z tapes) for the last complete calendar month.
6947. The Notices gave Petitioners 60 days to gather the
704requested documents before the audit was to commence. The
713Notices also requested that Petitioners complete an attached
721Questionnaire and Self Analysis Worksheet.
7268. In response to the Notices, Petitioners requested a 30 -
737day extension of time until July 18, 2013, to provide the
748requested documents and to designate a Power of Attorney.
7579. Petitioners did not provide the Department any books and
767records for inspection, nor did they complete and return the
777q uestionnaire and s elf a nalysis w orksheets. As a result, the
790Department ' s auditor determined the sales tax due based upon the
802best infor mation available.
80610. To calculate an estimated assessment of sales tax, the
816Department used the purchase data of Petitioners ' wholesalers and
826distributors of alcoholic beverages and tobacco, for July 1,
8352010 , through June 30, 2011; the 2010 National Ass ociation of
846Convenience Stores average markups and in - store sales percentages
856of alcoholic beverage and tobacco products; and historical audit
865data.
86611. After reviewing the purchase data for July 1, 2010 ,
876through June 30, 2011, and for July 1, 2011 , throu gh June 30,
8892012, the Department ' s auditor determined that the data was
900missing a few vendors.
90412 . As a result, the Department ' s auditor estimated the
916amount of Petitioners ' cigarette purchases, based on historical
925audit data that shows that cigarette s ales are generally
9354.31 times more than beer sales.
94113 . The Department ' s auditor and audit supervisor testified
952that the estimated gross sales seemed reasonable and consistent
961with the national averages and the purchase data for July 1,
9722011 , through Jun e 30, 2012.
97814 . The Department estimated gross sales (i.e., the retail
988sale value of the goods sold) by marking up the taxable sales and
1001exempt sales reported on the sales and use tax returns submitted
1012to the Department by Petitioners .
101815 . For example, for July 1, 2010 , through June 30, 2011,
1030Salma purchased beer from its wholesalers and distributors for
1039$148,826.15, and the Department marked up the purchase price by
105027 percent for a retail value of $189,009.21.
105916. For July 1, 2010 , through June 30, 20 11, Gausia
1070purchased beer from its wholesalers and distributors for
1078$132,138.65, and the Department marked up the purchase price by
108927 percent for a retail value of $167,816.09.
109817 . The Department ' s markup on the alcoholic beverage and
1110tobacco products i s reasonable because the Department ' s auditor
1121testified that he used a combination of 2010 National Association
1131of Convenience Stores average markups and the competitive pricing
1140and information from audits of other convenience stores.
11481 8 . The Department d etermined that the exemption ratio
1159reported on the sales and use tax returns submitted to the
1170Department by Petitioners was extremely high for their industry.
117919 . The Department used an exemption ratio of 15 percent,
1190based on historical audit data for th e industry, to calculate
1201Petitioner s ' estimated taxable sales.
120720 . A review of Petitioners ' sales and use tax returns
1219revealed that they did not apply the tax bracket system to their
1231taxable sales transactions, as required under sections 212.12(9)
1239and (10 ), Florida Statutes.
12442 1. Instead, Petitioners remitted sales tax on their
1253taxable sales based on their gross receipts at a flat tax rate.
1265The Department ' s auditor testified that this method of reporting
1276tax is inappropriate and does not accurately reflec t the sales
1287activity of the business.
129122 . The Department calculated the average effective tax
1300rate of 6.0856 percent, based on historical aud it data for the
1312industry.
131323. To calculate the estimated tax due, the Department
1322multiplied the effective tax ra te by the estimated taxable sales
1333and gave Petitioners credit for any tax remitted with their tax
1344returns.
134524 . The Department issued Salma a Notice of Intent to M ake
1358Audit Changes , dated August 8, 201 3, for audit number 200149872.
1369The Department issue d Gausia a Notice of Intent to Make Audit
1381Changes, dated August 8, 2013, for audit number 200149749.
139025 . The Department assessed Petit i oners sales tax on their
1402sales of alcoholic beverages and tobacco.
140826 . The Notice of Intent to Make Audit Changes gave
1419Petitioners 30 days to request a conference with the auditor or
1430audit supervisor, to dispute the proposed changes. Petitioners
1438did not make such a request.
14442 7 . The Department issued a Notice of Pro posed Assessment
1456(NOPA) to Salma on March 6, 2014, for tax in the sum of
1469$159,282.26 ; for penalty in the sum of $39,820.57 ; and interest
1481as of March 6, 2013, in the sum of $27,772.36.
149228. The Department issued a NOPA to Gausia on March 6,
15032014, for tax in the sum of $213,754.46 ; for penalty in the sum
1517of $53, 438.62 ; and interest as of March 6, 2013, in the sum of
1531$36,921.79.
153329. Additional interest accrues at $30.55 per day until t he
1544tax is paid.
154730. The NOPAs became final assessment s on May 5, 2014.
155831 . After filing a request for an administrative hearing ,
1568Petitioners completed the Questionnaire and Self Analysis
1575Worksheet and produced the following documents to the Department :
1585(a) a list of all of their vendors for alcohol, tobacco, soda,
1597chips, candy, etc.; (b) a list of vendors for alcohol and
1608tobacco, for the examination period of July 2010 to June 2011;
1619(c) a summary of their taxable sales, for the period
1629February 2010 through December 2012; (d) copies of their
1638federal tax returns, for the tax years 2010 through 2013;
1648(e) copies of its purchase receipt s for the months of July 2013;
1661and (f) copies of their daily register (Z - tapes) for the month of
1675July 2013.
16773 2 . The Department ' s auditor testified that aside from
1689being untimely, the records and information provided by
1697Petitioners d uring these proceeding s w ere not reliable because
1708Petitioners did not provide any source documents that would allow
1718the Department to reconcile the reported figures and confirm the
1728supplied information. In addition, the purchase receipts and Z -
1738tapes were not rel evant because th ey were from outside of the
1751audit period.
175333 . The Z - tapes are also unreliable because the manager of
1766the convenience store testified at the final hearing that
1775employees purposely and routinely entered taxable sales into the
1784cash registers as tax exempt sales.
179034. Petitioners argue that the Department did not use the
1800best information available when estimating the taxes due.
1808Petitioners claim that because their businesses are combination
1816gas station/convenience stores, the national data for standalone
1824co nvenience stores is inapplicable. However, notably absent from
1833Petitioners ' testimon y or evidence was any alternative data upon
1844which the Department could have relied for more accurate
1853estimates. 2/
1855CONCLUSIONS OF LAW
1858Jurisdiction
185935 . The Division o f Administrative Hearings has
1868jurisdiction over the subject matter and parties to this
1877proceeding. § 120.57(1), Fla. Stat. (2014) .
1884Sales and Use Tax Audits
188936 . The Department is authorized to conduct audits,
1898relating to sales and use tax imposed under ch apter 212, Florida
1910Statutes, of a dealer and to request information to ascertain t he
1922dealer ' s liability, if any. § 212.13, Fla. Stat.
193237 . The term " dealer " is defined as any person who leases
1944or rents tangible personal property for a consideration,
1952perm itting the use or possession of such property without
1962transferring title to the property. § 212.06(2)(e), Fla. Stat.
197138 . The Department is authorized to prescribe the books and
1982records to be maintained by all dealers that are subject to sales
1994and use t ax. § 212.12(6)(a), Fla. Stat. Further, the Department
2005is authorized to audit or inspect the books and records of
2016dealers and, if a deficiency exists, to make an assessment and
2027collect it. § 212.12(5)(a), Fla. Stat.
203339 . Dealers are required to keep su itable books and records
2045relating to sales tax and to preserve those books and records.
2056§§ 212.12(6)(a), 212.13, and 213.35, Fla. Stat.
206340 . For conducting an audit, only records and information
2073available when the audit commences are deemed acceptable.
2081§ 212.13(5), Fla. Stat.
208541 . If a dealer fails or refuses to make its records
2097available for inspection so that no audit or examination has been
2108made of the books and records, the Department has the affirmative
2119duty to make an assessment from an estimate based upon the best
2131information then available to it for the taxable period of retail
2142sales, together with interest, plus penalty. § 212.12(5)(b),
2150Fla. Stat. The Department must collect such taxes, interest, and
2160penalty on the basis of such assessment w hich shall be considered
2172prima facie correct, and the burden to show the contrary rests
2183upon the dealer. Id.
2187Respective Burdens
218942 . Florida tax law creates the presumption of correctness
2199of the Department ' s assessment of tax, penalty , and interest.
2210§ 212.12(5)(b), Fla. Stat.
221443 . The Department has the initial burden to show that it
2226made an assessment against Petitioner and that the assessment was
2236valid and correct. IPC Sports, Inc. v. State, Dep ' t of Rev . , 829
2251So. 2d 330, 332 (Fla. 3d DCA 2002); D ep ' t of Rev . v. Nu - Life
2270Health & Fitness Ctr . , 623 So. 2d 747, 751 - 52 (Fla. 1st DCA
22851992); § 120.80(14)(b)2., Fla. Stat. Once the Department has met
2295this burden, the burden shifts to Petitioner to prove by a
2306preponderance of the evidence that the assessme nt is incorrect.
2316Id. ; § 120.57(1)(j), Fla. Stat.
2321Florida Sales and Use Tax
232644 . The Florida sales and use tax is an excise tax on the
2340privilege of engaging in business in the state, not a tax on the
2353property sold. §§ 212.05 & 212.06, Fla. Stat.
236145 . The tax imposed by the Florida sales and use tax law
2374generally include s sales and use, admissions, transient rentals
2383and commercial rentals taxes. §§ 212.05 & 212.06, Fla. Stat.
239346 . The Florida sales tax and use tax are separate, but
2405complementary taxes, al though they are often referred to as one
2416tax. U.S. Gypsum v. Green , 110 So. 2d 409 (Fla. 1958).
242747 . It is the legislative intent that every person is
2438exercising a taxable privilege who engages in the business of
2448selling items of tangible personal propert y at retail in this
2459state. § 212.05, Fla. Stat., and Fla. Admin. Code R . 12A -
24721.038(1).
247348 . A tax, at the rate of six (6) percent of the sales
2487price of each item of tangible personal property is levied on
2498each taxable transaction when sold at retail in th is state,
2509computed on each taxable sale for the purpose of remitting the
2520amount of tax due the state, and including each and every retail
2532sale. § 212.05(1)(a)1.a . , Fla. Stat.
253849 . The Department made a prima facie showing of the
2549validity of the respective assessments of sales tax, penalty , and
2559interest against Petitioners. Petitioners have not presented any
2567credible evidence to refute the methodology used by the
2576Department in the performance of its audit.
258350 . In order to set aside the findings of the au dit,
2596Petitioners should have kept records that would have accurately
2605identified the inventory and sales made at the gas
2614stations/ convenience store s . Petitioners kept no records to
2624support their claim. The conclusions reached by the Department
2633regarding t he taxable sales, exempt sales, presumption of markup
2643percentages, and tax rate are deemed reasonable.
265051 . Further, without information to show that Petitioners
2659paid the statutory amount of sales tax on all their taxable
2670sales, the Department had the du ty to make an estimated
2681assessment that included estimated taxable sales and average
2689effective tax rate.
269252 . Petitioners had the duty to maintain records and make
2703them available to the Department for audit. Petitioners may not
2713now argue that their untim ely produced, incomplete, and non -
2724responsive records contradict the audit results.
273053 . P etitioners failed to overcome the presumption of
2740correctness of the assessment by a preponderance of the evidence.
2750Accordingly, the assessments are valid and correct.
2757RECOMMENDATION
2758Based on the foregoing Findings of Fact and Conclusions of
2768Law, it is RECOMMENDED that the Department of Revenue enter a
2779final order denying Petitioners ' requests for relief and
2788assessing, in full, t he Department ' s assessments of sales tax ,
2800penalty , and interest against both Salma and Gausia .
2809DONE AND ENTERED this 9th day of January , 2015 , in
2819Tallahassee, Leon County, Florida.
2823S
2824MARY LI CREASY
2827Administrative Law Judge
2830Division of Administrative Hearings
2834The DeSoto Building
28371230 Apalachee P arkway
2841Tallahassee, Florida 32399 - 3060
2846(850) 488 - 9675
2850Fax Filing (850) 921 - 6847
2856www.doah.state.fl.us
2857Filed with the Clerk of the
2863Division of Administrative Hearings
2867this 9th day of January , 2015 .
2874ENDNOTE S
28761/ Ahmed testified that he is the husband of the owner of both
2889Gausia and Salma as well as the manager of the two
2900establishments.
29012/ Gausia also argued that the assessed tax is completely
2911disproportionate to the inventory it carries a nd to the value of
2923its business based upon the current listing of the business for
2934sale. This testimony was not corroborated by admissible
2942documents and was not persuasive. Gausia attached its business
2951for sale listing and a monthly average balance sheet to its
2962Proposed Recommended Order. However, these documents wer e not
2971considered because they were not identified as exhibits prior to
2981the hearing , or admitted at the hearing.
2988COPIES FURNISHED:
2990Carrol Y. Cherry, Esquire
2994Office of the Attorney General
2999P laza L evel 01, The Capitol
3006Revenue Litigation Bureau
3009Tallahassee, Florida 32399 - 1050
3014(eServed)
3015Zersis Minocher
301712217 Northwest 35th Street
3021Coral Springs, Florida 33065
3025Nancy L. Staff, General Counsel
3030Department of Revenue
3033Post Office Box 6668
3037Tallahassee, Florida 32314 - 6668
3042(eServed)
3043Marshall Stranburg, Executive Director
3047Department of Revenue
3050Post Office Box 6668
3054Tallahassee, Florida 32314 - 6668
3059(eServed)
3060NOTICE OF RIGHT TO SUBMIT EXCEPTIONS
3066All parties have the right to submit written exceptions within
307615 days from the date of this Recommended Order. Any exc eptions
3088to this Recommended Order should be filed with the agency that
3099will issue the Final Order in this case.
- Date
- Proceedings
- PDF:
- Date: 09/30/2015
- Proceedings: Transmittal letter from Claudia Llado forwarding one-volume Transcript to the agency.
- PDF:
- Date: 01/09/2015
- Proceedings: Recommended Order cover letter identifying the hearing record referred to the Agency.
- PDF:
- Date: 12/02/2014
- Proceedings: Order Establishing Deadline for Filing Proposed Recommended Orders.
- Date: 10/29/2014
- Proceedings: CASE STATUS: Hearing Held.
- Date: 10/24/2014
- Proceedings: Respondent's Proposed Exhibits filed (exhibits not available for viewing).
- PDF:
- Date: 08/13/2014
- Proceedings: Order Granting Continuance and Re-scheduling Hearing by Video Teleconference (hearing set for October 29, 2014; 9:00 a.m.; Lauderdale Lakes, FL).
- PDF:
- Date: 07/23/2014
- Proceedings: Notice of Hearing by Video Teleconference (hearing set for October 14, 2014; 9:00 a.m.; Lauderdale Lakes and Tallahassee, FL).
- PDF:
- Date: 07/15/2014
- Proceedings: Notice of Serving Respondent's First Set of Written Interrogatories filed.
Case Information
- Judge:
- MARY LI CREASY
- Date Filed:
- 07/09/2014
- Date Assignment:
- 10/17/2014
- Last Docket Entry:
- 09/30/2015
- Location:
- Lauderdale Lakes, Florida
- District:
- Southern
- Agency:
- ADOPTED IN TOTO
Counsels
-
Carrol Y. Cherry, Esquire
Address of Record -
Zersis Minocher
Address of Record -
Nancy L. Staff, General Counsel
Address of Record -
Carrol Y Cherry Eaton, Esquire
Address of Record