20-005390 B Century 21, Inc. vs. Department Of Revenue Status: Closed Recommended Order on Thursday, October 21, 2021.

Summary: Petitioner failed to prove, by a preponderance of the evidence, that Respondent's January 27, 2020, Notice of Proposed Assessment was incorrect.

S TATE OF F LORIDA

D IVISION OF A DMINISTRATIVE H EARINGS

B C ENTURY 21, I NC . ,

Petitioner ,

vs. Case No. 20 - 5390

D EPARTMENT OF R EVENUE ,

Respondent .

/

R ECOMMENDED O RDER

On Ju ly 20, 2021, Administrative Law Judge Robert J. Telfer III, of the

Florida Division of Administrative Hearings (DOAH), conducted a final

hearing pursuant to section 120.57(1), Florida Statutes (2019), via the Zoom

platform .

A PPEARANCES

For Petitioner: Robert Andrew Heekin, Esquire

The Law Office of Rob Heekin, Jr., P.A.

2223 Atlantic Boulevard

Jacksonville, Florida 32207

For Respondent: Randi Ellen Dincher, Esquire

Franklin David Sandrea - Rivero, Esquire

Office of the Attorney General

Revenue L itigation Bureau

P laza Level 1 , The Capitol

Tallahassee, Florida 32399

S TATEMENT OF T HE I SSUE

Whether Respondent Department of RevenueÔs (Department) January 27,

2020, Notice of Proposed Assessment to Petitioner B Century 21, Inc.

(B Century 21) is inco rrect.

P RELIMINARY S TATEMENT

In a letter dated August 20, 2019, the Department notified Baligh

Altheeb, owner of B Century 21, that it had initiated a sales and use tax

audit of B Century 21, pursuant to section 213.32, Florida Statutes (2019).

Upon the c ompletion of the sales and use tax audit, the Department, in a

letter dated January 27, 2020, issued a Notice of Proposed Assessment to

B Century 21, which assessed B Century 21 with additional sales tax,

penalty, and interest owed in the sum of $240,016. 00.

On May 21, 2020, B Century 21, through its Qualified Representative

Brett Isaac, timely submitted a Petition to the Department challenging the

Notice of Proposed Assessment. On September 2, 2020, the Department

issued an Order Dismissing Petition with Leave to Amend. Thereafter, on

September 25, 2020, B Century 21, through Mr. Isaac, submitted an

Amended Petition. On December 14, 2020, the Department referred the

Amended Petition to DOAH.

The undersigned originally noticed this matter for final hearin g on

February 16, 2021. On January 21, 2021, the Department filed a Motion to

Continue Final Hearing, which the undersigned granted. The undersigned

thereafter noticed this matter for final hearing on April 20, 2021.

On March 9, 2021, the Department file d a Motion for Order Declaring

Petitioner Admitted the DepartmentÔs First Request for Admissions and for

Other Relief. Receiving no response from B Century 21, the undersigned, on

March 17, 2021, entered an Order Granting Motion Declaring Matters

Admitted and Setting Discovery Deadline, which: (a) pursuant to Florida

Rule of Civil Procedure 1.370(b), ruled that those matters contained within

the DepartmentÔs First Request for Admissions were deemed admitted and

were, therefore, conclusively established; and (b) ordered B Century 21 to

fully respond to all outstanding discovery, which included the DepartmentÔs

First Set of Interrogatories and Request for Production of Documents, or to

show cause in writing as to why it was unable to do so, on or before 5:00 p .m.,

on March 29, 2021. The Order Granting Motion Declaring Matters Admitted

and Setting Discovery Deadline further warned that failure to fully respond

to outstanding discovery or show cause in a timely manner may result in an

order precluding B Century 2 1 from introducing such requested records at

the final hearing.

On April 7, 2021, Mr. Heekin appeared in this matter as B Century 21Ôs

counsel of record. On April 13, 2021, B Century 21 filed an Unopposed Motion

to Continue Final Hearing, which the unders igned granted. The undersigned

thereafter noticed this matter for final hearing on July 20, 2021.

On June 9, 2021, the Department filed a Motion for AttorneyÔs Fees

Pursuant to Sections 57.105 and 120.595, Florida Statutes.

The undersigned conducted a fi nal hearing on July 20, 2021. B Century 21

presented the testimony of Mr. Altheeb, and introduced no exhibits. 1 The

Department presented the testimony of: Ron Collier, the desk audit manager

with the Department; Beth Baker, a revenue program administrator over the

lead development process with the Department; and Elena Pitre, a tax

1 At the beginning of the final hearing, the undersigned questioned the parties concerning a

relatively large number of documents B Century 21 provided to DOAH shortly before the

final hearing, in light of B Century 21Ôs failure to timely respond to di scovery requests.

During this discussion, the parties noted that B Century 21 provided approximately 127

pages of documents to the Department, which are contained in Exhibit R8, on June 28 , 2021 .

The remaining documents, according to B Century 21, were pro vided to the Department

electronically, through a shared folder, over several dates between late June and July 7 ,

2021 . Counsel for the Department denied ever receiving these additional documents, or

receiving any notification that B Century 21 had shared these documents electronically.

Although the undersigned deferred ruling on the consideration of these additional documents

at the beginning of the hearing, B Century 21 ultimately did not offer them into evidence.

auditor with the Department. The undersigned admitted into evidence

RespondentÔs Exhibits R1 through R9.

At the conclusion of the final hearing, the parties jointly requested a 30 -

day time period after the filing of the t ranscript to submit their proposed

recommended orders. The two - volume Transcript was filed with the Division

on August 25, 2021. The Department timely filed a Proposed Recommended

Order , which the undersigned ha s considered in the preparation of this

Recommended Order . B Century 21 did not file a proposed recommended

order, a response to the DepartmentÔs Motion for AttorneyÔs Fees Pursuant to

Sections 57.105 and 120.595, Florida Statutes, or any post - hearing subm ittal.

All statutory references are to the 2019 codification of the Florida Statutes

unless otherwise indicated.

F INDINGS OF F ACT

Parties

1. The Department is the state agency responsible for administering

FloridaÔs sales and use tax laws, pursuant to ch apter 212, Florida Statutes.

2. B Century 21 is a Florida S - Corporation that operates two liquor stores

(AlÔs Liquor and Arlington Liquor), as well as a bar (Overtime Sports Bar), in

Jacksonville, Florida.

3. Mr. Altheeb is the sole owner of B Century 21 a nd testified that he is

solely responsible for the operation of it, including the two liquor stores and

bar. With respect to the operation of B Century 21, Mr. Altheeb testified, ÑI

do all the paperwork, all the books, all the taxes. I do all the orders.Ò

Matters Deemed Admitted and Conclusively Established 2

4. B Century 21 received correspondence from the Department, dated

August 20, 2019. That correspondence, from Ms. Pitre, stated, in part, ÑI will

be conducting an examination of your books and records as authorized under

Section 213.34, Florida Statutes. Ò

5. B Century 21 received the DepartmentÔs form DR840, Notice of Intent

to Audit Books and Records, dated August 20, 2019, including the Sales and

Use Tax Information Checklist. The form DR - 840 indicate d that the

Department intended to audit B Century 21 for a tax compliance audit for the

period of July 1, 2016, through June 30, 2019. The Sales and Use Tax

Information Checklist listed a number of categories of documents the

Department intended to review as part of this audit.

6. B Century 21 (through its accountant, power of attorney, and qualified

representative, Mr. Isaac) received the DepartmentÔs October 30, 2019,

correspondence, which referenced the ÑAudit Scope and Audit

Commencement,Ò and an attach ed Records Request list.

7. B Century 21 (through Mr. Isaac) received an email, dated October 30,

2019, from Ms. Pitre. That email references an attached Audit

Commencement Letter.

8. B Century 21 (through Mr. Isaac) received an email, dated

November 12, 2019, from Ms. Pitre, which inquire d of Ñthe status of the

records requested during the meeting with you and Mr. Altheeb on

October 29, 2019.Ò

9. B Century 21 (through Mr. Isaac) received the DepartmentÔs Notice of

Intent to Make Audit Changes, form DR - 12 15, dated December 16, 2019. The

form DR - 1215 reflects a total amount of tax of $170,232.93, a penalty of

$42,558.24, and interest through December 16, 2019, of $25,461.86, for a total

deficiency of $238,253.04. The form DR - 1215 also reflects that if B Cen tury

2 See Order Granting Motion Declaring Mat ters Admitted and Setting Discovery Deadline .

Fla. R. Civ. P. 1.370(b).

21 did not agree with these audit changes, or only agreed with a portion, that

it had until January 15, 2020, to request a conference o r submit a written

request for an extension. Further, the form DR - 1215 attached a Notice of

Taxpayer Rights, which i ncluded additional detail on the options available to

B Century 21.

10. B Century 21 (through Mr. Isaac) received correspondence from

Ms. Pitre, dated December 16, 2019, which stated that as of the date of the

correspondence, the Department had not receiv ed the information previously

requested on October 13, 2019, which it needed to complete the audit. The

correspondence stated that B Century 21 had 30 days to review the audit

changes, provided contact information to B Century 21 if it wished to discuss

th e findings in the form DR - 1215, and noted that if the Department did not

hear from B Century 21 within 30 days, it would send the audit file to the

DepartmentÔs headquarters in Tallahassee , Florida .

11. B Century 21 (through Mr. Isaac) received the Departm entÔs Notice of

Proposed Assessment, form DR - 831, dated January 27, 2020. The form DR -

831 reflects a total amount of tax of $170,232.93, a penalty of $42,558.24, and

interest through January 27, 2020, of $27,224.82, for a total deficiency of

$240,016.00.

1 2. For the time period between August 20, 2019, and January 7, 2021,

B Century 21 did not provide the Department with: (a) any sales records;

(b) any purchase records; or (c) any federal tax returns.

13. For the time period between August 20, 2019, and J anuary 7, 2021,

B Century 21 did not provide any records to the Department for examination

in conducting the audit.

Additional Facts

14. In 2011, for the purpose of enforcing the collection of sales tax on retail

sales, the Florida Legislature enacted sec tion 212.133, Florida Statutes,

which requires every wholesale seller (wholesaler) of alcoholic beverage and

tobacco products (ABT) to annually file information reports of its product

sales to any retailer in Florida. See § 212.133(1)(a) and (b), Fla. Stat .

15. Once a year, ABT wholesalers report to the S tate of Florida their

name, beverage license or tobacco permit number, along with each Florida

retailer with which they do business, the Florida retailerÔs name, retailerÔs

beverage license or tobacco permi t number, retailerÔs address, the general

item s sold, and sales per month. See § 212.133(3), Fla. Stat. The information

collected captures the 12 - month period between July 1 and June 30, and is

due annually, on July 1, for the preceding 12 - month period. Id .

16. ABT w holesalers file these reports electronically through the

DepartmentÔs efiling website and secure file transfer protocol established

through the DepartmentÔs efiling provider. £ 212.133(2)(a), Fla. Stat.

17. Ms. Baker explained this statutory pro cess further:

[W]e annually, every year in the month of May, my

unit reaches out to the Florida Department of

Business and Professional Regulations. We compel

them to give us a list of all of the active wholesalers

who were licensed to sell to retailers i n the state of

Florida for the prior fiscal year. Once we receive

that list, we then mail a notification to all those

wholesalers and state the statute and the

requirements and give them a user name and a

password that will allow them to then log into that

portal and submit their retail Ð their wholesale Ð or

their wholesale sales to retailers in the state of

Florida for the prior fiscal year.

Those reports are due on July 1st of each year, but

they are not considered late until September 30th

of that year. So that gives the wholesaler

population a couple of months to compile all of their

sales for the prior year, fill out their reports and

submit them to the Florida Department of Revenue

by the end of September.

18. Additionally, each month, and for each reta il location, B Century 21

reports gross monthly sales to the Department, and remits sales tax, utilizing

the DepartmentÔs fo rm DR - 15.

19. Ms. Baker further described the process the Department utilizes in

identifying an Ñaudit lead,Ò utilizing the data tha t ABT wholesales provide:

Specifically for ABT, we have a very, actually, kind

of simple comparison that we do. . . . [A]s a

taxpayer, as a retailer in the state of Florida, you

may purchase from multiple wholesalers.

So, part of our job is we compile al l of the purchases

that each beverage license or tobacco license has

purchased, and once we compile all the purchases

for the fiscal year, then to say, you know, what

were the purchases for the fiscal year versus what

were the reported sales for the fiscal year.

And, again, a pretty simple comparison we really

look to see, did you purchase, or . . . did you report

enough sales to cover the amount of purchases that

we know you made as a Ï as a retailer. And if the

sales amount does not exceed the purchase amount,

then weÔll create a lead on it.

20. The DepartmentÔs efiling provider exports the ABT wholesalersÔ

information to SunVisn, the DepartmentÔs database. The DepartmentÔs

analysts review the ABT wholesaler sÔ reported data, and taxpayer

information, to identify audit leads. The Department then assigns these audit

leads to its service centers to conduct an audit.

21. A tax audit period is 36 months. In conducting ABT audits, the

Department has 24 months of reported data ( i.e., the first 24 months of the

audit period) for review. This is because the timing of section 212.133(3)

requires ABT wholesalers to report annually on July 1, for the preceding 12 -

month period of July 1 through June 30.

22. For the ABT reporting data examination period of July 1, 2016 ,

through June 30, 2018 (a period of 24 months), B Century 21Ôs gross sales for

its two liquor stores was as follows:

Liquor Store Reported Gross Sales

AlÔs Liquor $1,051,128.56

Arlington Liquor $902,195.49

23. For the same 24 - month time period of Jul y 1, 2016, to June 30, 2018,

B Century 21Ôs wholesalers reported the following ABT inventory purchases

to the State, as required under section 212.133:

Liquor Store ABT Inventory Purchases

AlÔs Liquor $1,250,055.79

Arlington Liquor $1,174,877.98

24. As the ABT wholesalersÔ reported ABT inventory purchases by

B Century 21Ôs retail outlets were higher than B Century 21Ôs reported sales,

the Department issued an audit lead, which led to the audit that is at issue in

this proceeding.

The Audit

25. For th e 36 - month audit period of July 1, 2016, through June 30, 2019

(audit period), B Century 21Ôs reported gross sales for each of its locations

was:

Location Reported Gross Sales

AlÔs Liquor $1,557,569.74

Arlington Liquor $1,434,551.65

Overtime Sports Bar $968,476.08

26. On August 20, 2019, Ms. Pitre mailed to B Century 21 (and received

by Mr. Altheeb), a Notice of Intent to Audit Books and Records for the a u dit

period. Included with the Notice of Intent to Audit Books and Records was

correspondence infor ming B Century 21 of the audit and requesting records.

27. On August 26, 2019, Ms. Pitre received a telephone call from

Mr. Altheeb. Ms. PitreÔs case activity notes for this call state:

Received a call from Baligh Altheeb and he said he

will be hiring Br ett Isaac as his POA [power of

attorney]. I informed him to complete the POA form

and to give it to Mr. Isaac for signature and send to

me. He knows about ABT Data assessments and

asked that I note on the case activity that he

contacted me regarding the au dit. He was worried

that his liquor license will be suspended if he does

not respond right away. I informed him that once I

receive the POA, I will contact Mr. Isaac and

discuss the audit.

28. On October 18, 2019, the Department received B Century 21Ôs

ex ecuted power of attorney (POA) form naming Mr. Isaac as its POA for the

audit. The executed POA form reflects that the DepartmentÔs notices and

written communications should be sent solely to Mr. Isaac, and not

B Century 21. The executed POA form further reflects that Ñ[r]eceipt by

either the representative or the taxpayer will be considered receipt by both.Ò

29. On October 29, 2019, Ms. Pitre met with Mr. Altheeb and Mr. Isaac at

Mr. IsaacÔs office, for a pre - audit interview. Ms. PitreÔs case activity not es for

this meeting state:

Met with the taxpayer contact person, POA Brett

Isaac and owner Baligh Thaleeb [sic], at the POAÔs

location to conduct the pre - audit interview.

Discussed the scope of the audit, records needed to

conduct the audit, availability of electronic records,

business organization, nature of the business,

internal controls, and the time line of the audit.

Discussed sampling for purchases and POA signed

sampling agreement. Made appointment to review

records on November 12, 2019.

Toured on e of the location [sic] to observe business

operations, Overtime Sports Bar.

30. On October 30, 2019, Ms. Pitre emailed Mr. Isaac a copy of the Notice

of Intent to Audit Books and Records, which included a ÑSales and Use Tax

Information Checklist,Ò which requested specific taxpayer records.

31. After receiving no response from Mr. Isaac, Ms. Pitre, on

November 12, 2019, emailed Mr. Isaac concerning Ñthe status of the records

requested during the meeting with you and Mr. Altheeb on October 29, 2019.Ò

32. S ection 212.12(5)(b ) provides that when a taxpayer fails to provide

records Ñso that no audit or examination has been made of the books and

records ofÒ the taxpayer:

[I]t shall be the duty of the department to make an

assessment from an estimate based upon the best

information then available to it for the taxable

period of retail sales of such dealer È or of the

sales or cost price of all services the sale or use of

which is taxable under this chapter, together with

interest, plus penalty, if such have accr ued, as the

case may be. Then the department shall proceed to

collect such taxes, interest, and penalty on the

basis of such assessment which shall be considered

prima facie correct, and the burden to show the

contrary shall rest upon the [taxpayer].

33. Section 212.12(6)(b) further provides:

[I]f a dealer does not have adequate records of his

or her retail sales or purchases, the department

may, upon the basis of a test or sampling of the

dealerÔs available records or other information

relating to the sa les or purchases made by such

dealer for a representative period, determine the

proportion that taxable retail sales bear to total

retail sales or the proportion that taxable

purchases bear to total purchases.

34. Mr. Collier testified that, in the absenc e of adequate records, the

Department Ñestimates using best available information, and for this

industry È ABT sales are a higher percentage of their taxable sales.Ò

35. Because B Century 21 did not provide adequate records to Ms. Pitre,

she estimated the total taxable sales for the audit period. For each liquor

store that B Century 21 operated, she multiplied its total ABT purchases by

average markups to calculate total ABT sales. To derive these average

markups, Mr. Collier explained that the Department r eceives data from

wholesalers, and then:

[W]e take that purchase information, apply average

markup to the different ABT product categories,

which include cigarettes, other tobacco, beer, wine,

and liquor; and then that gets us to total ABT sales

number. A nd then we derive what we call a

percentage of ABT sales, percentage of that number

represents.

And in this particular model, 95.66 percent

represents what we believe in a liquor store

industry, that this type of business, that 95.66

percent of their sale s are ABT products. We derive

the markups, and the percentage of ABT sales from

a number of liquor store audits that the

Department had performed on liquor stores that

provided records.

36. The Department utilized markup data from other ABT audits. The

De partment applied the following markups to these ABT categories: 6.5

percent for cigarettes; 47.5 percent for other tobacco products; 17.33 percent

for beer; 29.84 percent for wine; and 24.5 percent for liquor.

37. Applying the DepartmentÔs markup for liquo r stores to the

wholesalersÔ reported ABT data and percentage of taxable sales, Ms. Pitre

estimated taxable sales for the ABT reporting data examination period and

calculated the under - reported sales error ratio as follows:

Location Estimated Taxable Error Ratio

Sale s

AlÔs Liquor $1,597.544.01 1.519837

Arlington Liquor $1,516,259.34 1.680633

38. The Department then divided B Century 21Ôs estimated taxable sales

for the examination period, for each liquor store, by its self - reported tax sales

in its DR - 15s to arrive at the under - reported rate. The Department then

multiplied the under - reported rate by the reported taxable monthly sales in

the DR - 15s to arrive at the estimated taxable sales for the 36 - month audit

period. The result of this calculation was:

Location Estimated Taxable Sales

AlÔs Liquor $2,367,252.11

Arlington Liquor $2,410,954.82

39. The Department then multiplied the estimated taxable sales by an

effective estimated tax rate which, after giving credit for B Century 21Ôs

remitted sales t ax, resulted in tax due for the AlÔs Liquor and Arlington

Liquor for the audit period, as follows:

Location Sales Tax Owed

AlÔs Liquor $58,367.01

Arlington Liquor $70,068.44

40. For Overtime Sports Bar, the Department could not use ABT

wholesalersÔ da ta to estimate an assessment because the Department does

not have audit data averages for bars and lounges. The Department used the

ÑTax Due MethodÒ in estimating under - reported taxes and calculating under -

reported taxable sales. Mr. Collier explained:

Th e Department does not have average markup

and percentage of sales for a bar. Though, you

know, obviously, we all know that a bar, their main

product that they sell and in most cases is ABT

products.

So, therefore, typically, an auditor would need to

get i nformation about that specific location. Bars

can vary so much in their type of business that they

do, they can be like nightclubs, or they can be like

bar and grill that serves a lot of food.

So thereÔs a lot of variances there for that

particular type o f industry, so we havenÔt really

come up with average markups, average

percentage of sales for bars, per se. ItÔs a case - by -

case situation, and in this case, the auditor decided

that the fair, reasonable way to estimate the bar

location would be to just av erage the error ratios

that were derived from the AlÔs Liquor and the

other liquor store location and apply it to the

taxable sales reported for the bar. And I think

thatÔs a very fair and reasonable estimate based on

what we all know in a bar situation; t heir markups

are significantly higher.

And of course, there can be plenty of other non - ABT

taxable sales occurring in a bar setting, such as

prepared food, you know, just your regular cokes

and drinks. So itÔs certainly a fair way to estimate

in this part icular audit and I believe only benefits

the taxpayer.

41. The undersigned credits the DepartmentÔs methodology for estimating

an assessment for Overtime Sports Bar. Further, Mr. Altheeb testified that

Overtime Sports Bar operates as both a sports bar and a liquor/package

store, and stated:

Most of it Ð itÔs a liquor store. I donÔt know if you

know the area, itÔs a liquor store on the Westside.

So most of it Ð the sport bar doesnÔt really do too

much business in the Westside, mostly the liquor

stores. People coming in and buy package, you

know, buy bottles and leave. So, most of the

business is the drive - through window.

The DepartmentÔs decision to average the error ratios for the other two liquor

stores to derive the additional tax due average for Overtime S ports Bar is

reasonable, particularly in light of Mr. AltheebÔs testimony that Overtime

Sports Bar operates primarily as a liquor (package) store.

42. The Department calculated the additional tax due average error ratio

for Overtime Sports Bar by averaging the error ratios of AlÔs Liquor and

Arlington Liquor, and then multiplied it by B Century 21Ôs reported gross

sales to arrive at the additional tax due for Overtime Sports Bar of

$41,797.49.

43. Ms. Pitre testified that she determined that, for the audit period,

B Century 21 owed additional sales tax of $170,232.93. In addition, the

Department imposed a penalty and accrued interest.

44. On December 16, 2019, Ms. Pitre sent correspondence, the preliminary

assessment, and a copy of the audit work papers to B Century 21 (through

Mr. Isaac), informing B Century 21 that it had 30 days to contact the

DepartmentÔs tax audit supervisor to request an audit conference or submit a

written request for an extension. After receiving no response from B Century

21, Ms. Pi tre forwarded the audit workpapers to the DepartmentÔs

headquarters in Tallahassee , Florida , to process the Notice of Proposed

Assessment.

B Century 21Ôs Position

45. As mentioned previously, and after initially meeting with the

Department, B Century 21 fa iled to provide requested financial records or

respond to any of the numerous letters and notices received from the

Department, despite being given adequate opportunity to do so. And, after

filing its Amended Petition, it failed to timely respond to discov ery requests

from the Department which, inter alia , resulted in numerous matters being

conclusively established.

46. Mr. Isaac served as the POA for B Century 21 during the audit, and

also appeared in this proceeding as a qualified representative. However,

Mr. Isaac did not appear at the final hearing, did not testify as a witness at

the final hearing, and does not appear to have done anything for B Century

21 in this proceeding, other than filing the Petition and Amended Petition.

47. After Mr. Heekin app eared in this matter, and well after the time to

respond to discovery, B Century 21 provided 127 pages of documents to the

Department. These documents consist of: 18 pages of summaries of daily

sales that Mr. Altheeb prepared for the hearing; 41 pages of s ales and use tax

returns from B Century 21 locations, covering 25 months (DR - 15s); 2 pages of

HarbortouchÔs 2016 1099K, reporting credit card sales; 43 pages of unsigned

federal tax returns from 2016, 2017, and 2018, prepared by Mr. Isaac; and 17

pages of B Century 21Ôs untimely responses to the DepartmentÔs discovery

requests.

48. Florida Administrative Code Rule 12 - 3.0012(3) defines Ñadequate

recordsÒ to include:

(3) ÑAdequate recordsÒ means books, accounts, and

other records sufficient to permit a relia ble

determination of a tax deficiency or overpayment.

Incomplete records can be determined to be

inadequate.

(a) To be sufficient to make a reliable

determination, adequate records, including

supporting documentation, must be:

1. Accurate, that is, the r ecords must be free from

material error;

2. Inclusive, that is, the records must capture

transactions that are needed to determine a tax

deficiency or overpayment;

3. Authentic, that is, the records must be worthy of

acceptance as based on fact; and

4. Systematic, that is, the records must organize

transactions in an orderly manner.

(b) The nature of the taxpayerÔs business, the

nature of the industry, materiality, third - party

confirmations and other corroborating evidence

such as related supporting doc umentation, and the

audit methods that are suitable for use in the

audit, will be used to establish that the taxpayer

has adequate records.

49. The undersigned finds that the summaries of daily sales are not

adequate records because Mr. Altheeb prepared t hem for use at the final

hearing, rather than in the regular course of business.

50. The undersigned finds that the DR - 15s provided by Mr. Altheeb,

covering 25 months, are not adequate records because they are incomplete

and are not inclusive. The audit p eriod encompassed 36 months, for

B Century 21Ôs three retail locations; however, Mr. Altheeb only provided 25

months of DR - 15s.

51. The 2016, 2017, and 2018 federal tax returns that B Century 21

provided are not adequate records because they are not authe ntic.

Mr. Altheeb was unable to verify if these tax returns were correct, and they

were unsigned. B Century 21 did not provide any evidence that it had filed

any of these federal tax returns with the Internal Revenue Service.

52. Ms. Pitre reviewed the 12 7 pages of documents that B Century 21

provided and testified that the summaries of daily sales did not provide the

Ñsource documentsÒ for verification.

53. The unsigned federal tax returns reflect that B Century 21 reported a

cost - of - goods - sold (COGS) of $518,606 .00 for 2016 ; $1,246,839 .00 for 2017 ;

and $796,968 .00 for 2 0 1 8. Additionally, the unsigned federal tax returns

reflect that B Century 21 reported a beginning inventory (BI) for 2016 of

$95,847 .00 , and a year - end inventory (EI) for 2016 of $200,556 .00 , EI for

2017 of $280,235 .00 , and EI for 2018 of $295,628 .00 .

54. When comparing the unsigned federal tax returns with the ABT

wholesaler sÔ data, the federal tax returns reflect, for 2016, total inventory

purchases of $623,315 .00 (which is derived from $518,606 .00 (COGS)

$200,556 .00 (EI) - $95,847 .00 (BI)). However, the ABT wholesaler sÔ data for

2016 reflects that B Century 21Ôs ABT purchases were $1,174,997.34 Ï a

discrepancy of more than $500,000. 00.

55. For 2017, the federal tax returns reflect tota l inventory purchases of

$1,326,518 .00 (which is derived from $1,246,839 .00 (COGS) $280,235 .00

(EI) for 2017 - $200,5 56 .00 (EI) for 2016 ). However, the ABT wholesaler sÔ

data for 2016 reflects that B Century 21Ôs ABT purchases were $1,422,854 . 79

Ï a discr epancy of over $96,000 .00 .

56. And for 2018, the unsigned federal tax returns reflect total inventory

purchases of $812,361 .00 (which is derived from $796,968 .00 (COGS)

$295,628 .00 (EI) for 2018 - $280,235 .00 (BI) for 2017 ). However, the ABT

wholesaler sÔ data for 2018 reflects that B Century 21Ôs ABT purchases were

$1,335,814 .00 Ï a discrepancy of over $500,000. 00.

57. Mr. Altheeb testified that Arlington Liquor and Overtime Sports Bar

opened in 2016 Ï after B Century 21 began ownership and operation of A lÔs

Liquor. He stated that he did not purchase inventory for the openings of the

newer locations, but instead transferred excess inventory from AlÔs Liquor,

which resulted in lower total inventory purchases for 2016.

58. Mr. Altheeb also testified that B C entury 21Ôs three locations

experienced spoiled inventory. However, B Century 21 should include spoiled

inventory in COGS reported in its federal tax returns, and further, B Century

21 provided no additional evidence of the cost of spoilage for the audit p eriod.

59. The undersigned finds that the ABT wholesaler sÔ data for 2016

through 2018 reflects similar amounts for inventory purchases between 2016

through 2018. The undersigned credits the DepartmentÔs reliance on the ABT

wholesaler sÔ data, which reflect fairly consistent purchases for each year. The

undersigned does not find the unsigned federal tax returns that B Century 21

provided to be persuasive evidence that the DepartmentÔs assessment was

incorrect.

60. Mr. Altheeb testified that he believed Mr. Is aac, who B Century 21

designated as POA for the audit, and who appears as a qualified

representative in this proceeding, was actively handling the audit.

Mr. Altheeb stated that the audit, and the final hearing, Ñkind of came out of

nowhereÒ and that once he learned of it, he retained Mr. Heekin and provided

ÑeverythingÒ to him.

61. However, it is conclusively established that the Department provided

correspondence and notice to B Century 21 through its designated POA, and

that B Century 21 failed to respo nd to record requests in a timely manner.

Mr. Isaac neither testified nor appeared at the final hearing to corroborate

Mr. AltheebÔs claims that Mr. Isaac did not keep Mr. Altheeb or B Century 21

apprised of the status of the audit, including the failure t o provide requested

records or to communicate with the Department.

62. B Century 21 also attempted to challenge the DepartmentÔs use of

markup data from other ABT audits, in an attempt to argue that the

markups were inflated and not representative of B Cen tury 21Ôs markups.

However, and as previously found, B Century 21Ôs failure to timely provide

records Ð or respond in any meaningful way to the audit Ð undermines this

attempt. The undersigned credits the DepartmentÔs methodology in using the

best information available to it for the audit period in calculating the

assessment.

63. Although it became apparent during the final hearing that

Mr. Altheeb did not treat the audit of B Century 21 with appropriate

seriousness, and deflected blame to Mr. Isaac, and that his approach resulted

in a legally appropriate and sustainable audit and assessment based on the

DepartmentÔs best information available, the undersigned does not find that

B Century 21, Mr. Isaac, or Mr. Heekin knew that the allegations of the

Amended Pe tition were not supported by the material facts necessary to

establish the claim or defense, or would not be supported by the application of

then - existing law to those material facts.

64. The undersigned finds that the Department made its assessment

based on the best information then available, and is thus prima facie correct,

pursuant to section 212.12(5)(b).

65. The undersigned further finds that B Century 21 did not prove, by a

preponderance of the evidence, that the DepartmentÔs assessment is

incorrect , pursuant to section 212.12(5)(b).

C ONCLUSIONS OF L AW

66. The Division has jurisdiction over the subject matter and the parties

to this proceeding in accordance with sections 120.569, 120.57(1) and

120.80(14)(b ) .

67. Section 212.12(5)(b) provides that wh en a taxpayer fails to provide

records Ñso that no audit or examination has been made of the books and

records ofÒ the taxpayer, the Department has a duty to make an assessment

based on the best information then available to it. Section 212.12(5)(b)

furthe r provides that such an assessment Ñshall be considered prima facie

correct, and the burden to show the contrary shall rest upon the [taxpayer].Ò

See also A&S Entertainment, LLC v. DepÔt of Rev. , 282 So. 3d 905, 909 (Fla.

3d DCA 2019).

68. As the Departmen tÔs assessment in his matter is prima facie correct

pursuant to section 212.12(5)(b), B Century 21 has the burden to prove, by a

preponderance of the evidence, that the assessment is incorrect. See

§ 120.57(1)(j), Fla. Stat.; A&S Entertainment, 282 So. 3d at 909; IPC Sports,

Inc. v. DepÔt of Revenue , 829 So. 2d 330, 332 (Fla. 3d DCA 2002).

Preponderance of the evidence is described as Ñthe greater weight of the

evidenceÒ and Ñevidence that more likely than not tends to prove a certain

proposition.Ò S. Fla. Water Mgmt. Dist. v. RLI Live Oak, LLC, 139 So. 3d 869,

872 (Fla. 2014)(internal quotations omitted).

69. Section 212.05 states, in part:

It is hereby declared to be the legislative intent

that every person is exercising a taxable privilege

who engages i n the business of selling tangible

personal property at retai l in this state, including

the business of making mail order sales, or who

rents or furnishes things or services taxable under

this chapter, or who stores for use or consumption

in this state any item or article of tangible personal

property as defined herein and who leases or rents

such property within the state.

(1) For the exercise of such privilege, a tax is levied

on each taxable transaction or incident, which tax

is due and payable as follo ws:

(a)1.a. At the rate of 6 percent of the sales price of

each item or article of tangible personal property

when sold at retai l in this state, computed on each

taxable sale for the purpose of remitting the

amount of tax due the state, and including each

and every retail sale.

70. Section 212.02(15) defines ÑsaleÒ to include Ñ[a]ny transfer of title or

possession, or both, exchange, barter, license, lease, or rental, conditional or

otherwise, in any manner or by any means whatsoever, of tangible personal

property for a consideration.Ò

71. Section 212.02(19) defines Ñtangible personal property,Ò as follows:

ÑTangible personal propertyÒ means and includes

personal property which may be seen, weighed,

measured, or touched or is in any manner

perceptible to the senses, including electric power

or energy, boats, motor vehicles and mobile homes

as defined in s. 320.01(1) and (2), aircraft as

defined in s. 330.27, and all other types of vehicles.

The term Ñtangible personal propertyÒ does not

include stocks, bon ds, notes, insurance, or other

obligations or securities or pari - mutuel tickets sold

or issued under the racing laws of the state.

72. Sales tax is imposed at the rate of six percent, plus the discretionary

sales surtax, when applicable. Sales tax is levi ed when items are sold at

retail and is computed on each taxable sale for the purpose of remitting the

amount of tax due to the s tate. See §§ 212.05(1)(a)1.a. and 212.054, Fla. Stat.

Collected taxes are due to the Department on the first day of the succeed ing

month and are delinquent on the 21st day of the succeeding month. See

§§ 212.06(1)(a), 212.11(1)(b), and 212.13(1), Fla. Stat; Fla. Admin. Code

R. 12A - 1.056.

73. Section 212.12(2)(b) provides:

When any person required under this section to

make a re turn or to pay a tax of fee imposed by this

chapter fails to disclose the tax or fee on the return

within the time required È a specific penalty shall

be added to the additional tax or fee owed in the

amount of 10 percent of any such unpaid tax or fee

not paid timely if the failure is for not more than 30

days, with an additional 10 percent of any such

unpaid tax or fee for each additional 30 days, or

fraction thereof, while the failure continues, not to

exceed a total penalty of 50 percent, in the

aggregat e, of any unpaid tax or fee.

In this matter, the Department reduced the penalty to 25 percent of the tax

assessed.

74. In addition to the penalty the Department shall add interest to the

payment deficiencies. See § 212.12(5)(b) and 213.235, Fla. Stat.

75. Section 212.06(2)(c) defines ÑdealerÒ to include Ñevery person È who

sells at retail or who offers for sale at retail, or who has in his or her

possession for sale at retail; or for use, consumption, or distribution; or for

storage to be used or consumed in this state, tangible personal property as

defined herein, including a retailer who transacts a mail order sale.Ò

76. The Department is authorized to inspect the records and accounts of

all dealers that are subject to FloridaÔs revenue laws imposed under

chapter 212, and to request information to ascertain a dealerÔs tax liability, if

any. If an audit deficiency exists, the Department is authorized to make an

assessment and collect it. §§ 20.21, 212.12(5)(a), 212.13, 213.05, and 213.34,

Fla. Stat.

77. Th e Department is authorized to prescribe the records to be kept by all

dealers that are subject to sales and use tax. Dealers are required to keep

suitable books and records of all sales and other records needed to determine

the amount of tax due. All such books and records must be open to

examination at reasonable hours to the Department. § 212.12(6)(a), 212.13,

and 213.35, Fla. Stat. ÑOnly records, receipts, invoices, resale certificates, and

related documentation which are available to the auditor when su ch audit

begins shall be deemed acceptable for the purposes of conducting such audit.Ò

§ 212.13(5)(c), Fla. Stat.

78. Section 212.13(2) requires all ÑdealersÒ to maintain a Ñcomplete record

of tangible personal property or services received, used, sold at retail,

distributed or stored, leased or rented by said dealer, together with invoices,

bills of lading, gross receipts from such sales and other pertinent records and

papers as may be required by the department for the reasonable

administration of this ch apter È.Ò

79. Rule 12 - 3.0012(3) defines Ñadequate recordsÒ to include books,

accounts, and other records Ñsufficient to permit a reliable determination of a

tax deficiency or overpayment.Ò Rule 12 - 3.0012(3) further provides that

adequate records must be ac curate, authentic, and systematic, and must

include reliable supporting documentation.

80. For the audit period, B Century 21 was a Ñdealer,Ò and was therefore

required to collect and remit sales tax to the s tate. As a Ñdealer,Ò B Century

21 was required t o maintain suitable books and records of its sales.

81. Based on the competent, substantial evidence adduced at the final

hearing, B Century 21 failed to timely provide the DepartmentÔs auditor with

any records, and shortly before the final hearing, produc ed some documents

that were not Ñadequate records.Ò

82. B Century 21 received numerous communications, including

correspondence and notices, from the Department about the audit.

Mr. Altheeb and Mr. Isaac met with Ms. Pitre after receiving the August 20,

2 019, Notice of Intent to Audit Books and Records. B Century 21 executed a

POA form naming Mr. Isaac as its POA and instructing the Department to

send all further notices and written communications solely to Mr. Isaac, and

not B Century 21. The executed POA form further reflects that Ñ[r]eceipt by

either the representative or the taxpayer will be considered receipt by both.Ò

ÑGenerally, powers of attorney are strictly construed and will be closely

examined in order to ascertain the intent of the principal.Ò DeBueno v.

Castro, 543 So. 2d 393, 394 (Fla. 4th DCA 1989). The executed POA form

clearly appointed Mr. Isaac and clearly directed the Department to provide

all communications to Mr. Isaac. Based on the competent, substantial

evidence adduced at the final hearing, the Department complied with the

executed POA form, and Mr. AltheebÔs contention that B Century 21 was not

aware of the audit was not credible.

83. The Legislature enacted section 212.133 Ñfor the sole purpose of

enforcing the collection of the ta x levied by this chapterÒ on retail ABT sales.

See § 212.133(1)(a), Fla. Stat. As B Century 21 failed to provide the

Department with any records, the Department estimated the assessment on

the best information available to it Ï which was B Century 21Ôs ABT

wholesaler reported data of reported purchases, together with the

DepartmentÔs historical data of average markup rates and percentage of

taxable sales from the audits of similar Florida dealers. The undersigned

concludes, consistent with section 212.12(5) (b), that the assessment was

prima facie correct.

84. Based on the competent, substantial evidence adduced at the final

hearing, B Century 21 failed to show, by a preponderance of the evidence,

that the DepartmentÔs assessment was incorrect.

R ECOMMENDATIO N

Based upon the foregoing Findings of Fact and Conclusions of Law, the

undersigned hereby R ECOMMEND S that the Department enter a final order

sustaining the January 27, 2020, Notice of Proposed Assessment to

B Century 21, Inc.

D ONE A ND E NTERED this 2 1s t day of October, 2021 , in Tallahassee, Leon

County, Florida.

S

R OBERT J. T ELFER III

Administrative Law Judge

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrativ e Hearings

this 2 1s t day of October, 2021 .

C OPIES F URNISHED :

Mark S. Hamilton, General Counsel Franklin David Sandrea - Rivero, Esquire

Department of Revenue Office of the Attorney General

Post Office Box 6668 P l aza Level 1, The Capitol

Tallahassee, Florida 32314 - 6668 Tallahassee, Florida 32399

Randi Ellen Dincher, Esquire Brett J. Isaac

Office of the Attorney General 2151 University Boulevard South

Revenue Litigation Bu reau Jacksonville, Florida 32216

P laza Level 1 , The Capitol

Tallahassee, Florida 32399 James A Zingale, Executive Director

Department of Revenue

Robert Andrew Heekin, Esquire Post Office Box 6668

The Law Office of Rob Heekin, Jr., P.A. Tallahassee, Florida 32314 - 6668

2223 Atlantic Boulevard

Jacksonville, Florida 32207

N OTICE O F R IGHT T O S UBMIT E XCEPTIONS

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

ca se.