94-001200 Gainesville Amateur Radio Society, Inc. vs. Department Of Revenue Status: Closed Recommended Order on Friday, June 23, 1995.

Summary: Applicant did not qualify as scientific organization for sales tax exemption purposes.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

GAINESVILLE AMATEUR RADIO )

SOCIETY, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 94-1200

)

DEPARTMENT OF REVENUE, )

)

Respondent. )

__________________________)

RECOMMENDED ORDER

Pursuant to notice, the above matter was heard before the Division of

Administrative Hearings by its assigned Hearing Officer, Donald R. Alexander, on

March 13, 1995, in Gainesville, Florida, and by telephone on March 17, 1995.

APPEARANCES

For Petitioner: Sidney Schmukler, Esquire

3922 Northwest 20th Lane

Gainesville, Florida 32605-3565

For Respondent: Olivia P. Klein, Esquire

Department of Legal Affairs

The Capitol-Tax Section

Tallahassee, Florida 32399-1050

STATEMENT OF THE ISSUE

The issue is whether petitioner qualifies for a consumer's certificate of

exemption as a scientific organization within the meaning of Section

212.08(7)(o)2.c., Florida Statutes.

PRELIMINARY STATEMENT

This matter began on December 21, 1993, when petitioner, Gainesville

Amateur Radio Society, Inc., filed an application as a charitable organization

for a consumer's certificate of exemption with respondent, Department of

Revenue. If approved, petitioner would be able to make tax exempt purchases

that would otherwise be taxable under Chapter 212, Florida Statutes. On

February 3, 1994, the application was denied on the ground petitioner did not

qualify as a "charitable organization" within the meaning of the law.

Thereafter, petitioner filed a petition seeking to contest the denial of its

application.

The matter was referred by respondent to the Division of Administrative

Hearings on March 3, 1994, with a request that a hearing officer be assigned to

conduct a formal hearing. By notice of hearing dated March 17, 1994, a final

hearing was scheduled on July 14, 1994, in Gainesville, Florida. At the

parties' request, the matter was rescheduled to February 7, 1995, and then again

to March 13, 1995, at the same location. A continued hearing was conducted by

telephone on March 17, 1995.

On April 18, 1994, petitioner filed an amended petition along with a second

application for a consumer's certificate of exemption, this time on the theory

that it was a scientific organization. Leave to file the amended petition was

granted on May 3, 1994.

At final hearing, petitioner presented the testimony of Dr. Leon W. Couch,

II, George S. C. Barnes, Edward A. Slimak, Dr. Gary T. Gossinger, and Harold R.

Blalack, all members of the organization. Also, it offered petitioner's

exhibits 1-4. All exhibits were received in evidence. Respondent presented the

testimony of Dr. Gary T. Gossinger, Daniel M. Wagner, Jr., a Department sales

tax exemption examiner, and Sharon W. Bradley, an Internal Revenue Service tax

technician. Also, it offered respondent's exhibits 1 and 2. Both exhibits were

received in evidence. Finally, the parties stipulated into evidence joint

exhibits 1-3.

The transcript of hearing (two volumes) was filed on May 3, 1995, and

respondent's exhibit 2 was late-filed on June 20, 1995. Proposed findings of

fact and conclusions of law were filed by petitioner and respondent on May 23

and June 1, 1995, respectively. A ruling on each proposed finding has been made

in the Appendix attached to this Recommended Order.

FINDINGS OF FACT

Based upon all of the evidence, the following findings of fact are

determined:

A. Background

1. Petitioner, Gainesville Amateur Radio Society, Inc. (GARS or

petitioner), a Florida non-profit corporation, was incorporated on December 31,

1975. Its stated purpose is to promote an interest in amateur radio operation.

Among other things, GARS provides preparation for Federal Communication

Commission licensing examinations, supports community activities with free

communication services, and encourages public awareness of ham radio activities

through the publication of a monthly newsletter called the GARS-MOUTH.

2. Respondent, Department of Revenue (DOR), is charged with the

responsibility of administering and implementing the Florida Revenue Act of

1949, as amended. It has the specific task of collecting sales taxes and

enforcing the state tax code and rules.

3. By law, certain transactions are exempt from the state sales and use

tax. Among these are sales or lease transactions involving "scientific

organizations." In order for an organization to be entitled to an exemption, it

must make application with DOR for a consumer's certificate of exemption and

demonstrate that it is a qualified scientific organization within the meaning of

the law. Once the application is approved, the certificate entitles the holder

to make tax exempt purchases that are otherwise taxable under Chapter 212,

Florida Statutes. In the case of petitioner, a certificate would enable it to

save a hundred or so dollars per year.

4. Claiming that it was entitled to a certificate of exemption as a

charitable organization, GARS filed an application with DOR on December 21,

1993. After having the application preliminarily disapproved by DOR on the

ground it did not expend "in excess of 50.0 percent of the . . . organization's

expenditures toward referenced charitable concerns, within (its) most recent

fiscal year," a requirement imposed by DOR rule, GARS then amended its

application to claim entitlement on the theory that it was a scientific

organization. Although DOR never formally reviewed the amended application, it

takes the position that GARS still does not qualify for a certificate under this

new theory.

B. Is GARS a Scientific Organization?

5. Under Section 212.08(7)(o)2.c., Florida Statutes, a scientific

organization is defined in relevant part as an organization which holds a

current exemption from the federal income tax under section 501(c)(3) of the

Internal Revenue Code. A DOR rule tracks this statute almost verbatim.

Accordingly, as a matter of practice, in interpreting this statutory exemption,

DOR simply defers to the final determination of the Internal Revenue Service

(IRS). If the IRS grants an organization a 501(c)(3) status based on the

determination that it is a scientific organization, then DOR accepts this

determination at face value. DOR does not make an independent determination

whether the organization is "scientific" or question the decision of the IRS.

This statutory interpretation is a reasonable one and was not shown to be

erroneous or impermissible.

6. GARS received a federal income tax exemption from the IRS regional

office in Atlanta, Georgia by letter dated August 12, 1993. The record shows

that GARS was granted an "exempt organization" status as a "charitable

organization" and as an "educational organization" under Treasury Regulation

Section 1.501(c)(3). However, GARS did not receive an exempt status as a

"scientific organization" nor did the IRS make that determination. Therefore,

GARS does not qualify as a scientific organization within the meaning of the

law.

7. While petitioner submitted evidence to show that it engages in what it

considers to be a number of scientific endeavors, these activities, while

laudable, are irrelevant under Florida law in making a determination as to

whether GARS qualifies for a sales tax exemption as a scientific organization.

Therefore, the application must be denied.

CONCLUSIONS OF LAW

8. The Division of Administrative Hearings has jurisdiction over the

subject matter and the parties hereto pursuant to Section 120.57(1), Florida

Statutes.

9. In determining the merits of petitioner's application, it is first

noted that as the party seeking an exemption, GARS bears the burden of proving

its entitlement to a certificate of exemption by a preponderance of the

evidence. At the same time, it is well established that an exemption clause in

a tax statute must be strictly construed against the person claiming the

exemption. See, e. g., Asphalt Pavers, Inc. v. Dept. of Revenue, 584 So.2d 55,

57 (Fla. 1st DCA 1991). Finally, Section 212.08(7)(o)2., Florida Statutes,

provides that "the provisions of this section authorizing exemptions from tax

shall be strictly defined, limited, and applied in each category. . . "

10. Subsection 212.08(7)(o)2.c., Florida Statutes, provides in relevant

part as follows:

c. "Scientific organizations" means scientific

organizations which hold current exemptions

from federal income tax under s. 501(c)(3) of

the Internal Revenue Code . . .

Rule 12A-1.001(3)(g)3.d., Florida Administrative Code, tracks the statutory

definition almost verbatim.

11. Because the evidence shows clearly that petitioner does not hold a

"current exemption from federal income tax under s. 501(c)(3) of the Internal

Revenue Code," as required by the statute and rule, it does not qualify as a

scientific organization within the meaning of the law. This conclusion is

consistent with the principles that the statutory exemption be "strictly"

applied, and that the taxing statute be strictly construed against the person

claiming the exemption. Accordingly, GARS' application should be denied.

12. Finally, at the conclusion of the telephonic hearing on March 17,

1995, petitioner's counsel indicated that he intended to promptly file an

application for exemption as a scientific organization with the IRS. If that

application is ultimately approved, and a new application is then filed with

DOR, petitioner would appear to qualify as a scientific organization and be

eligible for a certificate of exemption.

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of law, it is

RECOMMENDED that respondent enter a final order denying petitioner's

application for a consumer certificate of exemption.

DONE AND ENTERED this 23rd day of June, 1995, in Tallahassee, Florida.

___________________________________

DONALD R. ALEXANDER

Hearing Officer

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

[phone]

Filed with the Clerk of the

Division of Administrative Hearings

this 23rd day of June, 1995.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 94-1200

Petitioner:

1-2. Partially accepted in finding of fact 4.

3. Partially accepted in finding of fact 6.

4. Partially accepted in finding of fact 1.

5. Rejected as being irrelevant.

6. Rejected as being unnecessary.

7. Partially accepted in finding of fact 5.

8-9. Partially accepted in finding of fact 7.

10. Partially accepted in finding of fact 5.

11. Partially accepted in finding of fact 7.

12. Partially accepted in finding of fact 6.

13. Rejected as being unnecessary.

14. Partially accepted in finding of fact 6.

Respondent:

1. Partially accepted in finding of fact 1.

2. Partially accepted in finding of fact 2.

3. Rejected as being unnecessary.

4. Rejected as being cumulative.

5-12. Partially accepted in finding of fact 7.

13-14. Partially accepted in finding of fact 4.

15. Partially accepted in finding of fact 3.

16. Covered in preliminary statement.

17. Partially accepted in finding of fact 4.

18-19. Partially accepted in finding of fact 6.

20-21. Rejected as being unnecessary.

22. Partially accepted in finding of fact 5.

23-24. Partially accepted in finding of fact 6.

Note - Where a proposed finding has been partially accepted, the remainder has

been rejected as being irrelevant, unnecessary for a resolution of the issues,

not supported by the evidence, cumulative, subordinate, or a conclusion of law.

COPIES FURNISHED:

Mr. Larry Fuchs

Executive Director

Department of Revenue

104 Carlton Building

Tallahassee, FL 32399-0100

Linda Lettera, Esquire

General Counsel

Department of Revenue

204 Carlton Building

Tallahassee, FL 32399-0100

Sidney Schmukler, Esquire

3922 N. W. 20th Lane

Gainesville, Florida 32605-3565

Olivia P. Klein, Esquire

Department of Legal Affairs

The Capitol-Tax Section

Tallahassee, Florida 32399-1050

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit to the agency written exceptions to this

Recommended Order. All agencies allow each party at least ten days in which to

submit written exceptions. Some agencies allow a larger period within which to

submit written exceptions. You should contact the agency that will issue the

Final Order in this case concerning agency rules on the deadline for filing

exceptions to this Recommended Order. Any exceptions to this Recommended Order

should be filed with the agency that will issue the Final Order in this case.