95-003113 Fdr Services Corporation Of Florida vs. Department Of Revenue Status: Closed DOAH Final Order on Monday, November 13, 1995.

Summary: Tax exemption permit and refund denied because property processed was not for sale.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FDR SERVICES CORPORATION OF FLORIDA, )

)

Petitioner, )

)

vs. ) CASE NO. 95-3113

)

STATE OF FLORIDA, )

DEPARTMENT OF REVENUE, )

)

Respondent. )

_____________________________________)

RECOMMENDED ORDER

Notice was provided and on October 3, 1995, a formal hearing was held in

this case. Authority for conducting the hearing is set forth in Section

120.57(1), Florida Statutes. The hearing location was the Office of the

Division of Administrative Hearings, The DeSoto Building, 1230 Apalachee

Parkway, Tallahassee, Florida. Charles C. Adams was the hearing officer.

APPEARANCES

For Petitioner: Robert A. Pierce, Esquire

Emily S. Waugh, Esquire

MACFARLANE, AUSLEY, FERGUSON & MCMULLEN

Post Office Box 391

Tallahassee, Florida 32302

For Respondent: James McAuley, Assistant Attorney General

Charles Catanzaro,

Assistant Attorney General

Department of Legal Affairs

The Capitol, Tax Section

Tallahassee, Florida 32399

STATEMENT OF ISSUES

Should the Department of Revenue grant Petitioner's request for a temporary

tax exemption permit and request for refund of sales and use tax which has been

paid under protest? See Section 212.08(5)(a) and (b)3a, Florida Statutes.

PRELIMINARY STATEMENT

On June 16, 1995, Petitioner filed a petition claiming that it was entitled

to a temporary tax exemption permit and a refund of the full amount of the sales

and use tax with interest which it had paid Respondent under protest. To

resolve the dispute, Respondent transmitted the case to the Division of

Administrative Hearings on June 21, 1995, where it was assigned DOAH Case No.

95-3113.

On June 16, 1995, Petitioner, consistent with Section 120.52(8)(c), Florida

Statutes, filed a petition for administrative determination of the invalidity of

Rule 12A-1.096(1)(b), (1)(d), (4), and (5)(e)1, Florida Administrative Code. In

that petition it is alleged that the rule enlarges, modifies or contravenes

Section 212.08(5)(b), Florida Statutes, by imposing additional requirements to

obtain the tax exemption permit described in Section 212.08(5)(a) and (b)3.a,

Florida Statutes. By order dated June 23, 1995, the Assistant Director of the

Division of Administrative Hearings assigned the undersigned to consider the

rule challenge. The order of assignment established DOAH Case No. 95-3038RX.

Petitioner moved to consolidate DOAH Case No. 95-3038RX and DOAH Case No.

95-3113. The parties also stipulated to extend the 30-day time limit for

considering the rule challenge. See Section 120.56(2), Florida Statutes. The

motion to consolidate was granted. The cases were consolidated for hearing

purposes only. Notice was provided and the cases were heard on the

aforementioned date.

At the consolidated hearing the parties presented a "joint prehearing

stipulation and statement" which contained stipulated facts. Those fact

stipulations were accepted and formed the basis for fact determination, as

supplemented with additional facts. The parties submitted the fact stipulations

in lieu of the presentation of testimony and tangible evidence. The parties

were granted ten days from the hearing date to submit proposed final and

recommended orders in the consolidated cases. Respondent requested an extension

for filing those proposals. Petitioner did not oppose the extension. The

parties were allowed to file their proposals on October 20, 1995. The proposals

were timely filed. The requirement to discuss proposed facts by the parties in

accordance with Section 120.59, Florida Statutes, has been precluded, because

the underlying facts in the cases were agreed to.

FINDINGS OF FACT

FACTS UPON STIPULATION

1. Petitioner opened a new commercial laundry facility in Pompano Beach,

Florida, in 1993.

2. Petitioner installed in the new facility machinery and equipment

costing approximately $1,400,000.00 for the purposes of cleaning and processing

linens used by hospitals in the south Florida area (the "Laundry Equipment").

3. Petitioner charges a fee to hospitals in the south Florida area for

cleaning and processing the hospitals' linens with the Laundry Equipment.

4. The new facilities are additional, not replacement, facilities.

5. The Laundry Equipment:

(a) Qualifies as "industrial machinery and equipment", as defined by

Section 212.08(5)(b) and (6)(c), Florida Statutes;

(b) Was purchased by Petitioner for use in a new business;

(c) Processes items of tangible personal property, the hospital's linens,

at a fixed location;

(d) Was purchased before Petitioner first began its productive operations

and delivery was made within 12 months of that date; and

(e) Has increased productive output at Petitioner's commercial laundry

facility.

6. The equipment included a tunnel washer system, conveyers,

feeders/folders, ironers, a boiler, and air compressors.

7. By application dated September 3, 1993, Petitioner applied for a

temporary tax exemption permit with respect to the Laundry Equipment which it

planned to purchase for use in its new business.

8. Section 212.08(5)(b), Florida Statutes, requires that a taxpayer obtain

that permit to receive the exemption.

9. The Department denied Petitioner's application.

10. On August 22, 1994, Petitioner paid to the Department, under protest,

the sum of $18,095.36, which represented the tax of $16,773.98, plus interest of

$1,321.38, on Petitioner's purchase of the Laundry Equipment.

11. Petitioner timely filed its claim for refund, which the Department

denied.

12. Respondent denied Petitioner's request for a temporary tax exemption

permit, and Respondent denied Petitioner's refund claim based upon Rule 12A-

1.096, Florida Administrative Code.

13. Petitioner's request for a tax exemption permit and Petitioner's

refund claim are based upon the exemption provided in Section 212.08(5)(b),

Florida Statutes, which applies to a new (as opposed to an expanding) business.

CONCLUSIONS OF LAW

14. The Division of Administrative Hearings has jurisdiction over the

subject matter and the parties to this proceeding pursuant to Section 120.57(1),

Florida Statutes.

15. Petitioner seeks exemption from the tax to be imposed on industrial

machinery and equipment purchased for its new business. To obtain that

exemption it must receive a tax exemption permit. Petitioner also seeks the

refund of sales and use tax paid under protest pending the final decision on its

exemption request. Petitioner seeks a refund in the amount of $18,095.36

constituted of tax in the amount of $16,773.98 and interest of $1,328.38. See

Section 212.08(5)(b)3.a., Florida Statutes.

16. Petitioner must prove its entitlement to the tax exemption. See

American Nat'l Bank v. Dept. of Revenue, 593 So.2d 1173 (Fla. 1st DCA 1992).

17. The basis for denying the exemption request is set forth in Rule 12A-

1.096, Florida Administrative Code. In pertinent part the rule states:

12A-1.096 Industrial Machinery and Equipment for

Use in a New or Expanding Business.

(1) Definitions -- The following terms and

phrases when used in this rule shall have the

meaning ascribed to them except where the context

clearly indicates a different meaning:

* * *

(b) 'Industrial machinery and equipment' means

'Section 38 Property' as defined in Section

48(a)(1)(A) and (B)(i) of the United States

Internal Revenue Code, as amended, and includes

parts and accessories, essential to the manufac-

turing, processing, compounding or producing of

tangible personal property for sale, or for

exclusive use in spaceport activities as defined

in s.212.02, F.S. 'Industrial machinery and

equipment' also means pollution control equipment,

or sanitizing and sterilizing equipment which is

essential to manufacturing, processing, compounding

or producing items of tangible personal property.

'Industrial machinery and equipment' also means

monitoring machinery and equipment which is essential

to manufacturing, processing, compounding or producing

items of tangible personal property. In determining

what is essential to manufacturing, processing,

compounding or producing items of tangible personal

property, the examination will not turn on how

vertically integrated the taxpayer is but rather

on the specific activity that the taxpayer asserts

is part of the production process. For example, if

the activity is essentially one of transportation or

storage, associated equipment and machinery will not

qualify for exemption unless specifically exempted

in subsection (8) of this rule.

* * *

(d) 'Process' means a series of operations

conducing to an end which is an item of tangible

personal property for sale or for exclusive use in

spaceport activities as defined in s. 212.02, F.S.

* * *

(5) Temporary Tax Exemption Permit -- Refund.

* * *

(e) The right to a refund of sales or use taxes.

1. The right to a refund of sales or use taxes

paid on qualifying industrial machinery and equipment,

or installation thereof, shall accrue when the new

business first places a product in inventory or

immediately sells a product.

18. The nature of Petitioner's use of the industrial machinery and

equipment which it purchased in starting the new business was one of processing

linen, but not for sale. Therefore, Petitioner is not entitled to the exemption

from taxation nor is Petitioner entitled to the refund of tax and interest paid

under protest.

RECOMMENDATION

In consideration of the facts found and conclusions of law reached, it is,

RECOMMENDED:

That a final order be entered which denies the request for a tax exemption

permit and a refund in the amount of $18,095.36.

DONE and ENTERED this 13th day of November, 1995, in Tallahassee, Florida.

___________________________________

CHARLES C. ADAMS, 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 13th day of November, 1995.

COPIES FURNISHED:

Robert A. Pierce, Esquire

Emily S. Waugh, Esquire

MACFARLANE, AUSLEY, FERGUSON & MCMULLEN

Post Office Box 391

Tallahassee, FL 32302

James McAuley, Esquire

Office of the Attorney General

The Capitol-Tax Section

Tallahassee, FL 32399

Linda Lettera, General Counsel

Department of Revenue

204 Carlton Building

Tallahassee, FL 32399-0100

Larry Fuchs, Executive Director

Department of Revenue

104 Carlton Building

Tallahassee, FL 32399-0100

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

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

Order. All agencies allow each party at least 10 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.