98-002858 Division Of Alcoholic Beverages And Tobacco vs. Betty J. Schmidt, D/B/A Smileys Tap Status: Closed Recommended Order on Monday, November 23, 1998.

Summary: Respondent failed to correctly report alcoholic beverage surcharges. As a result, Respondent is liable for penalties, unremitted taxes, and interest.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND )

PROFESSIONAL REGULATION, )

DIVISION OF ALCOHOLIC )

BEVERAGES AND TOBACCO, )

)

Petitioner, )

vs. ) Case No. 98-2858

)

BETTY J. SCHMIDT, d/b/a )

SMILEY’S TAP, )

)

Respondent. )

___________________________________)

RECOMMENDED ORDER

Pursuant to notice, a formal administrative hearing was

held in the above-styled cause by Don W. Davis,

Administrative Law Judge with the Division of Administrative

Hearings on November 5, 1998, in Daytona Beach, Florida.

APPEARANCES

For Petitioner: Elsa Lopez Whitehurst, Esquire

Department of Business and

Professional Regulation

1940 North Monroe Street

Tallahassee, Florida 32399-1007

For Respondent: Betty Schmidt, pro se

Smiley’s Tap

1161 North U.S. 1

Ormond Beach, Florida 32174

STATEMENT OF THE ISSUE

The issue for determination is whether Respondent's

alcoholic beverage license should be disciplined for

violation of Chapter 561, Florida Statutes. Resolution of

this issue requires a determination of whether Respondent

correctly reported and remitted alcoholic beverage

surcharges.

PRELIMINARY STATEMENT

By Notice to Show Cause dated April 29, 1998,

Petitioner alleged Respondent failed to remit the correct

surcharge tax amount to Petitioner as required by Section

561.501, Florida Statutes.

Respondent requested a formal administrative hearing

and the matter was transferred to the Division of

Administrative Hearings for conduct of formal proceedings

pursuant to Section 120.57(1), Florida Statutes.

At the final hearing, Respondent presented the

testimony of two witnesses and three evidentiary exhibits.

Petitioner presented four evidentiary exhibits and testimony

of three witnesses.

No transcript of the final hearing was provided. Both

parties submitted proposed findings of fact which have been

utilized where appropriate in the preparation of this

Recommended Order.

FINDINGS OF FACT

1. Respondent is Betty Schmidt. At all times

pertinent to these proceedings, she held alcoholic beverage

license no. 74-00275, Series 2-COP, for a licensed premises

located at 1161 North U.S. 1, Ormond Beach, Florida.

2. Petitioner's auditor, Muriel Johnson, performs

audits on vendors monthly surcharge reports in order to

confirm the accuracy of those reports and ensure compliance

with statutory and administrative rule requirements. The

audit in the instant case covered the reporting period of

Respondent from September 1, 1994 through August 31, 1997.

3. Alcoholic beverage licensees are afforded an

opportunity to elect to report and pay the surcharge by

either the purchase method or the sales method. Under the

purchase method, a licensee pays the surcharge on alcoholic

beverages purchased from authorized distributors. Under the

sales method, licensees pay the surcharge on alcoholic

beverages sold for consumption on the premises. Respondent

elected to report via the sales method.

4. A licensee's reporting under the sales method is

audited by the Sales Depletion Method. Under this

methodology, a beginning inventory is ascertained. Second,

purchases made by the licensee for the audit period are

computed. Third, an ending inventory for the audit period

is ascertained. Fourth, Gross Gallonage Available For Sale

is computed by adding the beginning inventory to the

purchases made during the audit period and then subtracting

the ending inventory. Fifth, the Net Gallonage Available

For Sale during the audit period is calculated by

subtracting from the Gross Gallonage an allowance for

spillage and a cooking adjustment. The end result is termed

the Adjusted Sales Gallonage from which amount the amount of

surcharge owed for the audit period is determined.

5. Because Respondent did not keep inventory figures,

and based upon her assertion that her inventory was

generally the same, Respondent and the auditor agreed upon

zero as the starting inventory. Second, purchases of

alcoholic beverages by Respondent during the audit period

were computed based upon purchase figures provided by

Respondent and verified independently through records

obtained from distributors. Third, the ending inventory was

agreed to be zero. Fourth, The gross gallonage available

for sale was determined by adding the beginning inventory

(zero) to the purchases made during the audit period and

subtracting the ending inventory (also zero). Fifth,

adjustments to net gallonage for sale included allowances

for spillage and package sales. Notably, the audit revealed

that Respondent was treating liquor mixers as wine coolers

and paying a lower tax on that basis when in fact wine

coolers are taxed at the rate of one ounce of liquor per

container at a higher rate. Adjustments for this practice

were also made. Finally, the total surcharge due for the

audit period was calculated and compared to the amount

already reported in order to determine the amount of under-

reported or over-reported tax.

6. Respondent sets up various disbursement stations

for beer on her property during “bike week” in Daytona

Beach. With only one cash register, the sales at the

various stations are maintained by hand on clipboards.

Additional staff is employed at this time and Respondent is

not personally present at each station to monitor sales

reporting.

7. Frequent sources of alcoholic beverage sales that

are not captured by a license’s cash register include theft,

breakage, leakage, spillage, overpouring of drinks, and free

drinks. The amounts of alcoholic beverage that are lost to

a cash register in these ways are captured by Petitioner’s

sales audit method.

8. While Respondent keeps good records, no cash

register method can ever capture all of the alcoholic

beverages available for consumption on premises and

consequently there will always be some discrepancy as the

result of a sales method audit.

9. As established by results of Petitioner's audit,

Respondent underpaid surcharges for the audit period in the

amount of $890. Additionally, it is established that

Respondent owes $557.66 in penalties and $193.33 in interest

on the payment deficiency.

CONCLUSIONS OF LAW

10. The Division of Administrative Hearings has

jurisdiction over the parties and the subject matter.

Section 120.57(1), Florida Statutes.

11. Section 561.501, Florida Statutes, imposing a

surcharge on the sale of alcoholic beverages, reads in

pertinent part as follows:

561.501 Surcharge on sale of alcoholic

beverages for consumption on the

premises; penalty.–

(1) Notwithstanding s. 561.50 or any

other provision of the Beverage Law, a

surcharge of 10 cents is imposed upon

each ounce of liquor and each 4 ounces

of wine, a surcharge of 6 cents is

imposed on each 12 ounces of cider, and

a surcharge of 4 cents is imposed on

each 12 ounces of beer sold at retail

for consumption on premises licensed by

the division as an alcoholic beverage

vendor.

(2) The vendor shall report and remit

payments to the division each month by

the 15th of the month following the

month in which the surcharges are

imposed. For purposes of compensating

the retailer for the keeping of

prescribed records and the proper

accounting and remitting of surcharges

imposed under this section, the retailer

shall be allowed to deduct from the

payment due the state 1 percent of the

amount of the surcharge due. Retail

records shall be kept on the quantities

of all liquor, wine, and beer purchased,

inventories, and sales. However, a

collection allowance is not allowed on

any collections that are not timely

remitted. If by the 20th of the month

following the month in which the

surcharges are imposed, reports and

remittances are not made, the division

shall assess a late penalty in the

amount of 10 percent of the amount due

per month for each 30 days, or fraction

thereof, after the 20th of the month,

not to exceed a total penalty of 50

percent, in the aggregate, of any unpaid

surcharges. The division shall

establish, by rule, the required

reporting, collection, and accounting

procedures. Records must be maintained

for 3 years. Failure to accurately and

timely remit surcharges imposed under

this section is a violation of the

Beverage Law.

12. The sale which is the subject of the surcharge is

defined by Section 561.01(9), Florida Statutes, as follows:

(9) "Sale" and "sell" mean any transfer

of an alcoholic beverage for a

consideration, any gift of an alcoholic

beverage in connection with, or as a

part of, a transfer of property other

than an alcoholic beverage for a

consideration, or the serving of an

alcoholic beverage by a club licensed

under the Beverage Law.

13. Respondent contends that Petitioner's failure to

use the cash register receipts provided by Respondent is

erroneous. Yet, pursuant to Rule 61A-4.063(4)(c), Florida

Administrative Code, it is Respondent who bears the burden

of proof to show that the method used by her in the

calculation of actual sales reported is accurate.

Respondent merely argued that her cash register was correct

and failed to show any error in the deficiency calculations

of Petitioner. Respondent's argument is unpersuasive.

14. Petitioner bears the burden of proving the

allegations of the Notice To Show Cause by clear and

convincing evidence. Ferris v. Turlington , 510 So. 2d 292

(Fla. 1987). Petitioner has met that burden. The proof

establishes that Respondent was deficient in reporting,

surcharge payments for the period September 1, 1994, through

October 31, 1997, in the amount of $890.11, plus $557.66 in

penalties, and an additional $193.33 in interest for a total

liability of $1641.10, contrary to Section 561.501, Florida

Statutes.

RECOMMENDATION

Based on the foregoing, it is hereby

RECOMMENDED that a Final Order be entered requiring

payment by Respondent in the amount of $1641.10, the amount

of total tax and liabilities claimed by Petitioner to be

due.

DONE AND ENTERED this 23rd day of November, 1998, in

Tallahassee, Leon County, Florida.

_____________________________ ______

DON W. DAVIS

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone] SUNCOM 278-9675

Fax Filing [phone]

Filed with the Clerk of the

Division of Administrative Hearings

this 23rd day of November, 1998.

COPIES FURNISHED:

Elsa Lopez Whitehurst, Esquire

Department of Business and

Professional Regulation

1940 North Monroe Street

Tallahassee, Florida 32399-1007

Betty Schmidt

Smiley's Tap

1161 North U.S. 1

Ormond Beach, Florida 32174

Richard Boyd, Director

Division of Alcoholic

Beverages and Tobacco

Department of Business and

Professional Regulation

1940 North Monroe Street

Tallahassee, Florida 32399-0792

Lynda L. Goodgame, General Counsel

Department of Business and

Professional Regulation

1940 North Monroe Street

Tallahassee, Florida 32399-0792

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.