98-004152
Action Boatworks, Inc. vs.
Department Of Revenue
Status: Closed
Recommended Order on Wednesday, May 5, 1999.
Recommended Order on Wednesday, May 5, 1999.
1STATE OF FLORIDA
4DIVISION OF ADMINISTRATIVE HEARINGS
8ACTION BOATWORKS, INC., )
12)
13Petitioner, )
15)
16vs. ) Case No. 98-4152
21)
22DEPARTMENT OF REVENUE, )
26)
27Respondent. )
29__________________________________)
30RECOMMENDED ORDER
32Pursuant to notice, a formal hearing was held in this case
43on January 28, 1999, by video teleconference with the Petitioner
53appearing from Miami, Florida, before J. D. Parrish, a designated
63Administrative Law Judge of the Division of Administrative
71Hearings.
72APPEARANCES
73For Petitioner: Jack Stein, Esquire
78Arthur Rosenberg, Esquire
81Stein, Rosenberg & Winikoff
85Seventh Floor
874875 North Federal Highway
91Fort Lauderdale, Florida 33308
95For Respondent: Eric Taylor, Assistant Attorney General
102401 Northwest Second Avenue, N607
107Miami, Florida 33128
110STATEMENT OF THE ISSUES
114Whether Petitioner owes the assessment for sales and use tax
124as alleged by the Department of Revenue.
131PRELIMINARY STATEMENT
133This case began on July 13, 1998, when the Department of
144Revenue (Department) issued a use tax notice to Petitioner,
153Action Boatworks, Inc. Such notice claimed a tax in the amount
164of $34,294.56 was past due for a vessel known as the "Action
177Lady." Such notice further alleged a penalty in the amount of
188$17,147.28 with interest at $8,129.21 to be also due for such
201vessel. The total amount of the use tax claim was $59,571.05.
213Thereafter, Petitioner filed a challenge to the claim and
222requested an administrative hearing as to the matter. The case
232was forwarded to the Division of Administrative Hearings for
241formal proceedings on September 22, 1998.
247At the hearing, Petitioner presented testimony from George
255Schoenrock, a principal with the company Action Boatworks, Inc.
264Petitioner's composite Exhibit 1 was admitted into evidence.
272Respondent's Exhibits A, B, C, and D have also been received into
284evidence.
285The Transcript of the proceedings was filed on March 15,
2951999. The parties were granted ten days' leave from such date to
307file their proposed recommended orders. To date, neither party
316has filed a proposed order.
321FINDINGS OF FACT
3241. George Schoenrock is a resident of the State of Florida.
335His address is 7600 Miami View Drive, Northgate Village, Miami,
345Florida.
3462. Mr. Schoenrock is the owner of a company known as Action
358Marine. This company is located in the State of Florida and
369manufactures and sells new boats.
3743. In 1996 Mr. Schoenrock also formed a company in North
385Carolina called Action Boatworks. This company, Action
392Boatworks, is the Petitioner in this cause.
3994. In 1996 Petitioner purchased a boat made in Wanchese,
409North Carolina and named it the "Action Lady."
4175. The boat was purchased to re-sell for profit by
427Petitioner, a dealer in North Carolina. Action Boatworks is not
437registered in Florida to sell boats nor does it possess a Florida
449sales tax dealer's license or a tax number from the Florida
460Department of Revenue.
4636. At the time of purchase Mr. Schoenrock considered the
"473Action Lady" unfinished as it lacked canvas, fishing equipment,
482chair rigging, and electronic equipment for navigation.
4897. The total paid to Davis Boatworks, Inc. (the
498manufacturer) for the "Action Lady" was in excess of $571,000.00.
509The invoice for this purchase, dated May 21, 1996, did not list
521Petitioner as the purchaser of the vessel but identified a
"531Barney Schoenrock."
5338. After the purchase of the boat, Mr. Schoenrock brought
543the "Action Lady" to South Florida where he intended to complete
554the installation of the items noted above and re-sell it. The
565vessel entered the State of Florida by the end of May 1996, and
578proceeded down the coast to a dock at Mr. Schoenrock's residence.
5899. One deterrent to the re-sale of the "Action Lady" was
600immediately discovered by Mr. Schoenrock. That is, the diesel
609engines did not pass a "P.I.D." inspection required for the
619warranty to be effective. This inspection required Detroit
627Diesel to complete the P.I.D. test and to certify the engines
638were acceptable.
64010. The vessel eventually passed this inspection some eight
649or nine months after Mr. Schoenrock had received the boat. The
660first effort to repair the vessel in order to pass the P.I.D.
672test was in June of 1996 when it was taken to a repair facility
686known as Safety Harbor. The "Action Lady" remained at Safety
696Harbor until August 7, 1996, when it returned to Mr. Schoenrock's
707residence.
70811. Thereafter, on or about October 24, 1996, the vessel
718went back to Safety Harbor for additional repairs which lasted
728approximately two weeks.
73112. After the repairs were completed, sometime in November
7401996, the boat was returned to Mr. Schoenrock's residence.
74913. In October 1996 Mr. Schoenrock listed the "Action Lady"
759for sale with Walsh Yachts. The asking price was noted at
770$695,520.00. Also at this time it was placed in the Fort
782Lauderdale boat show.
78514. Except for the time the boat was in repairs or on
797exhibition during the October boat show, the "Action Lady"
806remained docked at Mr. Schoenrock's residence.
81215. Eventually, Petitioner sold the vessel in South Florida
821to Joseph Gregory in March of 1997.
82816. According to Mr. Schoenrock the boat was not used for
839his own personal use. It was not used by others for personal
851use. It was subject to repairs, testing, and demonstration the
861entire time it was in Florida prior to its sale.
87117. According to Mr. Schoenrock, when he purchased the boat
881in North Carolina, he paid sales tax in that state totaling
892$2500.00.
89318. Mr. Schoenrock's company, Action Marine, was never in
902any way an owner of the "Action Lady."
91019. Mr. Schoenrock insured the vessel for its value and was
921the beneficiary of the policy.
92620. From June 1, 1996, through its resale in March 1997,
937the "Action Lady" did not leave the State of Florida.
947CONCLUSIONS OF LAW
95021. The Division of Administrative Hearings has
957jurisdiction over the parties to, and the subject matter of,
967these proceedings.
96922. Section 212.05, Florida Statutes, provides, in
976pertinent part:
978It is hereby declared to be the legislative
986intent that every person is exercising a
993taxable privilege who engages in the business
1000of selling tangible personal property at
1006retail in this state, including the business
1013of making mail order sales, or who rents or
1022furnishes any of the things or services
1029taxable under this chapter, or who stores for
1037use or consumption in this state any item or
1046article of tangible personal property as
1052defined herein and who leases or rents such
1060property within the state.
106423. Section 212.08(7)(t), Florida Statutes, provides:
10701. Notwiths tanding the provisions of
1076chapters 327 and 328, pertaining to the
1083registration of vessels, a boat upon which
1090the state sales or use tax has not been paid
1100is exempt from the use tax under this chapter
1109if it enters and remains in this state for a
1119period not to exceed a total of 20 days in
1129any calendar year calculated from the date of
1137first dockage or slippage at a facility,
1144registered with the department, that rents
1150dockage or slippage space in this state. If
1158a boat brought into this state for use under
1167this paragraph is placed in a facility,
1174registered with the department, for repairs,
1180alterations, refitting, or modifications and
1185such repairs, alternations, refitting, or
1190modifications are supported by written
1195documentation, the 20-day period shall be
1201tolled during the time the boat is physically
1209in the care, custody, and control of the
1217repair facility, including the time spent on
1224sea trials conducted by the facility. The
123120-day time period may be tolled only once
1239within a calendar year when a boat is placed
1248for the first time that year in the physical
1257care, custody, and control of a registered
1264repair facility; however, the owner may
1270request and the department may grant an
1277additional tolling of the 20-day period for
1284purposes of repairs that arise from a written
1292guarantee given by the registered repair
1298facility, which guarantee covers only those
1304repairs or modifications made during the
1310first tolled period. Within 72 hours after
1317the date upon which the registered repair
1324facility took possession of the boat, the
1331facility must have in its possession, on
1338forms prescribed by the department, an
1344affidavit which states that the boat is under
1352its care, custody, and control and that the
1360owner does not use the boat while in the
1369facility. Upon completion of the repairs,
1375alternations, refitting, or modifications,
1379the registered repair facility must, within
138572 hours after the date of release, have in
1394its possession a copy of the release form
1402which shows the date of release and any other
1411information the department requires. The
1416repair facility shall maintain a log that
1423documents all alternations, additions,
1427repairs, and sea trials during the time the
1435boat is under the care, custody, and control
1443of the facility. The affidavit shall be
1450maintained by the registered repair facility
1456as part of its records for as long as
1465required by s. 213.35. When, within 6 months
1473after the date of its purchase, a boat is
1482brought into this state under this paragraph,
1489the 6-month period provided in s.
1495212.05(1)(a)2. or s. 212.06(8) shall be
1501tolled.
15022. During the period of repairs,
1508alternations, refitting, or modifications and
1513during the 20-day period referred to in
1520subparagraph 1., the boat may be listed for
1528sale, contracted for sale, or sold
1534exclusively by a broker or dealer registered
1541with the department without incurring a use
1548tax under this part; however, the sales tax
1556levied under this part applies to such sale.
15643. The mere storage of a boat at a
1573registered repair facility does not qualify
1579as a tax-exempt use in this state.
15864. As used in this paragraph,
"1592registered repair facility" means:
1596a. A full-service facility that:
1601(I) Is located on a navigable body of
1609water;
1610(II) Has haulout capability such as a
1617dry dock, travel lift, railway, or similar
1624equipment to service craft under the care,
1631custody, and control of the facility.
1637(III) Has adequate piers and storage
1643facilities to provide safe berthing of
1649vessels in its care, custody, and control;
1656and
1657b. A marina that:
1661(I) Is located on a navigable body of
1669water;
1670(II) Has adequate piers and storage
1676facilities to provide safe berthing of
1682vessels in its care, custody, and control;
1689and
1690(III) Has necessary shops and equipment
1696to provide repairs or warranty on vessels; or
1704c. A shoreside facility that:
1709(I) Is located o n a navigable body of
1718water;
1719(II) Has adequate piers and storage
1725facilities to provide safe berthing of
1731vessels in its care, custody, and control;
1738and
1739(III) Has necessary shops and equipment
1745to provide repairs or warranty work.
175124. Rule 12A-1.0071, Florida Administrative Code, provides
1758guidelines for boats temporarily docked in Florida. Petitioner
1766did not comply with any of the provisions of this rule in order
1779to secure an exemption from use tax provisions. In fact,
1789Petitioner did not maintain it was entitled to an exemption until
1800after inquiries were made into the dockage history of the vessel.
181125. In this case Petitioner bears the burden to challenge
1821the accuracy of the use tax assessment issued by the Department.
1832The Petitioner has not contested the amount of the tax, the
1843penalty assessed, nor the interest due on the assessment.
1852Instead, the Petitioner maintains that a use tax is not owed as
1864the vessel was purchased and brought to the State of Florida
1875merely for repairs and resale, and not for the personal use of
1887the taxpayer. Mr. Schoenrock, a Florida resident, maintains he
1896did not use the vessel but that it was stored at his residence.
1909Petitioner maintains it spent the entire time repairing or
1918installing improvements to the boat, and that the boat P.I.D.
1928test was not completed and successful until February of 1997, one
1939month before the boat was sold. Petitioner cites the case of
1950Department of Revenue v. Yacht Futura Corporation , 510 So. 2d
19601047 (Fla. 1st DCA 1987) in support of its position.
197026. In the Futura case the yacht was purchased elsewhere
1980and brought to Florida for warranty repairs. The vessel arrived
1990in Florida in October of 1984 and was ready to leave the state in
2004January 1985. The court found that the act of "sailing the
2015Futura into Florida waters and docking it at various marinas in
2026Florida for the purpose of effectuating extensive repairs and
2035alterations upon it did not constitute a use or storage so as to
2048activate Florida's taxing statutes." Futura at 1049.
205527. Unlike the Futura vessel which was required to be
2065repaired in Florida, the "Action Lady" was brought to Florida for
2076the owner's convenience. The vessel was never reported or
2085registered for repair in a facility designated by statute or
2095rule. Moreover, the repairs and testing performed for the
"2104Action Lady" were done to enhance its resale value. Without the
2115P.I.D. approval the warranty would not have been available for
2125the engines. Nothing in this record demonstrates that the P.I.D.
2135could not be completed in North Carolina, the state of original
2146manufacture. Further, unlike the Futura, the "Action Lady" was
2155docked at the owner's residence for extensive periods. It was
2165not in marinas receiving repairs on a continuous basis. Of the
2176ten months it was owned by Petitioner and within Florida
2186(primarily at Mr. Schoenrock's personal residence), the "Action
2194Lady" was being repaired, at best, 117 days. The remainder of
2205the time it was available for use and was stored on the
2217Intracoastal Waterway.
221928. Additionally, unlike the Futura case cited by
2227Petitioner, the beneficiary of this boat transaction was a
2236resident of Florida. Mr. Schoenrock acquired the boat with the
2246intent of bringing it to Florida for resale. He made
2256improvements to the vessel to increase its value. He did not
2267follow the exemption criteria to seek an exemption under the
2277repairs provision for boats temporarily docked in Florida. His
2286North Carolina company (who it is claimed was the purchaser of
2297the vessel) did not document, by any of the appropriate
2307affidavits, the repair information cited by the rule.
231529. Despite the delays in obtaining the P.I.D.
2323certification, Mr. Schoenrock did not submit any documentation
2331regarding the necessity for such repairs in Florida. In fact,
2341if, as he claims, the P.I.D. was needed for warranty purposes, it
2353is curious that he accepted the vessel from its manufacturer in
2364North Carolina without such certification.
2369RECOMMENDATION
2370Based on the foregoing Findings of Fact and Conclusions of
2380Law, it is RECOMMENDED that the Department of Revenue enter a
2391Final Order affirming the use tax assessment.
2398DONE AND ENTERED this 5th day of May, 1999, in Tallahassee,
2409Leon County, Florida.
2412___________________________________
2413J. D. PARRISH
2416Administrative Law Judge
2419Division of Administrative Hearings
2423The DeSoto Building
24261230 Apalachee Parkway
2429Tallahassee, Florida 32399-3060
2432(850) 488-9675 SUNCOM 278-9675
2436Fax Filing (850) 921-6847
2440www.doah.state.fl.us
2441Filed with the Clerk of the
2447Division of Administrative Hearings
2451this 5th day of May, 1999.
2457COPIES FURNISHED:
2459Eric J. Taylor, Assistant Attorney General
2465Office of the Attorney General
2470The Capitol, Tax Section
2474Tallahassee, Florida 32399-1050
2477Eric Taylor, Assistant Attorney General
2482401 Northwest Second Avenue, N607
2487Miami, Florida 33128
2490Jack Stein, Esquire
2493Arthur Rosenberg, Esquire
2496Stein, Rosenberg & Winikoff
2500Seventh Floor
25024875 North Federal Highway
2506Fort Lauderdale, Florida 33308
2510Linda Lettera, General Counsel
2514Department of Revenue
2517204 Carlton Building
2520Tallahassee, Florida 32399-0100
2523Larry Fuchs, Executive Director
2527Department of Revenue
2530104 Carlton Building
2533Tallahassee, Florida 32399-0100
2536NOTICE OF RIGHT TO SUBMIT EXCEPTIONS
2542All parties have the right to submit written exceptions within 15
2553days from the date of this Recommended Order. Any exceptions to
2564this Recommended Order should be filed with the agency that will
2575issue the Final Order in this case.
- Date
- Proceedings
- Date: 10/15/1999
- Proceedings: Final Order with Settlement Agreement Attached filed.
- Date: 05/28/1999
- Proceedings: (Joint) Settlement Agreement (filed via facsimile).
- Date: 03/15/1999
- Proceedings: Transcript filed.
- Date: 02/23/1999
- Proceedings: (J. Stein) Notice of Appearance (filed via facsimile).
- Date: 01/28/1999
- Proceedings: CASE STATUS: Hearing Held.
- Date: 01/21/1999
- Proceedings: Amended Notice of Hearing sent out. (Video Hearing set for 1/28/99; 1:00pm; Miami & Tallahassee)
- Date: 11/05/1998
- Proceedings: Notice of Hearing sent out. (hearing set for 1/28/99; 12:00pm; Miami)
- Date: 10/08/1998
- Proceedings: Respondent, Department of Revenue`s Answer (filed via facsimile).
- Date: 10/06/1998
- Proceedings: Respondent, Department of Revenue`s Response to the Initial Order (filed via facsimile).
- Date: 10/06/1998
- Proceedings: Petitioner Response to Initial Order (filed via facsimile).
- Date: 09/24/1998
- Proceedings: Initial Order issued.
- Date: 09/22/1998
- Proceedings: Agency Referral Letter; Petition With Statement of Facts, letter form; Agency Action Letter dated 10/23/97; Agency Notice dated 7/13/98 filed.