99-002609 Division Of Alcoholic Beverages And Tobacco vs. Depaul, Inc., D/B/A Copper Penny Pub Status: Closed Recommended Order on Tuesday, October 26, 1999.

Summary: Lack of package sale records requires payment of a surcharge.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

DEPARTMENT OF BUSINESS AND )

PROFESSIONAL REGULATION, )

DIVISION OF ALCOHOLIC BEVERAGES )

AND TOBACCO, )

)

Petitioner, )

) Case No. 99-2609

vs. )

)

DEPAUL, INC., d/b/a COPPER PENNY )

PUB, )

)

Respondent. )

_____________________________________)

RECOMMENDED ORDER

On September 23, 1999, a formal administrative hearing in

this case was held in Tampa, Florida, before William F.

Quattlebaum, Administrative Law Judge, Division of Administrative

Hearings.

APPEARANCES

For Petitioner: Miriam S. Wilkinson, Esquire

Department of Business

and Professional Regulation

1940 North Monroe Street

Tallahassee, Florida 32399-0792

For Respondent: No appearance

STATEMENT OF THE ISSUE

The issue in the case is whether the allegations set forth

in the Department's Administrative Action dated January 21, 1999,

are correct.

PRELIMINARY STATEMENT

By Administrative Action dated January 21, 1999, the

Department of Business and Professional Responsibility, Division

of Alcoholic Beverages and Tobacco, notified the Respondent,

DePaul, Inc., d/b/a Copper Penny Pub, of tax liability of

$70,756.19, including penalty and interest for the period

October 1, 1996 through September 30, 1998. The Respondent

requested a formal administrative hearing to challenge the

alleged liability. The request was forwarded to the Division of

Administrative Hearings, which scheduled and conducted the

proceeding.

At the hearing, the Petitioner presented the testimony of

two witnesses and had Exhibits numbered 1-4 admitted into

evidence. The Respondent did not appear at the hearing. No

transcript of the hearing was filed. The Petitioner filed a

Proposed Recommended Order.

FINDINGS OF FACT

1. At all times material to this case, Respondent DePaul,

Inc. operated the Copper Penny Pub, 10553 Spring Hill Drive,

Spring Hill, Florida (the "licensed premises"). The Respondent

held license number 37-00584, Series COP4.

2. In or before September 1998, the Petitioner selected the

Respondent for audit based on the Respondent's failure to file

required monthly sales reports.

3. By letter dated September 2, 1998, the Petitioner

notified the Respondent of the audit. According to the letter,

the audit would occur on September 24, 1998, at the licensed

premises. The letter stated that the following items would be

reviewed:

1. All alcoholic beverage purchase invoices.

2. Petty cash records.

3. Business checkbooks or check stubs.

4. Records of alcoholic beverages used in

cooking (if any).

5. Any worksheets you might use to prepare

the report.

6. The enclosed Pre-Audit Questionnaire

completely filled out.

4. The Pre-Audit Questionnaire allows a licensee to

identify package sales. Package sales are those in which

alcoholic beverages are sold in the original sealed containers

for consumption off the licensed premises. A COP4 series

licensee can sell packaged alcoholic beverages for consumption

off premises.

5. Package alcohol sales are deducted from total sales

during the audit, and are not included in the surcharge tax

liability. The Pre-Audit Questionnaire directs the licensee to

identify documents that will be used to support the package sales

deduction.

6. The Respondent did not complete or submit the Pre-Audit

Questionnaire.

7. A licensee must establish entitlement to a package sales

deduction. Generally a licensee is required to maintain a log of

package purchases, and support the logged transactions with daily

cash register tapes, identified as "Z" tapes.

8. The Respondent produced no package sales records to the

Petitioner during the audit. Even though the Respondent did not

provide records supporting a package sales deduction, the auditor

allowed a two-percent credit for package sales.

9. There are two audit methodologies used in conducting the

tax audit, the "sales" method, and the "purchase" method. The

choice of audit methodology is left to the licensee.

10. The Respondent selected the purchase method audit. In

a purchase method audit, the licensee is required to pay

surcharge taxes based on the gallons of alcoholic beverages

purchased monthly.

11. Division Tax Auditor Maggie Herrera conducted the

audit.

12. According to Ms. Herrera, the licensed premises is a

bar located in a strip shopping center. The "package store" is

located outside and about thirty feet away from the bar. The

"package store" is about the size of a one-car garage.

13. In order to make a package sale, the bartender must

leave the bar, walk to the package store, unlock it, retrieve the

packaged goods, re-lock the door, and return to the bar.

14. According to Ms. Herrera, the package store contained

one-liter bottles of liquor on shelves with prices marked with

masking tape on the bottles. The store also contained two cases

of "hip flask" 375-ml size bottles, one case of 50-ml bottles, "a

lot" of brandy and dust-covered bottles of mixers.

15. During the several hours Ms. Herrera's was present at

the licensed premises, only one package sale (a flask size

bottle) was made.

16. Ms. Herrera traveled to the licensed premises on two

occasions to meet the Respondent.

17. On the date of the first scheduled meeting, the

Respondent did not appear.

18. On the date of the second scheduled meeting, the

Respondent presented approximately thirty distributor invoices to

Ms. Herrera and told her he was leaving for his home to retrieve

the remainder of the records. He left the licensed premises.

She waited for several hours. The Respondent did not return and

did not contact Ms. Herrera to explain his failure to return.

19. Ms. Herrera preformed an audit of the Respondent, using

standard audit procedures. Ms. Herrera utilized monthly

surcharge reports filed by the Respondent for the period between

January 1995 and December 1997, the distributor sales records for

the Respondent's purchases, and records of tax payments made by

the Respondent.

20. According the audit, the Respondent owes remaining tax

surcharge payments of $47,695.85, a penalty of $17,545.74 and

interest of $5,514.60, for a total liability of $70,756.19.

21. There is no evidence that the audit was done

inappropriately, or that the audited tax liability is incorrect.

22. The Respondent was notified of the tax liability by

certified letter.

CONCLUSIONS OF LAW

23. The Division of Administrative Hearings has

jurisdiction over the parties to and subject matter of this

proceeding. Section 120.57(1), Florida Statutes.

24. The Department of Business and Professional

Responsibility, Division of Alcoholic Beverages and Tobacco, is

responsible for collection of alcoholic beverage surcharge taxes.

The failure to accurately and timely remit surcharge taxes is a

violation of beverage law. Section 561.501, Florida Statutes;

Rule 61A-4.063, Florida Administrative Code.

25. The burden is on the licensee to establish actual sales

records and entitlement to package sales deductions. Rule 61A-

4.063(4)(c), Florida Administrative Code.

26. In this case, the licensee has failed to produce actual

sales records or entitlement to package sales deductions.

27. The uncontroverted evidence establishes that the

Petitioner's audit methodology and resulting tax surcharge

liability are reasonable.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is recommended that the Department of Business and

Professional Responsibility, Division of Alcoholic Beverages and

Tobacco, enter a final order imposing a total liability of

$70,756.19, including unpaid tax liability, penalties, and

interest.

DONE AND ENTERED this 26th day of October, 1999, in

Tallahassee, Leon County, Florida.

___________________________________

WILLIAM F. QUATTLEBAUM

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone] SUNCOM 278-9675

Fax Filing [phone]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administra tive Hearings

this 26th day of October, 1999.

COPIES FURNISHED:

Miriam S. Wilkinson, Esquire

Department of Business

and Professional Regulation

1940 North Monroe Street

Tallahassee, Florida 32399-0792

William T. Charnock, President

10154 Dunkirk Road

Spring Hill, Florida 34608

Joseph Martelli, Director

Division of Alcoholic Beverages

and Tobacco

Department of Business and

Professional Regulation

1940 North Monroe Street

Tallahassee, Florida 32399-0792

Barbara D. Auger, 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 must be filed with the agency that will

issue the Final Order in this case.