Beyond Fighting an Beyond Fighting an Assessment: Assessment: - - PowerPoint PPT Presentation

By: By: Jeanette Jeanette Moffa Moffa and Jerry Donnini and Jerry Donnini

Beyond Beyond Fighting an Fighting an Assessment: Assessment: Alternative Alternative Challenges Challenges to to State State and Local and Local Tax Disputes Tax Disputes

Jerry Donnini is a partner at Moffa, Sutton, & Donnini, P.A. and adjunct professor at Nova Southeastern University. He focuses on multistate and Florida state and local tax. Jerry has brought a variety of administrative law rule challenges against state agencies in defense of Florida taxpayers. www.FloridaSalesTax.com Jeanette Moffa is an associate at Moffa, Sutton, & Donnini, P.A. and adjunct professor at Broward College. She focuses on multistate and Florida state and local tax.

Speakers Speakers

Traditional Assessment Traditional Assessment Challenge Challenge

  60 60-120 days to initiate 120 days to initiate audit audit   Generally issue DR Generally issue DR-1215 within 1215 within 9 months 9 months

 30 days after DR 30 days after DR-1215 to i 1215 to issue ssue Noti Notice ce of Proposed Assessment

• f Proposed Assessment

 60 days after for Assessment to be fi 60 days after for Assessment to be final nal

Traditional Assessment Traditional Assessment Challenge Challenge

Traditional Assessment Traditional Assessment Challenge Challenge

  DR DR-1215 or DR 1215 or DR-1216 ( 1216 (Desk Audit) Desk Audit)  30 days to request conference 30 days to request conference – generally flexible generally flexible  Penalties Penalties usually waived usually waived if first time under audit if first time under audit  In Interest terest abated abated accordingly accordingly

Traditional Assessment Traditional Assessment Challenge Challenge

Traditional Assessment Traditional Assessment Challenge Challenge

  60 Days until 60 Days until Final Final

 Statute of Li Statute of Limi mitations tations & & Verizon Verizon

  In Informal formal Protest, Protest, Administrative Administrative Hearing, Hearing, and Judicial Hearing and Judicial Hearing options

• ptions

 In Informal formal Protest most common Protest most common

Traditional Assessment Traditional Assessment Challenge Challenge - NOPA NOPA

Traditional Assessment Traditional Assessment Challenge Challenge

  30 Days to File 30 Days to File Petition Petition for Reconsideration for Reconsideration   60 Days to File 60 Days to File Petition Petition for Chapter for Chapter 120 Hearing 120 Hearing (D (DOAH) OAH)

 Recommended Recommended Order; Order; In Informal formal & Fast; Less Expensi & Fast; Less Expensive ve

  60 Days to File 60 Days to File in in Court Court

 Bi Bindi nding ng Order; Lengthy; “Pay to Play” Order; Lengthy; “Pay to Play”

Traditional Assessment Traditional Assessment Challenge Challenge - NOD NOD

  What is a rule? What is a rule?

 ““Rule” means each agency statement of general appli ““Rule” means each agency statement of general applicability cability that i that implements, i mplements, interprets, or nterprets, or prescri prescribes law bes law or poli

• r policy

cy or descri

• r describes the procedure or practi

bes the procedure or practice requi ce requirements of an agency and rements of an agency and in includes cludes any form which any form which im imposes poses any requi any requirement or soli rement or solici cits ts any i any informati nformation

• n not speci

not specifi fically cally requi required by statute or by an exi red by statute or by an existing sting rule…” 120.52(16), rule…” 120.52(16), F.S. F.S.

Identifying a Rule Identifying a Rule

  How does a rule come to be? 120.54( How does a rule come to be? 120.54(3), 3), F F.S. .S.

 Must gi Must give ve noti notice ce  Consi Consider speci der special al matters matters

 Will it have an adverse Will it have an adverse impact on small impact on small businesses? businesses?

 Publi Public heari hearing ng opti

• ption
• n for affected persons

for affected persons  OR Emergency Rule procedures can be followed OR Emergency Rule procedures can be followed pursuant to 120.54(4), pursuant to 120.54(4), F.S. F.S.

Identifying a Rule Identifying a Rule

  Finding Finding a Rule in an Assessment a Rule in an Assessment

 Explicitly Explicitly Stated Stated  Im Implied plied - Basi Basis for I for Identi dentifyi fying ng a Taxable a Taxable Transacti Transaction

• n

 Why is this taxable? Why is this taxable?

 Im Implied plied - Methodology for Calculati Methodology for Calculating an ng an Assessment Assessment

 How is the total tax calculated? How is the total tax calculated?

Identifying a Rule Identifying a Rule

  How are rules challenged? How are rules challenged? 120.56, 120.56, F F.S. .S.

 Peti Petiti tioner

• ner must have standi

must have standing ng  Typi Typically cally challenged for thei challenged for their valid validit ity

 Is Is i it inconsistent with the statute? t inconsistent with the statute?  Is Is i it outside the scope of the statute? t outside the scope of the statute?

Challenging Rules Challenging Rules

  What is an What is an unadopted unadopted rule? 120.52( rule? 120.52(20), 20), F F.S. .S.

 “ “Unadopted Unadopted rule” means an agency statement that meets the defi rule” means an agency statement that meets the defini niti tion

• n of the term “rule,” but
• f the term “rule,” but

that has not been adopted pursuant to the requi that has not been adopted pursuant to the requirements of s. 120.54. rements of s. 120.54.  General applicability, prescri General applicability, prescribes law bes law or poli

• r policy, not adopted pursuant to the proper admi

cy, not adopted pursuant to the proper admini nistrati strative ve law law procedures procedures

Challenging Rules Challenging Rules

Case Study Case Study – Florida Bee Distribution, Inc. Florida Bee Distribution, Inc. v.

• v. Dep’t of Bus. &

Dep’t of Bus. & Prof’l Prof’l Reg., Reg., CASE NO. CASE NO. 1D16 1D16-1064 (Fla. 1st DCA 2016). 1064 (Fla. 1st DCA 2016).

  Taxable Taxable Base of Wholesale Base of Wholesale Tobacco Tobacco Products Products

 (Wholesale Sales Pri (Wholesale Sales Price + Federal Exci ce + Federal Excise se Tax) x Tax) x OTP Tax OTP Tax  Mi Micjo cjo  Wholesale Sales Pri Wholesale Sales Price ce when Separately Stated when Separately Stated  Wholesale Sales Pri Wholesale Sales Price ce when Forei when Foreign Manufactured gn Manufactured

 210.25(13), F.S. 210.25(13), F.S. defined* the taxable base of tobacco product tax as follows: defined* the taxable base of tobacco product tax as follows:  “Wholesale “Wholesale sales price” sales price” means the established means the established price for which price for which a manufacturer sells a manufacturer sells a tobacco product to a distributor, exclusive of tobacco product to a distributor, exclusive of any diminution any diminution by volume by volume or other discounts.

• r other discounts.

*the *the law has since been changed in subsection (14) law has since been changed in subsection (14) to: to: “Wholesale sales price” means the “Wholesale sales price” means the sum of: sum of: (a (a) The full price paid by The full price paid by the the distributor to distributor to acquire the tobacco products, acquire the tobacco products, including charges by including charges by the seller for the cost of the seller for the cost of materials, materials, the cost of labor and service, charges for transportation the cost of labor and service, charges for transportation and delivery and delivery, the the federal excise tax, federal excise tax, and any and any other

• ther char

charge, ge, even if the even if the charge is listed as a separate item charge is listed as a separate item on the

• n the invoice paid by

invoice paid by the the distributor, distributor, exclusive of any exclusive of any diminution diminution by by volume volume or

• r
• ther
• ther discounts,

discounts, including a discount provided to a distributor including a discount provided to a distributor by by a an affiliate; n affiliate; and and (b (b) The federal excise tax paid by The federal excise tax paid by the distributor the distributor on the

• n the tobacco products if the

tobacco products if the tax is not tax is not included in the included in the full full price under price under paragraph ( paragraph (a). a).

Case Study Case Study – – Florida Bee Florida Bee

  Mi Micjo cjo, Inc.

• Inc. v. Dep’t
• v. Dep’t of Bus. &
• f Bus. & Prof’l

Prof’l Reg. Reg., 78 So. 3d 124 ( 78 So. 3d 124 (Fla.

• Fla. 2d DCA 2012)

2d DCA 2012)

 “ “The essence of the di The essence of the dispute spute is is n not compli

• t complicated

cated and i and involves nvolves a pure questi a pure question

• n of law.”
• f law.”

 “The established “The established pri price i ce is for the sale of the tobacco product. The vari for the sale of the tobacco product. The various

• us other di
• ther distributor

stributor in invo voice ice costs for rei costs for reimbursement of federal exci mbursement of federal excise se tax, shi tax, shipping pping costs, and other charges, are not part of costs, and other charges, are not part of the tobacco.” the tobacco.”  “Based on the plai “Based on the plain meani meaning ng of wholesale

• f wholesale sales pri

sales price, we conclude the plai ce, we conclude the plain meani meaning ng of

• f

wholesale wholesale sales pri sales price ce is is t the manufacturer’s sales pri he manufacturer’s sales price ce of the tobacco and not the domesti

• f the tobacco and not the domestic

di distributor’s stributor’s in invoi voice ce pri price.” ce.”

Case Study Case Study – – Florida Bee Florida Bee

  Challenge Challenge Assessment Outright Assessment Outright   Challenge Challenge Rule or Rule or Unadopted Unadopted Rule Rule   Or Both! Or Both!

Challenges Challenges

  Protest underlying assessment Protest underlying assessment – Stalled Stalled in in DOAH DOAH pending pending rule challenge rule challenge

 Statutory Argument Statutory Argument  Fai Failure lure to Consi to Consider Pri der Prior A

• r Audi

udits ts & FL. & FL. Bee’s Reli Bee’s Reliance on them ance on them  Mi Micjo cjo

Florida Bee Florida Bee Traditional Assessment Traditional Assessment Challenge Challenge

  Department’s Department’s Va Varyi rying I ng Interpretations nterpretations of “Wholesale

• f “Wholesale Sales Price”

Sales Price”

 Not readi Not readily ly apparent from plai apparent from plain meani meaning ng of statute

• f statute

 Not readi Not readily ly apparent from meani apparent from meaning ng as i as interpreted i nterpreted in Mi Micjo cjo  Legi Legislati slative ve In Intent tent is is a an i n inappropri nappropriate argument ate argument  Expansi Expansive ve in interpretati terpretation

• n not appropri

not appropriate ate when i when interpreti nterpreting ng tax statutes tax statutes  Ambiguities Ambiguities resolve i resolve in the favor of Flori the favor of Florida da Bee Bee

Florida Bee Florida Bee Rule Challenge Rule Challenge

  Final Final Order Order

 “The suggesti “The suggestion

• n by the

by the Mi Micjo cjo Court that “the meani Court that “the meaning ng of thi

• f this

s statute and the legi statute and the legislature’s slature’s language i language is clear,” and the Department’s statement that the term “establi clear,” and the Department’s statement that the term “established shed pri price” i ce” is “clear “clear and unambi and unambiguous,” i guous,” is amusi

• amusing. Thi
• ng. This case i

case is obvi

• bviously
• usly fraught wi

fraught with th di

• difficulty. “
• fficulty. “

 Held i Held in favor of Flori favor of Florida da Bee, Bee, find findin ing that the Department of Busi that the Department of Business ness and Professi and Professional

• nal Regulati

Regulation’s

• n’s

poli policy cy statement “concerni statement “concerning the i ng the inclusion nclusion of federal exci

• f federal excise

se tax and shi tax and shipping pping charges for charges for purposes of calculating purposes of calculating the other tobacco products tax i the other tobacco products tax is s an an unadopted unadopted rule whose exi rule whose existence stence violates violates secti section

• n 120.54(1)(a),

120.54(1)(a), Flori Florida da Statutes.” Statutes.”

  Affirmed Affirmed by 1 by 1st

st DCA

DCA

Florida Bee Florida Bee Rule Challenge Rule Challenge

  Don’t be distracted by the merits of the underlying case. These cases are procedural Don’t be distracted by the merits of the underlying case. These cases are procedural in in nature. nature.   Explicit Explicit rules are easy to identify; rules are easy to identify; I Implicit mplicit rules need to be clearly defined rules need to be clearly defined by you by you   In Include clude alternative argument alternative argument that even if you are wrong, that even if you are wrong, there is at least some ambiguity there is at least some ambiguity and it must be resolved in favor of the taxpayer. and it must be resolved in favor of the taxpayer. Ma Maas Bros., Inc. as Bros., Inc. v. Dickinson

• v. Dickinson,1

,195 So. 2d 95 So. 2d 193 ( 193 (Fla. 1967).

• Fla. 1967).

Tips for Tips for Unadopted Unadopted Rule Challenges Rule Challenges

  Oral Oral Arguments Arguments   Fees Fees

Tips for Tips for Unadopted Unadopted Rule Challenges Rule Challenges

Stop Illegal Stop Illegal Adoptions! Adoptions! JerryDonnini@FloridaSalesTax.com JerryDonnini@FloridaSalesTax.com 954 954-642 642-9390 9390 JeanetteMoffa@FloridaSalesTax.com JeanetteMoffa@FloridaSalesTax.com 954 954-800 800-4138 4138 www.FloridaSalesTax.com www.FloridaSalesTax.com

Questions? Questions?