final until disposition of timely filed motion for rehearing.
Appeal from the State of Florida, Department of Revenue Lower
Tribunal No. AUDIT# 200199515, BPN:0003398990.
DiRuzzo & Company, Joseph A. DiRuzzo, III, and Daniel M.
Lader (Fort Lauderdale), for appellant.
Moody, Attorney General, and Randi E. Dincher, Assistant
Attorney General, (Tallahassee), for appellee.
LINDSEY, HENDON and GORDO, JJ.
case is a direct appeal pursuant to Florida Statutes section
120.68 from a "Notice of Decision" issued on
November 16, 2018, by the Florida Department of Revenue (the
"Department") following the Department's audit
of Appellant, A & S Entertainment, LLC ("A &
S"). The Notice of Decision informed A & S that it
owed the State of Florida sales and use tax, penalties and
accrued interest totaling $1, 925, 953.17. A & S argues
in this appeal that the Department denied it procedural due
process throughout the course of the audit because the
Department prepared its tax assessment without considering
certain unverified documents untimely submitted by A & S.
A & S further contends that the Department misapplied the
law in categorizing certain fees as taxable income. As we
conclude the Department afforded A & S procedural due
process and properly applied the law during its audit, we
& PROCEDURAL BACKGROUND
S is a company that owns and operates adult entertainment
establishments. In February of 2016, the Department issued A
& S a "Notice of Intent to Audit Books and
Records" and commenced an audit of its sales tax
liability, for the time period of January 1, 2013, through
December 31, 2015. The initial notice advised A & S of
the audit commencement date and included an itemized list of
the pendency of the audit, the Department sent numerous
correspondences to A & S, requesting federal income tax
records, bank statements and other information, in order to
assess A & S's outstanding sales taxes. The
Department's auditor made written requests for specific
documentation on April 7, 2016; May 13, 2016; July 19, 2016;
October 17, 2016; November 10, 2016; December 14, 2016;
December 23, 2016; January 4, 2017; January 17, 2017; and
January 30, 2017.
the first field visit, A & S's accountant and
corporate representative advised the auditor that he was
recently hired and was not in possession of the financial
records evidencing and supporting the tax returns for the
audit period. From April of 2016 to August of 2016, the
auditor attempted to meet with A & S's corporate
representative an additional five times. The representative
cancelled each meeting, stating that he was unavailable or
did not have the requisite documents. By the time the auditor
and corporate representative finally met at the end of August
of 2016, the corporate representative was still not in
possession of the requested documents.
S failed to provide verifiable bank statements, cash register
tapes, cancelled checks, an amended federal tax return for
2013 and filed federal tax returns for 2014 and 2015. On
appeal, A & S concedes the records it provided to the
Department were incomplete. Further, A & S casts doubt on
the accuracy of even the limited records it provided to the
Department by questioning the competency of its accountants.
several months of requesting documentation to no avail, the
Department's auditor used the best information available
to assess A & S's tax liability, pursuant to Florida
Statutes section 212.12(5)(b). The Department's auditor
utilized A & S's filed tax return for 2013 and its
reported gross sales to estimate A & S's unreported
sales for 2014 and 2015. Based on that data, the auditor was
able to complete the audit and prepare the Proposed
October 17, 2016, the Department sent A & S a
"Notice of Intent to Make Audit Changes" notifying
A & S that the audit had been completed. Enclosed with
the letter were copies of the audit adjustments and the audit
work papers in support thereof. This letter also provided an
opportunity for A & S to review the adjustments and
contest them within thirty days. The following day, the
corporate representative advised the auditor that additional
documentation was forthcoming. In the weeks that followed, A
& S again failed to provide the necessary documents.
Nearly four months later, the corporate representative
provided some bank statements and draft federal tax filings.
The auditor was unable to reconcile the draft tax filings
with either ...