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On February 1, 2012, a case named Micjo was decided that would change the alcohol and beverage tax world in Florida forever. Many of you in the alcohol and tobacco industry are familiar with the decision in Micjo. In Micjo, the taxpayer did not believe it had to pay Florida tobacco tax on all of the invoice components, including shipping charges and federal excise tax. Conversely, the taxpayer believed the tax should only apply to the tobacco product itself, not the federal excise tax and transportation charges. Consider this simple example - Micjo (or any tobacco distributor) gets an invoice from its supplier that says tobacco $200, federal excise tax $160, transportation charges $40, total invoice $400. Should the tobacco tax apply to the $200 or the $400? Of course our friends up at the Division of Alcoholic Beverages and Tobacco of the Florida Department of Business and Professional Regulation ("AB&T") believed it was the $400 and Micjo believed it was the $200.

To AB&T's disbelief, Micjo had the "audacity" to challenge AB&T as to what it believed was wrong. As it turns out, Micjo had the better argument and won the case. The Second District Court of Appeals looked to the statute at issue and determined that the tax should apply ONLY to the tobacco product itself. Since the case came down, many tobacco distributors and manufacturers have been claiming refunds and getting them back. Well, until recently. . . In fact, AB&T had been granting refunds… at least until the cumulative amount of the refunds began to hit tens of millions of dollars.

Recently, over the past several months, our firm has been receiving an increased number of calls from Florida tobacco distributors and manufacturers saying that AB&T has stopped issuing refunds on this issue. To my knowledge, there has been no change in the law and no new cases. Rather the almighty AB&T simply believes the court in Micjo was wrong and has been denying refunds. That's correct, despite an appellate court ruling clearing establishing how the law should be interpreted, AB&T has been completely ignoring the appellate decision.

In a recent example, Miami Hookah Co. is the most recent taxpayer to challenge the all-mighty AB&T. In Miami Hookah, the Taxpayer in an "effort to avoid the revocation or suspension of its license," paid the OTP tax to ABT based on the entire invoice amount. Included in the tax base was the federal excise tax. In late 2013, the taxpayer requested a refund from the Division to the tune of about $168,000. To put this in perspective, during the period at issue Miami Hookah purchased about $490,000 of tobacco during the period, paid about $197,000 in federal excise tax, which generated an overpayment of Florida tax of $168,000.

Following the refund claim, AB&T issued a letter of refund denial in early November. The Department did not offer much insight as to why the refund was denied. However, it did claim that "Florida law requires the Division to assess all costs included in the manufacturer's sales price when calculating OTP tax." (Emphasis added). However, as the taxpayer correctly points out in its complaint, Micjo says that tax is not calculated on all costs, but rather the tax should apply to the tobacco cost. It seems unexplainable that with an appellate case on the books that AB&T would simply ignore the decision and try the same case again. This very issue has surfaced on more than one occasion in our practice and we are litigating the exact same issue on multiple fronts.

What is even more frustrating for taxpayers is that AB&T really does not have any grounds to stand on. For taxpayers on the west coast, this is simply wrong in my opinion. Put other way taxpayers in the 14 counties governed by the second district, from Pasco Polk and Hillsborough down through Collier County, the ABT has no grounds to stand on because the Micjo case is in the same DCA as these counties. Consequently, Micjo is, legally binding the government's hands in this region of the state. For the lucky taxpayers in Florida's four other districts, AB&T will be fighting for the refunds simply because it believes Micjo is wrong.

It is likely that AB&T is playing the judicial lottery, i.e. looking to get another case before another judge in a different district with the chance of a different result. However, the appellate courts respect one another and this is really an uphill battle for AB&T. We strongly recommend if you are paying tobacco tax based on federal excise tax or shipping charges, then you should file for your refund. AB&T will likely deny the refund at which point you will be forced to file in court. Don't roll over and let them win. It is money to which you are entitled and you should not be afraid to fight for it. While many view this as the end of the road, this is just the beginning for our firm and we regularly challenge taxing agencies in court. In the right set of facts a contingency fee arrangement would be possible.

It is always worth noting that we have received word that the AB&T will not be kind to companies who simply stop paying the tax on these items, with potential civil and even criminal penalties to be threatened. We don't believe the AB&T would win if challenged on these issues, but it would likely be more costly and more risky to fight this issue by a "make them come try to take the tax from me" approach. Paying the tax then seeking a timely refund is the more cost efficient means of attacking this issue.

If you have any questions about beverage tax or tobacco tax imposed by Florida's Division of Alcoholic Beverages and Tobacco, or are under audit for beverage and tobacco tax then please contact me for a free consultation. If any agency in Florida threatens your business then please reach out to a competent Florida attorney to fight back.

Florida sales tax attorney, micjo, Florida wholesale tobacco tax, ABT tax, Florida wholesale tax, Jerry DonniniAbout the author: Mr. Donnini is a Florida and multi-state sales and use tax attorney and an associate in the law firm the Law Offices of Moffa, Sutton, & Donnini, P.A., based in Fort Lauderdale, Florida. Mr. Donnini's primary practice is Florida sales and use tax as well as Florida beverage and tobacco tax controversy. Mr. Donnini also practices in the areas of federal tax controversy, federal estate planning, Florida probate, and all other state taxes including communication service tax, motor fuel tax, and Native American taxation. Mr. Donnini is currently pursuing his LL.M. in Taxation at NYU. If you have any questions please do not hesitate to contact him via email or phone at 954-642-9390. Please also visit his blog, facebook, and Twitter


Miami Hooka Co vs FL Department of Business and Professional Regulation, 11th Jud. Cir., Miami Dade, Filed 1/13/14 (copy of the original complaint).