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FL Sales Tax: Rhinehart Equipment on to the Appellate Courts


Rhinehart Equipment on to the Appellate Courts

Just when the Florida Department of Revenue ("Department") thinks they have finally chalked up a sales tax legal victory, Rhinehart Equipment comes back swinging in the case Rhinehart Equipment Co, vs. Department of Revenue, Fla. 1st DCA, Case No. 11-2567. We will discuss the appellate case in-depth below, but first: hats off to Rex D. Ware, Esq. of Buchanan, Ingersoll, Rooney, PC for taking up the cause in this case.

Rhinehart Equipment Co. ("Rhinehart") is a dealer based out of Rome, Georgia that had been selling heavy equipment into the state of Florida. Rhinehart does not own or maintain a showroom or office space in Florida, nor does Rhinehart directly provide financing to any Florida resident for any of its sales. Additionally, Rhinehart does not have any employees in Florida. Rhinehart's employees deliver the equipment to Florida and may pick up trade-in vehicles from Florida customers with the same employees and equipment. However, what may have been the tipping point to claim Rhinehart had nexus in Florida, Rhinehart advertised in a heavy tractor equipment—Florida edition—magazine.

Argued by Richard L. Winston, Esq. and Rex D. Ware, Esq., Rhinehart, in its Initial Brief, makes two very compelling arguments: First, the Department's jurisdiction to impose sales and use tax on transactions that are interstate in nature is limited by the U.S. Constitution and Second, the Department waited approximately four years after Rhinehart filed a protest denying liability, as such, the Department was prohibited from assessing those taxes based on the three year statute of limitations set forth in Section 95.091, Florida Statutes ("F.S.").

U.S. Constitutional Limitation on Jurisdiction: In a very bold statement, Rhinehart argued that the Amended Final Order overturned decisions of the U.S. Supreme Court, in addition to the Florida District Court of Appeal. Rhinehart based their entire argument on the proposition resulting from Miller Bros., a State may not impose taxes on an out-of-state company that uses its own trucks to deliver products into the State.[i] The U.S. Supreme Court held that delivery of merchandise into Maryland using its own trucks and drivers was legally insufficient to allow Maryland to impose a tax on the petitioner. If Rhinehart's argument proves to be persuasive the Department's Amended Final Order will have effectively ignored the U.S. Supreme Court precedent.

In a game of numbers, the Department attempts to convolute the entire matter by claiming that a store 16 miles from the Maryland state line may expect a mix of sales from residents of the border state, whereas Rhinehart, located approximately 300 miles north of the Florida state line, solicited Florida buyers. By allowing this argument to stand, the Department would create a different Constitutional standard of state tax nexus for larger versus smaller states, as well as geographically longer and wider states. This is simply not a logical outcome for a state.

Statute of Limitations Challenge:

Section 95.091(3)(a), Florida Statutes ("F.S."), provides the statute of limitation rules for Florida sales and use tax with regards to both taxpayer refunds and Florida Department of Revenue assessments. The general rule is the statute of limitations for assessments or refunds is 3 years from the later of the date the return is due or the return is filed.

Despite its losing argument the first time around since the Department contacted the taxpayer multiple times before the taxpayer ever turned over information, Rhinehart argues that the Department seemingly disregarded the 3 year statute of limitations and instead attempted to stand for the idea that the statute of limitations never runs for a taxpayer who files a protest with the Department. Essentially, Rhinehart is claiming that the Department thinks they do not need to abide by the law.

The Department bases their response on three words – "at any time…" – so that the Department may pursue an assessment at any time after a taxpayer has failed to make any required payment of tax, unless the taxpayer has disclosed in writing the liability before being contacted by DOR. While persuasive at best, it is hard to believe that three words can be taken completely out of context in an effort to evade the statute of limitations. Clearly, as Rhinehart stated in its Reply Brief, the Department was fully aware that the clock was running, but chose to wait more than 3 years to issue its assessment and it barred from issuing its assessment.

Florida Hurricanes: The hurricane seasons of 2004 and 2005 brought nearly unprecedented destruction in Florida. With destruction comes heavy equipment. In an intriguing argument, Rhinehart states that in response to the major hurricanes making landfall in Florida, Rhinehart's sales and deliveries into Florida spiked compared to the two years prior. Rhinehart's customers sought out Rhinehart to fill a critical need during a State emergency. This would leave open the idea that the calendar years of the hurricanes could be enough to establish "substantial nexus," which the Department points out. The Department believes Rhinehart's argument lacks even a single citation supporting its proposition. However, Rhinehart points out the basic principles in Quill that a State cannot impose a sales and use tax on an out of state vendor until that vendor has substantial physical presence in the taxing State.[ii]

Although unsuccessful at the lower court, the result of this case may prove to be very beneficial to taxpayers. This case is also a good example of the need to consult with experience sales and use tax professionals when selling tangible personal property across state lines. Proper planning for even the gray areas of sales tax law can greatly reduce the time and expenses of having to deal with this type of situation.

the Law Offices of Moffa, Sutton, & Donnini, P.A. is a law firm dedicated to defending businesses against the Florida Department of Revenue, primarily in over sales and use tax matters. If your company or your client is having a problem with the Florida Department of Revenue, then please take advantage of our free initial consultation to see how you can fight back.

Bryan Appel; Florida Sales Tax Attorney; Florida Sales Tax Audit; Florida Sales Tax Litigation; Fort Lauderdale Sales Tax Attorney; Fort Lauderdale Sales Tax Audit

About the author: Mr. Appel is a law clerk with a the Law Offices of Moffa, Sutton, & Donnini, P.A. based in Fort Lauderdale, Florida. Mr. Appel's primary practice areas are Florida sales and use tax and multi-state sales and use tax. Mr. Appel earned a B.S. in Accounting and a Minor in Legal Environment of Business from The Pennsylvania State University. Mr. Appel is currently a Juris Doctorate Candidate at Nova Southeastern University Law School with an expected graduation in May 2016. Presently, Mr. Appel is the Executive Editor of ILSA Journal of International and Comparative Law, a Student-Coach and Advocate for Phillip C. Jessup International Law Moot Court, and a member of Nova Trial Association.


Rhinehart Equipment Co v. Florida Department of Revenue, Fla. 1DCA Case No. 1D14-3966

Initial Brief of Appellant

Reply Brief of Appellee

Answer Brief of Appellant


FL LITIGATION ALERT – RHINEHART EQUIPMENT – SOL, NEXUS, & A TIPSTER, published October 15, 2012, by James Sutton, CPA, Esq.

PLETHORA OF SALES TAX LITIGATION IN FLORIDA, published June 8, 2015, by James Sutton, CPA, Esq.

BURDEN OF PROOF & PERSUASION IN FL TAX CASES, published May 31, 2015, by James McAuley, Esq.

JAILED FOR MERE $1,500 IN FL SALES TAX – ORLANDO SIGN COMPANY OWNER, published July 6, 2014, by Matthew Parker, Esq.

CRIPPLING PENALTIES UNDER FLORIDA SALES AND USE TAX LAW, published July 19, 2012, by James Sutton, CPA, Esq.


[i] Miller Bros. Co. v. Maryland, 347 U.S. 340 (1954).

[ii] Quill v. North Dakota, 504 U.S. 298 (1992).