Air Jamaica, Ltd. v. State, Dept. of Revenue

• Decision Date: 07 August 1979
• Docket Number: Nos. 78-2280,78-2300,s. 78-2280
• Citation: 374 So.2d 575
• Parties: AIR JAMAICA, LTD., and Taca International Airlines, S.A., Appellants, v. STATE of Florida, DEPARTMENT OF REVENUE, Appellee.
• Court: Florida District Court of Appeals

Page 575

374 So.2d 575

AIR JAMAICA, LTD., and Taca International Airlines, S.A., Appellants, v. STATE of Florida, DEPARTMENT OF REVENUE, Appellee.

Nos. 78-2280, 78-2300.

District Court of Appeal of Florida, Third District.

Aug. 7, 1979.

Rehearing Denied Sept. 10, 1979.

Marlow, Shofi, Ortmayer, Smith, Connell & Valerius and Thomas F. Valerius, Morton H. Silver, Miami, for appellants.

Jim Smith, Atty. Gen. and E. Wilson Crump, III, Asst. Atty. Gen., Tallahassee, for appellee.

Before PEARSON, HUBBART and SCHWARTZ, JJ.

PEARSON, Judge.

These consolidated appeals are brought by taxpayers Air Jamaica, Ltd., and Taca International Airlines, S. A., (the Airlines) from a decision of the Department of Revenue (the Department) sustaining a finding that the Airlines were liable for uncollected sales tax on packaged meals purchased by the Airlines and served to their passengers on flights to foreign countries. The assessment is pursuant to Section 212.01 et seq., Florida Statutes (1977). We affirm the finding of the Department that the packaged meals purchased in the State of Florida are subject to the sales tax.

After notification of the proposed assessment, a hearing on the cause was held before a hearing officer of the Department of Administrative Hearings. This officer entered his recommended order finding that the meals were purchased for consumption outside the State of Florida and were not subject to the state tax. He recommended that the assessment be dismissed. The Attorney General's office filed exceptions to the hearing officer's recommended order. The Department of Administrative Hearings accepted the hearing officer's findings of fact but concluded that, as a matter of law, the assessment was valid and should be sustained. Thereafter, the Governor and the Cabinet, sitting as the Department of Revenue, accepted the order of the Department of Administrative Hearings instead of the recommended order of the hearing officer. This appeal is from that order.

The essential facts in this matter have been set out by the hearing officer and, inasmuch as they have been accepted by the Department, we accept these findings as the basis for the order appealed. They are as follows:

"During the three year period from October 1, 1974 through September 30, 1977 Air Jamaica purchased prepared meals from Jerry's Caterers at Miami (Jerry's) in the total amount of $740,760.04 and Taca purchased prepared meals from Jerry's in the total amount of $161,379.72.

"Sales tax, penalty and interest through March 20, 1978 were assessed against Air Jamaica in the amount of $35,291.54 on the total paid for meals from Jerry's.

"Sales tax plus interest through November 20, 1977 were assessed against Taca in the amount of $9,359.86 on the total paid for meals from Jerry's. These figures are accepted as accurately representing 4% Of the cost of meals purchased plus interest and penalties.

"The operations with respect to the meals were identical for both Air Jamaica and Taca. Prepared meals were delivered to the aircraft by Jerry's in trays holding 25 meals. These trays are supplied with heating elements and act as ovens in which the meals are heated. When placed aboard the aircraft by Jerry's employees the trays holding meals intended to be served hot are plugged into electrical outlets on the plane. Prepared food delivered to the aircraft by Jerry's intended to be served cold obviously are not plugged into the electrical outlets.

"Air Jamaica departs from Miami and serves only Montego Bay and Jamaica. Taca departs from Miami and serves the cities of Belize, El Salvador, Nicaragua and Panama.

"Some 30 to 50 minutes after leaving Miami each company serves a meal for which no separate charge is made to the passenger. At the time these meals are served the aircraft is well outside the boundaries of Florida and either over Cuba or international waters.

"Although no separate charge is made for the meal served the cost of the meal, like every other operational and administrative cost, is considered in arriving at the air fare charged to the passenger for the transportation from Miami to destination.

"Jerry's bills the airlines for the number of meals delivered at a wholesale price of $3.48 per meal for meals served to first class passengers and $2.19 for meals served to economy passengers. Each airline provided Jerry's with tax resale certificates which relieved Jerry's from the collection of sales tax on meals delivered to the aircraft."

Based upon these facts, the hearing officer recommended that the assessment be dismissed because it was his conclusion that Section 212.07(2), Florida Statutes (1977), violated the supremacy clause of the United States Constitution if applied to tickets sold to passengers in interstate or foreign commerce in that it would violate 49 U.S.C.A. 1513 (West 1976), which provides in pertinent part:

"(a) No State (or political subdivision thereof . . .) shall levy or collect a tax, fee, head charge, or other charge, directly or indirectly, on persons traveling in air commerce or on the carriage of persons traveling in air commerce or on the sale of air transportation or on the gross receipts derived therefrom; except that any State (or political subdivision . . .) which levied a tax, fee, head charge, or other charge, directly or indirectly, on persons traveling in air commerce or on the carriage of persons traveling in air commerce or on the sale of air transportation or on the gross receipts derived therefrom prior to May 21, 1970, shall be exempt from the provisions of this subsection until December 31, 1973.

"(b) Nothing in this section shall prohibit a State . . . from the levy or collection of taxes other than those enumerated in subsection (a) of this section, including property taxes, net income taxes, franchise taxes, and sales or use taxes on the sale of goods or services; and nothing in this section shall prohibit a State . . . owning or operating an airport from levying or collecting reasonable rental charges, landing fees, and other service charges from aircraft operators for the use of airport facilities."

He further held that the assessment of the tax would be in derogation of Section 212.06(5)(a), Florida Statutes (1977), which states that Chapter 212 is not intended to levy a tax on exports delivered "to a common carrier for shipment outside the state."

The Department in accepting the findings of fact of the hearing officer and declining to follow his legal conclusions reached the decision that the assessment did not violate the supremacy clause and that the sale of packaged meals to the Airlines did not constitute an export of the meals.

The position of the two appellant Airlines is identical on this appeal, and a decision for one would necessarily include a decision for the other. It is first argued that the Department's order violates Article I, Section 10, of the United States Constitution because the meals are purchased for export and, therefore, exempt from state sales tax. We think that this position cannot be successfully maintained in the light of the fact that the meals are consumed on board before reaching a foreign country. The United States Supreme Court, in determining the nature of goods shipped as to whether they were exports, has held that the term "export" includes the necessity of delivery to another country. See Swan & Finch Company v. United States, 190 U.S. 143, 23 S.Ct. 702, 47 L.Ed. 984 (1903). This rationale has been followed by other courts dealing with the exemption of goods from taxation. See Shell Oil Company v. State Board of Equalization, 64 Cal.2d 713, 51 Cal.Rptr. 524, 414 P.2d 820 (1936); and Collector of Revenue v. J. L. Richardson Company, 247 So.2d 151 (La.App. 4th Cir. 1971). We hold, therefore, that the Department correctly determined that the sale of the packaged meals to the Airlines in the State of Florida was not exempt as an export of the meals.

The Airlines, both of which are foreign carriers, next urge that the Department's order conflicts with 49 U.S.C.A. 1513 (West 1976). This statute, which has already been quoted, is not applicable because Section (b) thereof clearly exempts state sales taxes from its provisions.

The Airlines next urge that the Department's order is contrary to Florida Statutes, and particularly the sales tax chapter, because the packaged meals are purchased in Florida for resale and are resold outside of the state. They draw our attention to Section 212.06, Florida Statutes (1977), which provides in pertinent part:

"(1)(a) The aforesaid tax at the rate of four per cent of the retail sales price as of the moment of sale, four per cent of the cost price as of the moment of purchase, or four per cent of the cost price as of the moment of commingling with the general mass of property in this state, as the case may be, shall be collectible from all dealers as herein defined on the sale at retail, the use, the consumption, the distribution and the storage for use or consumption in the state, of tangible personal property.

"(2)(c) The term 'dealer' is further defined to mean every person, as used in this chapter, who sells at retail, or who offers for sale at retail, or who has in his possession for sale at retail, or for use, or consumption, or distribution, or storage to be used or consumed in this state, tangible personal property as defined herein.

"(3) Every dealer making sales, whether within or outside the state, of tangible personal property, for distribution, storage, or use or other consumption, in this state, shall at the time of making sales, collect the tax imposed by this chapter from the purchaser."

In support of this argument, the foreign carriers urge that

"(t)he testimony of appellant's regional manager was that the cost of the meals is included in the price of the ticket. Clearly the meal is being sold to the passenger, payment for which is incorporated in the price of the carriage. As this...