---~---~---------------- Electronically Filed 10/04/2013 02:18:29 PM ET IN THE CIRCUIT COURT OF THE SECOND JUDICIAL CIRCUIT IN AND FOR LEON COUNTY, FLORIDA CARDTRONICS USA, INC., Plaintiff, vs. CASE NO.: 13-CA-2136 FLORIDA DEPARTMENT OF REVENUE, Defendant. FIRST AMENDED COMPLAINT Plaintiff, Cardtronics USA, Inc., pursuant to Chapter 72 and 86, Florida Statutes, sues Defendant, Florida Department of Revenue ("Department"), and alleges: Introduction 1. This is an action brought pursuant to Section 72.011, Florida Statutes, contesting the legality of the Department's proposed assessment of sales and use tax (including penalties and interest) issued against Plaintiff (referred to herein as the "Assessment"). 2. This is also an action brought pursuant to Section 86, Florida Statutes, seeking a declaration that the business relationship involving the operation of financial kiosks discussed below is not a "lease" or "license" to use real property. Identity of Parties 3. Plaintiff is a corporation formed under the laws of the State of Delaware with its headquarters located in Houston, Texas, and authorized to conduct and conducting business in Florida.
4. The Department is an agency of the State of Florida. By law, the Department is vested with the responsibility of regulating, controlling, and administering the revenue. laws of the State of Florida, including specifically the laws relating to the imposition and collection of the sales and use tax imposed under Chapter 212, Florida Statutes. See Section 213.05, Florida Statutes. Jurisdiction and Venue 5. This action is authorized by Section 72.011 and 86.011, Florida Statutes. 6. This action is timely filed in accordance with Section 72.011(2), Florida Statutes. 7. Venue is proper in this circuit pursuant to Section 72.011(4)(a), Florida Statutes, and because Plaintiff has entered into one or more Placement Agreements discussed below in Leon County, Florida. Assessment 8. The Assessment was issued for the period August 1, 2008 through July 31, 2011 (referred to herein as the "Audit Period"). The Assessment, styled as a Notice of Proposed Assessment and dated November 13, 2012, is attached hereto and incorporated herein as Exhibit A. 9. The Assessment became "final" for purposes of Section 72.011(1), Florida Statutes, on June 3, 2013, when the Department issued to Plaintiff a Notice of Reconsideration sustaining the Assessment. 10. Plaintiff is contesting the Assessment in its entirety except for the tax amount of $5,931.25 and interest in the amount of $1,416.59. These uncontested amounts have been previously paid to the Department. 2
11. Prior to the filing of this Complaint, Plaintiff submitted to the Department a request for a waiver of the section 72.011(3)(b), Florida Statutes, payment or bond requirement for the contested amount of tax and interest set forth in the Assessment. By letter dated August 12, 2013, the Department agreed to Plaintiffs waiver request. A copy of the Department's August 12, 2013 waiver letter is attached hereto and incorporated herein as Exhibit B. 12. The amounts at issue in the Assessment are provided for under chapter 212, Florida Statutes. Background Allegations 13. Unless expressly stated otherwise, all facts alleged in this Complaint are true for all periods at issue herein. 14. Plaintiff owns and operates self-service financial kiosks ("Kiosks") located throughout the United States, including more than 3,000 Kiosks located in Florida including some Kiosks located in Leon County, Florida. Each Kiosk typically occupies floor space not exceeding approximately four square feet. 15. Kiosk users are able to make bank deposits and withdrawals, cash checks, transfer money, pay bills, and, in some cases, utilize various advanced financial management features. 16. For mutual benefit, Plaintiff enters into a Kiosk placement agreement (the "Placement Agreement") with each merchant (the "Merchant") for the exclusive right to install, operate, maintain, and remove the Kiosks at the Merchant's location(s) upon the agreement's fulfillment. 17. Depending upon the Placement Agreement, Merchants often agree, inter alia, to coordinate marketing efforts to maximize customer usage of the Kiosks; allow the use of the Merchant's branding on the Kiosks; provide data communication lines and pay the related 3
.,, expense; maintain security; provide electrical hook ups and electricity; maintain Kiosk signage; and absorb related premises liability risks and costs. Merchants also give up product placement in exchange for Kiosks. 18. In exchange, Plaintiff pays the Merchant a negotiated fee (the 11 Merchant Fee' 1 ) for the exclusive right to operate the Kiosk(s) at each Merchant's location(s), often contingent at least in part upon a minimum number of financial transactions. 19. Merchants benefit from Kiosks in other ways, for example, by virtue of attracting additional customers and the cash the Kiosks provide to customers to buy goods and services sold by the Merchants. To this extent, Kiosks are integral to the Merchants' businesses and overall profitability. 20. Depending upon the Placement Agreement, the parties thereto often specify intrinsically valuable personal property such as cross-licensed intellectual property rights including trademarks, service marks, trade names and logos and provide for cross-branding by the Plaintiff and Merchants of the Kiosks and the images they display. 21. The Department conducted a sales and use tax audit of Plaintiffs Florida operations for the Audit Period. During the audit, the Department asserted that the Merchant Fees paid by Plaintiff for the right to operate Kiosks at Florida locations were subject to sales tax as payments for the 11 lease 11 or 11 1icense to use 11 real property. Furthermore, because Plaintiff had not paid sales tax on such Merchant Fees, the Department asserted that Plaintiff was liable for the sales tax on Merchant Fees paid during the Audit Period. 22. The Department issued the Assessment as a consequence of the referenced audit. The taxes asserted to be due in the Assessment and contested herein consist entirely of sales taxes on Plaintiffs payments of Merchant Fees for Florida locations. 4
23. Plaintiff filed a written protest of the Assessment with the Department on December 4, 2012, contesting the Assessment except for the amount of $5,931.25, which was paid by check submitted with the protest. 24. In response to the protest, the Department issued a Notice of Decision on March 26, 2013, sustaining theassessment in its entirety. 25. Plaintiff filed a petition for reconsideration with the Department on April 25, 2013, providing additional information concerning the contested issue. On June 3, 2013, the Department responded with its Notice of Reconsideration again sustaining the Assessment. 26. Plaintiff has exhausted all legally necessary administrative remedies and has otherwise satisfied all other conditions precedent to the filing of this action. Count I Invalid Tax Assessment 27. The allegations contained in paragraphs 1-26 are incorporated herein by re(~r_ence. 28. The Merchant Fees paid by Plaintiff were paid entirely for the exclusive right to operate Kiosks on the Merchants' premises. These fees are not payments for the lease of or license to use the Merchants' real property. Accordingly, the Merchant Fees are not subject to sales or use tax. 29. To the extent that any portion of the Merchant Fees are dete1mined to be payments for the lease of or license to use the Merchants' real properly located in Florida, such amount is de minimis as compared to the portion of the Merchant Fee that is consideration for the exclusive right to conduct Kiosk operations at the Merchants' premises and for intrinsically valuable personal property. Accordingly, the Merchant Fees are not subject to sales or use tax. 5
30. Alternatively, to the extent that any portion of the Merchant Fees is determined to be attributable to the use of the Merchants' real property located in Florida, the arrangement between Plaintiff and the Merchants constitutes a non-taxable bailment for mut1ial benefit and not a lease or license of real property. Accordingly, the Merchant Fees are not subject to sales or use tax. 31. Alternatively, to the extent that any portion of the Merchant Fees are determined to be attributable to the use of the Merchant's real property located in Florida, only the portion that is reasonably attributable to the license or lease of real property is subject to sales tax. The remainder of the Merchant Fees paid by Plaintiff is not subject to sales tax. 32. The Assessment is contrary to the terms of Chapter 212, Florida Statutes, and is, therefore, unlawful and invalid either in part or in its entirety. Count II Assessed Taxes Previously Paid.. 3_3_. The allegatiqns containedjn_paragi:.aphs_ l:-2_6 _are _incorpi:n:ated herein by reference. 34. One of the Merchants to which Plaintiff paid Merchant Fees relating to Florida locations during the Audit Period is remitted Florida sales taxes to the Department on Merchant Fees paid to it by Plaintiff for Florida locations during the Audit Period. 35. The Assessment includes sales taxes on Plaintiffs transactions with on which previously paid sales taxes to the Department. 36. Even if the Merchant Fees are subject to sales tax, this tax cannot be collected more than once by the Department on the same transactions. 6
37. Even if the Merchant Fees are subject to sales tax, that portion of the Assessment attributable to Plaintiffs transactions with is invalid because the taxes were previously paid by Count III Unlawful& Invalid Penalty Assessment 38. The allegations contained m paragraphs 1-26 are incorporated herein by reference. 39. The Assessment includes a penalty in an amount equal to ten percent of the assessed taxes. 40. The Department is authorized by statute to compromise or settle a taxpayer's liability for penalty if it is determined that the taxpayer's noncompliance is due to reasonable cause and not to willful negligence, willful neglect, or fraud. Section 213.21(3)(a), Florida Statutes. A determination of the existence of reasonable cause is subject to de novo review in any judicial action challenging an assessment of a penalty imposed under Chapter 212, Florida Statutes. Id. 41. If Plaintiff failed to pay any sales taxes actually due during the Audit Period, Plaintiffs non-compliance was due to reasonable cause and not to willful negligence, willful neglect or fraud. 42. By imposing and failing to compromise or settle the penalty included within the Assessment, the Department abused the discretion afforded to it by Section 213.21(3)(a), Florida Statutes, and acted in an unlawful manner. 7
43. The penalty assessed against Plaintiff for the Audit Period must be compromised in its entirety in accordance with Section 213.21(3)(a), Florida Statutes. 44. The Assessment is invalid to the extent it imposes a penalty. Count IV Declaratory Judgment 45. The allegations contained in paragraphs 1-26 are incorporated herein by reference. 46. There is a bona fide, actual, present and practical need for a declaration and Plaintiff is in doubt whether the Placement Agreements into which the Plaintiff entered with Merchants, such as the Placement Agreement into which the Plaintiff has entered with 7-11, a redacted true and correct copy of which is attached hereto and incorporated herein as Exhibit C (the "7-11 Placement Agreement"), amount exclusively or in part to a "lease" or "license" for the privilege to use or occupy real property within the meaning of section 212.02(10), Florida... Statut~E;,. sq th<ltp<lyl:ll_e11t~ _ar.e 11\Jj ~()t_jq._t~~atiq11 ~.Ql1t:t9I.. in fu.ll1111d_~_r s_e_qtiq1li12,q3l (l)(c;)., Florida Statutes, or whether by virtue of the Placement Agreements, such as the 7-11 Placement Agreement, the Plaintiff is exclusively or in part a "tenant" or person "actually occupying, using or entitled to use any real property from which rental or license fee is subject to taxation" within the meaning of Rule 12A-l.070( 4), Florida Administrative Code. 47. There is also a bona fide, actual, present and practical need for a declaration and Plaintiff is in doubt whether the Placement Agreements, such as the 7-11 Placement Agreement, into which the Plaintiff has entered concern in part or in full "intrinsically valuable personal property" such as franchises, trademarks, service marks, and logos not subject to tax under section 212.031(1)(c), Florida Statutes; or concern a nontaxable bailment for mutual benefit; or 8
whether there must be a reasonable allocation of payments between payments taxable as rent or license fee and payments not subject to tax. 48. A declaration will deal with a present, ascertained or ascertainable state of facts, or present controversy as to a state of facts inasmuch as the Defendant has treated the Placement Agreements, -such as the 7-11 Placement Agreement, as giving rise exclusively to a lease or license and as not concerning intrinsically valuable personal property, and imposed the Assessment upon the Plaintiff as if it were exclusively a tenant or person actually occupying, using or entitled to use real property from which rental or license fee is subject to taxation. 49. Plaintiffs right to enter into the Placement Agreements, such as the 7-11 Placement Agreement, without the imposition of rental taxation is dependent upon the facts or the law applicable to these facts. 50. The Plaintiff has an actual, present, adverse and antagonistic interest in the treatment of the Placement Agreements, such as the 7-11 Placement Agreement, as taxable leases or license agreements as compared to the Defendant. 51. The antagonistic and adverse interests are all before the court. 52. The relief sought is not merely the giving of legal advice by the court or the answers or questions propounded from curiosity. Prayer for Relief WHEREFORE, Plaintiff, Cardtronics USA, Inc., requests that this Court: 1. Enter an order invalidating the contested portion of the Assessment in its entirety. 2. In the alternative, enter an order invalidating those portions of the Assessment which are determined to be unlawful. 9
-------------- 3. Declare that the Placement Agreements, such as the 7-11 Placement Agreement, and operation of Kiosks does not amount in whole or in part to a lease or license to use real property taxable under section 212.031, Florida Statutes and Rule 12A-l.070(4), or that section 212.02(10), 212.031(1)(c), and/or Rule 12A-l.070(4) are invalid to the extent they require treatment as such. 4. Declare that by virtue of its Placement Agreements, such as the 7-11 Placement Agreement, the Plaintiff is not exclusively or at all a "tenant" within the meaning of Rule 12A- 1.070(4), Florida Administrative Code, or that Rule 12A-l.070(4) is invalid to the extent it requires treatment as such. 5. Declare that the Placement Agreements, such as the 7-11 Placement Agreement, concern exclusively or in part intrinsically valuable personal property such as trademarks, service marks, and logos not subject to tax or a nontaxable bailment for mutual benefit. 6. Alternatively, declare that the Placement Agreements, such as the 7-11 Placement Agreement, are contractual arrangements that provide for both payments taxable as total rent or license fee and payments not subject to tax, requiring a reasonable allocation of such payments in accordance with section 212.031(1)(c), Florida Statutes. 7. Allow Plaintiff its costs herein and such other relief as may appear to this Court to be equitable and just. Submitted this 4th day of October, 2013. s/ Jam es M. Ervin, Jr. James M. Ervin, Jr. E-mail: jim.ervin@hklaw.com Secondary e-mail: janna.james@hklaw.com Phone: 850-425-5649 Fla. Bar No. 353574 10
--- ----- - --------~-~---- -------------- - c Nathan A. Adams, IV E-mail: nathan.adams@hklaw.com Phone: 850-425-5640 Fla. Bar No. 0090492 HOLLAND & KNIGHT LLP 315 South Calhoun Street, Suite 600 Tallahassee, FL 32301 Phone: 850-224-7000 Fax: 850:-224:.8832 Attorneys for Plaintiff Cardtronics USA, Inc. 11 #25985538_vl