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Florida Statute Imposing Tax on Florists Does Not Violation U.S. Constitution


Nexus

A Florida statute that imposes a sales and use tax on florists did not violate the Commerce Clause of the U.S. Constitution as applied to online sales of flowers, gift baskets, and other tangible personal property. Additionally, the statute did not violate the Due Process Clause since the taxpayer’s activities created substantial nexus in Florida. The taxpayer did not maintain any inventory of flowers, gift baskets, and other items of tangible personal property for its online sales, but would instead use local florists to fill the orders. The taxpayer charged sales tax on flowers and other items delivered in Florida by local florists, but it did not charge sales tax on flowers and other items delivered outside Florida. The relevant statute provides that florists located in Florida are liable for sales tax on sales to retail customers regardless of where or by whom the items are to be delivered. It also states that Florida florists are not liable for sales tax on payments received from other florists for items delivered to Florida customers. This is a common statute specific to florists across the states.  An Appellate Court held that imposing taxes on sales to out-of-state customers for out-of-state flower and gift deliveries violated the Commerce Clause, and accordingly, the tax was unconstitutional as applied to those sales.

 

The Florida Supreme Court held that the relevant statute does not violate the Commerce Clause as applied to the taxpayer’s online sales. The taxpayer had more than a slight presence in Florida. Its economic activities and transactions occurred at its principal place of business in Florida, where online orders were taken. The taxpayer had been doing business in Florida since 2001. As a result, the taxpayer’s activities created substantial nexus in Florida. The taxpayer argued that Florida sales tax should not apply since the taxpayer was being taxed on out-of-state sales that were not consummated until delivery took place out of state. The Florida Department of Revenue responded that it was the transactions that occurred in Florida that were being taxed, and that the transactions occurred in Florida where the taxpayer facilitated every stage of the transaction. The statute taxes the transaction that occurs in Florida, not the items sold or the activities that occur out of state. The tax did not discriminate against interstate commerce nor provide a direct commercial advantage to local business. The statute contains no provision that affords preferential treatment or commercial advantage to a Florida business over an out-of-state business. The court also held that the tax was fairly related to the services provided by Florida and that there was a reasonable relationship between the taxpayer’s presence and activities in Florida and the tax at issue. As a result, the statute did not violate the dormant Commerce Clause.

 

Additionally, the statute did not violate the Due Process Clause. Due process requires that there be some minimal connection between the state and the transaction it seeks to tax. The taxpayer has a physical presence and does business within Florida, and its activities create substantial nexus in Florida. (Florida Department of Revenue v. American Business USA Corp., Florida Supreme Court, No. SC14-2404, May 26, 2016)

 

UPDATE: On February 21, 2017, the U.S. Supreme Court denied a request to review the Florida Supreme Court’s decision that upheld the state’s imposition of sales and use tax on online florist sales. Therefore, the Florida Supreme Court decision stands and the provisions related to the taxation of florist sales is constitutional. (American Business USA Corp. v. Florida Department of Revenue, U.S. Supreme Court, Dkt. 16-567, petition for certiorari denied February 21, 2017)

(03/13/2017)
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