Florida—Sales and Use Tax: Statute That Imposes Tax on Florists Was Valid and Did Not Violate U.S. Constitution

A subsection of a Florida statute that imposes a sales and use tax on florists was not violative of the dormant Commerce Clause of the U.S. Constitution as applied to the taxpayer’s Internet sales of flowers, gift baskets, and other tangible personal property. Moreover, the statute did not violate the Due Process Clause in that the taxpayer’s activities had a substantial nexus to Florida.

The taxpayer, a for-profit business, did not maintain any inventory of flowers, gift baskets, and other items of tangible personal property for its online sales, but would use local florists to fill the orders. Although the taxpayer charged its customers tax on flowers and other items delivered in Florida by local florists, it did not charge its customers sales tax on flowers and other items delivered outside Florida. The 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, but Florida florists are not liable for sales tax on payments received from other florists for items delivered to Florida customers. The appellate court held that the imposition of taxes on sales to out-of-state customers for out-of-state flower and gift deliveries violated the dormant Commerce Clause, and that the tax was, as a result, unconstitutional as applied to the taxpayer’s sales to out-of-state customers for out-of-state delivery.

Commerce Clause

In evaluating a tax regarding its compliance with the Commerce Clause, the tax has been sustained when it: (1) is applied to an activity with a substantial nexus with the taxing state; (2) is fairly apportioned; (3) does not discriminate against interstate commerce; and (4) is fairly related to the services provided by the state. The Florida Supreme Court considered each prong and held that the state statute does not violate the dormant Commerce Clause as applied to the taxpayer’s internet sales of flowers, gift baskets, and other tangible personal property.

The taxpayer had more than a slight presence in Florida. Its economic activities and transactions occurred at its principal place of business in Florida, in taking Internet orders for flowers, gift baskets, and other tangible personal property and arranging for those items to be located and delivered out of state. In addition, the taxpayer had been doing business in Florida since 2001. As such, the taxpayer’s activities had a substantial nexus with Florida.

Regarding whether the tax was fairly apportioned, the taxpayer argued that the Florida tax should not apply because the taxpayer was being taxed on out-of-state sales that were not consummated until delivery was effected out of state. The Florida Department of Revenue responded that it was the transactions that occurred in Florida that were being taxed in Florida, and that the transactions occurred in Florida where the taxpayer facilitated every stage of the transaction from advertising for customers, accepting their orders, receiving payment, and locating and transmitting the orders to third-party florists. The Court noted that the U.S. Supreme Court has allowed some incidental effect on interstate commerce if the statute generally operates in an even-handed and non-discriminatory manner and the state is not attempting to take more than its fair share of taxes, and held that was what had occurred in the instant case. The statute taxes the transaction that occurs in Florida and not the items sold or the activities that occur out of state.

Also, the tax did not discriminate against interstate commerce nor did it provide a direct commercial advantage to local business. The statute contains no provision that affords preferential treatment or any 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. The taxpayer, who benefits from Florida public safety agencies as well as the orderly, civilized society afforded it by the state, had by its presence and transactions in Florida availed itself of the opportunities and protections made possible in part by the taxes imposed on its sales transactions. Consequently, the statute did not violate the dormant Commerce Clause.

Due Process Clause

In addition, there was no violation of the Due Process Clause. Due process requires only 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 have a substantial nexus to Florida. Consequently, the minimum connection required to satisfy due process was also met.

Florida Department of Revenue v. American Business USA Corp., Florida Supreme Court, No. SC14-2404, May 26, 2016, ¶206-181

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Wolters Kluwer TAA

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