It hurts to handle roses. I learned this painful truth during one of my first summer jobs, which entailed individually wrapping a rose with baby’s breath and decorative greenery. Paid by piecework, I quickly learned to ignore the inevitable sharp stabs so they wouldn’t slow me down. The numerous thorn tips embedded in my fingers became a source of pride.
I didn’t think about sales tax back then, living as I was in non-sales tax New Hampshire. (Nor did I think of the potentially deadly dangers of rose thorns.) But all those individually wrapped flowers were produced for sale, and the taxation of flower sales is serious stuff. So serious that the Florida Supreme Court will hear oral arguments on “a constitutional question about whether Florida should be able to collect sales taxes on flowers ordered online and delivered in other states.”
A tale of untaxed flowers
The Florida Department of Revenue (DOR) recently audited an online flower seller based in Florida. The DOR found its sales to be subject to tax because the orders are taken in Florida. The DOR therefore held the business liable for all sorts of unpaid sales tax.
The business fought the charges and the case ended up in the Fourth District Court of Appeal, which in 2014 ruled in favor of the florist. The court determined:
“Florida impermissibly burdened interstate commerce when it taxed out-of-state customers for out-of-state deliveries of out-of-state tangible goods.”
The Department of Revenue appealed. Next up, the Florida Supreme Court will hear oral arguments on the case tomorrow, November 5, 2015.
The law is unambiguous
In the Initial Brief of Appellant Florida Department of Revenue, filed with the high court on March 3, 2015, the Department of Revenue posits that the florist’s online sales are subject to Florida sales tax in part because of § 212.05(1)(l), Fla. Stat, which reads:
“Florists located in this state are liable for sales tax on sales to retail customers regardless of where or by whom the items sold are to be delivered. Florists located in this state are not liable for sales tax on payments received from other florists for items delivered to customers in this state.”
It continues: “Florida law thus establishes that the sale of flowers takes place where the florist makes the sale — not where the flowers are delivered. A majority of states have taken the same approach.”
Constitutional limitations on state sales tax
The Answer Brief, filed May 29, 2015, opens with a powerful statement: “This appeal concerns the constitutional limitations of a state’s power to collect sales tax.” Attorneys for the flower business argue that the DOR lacks jurisdiction to collect sales tax on the company’s out-of-state flower sales, and that to impose tax on these sales is a violation of the dormant commerce clause:
“For the florist tax to pass constitutional muster, the DOR must demonstrate a nexus with the sale sought to be taxed. Here, that is the purchase of out-of-state tangible goods by an out-of-state consumer. The DOR must show a connection to the sale it seeks to tax, not just a connection to the business.”
The florist’s argument that sales tax does not apply is based on the following facts (which the Department of Revenue does not contest):
- All flowers at issue were grown outside of Florida
- All flowers at issue were stored outside of Florida
- All flowers at issue were purchased outside of Florida
- All flowers at issue were delivered outside of Florida
- No flowers ever entered Florida
- No consumers ever entered Florida
Nexus is a thorny issue
The issue of nexus — the connection between a state and a business that triggers a sales tax obligation — is thorny indeed, particularly when it relates to remote sales like the online flower sales involved in this Florida case.
The United States Supreme Court has largely avoided the issue since its 1992 case, Quill Corp. v. North Dakota. In that ruling, it underscored that Congress may be best suited to resolve the issue. To date, Congress has not resolved the issue.
As a result, states are creating their own solutions and more and more remote sales tax cases are ending up in court. Earlier this year, Justice Kennedy wrote, “ Sounds like Justice Kennedy is willing to get a few thorns in his fingers.
Sounds like Justice Kennedy is willing to get a few thorns in his fingers.