TALLAHASSEE – The Florida Supreme Court recently determined it’s constitutional to tax the sale of flowers that are ordered online through a company that resides in the state even though the order is fulfilled outside the state.
The Florida Department of Revenue argued that American Business USA Corp. should have to pay sales tax. The court’s decision overturns one of an appellate court, which determined the tax was unconstitutional because it violates a federal commerce clause of the U.S. Constitution.
The dormant Commerce Clause stops a state from passing a law that burdens or discriminates against interstate commerce.
James Sutton, a certified public accountant and attorney at Moffa, Gainor & Sutton in Tampa, who wrote a friend-of-the-court brief in the case supporting American Business USA, was disappointed by the outcome.
“I think it is the wrong decision,” Sutton told the Florida Record. “I’m hoping it’s going to get appealed but I don’t think it’s going to.”
When sales taxes were enacted in the 1930s, florists were already using this model of filling out-of-state orders with out-of-state florists, according to Sutton’s brief. Floral companies lobbied state legislatures to establish that flowers should only be taxed in the state where the order is placed. But only 36 states passed laws to that effect.
“What the florist industry did not realize at the time is that they should have lobbied the U.S. Congress, who has the power to regulate interstate commerce. Any attempts for states to do so are limited by now well-developed dormant commerce clause precedents,” the brief states. “The fact that the industry was partially successful in accomplishing at the state level what should have been done at the federal level does not make such state laws any less unconstitutional.”
He said taking orders over the internet and arranging for their fulfillment and delivery by another company isn’t a business model reserved for florists anymore. Companies like eBay and Amazon operate this way. It makes American Business USA more like a broker – like a travel company that books hotels or flights. Without an inventory of flower, the company shouldn’t even be considered a florist under the state law, Sutton said.
Despite adamant arguments by the revenue department that this tax would only apply to florists, he thinks it could eventually be seen as precedent for taxes on other kinds of businesses that operate similarly within the state.
The 4th District Court of Appeal had concluded that the state had violated the clause by taxing flowers that are delivered out of state. The appeals court questioned the nexus with Florida – a legal term used to mean a company has a sufficient presence in a state that would require it to pay taxes. Since the order is placed and delivered outside the state, there is no nexus, the appeals court said. The Supreme Court disagreed.
"American Business is physically located in Wellington, Florida, and operates its business from that location," Florida Supreme Court Chief Justice Jorge Labarga wrote in the ruling. "It benefits from the public safety agencies of the state, as well as other infrastructure and public amenities paid for by state taxes. … Thus, there is a reasonable relationship between the company's presence and activities in the state and the tax at issue."