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Florida floral business asks U.S. Supreme Court to hear tax dispute

By Taryn Phaneuf | Nov 20, 2016

TALLAHASSEE — A Florida florist has asked the U.S. Supreme Court to review the state’s flower tax after the Florida Supreme Court upheld the levy in a decision issued in May.

The Florida Supreme Court ruled against American Business USA Corp. when it 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, the defendant in the lawsuit, argued that American Business USA Corp. should have to pay sales tax. The court’s decision overturned that of an appellate court, which determined the tax was unconstitutional because it violates a federal commerce clause of the U.S. Constitution, called the dormant commerce clause, which prevents a state from passing a law that burdens or discriminates against interstate commerce.

The state’s actions amount to taxing customers in other states, which violates Supreme Court precedent, Joe Henchman, vice president for state and legal affairs at the Tax Foundation, told the Florida Record in an exclusive statement. The Tax Foundation is an independent tax policy research organization.

"(The Florida court’s decision) is essentially granting Florida the authority to apply its sales tax to customers all over the country, clearly burdening interstate commerce, an area of authority left to the U.S. Congress," Henchman told the Florida Record.

American Business has asked the U.S. Supreme Court to review the dispute, arguing that the case allows the court to review its ruling in a case from 1992 that determined states can only impose sales and use taxes on companies that have a physical presence in the state. In Quill v. North Dakota, the court prevented states from imposing taxes on internet purchases made by customers residing in the state from companies based elsewhere.

It’s unclear whether the Supreme Court will agree to hear the case, Henchman said.

"It has turned down other state tax-related cases, as justices have preferred to see Congress address the interstate commerce question," Henchman said.

However, one justice indicated a willingness to revisit Quill in a previous decision. Meanwhile, Alabama and South Dakota have pending lawsuits that challenge the current rule, as well, he said.

“But those cases apply to state authority to require tax collections for sales to their residents, while Florida’s law poses the possibility of essentially taxing out-of-state residents,” he said. “What shouldn’t get lost in any of these cases is that a complex network of state tax laws with different administrative rules is an unnecessary, costly burden for businesses and the economy as a whole. State revenue concerns are understandable, but they should seek to raise that revenue in a fair, equitable and transparent manner.”

He said attempts by states like Florida to expand sales tax nexus laws — or laws regarding what constitutes sufficient physical presence for tax purposes — are problematic but not surprising.

“In the Quill ruling, the court made it clear that creating a fair, simplified sales tax structure that no longer burdens interstate commerce was in Congress’s domain,” Henchman said. “After years of inactivity on finding a federal solution, states have become more aggressive in expanding their nexus rules. But the more states expand their ability to apply their sales taxes out-of-state without simplifying their sales tax laws, the more administrative costs and legal risks are imposed on the interstate economy.”

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Florida Department of Revenue Florida Supreme Court U.S. Supreme Court