Anytime I need a gift for just about any reason, 1-800 Flowers or Flowers.com, is where I turn to first. The online retailers make it incredibly easy for someone who needs as much help as I normally do to send gifts to others. I can just go online, pick one of their pre-packaged gifts, give them my credit card, and then the recipient magically receives the gift as quickly as I need it. Recently, the Florida Department of Revenue decided that it is entitled to sales tax whether the flowers are delivered in Florida or outside of its borders. Being that this is contrary to normal sales tax destination rules, the taxpayer decided to fight back.
This story started when American Business USA Corp received an audit notice from the Florida Department of Revenue. As stated above, its business model seemed similar to that of 1-800 flowers or Flowers.com. Specifically, the taxpayer would use local florists to fill the orders placed online to its website. Armed with section 212.05, Florida Statutes (“F.S.”), the auditor wrote up the out-of-state sales as taxable. Florida law states:
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.
Similar to the position the taxpayer took, I would not think it was fair if Florida got tax on flowers ordered online sent to one of my relatives in Pennsylvania, or any other state.
The Taxpayer appealed the case by filing a protest with the Florida Department of Revenue. Eventually, the administrative law judge in favor of the Department and the Department issued a final order to that effect. Likely because the administrative court often only applies Florida law to a set of facts, it interpreted the statute above as applicable to the taxpayer. Consequently, it ruled in favor of the DOR.
Faced with no alternative but to pay the tax, the online flower company appealed the order. Appealing an administrative decision is often an effective route to challenge the constitutionality of a particular law. Here, the taxpayer believed the Florida law violated the due process clause and the commerce clause of the Constitution.
In an elegantly worded opinion, Judge Levine of Florida’s 4th District Court of Appeal agreed that such a law violated the Commerce Clause of the Constitution. Judge Levine went as far to cite excerpts from the Federalist papers in which Alexander Hamilton took exception with states burdening interstate commerce by stating that if interstate commerce was “not restrained by a national control,” then the turmoil between the states would be injurious to the Confederacy as a whole. Judge Levine also seemed to like James Madison’s view of a national economy because he was cited as well. In his view, Florida law created precisely the problem our framers sought to prevent.
This case serves as yet another example of the state overreaching its bounds. It is up to Taxpayers to stand up for their rights when they feel they are being unfairly assessed, and American Business USA Corp should be applauded for doing just that. If you believe a state is overreaching to collect tax, do not be afraid to take them on.