March 07, 2017
Update: Constitutionality of Sales Tax Origin Sourcing Upheld for Florida-Based Florists
On February 21, 2017, the U.S. Supreme Court declined to hear a case challenging a Florida Supreme Court ruling on an interstate sales tax matter involving a Florida florist, and in so doing, potentially paved the way for interstate sales transactions to become taxable in multiple states.
The underlying case was discussed in a Marcum Tax Flash published on September 9, 2016. The Tax Flash alerted taxpayers to the Florida Supreme Court's upholding of the constitutionality of a Florida Statute (§ 212.05(1)(l)) which states that: "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."
The Court's reasoning goes against what is usually thought of as sales tax, which is based upon changes of title and possession, the usual and customary foundation for sales tax.
Since the U.S. Supreme Court refused to hear the case, the original ruling by the Florida Supreme Court stands. The denial of the Court to hear the case opens a pathway for origin-based sales tax to extend to other industries or other states. In essence, a customer who places an order with a Florida florist to have flowers delivered to Georgia will be subjected to Florida sales tax on the sale. This is regardless of whether sales tax is charged upon the delivery in Georgia. Conversely, if a florist in Georgia delivers flowers to Florida, that sale is not subject to Florida sales tax unless the Georgia florist contracts with a Florida florist for fulfillment of the order.
This case, if expanded to other industries, could significantly change the long-held practice of basing sales taxes on the ultimate destination of a product. It could also embolden other states to enact similar statutes subjecting a single sale to taxation in multiple states.
Marcum will continue to provide updates on new developments in this evolving area of the tax law. Please contact your dedicated Marcum State and Local tax professional to address any questions regarding this case or any other tax matter.