Question: A Florida corporation, with a physical location and principal address in Florida, sells flowers, gift baskets, and other items of tangible personal property over the Internet. The company does not maintain any inventory and instead uses the inventory of florists in the delivery location to deliver purchased products. Are deliveries outside of Florida subject to Florida sales tax?
Answer: Reversing the lower appeals court, the Florida Supreme Court says yes.
The florist mounted two challenges. First was a Due Process argument. The Due Process Clause requires some type of physical presence within the taxing State. Quill Corp. v. North Dakota, 504 U.S. 298 (1992). That presence existed here.
The second challenge was a dormant Commerce Clause claim. Such claims are based on State activity that impairs interstate commerce. To survive a dormant Commerce Clause claim, a tax must meet the four requirements of Complete Auto Transit, Inc. v. Brady, 430 U.S. 274, 279 (1977). These four requirements are that the tax is applied to an [1] activity with a substantial nexus with the taxing State, [2] is fairly apportioned, [3] does not discriminate against interstate commerce, and [4] is fairly related to the services provided by the State.
The Court reviewed all four requirements and found them to be met, in large part due to the physical presence and formation in Florida. While not directly relevant, the Court also noted that Florida would not tax an out-of-state Florida that delivers through a Florida florist.
In regard to being “fairly apportioned,” an internal consistency test applies the legal fiction of all States having the same law as Florida and asks if more than one state could then impose tax. In this case, there would be no such double tax. This test has always been bothersome to me since it doesn’t ask whether the same transaction is actually being taxed in two jurisdictions due to the taxing regime in the other jurisdiction.
Implications: Sellers situated in Florida conducting Internet sales will not be able to raise constitutional objections to Florida sales taxes on sales out-of-state, even if the goods come from non-Florida sources or suppliers.
Florida Department of Revenue v. American Business USA Corp., 41 Fla.L.Weekly S237a (Florida Supreme Court, May 26, 2016)
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