Sales Tax Slice: Origin Sourcing Blooms Again; Destination Sourcing Withers on Vine


Florida, originally dubbed “La Florida” or “land of Flowers” when discovered in 1513, is a compliance-friendly place to set up a Florist shop.  In this day and age, floral arrangements are available at the click of a button and can reach their destination within hours. Being that flowers are perishable, it is customary in the industry for florists to coordinate to meet consumer demands. So for example, a bouquet of roses sold by a Florida florist may actually be arranged and delivered by a flower shop in Georgia for the ultimate recipient living in Georgia. This kind cooperation among florists is not without some sales tax implications, however. No doubt sales tax is due on the majority of sales by florists. The more complicated question becomes where the tax is due.

Both florists and consumers of their arrangements should know that origin-based sourced taxation is now budding in Florida while destination sourcing has withered away.

On May 26, 2016, the Florida Supreme Court, in Florida Dept. of Rev. v. American Business USA Corp., found constitutional a state statute requiring florists located in Florida to collect Florida sales tax on orders originating in Florida regardless of where the items are delivered. The defendant, American Business USA Corp., a florist located in Florida making deliveries both within and without the state, asserted that origin-based sourcing for interstate sales violates its Constitutional rights under the due process clause of the Fourteenth Amendment and the dormant Commerce Clause of the United States Constitution, but the Court was not persuaded by these arguments. As reported by Andrew M. Ballard in Bloomberg BNA’s Weekly State Tax Report, the Court ultimately concluded that Florida’s statute did not violate any constitutional safeguards because it did not inherently discriminate against interstate commerce.  As a result, American Business USA Corp. was liable for payment of taxes it failed to collect on retail sales of orders originating in the State or Florida and delivered outside the state.

It should come as no surprise that the Supreme Court of Florida rejected American Business USA Corp.’s arguments in light of the fact that many states have imposed origin sourced taxation on out-of-state flower deliveries. New York, California, Georgia, Maine and Illinois have also enacted similar legislation imposing sales tax on florists who receive orders and direct an out-of-state florist to complete the delivery. Kansas, on the other hand, continues to apply a destination-based sourcing rule; it is the delivery address, and not the purchaser’s address, that is the location of the sale. 

Although some states still maintain a destination-based sourcing scheme for florists making out-of-state deliveries, it appears that origin sourced tax schemes are becoming favored by states, requiring florists to ensure that state and local sales taxes are collected at the time the customer places their order. This begs the question of why states haven’t adopted origin-based sourcing for all sales.

Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Is origin based sourcing or destination based sourcing better for the flower industry?

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