SALES TAX SLICE: LEVY ON LOVE –VALENTINE’S DAY FILLED WITH SALES TAX OPPORTUNITIES

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Americans are expected to spend an estimated $18.2 billion on Valentine’s Day in 2017. That’s quite a bit of love to be purchased. Last year, Valentine’s Day participants spent $4.5 billion on jewelry, $4.4 billion on a Valentine’s night out on the town, $2 billion on clothing, $1.98 billion of flowers, $1.76 billion on candy and a combined $2.82 on greeting cards and gift cards and certificates, according to Fundivo.com. With such large sums being spent for this day of adoration, the romantic in me dreamily wonders, of course, “How much of this is subject to sales tax?”

Traditional Valentine’s Day gifts, like jewelry and flowers, are typically taxable, since most states imposing a sales and use tax do so on transactions involving tangible personal property. The taxability of candy is a mixed bag, however. Some states like Arizona, California, Michigan and Pennsylvania classify candy as exempt food items, while other states exclude candy from the definition of food and impose tax on the sweet treats. Connecticut and Maryland tax candy. So does Indiana—except for items that are normally thought of as candy but contain flour, like Kit-Kat, Nestle Crunch and Twix bars. (The lesson: give a case of Kit-Kats instead of a box of chocolates if you’re intent on saving on sales tax.)

Those who choose to send flowers this Valentine’s Day will pay tax in virtually every state that imposes a sales tax. The National Retail Federation estimates that 35 percent of consumers plan to give flowers this year. But very few of them are likely aware of the legal turmoil brewing, not over taxability of flower sales, but over which state should impose tax on the transactions.

One Florida-based online florist has taken the issue to the threshold of the U.S. Supreme Court in its petition in American Business USA Corp. v. Fla. Dep’t of Revenue. Indeed, the florist is challenging Florida’s law that requires the company to collect the state’ sales tax on orders that are placed in Florida but are fulfilled by an out-of-state florist and delivered to an out-of-state recipient. In response, the state has countered that although the Court’s 1992 decision in Quill Corporation v. North Dakota limits the state’s ability to require out-of-state vendors to collect its tax, the decision does not preclude the state from taxing in-state residents, like the Florida florist. (See the Feb. 10, 2017, article by Bloomberg BNA’s Jennifer McLoughlin, covering Florida’s response brief in opposition to the company’s petition.) The parties await the Court’s decision on whether or not to hear the case. For now, the question of which state gets to tax the sale of those roses you had delivered appears to remain an open question.

If you’re not into flowers and candy and prefer gifting unusual goodies, like heart-shaped pizzas, be prepared to pay sales tax on such prepared food items in a majority of states, as well as tax on any delivery charges. And when those heart-shaped buckets of fried chicken eventually migrate down from Canada to the U.S., they will likely be taxable, too.

Valentine’s Day in the 21st century naturally includes online dating, speed dating and dating apps. And the trends have not been lost on state tax departments. New York’s Department of Taxation and Finance issued a bulletin in 2010 listing online dating services among information services that are subject to sales tax. The state of Washington imposes sales tax on dating services and (for those interested in a less permanent relationship) escort services.

Lastly, for couples who choose Valentine’s Day to join together in wedded bliss, Las Vegas has plenty of venues, including a “Taco-Bell themed wedding” chapel offering a package for $600 that comes with his-and-hers t-shirts and Taco Bell champagne flutes. Sales tax will be due, since Nevada taxes items provided by wedding chapels as part of their services. But, you can’t put a price on love, right?

Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: What other traditional and emerging Valentine’s Day gifts are subject to sales tax? Is there any policy reason not to tax these items?

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