Florida Dept. of Revenue v. Share Intern., Inc., 93-4093
| Decision Date | 21 August 1995 |
| Docket Number | No. 93-4093,93-4093 |
| Citation | 667 So.2d 226 |
| Parties | 20 Fla. L. Weekly D1911 FLORIDA DEPARTMENT OF REVENUE and J. Thomas Herndon, Executive Director of the Department of Revenue, State of Florida, Appellants, v. SHARE INTERNATIONAL, INC., Appellee. |
| Court | Florida District Court of Appeals |
An appeal from the Circuit Court for Leon County. Judge L. Ralph Smith, Jr.
Robert A. Butterworth, Attorney General, and Lealand L. McCharen, and Eric J. Taylor, Assistant Attorneys General, Tallahassee, for appellants.
Lisa R. Daugherty of Law Offices of Davis, Scott, Weber & Edwards, Miami, for appellee.
The Department of Revenue appeals a trial court order in which the trial judge declared the Department's assessment of sales/use taxes against Share International, Inc. [Share] to be unconstitutional. We affirm.
Share is a Texas corporation which engages in the business of manufacturing and distributing chiropractic supplies. Share sells its products primarily through direct mail solicitation out of its principal offices in Fort Worth, Texas. Dr. James Parker is the president, director, sole employee and sole shareholder of the company. Dr. Karl Parker is a director and vice-president of the company.
For three days in November in the years 1986, 1987, 1988, 1989, and 1991, James and Karl Parker were present at seminars or conventions held in Florida, acting in the capacity of speakers and coordinators. The seminars are conducted by the Parker Chiropractic Resource Foundation [Foundation], also a Texas corporation, which is in the business of providing educational information and support for chiropractors. The Foundation, owned by James and Karl Parker, has no offices, employees, or agents in any state other than Texas.
During the Florida seminars, Share's products were displayed in an adjacent room and were available for sale. Share registered with the Department and collected and remitted to the Department sales tax on items sold in Florida during the seminars. Share did not, however, collect Florida sales taxes on sales or orders made by telephone or mail from residents in Florida but delivered by mail or common carrier or on orders received during the Florida seminars but delivered by mail or common carrier at a later date. Share generated approximately three million dollars in annual gross revenue during the years at issue, with the vast majority earned from mail order sales. Approximately 4.6% of the annual sales resulted from products sold directly to chiropractors at seminars held in Florida.
In November of 1990, the Department conducted an audit of Share's records for the period December 1, 1985 through November 30, 1990. The Department discovered that Share had not collected and remitted to the Department tax on orders taken in Florida and on mail order sales to Florida residents. The Department decided that Share had "substantial nexus" with Florida based on presence in the state during the seminars and the sale of products during these periods of time. The Department issued a final assessment in the amount of $77,933.98, determining that Share had the duty to collect Florida tax on all sales to Florida residents pursuant to section 212.0596, Florida Statutes.
Share timely filed a protest to the assessment. The Department issued a Notice of Decision upholding the assessment. Share then timely filed a complaint in circuit court challenging the assessment. The trial judge concluded that Share had not created a substantial nexus with Florida so as to provide the state with authority, consistent with the Commerce Clause, to require Share to collect and pay taxes on the mail order sales it makes to Florida residents and declared the assessment unconstitutional.
The Department argues that Share purposefully availed itself of Florida's economic market, that Share's contacts were not casual or random, and that Share came to Florida for sales and showed a continuing pattern of physical presence in the state by soliciting products and soliciting business in Florida at each of the seminars. The Department contends that the trial judge misinterpreted Supreme Court decisions construing the Commerce Clause. The Department notes that the Supreme Court has never required permanent physical presence in order to establish a substantial nexus with a state which would allow the state to require collection and remittance of tax on sales to residents and asserts that what is required is that a vendor have employees or agents in a state, have its products in a state, or make sales in a state and that the physical presence be coupled with the intent to have the opportunity for financial gain for the vendor in the taxing state.
In National Bellas Hess, Inc. v. Illinois Department of Revenue, 386 U.S. 753, 87 S.Ct. 1389, 18 L.Ed.2d 505 (1967), Bellas Hess was a mail order house with its principal place of business in North Kansas City, Missouri. The company had neither outlets nor sales representatives in Illinois. The Illinois Department of Revenue sought to require the company to collect and pay Illinois use taxes. All of the contacts which the company had with Illinois were via mail or common carrier. Twice a year catalogues were mailed to active or recent customers throughout the nation. The catalog mailings were supplemented by advertising flyers which were occasionally mailed to past or potential customers. Orders were mailed by customers and accepted in Missouri.
The Supreme Court determined that Illinois could not impose the burden of collecting the state's use tax on Bellas Hess. It was noted that the power of a state to impose collection responsibility had been upheld in cases when sales were arranged by local agents in the taxing state and when the mail order seller maintained local retail outlets, but "the Court has never held that a State may impose the duty of use tax collection and payment upon a seller whose only connection with customers in the State is by common carrier or the United States mail." 386 U.S. at 758, 87 S.Ct. at 1392.
In National Geographic Society v. California Board of Equalization, 430 U.S. 551, 97 S.Ct. 1386, 51 L.Ed.2d 631 (1977), National Geographic Society, a nonprofit educational and scientific corporation of the District of Columbia, maintained two offices in California that solicited advertising copy for the Society's monthly magazine. These two offices performed no activities related to the Society's operation of mail-order business for the sale from the District of Columbia of maps, globes, books, etc. Orders for these items were mailed directly to the District of Columbia headquarters on coupons or forms enclosed with announcements mailed to Society members and magazine subscribers. Payment for items ordered was mailed with the order or the customer was billed after receipt of the merchandise. The issue presented was whether the Society's activities at the offices in California provided sufficient nexus between the Society and the state, as required by the Commerce Clause, to support the imposition upon the Society of a use-tax collection liability on sales of merchandise to California residents.
The California Supreme Court concluded that the "slightest presence" of the seller in...
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