Sharper Image Corp. v. Department of Revenue of State of Fla.

• Court: Florida District Court of Appeals
• Writing for the Court: KAHN
• Citation: Sharper Image Corp. v. Department of Revenue of State of Fla., 704 So.2d 657 (Fla. App. 1997)
• Decision Date: 08 December 1997
• Docket Number: No. 96-3734,96-3734
• Parties: 22 Fla. L. Weekly D2766 SHARPER IMAGE CORPORATION, Appellant, v. DEPARTMENT OF REVENUE OF the STATE OF FLORIDA, Appellee.

Page 657

704 So.2d 657

22 Fla. L. Weekly D2766

SHARPER IMAGE CORPORATION, Appellant, v. DEPARTMENT OF REVENUE OF the STATE OF FLORIDA, Appellee.

No. 96-3734.

District Court of Appeal of Florida First District.

Dec. 8, 1997.

Rehearing Denied Feb. 20, 1998.

Thomas J. Jones and Susan L. Turner of Holland & Knight, Tallahassee, and Martin I. Eisenstein of Brann & Isaacson, Lewiston, ME, for Appellant.

Eric J. Taylor and Jarrell L. Murchison of the Office of the Attorney General, Tallahassee, for Appellee.

Cass D. Vickers, H. Michael Madsen and Robert S. Goldman of Vickers, Madsen & Goldman, Tallahassee, for Amicus Curiae Service Merchandise.

KAHN, Judge.

This case involves a tax assessment against appellant, Sharper Image Corporation (Sharper Image), by the Department of Revenue (Department). In 1994, Sharper Image filed suit in circuit court, challenging the Department's assessment of use tax on catalogs published by Sharper Image outside of Florida and sent by Sharper Image's printer directly to Florida residents during the audit period of April 1, 1987, through March 31, 1990. Sharper Image and the Department filed cross-motions for summary judgment. The circuit court granted the Department's motion and denied Sharper Image's motion, entering final summary judgment in the Department's favor. Sharper Image has appealed and raises essentially two points: (1) Sharper Image exercised no taxable privilege with respect to the catalogs in Florida as required by the Florida statute, and (2) the assessment of use taxes on Sharper Image catalogs violates the First Amendment and the Due Process Clause of the Fourteenth Amendment to the U.S. Constitution because the newspaper exemption of section 212.08(7)(w), as applied by the Department, violates the First Amendment, and the religious publication exemption of section 212.06(9) violates the First Amendment. ¹ Sharper Image seeks abatement of use taxes assessed against it. We hold that the Department properly assessed a use tax, and that, irrespective of the illegality of the exemptions, Sharper Image is not entitled to the remedy it seeks.

In this case, no dispute exists regarding the facts. Sharper Image is a Delaware corporation headquartered in San Francisco. The company makes retail sales of merchandise through both mail and telephone order, and in store sales. During the audit period, Sharper Image maintained seven retail stores in Florida. It collected and remitted to the Department all Florida sales and use taxes due on sales at the Florida stores and on mail order sales to Florida residents.

The challenged use taxes were assessed on Sharper Image's monthly catalog. The catalog was printed and mailed from Nebraska by a contractor selected by Sharper Image. The catalogs were delivered by the United States Postal Service to residents of Florida and other states. Sharper Image stipulated that it intentionally, purposefully, and with the object to increase sales in Florida, distributed or caused to be distributed, the catalogs.

I. Exercise of a Taxable Privilege

First, appellant asserts that Sharper Image exercised no taxable privilege in Florida with respect to the catalogs. According to appellant, the circuit court ignored the requirement under Florida law that a use or distribution of tangible personal property must occur "in this state" to properly trigger the use tax. Further, in arguing that no taxable event has occurred in this case, amicus Service Merchandise asserts that language in section 212.06(1)(a) ² and section 212.06(6) ³ "make[s] plain the Legislature's design only to tax transactions or activities which occur after the arrival of the property in Florida and its repose here as part of the mass of property." Neither contention will withstand scrutiny.

Section 212.05(1)(b), Florida Statutes (1987), provides: [A] tax is levied on each taxable transaction or incident, which tax is due and payable as follows: ...

(b) At the rate of 5 percent of the cost price of each item or article of tangible personal property when the same is not sold but used, consumed, distributed, or stored for use or consumption in this state.

(emphasis added). ⁴ Further, section 212.06(1)(a), Florida Statutes (1987), provides:

The aforesaid tax at the rate of 5 percent of the retail sales price as of the moment of sale, 5 percent of the cost price as of the moment of purchase, or 5 percent of the cost price as of the moment of commingling with the general mass of property in this state, as the case may be, shall be collectible from all dealers as herein defined on the sale at retail, the use, the consumption, the distribution, and the storage for use or consumption in this state of tangible personal property or services taxable under this part....

(emphasis added). ⁵ In our view, the collective import of these statutes is that if tangible personal property is distributed in Florida, it is subject to a use tax. Because Sharper Image distributed tangible personal property, i.e., its catalogs, in Florida, it exercised a taxable privilege in this state and must pay a use tax. The "mass of property" and "moment of commingling" language in sections 212.06(1)(a) and 212.06(6) refers only to valuation of property taxed under the statute and does not impose an additional prerequisite to taxation itself.

Sharper Image also asserts that "for the mailing of promotional materials from outside Florida directly to Florida residents to be a taxable event, a company must engage in activities regarding the production, printing, or mailing of the promotional materials in Florida " and "[t]hat simply did not occur here." The Connecticut Supreme Court has recently rejected a similar argument made by Sharper Image in contesting a use tax assessment on the distribution of its catalogs in that state: "Although Sharper Image neither stored, accepted or consumed the catalogs in this state, it did cause them to be distributed in Connecticut, which satisfies the broad taxable event of 'other use'...." Sharper Image, Corp. v. Miller, 240 Conn. 531, 692 A.2d 774, 779 (1997). The Connecticut use tax statute, unlike the Florida statute, does not include the word "distribution." Nevertheless, the Connecticut Supreme Court determined that distribution fell within the plain language of "other use," a term included in the statute. See also Service Merchandise Co. v. Arizona Dep't of Rev., 188 Ariz. 414, 937 P.2d 336 (App.1996) (upholding use tax assessment because distribution of catalogs and fliers in Arizona was use incidental to ownership even though "distribution" not specifically included in statute); cf. Sharper Image Corp. v. Department of Treasury, 216 Mich.App. 698, 550 N.W.2d 596 (1996) (finding no use tax due where use tax statute did not specifically provide for taxation of distributions), appeal denied, 560 N.W.2d 636 (Mich.1997).

In this case, not only does the Florida use tax statute specifically refer to distribution, but it also contains a definition of "use tax": "The term 'use tax' referred to in this chapter includes the use, the consumption, the distribution, and the storage as herein defined." § 212.02(28), Fla. Stat. (1987). Further, the Florida statute defines "use":

"Use" means and includes the exercise of any right or power over tangible personal property incident to the ownership thereof, or interest therein, except that it does not include the sale at retail of that property in the regular course of business. "Use" also means the consumption or enjoyment of the benefit of services.

§ 212.02(27), Fla. Stat. (1987). In addition, the definition section of the statute contains the following provision:

The terms "retail sales," "sales at retail," "use," "storage," and "consumption" include the sale, use, storage, or consumption of all tangible advertising materials imported or caused to be imported into this state. Tangible advertising material includes displays, display containers, brochures, catalogs, price lists, point-of-sale advertising, and technical manuals or any tangible personal property which does not accompany the product to the ultimate consumer.

§ 212.02(19)(b), Fla. Stat. (1987) (emphasis added). These statutes defining "use tax" and "use," particularly section 212.02(19)(b), evidence the Legislature's intent to tax the distribution of catalogs in Florida, the activity at issue here.

Although Sharper Image made all of the arrangements concerning the mailing of the catalogs from its California headquarters, Sharper Image nevertheless supplied the addresses for the catalogs and directed that those catalogs be placed in the United States mail. See Sharper Image Corp. v. Miller, 42 Conn.App. 310, 678 A.2d 977, 980 (1996) ("The plaintiff's control was the direction; relinquishing the right to withdraw or redirect does not for purposes of 'ownership' relinquish control.... By directing the shipping of the catalogs, Sharper Image retained ownership, even though it relinquished physical possession to the postal service."), aff'd, 240 Conn. 531, 692 A.2d 774 (1997); Talbots, Inc. v. Schwartzberg, 928 P.2d 822 (Colo.App.1996) (holding that distribution of catalogs to city addresses constituted use within city subject to taxation under municipal code provision). Sharper Image thus caused its catalogs to be distributed in Florida. Indeed, in the Connecticut case, Sharper Image may have conceded that its actions regarding the catalogs constituted "distribution" in that state. See Miller, 692 A.2d at 778 ("The crux of Sharper Image's argument is that, under the circumstances of this case, the distribution of its catalogs in Connecticut did not meet the definition of 'use' ...." (emphasis added)); Miller, 678 A.2d at 980 ("Sharper Image also argues that this statutory definition of 'use' cannot be judicially extended to include 'distribution.' "). Accordingly, in this case, the circuit court properly upheld the use tax assessment against Sharper Image because it...