A Charlotte, N.C.-based florist is battling national competitors who market themselves as local merchants but don't charge their customers sales tax.
Bill Miller, owner of the Flower Hut, believes his competition may be costing the state of North Carolina millions of dollars a year in lost tax revenue. After consulting with his CPA, he learned about the concept of "nexus," that out-of-state companies should be collecting sales taxes if they do business in the state.
Miller has written letters of complaint to the North Carolina Department of Revenue and the state attorney general. He contends that florists listed on searches of services such as Yahoo Shopping and Google, purporting to be located in Charlotte, do not actually own businesses there.
"The issue is that here in North Carolina, us real florists are getting slapped around by companies that advertise on television, radio and most particularly online over the Internet as being in the town where you need to have flowers," he said. "If a consumer puts into Google 'florist in Charlotte' you're going to come up with about 16 or 18 names. Of those, three are legitimate florists, and another five or six are links to Yellow Pages directories. What's left over are phony florists."
He noted that some of them charge sales tax in the state where they're located, but most charge no sales tax at all. He placed a series of test orders and found that the majority of the merchants did not pay sales taxes.
In response, the North Carolina Department of Revenue has assigned an investigator to look into the matter, according to Miller. He has since discovered that some of the nationwide florist services have begun to charge sales tax to some of their local florists in North Carolina for goods and services such as computer software and maintenance, but still don't charge sales tax to the end customer.
"When you go to their Web site as a customer and buy flowers for delivery into North Carolina, you find magically the sales tax disappears," he said. He asked the investigator if a merchant is legally allowed to choose which customers are charged sales tax and which are not, and the investigator said no.
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