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In this instance, Taxpayer, an
Indiana florist and also a member of the FTD association, stated that when a
customer places an order for the flowers to be delivered to a different state
or country, it relays that order to another florist, Delivering Florist,
through its FTD association network. Taxpayer explained that that Delivering
Florist (also a member to the FTD association), upon receiving the forwarded
customer's order from Taxpayer, will then prepare the flowers and deliver them
to the designated recipient per the customer's instruction. Taxpayer contended
that the Charges at Issue are not fees for services "[] performed in
respect to the property transferred before its transfer []" by Taxpayer;
but rather that the Charges at Issue are "for the service provided by the
florist delivery association for having the order filled by florists located in
other jurisdictions"; and that the Charges at Issue are not "a direct
cost associated with the actual preparation, fabrication, alteration,
modification, finishing, completion, or delivery of the product being sold to
the customer." Thus, Taxpayer asserted that it charges its customer the
Charges at Issue to "make a phone call to a florist in another area"
and that the Charges at Issue were "not a direct fee charged to the
customer as part of the sales price for the product/services provided to the
Taxpayer's customer." Taxpayer thus maintained that, pursuant to IC §
6-2.5-4-1-(e), the Charges at Issue are not subject to Indiana sales tax.
Taxpayer's reliance is misplaced.
Taxpayer, as well as other florists in similar circumstances, are the members
of the member-only FTD association, which promises 100 percent customer
satisfaction guarantee and which all members within the network share a portion
of revenue. Taxpayer may assert that it does not physically own the flowers
which were ordered and delivered to the customer's designated recipients.
However, possession includes "actual" or "constructive."
"Constructive possession occurs when somebody has the intent and
capability to maintain dominion and control over the item." Hall v.
Indiana Dep't of State Revenue, 720 N.E.2d 1287, 1290 (Ind. Tax Ct. 1999);
Hurst v. Indiana Dep't of State Revenue, 721 N.E.2d 370, 374-75 (Ind. Tax Ct.
1999). In this instance, every florist who is a member within the FTD association
network, including Taxpayer, has constructive possession over the flowers
ordered and to be delivered. When Taxpayer takes orders from its customers, it
knows that a Delivering Florist will honor and fulfill its forwarded orders
under the FTD association's rules. Thus, in making the sales, Taxpayer promises
and guarantees the customers that the ordered flowers will be delivered to the
customer's designated recipients in a different state or country. Taxpayer
promises and guarantees its customers to fulfill the orders as the customers
expect. These promises and guarantees are fulfilled according to the
arrangements through the FTD association. Taxpayer thus has constructive
possession of the flowers and is a retail merchant making retail transactions.
When the flowers are transferred for consideration, "all elements of
consideration are included in gross retail income subject to tax"
including, but not limited to, "[a]ny additional bona fide charges added
to or included in such price for preparation..., delivery, or other services
performed in respect to or labor charges for work done with respect to such
property prior to transfer." Therefore, any charges by Taxpayer "for
any services necessary to complete the sale" must be included in the
Indiana "gross retail income" and are subject to Indiana sales tax
pursuant to IC § 6-2.5-1-5(a) and IC § 6-2.5-4-1(e).
In short, the Charges at Issue are
subject to sales tax.
