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Few understand or even bring up sales tax issues when they order pizza. The next time you order pizza, take a look at the receipt and see if the pizza shop charges you for the delivery. Does the receipt reflect sales tax on just the price of the pizza or on the price of the pizza and the delivery fee? I doubt many people pay this kind of attention detail. Lauren Minniti, a resident of Broward County Florida recently purchased a pizza from Pizza Hut, had it delivered, and did pay attention to the sales tax on her receipt.

Pizza Hut allegedly charged Lauren tax based on the charge for the pizza and for the separately stated delivery fee, instead of tax on the pizza alone. Lauren didn't think that she should have paid sales tax on the deliver fee and, like what seems to be a growing trend in our country, contacted a lawyer. As the issue of paying 20 cents of sales tax on a pizza deliver fee usually doesn't warrant a legal action, she contacted a class action lawyer. Now this issue has become center stage for a recent class action filed in Broward County against Pizza Hut on behalf of everyone in Florida that paid sales tax on delivery fees.

But this begs the question: Was Pizza Hut supposed to charge sales tax on the delivery fee? Lauren Minniti and her lawyers sure don't think so. If you are a business owner in Florida that charges shipping or deliver fees, then this question apparently just got a LOT more important. If you get the answer wrong, then someone like Lauren Minniti might decide to take you to court over the issue. We aren't talking about your typical law suit. Class action law suits are a completely different breed of trouble for businesses that are enormously expensive. The only winner is usually the law firm filing the suit. Sure – we are only talking about a few cents per customer, but if you are charging sales tax wrong, this is EVERY CUSTOMER your business has and the legal fees get exponentially larger as the class of plaintiffs grows.

Now that you are on the edge of your seat because you realize the fate of your business may rely on the answer to one simple question: Are you charging sales tax correctly on your shipping or delivery fees? In essence, Florida sales tax rules for pizza delivery fees are the same as any other shipping charge. The answer depends largely on whether the delivery charge is separately stated and if it is optional.

Under Florida law, if the delivery charge is separately stated and the charge can be avoided at the customer's option, then it is not subject to sales tax. Additionally, though not applicable to Pizza Hut, if the customer assume the risk of lost at the time the item is shipped, then then the shipping charge is not subject to sales tax. If the charge is lumped into the sales price or it cannot be avoided by the customer, it is subject to tax (as long as the risk of loss doesn't pass to the customer at the time of shipment). Apparently, in this case, the charge is separately stated and the delivery fee can be avoided by the customer picking up their pizza. Therefore, Lauren has a strong argument that her pizza delivery fee should not have been subject to sales tax. According to the law suit, Pizza Hut erroneously charged tax and the class action ensued to recapture that tax that should have not been charged.

Rule 12A-1.045, Florida Administrative Code ("F.A.C."), speaks to this concept providing several examples including:

B is in the business of renting furniture and appliances. B rents a refrigerator to Customer C. B's policy is to allow customers to elect whether to pick up the rental property at B's place of business or to agree to a $25 delivery fee which B separately states on the customer's invoice. Since the separately stated $25 delivery fee could be avoided by a decision or action on the part of C, the $25 delivery fee is not subject to tax.

While it seems like the sales tax on shipping is a relatively straightforward analysis, the class action component of the case is a bit more complex. If it were this easy, wouldn't there be endless amounts of class actions and rich lawyers for every business that made a mistake in charging its customers too much tax?

In this case, the class alleged that Pizza Hut's approach 1) violated Florida's Deceptive and Unfair Practices Act, 2) was negligent, and 3) resulted in unjust enrichment. In response, Pizza Hut filed a motion to dismiss to have the case thrown out. Specifically, Pizza Hut countered by arguing that this action did not violate the Deceptive and Unfair Practices Act. Pizza Hut also argued that there was no claim for negligence because Pizza Hut had no duty to its customers. Finally, Pizza Hut also pointed out that there could be no class action because the customers failed to exhaust their administrative remedies. Perhaps Pizza Hut should have also made the argument that there was no unjust enrichment to Pizza Hut because all the sales tax was remitted to the Florida Department of Revenue. I'm also curious if refunding or assigning the right to the refund for each customer would effectively render the law suit moot.

Unfortunately for Pizza Hut, the standard to win on a motion to dismiss is as difficult as climbing Mount Everest. Essentially, a motion to dismiss victory means that if you take all of the assertions of the other side as true, they still can't win. The Court agreed with the class and stated that if all facts were taken as true, they could win, so the case would proceed. Whether the class can prove each or any of the causes of action is a different issue and remains to be seen.

As pointed out above, Pizza Hut is really not unjustly enriched by the sales tax collections because all the money is remitted to the state of Florida. So you might be asking why Lauren (and her lawyers) didn't fill suit against the Florida Department of Revenue instead of Pizza Hut. Great question and there is a simple answer. While the class can be maintained against Pizza Hut, there is a statute preventing class action law suits against the state for sales tax. (It happened once over improperly collected car tag taxes and it cost the state millions. So the legislature insured against future class action litigation by statutorily preventing it.) Instead, each individual taxpayer would have to file and fight their own refund action, which is likely relatively small, especially in this case. Therefore, an action for a tax refund is impractical unless each taxpayer has a relatively enormous refund at state. The result leaves only one remedy to litigious taxpayers with small amounts of tax at issue – sue the vendor who charged the tax on behalf of all customers.

Before you start to dismiss this case as a rarity, you should know that this type of litigation is catching the attention of class action law firms. Pappa Johns is defending similar law suits in multiple states at the moment. With food deliver services popping up around the country, this issue could affect the entire restaurant industry. Furthermore, there are thousands of other industries that ship their products to customers and the sales tax rules on deliver vary from state to state. As a result, if your business or your client's business ships products to customers, the question of whether sales tax is being charged correctly on delivery or shipping fees should become a very important question.

To make matters even worse, this type of tax situation goes counter to most sales tax advice historically given to businesses. Most businesses when faced with a "grey" issue of whether to collect sales tax on a specific item have historically been advised to be conservative and collect the tax. The logic has been that over collecting and remitting sales tax would mitigate against the state asserting that the company was liable for under collecting the tax, which happens every day on audit. This type of conservative logic has been implemented by millions of businesses across the country. However, being too conservative on sales tax can now have dire consequences of its own.

What is a business to do in Florida? Step one - please take this issue very seriously. Step two – review your company's sales tax procedures for deliver/shipping fees. Step three – if you have any questions or concerns, then contact a tax professional that is very knowledgeable in this area of law. For businesses, if you want to gain a competitive edge, then you should possibly consider making your delivery charges separately stated and make the charge optional blatantly optional.

the Law Offices of Moffa, Sutton, & Donnini, P.A. is a law firm dedicated to defending businesses against the Florida Department of Revenue, primarily for sales & use tax matters. With offices in Fort Lauderdale, Tampa, & Tallahassee, we represent taxpayers all over the state in audits, protests, petitions for reconsideration, before Division of Administrative Hearings, before Circuit Courts, in collections matters, during revocation hearings, and during criminal matters (with DOR investigators & before the State Attorney's office). Florida sales and use tax controversy is simply what we do. With 7 attorneys and 3 former Florida Department of Revenue agents, we help business owners truly understand their situation and how best to fight back. If you have questions about Florida sales & use tax, then please take advantage of our FREE INITIAL CONSULTATION by talking to one of our attorneys today.

Jerry Donnini Esq; Tax Attorney Donnini; Florida Tobacco Attorney; Tobacco Tax Attorney; Florida Sales Tax Attorney; Florida Sales Tax Audit; Florida Sales Tax Audit DefenseAbout the author: Mr. Donnini is a multi-state sales and use tax attorney and an associate in the law firm the Law Offices of Moffa, Sutton, & Donnini, P.A., based in Fort Lauderdale, Florida. Mr. Donnini's primary practice is multi-state sales and use tax as well as state corporate income tax controversy. Mr. Donnini also practices in the areas of federal tax controversy, federal estate planning, Florida probate, and all other state taxes including communication service tax, cigarette & tobacco tax, motor fuel tax, and Native American taxation. Mr. Donnini earned an LL.M. in Taxation at NYU. You can read more about Mr. Donnini in his firm BIO HERE.


Rule 12A-1.045, Florida Administrative Code (detailed rule on taxability of shipping charges)

Minniti v Pizza Hut of America – CACE-14-023335: Complaint

Minniti v Pizza Hut of America – CACE-14-023335: Defendant's Motion to Dismiss Denial Order


SHIPPING CHARGES VS FL SALES TAX, published June 8, 2014, by James Sutton, CPA, Esq.

WHAT SERVICES ARE SUBJECT TO SALES TAX IN FLORIDA?, published May 1, 2012, by James Sutton, CPA, Esq.

PLETHORA OF SALES TAX LITIGATION IN FLORIDA, published June 8, 2015, by James Sutton, CPA, Esq.