Interior design is one of those industries where the work looks like a pure creative service — you sit down with a client, develop a vision, specify furnishings and finishes, manage a project from concept to completion — and the natural instinct is to treat the entire business as a service business that does not need to worry much about sales tax. That instinct is understandable. It is also wrong in a significant number of design engagements, and it is costing Florida interior designers enormous sums of money when the Florida Department of Revenue (FL DOR) arrives for a sales tax audit.
I have taught Florida sales and use tax to CPAs, attorneys, business owners, and law school students. I have represented over 100 interior designers of all sizes. I have not run into one that was doing everything correctly when it comes to Florida sales tax. Most of my clients went into the audit thinking they were doing everything correctly. In almost every case, the underlying problem was the same: the designer genuinely believed their design service fee was never subject to Florida sales tax or they knew the rules were murky and hoped for the best. Neither approach ends well when the FL DOR's auditor send you a Form DR-840 three audit notice.
This article is written for interior designers and the CPAs who advise them. It will explain exactly when Florida sales tax applies to interior design work, how the FL DOR approaches audits in this industry, what the financial consequences of non-compliance look like, and what steps you can and should take right now before an audit notice arrives.
THE FUNDAMENTAL RULE: SERVICES ARE NOT TAXABLE — UNTIL THEY ARE
Florida's sales tax framework starts from a simple premise: the sale of tangible personal property is taxable, and services are generally not. That rule sounds favorable to interior designers. The problem is sales tax is never that simple are often rarely intuitive.
Under Florida Statute Section 212.05 and Rule 12A-1.006, Florida Administrative Code, when a seller provides both tangible personal property and services as part of a single transaction, the entire charge — including the design fee, consulting fee, project management fee, or whatever else is charged under the design contract — is all subject to sales tax. The presence of tangible personal property in the transaction sweeps the services along with it.
It doesn’t matter that you followed some else’s advice. It doesn’t matter that you didn’t collect the tax. If you provide even a single painting with your design services, then you will owe sales tax on the enter fee charged to your customers. Some people think paying tax when you buy the tangible personal property is enough only to find out that they only get credit for the tax paid, but still owe tax on the full fee charged to the client.
For interior designers, this means the following: if you specify a sofa, procure it, and deliver it to a client's home, you are not merely performing a service. You are selling tangible personal property. And if your design fee, procurement fee, and markup are all bundled into the same engagement — even if charged on different invoices — the FL DOR's position is that the entire charge is subject to Florida sales tax.
This is the rule that catches most designers by surprise. You have been invoicing for "design services" for years. You client pays a design retainer. As the designer, you receive a trade discount on the furniture and passed the retail price through to your client. No one charged sales tax on the design fee. When the FL DOR auditor reconstructs three years of revenue, that "design services" fee — the one you have always thought was purely a service — turns out to be taxable.
BREAKING DOWN THE TYPES OF ENGAGEMENTS — AND HOW EACH IS TAXED
Not every interior design engagement is taxed the same way. The tax consequences depend heavily on what the designer is actually doing for the client and how the contracts are structured. Here is how the FL DOR approaches the most common scenarios:
Pure design services — no tangible personal property involved. If a designer provides only conceptual services — space planning, mood boards, color palettes, specification documents — and the client purchases all furnishings and materials independently from third-party vendors, there is no tangible personal property being transferred from the designer to the client. In this case, the design fees are not subject to sales tax. This is the cleanest scenario from a tax standpoint, but it is also the least common model in practice.
Designer procures and sells furniture and furnishings to the client. This is the most common model and the one that generates the most sales tax liability. When a designer purchases furniture, artwork, rugs, lighting, or other tangible personal property at trade pricing and sells those items to the client at retail (or at a marked-up price), the designer is a dealer of tangible personal property. Every dollar the client pays for those goods is subject to Florida sales tax at the applicable state and local rate (6% state plus the applicable county surtax).
The FL DOR's position — codified in Technical Assistance Advisement TAA 15A-004, which addressed interior design services specifically — is that interior design fees related to the sale of tangible personal property are subject to tax as part of the sales price of that tangible personal property. It does not matter how you label the line item on the invoice. If there is a sale of tangible personal property in the same transaction, the entire charge is in play.
Design-build projects involving real property improvements. This is where the rules get even more complicated. When a designer acts more like a contractor — overseeing kitchen renovations, bathroom remodels, custom millwork installations, or built-in cabinetry — the tax treatment shifts again. A design build contract that the majority of the fee relates to real property improvement is treated differently in that the design build contract is now NOT subject to sales tax to the customer. A design build contract is considered a non-taxable real property improvement. In this case, the designer (or the subcontractor) is considered the final consumer of the tangible personal property and the contractor (or designer acting as contractor) generally pays sales tax on the materials they purchase but does not charge sales tax to the client on the total contract price. This is still the case even if some furniture is sold to the customer in the same contract. This is known as the “predominate nature of the contract rule.” If the majority of the fee is real property improvement – then the whole fee is treated as a non-taxable real property improvement contract. However, if the majority of the fee is for tangible personal property, then the whole contract is treated as a taxable sale of tangible personal property. You read that right – the whole contract can be taxable or non-taxable depending on the allocation of fees to real property or tangible property. Therefore, it is very important to know the rules before the agreements are signed, not after the project is finished and the sales tax auditor is knocking on your door.
Procurement fees and markups on client-purchased goods. Some designers handle procurement as a separate service — the client holds the purchase account with the vendor, the designer specifies and coordinates, and the designer charges a procurement fee or markup. Whether this arrangement is taxable depends on who the actual purchaser is. If the designer is the buyer of record and resells to the client, the designer is a dealer and much collect and remit sales tax on the sale. If the client is the buyer of record and the designer is simply being compensated for a coordination service, the procurement fee may be non-taxable — but the documentation needs to support that clearly. Similarly, if the customer signs a design contract then later signs a completely separate procurement contract, then there is an argument the design fees are not taxable, but make sure not to put the two contracts on one invoice.
HOW THE FL DOR FINDS INTERIOR DESIGNERS TO AUDIT
The Florida Department of Revenue has become increasingly sophisticated in identifying non-compliant businesses, and the interior design industry has not escaped that scrutiny.
One of the primary audit triggers is the comparison of IRS Form 1099-K data — which reflects total credit and debit card receipts reported by payment processors — against the designer's Florida sales tax returns. If a designer is processing substantial amounts through credit cards each year but reporting little or no taxable sales to the FL DOR, the gap creates a red flag that the department's data systems are designed to catch. For a designer with $800,000 in annual revenue who has never filed a sales tax return, the mismatch is glaring.
The FL DOR also receives information from contractors, vendors, and other parties involved in design projects. A luxury furniture vendor who issues resale certificates to designers and later discovers a client complained about the sales tax treatment of a purchase can become a source of referral information. Former employees and business partners have also been known to contact the department.
Additionally, the FL DOR conducts industry-wide initiatives. When the department identifies a pattern of non-compliance in a sector — and interior design has been identified as such a sector — it can launch targeted audits across a region or industry category. The designers who get selected are not necessarily the ones doing anything more wrong than their competitors; they may simply be the ones the algorithm found first. Similarly, an interior designer who reports very little subject to sales tax appears like someone who doesn’t understand that design fees are taxable when anything tangible is sold under the design contract. The is a huge audit flag for anyone in the industry.
WHAT HAPPENS WHEN THE AUDIT STARTS
When an interior design studio receives Form DR-840 — the FL DOR's Notice of Intent to Audit Books and Records — the clock starts running and the stakes are immediately high. Here is what to expect if an audit proceeds without professional representation.
The auditor will request three years of records from the date the audit notice was issued. The records the auditor wants will include all client contracts and invoices, bank statements, federal tax returns, vendor invoices showing what was purchased and at what price, resale certificates used to purchase goods tax-free, and any sales tax returns that were filed.
When the auditor starts reviewing contracts, if they see any tangible personal property being sold with design contracts, then they will consistently do what no interior designer expects them to do. The auditor will presume that every penny collected from your customers over the 3 year audit period should be taxable. Then the auditor will leave it to you to prove them wrong. What is shocking is that the law allows the auditor to handle audits this way. You are guilty until you prove yourself innocent. It’s one of the most un-American laws we have and your industry is in the cross-hairs.
The resulting assessment will include the unpaid tax itself, plus interest currently accruing at approximately 11% per year from the date the tax was originally due, plus a penalty of 25% to 50% for failure to collect/remit the correct amount of tax. It does not matter that you never collected the tax from your customers. For an interior designer who has been in business for three years doing $600,000 to $1 million in revenue annually and has never charged sales tax on design fees or furniture sales, the assessment — with interest and penalties — can easily exceed a $200,000 assessment.
The cruelest part of this math is that the designer typically cannot recover the tax from clients after the fact. The sale happened years ago. The client moved on. The assessment becomes an out-of-pocket loss that the business must absorb.
THE RESALE CERTIFICATE TRAP
Many interior designers do purchase furniture and materials using a Florida Annual Resale Certificate (Form DR-13), which allows them to buy goods tax-free with the intention of reselling them and charging sales tax at the point of resale. Used correctly, this is entirely legitimate. Used incorrectly, it creates a secondary problem on top of the primary one.
If a designer uses a resale certificate to purchase goods tax-free but then fails to charge sales tax when those goods are sold to the client, the designer has committed two errors: they avoided paying tax on the purchase (legitimately, with a resale certificate) and then failed to collect tax on the sale. The net effect is that no tax was collected anywhere in the chain. The FL DOR will assess the uncollected tax on the sale, and the fact that the designer held a valid resale certificate does not reduce that liability — it only established the precondition for the sale to be properly taxed.
Conversely, if a designer uses a resale certificate to purchase goods tax-free but then decides to use those goods in the designer's own studio — as sample furniture, office décor, or showroom displays — without ever reselling them, the designer owes use tax on those purchases. The resale certificate covers purchases made in anticipation of resale. When the goods are diverted to personal or business use, the tax comes due.
For CPAs reviewing a client's books, a simple question to ask is: does the designer hold a resale certificate? If yes, are they also filing and remitting sales tax on the sales of those goods? Are they collecting tax on the full design fee? If the answer to either of these questions is no, or if no sales tax returns have ever been filed, the mismatch is precisely what the FL DOR is looking for.
THE SEPARATE CONTRACT STRATEGY — AND WHY IT IS NOT A MAGIC FIX
One approach that Florida interior designers have used — with varying degrees of success — to minimize sales tax exposure is to structure their engagements using separate contracts: one contract for design services, and a separate contract (often through a separate entity) for the procurement and sale of goods. The theory is that by clearly segregating the service component from the goods component, the design fee can remain non-taxable.
The FL DOR is well aware of this strategy and scrutinizes it closely. For the separate contract approach to withstand an audit, several elements must be genuinely present: the contracts must be separate and independent (not just two line items on the same invoice), the consideration for each must be separately negotiated and independently valued, the client must understand they are entering two distinct commercial relationships, and the design services must be capable of standing alone as a service that the client would pay for even if no goods were involved.
If the separation is superficial — if the contracts are signed the same day and are interdependent on each other — the FL DOR will not respect them as separate contracts. The auditor will collapse the two contracts into a single transaction and assess tax on the full amount. I have seen this play out repeatedly. However, if the designer sets up a second LLC, one for design services and one for procurement services – and issued separate invoices for each contract, then you have a pretty strong case that the design services should not be taxed. The dual entity set up has administrative costs, but it can give you a distinct competitive advantage over other interior designers that have to charge sales tax on the same services. A little knowledge and pre-planning can go a long way. But it must be done thoughtfully, prospectively, and with the guidance of someone who understands where the FL DOR draws the line.
PERSONAL LIABILITY: IT DOES NOT END WITH THE BUSINESS
One of the most important — and most frequently overlooked — aspects of Florida sales tax non-compliance is that the liability does not necessarily stay at the business entity level. Florida law gives the FL DOR the authority to assert responsible party liability against the individuals who controlled the collection and remittance of sales tax on behalf of a business.
For an interior design studio that is structured as an legal entity, the owner-designer who made the day-to-day decisions about what to charge and how to invoice may be personally liable for the business's unpaid sales tax, even after the business entity is dissolved or has insufficient assets to pay the assessment. Federal bankruptcy will not even protect you because sales tax is specifically excluded from bankruptcy protection. This liability is not limited to situations involving intentional fraud. The FL DOR takes a broad view of who is a "responsible party" — and the standard is control, not intent. When the FL Department of Revenue does come after the owner for the sales tax liabilities of the business, they hit you with a 200% of tax penalty under section 213.29 F.S. It is quite the sledge hammer wake up call to any business owner that thinks sales tax is something they can easily walk away from.
WHAT YOU SHOULD DO RIGHT NOW
If you are an interior designer — or the CPA advising one — and this article has prompted any concern about whether sales tax is being handled correctly, the time to act is before the DR-840 arrives. Here is what to do:
First, take advantage of our free initial consultation. Ask questions about how you handle sales tax and whether it’s done right. Then, with high level real advice (not someone’s best guess at the law), conduct a thorough review of how the business bills clients. Pull a representative sample of recent invoices and contracts. For each project, determine whether any tangible personal property was transferred to the client. If yes, identify every dollar the client paid in connection with that project — design fees, procurement fees, markup, delivery charges — and ask whether the entire amount was subjected to sales tax. Then estimate your exposure over the last 3 years (or the full life of your business if you haven’t been filing sales tax returns).
Second, consider Florida's Voluntary Disclosure Program. The FL DOR operates a formal program that allows businesses to come forward proactively and report previously unreported or underreported tax liabilities. In exchange for self-disclosure, the program typically offers a reduced look-back period (often limited to three years instead of potentially longer) and a penalty waiver. Voluntary disclosure is not available once an audit has already been initiated — so the window closes the moment a DR-840 is received. We handle a half dozen voluntary disclosures a month and would be happy to assist making the process as painless as possible. We can even negotiate a payment plan with the state, if you need it.
Fourth, if a DR-840 has already arrived, do not speak with the auditor alone and do not begin producing records without professional guidance. The scope of an audit, the records the auditor is entitled to review, and the way taxable sales are reconstructed are all areas where an experienced Florida sales tax attorney can make a material difference in the outcome. Engaging representation early — before the first meeting with the auditor — is almost always less expensive than trying to fix the damage after the assessment has already been issued.
THE BOTTOM LINE
Florida's sales tax rules for interior designers are genuinely complicated. The line between a taxable sale of tangible personal property, a non-taxable service transaction, and a real property transaction can be narrow and fact-specific. But that complexity is not a defense when the FL DOR audits your books and finds three years of furniture sales that were never subjected to sales tax, or a decade of design fees bundled with goods on invoices that were never taxed.
The interior designers and CPAs who fare best in the Florida sales tax environment are the ones who understand the rules before the auditor shows up — and who have structured their businesses, contracts, and invoicing practices accordingly. If there is any doubt about whether your current practices are compliant, the time to find out is now.
ABOUT THE AUTHOR
James H. Sutton, Jr., CPA, Esq. is a shareholder and named partner at the Law Offices of Moffa, Sutton & Donnini, P.A., one of Florida's preeminent state and local tax law firms, with offices in Fort Lauderdale, Tampa, and Tallahassee. Mr. Sutton holds dual credentials as a Certified Public Accountant and a Florida-licensed attorney, and his practice is devoted exclusively to Florida sales and use tax controversy — representing businesses from the initial audit notice through protest, litigation, and criminal defense before the Florida Department of Revenue. He has taught Florida sales and use tax to CPAs, attorneys, enrolled agents, and law school students, and has authored dozens of articles on the FloridaSalesTax.com blog addressing complex tax issues across virtually every Florida industry. Mr. Sutton has represented interior designers, design-build contractors, and home furnishing retailers in sales tax audits and has an in-depth understanding of the unique compliance challenges this industry faces. He can be reached at 813-775-2131, JamesSutton@FloridaSalesTax.com or through the contact form at www.FloridaSalesTax.com.
The information in this article is for general informational purposes only and does not constitute legal advice. Reading this article does not create an attorney-client relationship.
ADDITIONAL RESOURCES
The following articles from FloridaSalesTax.com provide further guidance on Florida sales tax compliance for interior designers, design-build contractors, and related industries:
- FLORIDA SALES TAX: INTERIOR DESIGN SERVICES — Published August 17, 2025, by James Sutton, CPA, Esq. A comprehensive breakdown of how Florida sales tax applies to every category of interior design engagement, from pure design services to full design-build contracts.
- INTERIOR DESIGNERS: FL SALES TAX PLANNING — Published July 16, 2015, by Amanda Levine, Esq. Discusses practical strategies interior designers can use to minimize Florida sales tax exposure, including the use of separate contracts and separate entities for design services versus goods procurement.
- FLORIDA SALES TAX AUDIT: CONSTRUCTION CONTRACTORS — Published November 2025. Covers the sales tax audit landscape for contractors and design-build firms, including the common mistake of treating installation labor as non-taxable when tangible personal property is involved — a trap interior designers frequently fall into as well.
- FLORIDA SALES TAX HANDBOOK: CONSTRUCTION CONTRACTORS — Published October 2019. A detailed guide to contractor sales tax obligations that is highly relevant to interior designers who manage renovation or build-out projects as part of their scope of services.
- ARE SERVICES TAXABLE IN FLORIDA? — Published September 2020. Explains Florida's foundational framework for taxing services, including the rule that design fees become taxable when bundled with the sale of tangible personal property.
- FLORIDA SALES TAX - IS LABOR TAXABLE? — Published October 2025. Addresses when labor charges — including design time, installation coordination, and project management — become taxable under Florida law, with practical examples directly applicable to the design industry.
- FLORIDA SALES TAX - VOLUNTARY DISCLOSURE PROGRAM — Published April 9, 2018. Details how a business with unreported or underreported Florida sales tax can use the Voluntary Disclosure Program to come into compliance with a reduced look-back period and the possibility of penalty relief — before an audit begins.
- FLORIDA SALES TAX INFORMAL WRITTEN PROTEST — Published November 17, 2018, by James Sutton, C.P.A., Esq. For designers who have already received an audit assessment, this article explains the protest process available under Florida law and how businesses can formally challenge an assessment they believe is incorrect or overstated.
- TAA 15A-004 — INTERIOR DECORATING — Technical Assistance Advisement issued May 4, 2015 by the Florida Department of Revenue. The FL DOR's own formal guidance on when interior design fees are subject to Florida sales and use tax — essential reading for any designer or CPA navigating this issue.
© Copyright 2026. James H Sutton, Jr. All rights reserved.