EIN News — CHARLOTTE, NC – October, 2008 /PRAvenueNW/ – While Bill Miller was browsing through the “Florist” section of the Charlotte, NC telephone directories this Spring, he inadvertently stumbled on a situation that may be costing North Carolina citizens as much as Ten Million Dollars a year in lost Tax Revenues.
Miller is the owner of the Flower Hut, Yahoo Shopping’s highest ranked florist in Charlotte, so he usually knows what’s going on in town, “But I didn’t recognize the names of several of the advertisers as being local merchants. I was curious, so I decided to do a little bit of checking.”
Miller learned that the “florists” whose names he didn’t recognize were actually Floral Marketers located in other states. Finding their exact locations wasn’t easy because their call center operators were devious in answering his questions, and their websites did not indicate their physical location. But a little research allowed him to verify that these were all out-of-state merchants that were “posing” as local flower sources.
But the real surprise happened when he started to place “test” orders and learned that none of them was charging North Carolina sales tax. Miller knows that if a merchant is out of state, and not actively advertising in another state, then popular convention is that no sales tax is charged.
“But, Miller pointed out, “these businesses are advertising in local publications! Doesn’t that mean that they are actually doing business in North Carolina? And shouldn’t they be paying taxes just like The Flower Hut does?”
He turned to his CPA and immediately learned the answer. According to North Carolina Statutes, if a retailer is purposefully or systematically exploiting the market by using the media, then this creates nexus with the State. “Nexus” is just a fancy term for doing business in North Carolina.
Based on Miller’s recent experience, and expanding that to the 600 florists in North Carolina, he estimated the sales tax that these “florists” should have paid the State was around a million and a half dollars per year. “But I think my estimate is way too low,” Miller stated. “That’s because the flower business is highly seasonal, with huge order volumes around Christmas, Valentine’s Day and Mother’s Day. I wouldn’t be surprised if North Carolina’s actual tax loss isn’t closer to ten million dollars.”
Miller then pointed out that many of these companies have been exploiting the North Carolina market for close to a decade, so the amount in back taxes might be as high as fifty million dollars.
“I hope,” Miller concluded, “that North Carolina authorities move on this in a timely fashion. North Carolina merchants are losing lots of sales to these Phony Florists, and the State is losing Millions in tax revenues. I’ve sent a detailed report to the North Carolina State Tax Fraud Hotline. But so far, I haven’t heard anything back from them.”
William Miller, The Flower Hut
Telephone: 800-525-3162 or 704-535-1041
The Flower Hut
5208 E. Independence Blvd.
Charlotte, NC 28212