On November 18, 2024, a First Amended Class Action Complaint was filed in the Southern District of Florida against Walmart, Inc., challenging Walmart’s charging and collecting of sales tax on delivery fees. The class action seeks damages as well as injunctive and declaratory relief.

In Florida, transportation services in addition to the sale of tangible personal property are generally exempt when the charge is separately stated and can be avoided by a decision or action solely on the part of the customer. When it comes to online purchases, the taxability of these purchases will generally hinge on whether there is an option for the taxpayer to go the store and pick up the item there. While this is not an option for Amazon and other marketplace facilitators who generally do not have store locations for the pickup of products ordered online, some online retailers, such as Walmart, do provide that option.

Rule 12A-1.045, Fla. Admin. Code, provides several examples of how the delivery or shipping and handling may or may not be taxable depending on the two factors above. It is worth noting that Rule 12A-1.045 only applies to transportation charges and is defined as inclusive of “carrying, delivery, freight, handling, pickup, shipping, and other similar charges or fees.”

 As online retailers have expanded and evolved, some transaction fees do not clearly fit inside those boxes, such as processing or transaction fees. Even in brick-and-mortar locations, it is becoming increasingly popular in Florida for business to charge an extra 3% of purchases made by credit card to cover credit card fees.

While questions remain in the “fee” area, the clarity of delivery fees in Florida makes the Walmart case a little surprising at first glance. With that said, the corporate structure of “Walmart.com” and “Walmart” could impact these transactions. Although it appears that Walmart.com may be a subsidiary of Walmart, Inc., how these transactions unfold and the impact on delivery charges is not clear.   

For example, Plaintiff’s Exhibit A is an online receipt of “Off! Active Insect Repellent” which was purchased for $6.44 plus $19.95 in express delivery fees. If the customer wanted to pick up the bottle of repellent purchased, he would likely not be allowed to drive to the Walmart.com warehouse where it is stored. If Walmart.com simply lets you know that this same product is in stock and can be purchased at a local Walmart brick-and-mortar store, that seems fundamentally different than optional delivery. Alternatively, if you can purchase this item on Walmart.com and then take your receipt to a local brick-and-mortar store to pick up your purchase, that would be evidence that delivery is optional on purchases from Walmart.com.

One question to be considered is the return policy for purchases made at Walmart.com. Can the customer return this insect repellant to a store location or must it ship the bottle back to the warehouse?

Another question, which may only be of interest to this author, is why the sole purchase identified in the case is with “Express delivery” for the price of $19.95. Surely express delivery is optional, while, if any are mandatory, it would be the standard delivery option. It begs the question – does Exhibit A really show a mandatory delivery fee?

Finally, another area of investigation is whether these fees are mandatory on Walmart items or other retailers selling their products through Walmart.com. If the Insect Repellent is in fact being sold by a third-party which has no physical location except for an out-of-state warehouse, there could be no option to pick the product up in person unless you made a purchase directly from Walmart the retailer, not facilitator, at a brick-and-mortar location.

If the case was as simple as Walmart erroneously charging tax on optional delivery, it probably would have been resolved by the Walmart tax department by this point. It will be interesting to see how Walmart responds, and what the facts of these transactions, and their delivery component truly are. For some reason, Walmart believes it must charge tax on delivery. Are they right?