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Target Enter. v. State Dep't of Revenue

Target Enter. v. State Dep't of Revenue

Circuit Court of the Second Judicial Circuit of Florida, Leon County

November 28, 2022, Decided; November 28, 2022, Filed

CASE NO.: 2021-CA-002158

Opinion

FINAL JUDGMENT FOR PLAINTIFF

This action was tried before the court on November 2, 2022. On the evidence presented, the Court finds as follows:

FINDINGS OF FACT

A. Target Enterprise, Inc. ("TEI") is a subsidiary of Target Corporation ("Target"). Both TEI and Target are headquartered in Minnesota. Target is a nationwide online and brick-and-mortar retailer. TEI earns revenue from providing services to Target and certain other third parties.

B. In 2011, TEI and Target entered into a Retail Operating Services Agreement (the "ROSA"). [Plaintiff's Exhibit ("Plaintiff's Ex.") P1] Under the terms of the ROSA, TEI was to provide Target (1) merchandising services, (2) marketing services, and (3) strategy and management consulting services. In return for those services, Target agreed to compensate TEI.

C. Ernst & Young ("EY") was engaged to prepare a transfer pricing study to determine the arms' length cost for the services provided by TEI to Target under the ROSA. During the period at issue, EY prepared a transfer pricing report in 2016 and updated that report in 2017. [Plaintiff's Exs. P13 and P14] TEI set the pricing of its services in accordance with these transfer [*2]  pricing reports. [Trial Transcript ("Tr. Trans.") 41:12-19] The Department did not question the transfer pricing conclusions of EY. [Tr. Trans. 44:22-25]

D. TEI owned no real or tangible personal property in Florida during the audit period. [Plaintiff's Exs. P2-P4]

E. During the audit period, TEI had over 11,000 employees, almost all of whom were located at TEI's headquarters in Minnesota. TEI did have a small amount of payroll attributable to Florida. [Plaintiff's Exs. P5-P7]

F. Chapter 220, Florida Statutes, provides for a Florida income tax on corporations. The State of Florida Department of Revenue ("DOR") conducts audits of taxpayers' records to determine if the appropriate income tax was calculated, reported, and remitted to DOR.

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2022 Fla. Cir. LEXIS 2986 *

TARGET ENTERPRISE, INC., a foreign corporation, Plaintiff, v. STATE OF FLORIDA DEPARTMENT OF REVENUE, an agency of the State of Florida, Defendant.

CORE TERMS

costs, sales, documentation, COP Rule, payroll, auditor, apportionment, receipts, audit, numerator, taxpayer, retail, income producing activity, greater proportion, headquartered, records, business activity, provide a service, methodology, inspection, pricing