The Supreme Court has ruled that fresh-flower decorations installed at wedding halls are not the supply of agricultural products exempt from value-added taxes, but taxable decoration services. While fresh flowers themselves are agricultural products, the court said what customers purchase at a wedding venue is not so much ownership of the flowers as the wedding space decorated with flowers.
The Supreme Court's First Division (presiding Justice Shin Suk-hee) said on the 25th that on the 16th it upheld a lower court ruling that ruled against Josun Hotels & Resorts in its final appeal seeking to overturn an assessment of value-added taxes and other levies imposed by the Namdaemun Tax Office chief.
Josun Hotels & Resorts operates several hotels, including the Westin Josun Hotel. The company provided wedding ceremony services to couples marrying at its hotels and installed fresh-flower decorations at the venues through Business A, which engages in wholesale and retail of fresh flowers, vases, and sundries.
The Value‑Added Tax Act exempts unprocessed agricultural, livestock, and marine products from value-added taxes. Josun Hotels & Resorts viewed the flower decorations installed at wedding halls by Business A as the supply of agricultural products and did not report the related value-added taxes in 2018.
However, in 2023 the Namdaemun Tax Office determined that the decorations constituted a "supply of services," which is taxable, rather than the supply of agricultural products exempt from value-added taxes, and imposed 154,460,000 won in value-added taxes for 2018 on Josun Hotels & Resorts.
The key issue in the trial was whether wedding-hall flower decorations were "fresh-flower sales" or "decoration services to adorn the wedding space."
Josun Hotels & Resorts argued that even when supplying fresh flowers to general consumers, the act of arranging, such as in bouquets or baskets, accompanies the sale, yet that is still treated as the supply of fresh flowers exempt from value-added taxes. It said the essence of wedding-hall flower decorations is likewise the supply of fresh flowers, so value-added taxes cannot be imposed.
Tax authorities, by contrast, emphasized that the decorations were not provided directly to customers but used to adorn the wedding hall. They also argued that florists and other specialists were mobilized for the venue decor, and even if guests took home fresh flowers after the ceremony, couples did not choose the decorations to distribute flowers to guests.
The court of first instance sided with the tax authorities. The panel found that the couple did not buy fresh flowers in units such as bouquets or baskets but entered into contracts that priced the flower decorations by installation location—stage, tables, dais, and the bride's waiting room. Unlike ordinary fresh-flower sales, the focus of the transaction was on decorating the wedding-hall space.
The first-instance court determined, "It is reasonable to see the purpose of the flower-decoration contract as allowing the customer to use the wedding hall where the decorations are installed, rather than transferring ownership of the fresh flowers to the customer." It cited as grounds that the price of the fresh-flower decorations reached about 20 million won and that Josun Hotels & Resorts employed 35 staff members with expertise to decorate the venue lavishly and luxuriously.
Josun Hotels & Resorts appealed, but the appellate court did not change its view. The appeals court found it difficult to see the contracts as being for the customers to purchase fresh flowers worth about 20 million won and immediately distribute them free to guests. It also determined that the supply of flower decorations by Business A was not an independent transaction separate from Josun Hotels & Resorts' wedding ceremony services.
The Supreme Court also dismissed the appeal, finding no error in the lower court's application of the legal principles under the Value‑Added Tax Act.