The pandemic has shifted the buying habits of Floridians who don’t want to expose themselves to crowds of shoppers. In response, Florida must finally shift the way it taxes commerce on the internet.
Under current law, a relic of the Sears catalog era, remote sellers who have a “physical presence” in Florida – think of those Amazon warehouses – must charge sales tax on those orders. Internet retailers who don’t have buildings and employees in Florida, however, don’t need to charge sales tax on their orders (though some are).
It’s like we’re giving those out-of-state and out-of-nation companies an economic advantage because they haven’t hired people here or built anything here. Thank you for staying away from us.
Little known fact: consumers who haven’t paid sales taxes on their online orders are supposed to download a form (Form DR-15MO; warning: math will be required) and pay the tax to the state on an honor-system basis. Naturally, hardly anyone does this.
As a result, the state foregoes more than $400 million in sales tax revenue each year.
Legislators, who will be staring down a $5.4 billion two-year budget gap when they start writing a budget in March, have strong motivation next year to correct this situation.
And sure enough, among the first batch of bills filed this week was HB 15, which would require internet retailers and online marketplaces to collect state sales tax on Florida orders.
Bills to collect sales taxes on internet sales have been filed and routinely defeated since 2004. Opponents have always characterized them as tax increases. Supporters have argued that such action is merely repairing a tax loophole. Tax reform or tax increase? It’s an almost theological debate.
At long last, though, the loophole argument is looking more convincing. The shift in attitude is greatly aided by a 2018 U.S. Supreme Court ruling making it easier for states to tax internet sales to residents. Most states already have jumped at the opportunity. Florida did not. Legislation to do that was introduced and failed last session.
Florida, which has a prohibition on a state income tax enshrined in its constitution, is heavily dependent on its sales tax. It accounts for more than three-quarters of the state’s general revenue. The tax is good in good times and bad in bad times. These are bad times. We have a pandemic and recession to react to.
It simply makes sense to modernize the tax to adapt to the way more people buy things. So far, legislative leaders have sounded far more open to the idea than in the past.
Both Senate President Wilton Simpson, R-Trilby, and House Speaker Chris Sprowls, R-Palm Harbor, have spoken in favor of the tax reform side of the increase-or-reform question.
“It’s not a tax increase to pay the taxes you owe,” Simpson has said.
“I’d rule out tax increases, but what you’re suggesting is something like the sales tax collection on something,” Sprawls has said.
Nothing like a multi-billion revenue shortfall to concentrate the mind. Overdue modernization of the sales tax could be one more adjustment forced on the state by pandemic times.
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