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House tax committee opens debate over taxing online sales

Members of the House Ways & Means committee hankered openly Wednesday to collect potentially hundreds of millions of dollars in sales taxes on online sales.

What wasn’t clear is whether Florida’s new supermajority requirement to raise revenues would allow them to do that.

“That’s going to be a policy call for you guys,” staff director Don Langston told the committee during its first hearing of the year.

Nevertheless, committee members from both parties expressed interest in going after this revenue.

Business groups, too, have advocated for extending the sales tax to online retailers — both to shield small businesses against major online retailers and to align the state’s tax code with the digital economy.

“It’ll be one of the biggest issues before the Legislature this session,” committee chairman Bryan Avila, a Hialeah Republican, said after the hearing.

He didn’t know how much money is at stake. “All I can say is hundreds of millions. I really wouldn’t be able to give you an accurate number.”

Freshman Delray Beach Republican Mike Caruso said there is little appetite to target smaller retailers.

“There’s an economy of scale. To go after 1,000 little guys that add up to one Amazon is always a challenge for any regulatory body,” he said.

“I think they estimated between $400 million and $500 million a year for the state of Florida alone. That’s a significant dollar amount.”

Whether the effort might run afoul of Amendment 5 — the voter-approved requirement for supermajorities in the House and Senate to OK any new taxes or increase existing ones — “those are still ongoing conversations,” Avila said.

The U.S. Supreme Court in April upheld a South Dakota law requiring online retailers to collect sales taxes on goods sold online to state residents. The case is South Dakota v. Wayfair.

Previously, high court precedent allowed states to tax only businesses maintaining physical presences within their jurisdiction.

Formally, Florida’s levies on commerce are known as the Sales and Use Tax. Retailers collect sales taxes for remittance to the state. Consumers of taxable items — often purchased out-of-state for delivery in Florida — are supposed to pay the use tax.

Few actually do, although Department of Revenue audits of businesses sometimes turn up taxable purchases, Langston said.

“The reality is that if we’re expecting an everyday Floridian who’s making an online purchase to follow the law in that way, it’s not happening,” said Anna Eskamani, a Democratic freshman from Orlando.

“We’re looking toward these bigger companies, like the Amazons of the world, to have a system where they can pay sales taxes for third-party sellers. It’s going to be a game-changer for us in this state.”

Is it legal? It ultimately may depend on whether the courts conclude targeting online sales constitutes a new tax.

“One argument would be that it’s not really a new tax. It’s improving enforcement of a tax,” Langston said.

Another question is whether the Legislature can get it done this year.

“It might require more than one session to make it happen. It might even require a work group or a task force. But I was really excited to see other legislators engaged on this,” Eskamani said.

“This is not a sprint — it is a marathon. I think we have to start now.”

Written By

Michael Moline is a former assistant managing editor of The National Law Journal and managing editor of the San Francisco Daily Journal. Previously, he reported on politics and the courts in Tallahassee for United Press International. He is a graduate of Florida State University, where he served as editor of the Florida Flambeau. His family’s roots in Jackson County date back many generations.

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