Florida may be one step closer to “e-fairness.”
The Senate Commerce and Tourism Committee unanimously advanced legislation Monday (SB 50) that would allow the collection of sales tax online. Sen. Joe Gruters, the bill’s sponsor, said the pandemic shows the need more than ever for digital purchases to be taxed the same as those made in Main Street shops.
“Online purchases have multiplied, and I don’t think they will ever go back,” the Sarasota Republican said. “It’s time to create some fairness and level the field for our local retailers.”
It’s a case he has argued most of the year as brick-and-mortar retailers often faced lockdown orders, and consumers even without such restrictions gravitated to buying goods online to be delivered.
The legislation hasn’t been scored by a revenue estimating conference yet, Gruters said. But last year, state estimators figured some $620 million would be generated through charging sales tax online. About $120 million of that would go to local governments.
He also stressed the bill was not a new tax, but rather one that most people don’t bother to pay. State law requires individuals to remit the tax owed through online purchases each year, but that’s an arduous process few feel any incentive to pursue absent an audit. As a result, only about 2% of taxes owed get collected in Florida.
Meanwhile, a 2018 Supreme Court decision clarifying states can charge the tax has incentivized most states in the union to start assessing it at point of sale. Florida and Missouri remain the only states charging sales tax who do not assess it as part of a transaction.
The bill drew support from retail groups across the aisle, but progressive groups expressed partial opposition. Rick Templin, lobbyist for the AFL-CIO, said his organization supported e-fairness, but felt the legislation should be paired with other legislation that closed corporate tax loopholes as well.
Karen Woodall, Executive Director of the Florida Center for Fiscal and Economic Policy, concurred and said sales taxes are by nature regressive, taking a higher percentage of disposable income away from the poorest citizens.
“If you’re going to raise the state sales tax, we’re encouraging you to also look at returning the state corporate income tax rate that was there before 2018 as a fair way to raise revenue,” Woodall said.
Ida Eskanani, a lobbyist for Florida Rising, characterized online sales tax as new, which spurred some debate. “If we do charge a new consumer tax, then we ask you make sure it goes to those most in need,” she said.
Woodall and Templin, while joining in asking for legislation to be coupled with the e-fairness bill, said they do not consider Gruters’ bill an assessment of a new tax but that, regardless of technicalities, it will be viewed as one.
“When they make their online purchases, they will be spending more on those purchases,” Templin said.
It’s more than a question of rhetoric. To classify the bill as a new tax would mean it required a two-thirds vote to pass.
Fears about the proposal being considered a new tax have stymied efforts to pass it, even though the change has been supported by large business groups, the Florida League of Cities and the Florida Association of Counties.
As state and local governments face budget crunches — and as the pandemic has led to more shopping online — a task force led by officials from Associated Industries of Florida, the Florida Retail Federation, the National Federation of Independent Business Florida and the Florida Restaurant & Lodging Association included the online sales tax collection in a list of proposals for the 2021 Legislative Session.
Tallahassee-based Florida TaxWatch for years has argued the proposal would ensure online dealers don’t have an advantage over brick-and-mortar stores in selling the same products without the added state tax.
“They are invading our markets, and we are not collecting the sales and use tax. We are putting our own employers at a clear competitive disadvantage,” TaxWatch President and CEO Dominic Calabro said. “This needed to be done before this pandemic and absolutely must be done because of the pandemic.”
Gruters’ 2020 proposal did not get through Senate committees. The House never took up a version of the bill, which was sponsored by Rep. Chuck Clemons, a Newberry Republican who is again sponsoring the issue for the 2021 Session (HB 15).
Many online sales to Floridians are taxed if, for example, retailers have stores or other operations in the state. But Gruters’ proposal uses a 2018 U.S. Supreme Court decision in a case known as South Dakota v. Wayfair as a basis for trying to require other out-of-state businesses to collect and remit the taxes to Florida.
The decision against Wayfair, a large online retailer with no physical presence in South Dakota, overturned a “physical presence test,” expanding states’ abilities to collect sales taxes.
A South Dakota law, which focuses on remote sellers with $100,000 of sales or 200 individual transactions into the state, has since been copied by 43 states and the District of Columbia. Another 38 states and Washington, D.C., have set up marketplace provider collections.
Senate President Wilton Simpson has highlighted the proposal as a way for lawmakers to offset a projected $2.75 billion revenue shortfall. Simpson has also proposed establishing a new gambling agreement with the Seminole Tribe of Florida.
The News Service of Florida contributed to this post. Republished with permission.