The world wide web seemed a jurisdiction without taxation for years, even though consumers technically owed the costs. With no one states for years requiring companies selling online goods to charge sales tax at point of sale, companies didn’t, with corporations like Amazon and Wayfair questioning if governments even could force the tax on interstate transactions.
That changed in 2018 when the U.S. Supreme Court ruled in South Dakota v. Wayfair that states in fact could require taxes be collected and require the company to get dollars to government coffers.
Yet, Florida still doesn’t, even as tech groups once committed to fighting the tax long ago waved the white flag. But as the coronavirus pandemic pushed many consumers’ shopping habits online, supporters of “e-fairness” hope this will be the year Florida begins collecting the taxes.
“Obviously the momentum has been building for a while,” said Sen. Joe Gruters, sponsor for Senate legislation (SB 50) to bring sales tax online.
Gruters and House sponsor Rep. Chuck Clemons have stressed repeatedly the change won’t implement a new tax, just enforce one that already exists, but that few pay. The revenue not collected now is technically owed by consumers, and revenue estimators continue to increase the amount they believe goes unpaid. Gruters expects state economists when they finally score the bill to figure some $1.3 billion in sales tax revenue will be collected from implementing e-fairness, with $300 million of that going to local governments.
But those numbers raise hairs in some parts of Tallahassee, where any increase in revenue gets viewed as an increase in taxes. It’s part of why the bill last year failed to get a committee hearing in the House, and why the House version (HB 15) saw some open skepticism the first time it was discussed in committee ahead of session this year. The House Ways and Means Committee dedicated a meeting to the issue, but the bill in the House yet to hear a vote. There, business groups either expressed support for e-fairness or neutrality.
Even Amazon officials, once the most vocal opponents to online sales tax anywhere, argued “the time is right” for Florida to become the 44th state to levy the tax at point of sales. Mike Shutley, senior manager of public policy for Amazon, said the company had concerns as late as 2017 when states first started charging sales taxes about the logistics. It falls on companies to figure sales tax that can be set at different levels in different states, counties, cities and school districts. But there are now services like Avalara that calculate sales tax based on street address.
“The benefit for being the next to the last state to help level this playing field is that we will learn from those other states that perhaps did it in haste,” Clemons said.
Increasingly, even large retailers with physical locations have grown frustrated with trends like “showrooming,” where consumers look at products in stores, but then seek cheaper prices for the same goods online. As long as Florida doesn’t charge its 6% sales tax online, that’s an immediate discount that nobody selling goods in a physical store can match.
There remain some logistical concerns, particularly concerning those websites that act as marketplaces, facilitating sales between individual consumers as opposed to selling goods themselves. But for the most part, Florida retailers say it’s important to bring some sense of equity to those doing business here and competing against businesses outside the state — or country — who can sell goods to consumers in Florida duty free.
Debbie Harvey, president and COO of Ron Jon Surf Shop, stressed to lawmakers that online sales tax no longer is novel. It’s commonplace, and something any business based in Florida and shipping elsewhere must deal with already.
“We’re already having to do this for the other states,” she said. “It’s not a further burden on Florida businesses. It could be a burden on out-of-state businesses but we are already doing this for every other state we sell to.”
Still, the notion Florida could be wrestling money from constituents to more easily pay its bills has led to behind the scenes discussion in Tallahassee. Gruters, at a Senate Commerce and Tax Committee, said he would be fine tying the charging of online sales tax to a reduction on business rental taxes, a levy charged by Florida and no other state. That could make the bill revenue neutral while also reducing a burden on the retailers operating brick and mortar shops in the state.
“Some people think any increase in revenue is a tax increase,” Gruters said. “I don’t want to raise taxes. I want to make sure we are reflecting what’s currently owed, and that we create a fair playing field for local retailers.”
On that front, he said a walk through any downtown or shopping mall will provide the evidence those selling goods in person face unfair challenges today.
“This is about fairness to communities, fairness to consumers, fairness to the state and fairness to local brick-and-mortar stores. There are the business owners creating jobs in the community. These are the businesses supporting our Little League teams,” he said. “This has so many more benefits that a revenue uptick.”