House committee advances online sales tax collection plan

Rep. Chuck Clemons. Image via Colin Hackley

A House Committee for the first time heard and advanced legislation on collecting sales tax online.

The House Ways and Means Committee voted in favor of moving a bill (HB 15) sponsored by Rep. Chuck Clemons that could generate nearly $1 billion in revenue this year for Florida.

The bill advanced with a 16-2 vote.

House Speaker Chris Sprowls on the eve of the hearing offered his support to the bill, conditional on an amendment directing all dollars raised to Florida’s Unemployment Compensation Trust Fund. Sprowls and Senate President Wilton Simpson issued a joint release in support of the revenue-neutral approach as a way to avoid an automatic trigger of an unemployment tax increase.

Clemons offered an amendment in committee that put the plan in place. He said the legislation would level the playing field between out-of-state online retailers and the brick-and-mortar businesses that call Florida home.

“This levels the playing field for purchasers of goods in Florida as well as the seller by adjusting the point of collection from the buyer to the seller,” Clemons said.

Lawmakers stressed the bill does not constitute a new tax. The law already requires consumers to pay sales tax for online purchases, but few do absent an audit because doing so requires actively downloading forms and paying the tax directly to the Department of Revenue.

While critics branded the shift as a tax increase on consumers, Clemons argued the legislation will help avoid penalties and interest that catches individuals unawares during audits.

While e-commerce companies for years argued states should not be able to charge sales tax for online purchases, a 2018 Supreme Court ruling in the South Dakota v. Wayfair case affirmed states have that ability. Since that ruling came down, 43 of the 45 states with a sales tax have put laws in place requiring the tax be collected by retailers and sent to states.

Advances in technology also remove some of the burden of calculating sales tax charged to consumers in jurisdictions around the globe. At a House workshop last month, executives noted services like Avalara can calculate sales tax based on street address.

Clemons noted Florida retailers, thanks to other states moving more quickly on the Wayfair decision than Florida, already must charge online sales tax online for any customers in those 43 states.

In the Ways and Means Committee, Rep. Anna Eskamani, an Orlando Democrat, filed an amendment to direct revenues instead to the Local Government Housing Trust Fund, better knows as the Sadowski Fund. She argued using money to stop an unemployment tax increase when Florida already charges less than any other state served as a helping hand to businesses not to workers.

But Clemons said some businesses could see as high as a 700% increase in unemployment taxes should the state ignore the depletion of the unemployment trust.

The failures of Florida’s unemployment system also came into view clearly during the pandemic when a surge in claims crashed the state’s CONNECT system. Some consumer advocates argued in committee that using the windfall from online sales tax to prevent a business tax hike prioritizes the needs of businesses not paying their share and puts the burden on consumers.

But business groups like the Florida Chamber of Commerce came out immediately in favor of the plan. Florida Chamber President and CEO Mark Wilson on Tuesday said the plan “benefits Florida’s main street businesses by leveling the playing field on sales tax collections, while at the same time providing much needed relief from a looming $713-million tax increase on employers.”

Revenue estimators estimate collecting tax at the point of sale will generate $973.6 million in general revenue funds in the 2021-2022 fiscal year and $1.08 billion each year afterward.

While lawmakers on both sides of the issue argue the move is not a tax increase by legal definition, others disagree. Rep. Anthony Sabatini, a Howey-in-the-Hills Republican, argued that Tallahassee has a different definition of a tax hike than most constituents. He noted that once the unemployment trust gets replenished, the collection of online sales tax will remain.

“The Tallahassee bubble definition of a tax increase, the lobbyist definition, is we found an old statute that was never applied that says this money owed because it’s existed since 1940,” Sabatini said. “The Lake County definition is government taking more money from somebody than they did before.”

Legislators may have to convince Gov. Ron DeSantis, who did not include the collection of online sales tax in his proposed budget and has said he doesn’t support tax increases.

In the Florida Senate, companion legislation (SB 50) filed by Sen. Joe Gruters already cleared three committees. It was scheduled for debate on the Senate floor Thursday. But Gruters said it was temporarily postponed while he drafts an amendment clarifying revenue will go to the unemployment trust, bringing it in line with the House version.