Small businesses could catch a break this holiday season, in the form of a tax break.
Sen. Annette Taddeo sponsored a bill (SB 302) to allow a “tax holiday” for small businesses. During a Saturday in late-November small businesses would not have to collect state and county sales taxes.
The day would coincide with “Small Business Saturday”, which takes place the Saturday after Thanksgiving.
The Senate Finance and Tax Committee voted unanimously to advance the legislation. It was the second Senate committee to do so.
Taddeo said small businesses need the holiday because of COVID-19.
“As small businesses are trying to really recover from a very, very tough economic time due to the pandemic, this holiday season, this next holiday season, this Thanksgiving, would give them just an extra boost for people to shop local, and to buy their holiday gifts from small businesses in Florida,” Taddeo said.
While the tax break wouldn’t save businesses money on their own tax bills, the reduced cost to consumers who wouldn’t pay sales tax could motivate increased commerce.
Florida Chamber Foundation Chief Economist Jerry Parrish said in November the COVID-19 pandemic is devastating small businesses.
“It’s affecting small businesses more than large businesses because of the opportunity to have capital,” Parrish said. “The large businesses certainly have an advantage here.”
Parrish said leisure, hospitality, and other tourism-related industries have been it the hardest.
But the popular bill is pricey. The Revenue Estimating Conference estimates the bill would reduce state revenue by $36.4 million, and the bill would reduce local revenues by $11 million.
Sales tax is important to Florida’s recovering economy. A bit more than 74% of the total fiscal gains in January came from sales tax, according to Florida’s most recent revenue report.
But Taddeo said local businesses are more likely to keep revenue in the community.
“When someone spends $100 at a local small business, $48 is recirculated in our local economy. But if that same $100 is spent at a big store or a national retailer or Amazon, only $14 makes it back to our local economy. Let’s keep our dollars in our local economy, it’s an investment towards small businesses to get back,” Taddeo said.
The bill defines a small business as one that contributes less than $200,000 in sales tax for a one-year period.
The tax break would apply to items costing $1,000 or less.
Florida sales tax is 6% of the cost of a good. Many counties have levied additional taxes. Pinellas County, for example, has a 1% Penny for Pinellas sales surtax that brings its local sales tax to 7% of a purchase on taxable items.
If passed the tax holiday would occur Nov. 27.
Small Business Saturday is an event started by American Express in 2010 as a way to encourage cardholders to shop at small businesses the Saturday after Thanksgiving. The effort was later taken on by the U.S. Small Business Administration in 2015, and small business shopping on the day is growing. More than 110 million consumers spent almost $20 billion at small businesses on Small Business Saturday in 2019, compared to the almost $18 billion spent by 104 million consumers in 2018, according to the Small Business Administration.
The bill now heads to its last committee stop in the Appropriations Committee.
House companion legislation (HB 637) has yet to be heard in any of its three assigned committees.