Floridians could soon have to pay sales tax on internet purchases after senators voted on hot-button legislation that would close a longstanding loophole.
Senators in a 30-10 vote approved online sales tax legislation, which if signed into law will require internet retailers to collect the tax at the point of sale.
The bill cleared only after a controversial amendment required new revenue raised to be directed to Florida’s unemployment trust. Supporters of that amendment argue the funds are needed to protect businesses from looming tax hikes to refill depleted unemployment coffers while critics argue the money could be better spent helping average Floridians recover from the economic depression thrust upon them by an ongoing pandemic.
Sen. Joe Gruters, a Sarasota Republican, has pushed for an e-fairness measure for years.
“This is about fairness for all of Florida,” he said. Gruters encouraged senators to consider the vacancies within area malls to measure the unfair burden brick-and-mortar storefronts face in retail with online shopping now claiming a sizable share of the market.
But his proposal found traction only amid the economic fallout from COVID-19. The bill (SB 50) boasts the support of leadership in the Legislature, but Senate President Wilton Simpson and Speaker Chris Sprowls only came out in favor of the plan after it was tied to the unemployment crisis.
Until recently, major online retailers lobbied hard against measures in all states regarding collection of online sales tax.
That changed when the U.S. Supreme Court in 2018 ruled in South Dakota v. Wayfair that states did have that right. Since then, 43 of 45 states with a sales tax began requiring the tax to be assessed. Florida could soon become the 44th.
Should that happen, revenue estimators say it could generate nearly $1 billion in revenue next year alone.
The amendment, approved on a 24-16 floor vote, requires all of that money be directed into Florida’s Unemployment Compensation Trust Fund — at least until that account reaches pre-pandemic levels.
When the fund became depleted last year under a record number of jobless claims in the spring, it triggered an increase in unemployment tax on businesses in Florida at the start of this year. Should the fund remain low, another increase will be triggered in the future to replenish the fund.
Gruters argued that’s yet another unfair burden on those businesses headquartered in Florida, which already must compete against online outlets that don’t charge the same tax as those conducting countertop retail.
The legislation has moved with ease through the Senate. But Sen. Perry Thurston, a Broward Democrat, questioned why an amendment earmarking the way dollars were spent was necessary. He suggested Florida doesn’t need to focus on keeping the business tax down, already the lowest in the nation, before fixing the state’s unemployment system.
“Why contribute a billion dollars to businesses?” he asked.
Sen. Audrey Gibson, a Jacksonville Democrat, also openly questioned why the entirety of revenue must be directed to the unemployment trust
“Don’t you think we could help Floridians more if we utilized some of the money in (general revenue) to have more sales tax holidays and perks that help everyone?” she asked.
Gibson had voted for the bill in committee, but said she had grave concerns about the amendment presented on the Senate floor.
Gruters, though, said replenishing the unemployment system would help everyone, hopefully by preventing layoffs and keeping people off the unemployment system in the first place.
He also stressed Floridians, whether they know it or not, are already obligated to pay sales tax on online purchases. They are expected to pay the sales tax directly to the Department of Revenue, but few do outside an audit. As an accountant, Gruters said he frequently hears clients surprised to learn they owe this tax sometimes with interest and penalties.
Debate was delayed on the bill while Senate Rules chair Kathleen Passidomo considered whether the legislation counts as a tax increase. She pointed to staff analyses that required payment of tax on mail-order purchases dating back to 1990.
Gruters, for his part, rejected assertions his bill constituted a new tax. Rather, it’s one owed but largely uncollected for decades.
That’s an important dispute that may come up again should the bill reach Gov. Ron DeSantis‘ desk. His budget does not include a boost in sales tax revenue from collecting on e-commerce, and the Governor has said he doesn’t support any tax increase.
An amendment was also approved that changed the name of the proposed law after Randy Miller, a Florida retailer advocate and the first executive director of the state Department of Revenue, who died from COVID-19 this year. Miller long advocated for collecting sales tax online.
A House version of the bill (HB 15), sponsored by Rep. Chuck Clemons, has passed in the House Ways and Means Committee and awaits a vote in the Commerce Committee.