Florida lawmakers considering new online sales tax costing $612M per year
A bill that would require remote sellers to collect sales tax is back on the table in Tallahassee amid a search for new revenue.
After failing to make its way out of committee in 2019, a bill to require remote and online sellers to collect sales and use tax from customers in Florida has reemerged in Tallahassee.
House Bill 15, co-sponsored by state Reps. Chuck Clemons, R-Cross City, and Chip LaMarca, R-Lighthouse Point, would require online retailers that sell in the state to collect the same 6% state sales tax brick-and-mortar stores are required to collect.
The new tax is expected to bring in $421 million in year one and $612 million per year after that.
Throughout the pandemic, Florida residents have turned to online retailers for shopping and delivery to meet their needs – purchases that did not collect sales tax, unlike brick-and-mortar stores.
The U.S. Supreme Court’s 2018 decision in South Dakota v. Wayfair Inc. undid precedent that required only businesses with a physical presence in a state to collect and remit tax, opening the door to new state revenue. Florida and Missouri are the only states with a sales tax that haven’t expanded their sales tax law following the decision.
HB 15 would require remote sellers, including online vendors such as Amazon, to collect and remit tax if they have 200 or more sales, or more than $100,000 in sales in the state within the previous calendar year.
Technically, Florida currently levies a “use” tax for online sales. However, if a Floridian was to purchase something from a business that didn’t reside in the state, the customer was asked to report the transaction to the state Department of Revenue and manually pay the tax – a system with which compliance is almost nonexistent.
Moreover, since Florida doesn’t levy a personal income tax, the state has historically relied heavily on a sales tax for revenue. With the downturn in tourism and other business-related COVID-19 restrictions, sales tax collections plunged nearly $1.8 billion between April and July 2020.
Collections following July exceeded estimates, giving hope for a quicker recovery than expected. Sales taxes alone accounted for nearly 92% of October’s total general revenue gains, which beat monthly projections to reach more than $313 million.
While Florida lawmakers should bring fairness to the tax system – treating brick-and-mortar businesses and online retailers the same – they should not look to impose a larger total tax burden on Florida families that have been impacted by the continuing economic downturn.
Any measure to bring tax fairness to online retailers should be revenue-neutral. For example, lawmakers can offset the potential of an increased tax burden caused by cutting other tax burdens, such as the rental tax on commercial property.
Florida is the only state in the nation to charge a tax on small businesses for the privilege of renting a storefront, costing a whopping $2 billion per year. With the new online sales tax expected to bring in $612 million per year, lawmakers have plenty of room to reduce the commercial rent tax without blowing a hole in the state budget.