Lawmakers in sales-tax dependent Florida to consider Wayfair bill
Florida may become one of the last states to pass a law requiring remote sellers to collect the state’s sales tax on purchases.
Bills have been filed for next year’s legislative session requiring sellers and marketplace providers that don’t have a physical presence in the Sunshine state to collect the state’s 6% sales tax. If passed, the law would become effective July 1, 2020.
Passing such a measure would be a boon for the state budget. In fiscal 2019, 77% of the $89 billion state budget was supported by revenues from sales tax collections. Florida’s sales tax is even more important to the annual spending plan because the state has no personal income tax.
Currently, people who make purchases over the internet and through mail orders are required to self-report them and pay sales taxes to the state Department of Revenue. Few people do, even though they are legally liable for paying the tax.
Florida lawmakers will be considering pre-filed bills next year that contain measures similar to laws passed in most states since the U.S. Supreme Court handed down its decision in South Dakota v. Wayfair on June 21, 2018, giving states the right to require out-of-state sellers with at least a specified amount of sales within the state to collect and remit sales taxes.
According to the Sales Tax Institute, South Dakota’s law has a two-part test for determining if a remote seller is required to collect sales tax.
Sellers must collect taxes if their gross revenue from the sale of tangible personal property delivered to South Dakota exceeds $100,000 or if a seller has sent more than 200 invoices to customers in the state.
Since the Wayfair decision, 43 of 45 states with general sales taxes have implemented laws requiring sales tax collections. Florida and Missouri are the holdouts, although both states are on track to join the pack.
In Missouri, eight sales tax-related bills are under consideration, according to a state-by-state chart on Wayfair-related laws published by the Sales Tax Institute.
Florida Sen. Joe Gruters, R-Sarasota, has pre-filed Senate Bill 126 for next year’s session. It would require retailers with no physical presence in the state to collect sales taxes on items delivered to purchasers, if the retailer makes a certain number of sales. Marketplace providers, such as Amazon and eBay, would also be required to collect sales taxes.
The bill applies to dealers that have 200 or more individual retail sales delivered to Florida or that have more than $100,000 in retail sales delivered to the state. Those measures would be determined by deliveries and sales in the previous year.
The Senate Committee on Commerce and Tourism unanimously approved SB 126 on Oct. 15.
Before the vote, Gruters said that Florida was one of two states that hadn’t approved the sales tax collection requirement for remote sellers.
“We are falling behind the times,” he said.
Gruters, who is also chairman of the Florida Republican Party, said his bill would accomplish two goals: requiring sellers and third-party market places to collect an existing tax and to “level the playing field for our brick and mortar stores.”
The current situation is unfair to existing instate retailers with a physical presence because they also pay commercial and payroll taxes, he said.
“I think [the new sales tax requirement] will generate close to $700 million in terms of the additional revenue that it will bring to the state that’s owed, but that’s just not being collected,” Gruters said. “All this is doing is making it convenient for consumers.”
The amount of sales tax revenue expected to be generated came from a sales tax bill Gruters filed earlier this year that failed to pass. Senate Bill 1112 required remote sellers to collect sales taxes but was part of a broader measure that included reducing the state tax rate on commercial property rentals to 3.5% from 5.7%; provided a tax credit for projects that create intellectual property such as certain computer software; and exempted construction equipment rentals from paying the state sales tax.
An analysis of SB 1112 said that requiring remote sellers and marketplaces to collect sales taxes would bring the state an estimated $702.7 million in recurring revenues annually. The various tax cuts proposed by the bill, known as “offsets,” would have decreased general fund revenues by $104.9 million annually.
SB 1112 died in the Senate Appropriations Committee on May 3.
Gruters said the bill he prepared for next year’s session doesn’t include any offsets.
Lawmakers can decide how to spend the added revenue, he said, suggesting that some of it could be used to reduce the business rental tax. The Republican-led Legislature has cut business taxes each year for nearly a decade.
Kyle Baltuch, director of development and an economist for the nonprofit think tank Florida TaxWatch, told the Senate Committee on Commerce and Tourism that under state law today, Florida residents can incur a tax liability.
“Millions of Floridians go online and are unknowingly breaking the law by not remitting these taxes,” Baltuch said. “A perfect example of this is a woman who reached out to TaxWatch last year.”
Baltuch said the woman purchased a car part online “and thought she was done.” Later, she received a notice in the mail that she was being audited by the Department of Revenue.
“This is relatively rare,” he said, adding that the DOR can’t audit millions of transactions each year, but it happens.
TaxWatch helped the woman determine what to do, which included assembling receipts for all her purchases. DOR asked for computer screen shots of all her purchases, such as those from Overstock and eBay, he said.
Baltuch said the audit took quite a while, and the woman suffered "quite a lot of emotional stress." He added, “So we do ask that the Legislature moves forward with [Gruters] bill.”
Lindsay Cross, government relations director for the nonprofit Florida Conservation Voters, said her organization also supports the bill. She called it a prudent step for the state to take.
Cross told the committee that the record numbers of tourists visiting Florida and the constant in-migration of new residents will require new funding to support the governmental services they need.
“With the lack of an income tax it’s imperative we keep this money in our state in terms of conservation initiatives,” she said. “We do think this supports our local businesses and makes them more competitive and viable in the long term.”
Requiring remote sellers to collect sales taxes has also received support from other organizations, including the Florida League of Cities and the Florida Chamber of Commerce. The Committee on Finance and Tax will consider SB 126 next.
House Bill 159, an identical sales tax measure sponsored by Rep. Charles Clemons, R-Newberry, has been filed although it hasn’t been scheduled for the first of its three committee hearings.
Florida’s three-month legislative session begins Jan. 14.