It looks like Congress rather than the Florida Legislature finally could be the one to stand up for the state's jobs and residents and modernize the sales tax system to include more Internet purchases. It's about time.
As early as this week, the U.S. Senate expects a bipartisan vote on legislation that would require out-of-state Internet retailers to collect state and local sales taxes from customers and remit them. The so-called Marketplace Fairness Act would finally level the playing field between most brick-and-mortar stores and e-commerce. President Barack Obama has said he supports the proposal. After the Senate acts, the U.S. House should sign on and send the bill to the president's desk. The nation needs a tax code for state and local governments that better reflects how business is done in the 21st century.
This should not be a hard call for any lawmaker who cares about keeping jobs and dollars in local communities. In Florida and elsewhere, the status quo has benefited carpetbaggers and out-of-state operations over traditional merchants, undermining job creation and unfairly penalizing any resident who does not regularly shop online, most notably the poor.
But the lack of sales tax collection also undermines the government services closest to home — from public schools to public safety. As more commerce has switched to the Internet, economists estimate Florida will lose $454 million next year in sales tax collections — a number that is sure to only grow. Nationally, the total lost sales tax revenue is estimated at $23 billion.
A 1992 U.S. Supreme Court ruling, Quill Corporation vs. North Dakota, precipitated this mess. The justices ruled a mail-order catalog company didn't have to collect sales tax for out-of-state sales. Three years later, Amazon.com debuted, and by 2000, several states began clamoring for congressional action. It took several major states — including California, Texas and New York — to finally force the issue as Amazon began seeking new distribution centers around the country. Fifteen states now require at least Amazon to collect sales taxes.
EBay, however, has not given up on trying to protect this special-interest loophole. Over the weekend, its CEO argued any congressional action should exempt businesses with less than 50 employees or $10 million in annual sales. That is discriminatory. Ideally, there would be no difference in how the law treats small and large businesses — just as there is no distinction between mom-and-pop traditional stores and their big-box competitors in Florida's sales tax law. If there has to be a loophole to move this issue along, the proposed exemption in the Senate bill, for small online businesses collecting no more than $1 million in revenue annually from remote sales, is more reasonable.
Floridians might have hoped that their own Legislature would be as responsible as those in 15 other states to ensure competitive business practices. But with another session set to adjourn May 3 in Tallahassee without action, Floridians have to look to Washington for a solution. This time, Congress should deliver.