The Republican-dominated Pinellas County Commission smartly voted last week to sue online travel companies like Priceline and Expedia that have avoided fully paying the county's bed tax. Too bad their Republican colleagues in the Florida Legislature are not as aggressive in addressing other unfair tax policies, including by extending the state sales tax to all Internet sales.
Florida requires sales tax collection from retail stores but not their Internet-only competitors. It collects more sales taxes from customers who book their room through a hotel than from those who book through an online broker. Yet lawmakers cost the state millions of dollars by refusing to make it easier to collect sales taxes from all Internet sales. The state's overall tax burden unfairly falls on consumers who shop locally or book their hotel room through someone other than an online broker.
In the early days of Internet commerce, such inequities were less glaring. But as Internet trade has exploded, so has the tax drain. By not demanding online brokers collect taxes on the retail price of hotel rooms — rather than their wholesale price — the state has lost an estimated $198 million in sales taxes since 1999. And state economists have estimated that collecting sales taxes on goods sold on the Internet would net the state as much as $700 million annually.
Fixing both inequities would have gone a long way toward addressing next year's budget deficit, pegged at $2.6 billion even after an infusion of federal stimulus dollars.
At least local governments are figuring out that restoring equity to taxation is in everyone's interest. The state's counties are estimated to have lost $146 million in bed taxes since 1999 because online brokers compute their payments based on their wholesale price rather than the retail price customers pay.
Ironically, the Pinellas lawsuit, wisely championed by Tax Collector Diane Nelson, would have been unnecessary had the Legislature acted last year on a bill offered by Rep. Janet Long, D-Seminole, and others. The bill would have granted the online brokers amnesty for past tax dodges, but it would have rewritten the law to make clear they must collect tax on the consumer price — which would have netted Pinellas roughly $1.4 million more this year.
It's time for Republicans in the Legislature follow the lead of Republican leaders in Pinellas and elsewhere by bringing equity back to taxation. The state no longer has a sales tax holiday to buy school supplies, but for too many Internet-based sales, every day is a tax holiday.