Florida’s state tax law hasn’t caught up to the internet, leaving online shoppers regularly breaking the law without knowing it.
“It makes them outlaws,” said Rep. Chuck Clemons, R-Newberry, who is sponsoring a Florida House bill in the upcoming session that aims to modernize Florida’s sales tax law to make it more like the laws in nearly every other state.
As is, Florida law requires buyers to remit their own sales tax on items they have purchased and have shipped in from out of the state or country.
Here’s how it works. When people check out at a St. Petersburg Target, they’re automatically charged a 6 percent state and 1 percent local sales tax. Target then makes sure that money is sent to state. But when customers make online purchases originating outside Florida, the sales tax collections fall to them. The Florida Department of Revenue website has a downloadable form to help shoppers file that few people know exists.
As a result, Floridians become vulnerable to audits from the state revenue department, and the state is missing out on millions of dollars in could-be revenue. Some estimates put the state number at roughly $700 million a year in uncollected sales tax dollars.
The new law would shift the burden of online sales collections onto businesses, not the buyer. That’s how sales tax collections works already for brick-and-mortar stores or retailers with any physical presence in the state.
“This is not a new tax,” Clemons said. “It’s modernizing the mode of collection that’s already due.
“We’re behind other states. I can’t think of any other tax that’s due in Florida where the purchaser is responsible of remitting to the state.”
A similar bill, sponsored by state Sen. Joe Gruters, R-Sarasota, has been filed in the Senate. But last year, attempts to update the law failed.
Clemons is optimistic that this session will be different. The pandemic — particularly its hit to tourism — has put the state in a deficit upwards of $3 billion. Clemons says Florida can’t afford to leave hundreds of millions of dollars on the table.
Beyond that, retailers want to see the sales tax applied fairly to all sellers.
“This is very much about leveling the playing field with online competitors,” said Florida Retail Federation president Scott Shalley. “It’s good for retail, and it’s good for Florida.”
The bill would provide uniformity in sales tax collection at the point of sale, Shalley said. The bills mandate that online retailers who sell at least 200 items, or have $100,000 worth of sales in Florida, must collect sales taxes to remit to the state.
Florida is one of two states with sales tax laws that haven’t been updated to reflect the reality of online sales following the 2018 U.S. Supreme Court case of South Dakota v. Wayfair. The case gave states more reach when collecting sales taxes from sellers, even when those businesses don’t have workers or a physical presence in that state.
Florida currently works on an honor system. Any time someone purchases something online that isn’t taxed, they’re supposed to fill out the form and submit it to the Department of Revenue with the money.
The new bill would require online marketplaces, such as Amazon, to collect sales taxes for its third-party sellers and remit the money to the state. Amazon already is doing that in 42 states, the District of Columbia and Puerto Rico.
In a statement to the Tampa Bay Times, Amazon says it supports the two bills proposed in the Florida Legislature.
About half of Amazon’s overall sales come from third-party sellers, with Amazon acting as the facilitator. Many of those third-party purchases are made by shoppers who may not know they’re supposed to pay the sales tax themselves. The same goes for purchases made on Ebay.com.
Only once since 2016 has the Florida Department of Revenue collected more than 5,000 individual forms of remitted sales tax, according to state records.
For the 2019-20 fiscal year, the state revenue department reported receiving 4,315 of the forms. As of November 2020, the state had 1,684 forms for the current fiscal year. That’s out of the tens of thousands of out-of-state online sales undoubtedly going on every day.
Florida’s treasury department estimates that the state missed out on $480 million in 2019. But the Tallahassee-based nonprofit, Florida TaxWatch, puts that number at nearly $700 million. Sales tax expert Chuck Maniace could see the revenue growing even higher than that. He pointed to South Carolina, which has a much smaller economy than Florida’s, and collected an additional $311.5 million in sales tax revenue from October 2019 to October 2020 after updating its laws.
“At this point, businesses are complying with these rules already in other states,” Maniace said. “Adding Florida isn’t going to materially change their burden.”
Maniace, who works for the tax software company Sovos, said it would be easy for Florida to look to other states that have deployed these laws successfully as examples.
“Instead of working with thousands upon thousands of individual remote sellers, the state can instead work with a smaller cadre of facilitators who, at least in theory, are more equipped to effectively handle sales tax on the aggregate for all their client sellers,” Maniace said.
Peter Martin, 57 of Valrico, has been using Amazon to sell his line of herbal supplements since 2015. He has seen how Amazon handles sales tax collection in other states when he sends merchandise to Texas or Illinois. He doesn’t have to worry about those state’s tax collection, and neither do his buyers. It falls to Amazon.
“Which is the way it should be done,” Martin said. “It’s a lot more organized, and the state is ensured it’s getting the taxes that it’s owed.”
Clemons says the biggest barrier is education.
“I can’t speak for why it hasn’t passed before,” he said, “My speculation is that from an education stand point, not knowing all the facts, the predominantly conservative legislatures view it as a new tax.”
Clemons said the language in the House and Senate bills doesn’t match exactly, but he expects to amend the bill in committee. The regular session of the Florida Legislature begins March 2.