Collecting sales tax from all eligible purchases should be a no brainer. Allowing online-only businesses to skirt collections gives them an unfair advantage over their competitors. But that’s the way it works in Florida — online sellers without a physical presence in the state don’t have to collect the tax. And year after year, lawmakers in Tallahassee refused to close the glaring loophole, despite empty lip service about how the law’s vagaries handicapped the state’s brick and mortar retailers. Thankfully, commonsense appears to be prevailing this year.
For too long, too many lawmakers equated updating the archaic law to raising taxes. But this isn’t a new tax. The money was already owed, it just wasn’t being collected. While online-only sellers weren’t required to collect and remit the tax, the law required buyers to add the 6 percent tax to the purchase price, fill out a tax return and pay up. That’s right — online shoppers who bought a kitchen blender or a bicycle from an out-of-state seller were supposed to calculate the tax and send it to Tallahassee. Adding to the inconsistencies: Amazon collects the sales tax on items bought directly from the retailer, but not on the same type of products bought from a third party but fulfilled and shipped by Amazon.
It’s head spinning. No wonder most shoppers didn’t know about the quirk and never sent in the tax. The faulty system turned millions of Florida shoppers into scofflaws and cost the state billions of dollars in revenue over the years.
House and Senate leadership have now backed a sensible plan to ensure all retailers — not buyers — collect and remit the sales tax. The canard about “raising taxes” finally faded away on the idea of using the estimated $1 billion a year to replenish the trust fund that pays weekly jobless claims, which was depleted by high unemployment during the pandemic. Businesses usually pay an annual fee into the trust fund for each employee. Thanks to the increase in unemployment, those fees were set to rise in some cases from $7 to a minimum of $87 per employee. Businesses wouldn’t suffer those steep hikes under the new plan.
The proposal also addresses another priority of many conservative lawmakers — lowering sales taxes on commercial rents. Florida remains the only state that charges that tax. The money from online sales taxes would stop flowing into the unemployment trust fund once the fund reaches a little more than $4 billion. At that time, the commercial rent tax would drop from 5.5 percent to 2 percent. The idea being that the unemployment trust fund would no longer need the additional support. The ongoing collections from the online sales tax would then help offset the losses from lowering the commercial rent tax.
Critics have lamented the plan as a giveaway to big business, but that’s shortsighted. Sure, some large companies could afford the massive increase in unemployment insurance taxes. Many others — both big and small — could not. They would have to lay off employees, freeze hiring, cut salaries or slash other expenses. Under the plan, businesses would still pay into the fund at the lower rates, but they wouldn’t have to account for the huge increases. Forcing businesses to absorb the higher costs at this time — when a better option exists — would be foolish. The self-inflicted wound would have a harmful ripple effect just as the state economy is regaining its footing.
Unemployment benefits are an important part of weathering any recession. They help individuals stay financially afloat, while injecting much-needed spending into the overall economy at a critical time. For those reasons, replenishing the trust fund must be a priority. And using the online sales tax would help the state get there quickly and with little financial downside.
While not perfect, the proposal has finally broken the ideological logjam about collecting online sales taxes from out-of-state sellers. That alone is worth celebrating. Florida, after all, is one of only two states not to have updated its laws since a 2018 U.S. Supreme Court ruling that authorized sales tax collections from merchants that don’t have a physical presence in the state. The plan makes fiscal sense and would finally provide a level playing field by treating all retailers the same. The state needs this sensible update to its tax laws.
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