As the legislative session winds down, several good ideas appear destined to fall short of the finish line. One of those good ideas: Requiring online retailers to collect sales taxes. It’s another missed opportunity to level the playing field.
For too long, only retailers with a physical presence in the state had to collect the tax. Their online-only counterparts didn’t. Talk about a competitive disadvantage. The set-up is obviously one-side, but many so-called pro-business legislators still don’t get it.
A tax package moving through the Florida Senate would end the unfairness. The legislation, SB 1112, requires nearly every online retailer to collect the state’s 6 percent sales tax, a move that would net the state about $700 million a year. The bill exempts online companies that sell less than 200 items or $100,000 worth of goods.
For years, U.S. Supreme Count opinions from the 1960s and 1990s prevented states from forcing retailers with no physical locations in the state to collect the tax. Doing so would interfere with interstate commerce, the court concluded. But pressure mounted as online giants such as Amazon captured ever-larger slices of the retail pie and states lost out on needed tax revenue. In 2000, online sales made up less than 2 percent of overall retail sales, according to the Federal Reserve Bank of St. Louis. Last year, it was nearly 30 percent.
Floridians who made online purchases from out-of-state retailers were supposed to remit the sales tax directly to the state, but that wasn’t well known and very few people complied. Last year, the Supreme Court woke up to the new economic realities. In a 5-4 opinion, the court said states could require retailers without a physical presence to collect the tax. The change should have been welcome news in Florida, which doesn’t have an income tax and relies more heavily on sales tax revenue. Other states, including Georgia, Colorado and Illinois, already have gone ahead with plans to make online retailers collect the tax.
This isn’t a new tax. The Senate bill simply closes a loophole. Still, the bill, sponsored by Sen. Joe Gruters, R-Sarasota, has met resistance from his fellow Republicans, who don’t want to look like they are raising taxes.
To his credit, Gruters has pushed back against that misconception and even included a list of tax cuts to offset the extra revenue. He favors slashing the sales tax on commercial rent payments from 5.7 percent to 4.2 percent, which would save business renters about $450 million a year. The bill would also create a 14-day sales tax holiday for disaster preparedness and supplies, and provide a tax cut to insurers that cover remote visits with doctors, known as “telehealth.”
Amazon finally began collecting and remitting the tax on many of its sales in 2014, as it began opening warehouses in Lakeland and other parts of the state. But other sites like Wayfair have resisted.
The time has come to restore free market principles. Fairness demands it.