As we approach the holiday season, countless Floridians will shop online for the perfect gift. During Cyber Monday and through the weeks ahead, many of these shoppers will unknowingly come short on the taxes owed for these remote purchases. This is why the 2020 Florida Legislature should finally address the most significant tax compliance and collection issue facing Florida — the collection of sales taxes on remote sales. This can be done by taking the burden of remitting the tax off the consumer and putting it where it belongs — on the seller.
Since the 2018 U.S. Supreme Court Wayfair decision, which ruled that states can apply reasonable requirements for remote vendors to collect taxes on sales to residents, every state except Florida and Missouri have taken steps to resolve the issue. Not collecting taxes on remote sales costs Florida governments more than $700 million in legally owed revenue, places retailers at a competitive disadvantage, distorts purchasing decisions, is unfair to Floridians that do pay the tax, and makes millions of taxpayers—often unwittingly—lawbreakers.
For years, remote sales, whether through a catalog, mail, or online purchase, have made consumers unsuspecting criminals when the sales tax due is not collected. That’s because it is currently, and unfairly, the buyer’s responsibility to remit taxes to the Florida Department of Revenue. It is time that all remote sellers adhere to the same standards as traditional brick-and-mortar storefronts by collecting and remitting their customers’ taxes on purchases.
State Senator Joe Gruters (R-Sarasota) has filed Senate Bill 126 for the 2020 Session. This bill transfers the responsibility of remitting sales taxes on remote sales from the buyer to the seller, in most cases. The bill also requires marketplace sellers (such as Amazon and Ebay) to collect and remit the tax on behalf of its marketplace sellers. This year, similar legislation, House Bill 159 by Rep. Chuck Clemons (R-Newberry), has also been filed. Both bills have minimum thresholds to ensure small retailers are not overburdened.
Lawmakers and taxpayers need to understand this is not a tax increase. In fact, the hundreds of millions of dollars in uncollected sales taxes could be used to reduce other onerous taxes — such as the Business Rent Tax (BRT) and the Communications Services Tax (CST).
Florida is the only state with a BRT, which subjects all commercial leases to state and local sales taxes, putting the state at a competitive disadvantage when trying to attract new businesses and burdening start-up companies with unnecessary costs.
According to two TaxWatch reports on the BRT, released in 2015 and 2017, we find that taxes play a prominent role in the decision on where to locate or expand a business. The increase in occupancy costs of up to eight percent in state and local tax from the BRT is tough to overcome. There is widespread bipartisan support for reducing, and eventually eliminating the BRT. The only thing standing in the way is the substantial fiscal impact.
The same is true for the CST, the tax nearly every Floridian pays on cellphone and cable services, often paying it on multiple services. The average total state and local tax rate paid on these services is approximately double the state and local sales tax rate that applies to most other retail purchases. This makes the tax discriminatory and distortionary. The high tax rate relative to other states also raises economic development and competitiveness concerns.
The loss of government revenue is standing in the way of reducing these taxes. Collection of taxes on remote sales can help solve that problem.
Former Sen. Pat Neal is Florida TaxWatch’s Board Chairman and CEO of Neal Communities. Dominic Calabro is President and CEO of Florida TaxWatch, a taxpayer research institute based in Tallahassee.
