Legislators Propose Online Sales Tax Plan To Bolster Unemployment System
Senate President Wilton Simpson and House Speaker Chris Sprowls announced a plan Wednesday to require out-of-state online retailers to collect sales taxes on purchases made by Floridians, with the additional money used to shore up the state’s unemployment-compensation system.
A joint announcement said the move could bring in about $1 billion a year for the state, with the money put into a trust fund used to pay unemployment benefits. That trust fund, which is funded through taxes on businesses, became depleted during the past year because of huge job losses during the COVID-19 pandemic.
The surge in demand for benefits caused a tax increase on businesses that took effect in January. Tax rates have been projected to continue increasing in the coming years to replenish the fund, according to Wednesday's announcement.
“Our plan makes responsible use of the resources we have so that we can rescue Florida business owners from a major tax increase,” Sprowls, R-Palm Harbor, said in a prepared statement. “Florida businesses must be able to retain and hire employees and contribute to our recovering economy.”
The announcement also was a major victory for business groups that have lobbied for years to force out-of-state retailers to collect and remit sales taxes on purchases made by Floridians.
Currently, retailers that have a physical presence in Florida must collect and remit sales taxes for items sold in the state. But that doesn’t apply to retailers without a physical presence in the state.
Technically, consumers are supposed to pay sales taxes when they buy goods from those out-of-state retailers, but few do. In-state businesses argue the situation creates unfair competition — especially as consumers have increasingly turned to the internet to make purchases.
“Under the law, online purchases are not tax-free. Every time government turns a blind eye on collecting taxes, we put a greater burden on the businesses and Floridians who are following the law,” Simpson said in a statement Wednesday. “Making sure we are collecting existing taxes that are owed is the right thing to do. Rather than treating additional revenue that is already owed to the state as a windfall for the spending priorities of the day, the prudent thing to do is to reinvest these funds in our Unemployment Compensation Trust Fund, helping businesses survive a situation no one could have anticipated, and shoring up benefits for the struggling Floridians who have lost their jobs as a result of this pandemic.”
Lawmakers in recent years have repeatedly considered requiring out-of-state retailers to collect and remit sales taxes but have not passed legislation. The issue has been tricky politically, in part, because it could be viewed as a tax increase by consumers.
But supporters of the change were bolstered by a 2018 U.S. Supreme Court decision in a case known as South Dakota v. Wayfair. The decision against Wayfair, a large online retailer with no physical presence in South Dakota, overturned a “physical presence test,” expanding states’ abilities to collect sales taxes.
Florida economists have estimated that the change could result in the collection of an additional $973.6 million in the upcoming 2021-2022 fiscal year and $1.08 billion in each following year, according to the House and Senate.
Simpson has been a vocal supporter of requiring the taxes to be collected, and a bill on the issue (SB 50) was scheduled to be heard on the Senate floor Thursday. But the announcement early Wednesday evening said the bill will be delayed to draft an amendment making clear the additional money would go to the unemployment compensation trust fund.
The House version of the bill (HB 15) will go before the House Ways & Means Committee on Thursday.
Florida Chamber of Commerce President Mark Wilson issued a statement Wednesday evening praising the plan..
“Today’s welcome announcement benefits Florida’s main street businesses by leveling the playing field on sales tax collections, while at the same time providing much needed relief from a looming $713 million tax increase on employers,” Wilson said.
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