The state of Florida does not actively attempt to enforce the collection of sales/use taxes on purchases made on the Internet or from other remote out-of-state vendors.
Florida law is specific in stating that if the sales tax is not collected at the time of sale, the purchaser is required to remit a use tax directly to the state. For example, if you were to purchase a product from Amazon.com, technically you are required by the state to fill out a form and remit the sales tax amount on that purchase to the state of Florida. Most people don’t even realize that is a requirement under our laws and, because it isn’t enforced, there is no incentive to do so. Last year, it was estimated that Florida loses roughly $800 million to $1 billion in sales tax during the year on Internet sales where the tax is not remitted.
Several states have now begun to tackle this collection issue to enhance the nexus provisions related to physical presence and extended nexus to click through sellers located within the jurisdiction of a particular state. Recently, the state of California was successful in settling the dispute with Amazon.com by having Amazon agree to the conditions of the California law, which will allow Amazon.com to continue not to collect the sales tax for one year, but they must give notice to California citizens in the interim period that the tax is due and should be paid directly to the state. This occurrence has resulted in the desired effect of having the world’s largest Internet vendor being placed on the same level playing field as brick-and-mortar retailers, which eliminates a government-created price differential.
Attempts also have been made at the federal level. Last year, legislation called the “Marketplace Fairness Act” was introduced, but it has yet to be implemented, and without federal action, the states are still left trying to resolve the issue themselves.
The proponents’ position is that e-fairness is a simple concept — companies that sell exclusively through the Internet should abide by the same sales tax rules as companies that sell through brick-and-mortar locations.
Last year, retailers right here in our community began to demand protection and fairness as it relates to Internet sales. Many business owners in the East County approached me about how frustrating it is when customers come to their stores, try on their shoes and then buy the shoes online, avoiding the sales tax. The trend, known as “show-rooming,” hurts the bottom lines of traditional stores while benefiting online-only retailers.
Most brick-and-mortar retailers are perfectly fine with open competition on prices and the free market, but they want the free market to be fair and they feel it is inherently wrong for them to be required to remit sales taxes on purchases in their store, but online companies do not have to remit those same taxes. They argue that it puts them in a competitive disadvantage. They certainly make a valid argument.
I introduced legislation this past year to address this issue; it passed a committee in the Senate but never received a single committee hearing in the House.
Obviously, this debate will continue as more people do their shopping online. As a state that relies on sales tax as their primary revenue stream, this is a challenge Florida clearly will have to face.
State Rep. Greg Steube represents Florida District 67.