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FL: State Internet taxes are ‘first step’ toward national online sales tax

By   /   December 5, 2012  /   6 Comments

By Yaël Ossowski | Florida Watchdog

CLEARWATER — The world’s freest marketplace is set to become the next playground for Florida’s tax collectors.

TAX IT: Margolis has put forth legislation to tax online sales in Florida

Come 2013, the Sunshine State could find itself with an Internet sales tax, thanks to a bill put forward by state Sen. Gwen Margolis, D-Miami, on Monday.

Margolis did not return calls to Florida Watchdog, but she told Jacksonville News 4 that the idea of the tax rests on imposing fairness for Florida’s businesses.

“The state of Florida is losing jobs and money because people have been shopping online all year,” said Margolis. “Our whole revenue source is sales tax in the state of Florida.”

The bill aims to modify the state’s Sales and Use Tax, which requires residents to declare and pay sales taxes on goods purchased or delivered from out of state.

NO FREE RIDE: Internet companies will soon have to comply with Florida’s sales tax

“Florida has always had the use tax, but it’s never had anything to do with the Internet,” said Steve DelBianco, executive director of NetChoice Coalition, a coalition of Internet businesses and trade associations organized to “promote commerce on the net,” according to its website.

His group has been repelling similar laws across the nation, arguing that additional sales taxes will only hurt consumers in the end.

“Truth is, shoppers go online for superior selection, lower prices, and greater convenience — not to avoid paying sales taxes,” he recently wrote on the NetChoice website.

He hasn’t yet made a determination about the impact of Florida’s proposed law.

Across the state, groups have organized to press the initiative in order to level the playing field in retail sales.

Florida Retail Association CEO Rick McAllister told the lawmakers that online taxes were needed because “it’s an issue of fairness,” not revenue, citing the need to help prop up local retailers.

IT’S WAR: Pimienta says brick and mortar businesses are doing everything possible to catch up with online businesses

“Traditional retailers see the Internet as taking their sales away,” said e-commerce expert Vicente Pimienta.

He helps businesses set up their profiles and sales systems online to attract new customers.

“There is a war between the brick-and-mortar stores and the e-commerce people,” Pimienta said. “It’s about the disadvantage, and the retailers are ready to pressure the government to do whatever possible to beat them.

“All this really points to the first step toward a single tax for the nation.”

In an editorial last year, the Tampa Bay Times called on the Legislature to end the “giant loophole” allotted to Internet companies, calling customers of top retailer Amazon.com an “army of corporate spies” for comparing prices with other retail stores and sharing them online.

Former Florida Gov. Jeb Bush joined the debate last year in a letter to Gov. Rick Scott, iterating his support for taxing Internet sales at the state level.

“It seems to me there has to be a way to tax sales done online in the same way that sales are taxed in brick and mortar establishments,” he wrote to Scott . “My guess is that there would be hundreds of millions of dollars that then could be used to reduce taxes to fulfill campaign promises.”

WE NEED IT: Former Gov. Jeb Bush says taxes must be equalized for online merchants

And while Florida legislators ponder the Internet sales tax for local residents, the federal government is ready to enact the same nationwide.

Lawmakers on Capitol Hill have begun considering the Marketplace Fairness Act, introduced by Sen. Mike Enzi, R-Wyo., last year, which would set new rules on how Internet companies are expected to collect sales taxes at the state at federal level.

Reports also indicate that a similar version of the bill was inserted into an amendment to the National Defense Authorization Act.

Contact Yaël Ossowski, Watchdog.org’s Florida Bureau Chief at Yael@Watchdog.org

—Edited by Kelly Carson, kcarson@watchdog.org

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Yaël has worked as a multimedia journalist in Philadelphia, Charlotte, Tampa, and Vienna, and his writings have appeared in the Washington Examiner, The Gaston Gazette, Reason Magazine, Sunshine State News, Wisconsin Reporter, and PanAmerican Post. He speaks four languages and his hometown is Saint-Hyainthe, Québec. His personal website is Yael.ca and his PGP key is available here.

  • http://www.facebook.com/keith.yockey Keith Yockey

    As an online retailer here in S.C., there is no State Law that FL could pass that would force me to collect tax from Florida … see Quill v ND. Only Congress can address this issue.
    Fairness issue? Build B&M business? …. a MYTH at best. That $100 item in a B&M can still be found for $75 online with or with out Sales Tax. Don’t be fooled, lawmakers are only looking for a bigger piece of tax pie.
    And just be forewarned you FL online businesses, S.C. wants it’s Sales Tax too; so look forward to handling over 100 tax districts not defined by zip code, filing quarterly tax returns, and know what is to be taxed and what isn’t. Enjoy the pain.

  • c p

    I believe this would take a constitutional amendment because sales tax on goods crossing state lines is a Constitutional issue. More than this, it shows the greed of these local businesses who would complain because someone opened a similar business to theirs down the street, but that is what captialism is about, the freedom to do business like that. It’s not going to benefit them to get others to pay a sales tax online when they will have to pay it also. It’s about revenge and sticking it to those who they think are picking their pockets in a free enterprise system. Ultimately, it will amount to business wellfare where the Federal government will be the one in control of the internet tax and dishing it out to states in smaller sums than is collected from those it takes it from. In the long wrong, it will just be another federal tax to fill the coffers of big government with very little benefit to those states. In the end they will regret it because it will provide very little benefit to the states or the businesses because it won’t prevent people from shopping out of state. I know this because I live in a tri-state area where I can reach one of any three states within minutes and I buy out of state anyway even though my state does not have sales tax and the others do. Besides all this, can you imagine the paperwork nightmare this will create to those businesses who also sell online? It’s bad enough collecting tax from your own state, imagine trying to collect it from all the others. In my opinion, you have been conned into thinking this is a good thing by lawmakers who just want more money to spend themselves. Reaching in your pockets for money it doesn’t earn is what the government does best and they do it buy selling it as a good thing.

  • PhilBear

    There is a reason many items can be found cheaper through online stores. Online stores do not have to pay rent, utilities and many do not have the proper city/county/state business licenses they need to operate, they do not have to carry insurance on their building and more.

    Yeah, they may have to pay an ISP to host their website – I can assure you they are not paying $1000 to $10,000 a month unless they are a mega online retailer. Businesses pay higher rates on electricity, water, gas, garbage collect, phone service.

    You don’t have a $800 or more a year insurance charge for loss of your building and its contents (not to mention the possibility of customers having accidents in your store).

    With an online store you do not get to touch, feel, try it out. You do not get in person support – especially from a knowledgeable person – there is either an FAQ, it you are lucky you might get a robo response to programmed questions, even more rare is a live person who can look up questions from a list and then the most rare is a real person who knows what they are selling.

    Most everyone who will read this will be to young to remember full service gas stations where the gas was pumped for you, the oil was checked, windows were washed, tire pressure checked and several other little things.

    Different states have different rules on collecting internet sales tax if he sale takes place within the state. Many online companies do not bother to collect and report this form of sales tax. If a customer in my city buys an item in my store online then there is city, county and sate tax due. If they buy outside of the city but within my county then county and state tax must be collected. If they purchase outside of my city and county then only state sales tax. If the purchase is made by a customer outside of the state then I do not have to collect sales tax (however, I must report it as an out of jurisdiction sale).

    If the lawmaker really wanted to help out brick and mortar stores they would place a special fee on internet sales for businesses that did not have a physical store within that state.

  • http://www.facebook.com/people/Afi-Keita-James/651695123 Afi Keita James

    Veto this Bill

  • http://www.facebook.com/keith.yockey Keith Yockey

    @ PhilBear:
    All your points are valid except the last one. Placing a fee on online to sell in a location would be what? State by State? County by County? City by City? Yearly Federal Fee? And just who would get the funds?
    Online businesses already file for permits, etc. in there home location, just like B&Ms do, and they collect/remit Sales Tax for their home State. It’s bad enough that online deals with hundreds of tax districts within a state when a B&M only deals with one.

    The BEST solution is to have the merchant accounts (PayPal, Visa, MC, Authorize.net) collect the tax and remit it directly to the States (States pay related fees) It’s a win-win as States get instant funds, is 95% compliant, paperless for retail, no pivacy issues, and works for B&Ms as well as online. Best of all it save retail real money as the fees charged on Sales Tax is an out of pocket business expense that is not reimbursed by the States.

  • Andrew Johnson

    There’s no doubt that the US Supreme Court has cleared the way for the Congress to take action on this issue. In Quill, they held that this is a Commerce Clause issue. The Congress has the express right to regulate commerce “among the several states.” Advocates of congressional involvement, though, are really hoping Congress passes a law forcing all companies to collect sales tax everywhere based solely on their volume of sales in the destination state. This is not a solution without significant burdens to businesses as advocates seem loathe to acknowledge. The field is plenty level already — States need only enforce their use taxes. Asking the Congress to pass these types of laws is nothing more than States attempting to shift the costs of collection to nonresident, non-voting businesses.

    Once the law is in place, it’s a simple matter to adjust the volume of sales year after year until any company selling anything must now collect and pay tax everywhere. A slippery slope for sure. Complying with laws and regulations in many jurisdictions is complicated, no matter how you look at it. We are in the trenches every day trying to help companies cope with the costs of doing business and just survive. Adding to their burden is not good for our economy.

    And don’t believe for a second that this bill will make it easier for businesses just because there’s a $500K threshold for nexus. All it will mean, in my opinion, is that you will have nexus everywhere you currently have nexus because of “physical presence” (however that is interpreted state-by-state) and you will also have nexus wherever you have more than a certain volume of sales. That’s a great answer for government, but a bad answer for businesses, especially smaller businesses. That’s also a great answer for very large online retailers who can absorb these costs more readily than smaller businesses.

    Maybe Congress could do something like pass a law saying you have to be headquartered in a state and have some voting privileges in that state in order for the state to force you to pay or collect their taxes. That seems like a good way for Congress to “step into [the] Web sales tax fray.” Some have said that maybe Congress could pass a law that clarifies exactly what “physical presence” is. But hoping that Congress can do something that “clarifies” or “simplifies” is almost comical.