The cost of buying items on Amazon could rise if the Florida Legislature passes a bill that would require out-of-state online retailers to collect sales tax.
For more than a decade, Florida retail leaders have tried unsuccessfully to level the playing field for brick-and-mortar retailers who struggle to compete on price. As this year’s Legislative session opens Tuesday, they believe they have more support.
“There really hasn’t been a year when we’ve had all the entities saying the same thing,” said John Fleming, a spokesman for the Florida Retail Federation. “There’s a recognition that it’s time to do something.”
The stakes have never been higher, as more people look to the Internet to make purchases and comparison shop. Online sales grew 15 percent nationwide last year compared with less than 5 percent for traditional retail sales. Amazon, the largest retailer of online goods, finished 2012 with $61 billion in sales, compared with $5.3 billion a decade ago.
Economists estimate Florida loses $454 million a year in sales tax revenue on goods bought from Internet-only vendors — a number some say could be considerably lower or as high as $1.5 billion. Overall, the state collected more than $17 billion in sales tax during fiscal year 2011-2012.
The state requires retailers that are physically located in Florida, such as Best Buy and Target, to collect sales tax, even if the item is purchased online. Stores without a brick-and-mortar presence don’t have to pay the tax, resulting in a 7.5 percent savings in Monroe County, 7 percent savings to customers in Miami-Dade and 6 percent savings in Broward and Palm Beach counties Florida residents, for instance, don’t pay sales tax on many purchases from Seattle-based Amazon.
“There is a basic fairness issue here,” said Jerry Custin, president and CEO of the Upper Tampa Bay Chamber of Commerce, based in Oldsmar. “It puts the retail guy in your community at a disadvantage. In addition to what they already do to have a brick-and-mortar business, they also have to pay sales tax.”
While lawmakers appear united on the fairness issue, there’s less agreement on how the additional revenue would be spent. The legislation (Senate Bill 316 and House Bill 497) includes a revenue-neutral provision that would mean no new tax money for state government. Rather than count the revenue as money for education, healthcare, roads and other basic needs, the Department of Revenue would track the amount collected from out-of-state online retailers and return the amount to taxpayers.
The bill, which if passed would take effect July 1, stipulates the money would be used to reduce taxes, including giving breaks to manufacturers buying equipment. Florida, which has no personal income tax, relies on sales tax for more than 70 percent of its annual revenue.
Some supporters of the legislation have said the revenue debate, while important, is secondary to resolving the equity issue and collecting what is owed to the state. Florida law requires residents to pay sales tax on purchases made over the Internet, but few do, and there’s no enforcement. Many people aren’t even aware of the rule.
Last year, a Florida Senate committee approved a similar e-commerce bill, but it died in the House. Republican lawmakers committed to not raising taxes said it amounted to a new tax. It also contradicted a 1992 U.S. Supreme Court ruling that a state can’t require remote retailers without a physical presence to collect sales tax in that state.
Senate President Don Gaetz said last week the latest bill by Sen. Nancy Detert, R-Venice, is an improvement over last year’s, which would have used the Internet sales tax money to cover tax cuts for businesses. He has reservations about designating the money for manufacturers purchasing machinery and equipment.
“If you are going to make it revenue neutral, it can’t just be revenue neutral in the books of the state,” he said. “Corporations that buy manufacturing equipment don’t buy shirts on the Internet. So the people for whom you would collect the Internet sales tax should be the people that you give a tax reduction to if you’re going to truly make it revenue neutral.”
Gaetz was unsure how far the issue would get in the legislative session ending May 3. Philosophically, some lawmakers remained opposed to collecting the tax. “If I didn’t pay it before and I have to pay it now, I think it’s a tax increase,” he said.
Retailers see the legislation as a way to boost the state’s economy. Stores that now lose business to out-of-state online retailers would generate more sales and, therefore, be in a better position to expand. For every $1 million in new retail sales, traditional stores create four times as many jobs as Amazon, according to a 2011 study by the University of Tennessee.
“It’s not really fair to have a mandated tax be the competitive edge” for out-of-state competitors, said Kane Morris-Webster, the government relations chairwoman for the International Council of Shopping Centers representing Florida. “The brick-and-mortar retailers are the ones supplying the jobs. They are contributing to the state.”
The shopping center group representing 4,000 members in Florida supports the revenue-neutral provision as a means to secure the bill’s ultimate passage. It would like to see the online sales tax collections used to offset the sales tax money now generated by commercial leases.
The ICSC is pushing legislation to eliminate the longstanding sales tax charged on every commercial lease. The bill (656 in the Senate and 629 in the House) would phase out the tax by 2019.
Supporters say ending the tax, which generates an average $1.2 billion a year, would give retailers more money to invest in their businesses and offer out-of-state companies greater incentive to move here. Florida is the only state in the country to collect such a tax.
Business leaders have tried for years to end the tax but, in tough financial times, gained little support. This year, they hope the state’s budget surplus could change lawmakers’ minds.
Both sales tax bills — e-commerce and commercial leases — would require approval by the House and Senate before going to the desk of Gov. Rick Scott. Scott made no mention of either when unveiling his 2013-2014 budget proposal. Instead, he recommended expanding the sales tax exemption for manufacturers buying machinery, a move that would save $115 million a year in state sales tax.
Nonetheless, business leaders are confident Scott would back a revenue-neutral e-commerce bill.
“He knows what it’s like to be in a competitive marketplace, and this is ultimately going to create more Florida jobs,” said Fleming of the Florida Retail Federation. “The situation now is the worse-case scenario. We’re allowing the sales to go to outside companies, and we’re not collecting any taxes on it.”
Florida’s legislative efforts coincide with what’s happening at the federal level. In February, lawmakers in Washington, D.C., introduced the Marketplace Fairness Act, which would give states the authority to require out-of-state retailers to collect sales tax.
So far, 24 states have passed legislation to simplify the collection process as would be mandated by the Fairness Act. Other states such as California and New Jersey have cut deals with Amazon requiring the online retailer to create a physical presence — like a warehouse or distribution center — in exchange for a delay in collecting the sales tax or tax incentives.
Amazon has no immediate plans to open a distribution center in Florida, although it’s not of out of the question as the company looks to expand its next-day delivery service.
Herald/Times staff writer Toluse Olorunnipa contributed to this report.