Late Monday night, with no fanfare or public ceremony, Governor Ron DeSantis signed a bill into law that requires out-of-state retailers to collect Florida’s sales tax on on-line purchases.
This comes in sharp contrast to earlier in the day when the Governor, surrounded by uniformed law enforcement officers, members of his cabinet and Florida Legislators gathered for congratulatory speeches and the official signing of the Anti-Riot bill into law.
But collecting taxes is not an issue that draws unquestioned Republican support like supporting law enforcement does.
Senate Bill (SB) 50 was designed to prevent a 700 percent surge in unemployment taxes for Florida businesses this year, create a fair playing field with out-of-state businesses and ensure necessary compensation is available for Florida workers seeking re-employment.
Known as the Wayfair Bill, SB 50 promotes what the sponsor calls a “fair climate” for those doing business in Florida by ensuring that all entities doing business in Florida, whether brick and mortar or online, collect and remit to the state sales taxes for online purchases. Specifically, the bill requires out-of-state retailers and marketplace providers with no physical presence in Florida to collect Florida’s sales tax on sales of taxable items delivered to purchasers in Florida if the out-of-state retailer or marketplace provider makes a substantial number of sales into Florida.
The new law green-lights the collection of approximately $1 billion of uncollected sales tax from out-of-state retailers which will be deposited into Florida’s Unemployment Compensation Trust Fund annually until the Trust Fund is replenished to pre-pandemic levels or the year 2025, whichever comes first. Replenishing the trust fund will prevent an automatic increase in unemployment (reemployment assistance) taxes facing businesses, while ensuring that the fund remains solvent for employees when they need to claim their benefits. The plan uses uncollected taxes that are already due to the state to help relieve an unforeseen tax burden for businesses with a physical presence in the state.
After the trust fund is replenished, revenue from the sales tax will be used to reduce the business rent tax.
Political pundits and critics of the bill say that the Governor’s signing of this bill is a political mistake, and he will be attacked for “raising taxes” on Floridians.
But technically, the bill does not raise taxes. It simply collects taxes already due according to long-standing state law.
Florida TaxWatch President and CEO Dominic M. Calabro, a nonpartisan tax watchdog organization, says to characterize this bill as a tax increase is “blatantly false. In fact, taxpayers should thank the legislative leaders and the Governor for removing a serious taxpayer penalty (up to 50 percent) and interest and extraordinary administrative burden and placing it on out-of-state remote sellers. Thus, it also levels the playing field for Florida based businesses and nearly one million Florida retail employees and helps their families and communities, while also helping fund core functions of the state of Florida.
“As Florida TaxWatch has said for 20 years, the non-collection of sales taxes on sales to in-state customers by remote (out-of-state) sellers has been one of the most significant tax compliance and collection issues facing Florida and other states for many years. Today, Florida joins the 43 other states that have acted on this critical issue, and most importantly, puts the burden of tax collection on the out-of-state sellers, where it belongs.”
“Under the law, online purchases are not tax-free. When government turns a blind eye on collecting taxes, businesses and Floridians who are following the law face a heavier burden. Collecting existing taxes that are owed is the right thing to do,” said Senate President Wilton Simpson (R-Trilby). “However, rather than treating additional revenue that is already owed to the state as a windfall, 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. This bill will complement legislation proposed in the Senate to increase the weekly unemployment benefit from $275 to $375.”
According to the Senate President’s office, Florida’s existing unemployment (reemployment) tax is paid by employers and the tax collected is deposited into the Unemployment Compensation Trust Fund for the sole purpose of paying reemployment assistance benefits to eligible claimants. A specific rate, calculated annually, is charged by the state to the employer on the first $7,000 of wages paid to each employee.
Unfortunately, the decline in the balance of the fund caused by the pandemic triggered an increase of nearly 700 percent in rates for all employers beginning in January 2021. The rates are projected to increase even further over the next few years until the fund is replenished to pre-pandemic levels.
In the six-month period before April 2020, Florida’s average monthly reemployment assistance benefits expense was $27.2 million. Beginning in April 2020, Florida’s monthly reemployment assistance benefits expense increased by 800 percent, and at times, the increase exceeded 2,000 percent. Florida’s reemployment assistance benefits expense remains 473 percent over the six-month average benefit amount before April 2020, and is estimated to continue at elevated levels for the foreseeable future.