TALLAHASSEE — A proposal is ready to go before the Senate that could cut deeply into the state’s revenue shortfall by requiring many out-of-state online retailers to collect sales taxes on purchases made by Floridians.
The Senate Appropriations Committee unanimously backed a proposal (SB 50) that sponsor Joe Gruters, R-Sarasota, maintains isn’t a tax increase while acknowledging work is needed to convince still-skeptical House members.
“I’m working every angle I can, for sure,” Gruters, who doubles as state Republican chairman, said after the committee’s vote positioned the bill to go to the full Senate.
And for good measure, Gruters noted, “as the chairman of the Republican Party of Florida, I could say with certainty that it’s not a tax increase.”
The measure focuses on out-of-state retailers that have conducted more than $100,000 in remote sales in a year.
Florida business organizations have long argued that in-state retailers are at a competitive disadvantage as at least 14 percent of the nation’s 500 largest online retailers aren’t collecting sales taxes on purchases by Floridians.
Currently, retailers that have a physical presence in Florida must collect and remit sales taxes for items sold in the state.
Through what is sort of an honor system, Florida residents are supposed to submit sales taxes when they are not collected by out-of-state retailers. But few Floridians comply with that requirement, and Gruters’ measure would require the out-of-state retailers to collect the tax.
A House version of the bill (HB 15), sponsored by Rep. Chuck Clemons, R-Newberry, has not been heard in committees as the first week of the 60-day legislative session wraps up.
Clemons filed a similar bill last year that was never brought before a committee.
As the Legislature wrestles with a major revenue shortfall caused by economic fallout from the COVID-19 pandemic, Senate President Wilton Simpson, R-Trilby, has called the proposal “very important.”
State economists have projected the bill would increase state general revenue by $937.6 million next fiscal year, with the amount increasing to $1.08 billion in the following years. Local governments across the state would collectively see revenue go up $229.5 million next fiscal year and by $253.7 million the following year.
“It’s not a new tax. It’s always been owed. People aren’t paying it. And what it’s doing is it’s hurting our local retailers,” Gruters said. “We’ve created an unfair competitive advantage for foreign players and out-of-state retailers on the backs of our local retailers.”
Gruters’ proposal uses a 2018 U.S. Supreme Court decision in a case known as South Dakota v. Wayfair as a basis. 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.
To lessen concerns about the appearance of a tax hike, Gruters has suggested the increased revenue could be offset by lowering a 5.5 percent sales tax on rent collected from commercial properties — a tax business groups have long criticized.
Gruters said his focus is passing the bill, which has gained traction this year because of the projected shortfall.
“I think some of these other decisions will be made later on,” Gruters said, indicating that reducing the commercial-rent tax or making other offsets could be pushed when the House and Senate negotiate a tax package later in the session.