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Online sales tax bill passes Senate in bid to avoid tax hike on Florida businesses

by | Mar 25, 2021


A bill touted by its sponsor Senator Joe Gruters (R-Sarasota) as a “circle of good” and a “win, win, win” passed the Florida Senate today.

Senate Bill (SB) 50 is 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 ensures 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.

If the bill is passed in the House and signed into law by Governor Ron DeSantis, approximately $1 billion of uncollected sales tax from out-of-state retailers would be collected and 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.

“Businesses with brick and mortar stores are already acting in good faith and accordance with the law by collecting sales tax for online purchases at the point of sale. Unfortunately, right now, Florida-based, brick and mortar businesses are at a disadvantage because they collect sales tax and their out of state competition does not,” said Gruters. “Investing revenue already owed to the state in our Unemployment Compensation Trust Fund alleviates a huge and unexpected burden on Florida business, while also making certain that unemployment compensation benefits are available when Floridians need them. If we do nothing, unemployment taxes paid by employers at the minimum rate will remain significantly higher than last year, negatively impacting the full economic recovery we are working towards here in Florida.”

“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.

Although the bill sailed through several committees with bi-partisan support, a late amendment stipulating the revenue received go to the unemployment trust fund rather than general revenue caused several Democrat senators to withdraw or second think their support.

Senator Audrey Gibson (D-Duval County) questioned whether part of the money collected could go into the unemployment trust fund with some of it going back into general revenue. “That way it would be beneficial to the whole state,” she said.

Senator Perry Thurston (D-Broward County) called the amendment to use the funds to replenish the unemployment trust fund, “a bailout of big business.” And the bill’s co-sponsor Loranne Ausley (D-North Central Florida) said she couldn’t vote for the bill because it was a “slap in the face to our frontline workers.”

After considerable debate, the amendment passed 24 to 16. The overall bill passed 30 to 10.

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