November 27, 2014
Tax Matters - Time to collect tax on internet sales in Florida

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Tax internet sales and phase out the tax on commercial property leases.

Bright Ideas for 2014

Tax Matters - Time to collect tax on internet sales in Florida

| 12/3/2013

A Gallup poll in June found that 57% of Americans and an even larger majority of young people, 73%, oppose a federal bill to require internet, catalog or other "remote" retailers to collect sales tax from customers and remit the money to the customers' home states. Heartening as it is to see Americans united across party lines and demographic categories, it's simply a matter of fairness to brick-and-mortar retailers that dictates that online sellers pay the tax as well. The tax is owed, but states can't force retailers to collect it unless the retailer has a physical "nexus" in a particular state.

Absent that presence, compliance relies on consumers voluntarily calculating what they owe and mailing off checks to their state revenue departments. In practice, the body politic has shown it prefers to keep its money. In Florida, for the last full year, people sent sales tax in voluntarily on just 4,831 purchases. It's "the most significant tax compliance and collection issue" in Florida, says Florida TaxWatch.

Florida shouldn't be in the business of picking winners and losers in the economy. Giving at least a 6% price advantage to remote sellers awards them a big win.

Besides, it's real money. Arduin, Laffer & Moore Econometrics, the firm headed by former Gov. Jeb Bush's budget director, Donna Arduin, and supply-side guru Art Laffer, estimated Florida's Revenue Department lost out on as much as $454 million in revenue in 2012 and by 2020 will be out a cumulative $6 billion. It found the failure to collect costs jobs at Florida retailers, narrows the sales tax base and damages growth by pushing other taxes higher.

Getting the state's hands on all that cash requires federal action, but the state can recoup some of the lost revenue through a compact of 1,400 sellers that collects the money voluntarily and sends it to participating states. It also could recover revenue through E-Fairness, a proposal, subject to court challenge, to more broadly define a seller's affiliates so that the state can reach down the chain to demand tax collection. Florida TaxWatch estimates the state could bring in $55 million to $62 million through the compact alone.

Florida could put the money to good use by beginning to phase out the tax on commercial property leases, a disincentive to companies locating here and a drag on the economy, hiring and, in the long term, state revenue.

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