To tax or not to Tax? Political insiders debate internet sales

Feb 27, 2012

Florida House and Senate conferees have begun trying to work out the differences between the two chambers’ versions of the new state budget.  Nearly all the budget-balancing emphasis has been on spending cuts, but one way to boost state revenue is still alive in the senate.  Tom Flanigan reports a Capital City meeting was the site of a pro-and-con debate on that idea.

The site of the showdown was the Capital Tiger Bay Club luncheon meeting.  That organization counts many local business and government leaders in its membership.  The meetings usually have a speaker - or speakers – talking about politics or other timely issues.  This issue was a proposed change to Florida’s sales tax law that’s been going though the state senate.  It would compel firms that make Internet sales in Florida collect and remit the state sales tax.  Rick McAllister, the executive director of the Florida Retail Federation spoke in favor.

“This is a tax-collecting issue; it’s not about taxing anything.  It’s about collecting the taxes that are legally due, so we have in the state of Florida a use tax and every item that’s purchased either pays a sales tax if it’s going to be brought into the state of Florida or a use tax.

As the law stands now, it’s up to the people making the online purchase to fork over the sales tax to the state….something that virtually nobody does.  So the senate proposal would require one of the other parties involved in the transaction to cough up the cash.  However, it wouldn’t be the actual seller who’d have to do that.  It would be whatever Florida-based “affiliate” of the seller provided an online click-through from their site to the seller.   Abigail McGiver with Americans for Prosperity, the anti-tax group affiliated with folks like Grover Norquist, thought that a bridge WAY too far.

“So you’re searching the Internet and you go to a site and they have an advertisement for some custom-made dog collars and you click on it and it takes you to some else’s site.  Well that company that makes and sells those dog collars will pay a referral fee to that company that provided that web site that provided that little click-through.  So I have an issue with whether or not that little web site click-through constitutes a physical presence in a state.”

McAllister countered the fundamental matter is simple fairness and leveling the playing field.

“Ladies and gentlemen, it really is about are we going to support the people in our hometowns?  Are we going to support small business?  Are we not going to have those out-of-state people have an eight-percent advantage every single day and are we going to make our tax system work?”

McGiver calling that argument bogus.

“We already compete with out-of-state retailers.  If Georgia or Alabama or Louisiana has a more competitive tax rate than the state of Florida, all you have to do is drive across the state line and purchase something and come back into the state of Florida and the State of Florida doesn’t get any revenue from that.”

No matter, shot back McAllister….the bill is simply a way to carry out the demands of a law already on the books.

“You owe this tax now; this is not a new tax.  You owe it!"

…to which McGiver replied states other than Florida have tried similar ways to collect Internet sales taxes.

“This will cost jobs, this will cost revenue.  States have not collected any new revenue so it hasn’t balanced out and potentially could be litigated, which would cost the state more money.  So is it really worth it for the State of Florida to expand in this nature?”

…and besides, McGiver insisted, the whole contention that governments need to find new sources of revenue to maintain current service levels is just a ploy to grow government.

“We should not be encouraging the government to bring on more revenue.  We should be trying to decrease out spending.”

Florida’s James Madison Institute, a free-market favoring think tank, agrees with McGiver.  Its position paper argues that shrinking revenues provide a perfect opportunity for government at all levels to refocus its efforts on core functions.  But Florida Taxwatch President and CEO Domenic Calabro says the matter isn’t just about government, but also what’s going on in Florida’s private sector…

“Each billion dollars of remote sales sold from out-of-state into Florida costs Floridians 10,100 jobs…Florida jobs.  Those are jobs we need in Florida, not in Indonesia, not in the state of Washington, not in other states.”

But, just in case you’re wondering how much Internet tax revenue Florida is losing each year, Calabro says that’s somewhere in the neighborhood of eight-hundred-million dollars.