The idea of Florida collecting more taxes from online retailers is getting bipartisan support among state lawmakers. What was once an idea pushed mainly by Democrats is getting the attention of Republicans now that Florida businesses are calling for relief.
Kim Williams owns a stationery and party-supply store called the Polka Dot Press in Tallahassee.
“We try to outservice everybody,” she said. “I mean, I preach that in my store to my staff.”
She said, that customer service is her competitive edge. Because, when she sets her retail prices on things like napkins and cards, she has a hard time competing with online sellers’ prices. She said, it’s because Florida doesn’t collect sales taxes from out-of-state retailers who sell their merchandise through the Internet. Anyone who’s ever browsed for a something in a store before buying the same item online, tax-free, knows what she’s up against.
“From a store owner’s standpoint, it would really level the playing field and allow us to be competitive with other brands,” Williams said.
And she’s not alone in her frustration. John Fleming, a spokesman for the Florida Retail Federation, says some Florida store owners must collect 8 percent more in the taxes than out-of-state online sellers do.
“There’s a built-in price disadvantage for them,” he said. “The state sales tax is 6 percent. Local-option taxes add on another percent or 2 to that.”
And he said, the problem is two-fold. The other part of the loophole, he said, is, if the seller doesn’t have a physical presence in the state, like a brick-and-mortar store, Florida law leaves it up to the buyer to report how much use tax they owe on every online purchase.
“There is a loophole big enough to drive a delivery truck through,” he said.
Fleming said, his federation advocates tweaking the definition of “physical presence” a retailer has in a state. For example, that could mean, if they have distribution centers instead of just retail storefronts, they’d have to collect sales tax. And, he said, other large states are trending that way.
“New York has done something about it. Amazon.com, the biggest Internet retailer, is collecting in New York. They’re doing it in Texas. They’re doing it in California. So, of the big four, Florida is the last one to address this issue,” he said.
The Florida Department of Revenue, which is tasked with enforcing tax collection, tries to educate people that they must pay use tax on online purchases. Mark Zych, with the department, said, last year, people voluntarily reported $6.6 million in use taxes to the state. And Florida recovered an additional $9 million by inspecting things like customs records and the inventories of tractor trailers driving in from out of state.
Zych said, “We will see if someone has bought furniture from North Carolina or art from other places, and then we will write them, saying, ‘Have you paid tax on it?’”
But even though the state targets shippers to collect use taxes, Dominic Calabro, with the think tank Florida TaxWatch, said, the explosive growth in online sales means more and more taxes are going uncollected.
“We haven’t been doing enough to make this a real key priority,” Calabro said, “and in the mean time, the red ink has been pouring and jobs have been lost in Florida because of this.”
Florida TaxWatch estimates that if Florida were to expand the definition of what constitutes a physical retail presence in the state, it would collect $50 million in the first year.
Bills that have been filed in the House and Senate that would do just that. One, sponsored by Sen. Nancy Detert (R-Venice), would define physical retail presence as an office, distribution facility or warehouse. Sen. Gwen Margolis and Rep. Jared Moskowitz, both Democrats, have filed similar bills. And House Speaker Will Weatherford and Senate President Don Gaetz have said they support taking a close look at online sales tax law.
But even if Florida starts collecting more online taxes, advocates for the change point out, there’s only so much the state can collect under the federal Commerce Clause. That’s why TaxWatch, the Florida Retail Federation and others are lobbying Congress for a more uniform policy on Internet sales.
Before opening her brick and mortar shop, Tallahassee store owner Kim Williams started her business through a website. And a patchwork of state tax laws would make it difficult to keep track of what she owed each state. “To collect it for 50 different—or however many counties—however that would work—sales tax could be really confusing if I had to logistically figure out, or buy software that figured out, you know, that could become a burden.”
Williams said, in the age of growing online sales, the desire for uniform federal tax laws is something all retailers can agree on.