The state of New York now has a battle-tested template for Florida legislators to follow if they want to boost the state’s tax base by millions of dollars each year.
New York has a law on the books aimed at getting some Internet retailers to remit state sales taxes, no matter where the online company’s headquarters are located. If an out-of-state retailer pays a go-between in New York to refer customers to that retailer’s site, they are required to charge and remit state sales taxes to New York.
Online companies Amazon and Overstock.com challenged the law in court and lost. The U.S. Supreme Court declined last week to hear the case, essentially upholding the law.
Florida lawmakers should consider similar legislation during their session this spring. Although it won’t affect every online company with Florida sales, it will put the state on the right path.
Florida, by some estimates, misses out on between $200 million and $800 million in online sales tax revenues a year. Despite that substantial sum, Florida lawmakers have refused over the years to enact legislation that would position the state to collect the sales taxes. Opponents make the false claim that collecting online sales tax would amount to a tax increase on Floridians.
That bogus argument grows increasingly tiresome as the world of Internet commerce explodes. Cyber Monday set a sales record this season, and there is every reason to think that trajectory will continue. The online industry may have needed a boost in its fledgling years. But those days are long gone.
If fact, it is the brick-and-mortar stores, which must collect the sales taxes, that need relief. They are left to compete with online companies that offer the same products for less, in part because they don’t impose sales taxes. Another stale argument, that online retailers don’t use the public services that sales taxes support, doesn’t hold water. Sales taxes provide for the roads and other infrastructure that gets their products to the consumer.
Collecting the tax is a matter of fairness. If lawmakers don’t think there is a need for the additional revenue, they could cut tax rates to make it revenue neutral.
Of course, Congress could help clarify the matter once and for all. Federal law prohibits a state from collecting the sales taxes from online retailers without a physical presence in that state. But a measure that passed the U.S. Senate with bipartisan support would change that law, allowing states to collect the tax from online retailers with more than $1 million in sales. Even Amazon is encouraging Congress to act.
Sadly, the Marketplace Fairness Act, as the measure is known, has stalled in the U.S. House, where it faces tea party opposition. What else would you expect from Congress these days?
Amazon’s decision this year to establish a physical presence in Florida by building warehouses in Ruskin and Lakeland gives the state the green light to collect sales taxes from Amazon purchases. But that won’t even the playing field when brick-and-mortar stores compete with online retailers lacking a physical presence in the state.
Who knows when Congress will ever come to its senses. In the meantime, Florida can introduce some fairness into its sales tax rules and broaden its revenue base by adopting a law similar to New York’s.