Florida's online shoppers will have to start paying sales taxes on all purchases starting this July.
Nearly three years after it became legal to tax all online purchases, the nation’s third-largest state is finally about to do so.
On Monday, Gov. Ron DeSantis signed into law a plan to require out-of-state online retailers to collect sales taxes on purchases made by Floridians. It is expected to raise an estimated $1 billion a year in revenue that will help pay for a tax cut for some businesses.
The move was controversial in Florida even though online shoppers just about everywhere else are already paying sales taxes on all their purchases. In June 2018, the U.S. Supreme Court ruled that state and local governments had the right to collect sales taxes from purchases made online, no matter where the seller was located. (Prior to that landmark case, South Dakota v. Wayfair, sellers only had to remit sales tax if the online purchase was made by someone in the same state.)
Following the ruling, most states and localities spent about a year or so implementing their own rules and regulations for how they’d go about collecting those sales taxes. But not Florida. Florida business groups have lobbied for years to require out-of-state retailers to collect and remit sales taxes, saying it is a matter of fairness.
But past proposals failed because Republicans were worried they could be viewed as increasing taxes on consumers. Meanwhile, Democrats opposed this particular bill, arguing that it was a break for businesses at the expense of consumers. “Governor just signed a bill into law to increase your taxes and give the new revenue of $1 billion to businesses,” said a tweet by Rep. Anna Eskamani, D-Orlando.
Beginning July 1, most retailers selling more than $100,000 a year online will have to start collecting Florida’s 6% sales tax at the point of sale.
Chuck Maniace, vice president of regulatory analysis and design at the tax firm Sovos, called the news a “significant development,” noting that “Florida has now joined the vast majority of other states” in enacting a law enabling the state to collect sales tax on remote sellers.
“In fact,” he added, “Missouri is now the only holdout in terms of taxing remote sellers and we expect them to join Florida in passing legislation this year. Given the boom in e-commerce due to the pandemic, the importance of closing this enforcement gap becomes all the more important in shoring up any revenue shortfalls, especially in states like Florida that rely heavily on tourism for tax revenue.”
Florida is one of several mostly red states that is still struggling to recover lost revenue from the Covid-19 crisis. Personal income tax revenue has essentially recovered since March 2020, but sales tax revenue is still down an average of 2.4%. States like Florida that rely heavily on sales taxes and don’t tax income are taking longer for their budgets to recover.
The sales tax revenue raised by Florida’s new law will be used to replenish a depleted unemployment trust fund. After the fund is replenished, revenue will go toward paying for a commercial rent tax cut. Florida is the only state that collects a sales tax on commercial rent payments.
