It is time to have an honest discussion about “internet sales tax” and separate fact from fiction. First, this issue is undoubtedly best handled at the federal level. Unfortunately, like many other issues, when the federal government fails to act, the public gets restless and looks to state government for solutions.
Without question, this is a challenging topic and pressure is mounting from our in-state brick-and-mortar businesses to do something about the “unfair” tax advantage that on-line retailers enjoy. There is a grassroots movement from the business groups to encourage Florida to take the lead from California and New York and pass laws that will bring the largest on-line retailers, such as Amazon.com, to the bargaining table. As Chair of the Finance and Tax Committee, I recently held a workshop which confirmed the challenges that confront finding a state, legislative solution.
Those that oppose the tax provide another obstacle claiming that it is a “new” tax. This is a myth. The sales tax on any item purchased by a Florida resident must be paid. The problem is that it has to be paid by the consumer because the state does not have a legal nexus to force the on-line retailer to collect and remit the tax. Most of the public is unaware of this fact. Further, since the Department of Revenue has no way of tracking online purchases, the perception builds that there is no tax on internet sales. Again, this is far from the truth.
Another myth is that the lack of taxes paid by retailers gives them an unfair advantage and is sending more consumers to the internet. However, it is convenience, not a sales-tax savings, that drives people toward internet purchases. Internet sales are the future; people find it more convenient and cheaper. Goods are often cheaper online because the internet retailers have less overhead and likely buy in larger quantities. I understand that our brick-and-mortar retailers are often the showrooms for what people later purchase on-line, but it is all a part of our changing economy. Retail is an ever-changing industry. We already went from mom-and-pops to larger retailers. Some mom-and-pops survived and some did not. The same will go for those who have to compete with on-line retailers.
Having said that, the time has come to address this issue and we will, but it will come with a price. Undoubtedly, as in other states that have passed similar laws, there will be constitutional challenges to this legislation. Politically, we will need to make sure that any change we make is revenue neutral to the state. The public policy driving any law that deals with internet sales tax should focus on fairness and not revenue for the state. Since it is indeterminate how much we would receive in internet sales tax, we have proposed a quarterly sales tax holiday after receiving reports with actual collection figures from the Department of Revenue.
Everyone should come out a winner. The brick-and-mortar retailers will no longer be at a sales tax disadvantage. Those that oppose the idea as a new tax will feel comfortable that we are not increasing the tax burden on the citizens. Last but not least, the consumer wins big with a quarterly sales tax holiday to offset the earnings and the brick-and-mortar retailers get an extra boost (sales tax holiday) to reward their persistence.
Sen. Ellyn Bogdanoff is Chair of the Senate Budget Subcommittee on Finance and Tax.