Questions From Town Hall
10:00 am
Mon March 25, 2013

Bookseller Wonders, Why Doesn't Florida Get Sales Tax For Stuff You Buy On The Internet?

Florida's sales tax is a huge competitive downside for local retailers who sell the same products as their Internet competitors.

FIVE YEARS, FIVE TRIES: State. Rep. Michelle Rehwinkel Vasilinda says no-new-tax sentiment has blocked her attempts to pass an Internet sales tax bill.
FIVE YEARS, FIVE TRIES: State. Rep. Michelle Rehwinkel Vasilinda says no-new-tax sentiment has blocked her attempts to pass an Internet sales tax bill.
Credit Rick Stone

Because online sellers rarely collect the sales tax, it leaves the brick-and-mortar shops at a roughly 7-percent price disadvantage. And that's why business and retail lobbies have been demanding sales tax collection for online sales for years.

The issue arose during the WLRN-Miami Herald Session 2013 Town Hall last month, where we heard from Fort Lauderdale bookseller Donna Mergenhagen.

"I own an independent book store," she said, "and I collect Florida sales tax on everything I sell. I'd like to know why the Florida Legislature has failed to implement the sales tax on billions of dollars of online sales."

Good question. According to a recent Florida Chamber of Commerce estimate, online sales tax enforcement could net our cash-strapped state up to $4 billion a year.

Now, let's be clear. Sales tax (or an alternative called the "use tax") is already required from online purchases under rules developed during the days of mail-order. The rules apply to any company that has a "physical presence" such as a store or a sales office in Florida.

When there is no physical presence, the buyer is supposed to remit a use tax, which is the same amount as the sales tax, to the state.

Neither rule is being enforced and the online merchants continue to eat the lunch of store-based retailers.  But some of the savings can be eaten up by shipping costs.

We took Donna's question to State Rep. Michelle Rehwinkel Vasilinda, a Democrat from Tallahassee who has tried to pass an Internet sales tax bill in each of the last four years and has filed another one this year.  She's hit the same two problems every time.

'I'd like to know why the Florida Legislature has failed to implement the sales tax on billions of dollars of online sales,' asks bookstore owner Donna Mergenhagen.

"One is a guy by the name of Grover Norquist," she explains. "He runs Americans for Tax Reform and he does not want any new revenue. So, those legislators who have signed the Americans for Tax Reform pledge do not want to violate that pledge."

Rehwinkel Vasilinda said more than two dozen House members have taken the Grover Norquist no-new-revenue pledge. But the ones who haven't don't vote for the Internet tax, either, she says, for fear of primary challenges.

"They think when they go to run for office, somebody will send out a mail box piece that says, 'you voted for a new tax!'"

A Senate Internet tax bill has begun making its way through the committee process while Rehwinkel Vasilinda's fifth bill sputters in the House.

There's a big picture here. Back in 2000, when the dominance of the Internet as a retail venue was becoming apparent and Congress was showing signs of wanting to prohibit sales tax collection online, states banded together to standardize their sales and use tax collection systems. By 2011, 24 states were members of the Streamlined Sales Tax Project.

The motive was to preserve their sales tax revenue streams with the understanding that the more states enforcing the rules, the more money each would receive.

Rehwinkel Vasilinda says fellow lawmakers have amended her bill with language that takes it away from SSTP standards in ways that could attract lawsuits.

Florida has a general sales tax rate of 6 percent and it allows counties a local option that could raise it to 7.5 percent. Broward and Palm Beach counties collect only the 6 percent. The rate in Miami-Dade is 7 percent and it’s 7.5 percent in Monroe.

And those percentages are the automatic discounts that online retailers can offer in addition to letting you buy stuff with a mouse click from home and waiting for it to show up on your doorstep.