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Online Sales Tax On Its Way, But Phone, Cable and Web Service Taxes Would Be Cut

| April 12, 2013

Not including taxes.

Not including taxes.

Internet retailers would have to collect sales tax when Florida residents make online purchases and remit the money to the state under a bill that cleared a Senate committee Thursday.

The measure would offset the increased revenue brought in by the measure by lowering other taxes, including offering a sales tax holiday for shoppers at brick and mortar stores. The “revenue neutral” offset provision helps Republican backers of the idea avoid any notion that the proposal is a tax increase, although they also claim that the bill simply modernizes the tax laws to require collection of money that should have been flowing into state coffers all along.

In addition to offsetting new revenue through what would surely be a popular break from the sales tax, the bill (SB 316) also would lower the communications services tax rate. That tax is charged on things like telephone service, and cable and satellite TV. Bill sponsor Sen. Nancy Detert said Florida residents would notice their home Internet service would be cheaper, offsetting the additional cost of items purchased through that Internet connection.

Online retailers like Amazon don’t collect sales taxes on Florida purchases, even though Florida lawmakers say that technically, the purchases should be subject to the state’s 6 percent sales and use tax.

“It’s something that we should have been collecting and haven’t,” said Detert, R-Venice.

As it is, Florida, which has no income tax, relies primarily on its sales tax to fund government. Sales taxes make up 70 percent of general-fund revenue.  The 6 percent sales tax is levied on most tangible personal property, retailed goods, some services, rentals, vehicles and so on. But there are some 200 exemptions, including for food and medicine. 

A legislative analysis of the proposed bill found that while studies estimate differing amounts of lost sales tax revenue, the most recent, a September 2011 report by Arudin, Laffer, and Moore Econometrics, estimated tax revenue losses of $374 million in 2010 and between $449.6 million and $454.0 million in 2012. The analysis found it difficult to determine the actual amount of lost sales tax revenue in total due to the  200 sales tax exemptions and the 67 different state and local taxing jurisdictions in the state.

The analysis also found that many of the states who have enacted similar laws have become involved in lawsuits challenging the constitutionality of their laws. If this bill were to become law, Florida may be subject to such lawsuits.

Nevertheless, the bill is strongly supported by physical retailers who rely on non-Internet sales, who have claimed for years they’re at a disadvantage because buyers would rather purchase items online to save sales tax.

“This bill helps to support the bricks and mortar stores in our state,” said Detert. “We’re helping small business and we’re helping with a tax refund to consumers.”

The bill passed 10-1 in the Senate Finance and Tax Subcommittee, with the lone no vote coming from the panel’s chairwoman Sen. Dorothy Hukill, R-Port Orange.

While voting for it, Sen. Jeff Clemens, D-Lake Worth, questioned why lawmakers were insistent on offsetting the new revenue with other tax cuts.

“This is money we’re already due, so it shouldn’t have to have an offset,” Clemens said.

But legislation that could be interpreted as raising taxes has never played well in the GOP-dominated Legislature and Gov. Rick Scott has begun a re-election campaign and is expected to be cool to anything opponents might portray as a tax increase.

“We’re doing a tax shift,” insisted Detert.

–News Service of Florida and FlaglerLive

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20 Responses for “Online Sales Tax On Its Way, But Phone, Cable and Web Service Taxes Would Be Cut”

  1. MSFB says:

    TAX, TAX, TAX… I don’t know about the rest of you but I have had it with TAX and SPEND Legislatures. Stop voting Republican and Democrat and start voting Libertarian. How much more do you want to pay? .50, .60,.70,.80 of every dollar you make. Enough is enough!

  2. Think About it says:

    On line stores should collect sales tax, period. They are a store. A customer goes “to your store” online and “shops” and “buys products” just like you were to walk into Walmart, Belks, Staples just to name a few. You have to pay sales tax there and online stores shouold also collect sales tax. It’s just not only fair, it’s RIGHT.

  3. Thomas says:

    Fine…. I’ll just order my items from another state that does not RIP ITS citizens off and have them shipped through family members outside of Florida. I have had ENOUGH with this “taxing” anything and everything to give more revenue to these Florida politicians retirement packages.

  4. Nancy N. says:

    This legislation will be an absolute disaster for internet publishers like myself. The legislation uses what is called “affiliate nexxus” to implement the sales tax collection. It uses Florida-based internet publishers like myself who participate in the affiliate programs of online retailers to collect the tax by defining us as a “physical presence” of the retailers whose programs we belong to.

    The effect of this is that the vast majority of these advertising programs will be shut down by the retailers to avoid compliance with the law. It is what has happened in many other states that have implemented similar laws. The result is the complete devastation of businesses like mine – huge chunks of our revenue disappear overnight – and the state doesn’t collect the revenue it was chasing anyway. In fact, the result is a net loss – since my income, which was coming from outside the state, and resulting spending I would have done is lost to the state.

    I’m tired of my family’s income being a pawn in the battle to force online retailers to collect sales tax. If you want to collect the tax, sign on to the national sales tax package that is being worked on in DC. You’ll get the revenue you want – without sacrificing the businesses of hard-working entrepreneurs like myself.

    I’ve been working hard building a business for over 7 years and with one law, the state government is going to destroy it. I honestly don’t know what my family is going to do if this passes.

    • Magnolia says:

      You are correct, Nancy. Sadly, this will be the end of the internet as a retail outlet. The outlets will drop online selling here in Florida.

      Face it folks, you can’t compete with special interests when it comes to politicians. You can only vote them out. And in Palm Coast, we don’t vote.

      • Nancy N. says:

        They won’t stop online selling here in Florida. What they’ve done in other states is stopped using affiliate advertising so that we – the affiliates who are placing their ads on our online publications – can no longer be used as a backdoor way for them to be claimed to have a “presence” in the state that mandates collecting sales tax. They will stop using affiliate advertising that is the income of many many internet content providers like myself (you didn’t really think all those websites you were reading for free were actually free, did you? They are supported by affiliate sales when you shop after clicking on their ads) and will switch to different sorts of advertising instead.

        Use of affiliate nexus discriminates between different kinds of advertising payment systems. If an advertiser gives me an ad to run on my site and says they will pay me based on the sales the ad generates for them, according to the legislature that makes me a “presence” of the company in the state. If they give me the exact same graphic and pay me a specific dollar amount to run it on my site for the month, then the state says I’m not a “presence”? The only difference is the terms of my payment contract having an incentive in it!

        • johnny taxpayer says:

          I wonder if you couldn’t set up your “company” in another state, Texas or South Dakota perhaps, as a means to circumvent this ridiculous overreach by our legislature?

          • Nancy N. says:

            Delaware is the affiliate publisher’s tax-free haven of choice to incorporate in. But incorporating comes with expense and tax burdens that I don’t currently have…which I wouldn’t need to take on if the stupid state would just wait a few months till the Federal government resolves this issue.

  5. Think About it says:

    @ Thomas………..

    So, if I understand your comment, if you go into Walmart …you’re going to refuse (not want) to pay sales tax? It’s the same difference..But in MANY cases instead of sales tax you ARE paying shipping costs..So, please explain why you are willing to support, UPS – Fed-X, USPS and who ever the shipping company is instead of your tax money going to your own state…
    These shipping companies are making out like bandits and people are bitching about a few cents, that goes to their own state? The teeter is just not tottering…

  6. tulip says:

    I think it’s a good idea to have customers pay the sales tax on online purchases. We pay tax on anything that is ordered online from a company that has a physical business in Florida—people that buy from HSN and I believe QVC know that already. The same thing applies in other states.

    So we would pay sales tax on ALL online purchases BUT, if the tax on cable, etc. goes way down as they say it would, then the consumer is ahead of the game, especially those who don’t order that much online to begin with.

    No matter what the outcome, people will still order online for many reasons and paying 6 cents tax on the dollar isn’t very much. Sometimes the shipping costs outweighs the sales tax savings.

    • Nancy N. says:

      We are already supposed to be paying sales tax on online and mail order purchases by filing returns and paying Use Tax on our purchases, but nobody does it. The only change here is in enforcement – the state is going to force the online retailers to collect the tax for them instead of relying on consumers to voluntarily pay it (which none do).

      Personally, I don’t just shop online to save money…I shop online to have access to a wider range of products, to things that I can’t get locally. And most of the things I buy online have a price that is cheaper than local stores, even before you add sales tax. I’m an Amazon Prime member, and often use free shipping promos on other sites, so I rarely pay shipping on anything.

      I pay sales tax on a lot of the places that I order from…Kohl’s, Lowe’s & Walmart (to get stuff they don’t carry locally in their stores), The Children’s Place, Talbot’s, Apple…it’s not always about avoiding sales tax!

  7. Think About it says:

    If you tihnk every online store is going to drop off the face of the earth….because of a sales tax? Get real…

    Better sell your PC, I-Pad, Noteboolk, Cell phone and go back to the party lines….!!! lolololol

  8. Mikeylikesit says:

    For my business, this helps level the playing field. In the case of my online business which is based here in Floirida, I have to charge the state sales tax on ALL of my sales irrespective of where the product is being shipped. That’s state law today. What this means to me and my business is that my out of state competitors must now charge, collect and pay the same sales tax. The only way I would oppose this tax is if Florida allowed me to not have to charge and pay sales tax on my customer’s purchases.

    Why should my Florida based business be at a disadvantage when competing with businesses located in other states.

    Don’t get me wrong. I dislike taxes as much as anyone else. But lets be fair, especially to Florida businesses.

  9. Magnolia says:

    Nancy, good comments. Amazing how some disregarded your comments about the damage it will do to the small business guy.

    I am tired of the guilt trip imposed upon me by scheming politicians who want to raise my taxes, cut my benefits, and who have NO INTENTIONS of cutting THEIR spending.

  10. Anonymous says:

    This is a design is to help the big retailers and allow for more spending. I won’t buy local, or in Florida if I can save money shopping elsewhere.

  11. Mel Bronson says:

    Blood suckers sit around in Tallahassee dreaming up new laws to steal citizens freedoms and invent new ways to tax to have money to WASTE, URINATE away, and provide excuse for their existence.

    Democrat party knows nothing but tax and spend, tax and spend. Living in Florida will become to expensive to endure.

  12. 1pub says:

    Results from Illinois:

    Two years ago, Illinois enacted what’s become known as the “Amazon tax.” This measure, championed by Senate President John Cullerton, D-Chicago, essentially forced online retailers to pay Illinois taxes even if they didn’t have a storefront or other physical presence in the state. Under this law, working with Illinois-based marketing affiliates — such as a blogger who links to your product on his site — became enough to trigger an Illinois tax bill.

    In his sales pitch, Cullerton positioned the Amazon tax as good for Illinois’ struggling economy: “House Bill 3659 will help spur economic activity and job growth within the state,” he said, adding that the tax would generate $150 million, which would “prevent millions of dollars in cuts to public safety, health care, and education.”

    As it turned out, the tax did spur economic growth — in other states.

    After the law was enacted, businesses fled. Overstock.com and Amazon.com ended their relationships with Illinois-based marketing affiliates. Chicago-based CouponCabin moved to Indiana. And FatWallet.com, which had been headquartered near Rockford for three years, skipped the border to Wisconsin.

    “The so-called Amazon tax was misguided,” said Brent Shelton, a spokesman for FatWallet.com. “(It) did little to increase the competitiveness of the local merchants it was purportedly designed to protect. It’s primary result was to cause businesses like ours to leave the state.”

    Each of these companies took with them people, jobs and money.

    And the $150 million?

    The actual money generated by the law was much less. According to the Illinois Department of Revenue, the law generated just $3.8 million between July 2011 and January 2012. The state was on pace to net $6.4 million from the tax by the end of the fiscal year. This law, billed by one of Illinois’ top political leaders as a step toward solving Illinois’ economic and fiscal problems, failed to achieve even 5 percent of its intended target.

    When asked for more recent revenue figures to see if the tax had picked up steam, the Revenue Department said the agency no longer was tracking this law’s performance.

    Illinois’ Amazon tax, like so many other laws, had unintended consequences and underwhelming results. Forcing businesses to cross state lines in order to survive is hardly tax fairness.

    Since this law has failed to produce its anticipated revenue and resulted in Illinois losing jobs to border states, Illinois should repeal the Amazon tax. It has not helped the state; it has hurt it.

    As for Durbin, his proposal is not identical to Illinois’ but he’s using the same sales pitch: “economic fairness” and “leveling the playing field.” His proposal is anything but either of these terms.

    Durbin’s proposal would force online retailers to collect and remit the tax rates for consumers’ place of residence — a standard that is not applied to bricks-and-mortar stores. It would put online businesses at a supreme disadvantage by requiring them to learn and enforce the rules and regulations of more than 9,600 taxing jurisdictions nationwide.

  13. wsh302@msn.com says:

    government will never have enough money, they want want and want always crying about not enough money so they come up with another tax. stop spending like they tell us when we do not have enough money. if the government could come up with a way to tax every breath a citizen takes believe me they would tax the air you breath. we have a lot of idiots at the local, state and especially the federal levels. I have more respect for my dogs than the politicians and i am not joking.

  14. johninc says:

    The legilsture targets Amazon, because they are the most well known of the internet sellers. What will they do about Ebay and the thousands of other foreign companies selling on the internet? And how will they enforce their Florida laws on those foreign companies? Probably by penalizing us, the consumers. The world is changing and so must the law. The Florida legislature doesn’t get it, and is trying to adapt the old law to a new world. Since only we, the consumers, stand to lose here, I guess the real questions is: why do we keep electing the same thoughtless dolts into office?

  15. Sherry Epley says:

    Excellent comment 1Pub! If you haven’t already, I would like to encourage you to send this information to our state legislature. It seems that internet sales will eventually have a “sales” tax, but the only fair way to do it is to charge the tax at the federal level. In that way no state would have an advantage/disadvantage over another, and businesses (large and small) would not have the huge burden of complying with individual tax law for 50 different states. Then, some knd of revenue sharing could be set up to benefit the states, or we could have that revenue used specifically to benefit everyone nation wide. . . like saving Social Security/Medicare.

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