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U.S. Supreme Court Ruling On Web Retailers Could Boost Florida’s Sales Tax Revenue

| June 21, 2018

In 2014, Amazon, the largest online retailer, began collecting the tax in Florida after it opened a series of “fulfillment centers” in the state. But the tax is not applied to third-party sales through the Amazon network. (Amazon)

In 2014, Amazon, the largest online retailer, began collecting the tax in Florida after it opened a series of “fulfillment centers” in the state. But the tax is not applied to third-party sales through the Amazon network. (Amazon)

A U.S. Supreme Court decision expanding the ability of states to pull in tax dollars from online purchases could have a significant impact in Florida.

In a 5-4 ruling Thursday, the nation’s highest court upheld a South Dakota law that allowed the state to apply its sales tax to major online retailers, even if they had no physical presence in the state. The ruling reversed a 1992 court decision that held online retailers could only be required to collect and remit sales taxes if they had stores or some other “nexus” in states.

Brick-and-mortar retailers in Florida and other states have long complained that allowing some online retailers to evade sales taxes creates a competitive advantage for the remote sellers. Consumers were supposed to voluntarily pay sales taxes on remote purchases, although it rarely happened.

In his majority opinion Thursday, Justice Anthony Kennedy cited the expansion of internet commerce since the court’s 1992 decision, noting national mail-order sales totaled $180 billion at that point, compared to $453.5 billion in online sales in 2017, according to the U.S. Department of Commerce.

“(The prior decision) puts both local businesses and many interstate businesses with physical presence at a competitive disadvantage relative to remote sellers,” Kennedy wrote. “Remote sellers can avoid the regulatory burdens of tax collection and can offer de facto lower prices caused by the widespread failure of consumers to pay the tax on their own.”

In a dissenting opinion citing the court’s prior ruling, Chief Justice John Roberts said federal lawmakers, not the court, should decide whether to tax remote sales.

“Any alteration to those rules with the potential to disrupt the development of such a critical segment of the economy should be undertaken by Congress,” he wrote.

The court decision was praised by Florida business groups.

“For years, online-only retailers have exploited this loophole that allows them not to collect sales tax, which has given them an unfair competitive advantage over brick-and-mortar stores,” said James Miller, a spokesman for the Florida Retail Federation. “This decision finally levels that playing field, and I think that’s all any business owner wants.”

The court decision could also be important in Florida because of the state’s heavy reliance on sales-tax revenue. Expected to generate more than $24 billion for the state government in the current fiscal year, the sales tax is the single largest source of funding for the state.

Dominic Calabro, president of Florida TaxWatch, a business-oriented advocacy group, said the ability to apply the sales tax to more internet sales will keep the state’s tax structure in sync with the evolving economy.

“The taxpayers of Florida really rely heavily on the sales tax. You’ve got to have a modern sales tax, so we don’t have to have any other kind of tax that people don’t want,” Calabro said. “So, by relying on a sales tax, you have to make sure it’s modern and up to date.”

The exact impact of the ruling on Florida’s sales tax collections is unknown but it could be significant.

Last November, the federal Government Accountability Office estimated that states could have collected between $8.5 billion and $13.4 billion in sales taxes in 2017 if they had expanded taxing authority. The estimate represented between 2 and 4 percent of total state and local sales tax collections in 2016, the analysts said.

In testimony before the Florida House Ways & Means Committee in January 2017, analysts gave a rough estimate of $200 million in potential sales tax revenue resulting from applying the tax to more remote sales.

In Florida, the sales tax has been applied to a wider range of internet sales over the last few years. In 2014, Amazon, the largest online retailer, began collecting the tax in Florida after it opened a series of “fulfillment centers” in the state. But the tax is not applied to “third-party” sales through the Amazon network.

And according to the Supreme Court case, some large online retailers do not collect taxes on their remote sales. Wayfair Inc., an online retailer of home goods and furniture that challenged the South Dakota law, had more than $4.7 billion in net revenue in 2017, according to the opinion.

But even with the court’s decision, not all remote sales are likely to be taxed. The South Dakota law only applied the tax to online retailers that had at least $100,000 of annual sales in the state or 200 individual transactions.

–Lloyd Dunkleberger, News Service of Florida

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9 Responses for “U.S. Supreme Court Ruling On Web Retailers Could Boost Florida’s Sales Tax Revenue”

  1. tulip says:

    I think it’s good that the sales tax will be added. When people order online, they are giving their business and money to another state, city or town, and depriving their own place of residence much needed sales tax money and business to help run the state or city and also keep retail from closing in their area and depriving people of potential jobs. Not only that, but as sales tax revenue declines, they have to make it up somewhere—the taxpayers.

  2. Anonymous says:

    Those that are reselling should not be charging or collecting sales tax as sales tax was already charged when then items were newly purchased. This is stealing from the people by double or triple taxation! Anything bought over the internet should not be taxed. Next thing you know they are going to want landscapers and painters to start charging sales tax for their services. If the fools would stop their crazy spending and lavish conferences and things they woudn’t need more money. Where does it stop? People are struggling enough now as it is. Jobs aren’t paying wages that they should and electronic self check outs and computers are taking the jobs of people. The Supreme Court needs to use some common sense!

  3. The Truth says:

    Perhaps these brick and mortar stores (Office Depot, Staples, etc) should start pricing items more competitively rather than just bitching and complaining. I shop online because I find items far cheaper in many cases than shopping at brick and mortar stores.

    A perfect example of this is computer parts from stores like Office Depot priced 40-50% higher than the same item is priced on sites like Newegg, Amazon and others. I realize there are more expenses to run a store, but pricing that much higher is just taking advantage of those who don’t know better and cutting out potential customers who would purchase those items at a brick and mortar.

  4. tulip says:

    Well, if you can buy something online much cheaper than in a brick and mortar store, you still would save money because the sales tax amount would be less than if you paid sales tax on a higher price.

    I have found that Amazon is kind of sneaky. I looked up something and the price was extremely reasonable. After further investigation, I found that in order to get that price I had to join Prime for $100+dollars a year! Then I looked at the box for shipping without Prime and the shipping price was very very high, making the actual money spent on the article as no bargain, especially if I had to return it.

    I order very little online, as I prefer to see and touch the merchandise and support businesses locally and give people a chance to have a job so as they don’t have to wind up on welfare or worse.

  5. Pogo says:

    @Over 20 years late – but better late than never.

    I see the usual taxation is theft BS. Yes, yes – unaccountable personal property, wealth, and power is the way to go – follow the “new” Republican party to the return of the feudal system they’re hell bent on. A new Medieval world awaits. When you get there, don’t forget to thank all the pimple-faced little Johnny Galts and DagnyTaggarts that grew up to become the dead-eyed eels running Floriduh and surrounding the depraved sleaze called trump.

    You were warned

  6. 107 says:

    The big time stores are trying to choke out the little people! The big time stores rip off people every turn they can and because there are only a few choices in each community they know they have us by the short hairs! I will still continue to buy on line and the big time stores can all dry up as far as I am concerned. The law makers are all over this because it is a way of them getting MORE revenue!!!

  7. snapperhead says:

    I ‘ve never bought anything online just to avoid sales tax. Online gives me way more options and is much more efficient for my time and money than running around to several brick and mortar’s and hoping they have what i want. If it’s something I have to have immediately I’ll go brick and mortar, if not i’d be foolish not to utilize the infinite resources of the internet to get exactly what I want’/need at the best price.I’ll give you a perfect example…A computer I had needed a wifi usb widget…I went to Walmart…$33….Staples….$35…I didn’t need it right away so I shopped online and found one on for $9 PLUS TAX I’ll gladly pay online sales tax if i’m saving 75% off retail. Sales tax avoidance isn’t the business advantage some try to make it out to be. Brick and mortar’s are inherently more expensive because of overhead costs.

  8. Bill says:

    Good about time.

  9. tulip says:

    To 107 The Big time stores as you put it aren’t trying to choke the regular guy, Amazon is! They do it by being what closely resembles a monopoly. They control stores in the network, they control the customer with its choice of Prime at about $100 a year and rising (multiply approx 400 million active customers worldwide by $100 and see how much money Amazon makes for doing nothing. Billions. So the customer has 2 choices, opt for Prime on a yearly basis and get “free shipping” or not be in the Prime program and pay over inflated shipping costs of which Amazon gets a piece of, under the guise of the word “handling”. That now makes a customer’s purchase about the same as in a brick and mortar store. Amazon is well on its way to controlling the retail market, and Walmart is trying to get a hunk of it too.

    People better realize that cities and towns could wind up with very little actual places to shop, very very few jobs, and much higher taxes because of the loss of sales tax revenue. Just look at all the store closings and job loss there already is and it will continue if people enable it to happen.

    If you feel that retail rips you off, perhaps you should get rid of your cell phone and cable/satellite tv because those communication and other fees are really a bad rip off that we pay month after month forever. In fact, some of the phone companies are merging, Translation=more control of customer base and fewer choices for users.

    I only order online when necessary which is seldom, and I don’t like paying more tax than I have to either or paying more for merchandise either. However, for the sake of saving a few dollars on an item and 7cents on the dollar tax, I’d much rather spend it where I live and support the businesses here because the alternative is not attractive at all, especially when the end result could be higher taxes and fees to make up for the loss of revenue that is needed to run things.

    For these reasons, I feel that the states should get their fair share of the sales tax and not let the fat cat stockholders and management be the only beneficiaries.

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