On-Line Sales Tax Exemption to End for Amazon.com’s Florida Customers
Over the years, more and more consumers have gravitated toward buying whatever they need through one of the internet retailing giants, such as Seattle-based Amazon.com. Let’s face it: What could be more convenient than sitting in a comfortable chair with a cup of coffee and an iPad? You can search for virtually any product from any retailer or manufacturer, compare prices, then add your selection in your electronic cart and check out. In some cases, you can even get free shipping! Best of all, in most states, there is no sales tax on your internet purchases. In Florida, this equates to an immediate six- or seven-percent discount over buying the same item at your neighborhood retail store. So why shop any other way?
Well, here is a warning to you Floridians who do most of your shopping specifically through Amazon.com: The free ride on sales tax is just about over.
Starting May 1st, Amazon.com will be required to begin collecting sales tax on all online purchases made by Sunshine State customers. By Florida law, online companies are not required to begin collecting sales taxes as long as they do not have a “physical presence” in the state. But with the near completion of one of two massive 1.1 million square foot “fulfillment” centers currently under construction in Hillsboro and Polk Counties, Amazon is now losing that waiver.
Under the current tax policy, the consumer is responsible for paying all of the sales taxes for their online purchases directly to the state. Since this is a little-known, honor-based program with no clear means of enforcement, very few people actually do. But with this change, where the burden of collection now falls on the online retailer rather than the consumer, the state can expect to see an estimated $80 million boost in new sales tax revenues. In addition, the fulfillment centers, once complete and operational, are projected to generate up to 2,500 new jobs. This is pretty much the best of both worlds for the state.
In assessing their potential loss in sales tax revenue, many states have pushed to have sales tax collections apply to all online retailers, for purchases originating in their state. In 2013, the U.S. Senate passed a bill called the Marketplace Fairness Act. This bill grants states the authority to compel online and catalog retailers (“remote sellers”), no matter where they are located, to collect sales tax at the time of a transaction — exactly like local retailers are already required to do. But this bill is already riddled with problems, including the requirement for each state to decide on one flat sales tax to use for collection purposes, verses current state and local tax variations. On the other side, there will be the administrative and software costs that will need to be incurred by the e-retailer in order to track, coordinate, and collect taxes at 50 different state tax rates. These costs will certainly be passed along to the consumer.
In spite of the fact that the bill has such strong support among brick-and-mortar retailers, since it is viewed as “leveling the playing field,” there are still too many obstacles to overcome before passage through the U.S. House is assured. So it is doubtful the bill will become the law of the land anytime soon.
But remember: If you live in Florida, and are browsing through the Amazon.com website looking for that great deal, you had better act before your coffee gets cold. After May 1st, that sales-tax-free savings becomes history.