By Lazaro Aleman
Greene Publishing, Inc.
The issue of the taxation of online purchases is one that, if not having its day at the state and national levels, is certainly drawing its share of attention.
At the state level, Florida District 9 State Representative Michelle Rehwinkel-Vasilinda introduced a bill this session that once again seeks to bring the state’s six-percent sales tax to bear on Internet transactions. HB-217, which received its first reading on March 4, is Rehwinkel-Vasilinda’s sixth attempt to introduce similar legislation since 2009.
Meanwhile, at the national level, the U.S. House of Representatives is set to take up the Marketplace Fairness Act, a version of which the U.S. Senate approved last year.
The Marketplace Fairness Act, if approved, would reportedly allow states to require that large Internet retailers and other ‘remote sellers” with annual sales of more than $1 million collect sales taxes and send the revenues to the appropriate locations.
Back to Florida, HB-217 aims to fix what Rehwinkel-Vasilinda characterizes as a loophole in the present system.
“We’re actually giving tax breaks to out-of-state retailers who do nothing for the state of Florida and our communities,” Rehwinkel-Vasilinda is quoted saying. “That’s really upside down and backwards.”
If approved, HB-217 would allow Florida to become a member of the 1999 Streamlined Sales and Use Tax Agreement, an interstate compact that simplifies sales and use tax collections and encourages retailers with a physical presence in one member state to remit and collect sales taxes on behalf of other member states. Florida would become the 25th member state to join the agreement.
If Rehwinkel-Vasilinda’s past failed attempts to have similar legislation approved are any indication, however, HB-217 at minimum faces an uphill battle. All the same, a recent Supreme Court ruling giving states broad authority to apply the sales tax to online transactions, as well as Amazon’s decision to locate two distribution centers in Florida are credited with possibly changing the political landscape in favor of the bill’s passage.
Proponents of the legislation argue that the current system is unfair, as it taxes brick-and-mortar businesses but not online retail giants like Amazon. Opponents, on the other hand, counter that taxing businesses outside the state amounts to “taxation without representation” and would further burden small retailers.
Florida, according to one study, is losing an estimated $450 million annually in uncollected sales taxes. And the National Conference of State Legislatures estimates the state failed to collect as much as $1.5 billion in 2012.
Both the Florida Retail Federation and the Florida Chamber of Commerce support the move to collect the online sales tax.
At the national level, it’s reported that Main Street retailers and state governments now look to Congress to decide the issue with passage of the Marketplace Fairness Act. If approved, however, states would have to acquire software that would make the tax collections possible and they would also have to simplify their tax systems to make things easier for retailers.
The following synopsis is based on an eight-page Legislative Update of the National Write Your Congressman (NWYC), whose stated mission is “to encourage responsible Americans to use their influence in government to preserve the freedoms set forth by the Founding Fathers.”
The NYTC summarizes the controversy as follows: proponents want the playing field between brick-and-more stores and online shopping sites evened, and opponents say small businesses don’t have the means or wherewithal to calculate and collect the tax.
The statistics show that an ever-increasing number of people are shopping online. The literature also indicates that although the recent Supreme Court ruling gave state broad authority to require retailers to collect the sales tax, it did not give them the obligation to do so. The issue, moreover, is infinitely complicated, the research indicates. That’s because taxes vary drastically from state to state and even from city to city within states, not to mention that five states impose no sales taxes whatsoever.
Some noteworthy items from the NYTC report:
* Polls show that 57 percent of likely voters oppose imposition of the tax on online transactions, with opposition highest among young adults ages 18 to 29 and next highest among adults ages 30 to 49.
* The US Bureau of the Census estimates that more than $4 trillion and 16.1 percent of all U.S. shipments and sales in 2010 were transacted via the Internet. Other estimates put the so-called e-commerce value at approximately $3.9 trillion; it is also generally accepted that e-commerce will continue to grow.
* The National Conference of State Legislature estimates that in 2012, states lost $23 billion in uncollected taxes of all types, with about half of the loss revenues attributed to uncollected taxes online sales.
* As things stand now, consumers are obligated to pay the sales tax for Internet purchases on their own. Most people, however, either are unaware of the requirement or simply ignore it. States, for their part, have no practical way of enforcing the requirement.
* At the start of Internet retail sales, state tax regulations were eased or lifted to help bolster the innovative marketplace. Now, however, a recent government surveys indicates that e-commerce sales totaled $226 billion in 2012 — a 16-percent increase from the previous year. Which figures support the argument that Internet retailers are thriving and should no longer get special breaks.
* Among the most commonly cited benefits of online shopping are the availability of information, in terms of consumer reviews, full specifications and possible alternatives; the quick access to a wide variety of products, including specialty items; the ease and convenience of shopping electronically; and the privacy it provides, for those who don’t want others to be aware of their purchases.
* Among the cited advantages of “real” store shopping are the social and therapeutic benefits that shopper derive from the experience, including strolling the mall; mingling with other shoppers; imbibing the malls’ sights, scents and sounds; enjoying the refreshments and other offerings at the food plazas and coffee shops; and acquiring instant possession of their purchases.