George Gibbs Center for Economic Prosperity

Tampa Tr⁠i⁠bune: Amazon deal br⁠i⁠ngs In⁠t⁠erne⁠t⁠ ⁠t⁠ax ⁠i⁠ssue ⁠t⁠o forefron⁠t⁠

By: The James Madison Institute / 2013

BY JAMES L. ROSICATALLAHASSEE – The news that Amazon, the massive online retailer, plans a physical presence in Florida has again sparked a debate over tax fairness.The good news – 3,000 jobs and $300 million in warehouse construction, a big piece of it targeted for south Hillsborough County – comes with a catch: Amazon customers in Florida will have to pay sales tax on their purchases.Gov. Rick Scott’s press release said Amazon “will begin collecting Florida sales tax at such time as it is required under current Florida law.”At the same time, proposed legislation is brewing in Congress that would allow state governments to collect sales and use tax from online retailers without a physical presence in the state. The fix ultimately lies there because Congress regulates interstate commerce.Meantime, Internet sellers, “brick-and-mortar” businesses and politicians continue to snipe at each other over who should pay what taxes to whom.Regarding Amazon and similar concerns, “if they want to be a good corporate citizen, they should collect tax like any other shop in Main Street,” said state Rep. Michelle Rehwinkel Vasilinda, a Tallahassee Democrat. “Otherwise they’re not doing what they ought to be doing.”The U.S. Supreme Court has previously ruled, back in the days of catalog and mail-order sales, that retailers who don’t have a physical presence in a state don’t need to collect that state’s sales tax on purchases. The decisions have translated to Internet purchases, too.Instead, it’s the buyer’s responsibility to pay the tax directly to his or her state.Florida law imposes a 6 percent use tax – literally, a tax on using or consuming something here – on out-of-state purchases. The state has a form, the DR-15MO that consumers are supposed to fill out. Of course, almost no one does, because the law is largely unenforceable.“Have You Bought or Received Merchandise From Out of State or Through the Internet?” it reads. “You Might Owe Florida Tax.”Rehwinkel Vasilinda sponsored bills in the last five legislative sessions to require enforcement and reporting of Florida sales tax from out of state. She said she regularly pays state sales tax on items she buys off the Web.Now, the Marketplace Fairness Act – the proposed federal law – aims at leveling the playing field for all retail operators.Even Amazon supports the bill, though not necessarily to be on the right side of history, suggests Grover Norquist, conservative activist and founder of Washington-based Americans for Tax Reform.“They want their competitors saddled with the same taxes,” Norquist told the Tribune on Friday.“The bigger issue is, should politicians in one state be able to tax people in another?” Norquist said. “Florida has a big interest in that answer being ‘no,’ because it’s a low tax state.”In other words, a lack of uniformity encourages tax competition among states, keeping taxes low.Scott, in his statement, promised that “to make the proposed job creation and investments economically viable, the availability of economic development incentives will be a material factor in any final location decisions.”As Norquist put it, “There’s a reason Maine doesn’t beat L.L. Bean senseless with taxes – L.L. Bean employs a lot of people.”Rick McAllister, president and CEO of the Florida Retail Federation, welcomed Amazon but stressed his concern that “all online retailers play by the same rules.”“Congress must act to resolve the longstanding issue over fair collection of state sales taxes,” he said. “Conservative governors across the United States are supporting the Act and pledging to reduce taxes in their states, and Florida should join their ranks.”Senate President Don Gaetz has generally been opposed to efforts to collect sales tax revenue from online retailers unless it includes tax relief somewhere else, spokeswoman Katie Betta said.“For example, in the past he has expressed support for legislation on the Internet sales tax issue that would include a reduction in the Communications Services Tax,” she said.Estimates vary on the amount of revenue Florida could gain from capturing taxes on online sales, anywhere from $500 million to $1 billion.The James Madison Institute, a conservative Florida-based think tank, has traditionally opposed anything resembling an Internet sales tax because of a lack of consistency between state tax rates and the taxability of various products.“If Internet sales are to be taxed, they ought to be taxed based on the location of the seller – as is the practice with bricks-and-mortar sellers – rather than based on the place of residence of the purchaser,” said Bob Sanchez, the group’s policy director.“This means that the seller would need to keep up with a single tax rate and a single statute concerning which goods or services are subject to a sales tax,” he said. “It would … simplify the tax code for both buyers and sellers and force states into an open marketplace to compete against one another for business.”Ultimately, though, Congress will decide. Or, as experience suggests, it will keep punting.“The underlying issue is not only one that Congress may be better qualified to resolve,” the Supreme Court wrote, “but also one that Congress has the ultimate power to resolve.”That was in 1992.