Florida- Can Remote Sales Tax Help Florida’s COVID-19 Budget Crisis?

Florida has no income tax or remote sales tax, so it relies heavily on sales tax collected by in-state businesses. With many of these businesses shuttered or making only a fraction of their normal sales due COVID-19, the Sunshine State is looking to collect significantly less sales tax revenue than normal.

Florida’s general revenue collections for the 2019–2020 fiscal year were slated to be just over $34 billion, with more than $26 billion coming from sales tax collections. Yet those numbers were calculated during a different reality, when people moved freely across state and international borders and Disney World, NASCAR and vacation rentals were open for business.

The full impact of COVID-19 on Florida’s sales tax collections isn’t yet known, but it’s likely to be big for two reasons:

  1. Tourists are being encouraged to stay home
  2. Floridians don’t pay sales tax on many online sales

The Florida Legislature considered an economic nexus measure (Senate Bill 126) during its 2020 session, but the bill was withdrawn from consideration and indefinitely postponed shortly before the Legislature adjourned on March 19. Taxing remote sales would generate an estimated $700 million annually for the Sunshine State.

Another bill that could have increased sales tax collections also died. House Bill 159 would have required marketplace facilitators (e.g., Amazon, eBay) doing a certain amount of business in the state to collect and remit sales tax on behalf of their third-party sellers. According to a fiscal analysis for SB 126 and HB 159, Florida missed out on more than $8.5 million in in state sales tax revenue in 2019 because of “escaped” or untaxed marketplace sales”.

The COVID-19 pandemic has caused a drop in retail sales nationwide according to the U.S. Census Bureau. Moody’s Investors Service predicts sales tax collections will remain low for the remainder of the year. Whether this dismal news will inspire Florida lawmakers to change their attitudes toward economic nexus remains to be seen.

For more information: Accounting Web

Accounting web
May 11, 2020