Online retail giant Amazon.com this month began collecting sales tax for online purchases made by Floridians. Why now? It’s because Amazon.com now has a physical bricks-and-mortar presence in Florida.
Florida requires online companies to begin collecting sales taxes once a company has a bricks-and-mortar “domicile” or physical presence in the state. Prior to the establishment of that presence, out-of-state online retailers, including Amazon, avoided collection of sales taxes on online purchases.
As is current law in Mississippi, Floridians were supposed to voluntarily pay their sales taxes themselves when they made purchases from online retailers – which also is as in Mississippi, most buyers simply don’t do.
Amazon’s decision came after the company revealed plans to build two “fulfillment” or distribution centers in Florida along Interstate 4.
A year ago, the U.S. Senate by a vote of 63 to 30 passed the Marketplace Fairness Act (MFA), which would empower states to collect sales tax out-of-state online purchases.
After passing the Senate, the bill was referred to the U.S. House Judiciary Committee. There, hearings in March focused less on passing the Senate-backed bill and more on seeking alternative proposals that would allow states to collect the sales taxes that are already owed but unable to collect.
One false premise that the House hearings seemed to knock down was the red herring that the taxes proposed in the Marketplace Fairness Act were in any way “new taxes.”
But the recent Florida events are helping to shape the ongoing national debate. The nation’s bricks-and-mortar retailers – many of whom originally opposed online sales tax collection – are now supporting MFA because they said that Congress shouldn’t pick “winners and losers” between big box retailers and online retailers like Amazon.
Proponents of MFA said the new law would balance an unfair advantage that online retailers currently enjoy over traditional bricks-and-mortar stores. Current law prohibits states from collecting sales taxes from retailers who have no physical location or “nexus” in their state.
The Congressional Research Service cited federal estimates of $4.1 trillion in online sales in 2010, which amounts to 16.1 percent of all U.S. sales. Estimates of foregone sales tax revenue from these transactions total some $23 billion. The NCSL identifies an annual $303.4 million in uncollected Mississippi sales tax revenues.
The MFA doesn’t tax the Internet. It makes goods purchased on the Internet subject to the same tax collected daily on counter sales of exactly the same goods. So, as a matter of fact, the subject under debate is online sales tax collection.
U.S. Sen. Mike Enzi, R-Wyoming, the MFA’s author, said: “My Marketplace Fairness bill doesn’t create a new tax or raise any tax. It allows a state to enforce its own laws without having to ask Washington for permission,” Enzi said.
More to the point, a failure to make full collection of existing sales taxes coupled with soaring online sales will put state and local governments in the position of either crippling reductions in service or the scarier prospect of increasing other taxes to make up the difference.
Florida’s expected to take in $80 million from Amazon’s collection of existing Florida sales taxes on online buyers in their own state.
That’s not new taxes. That’s taxing new technology the same way you tax the old technology and at the very same existing rate.
Sid Salter is a syndicated columnist. Contact him at (601) 507-8004 or firstname.lastname@example.org. He is the chief spokesman for Mississippi State University.