Seen Around: Online retailers

The following article appeared in yesterday’s Palm Beach Post and was contributed by Editorial Page Editor, Randy Schultz.

Schultz: End the free ride Florida gives online retailers

Almost everyone in Florida is a tax cheat. We may not be able to get away with it much longer, which would be a good thing.

If you buy online, from a catalog or through a call to QVC, you must pay state and local sales taxes unless the retailer does it for you. That only happens, though, if the retailer has an actual store in the state. Buy online from Macy’s or J.C. Penney or Target, and it’s easy. They have big stores throughout Florida, and collect the tax already. Buy a Dell computer, and the Austin, Texas-based company collects the tax because it has kiosks in malls.

When Floridians buy from a non-Florida company that doesn’t collect the tax, however, we are supposed to send the money to the Department of Revenue. Not surprisingly, few of us do. In the last fiscal year, which ended June 30, the state collected about $8.8 million through a system whose terminology dates to 1986. The state budget, which relies on sales taxes for the most important services, is $67 billion.

Even before Internet sales began to multiply, this tax evasion was unfair to “brick-and-mortar” retailers who collect the sales tax, pay property taxes and employ Floridians. According to Randy Miller, director of legislative affairs for the Florida Retail Federation, 20 percent of all state jobs are tied to retailing.

Since the financial crisis of 2008, however, states have become more demanding that online giants like Amazon.com and Overstock.com (now O.co) start collecting sales taxes. The companies have refused, claiming that a 1992 Supreme Court ruling set the “physical store” standard for collecting. Not collecting the tax, of course, gives online retailers a price advantage over traditional retailers.

This year, California struck back, requiring online retailers to collect the sales tax. California allows laws to be repealed through referendum, and Amazon, which had refused to follow the law that took effect July 1, began a petition drive to repeal it. The assembly responded with a new law – same intent – that, if it got a two-thirds vote rather than a majority, would not be subject to repeal.

Last week, the state and the company reached a compromise. If Congress has not set a national standard for online sales tax collections, which Amazon favors, by next September, Amazon must start collecting the California sales tax.

Because it has no income tax, Florida should be a leader in this fight. Jeb Bush made only a halfhearted effort, and Charlie Crist did even less, wrongly asserting that collecting online sales taxes would amount to a “new tax.”

Florida, though, needs money, despite what some in Tallahassee claim. Transforming the state’s economy will require investments in higher education and public works. That won’t happen with a tax structure dating to when you used a phone booth for calls away from home.

So the events in California could help Florida. “In my opinion,” Mr. Miller said, “this is good news. He says the retail federation has been meeting with legislators since January, and hopes to speak with all 160 before the session opens in January. “The bulk,” he says, “are supportive.” As always, everything depends on the House and Senate leadership, which has made “no firm commitment.”

By the way, if you deal on eBay, don’t worry. The retail federation regards eBay not as a competitor but as a high-tech flea market that brings together buyers and sellers, and doesn’t envision including eBay in any online sales tax legislation.

Amazon and the others, however, don’t deserve the free ride they’ve been getting. Amazon’s sales in 2010 were $34 billion, and that number is trending up for this year. It is estimated that California could have collected at least $200 million from Amazon alone in the next year. In California, the statewide sales tax is 7.25 percent. In Florida, it’s 6 percent. Both states allow local governments to levy smaller sales taxes, usually with voter approval.

Especially in the last few years, legislators have postured on taxes and the budget. They denounced federal spending as they took federal stimulus money. They passed a cigarette tax to help balance the budget and called it a surcharge. They raised fees on vehicle registrations but bragged about not raising “taxes.” They dumped costs onto counties while limiting how much counties can collect.

Florida TaxWatch, hardly an advocate for free-spending government, favors taxing Internet sales. Congress or the Legislature could act. Tolerating online tax cheating hurts Florida and hurts some of Florida’s biggest employers. These online retailers don’t give to the state; they just take. In helping these companies to cheat the state, Floridians actually cheat themselves.