Will 2020 be the year Florida taxes remote sales?

Florida and Missouri are the only two states that have a general sales tax but haven’t yet adopted a law or rule requiring out-of-state sellers to collect and remit sales tax. In the race to see which state will be next to do so, Florida seems to be edging ahead.

Senate Bill 126 jumped over its first hurdle when the Senate Committee on Commerce and Tourism unanimously approved it on October 15, 2019. If the bill finds similar support elsewhere in the Florida Legislature and the governor’s mansion, remote sellers will have to register to collect Florida sales tax starting July 1, 2020.

The bill calls for a retailer with no physical presence in Florida (remote retailer) to register with the Florida Department of Revenue and collect and remit sales tax if it makes “a substantial number of remote sales” in the state in the previous calendar year. “Substantial” is defined as conducting:

• More than $100,000 in retail sales of tangible personal property to be delivered into Florida; or
• 200 or more retail sales of tangible personal property to be delivered into Florida.

Basing a sales tax collection obligation solely on economic activity in a state is known as economic nexus. States won the right to enforce economic nexus when the Supreme Court of the United States issued its decision on South Dakota v. Wayfair, Inc. (June 21, 2018). Prior to the ruling, states could only require sellers with a physical connection to the state to collect and remit sales tax.

In addition to establishing economic nexus for remote sellers, SB 126 would require a marketplace provider (aka, facilitator) to collect the tax due on all sales made through the platform if it has:

• A physical presence in Florida; or
• Economic nexus as defined above (more than $100,000 in retail sales or at least 200 retail transactions).

As in other states with marketplace provider provisions, marketplace sellers would continue to be liable for their direct sales in Florida if they have a physical presence in Florida or economic nexus. However, marketplace providers meeting the above requirements would have to collect on behalf of third-party sellers.

For marketplace sales, the Florida Department of Revenue would audit the marketplace provider. However, the department could also audit the marketplace seller if the provider collected an incorrect amount of tax based on incorrect information provided by the marketplace seller.

The collection requirement for marketplace providers would take effect October 1, 2020.

The bill specifically excludes the following services from the definition of a “marketplace provider”:

• Any person who solely provides travel agency services
• A delivery network company, unless it’s a registered dealer that notifies all its local third-party merchants that it must remit taxes in the same way as a marketplace provider

It defines “delivery network company” as “a person who maintains a website or mobile application used to facilitate delivery services, the sale of local products, or both.” A delivery network company must be located within 75 miles of the local merchant that uses it. Additional definitions are defined in the bill and the bill analysis.

Finally, the measure amends an existing provision of the law that requires certain mail order sellers to collect and remit sales tax. It changes the term “mail order sale” in 212.0596, F.S., to “remote sale.”

That’s the question everyone who sells into Florida wants to know. The answer is unknown. It’s hard to imagine Florida lawmakers not pushing a remote sales tax bill through eventually, given that all other states with a sales tax have already done so (except Missouri, of course).

Then again, a bill much like SB 126 died in committee earlier this year. That bill was also sponsored by Senator Joe Gruters, who’s leading the charge this time around. He points out now, as then, that this would not be a new tax: “The tax is owed. This makes it convenient for consumers.” He’s referring to the fact that if retailers don’t collect sales tax on taxable transactions, Florida consumers owe the equivalent use tax.

SB 126 is now in the Committee on Finance and Tax. Whether it becomes law remains to be seen. Check with the Avalara blog in the coming months for more information.