Two bills introduced in Florida seek to tax out-of-state sales

Both bills seek to establish economic nexus, which bases a sales tax collection obligation solely on economic activity in the state. Economic nexus laws allow states to tax sales by out-of-state sellers with no physical presence in the state (remote sellers).

Like most states with economic nexus laws, Florida would provide an exception for small businesses — those with sales beneath the economic nexus threshold. Both HB 15 and SB 50 provide a small seller exception, but the proposed thresholds aren’t the same.

HB 15 would establish a sales tax collection obligation on businesses “making a substantial number of remote sales” in the state. This is defined as:

• 200 or more retail sales of tangible personal property to be delivered to a location within Florida in the previous calendar year; or
• More than $100,000 in retail sales of tangible personal property to be delivered to a location within Florida in the previous calendar year

SB 50 has no transaction threshold; it would impose a sales tax collection obligation on out-of-state sellers with “any number of taxable remote sales in the previous calendar year in which the sum of the sales prices … exceeded $100,000.” The $100,000 sales threshold is based on retail sales of tangible personal property delivered to a location in Florida. It doesn’t include exempt sales of tangible personal property, or taxable or exempt services.

Economic nexus is enforced in 43 states, plus Washington, D.C., and parts of Alaska, and approximately 16 of those states have no transaction threshold. States with no transaction threshold include Arizona, California, Iowa, and Texas.

Florida is one of only two states with a sales tax that doesn’t impose economic nexus on out-of-state sellers. Missouri is the other. Lawmakers in both states have introduced economic nexus measures in the past, to no avail. However, with Florida facing a $3.3 billion shortfall for the current and upcoming fiscal year, this year could be different.

HB 15 would eliminate a provision excluding mail-order sellers from collecting and remitting applicable local option surtax. Remote sellers with economic nexus would be required to collect applicable local sales taxes in addition to the state sales tax unless the Florida Department of Revenue waives that requirement.

SB 50 doesn’t reference local option surtaxes. 

Both bills would also establish a sales tax collection obligation for marketplace providers (aka, marketplace facilitators). As with the economic nexus provisions, there are a few key differences between the measures.

HB 15 would require certain marketplace providers to collect and remit sales tax on behalf of third-party sellers. This applies to marketplace providers with economic nexus (i.e., more than $100,000 in sales or 200 transactions in the state in the previous calendar year) or a physical presence in Florida.

Businesses that solely provide travel agency services aren’t considered marketplace providers and therefore aren’t responsible for the tax due on sales made through their platforms. Likewise, the marketplace provider provision generally doesn’t apply to delivery network companies “unless the delivery network company is a registered dealer” in the state. See the text of the bill for additional details.

SB 50 would also impose a sales tax collection obligation on marketplace providers with economic nexus (i.e., more than $100,000 in sales in the state in the previous calendar year) or a physical presence in Florida. As with HB 15, the collection requirement established by SB 50 generally doesn’t apply to travel agency service providers or delivery network companies.

Both measures require marketplace sellers that have a physical presence in Florida or economic nexus with the state to register and collect tax on non-marketplace sales. When calculating the economic nexus threshold, remote sellers should exclude sales made through a marketplace.

The main difference between the marketplace provisions in HB 15 and SB 50 is the effective date. Under SB 50, marketplaces would be responsible for collecting and remitting tax on marketplace sales starting July 1, 2021. The marketplace provision in HB 15 takes effect October 1, 2021.

Find out where you may be most at risk of creating economic nexus with Avalara’s free sales tax risk assessment.