Online sales tax signed by Governor Ron

Online

The online sales tax bill has been signed by Governor Ron DeSantis into law. This answers the question of whether he would act on the bill or not.

Earlier this month, legislators finalized the Republican legislative leadership’s plan to require online retailers to collect sales tax.

An estimated $1 billion in revenue would come from the new enforcement of sales taxes technically already owed on purchases Floridians make from out-of-state sellers, but which few Floridians pay.

DeSantis had until midnight to sign or veto the bill into law or else it would have gone into effect without his signature. Lawmakers sent him the bill on April 12. He waited until one hour left in the day Monday to send the alert that he had signed the measure.

The Governor’s budget recommendations for the 2021-22 fiscal year did not include e-fairness legislation.

When asked in January about fully implementing the online sales tax, the Governor told reporters, “There are no tax increases in our budget. We’re not going to do that.”

When DeSantis did sign the bill, it was announced at 11:23 p.m. 37 minutes before the bill would have become law without his signature. The Republican announced his action in a news release about signing five different and unrelated bills and offering no comment on the legislation.

While the proposal was widely supported by business groups, DeSantis’ signature came with far less fanfare than when he appeared Monday morning in Polk County to sign a controversial bill cracking down on violent protests.

State revenue estimators predict collecting sales tax online at the point of sale will generate a $973.6-million boost in general revenue funds in the 2021-2022 fiscal year and a $1.08 billion boost each year afterward.

Yet supporters contend the bill is not a tax increase since people technically owe the state the money already. Consumers are currently supposed to send sales taxes directly to the Department of Financial Services in a separate check. Under the new plan, out-of-state sellers would begin collecting those taxes for consumers, as in a conventional purchase.

Brick-and-mortar retailers, who have complained about the inequity of online sellers evading tax collection, cheered the legislation.

“Through the passage of SB 50, Gov. DeSantis and legislative leaders have acknowledged the pivotal role that the retail industry plays in supporting Florida’s families,” said Scott Shalley, president and CEO of the Florida Retail Federation.

“With this measure signed into law, all businesses can compete on a level playing field and continue to support the 2.7 million Floridians who work in the retail industry. Thank you, Governor Ron DeSantis, for your leadership and for providing meaningful relief to Florida retail businesses.”

Regardless, Republican critics like Rep. Anthony Sabatini and Anthony Rodriguez and a slim majority of Democrats who had backed the measure until it got tied to restocking the unemployment trust fund have tried to portray the bill as a tax increase.

However, Democratic Leader Gary Farmer raised an objection, arguing it was a tax increase that required a supermajority vote but was overruled.

Moreover, as the bill was written in January, the additional revenue would have gone into general revenue, but the plan is now “revenue neutral.” Republican legislative leadership’s latest deal includes using the additional revenue to replenish the Unemployment Compensation Trust Fund to prevent a tax hike on businesses.

With the trust depleted last year, unemployment taxes on employees jumped from $7 per employee last year to $49 this year. If nothing changes, that rate could jump to $87 next year.

Furthermore, a measure added in an amendment approved this month would use the additional revenue to lower commercial rent taxes once the unemployment trust fund is refilled. Once the trust is restored to $4.07 billion, the statute now calls for the rent tax to drop from 5.5% to 2%, which will cut taxes by approximately $1 billion annually.

“This basically makes the bill revenue-neutral forever,” said bill sponsor Sen. Joe Gruters.

Proponents for e-fairness legislation, including the bill’s House sponsors, Reps. Chuck Clemons and Chip LaMarca, argue it will level the playing field for local and brick-and-mortar businesses, who compete against online businesses who don’t list the tax in their final sale total.

The Florida Chamber of Commerce lauded the measure. Chamber President and CEO Mark Wilson thanked the Governor for his leadership in relieving Florida’s businesses.

“Gov. DeSantis’ signature reiterates his commitment to relaunching Florida’s economy and helping Florida job creators recover from a once in a century pandemic,” he said.

Florida Retail Federation President and CEO Scott Shalley said the bill the pivotal role Florida’s retail industry plays.

“With this measure signed into law, all businesses can compete on a level playing field and continue to support the 2.7 million Floridians who work in the retail industry,” he said.

Florida TaxWatch has been pushing for e-fairness legislation for years. TaxWatch President and CEO Dominic Calabro called the measure a “Taxpayer Penalty Relief Endeavor” that also would alleviate the effects of COVID-19 on businesses.

“The combination of each of these provisions will certainly have significant and lasting benefits on Florida’s fiscal landscape, leading to a more prosperous future for all,” he said.

Florida League of Cities President Tony Ortiz, an Orlando city commissioner, said the bill addresses statewide issues but argued the positive impacts at the local level “can’t be understated.”

“No longer will out-of-state retailers, who don’t contribute anything to the betterment of our communities, have an unfair advantage over our local businesses who are not only part of our local communities but who have a vested interest in them and their success,” he said.

Democrats support the underlying e-fairness legislation but opposed directing those funds to help businesses, arguing it would lower taxes on businesses on the backs of consumers. They instead supported using the revenue to increase unemployment benefits.

If DeSantis had vetoed the bill, the Legislature in theory would have had the votes to overturn his decision. It passed the House by a 93-24 vote, and the Senate by a 27-12, indicating enough support in both chambers to reach the two-thirds threshold to overturn a veto.

Of the 45 states that charge sales taxes, only Florida and Missouri haven’t forced them on online sales since a 2018 U.S. Supreme Court ruling cleared that path. Florida will join the rest when the law goes into effect in July.

Governor Ron DeSantis proposed a $96.6-billion budget

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At the end of January, Governor Ron DeSantis proposed a $96.6-billion budget — $4.3 billion over the current year. In making his request, DeSantis cited higher-than-expected revenue for December and January and optimism that Florida’s economy is gaining momentum. But lawmakers, who’ll consider DeSantis’ priorities as they craft the budget, are warning of deep cuts as they grapple with a projected $2.75-billion deficit in general revenue for 2021-22 fiscal year.

Online Sales Tax — Potential Revenue: $480 million-$1 billion

The Florida Retail Federation and its allies have tried for years to pass legislation that would require online vendors without brick-and-mortar stores in Florida to collect and remit sales tax to the state. Some Republicans have balked at the idea in the past, for fear they could be seen as increasing taxes, but a $2.75-billion budget gap may make the idea more palatable. The state’s Revenue Estimating Conference says collecting those taxes would bring in an extra $480 million a year to Florida and $133 million a year for local governments. Texas (with 29 million residents) raked in $1.25 billion in online sales taxes during the past fiscal year, and Florida TaxWatch estimates the Sunshine State could bring in about $1 billion. Senate President Wilton Simpson and House Speaker Chris Sprowls have both signaled support for the measure.

Tax Amnesty Program — Potential Revenue: At least $200 million

A time-limited tax amnesty program that would allow taxpayers who owe money to pay up without penalties. In 2010, the last time Florida offered such a program, it brought in more than $200 million. Dominic M. Calabro, president and CEO of Florida TaxWatch, predicts it would bring in just as much, if not more.

Federal Relief — Unknown

Funding through the federal Cares Act helped Florida weather last year’s budget gap, and President Joe Biden’s proposed $1.9-trillion, COVID-relief package could provide a similar cushion. The Biden plan includes $350 billion in emergency aid to state and local governments. DeSantis has already given thought to how he’d like to use it: “If they’re going to send me money, we’re happy to take it, and we’ll put it to good use, probably beef up our budget reserves,” he told attendees of a conservative Texas Public Policy Foundation conference in January. It’s far from a done deal, however, and question marks remain over the ultimate amount and timing of any relief package, and whether the money comes with strings attached.

Trust Fund Sweeps — Potential Revenue: $300 million-$400 million

Lawmakers regularly raid the state’s trust funds — money set aside for specific purposes. Current general revenue estimates from the Legislative Budget Commission already assume a $312-million trust fund sweep, based on three-year averages, but lawmakers could take even more. During the 2008 financial crisis, the Legislature swept a record $940 million from trust funds into general revenue funds.

Tapping Reserves — Potential Revenue: $1.6 billion

Under state law, Florida must transfer at least 5% of the net revenue it collects each year to a Budget Stabilization Fund. As of January, the rainy day fund was fully funded at $1.6 billion, and Florida had about $4.8 billion in total reserves. Although the state can dip into these reserves for emergencies, there’s a general reluctance to do so because it could hurt the state’s AAA bond rating. One Tallahassee insider predicted some jockeying between the House and Senate over withdrawals. “If I were President (Wilton Simpson), I’d say ‘What’s the point of having an umbrella if you’re not going to use it?’ I think they’ll take some if they need to. I don’t think that they’ll want to take more than, call it, a third of it,” the source told TREND.

Seminole Gaming Compact — Potential Revenue: $350 million-$700 million

Senate President Wilton Simpson and other lawmakers are interested in hammering out a new gaming compact with the Seminole Tribe, which stopped making $350 million payments to the state in early 2019 following a dispute over banked card games at pari-mutuels. Any negotiation success this year will likely hinge on sports betting, which is not allowed in Florida, as well as full electronic gaming within the state and the addition of new types of casino games at tribal locations that don’t already have them. According to the South Florida Sun-Sentinel, the state reportedly came close to a deal with the tribe last year that would have granted it exclusive rights to host sports betting and allow it to add craps and roulette to its casino games in exchange for allowing pari-mutuels to continue offering banked card games. In the meantime, Sen. Jeff Brandes has reintroduced legislation to legalize sports betting in the state — a move that could nudge the Seminoles and lawmakers closer to a deal.