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The recent U.S. Supreme Court decision in an Internet sales tax case, South Dakota V. Wayfair, could add hundreds of millions of dollars a year, at least, to Florida state coffers.
It’s also belated vindication for former State Rep. Michelle Rehwinkel Vasilinda, a Leon County Democrat-turned-Republican now running for mayor of Tallahassee. It was Rehwinkel Vasilinda, who, six times from 2008 to 2016, introduced an Internet sales tax bill during the Legislative session, only to be thwarted each time. “This was an issue of fairness, an issue of the rule of law and issue of clarity,” Rehwinkel Vasilinda tells Coffee Talk. “There was a lot of money left on the cutting room floor in Internet sales taxes we could have collected.”
Rehwinkel Vasilinda adds one study she commissioned pegged that figure, in lost Department of Revenue collections, at greater than $2 billion. Despite that tantalizing source of funds, House Republicans, says Rehwinkel Vasilinda, balked at doing something they considered an additional tax. That’s why the bill, she says, failed to get past committees in most cases.
But the Supreme Court’s 5-4 ruling in Wayfair that allows, or confirms, a state’s ability to collect a sales tax on Internet purchases rights a wrong, says Fort Myers attorney Mark Nieds — not adds a tax. “For small businesses, this can really level the playing field,” says Nieds, echoing positions of several Florida business groups, including Florida TaxWatch and the Florida Retail Federation.
Prior to Wayfair, says Nieds, a state could not require an out-of-state or online retailer to collect sales taxes from its customers if that retailer did not have an actual, physical presence within the state. This dates back to mail-order sales, when Amazon hadn’t yet sold a book. (More recently, when Amazon opened warehouses in Florida in 2014, the online giant, for the first time, agreed to collect sales tax from Florida customers because of its presence, or nexus, in the state.)
“Since online retailers without a physical presence in a state were not required to collect sales taxes, this led to trillions of dollars in online sales transactions going basically tax free,” Nieds writes in a blog post.
South Dakota, to get its hands on some of those revenues, passed a law in 2017 that taxed Internet sales for online retailers with at least $100,000 in annual sales or 200 individual transactions. But Wayfair, which posted $4.7 billion in revenues in 2017, didn’t comply with the law. That led to a lawsuit that ultimately made it to the U.S. Supreme Court.
Florida currently has no law, like South Dakota, that provides for a clear avenue to tax online retailers. Nieds says it’s possible the Florida Department of Revenue could just begin collecting the tax, without a law. State Sen. Kelli Stargel, R-Lakeland and chairwoman of the Appropriations Subcommittee on Finance and Tax, didn’t return a call seeking comment on any potential 2019 legislative proposals.
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