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Tougher Approach To Internet Sales Taxes Considered

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By JEROME R. STOCKFISCH, The Tampa Tribune

Published: November 16, 2007

TALLAHASSEE - So you finally splurged on that sweet plasma high-definition television, snagging it for a bargain $2,000 from an online electronics retailer in the Midwest.

Certainly, after your purchase, you went to the Florida Department of Revenue Web site and printed out Form DR-15MO, didn't you? You filled out the form, scratched out a check for $120 in state sales tax, and mailed it to Tallahassee, right?

Did you remember to call DOR to find out the floating interest rate if your payment occurred after the 20th day of the month after the quarter in which you bought the TV, making it late?

If you went through that process, you provided one of just 2,916 returns in the past year acknowledging to the state an Internet purchase and owning up to the sales tax.

Florida's attempts at collecting taxes from online shopping would be downright comical were it not for the amount of money at stake - as much as $2.4 billion in the state next year and almost $34 billion nationally.

Now, with the state's economy slumping, its budget in the red and taxpayers in open revolt, attention is turning once again to simplifying - and enforcing - Internet sales tax collections.

"We are going to take another look at that," said state Sen. Mike Haridopolos, R-Indialantic, head of his chamber's Finance and Tax Committee. "It's imperative that we look at every revenue source and make sure there are no loopholes, or that people are avoiding it. Every time someone avoids taxes, it increases the burden on other businesses and individuals."

That burden is measured in the billions. The Census Bureau said e-sales nationwide totaled $130 billion in 2004; the bureau estimates that by 2010, that will hit $329 billion. A University of Tennessee study estimated that Florida's missing share of lost sales tax was $1.1 billion in 2003, and could hit $2.4 billion next year. Notable is that the state's $72 billion budget for this fiscal year had to be slashed when economists projected that revenue would come up $1.1 billion short.

It's A Matter Of Trust

The issue is that Internet retailers can't be forced to collect the tax over state lines. That means if you purchase something from a Web site that doesn't voluntarily compute your tax, the state is trusting you to pay it on your own.

Needless to say, few people do.

It's not just a statewide issue. Hillsborough, Pasco and Pinellas counties all tack a 1 percent local option sales tax on the state's 6 percent, and Hillsborough officials estimate $10 million is erased from local revenue by Internet buyers failing to provide that penny on the dollar.

Curt Kiser, a former state senator who has sounded dire warnings about the Florida economy as a board member of the LeRoy Collins Institute, said the issue goes beyond dollars.

"The big issue to me is fairness," he said. He envisioned a consumer browsing and comparing competing products at a bricks-and-mortar store, which, of course, pays for rent, utilities, insurance, and salaries. The consumer determines which product is best - then goes home and buys it online to avoid the sales tax.

"That's just not fair, and I'm a little surprised the Florida Legislature doesn't have a little more sympathy for those businesses that have to put up with that unfair competition," Kiser said.

The state's current efforts to collect taxes on e-sales rely pretty much on the honor system.

The Department of Revenue has touted its Web site, www.myflorida.com/dor/, which has a home-page link explaining the process and providing the form. DOR is also working with the state Agriculture Department, which examines incoming trucks' bills of lading at inspection stations to try to catch any major purchases entering the state untaxed.

"It's obviously a very difficult issue to police," said DOR spokeswoman Renee Watters. "People are sitting in their homes and purchasing things. And they're not paying it."

Changes Proposed

A solution could be in the works. In March 2000, a group of states organized the Streamlined Sales Tax Project to collect and disburse sales taxes as they are in the bricks-and-mortar world - that is, by the retailers themselves.

The hope is that if enough states get onboard, and retailers follow as the process of collecting taxes becomes less onerous, Congress could mandate collection of e-sales taxes by retailers.

Twenty-two states are currently onboard with the project. Florida is not among them, despite several attempts to pass conforming legislation in Tallahassee.

There are two main reasons. Some conservative Republican Florida lawmakers consider ramping up collections of taxes on e-commerce a "new" tax or growth of government, both violations of the party mantra. There also is an ingrained fear of yielding to a national tax structure.

Although the Department of Revenue has no official position on the tax project, general counsel Marshall Stranburg said it's not an issue of sovereignty. "States still maintain the right to what they want to tax and what they want to exempt under the law," he said.

As for the collection of Internet sales taxes being a "new" tax, Hillsborough County's top tax man strongly disagrees.

"The fact that the taxes are levied, and they're being undercollected, makes the notion that this is a tax increase just silly," said Eric Johnson, the county's director of management and budget.

Opposition to the Streamlined Sales Tax Project appears to be softening. Nationally, more than 1,000 retailers are working with the 22 member states, collecting and disbursing state and local sales taxes. Those retailers utilize software that can sort through the more than 7,000 tax jurisdictions in the United States by ZIP code.

Some big retailers, such as Wal-Mart, have been collecting state and local taxes nationwide for several years.

In Florida, Allan Bense, former House speaker, says his Taxation and Budget Reform Commission will take up the issue of joining the national project.

What's more, "If I had to guess, I think it would probably pass," he said.

The commission meets every 20 years and is in session. It has the power to bypass the Legislature and place constitutional amendments directly on the statewide ballot, which it would do for November 2008. It also can send recommendations to the Legislature.

"A recommendation from the Commission, especially one that's unanimous or close to unanimous, would carry a lot of weight," said House Speaker Marco Rubio, R-West Miami. "It's an issue we're going to have to resolve one way or another down the road."

Reporter Jerome R. Stockfisch can be reached at (850) 222-8382 or jstockfisch@tampatrib.com.

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