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Untaxed E-Sales Cost Florida 112,000 Jobs

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The Tampa Tribune

Published: March 25, 2009

With the state facing at least a $3 billion shortfall, Gov. Charlie Crist and state lawmakers must get serious about generating more revenue. Yes, more budget cuts are inevitable, but Florida already spends less per person than any state in the South. The surest way to doom the state's economic prospects is to neglect its education system, infrastructure, resource protection and the social safety net that helps those in need regain self-sufficiency.

And there is one way to add some desperately needed dollars to Florida's coffers that actually would save thousands of state jobs.

All the state need do is begin collecting the sales tax on online purchases from out-of-state vendors.

A recent study by TaxWatch, a nonpartisan, nonprofit watchdog of government spending, estimates the state loses a little over 10,000 jobs for every $1 billion worth of online sales. Thus the state's $11.2 billion in Internet sales in 2008 cost Florida roughly 112,119 jobs.

The state, in effect, penalizes local retailers while giving a tax break to out-of-state companies.

As TaxWatch President Dominic Calabro says, "If the state doesn't make a reasonable effort to collect remote sales, then it amounts to the unilateral economic disarmament of the people of Florida."

The remedy is not difficult.

Since the 1950s Florida law has called for consumers to pay the sales tax when buying goods from out-of-state. It is left up to the individual to report and is impossible to monitor or enforce.

But Florida could join the Streamlined Tax Project, a compact among 22 states and about 1,200 businesses. The states agree to a consistent sales-collection system, and participating businesses voluntarily collect the tax.

The compact was a response to a Supreme Court ruling that a state cannot require an out-of-state vendor to collect its sales tax because of the complex burden it places on the business. The court found, though, that Congress could adopt a system for the states to collect sales tax.

The Streamlined Tax Project allows states to collect at least a portion of out-of-state sales taxes until Congress approves a national system.

It's estimated the state would add another $55 million a year in revenue should it join the consortium.

When Congress approves a national standard, Florida could gain another $2 billion to $4 billion a year.

And by joining the Streamlined Tax Project, Florida would generate momentum for congressional action. Most plans for a national sales tax collection system would exempt small businesses and minor transactions, such as EBay sales.

Current Florida policy penalizes local businesses that provide jobs, pay taxes and support local charities while giving out-of-state vendors, as Calabro says, "a 6 or 7 percent incentive to invade our state."

Lawmakers who rail against new taxes should recognize the sales-tax requirement on remote sales has been on the books for decades but has gone uncollected. The inequitable application of the tax is detrimental to Florida's retail industry. Favoring out-of-state merchants only gives the illusion of lowering costs for consumers.

It is an irrational policy Florida should abandon immediately.

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