Florida on Monday enacted a new law requiring out-of-state online merchants to collect and remit sales tax, which supporters say will bring in an additional $1 billion a year that previously went uncollected. Here’s what it means to consumers.
Online shoppers will have to pay sales taxes in cases where they weren’t. The law requires online merchants who have no presence in Florida to charge the tax to Florida residents who buy from them.
About $40 to $50 a year on average, says Jared Walczak, researcher for Tax Foundation, a nonprofit tax policy advocacy organization. We’ve been paying $70 to $80 a year up to this point for online purchases from retailers, such as Target and Best Buy, that have a physical presence in the state. Prior to the 2018 Supreme Court ruling, retailers without a physical presence in the state were not required to collect sales taxes.
Not technically. Florida law has long required consumers to voluntarily remit unpaid sales taxes on purchases if those sales taxes were not collected by the seller. Few consumers were aware of this requirement, few complied, and the state did little to enforce it. As a result, consumers remitted only about 2% of what they owed.
Business groups, including Florida TaxWatch and Florida Retail Federation, have been urging the state to enact the law since 2018. That year, the U.S. Supreme Court ruled in South Dakota vs. Wayfair that states can require online businesses to collect sales taxes even if they do not have a physical presence in the state. After the ruling, most states quickly created laws or rules requiring sales tax collection by out-of-state online retailers. By the time Florida enacted its law, 43 other states had such laws on their books.
Online businesses that don’t collect sales taxes have an advantage over brick-and-mortar businesses that do collect them. The higher the price for a good or service, the bigger the advantage.
Florida TaxWatch President and CEO Dominic Calabro called the enactment “major tax reform and modernization that will keep sales and use taxes the preferred method of taxation in Florida for another generation.”
The law, which takes effect on July 1, is mainly concerned with what are called “marketplace facilitators” — platforms such as eBay, Etsy, Overstock and Amazon Marketplace through which independent sellers promote and sell their goods. Those platforms already have software that calculates and adds sales tax to the purchase price based on where the buyer lives. The platforms, not the sellers, are responsible for sending sales tax revenues to states.
Amazon collects sales tax on its own sales but not on third-party sales through its marketplace platform.
Platforms that sell apps that we download to our phones, computers and tablets. Those include Google Play store, Apple’s App Store and the Microsoft Store.
The law exempts any business that sells less than $100,000 a year in Florida.
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