Controversy Erupts as Florida Follows Forty-Three States in Adopting Uncontroversial Tax Provision

April 21, 2021

“Just before midnight, DeSantis reveals he’s signed $1 billion tax on consumers,” the Orlando Sentinel headline read.

“Governor just signed a bill into law to increase your taxes and give the new revenue of $1 billion to businesses,” one lawmaker tweeted (and got quoted in media coverage).

What did Florida do now? Nothing out of the ordinary, as it turns out. Forty-five states impose statewide sales taxes, and in the wake of the Supreme Court’s 2018 South Dakota v. Wayfair decision, nearly all of them have acted on the authority to require remote sellers to collect and remit sales tax on remote (typically online) purchases.

In fact, Florida and Missouri were the two holdouts, prompting much handwringing: why wouldn’t these two states take this obvious step to collect taxes that are already owed?

And to be clear, these taxes are owed already. What we call sales taxes are really sales and use taxes, and the “use” part obligates a purchaser to remit tax to their state on any taxable sale on which they were not charged sales tax. Technically, if you shop online and the seller doesn’t charge sales tax (but the item is taxable in your state), you must remit use tax. That compliance is low does not mean the tax doesn’t exist. After the Wayfair decision, however, states were finally able to bring compliance in line by turning remote sellers into tax remitters just like in-state sellers are.

Missouri, now the last holdout, just saw remote seller legislation clear its Senate 28-4, with the expectation that lawmakers will get the task done this year.

The outrage in Florida is amplified by the fact that the state plans to use the revenue, initially, to replenish the unemployment compensation trust fund. This is, of course, also not unique to Florida: states across the country are scrambling to find ways to replenish those depleted funds, which is a top priority, especially since they are the only aspect of state finances to take a serious hit during the pandemic in most of the country.

If there’s a criticism of Florida here, it’s that it has taken this long to adopt a remote seller law, only narrowly beating out Missouri to be the last state with a sales tax to do so.

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A sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding.