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Florida Governor Signs Economic Nexus Bill 

Posted on Apr. 21, 2021

The governor of Florida has approved a bill requiring out-of-state retailers to collect and remit tax on sales into the state starting July 1.

Gov. Ron DeSantis (R) signed S.B. 50 on April 19, after the Legislature passed the bill April 8.

With the bill, Florida joins the majority of states with a sales tax that have adopted collection requirements for out-of-state sellers in the wake of the U.S. Supreme Court’s 2018 decision in South Dakota v. Wayfair, Inc. Legislators in Missouri are still working out a compromise on legislation to address the issue.

The bill signing was commended by the pro-business nonprofit Florida TaxWatch, which sent a letter to the governor April 15 urging him to sign the legislation.

In a statement, Dominic M. Calabro, president and CEO of the nonprofit, said that the legislation “levels the playing field for Florida businesses by forcing online sellers without a physical presence in Florida to collect and remit Florida sales tax, just as those with a presence in Florida do today.”

“As [Florida TaxWatch] has said for 20 years, the non-collection of sales taxes on sales to in-state customers by remote (out-of-state) sellers has been one of the most significant tax compliance and collection issues facing Florida and other states for many years. Today, Florida joins the 43 other states (of the 45 with a sales tax) that have acted on this critical issue, most importantly, putting the burden of tax collection on the out-of-state sellers, where it belongs,” according to the statement's preface to Calabro's remarks.

Under the bill, out-of-state retailers and marketplace providers that conduct more than $100,000 per year in taxable remote sales into Florida will be required to collect and remit sales tax. The bill also requires marketplace providers to collect and remit on behalf of their third-party sellers.

The bill is estimated to generate about $1 billion in state revenue each year. It is also expected to increase local government revenues by $229.5 million in fiscal 2022 and by $253.7 million each year after that, according to a fiscal note

Zachary T. Atkins of Pillsbury Winthrop Shaw Pittman LLP told Tax Notes that Florida’s new $100,000 annual economic nexus sales threshold is among the lower sales thresholds established by states.

“However, only proceeds from taxable remote sales count toward Florida’s sales threshold, whereas in some states proceeds from taxable and nontaxable sales of tangible personal property, and sometimes services, may count toward the sales threshold,” Atkins said.

“Under the new laws, it appears a remote seller with more than $100,000 of taxable remote sales in Florida in the previous calendar year is effectively treated as having nexus in every county in the state for discretionary sales tax purposes. This is reminiscent of the approach taken by California, where a remote seller with more than $500,000 of California sales of tangible personal property in the preceding or current calendar year is regarded as having nexus everywhere for purposes of collecting district use taxes,” Atkins said.

S.B. 50 was amended April 7 to reduce the sales tax on commercial rent from 5.5 percent to 2 percent.

Under the amendments, revenue generated by the bill will be distributed to the unemployment compensation trust fund — instead of the general fund — until the balance reaches $4.07 billion. Two months after the level is reached, the tax rate on commercial real property rentals will be reduced to 2 percent.

The amendments are part of a plan announced March 29 by House Speaker Chris Sprowls (R) and Senate President Wilton Simpson (R).

Under that agreement, revenue generated by requiring out-of-state retailers to collect and remit the tax would be deposited into the state’s unemployment compensation trust fund each year until the fund has been replenished to pre-pandemic levels. Any additional funds would be used to reduce the business rent tax to 2 percent.

Florida TaxWatch's COVID-19 Taxpayer Task Force released a report in August 2020 that recommended using collections from online sales tax legislation to reduce and eliminate the "business rent tax." The task force included representatives from the Florida Retail Federation and various businesses and industry groups.

The report said doing so could "encourage economic growth and make Florida an even more attractive place for residents and companies to locate."

Some Democrats have argued that the increase in tax collections should be used to fund spending priorities or cut taxes for people instead of businesses, and the bill signing was slammed by Rep. Anna Eskamani (D), who said the bill will increase taxes on consumers to provide a tax break for businesses.

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