Plan to use online sales tax to replenish unemployment fund gets House support

TALLAHASSEE, Fla. - A day after legislative leaders unleashed the plan, the House began moving forward Thursday with a proposal that would cover a pandemic-caused shortfall in the unemployment system by requiring out-of-state online retailers to collect sales taxes from Floridians.

The House Ways & Means Committee voted 16-2 to support the measure (HB 15), which is projected to bring in about $1 billion a year in sales taxes. The vote came after lawmakers made changes that included directing the additional money to be used to replenish the state’s Unemployment Compensation Trust Fund.

Bill sponsor Chuck Clemons, R-Newberry, said Florida businesses are facing large automatic increases in unemployment taxes, triggered by the steep jump in people losing jobs because of the coronavirus pandemic. Using the additional sales tax money would be designed to prevent unemployment tax hikes.

"All businesses, whether they laid people off or not, would pay per employee," Clemon said. "What we are trying to do … is to make sure those businesses are not penalized."

But Rep. Anthony Sabatini, a Howey-in-the-Hills Republican who announced a run for Congress on Monday, voted against the bill and called it "a temporary tax cut attached to a permanent tax increase."

"In my opinion, we should be eliminating the entire unemployment tax," Sabatini said. "Why are we punishing businesses for something they cannot control? Why, if somebody gets fired from a business, that business has to pay for their unemployment? Why isn't that money from the general fund?" 

The full Senate had been scheduled Thursday to take up its version of the sales-tax bill (SB 50), sponsored by Sen. Joe Gruters, R-Sarasota. But consideration of the bill was postponed to allow time to draft an amendment that would link the increase in revenue to the unemployment trust fund.

The moves Thursday came after House Speaker Chris Sprowls, R-Palm Harbor, and Senate President Wilton Simpson, R-Trilby, announced the plan Wednesday evening to tie the tax and unemployment issues.

The announcement was a major victory for business groups that have lobbied for years to force out-of-state retailers to collect and remit sales taxes on purchases made by Floridians. 

Currently, retailers that have a physical presence in Florida must collect and remit sales taxes for items sold in the state. Through what is sort of an honor system, Florida residents are supposed to submit sales taxes when they are not collected by out-of-state retailers. But few Floridians comply with that requirement, and the proposal would require out-of-state retailers to collect and remit the taxes.

The surge in demand for jobless benefits over the past year caused Florida businesses to face an increase in unemployment taxes that took effect in January, with additional increases expected in the coming years to replenish the trust fund.

Florida economists have estimated that the proposal to require out-of-state retailers to collect sales taxes could generate $973.6 million in the upcoming 2021-2022 fiscal year and $1.08 billion in each following year, according to the House and Senate.

Proposals in the past to begin requiring the tax collections stalled because of concerns similar to those raised by Sabatini --- that it would equate to a tax increase on consumers.

But supporters of the change point to a 2018 U.S. Supreme Court decision in a case known as South Dakota v. Wayfair, a large online retailer. The court ruled against Wayfair, overturning a "physical presence test" and expanding states’ abilities to collect sales taxes.

Simpson said the agreement to tie the sales-tax and unemployment issues would help small businesses.

"The biggest thing we could think of, the single biggest thing, is take this Wayfair money, which I believe is a fairness bill, it’s certainly not a tax bill, and apply that to the unemployment system so that the burden doesn’t hit our small businesses," Simpson said Thursday.

The revised proposal drew the support of groups such as the Florida Chamber of Commerce, the Florida Retail Federation, the National Federation of Independent Business, the International Council of Shopping Centers, Associated Industries of Florida and Amazon. Amazon collects and remits sales taxes because it has a physical presence in Florida.

But Rep. Anna Eskamani, an Orlando Democrat who cast the other vote against the bill in the House committee, said she would prefer to use the increased sales-tax money to raise from $275 to $375 the maximum amount of weekly state unemployment benefits paid to workers or to only provide the trust-fund assistance to businesses that were hurt by the pandemic.

Eskamani also could not amend the House proposal to allocate money from the proposed online sales-tax collections to affordable-housing trust funds.

"Our economy is very much guided in money transferring from one hand to the other," Eskamani said. "So, if somebody can't pay the rent, then the landlord is screwed. We just want to make sure that a person's basic needs are met."

Florida AFL-CIO lobbyist Rich Templin said he supported the sales-tax proposal earlier when the money would have gone to state general revenue.

"What this legislation is doing is increasing the out-of-pocket living expenses of your constituents, to pay an insurance premium for a private company. It’s that simple," Templin said.

Simpson said a bill is being crafted that could address increasing the weekly unemployment maximum, which he believes should go to $375 a week.