COVID-19 Pandemic May Force Florida to Adopt Economic Nexus
Florida, unlike 42 of the 45 states that impose a sales and use tax, has yet to enact an economic nexus provision for remote sellers or marketplace facilitators after South Dakota v. Wayfair (Wayfair) was decided. However, Florida and many other states are contemplating how to best cope with depleted unemployment insurance funds due to the COVID-19 pandemic. The Florida House Ways and Means Committee recently passed a bill (HB 15) that would deposit sales tax collected from remote retailers and marketplace providers directly into the unemployment fund. A companion bill in the Senate (SB 50) is being considered as well.
The proposed law would impose a sales tax collection responsibility on remote sellers with a “substantial number of remote sales” into Florida. “Substantial number of remote sales” means any number of taxable remote sales in the previous calendar year in which the sum of the sales prices exceeded $100,000. It should be noted there is no transaction threshold, unlike the economic nexus provisions enacted by several other states. “Remote sale” means a retail sale of tangible personal property ordered by mail, telephone, the internet, or other means of communication from a person who receives the order outside of this state and transports the property or causes the property to be transported from any jurisdiction, including from within Florida, to a location in Florida. In addition, the legislation would impose the sales tax collection responsibility on marketplace providers who make or facilitate a “substantial number of remote sales” into Florida. “Marketplace provider” means a person who facilitates a retail sale by a marketplace seller by listing or advertising for sale by the marketplace seller tangible personal property in a marketplace and who directly or indirectly through agreements or arrangements with third parties, collects payment from the customer and transmits all or part of the payment to the marketplace seller, regardless of whether the marketplace provider receives compensation or other consideration in exchange for is services.
Florida has imposed sales tax on “mail order” sellers since 1987, but that statute is largely unconstitutional under former U.S. Supreme Court precedent—namely National Bellas Hess, Inc. v. Illinois Dept. of Revenue and Quill Corp. v. North Dakota. Even after Wayfair, language of that statute does not conform to many aspects of the South Dakota law approved in Wayfair and has not been enforced by the Florida Department of Revenue.
Taxpayers, especially distributors and parties involved with drop shipments, with sales into Florida should carefully plan for this legislation’s effect and examine its nuances.
For additional guidance on HB 15 or SB 50, reach out to your BKD Trusted Advisor™ or submit the Contact Us form below.