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EDITORIAL: Getting online taxes in state hands
[October 12, 2009]

EDITORIAL: Getting online taxes in state hands

Oct 12, 2009 (Tampa Tribune - McClatchy-Tribune Information Services via COMTEX) -- If the latest gloomy financial forecast out of Tallahassee isn't enough to prompt state lawmakers to finally take steps to start collecting sales taxes on Internet purchases, it's likely nothing will.

Only a few months after the Legislature slapped Floridians and visitors with $2.2 billion in higher fees and taxes to balance the budget for the current fiscal year, the Office of Economic and Demographic Research warned last week that the state could have a deficit as high as $2.6 billion next year.

And the hole could be as big as $3 billion, frets Sen. JD Alexander of Lake Wales, because of uncertainty over how much the federal government will fund Medicaid.

"It's devastating," Alexander, the Senate's top budget official, is quoted in The Miami Herald. "Three billion dollars is equivalent to a penny sales tax." But additional revenue is available -- from $1 billion to $2 billion or more annually in sales taxes on online purchases that are going uncollected.

It is mind-boggling that lawmakers in this cash-challenged state would rather increase taxes and fees, and slice millions of dollars from education and other programs, instead of pursuing with gusto this new revenue stream.

This is not a new tax or a tax increase. People purchasing items and goods online aren't exempt from sales taxes, but they aren't paying them for two main reasons: No federal law requires it, and a 1992 U.S. Supreme Court ruling limited the ability of states to mandate that "remote sellers" collect sales taxes from customers.

Such a gaping hole in tax policy is blatantly unfair to local merchants. In Florida, retailers must charge sales tax of at least 6 percent on taxable goods and items. Yet, an out-of-state Internet business is allowed to skirt this tax and put local businesses at a major disadvantage.

Congress needs to level the playing field in commerce and help the states by adopting legislation to allow the collection of this money.

It's a source that will continue to grow because of the convenience and popularity of Internet sales. Even in a poor economy last year, online purchases increased 6 percent.

The Legislature needs to get its head in the game, too, by adopting the Streamlined Sales and Use Tax Agreement and joining a coalition of 23 other states seeking sales tax dollars on Internet sales. The compact establishes a simplified and more uniform tax collection system.

A bill pending in Congress, the Main Street Fairness Act, would give member states the authority to require all sellers to collect states' sales and use taxes. At present, participation by remote merchants is only voluntary, making it highly unlikely this revenue source will ever be fully tapped unless Congress takes action.

Fortunately in Florida, state Reps. Kurt Kelly, an Ocala Republican, and Michelle Rehwinkel Vasilinda, a Tallahassee Democrat, are leading a push to correct this taxing inequity. They deserve strong bipartisan support at this critical time.

In addition to the likelihood of another major budget deficit, the state's share of federal stimulus dollars -- money used to help fend off what could have been much deeper cuts in the current budget -- is expected to dry up in the middle of the next fiscal year. Both scenarios raise the disturbing prospect of even deeper cuts to state programs.

Although budget shortfalls have brought fresh urgency to the search for new revenue, Florida should have begun years ago helping other states figure out how to collect taxes on online sales. The Legislature and Florida's congressional delegation owe it to local businesses and residents to get behind this effort.

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