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"Robbing Peter to pay Paul?": Money from online taxes could go to new biz tax cuts

Florida lawmakers voted to move forward a proposal that would force online-only companies—and people who buy goods on the Internet—to pay the state’s 6-percent sales tax. 

Once shunned by conservative legislators averse to new taxes, the proposal has been packaged in a new “revenue neutral” form, meaning whatever money brought in by new taxes would be offset by tax cuts. Until now, it was widely believed that the money would go back to consumers in a new tax holiday.

However, a new amendment to the bill’s language allows for Tallahassee lawmakers to decide who gets the break. In the business-friendly climate of the Legislature, the money could go to reducing taxes on businesses, not directly to consumers. On Wednesday, the House passed a $120 million package of tax cuts on businesses, ranging from reductions to the corporate income tax to reducing taxes on private plane repair.

According to Sen. Nancy Detert, R-Venice, the bill's sponsor, the online tax revenue should go to cutting business taxes.

“I’m envisioning this money to go to businesses… because these are the job-creators,” she said, adding that the election of Gov. Rick Scott sent a message that people wanted lawmakers to focus on jobs.

The bill was heard in the Senate Committee on Banking and Insurance on Thursday, but similar legislation has not moved in the House recently.

The bill was drafted so that Internet companies would not have an unfair tax advantage over brick-and-mortar companies. In growing numbers, lawmakers have said the loophole amounts to picking winners and losers in government policy. But the new amendment allows government to choose who gets a tax break as a result of taxes paid on Internet sales at sites like Amazon—consumers or corporations.  The “picking-winners-and-losers” language appears to apply here as well.

“I did not want to target one particular tax,” Detert said. “I wanted us to have the flexibility…to decide about that pot of money.”

Estimates for the amount of revenue that would be brought in by the new tax range from about $400 million to upwards of $1 billion annually. That means up to $50 in additional costs for every man, woman and child in Florida.

The business community strongly supports the measures, stating that competition from retailers like Amazon and eBay is putting local companies out of business. Detert called it a “win-win” for small businesses, and that could be the case if they see their competition taxed further, and then get a new corporate income tax cut to boot.

Sen. Don Gaetz, R-Niceville, expressed concern about online sales tax revenue being returned to businesses and not directly to consumers via a sales tax reduction or tax-free holiday.

“I’m all for business incentives, but we’re kind of stealing from Peter to pay Paul,” he said. 

For people like Hossein Tavana, a South Florida man who does 60  percent of his shopping online, the bill could mean more than $600 a year in additional costs. He would not see that money directly returned to him if the offset goes to tax cuts for corporations.

Still, local businesses are in support, hoping to level the playing field against growing companies like Amazon. 

“The world has changed since we wrote our tax code," said Detert. "And I think it’s time to bring our tax code into current law, and deal with e-commerce.” 

Also of note, Amazon is looking to cut a deal with the state behind the scene, seeking a two-year sales tax holiday in exchange for building a couple warehouses in Florida.