Florida Governor Ron DeSantis signed into law a bill that requires out-of-state sellers to collect taxes on their Florida sales. The law, known as SB 50, requires remote sellers and marketplace providers with more than $100,000 in sales of tangible personal property in Florida during the previous calendar year to collect and remit a 6 percent state sales tax, plus any applicable county surtaxes. The law goes into effect July 1, 2021.
Remote Sales and Nexus Threshold
SB 50 revised the term “retail sale” to include a “remote sale,” which it defines as “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 this state, to a location in this state.” The law includes in its definition of a “retail sale” any sale made through a marketplace, which it defines as “any physical place or electronic medium through which tangible personal property is offered for sale.”
The law requires marketplace providers and marketplace sellers with a “substantial number of remote sales” to register and collect and remit sales and use taxes. This “substantial number” is any number of taxable remote sales in the previous calendar year that total more than $100,000. Any person who makes a “substantial number of remote sales” is a dealer for purposes of the law and must register with the state.
Marketplace Providers and Sellers
SB 50 defines a “marketplace provider” as a person who facilitates a retail sale by a marketplace seller through listing or advertising in a marketplace and who directly or indirectly “collects payment from the customer and transmits all or part of the payment to the marketplace seller.” This applies regardless of whether the marketplace provider charges for the services. The law excludes from the definition of a “marketplace provider” a person who solely provides travel agency services, delivery networks (with some exceptions), and payment processors. SB 50 defines a “marketplace seller” as a person who has an agreement with a marketplace provider to make retail sales through a marketplace that the marketplace provider owns, operates, or controls.
A marketplace provider must certify to its marketplace sellers that it will collect and remit the tax, and a marketplace seller may not collect and remit sales tax when the marketplace provider certifies that it will collect and remit the tax. However, a marketplace seller, rather than the marketplace provider, is liable for collecting and remitting the sales tax if they have a physical presence in Florida or have economic nexus through more than $100,000 in remote sales. When calculating its economic nexus, the marketplace seller must exclude sales made through a marketplace provider.
In addition to the sales and uses taxes, a marketplace provider is required to collect and remit the prepaid wireless E911 fee, the waste tire fee, and the lead-acid battery fee, on applicable sales at the time of sale, beginning April 1, 2022.
SB 50 authorizes Florida’s Department of Revenue to establish rules for collecting taxes from unregistered persons who would not be required to remit sales or use tax directly to the department but for their remote purchases. The procedures may include waiver of registration, provisions for irregular remittance of tax, elimination of the collection allowance, and non-application of local option surtaxes.
These procedures will make it easier to collect sales or use taxes from unregistered taxpayers so that a taxpayer does not have to file an application for a sales tax permit in order to remit taxes. This will make it easier for the state to collect taxes from unregistered individuals or businesses who made a remote purchase in the past and did not pay the tax at time of purchase.
Relief for Taxes Prior to Bill
Sellers who register by October 1, 2021 will also have relief from taxes, penalties, and interest for any sales that occurred prior to the effective date of the bill. This applies to any person who conducted remote sales, a marketplace seller for those remote sales, and a marketplace provider with a physical presence in this state. The relief, however, does not establish a right to a refund of taxes already paid in prior periods.
Effect on Other Taxes
Florida has considered legislation to tax remote sales for the past two years. The need to fund a shortfall in the State’s Unemployment Compensation Trust Fund caused by the pandemic and to prevent an automatic increase in unemployment taxes for Florida businesses motivated legislators to pass the bill this year. Receipts from the tax will be deposited in the trust fund until the fund reaches $4.07 billion or December 31, 2025, whichever comes first. Additional sales tax receipts will then be used to reduce Florida’s tax on rental or license fee for use of real property from 5.5 percent to 2 percent of the total rent or license fee.
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