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Lawmakers trying to tame Amazon in sales tax fight

Published:   |   Updated: March 19, 2013 at 02:05 PM

Florida lawmakers want Internet retailers such as Amazon to start collecting and handing over sales taxes when consumers in the Sunshine State shop online.

The push to get it done may go nowhere this year, lawmakers say, in part because it appears Amazon simply can refuse to do it.

That's because Amazon has no physical presence in Florida. The Seattle-based retailer sells billions of dollars in merchandise here every year, but it has no warehouses in Florida. No delivery trucks. No employees.

That means Amazon has no "nexus" of operation — a term introduced into the laws of commerce before there was an Internet — so Florida has no more legal standing to force payment of sales taxes than Nevada has to set speed limits in Ohio, tax experts say.

That puts retailers in Florida at a disadvantage and robs the state of tax revenue, says Randy Miller, executive vice president of the Florida Retail Federation.

"We've been hoping to get some momentum on this for the last 10 years," Miller said.

Forcing Amazon's hand might dissuade the online sales giant from ever opening a warehouse here, with all the jobs that might bring.

Still, Miller said, the state might gain the upper hand in the long run, and Amazon is beginning to see it will have to cough up some money as online sales gain a bigger and bigger share of all retail sales.

"Florida's now the fourth-largest state, probably third soon," Miller said. "You cannot ignore that kind of market forever."


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Amazon, for its part, already is offering Florida a deal.


The retailer told some key state lawmakers it will build a distribution center in Florida and bring upward of 2,500 jobs to the state if Florida gives the retailer a two-year break on sales taxes once they are imposed.

Among other benefits to Amazon, a warehouse in Florida would enable faster deliveries here, especially during the rush of last-minute holiday shopping.

States such as South Carolina have accepted such offers, and Amazon now plans a major distribution center in Spartanburg County, S.C.

Potentially at stake in Florida is $450 million a year in tax revenue, money that retail lobbyists say would have gone to Florida's budget.

It's an especially critical question for Florida, which has no personal income tax and relies on sales taxes for an estimated 70 percent of all revenue, money used to fund everything from roads to troopers.

Also at stake is the health of Florida businesses that are losing sales to out-of-state online retailers.

On the other hand, charging sales taxes will cut into the bargain prices consumers enjoy when they buy online.

After a shopper in a retail store picks up a television, pair of jeans or bottle of perfume, the cashier will add a 6 percent state tax, plus 1 percent in Hillsborough County, amplifying the difference between online merchants and Internet retailers who charge no taxes.

Some examples:

Local stores offer one advantage: Customers can inspect the merchandise and walk out the door with it. Even here, though, Amazon counters with free shipping on many items, expanding the list on highlighted products each holiday season.

The legal fight over online sales taxes centers on the authority of states versus the federal government to regulate commerce.

The U.S. Constitution gives the federal government sole authority to regulate commerce with other nations, Indian tribes and across state lines through what is called the Commerce Clause.

That means one state can't pass laws hurting another state with regard to trade.

North Dakota challenged this in the 1980s, arguing that office supply merchant Quill should collect and pay taxes for catalog purchases customers made in the state. But the Supreme Court in 1992 found Quill had no "nexus" of operation there and therefore wasn't subject to the state's taxing authority.

Miller, of the Florida Retail Federation, says retailers haven't been able to identify any physical presence of Amazon in the state that would establish a "nexus."

At least six states have passed laws trying to get around that requirement by targeting "click-through" relationships, said Bernie Barton, a tax lawyer at the law firm of Holland & Knight in Tampa.

For instance, a sunglass seller in Key West may operate a website with some items it keeps in stock and other items kept at Amazon outside Florida. When online customers click an item they are directed to Amazon's page, and part of the purchase price comes back to the Key West dealer as a commission.

Florida legislators want to call that a "nexus" for Amazon and require taxes on Amazon's sales in Florida, pressuring Amazon either to sever ties with third-party sellers or start paying taxes.

Even the Legislature's staff analysis of several Internet sales tax bills found "it remains unclear" whether Florida could compel Amazon to collect taxes given the constitutional issues.

"Companies will likely challenge any such legislation, and some are challenging such new laws in other states," Barton said.

Republicans in the Legislature, eager to avoid the impression they are raising taxes, are proposing to take any extra taxes on Amazon's sales and return them to Floridians through sales-tax holidays. Gov. Rick Scott has said he likes this approach. The enabling legislation, though, doesn't spell out how or when to make it happen.

"This is one reason why you see us sit up here and have to cut budgets every year," said state Sen. Gwen Margolis, a Miami Democrat. "If people are buying here online, they should be paying taxes here."

Margolis said she recognizes there will be legal challenges but says Amazon soon will have to open a physical presence here, giving the state a legal foothold.

State Rep. Greg Steube, a Sarasota Republican, introduced a bill in the House but watched it languish, dimming his hopes of a new law this session.

"Current law says individual people are supposed to self-report and pay their own taxes in Florida, but it's not being enforced," Steube said. "It would be better if the retailer is the one who collects it, … and it would be better if Congress would come up with a solution."


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There is some action in Washington to address the issue, partly because online sales are surging.

Market researcher comScore recently reported that online sales grew 14 percent in the fourth quarter of 2011 to $49.7 billion. Amazon accounted for $17.4 billion of that.

Physical retailers are trying to get around the Quill decision by backing a new federal Main Street Fairness Act that they say would level the playing field across the country and require catalog merchants, by-telephone marketers 1-800 sellersand Internet retailers to collect local taxes at the point of purchase.

Amazon executives have testified in Congress that they support some form of national solution, noting the Quill decision was made a year before the World Wide Web was invented.

Some Democratic senators have proposed legislation along those lines — even though the revenue would go to the states and not the federal government.

It's an especially critical question for Florida, because this state has no personal income tax and relies on sales taxes for an estimated 70 percent of its revenue.

Meanwhile, there's the deal Amazon is offering Florida.

rmullins@tampatrib.com (813) 259-7919 Twitter: @DailyDeadline