The economy in which we live today is constantly advancing which has resulted in a greater range of people using new and improved technology than ever before. This has caused a major change in the way people both obtain information and purchase products. Over the past few years, a large amount of sales have shifted from retail stores to on-line stores. Many consumers believe the internet has provided a more convenient and reliable way of shopping than previously available. However, this has also made it increasingly difficult for states to collect sales and use tax on certain products. In order to combat this difficult situation, a bill has recently been filed in the Florida Senate. If enacted, the bill would include a sales and use tax click-through nexus provision which would require more non-Florida businesses to collect and remit Florida sales tax in certain situations. The bill, if enacted, would become effective July 1, 2013.
Currently, if a company has a physical presence in Florida, that company would be required to register for sales and use tax collection with the Florida Department of Revenue. However, the new legislation will significantly alter what it means to have presence in the state of Florida. The term "mail order sale" under the bill includes sales of any tangible personal property which is ordered via the internet. The new legislation also re-defines what it means to be an "agent." The term "agent" is defined to include a resident of Florida who enters into a contract in which they directly or indirectly refer potential customers to a dealer, whether by a link on an internet website or otherwise, for a commission or other consideration. The commission or consideration must meet a $10,000 threshold based on the preceding four quarterly periods ending on the last day of March, June, September, and December.
Moreover, if the dealer has a contract with a person located in Florida under which the dealer sells the same or a substantially similar line of products as the person and does so using an identical or substantially similar name, trade name, or trademark as the person and provides a commission or other consideration to the person based upon sales by the dealer, the dealer would have a Florida sales and use tax requirement. This provision would be inapplicable if the cumulative gross receipts from sales by the dealer to customers in the state under all such contracts were less than $10,000 during the preceding four quarterly periods ending on the last day of March, June, September, and December.
The bill also includes a provision that would require a dealer who makes mail order sales but who is not required to collect Florida sales and use tax to notify the purchasers that Florida use tax must be paid on non-exempt purchases. The notice will have to state the following:
- The dealer is not required to collect and does not collect Florida sales and use tax;
- The purchase is subject to state use tax unless it is specifically exempt;
- The purchase is not exempt merely because the purchase is made over the Internet, by catalog, or by other remote means;
- Florida requires each resident to report any purchase that was not taxed and to pay tax on the purchase; and
- The use tax form and corresponding instructions are available on the website of the Florida Department of Revenue.
As noted above, if the bill is enacted, the legislation above would be effective July 1, 2013.
Should you have any questions related to this Tax Flash, please contact your Marcum LLP tax professional.