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Saturday, October 5, 2013

Florida tax loophole pits brick and mortar retailers against online retailers

Tax collection for online sales is required by the Marketplace Fairness Act
Online tax collection is required by law
By Steven Klitzner

Many Florida based brick and mortar retail outlets feel that they are at a disadvantage competing against online retailers and it is not hard to see why. At present, Florida law stipulates that while local retailers must collect sales tax for all purchases, online retailers are under no obligation to do so. While the law does require buyers to report and pay taxes for online purchases on their own, very few do so.

For this reason, Florida TaxWatch, The Florida Chamber of Commerce, Associated Industries of Florida and Florida Retail Federation have issued an open letter formally requesting that this online sales tax loophole be closed as soon as possible. The legislation for this is already in place thanks to the Marketplace Fairness Act recently passed by the Senate, so it may be just a matter of time before internet shoppers are no longer able to get away with buying goods tax-free.

What does the Marketplace Fairness Act stipulate?

The Marketplace Fairness Act makes requires online retailers to take responsibility for collecting sales tax from customers. The amount of sales tax paid would be determined by the customer's geographical location, not the geographical location of the online retailer, which means that Florida residents would pay the same amount of tax that they would have to shell out at a brick and mortar store.

While small online retailers that make less than a certain threshold in annual sales would not be required to collect sales tax from customers, the new law would affect many large and even medium sized online retail outlets. This would "even the playing field," so to speak, by making prices online closer to those found in regular stores throughout Florida.

What will happen as a result of this?

While many online retailers and even shoppers are not particularly happy about this recent turn of events, a recent economic study suggests that closing the above mentioned tax loophole has the potential to create 100,000 new jobs in the state and increase Florida's GSP by over 3%. Small shops that have found it difficult to compete against large brick and mortar retailers as well as internet based ones are naturally overjoyed about the possibility of being able to improve or even expand their businesses thanks to this new law.

Online retail sites have a lower overhead than traditional stores and so can often afford to offer better prices than brick and mortar retail outlets. This, coupled with the fact that it is very easy to purchase goods online without paying sales tax, has made it very difficult for small brick and mortar stores and businesses to be financially successful. The possibility that the online sales tax loophole will be closed has encouraged business owners who hope to be more competitive and thus more profitable. What is more, the new law opens the possibility of Florida being able to create tens of thousands of jobs and increase state revenue, which is sure to benefit Floridians from all walks of life.

About the author: This article is courtesy of Steven Klitzner or Florida Tax Solvers. Mr. Klitzner focuses on helping both individuals and businesses with their IRS tax issues.

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