The collection and remittance of sales tax by out-of-state sellers has been a prominent issue for many years. One of the main points of contention involved in this matter has been the treatment of out-of-state sellers with limited physical contact with the state in question. If an out-of-state seller has only minimal physical contact with a particular state, can this state impose a collection and remittance obligation on the out-of-state seller?
This debate was helped along substantially by the 2018 Supreme Court decision of South Dakota v. Wayfair. Now, many states, including the State of Florida, have enacted “economic nexus” laws which essentially remove the physical nexus element altogether.
In this post, we will discuss the requirements of the new Florida State sales tax law on out-of-state sellers which took effect on July 1, 2021. As we will see, this law imposes obligations on sellers and on marketplace providers.
The New Law Governing Remote Sales – Florida Statutes § 212.0596
As mentioned, the new law passed in Florida pertaining to sales tax for out-of-state sellers took effect on July 1, 2021. Prior to this law – which was Senate Bill 50 before its passage – Florida had made several previous attempts to create a law with similar provisions, but those attempts all failed. Now, the current law creates an “economic nexus,” rather than a physical nexus, and so the debate regarding the level of physical contact has been effectively removed.
Economic Nexus vs. Physical Nexus
The economic nexus analysis of the current law applies to both out-of-state sellers and marketplace providers who supply a medium through out-of-state sellers conduct transactions with Florida purchasers. Under the new law, an out-of-state seller need not have any physical presence with Florida to qualify, but instead must collect and remit sales tax to Florida if the seller had sales exceeding $100,000 in the previous year.
In addition to collecting and remitting sales tax, the seller must also register with the Florida Department of Revenue. Marketplace providers must comply with the same requirements: if the provider facilitates more than $100,000 in transactions to Florida purchasers, then the provider must register, and collect and remit sales tax.
Requirements Pertaining to Marketplace Providers
Given that these requirements on sellers and marketplace providers will overlap in many cases, the law includes a provision that marketplace providers must “certify” to their sellers when they exceed the threshold and begin collecting and remitting sales tax. This prevents the possibility of double taxation on the same transaction.
So, once the marketplace provider gives the certification to the seller, that seller is no longer required to collect and remit sales tax. To get a sense of how this may operate, think of a common marketplace facilitator, such as EBay. Once EBay crosses the threshold, and gives the certification to sellers, the sellers are not obliged to collect and remit the tax, as that falls on the facilitator.
Importantly, the law provides for two significant exceptions when it comes to marketplace providers. The first exception is for travel agency services. So, if an entity is providing travel agency services and nothing else, then this entity will not be treated as a “marketplace provider” for the purposes of this current law. The other exception is food delivery and item delivery service providers.
Contact The Frazer Firm for More Information
Readers should know that there is more to this law than what we’ve covered here. Out-of-state sellers into Florida should discuss the application of the new remote sales tax law with their tax professionals in consultation with experienced Florida business attorneys. For additional information, contact The Frazer Firm today.
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