President Office, Florida Senate — Press Release
FOR IMMEDIATE RELEASE
April 20, 2021
CONTACT: Katie Betta, (850) 487-5229
LEGISLATION TO PREVENT UNEXPECTED TAX HIKES ON BUSINESSES, REPLENISH UNEMPLOYMENT COMPENSATION TRUST FUND SIGNED INTO LAW
Existing but Uncollected Taxes from Out-of-State Online Retailers to be Collected, Deposited Annually into Unemployment Compensation Fund, Permanent Reduction to Business Rent Tax
Florida Governor Ron DeSantis today signed Senate Bill 50, Taxation, by Senator Joe Gruters (R-Sarasota). The bill creates a fair playing field for Florida businesses by requiring the collection of existing taxes that are owed, but not currently collected from out-of-state online retailers. Revenue derived from these collections will be used to replenish the Unemployment Compensation Trust Fund depleted by the COVID-19 Pandemic, ensuring necessary compensation is available for Florida workers seeking re-employment. When the trust fund reaches pre-pandemic levels, the new law automatically triggers a permanent reduction in the business rent tax.
“I am grateful to Governor DeSantis for signing this legislation today, protecting our Florida businesses and the jobs they create, which Florida families rely on. Under the law, online purchases are not tax-free. When government turns a blind eye on collecting taxes, businesses and Floridians who are following the law face a heavier burden. Collecting existing taxes that are owed is the right thing to do,” said Senate President Wilton Simpson (R-Trilby).
“Rather than treating additional revenue that is already owed to the state as a windfall, this law makes sure that we reinvest these funds in our Unemployment Compensation Trust Fund, helping businesses survive a situation no one could have anticipated, and shoring up benefits for the struggling Floridians who have lost their jobs through no fault of their own,” continued President Simpson. “Moving forward, by reducing the business rent tax, we will continue to help existing businesses, encourage more entrepreneurs, and have an even better recruiting portfolio for businesses we want to lure away from highly regulated, high-tax states.”
“It is great to see this legislation become a reality that will benefit businesses and employees in Florida for years to come, and I appreciate our Governor signing it into law today,” said Senator Gruters. “When I first filed this legislation, my motivation was to create a level playing field between Florida-based, brick-and-mortar businesses and their out-of-state competition. Small businesses are the lifeblood of our economy, and those with traditional storefronts were at a big disadvantage because they collect sales tax and their out of state competition does not. This legislation addresses that critical issue, and I am pleased that along the way, we have also been able to respond to the needs of businesses across our state not only by alleviating a huge and unexpected tax burden, but by providing for a future reduction in the business rent tax.”
Senate Bill 50 promotes a fair climate for those doing business in Florida by ensuring that all entities doing business in Florida, whether brick and mortar or online, collect and remit to the state the existing sales tax required on purchases. Specifically the bill requires out-of-state retailers and marketplace providers with no physical presence in Florida to collect Florida’s sales tax on sales of taxable items delivered to purchasers in Florida if the out-of-state retailer or marketplace provider makes a substantial number of sales into Florida.
Beginning this year, approximately $1 billion of uncollected sales tax from out-of-state retailers will be collected and deposited into Florida’s Unemployment Compensation Trust Fund annually until the trust fund is replenished to pre-pandemic levels. Replenishing the trust fund will prevent an automatic increase in unemployment (reemployment assistance) taxes facing businesses, while ensuring that the fund remains solvent for employees when they need to claim their benefits. The plan uses uncollected taxes that are already due to the state to help relieve an unforeseen tax burden for businesses with a physical presence in the state. Once the fund has been replenished to pre-pandemic levels, taxes owed and now collected from out-of-state retailers under the new law will allow the state to permanently reduce Florida’s business rent tax rate from the current 5.5% to 2%. Florida is the only state to charge sales tax on commercial rentals of real property.
The legislation signed today by Governor DeSantis is estimated to save businesses that have employees the following amounts over the next four fiscal years.
FY 20-21 – over $600 million
FY 21-22 – over $1 billion
FY 22-23 – over $1billion
FY 23-24 – over $400 million
Florida Sales and Use Tax
Florida levies a 6 percent sales and use tax (sales tax) on the sale or rental of most tangible personal property, admissions, transient rentals, and a limited number of services, and a 5.5 percent sales and use tax on commercial real estate. Chapter 212, F.S., authorizes the levy and collection of Florida’s sales and use tax, and provides exemptions and credits applicable to certain items or uses under specified circumstances. Florida requires a dealer to add the tax to the sales price of the taxable good or service and collect it from the purchaser at the time of sale.
Florida’s use tax requires an in-state purchaser to remit to the Florida Department of Revenue the tax owed on their purchase of an untaxed item. However, compliance is reported as low as two percent and is difficult to enforce. A recent Revenue Estimating Conference determined that provisions of SB 50 will result in $973.6 million in owed but previously uncollected taxes in Fiscal Year 2021-2022 and $1.08 billion each year thereafter.
Florida’s Business Rent Tax
Since 1969, Florida has imposed a sales tax on the total rent charged under a commercial lease of real property. Sales tax is due at the rate of 5.5% on the total rent paid for the right to use or occupy commercial real property. Local option sales surtaxes can also apply. If the tenant makes payments such as mortgage, ad valorem taxes, or insurance on behalf of the property owner, such payments are also classified as rent and are subject to the tax.
Commercial real property includes land, buildings, office or retail space, convention or meeting rooms, airport tie-downs, and parking and docking spaces. It may also involve the granting of a license to use real property for the placement of vending, amusement, or newspaper machines.
Florida’s Unemployment Tax and Trust Fund
Florida’s existing unemployment (reemployment) tax is paid by employers and the tax collected is deposited into the Unemployment Compensation Trust Fund for the sole purpose of paying reemployment assistance benefits to eligible claimants. A specific rate, calculated annually, is charged by the state to the employer on the first $7,000 of wages paid to each employee.
The rate paid by each employer is based on certain factors, including the employer’s prior use of the fund, and the statewide balance of the fund. An employer who frequently lays off employees who then collect unemployment benefits will pay a higher rate. However, any employers who were forced to lay off employees due to the COVID-19 pandemic did not have those benefits charged directly back to their accounts, which was announced by an Executive Order issued by Governor DeSantis.
Unfortunately, the decline in the balance of the fund caused by the pandemic triggered an increase in rates for all employers beginning in January 2021. The rates were projected to increase even further over the next few years until the fund is replenished to pre-pandemic levels.
In the 6-month period before April 2020, Florida’s average monthly reemployment assistance benefits expense was $27.2 million. Beginning in April 2020, Florida’s monthly reemployment assistance benefits expense increased by 800 percent, and at times, the increase exceeded 2,000 percent. Florida’s reemployment assistance benefits expense remains 473 percent over the 6-month average benefit amount before April 2020, and, without any action, was estimated to continue at elevated levels for the foreseeable future.