Florida adopts Wayfair threshold for remote sellers
TAX ALERT |
On April 19, 2021, Florida Gov. Ron DeSantis approved Senate Bill 50, enacting remote seller and marketplace facilitator nexus, as well as adopting other administrative tax changes.
Economic sales tax nexus provisions
Effective July 1, 2021, remote retailers making a substantial number of remote sales to Florida customers are required to register, collect and remit Florida state and local option sales and use taxes. A ‘substantial number of remote sales’ is defined as sales exceeding $100,000 during the previous calendar year.
Similarly, marketplace providers must also collect by July 1, 2021 if sales exceed $100,000 during the previous calendar year. A ‘marketplace provider’ is defined generally as those that facilitate a retail sale and collects payment from the customer. Excluded providers include certain travel agency services, delivery network companies under certain conditions and payment processors.
Effective April 1, 2022, marketplace providers must also collect and remit the prepaid wireless E911 fee, waste tire fee and lead-acid battery fees for qualifying sales made through the marketplace. Also effective April 1, 2022, marketplace providers may contract with certain large marketplace sellers for the seller to collect and remit all applicable taxes and fees. Qualifying marketplace sellers include those that make more than $1 billion of annual sales in the United States, provide evidence to the marketplace provider that it is registered in Florida and notify the department that the marketplace seller will collect and remit applicable taxes.
Senate Bill 50 eliminates the sales tax ‘bracket system’ used to determine the sales tax due when the rate applied produced fractional cents. In place of the bracket system, the state will instead use a rounding system based on a computation of the tax to the third decimal place. The tax is rounded to the whole cent using a methodology that rounds up to the next whole cent whenever the third decimal is greater than four. While the change may appear minor, historically, retailers making many small transactions incorrectly calculating the tax under a traditional rounding method, rather than the bracket system, may have generated significant sales and use tax liabilities.
Tax collected under Senate Bill 50 will be used to replenish the state’s unemployment compensation trust fund on a monthly basis until the fund reaches approximately $4.7 billion. Two months after that triggering event, the tax on the rental or license of real property will be reduced from 5.5% to 2%.
Florida becomes the second-to-last state with a general sales tax to adopt an economic sales tax nexus policy, with only Missouri having yet to adopt a similar provision. Multistate retailers that registered in states after the Wayfair decision should review their Florida sales to determine whether registration will be necessary by July 1, 2021. Renters of real property should also consider that the rate may change due to the revenue derived from the new economic sales tax nexus provisions. For more information on Wayfair and nexus generally, please read our article, Wayfair nexus settles in after two years, but questions remain. Taxpayers with questions about the new sales and use tax nexus law or administrative changes should speak to their Florida sales and use tax adviser.