ISSUE: What steps can be taken to ameliorate the impact of impending unemployment compensation tax increases on Florida’s employers.

DISCUSSION: Florida’s Unemployment Compensation Tax System continues to be an area of crucial concern for Florida’s employers. Without intervention by the Legislature, employers paying at the minimum rate will have a tax rate of $171.70 starting January 1, 2012. This is an increase of $99.60 per employee. Employers will also have to pay an additional special assessment of around $10.00 per employee in order to make a payment on the interest due to the federal government.

Two significant changes need to be made to Florida’s Unemployment Compensation Tax Policy in order to ensure Florida’s employers don’t suffer further negative consequences as a result of the expected tax increase.

First, we need to stretch out fund balance recoupment over a longer period of time. Fund balance recoupment is designed to provide a cushion to Florida’s Unemployment Compensation Trust Fund. There is no federal requirement to maintain such a cushion and, in dire times such as these, this is just extra money that’s being pulled from the pockets of employers. Currently, Florida Statutes require $2 billion dollars be recouped from employers over a three-year period. Stretching out fund balance recoupment over a longer period of time will not impact benefits. It will simply reduce the tax burden on employers and allow them to have more money available to create jobs.

Second, we need to maintain the taxable wage base at $7,000. A minimum taxable wage base of $7,000 complies with federal policies. Like stretching out fund balance recoupment, maintaining the minimum wage base at this level will reduce the tax burden on employers and encourage job creation. And, it will not impact the ability of claimants to receive benefits.

We cannot change the amount we owe the federal government, but we can make smart choices about the impact on Florida’s employers.

POSITION: The Florida Retail Federation supports the review and adoption of key taxation policies that will minimize the negative impact on Florida employers and help get Floridians back to work.

RELATED BILLS

HB 1061 (Horner)

SB 1416 (Bogdanoff)

UPDATES:

1/13/12
The issue of Unemployment Compensation Taxes was the subject of much discussion this week. On Wednesday, The House Business & Consumer Affairs Subcommittee held a workshop to discuss the proposal being advanced by the Florida Business Community which would ameliorate the impact of the current statutory requirements related to the Unemployment Compensation Program, which increases the wage base to $8,500 and triggers the Unemployment Compensation Trust Fund reserve balance recoupment to begin on January 1, 2012. Back on December 6, 2011 the Florida Retail Federation, along with seven other business organizations , including the Florida Chamber and Associated Industries of Florida, all signed on to a letter to Governor Rick Scott and both Legislative Leaders encouraging them to not allow the largest tax increase in the history of the Unemployment Tax to occur. The proposal is very straight forward and does not adversely impact any current unemployed claimants. The business community simply has requested that the $7,000 wage base remain in effect and the recoupment period be extended from a three year repayment period to a six year repayment period, with the six years to begin on January 1, 2013. By adopting these changes, the new minimum rate for 2012 would drop from $171.70 down to $75.60 per employee for employers paying at the minimum rate. This is a tax savings of $96.10 per employee, resulting in $447.2 million in savings to Florida Employers during 2012.

1/27/12
On Thursday afternoon, the Senate Commerce and Tourism Committee took up SB 1416 by Senator Ellen Bogdanoff relating to unemployment compensation. The bill, which rebrands the state’s unemployment compensation program as the reemployment assistance program, was met with opposition by state business groups due to an amendment filed by Senator Nancy Detert which allows employee leasing companies, or PEO’s, to make a one-time election to report and pay contributions under the tax identification number and contribution rate for each of their clients. Business groups argued that allowing an employee leasing company to elect to shift a claim back to the employer, whose rates may differ from their rates, would in turn shift rates across the board, creating a need for an across-the-board rate adjustment which all businesses would be responsible for paying. Senator Bogdanoff expressed some concerns about the amendment and its potential to weigh down the bill, but agreed to accept it. Despite business groups’ voiced concerns, the amendment passed and SB 1416 reported favorably from the committee with a vote of 6 to 0.

ISSUE: Since Florida currently has no effective or efficient way to collect sales or use taxes that are due and owing on purchases made over the Internet or from other remote sellers, should the Florida Retail Federation seek legislation during the 2012 Legislative Session to enhance the collection efforts of these taxes by changing/expanding the definition and application of “nexus” for sales tax purposes related to companies that exploit the Florida retail market through remote means.

DISCUSSION: The state of Florida does not actively attempt to enforce the collection of sales/use taxes on purchases made over the Internet or from other remote out-of-state vendors. Florida law is very specific in stating that if the sales tax is not collected at the time of sale, the purchaser is required to remit a use tax directly to the state of Florida, but since there is no active enforcement of this requirement, it is necessary to establish ways to require the remote vendors to collect the sales tax at the time of sale that would not violate the Federal Constitution.

Several states have now begun to tackle this collection issue by creating a broad based grass roots effort, known as Main Street Fairness, to pressure the various state governments to enhance the nexus provisions related to physical presence and extended nexus to click through sellers located within the jurisdiction of a particular state. Recently, the state of California was successful in settling the dispute with Amazon.com by having Amazon agree to the conditions of the California law, which will allow Amazon.com to continue to not collect the sales tax for one year, but they must give notice to California citizens in the interim period that the tax is due and should be paid directly to the State. This occurrence has resulted in the desired effect of having the world’s largest Internet vendor being placed on the same level playing field as brick and mortar retailers, which eliminates a government created price differential. Hopefully Florida will be able to negotiate a similar resolution.

POSITION: The Florida Retail Federation will encourage the Florida Legislature to clarify its position on the collection of the sales/use taxes and pass additional legislation on nexus which resembles the California statute that will eliminate the current price disparity between Internet purchases and purchases made at brick and mortar retailers.

RELATED BILLS

ISSUE: The Streamlined Sales Tax Project would revise the Florida sales tax statutes to standardize them with 24 other states that have already adopted the same model legislation. This would allow Florida to collect sales taxes on remote sales, meaning those occurring on the Internet, through catalogues and from television solicitations. If Florida adopts this model legislation before the U.S. Congress passes federal legislation, there would be a $44 million cost to the state treasury due to certain mandated changes to Florida’s sales tax statutes which are currently not recognized in Florida law. Recognizing this cost, should the Florida Retail Federation continue to pursue passage of the model legislation prior to the Federal law being changed.

DISCUSSION: Currently, Florida relies on the honesty of its individual citizens to remit the “use tax” to the Florida Department of Revenue on a transaction-by-transaction basis. Since many citizens aren’t aware of the requirement to pay the tax on items purchased from remote sellers, very little money is collected and, as a result, Florida’s main street merchants are placed at a competitive disadvantage in pricing. The out-of-state merchant not only does not collect or pay taxes in Florida, but uses this fact to gain a price advantage through being able to sell an item at a lower cost simply because he or she doesn’t collect the tax due on the sale.

POSITION: The Florida Retail Federation will be actively engaged and encourage the 2012 Florida Legislature to adopt a Joint Resolution requesting that the U.S. Congress pass federal legislation authorizing the states to implement legislation to collect these taxes. In addition, the Florida Retail Federation will support passage of legislation which will clarify the nexus provisions of the current state sales tax law that will allow the Department of Revenue to enforce the requirement to collect sales tax on Internet sales.