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Legislature May Eliminate Sales Tax Exemptions

Example: Should 6% Be Paid On Hospital Meals?

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The House of Representatives is considering which sales tax exemptions to discontinue, including hospital physical fitness charges.

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By Gary Pinnell | Highlands Today

Published: March 22, 2009

SEBRING - Should some items be taxed, and others not?

The Florida House of Representatives studied that issue last week to decide whether to levy sales taxes on rent, sports tickets, gym admissions, toll road charges, and hundreds of other goods.

If the exemptions were removed on drugs and groceries, for instance, the state of Florida could collect $4 billion in sales taxes. The state will be more than $6 billion in the hole for fiscal year 2009-10, so the move could fill 60 percent of the budget problem.

But not everyone agrees.

"These are basic life necessities and those exemptions should not be repealed," said Rep. Denise Grimsley, R-Lake Placid.

The House Finance and Tax committee is reviewing 239 exemptions.

"If you remove the food and drug exemptions," Grimsley said, "the total of other exemptions are $9 billion. I believe it is appropriate for the legislature to periodically review every exemption to determine the origin and if the exemption is still needed."

Those other exemptions include Super Bowl tickets (an insignificant sum of money), skyboxes ($900,000), student sports tickets ($5.7 million), the sales of boats and airplanes which are registered in another state ($114 million), and rent.

Rent can be taxed? Yes, according to the House committee. In 1972, specific exemptions were granted to long-term occupants, full-time students, military personnel, permanent residents and mobile home residents. Discontinue those exemptions, and $1.3 billion in sales taxes could be collected.

"Our mission is to do everything we can to create jobs and help get Floridians back to work," Grimsley said. "If repealing an exemption does that, I will support it.If it does not, then I won't."

Gov. Crist hasn't decided whether he'll allow any exemptions to be repealed.

"The governor has not reviewed the proposed tax exemptions current ly being reviewed by the Florida Legislature," said his press secretary, Sterling Ivey. "Once a final budget or bill is passed and presented to the governor, he will review and determine if the exemptions are appropriate."

The House Finance and Tax Council panelists concluded the series of workshops on sales tax exemptions without coming up with a list of specific exemptions to be rescinded.

Meanwhile, Democratic leaders complained that the Republican majority has not given them a seat at the table. The GOP countered that the minority members have complained about unfair exemptions, but have not followed up with concrete proposals to close unnecessary loopholes that now exempt more than 250 items, like bottled water ($42 million) and metered water ($305 million).

Chris Rapp is the chief operating officer of Keystone Water Co., which bought one of the two water producers southeast of Lake Placid.

The governor is also proposing a severance tax on water bottlers, Rapp said. "We've discussed this at length. The governor is proposing a tax on natural springs and bottling companies."

His problem is that big out-of-state companies like Evian and Fiji aren't taxed, but tiny local companies like Kelley Springs are.

Many of the sales exemptions are agricultural: diesel engines and irrigators ($2.8 million), and farm equipment ($34 million).

The official position of the Highlands County Citrus Growers Association Inc. is that taking any exemption from the agriculture industry decreases its ability to stay viable, said Raymond D. Royce, executive director.

Speaking for himself, Royce wondered if the state simply erased every exemption ($12.3 billion), could it then reduce the current 6 percent sales tax to 2 or 3 percent on all items?

"Personally, I think it would be equitable, but I don't know," Royce said. "I haven't given it deep thought. But I do know this: some very bright people have, historically, figured out which should have exemptions. This legislature would have to nit pick, and figure how to lift the exemptions on this 50, but keep those on the other 200 or so."

Royce has been tracking the committee meetings, so he's not sure anything will come of the process.

"Neither the Democrats nor the Republicans have brought forward a single item to discuss," Royce said.

Highlands Today reporter Gary Pinnell can be reached at gpinnell@highlandstoday.com or 863-386-5828

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