By Paul Williams

Law360 (May 27, 2020, 5:33 PM EDT) -- Florida tax collections came in almost $880 million below estimates in April as a result of the novel coronavirus pandemic, according to a state economic report that found the health crisis hit sales tax revenue the hardest.

Nearly $600 million of the tax collection shortfall was attributed to a drop-off of sales tax collections, according to a monthly revenue report released Tuesday by the Florida Office of Economic and Demographic Research. The report said the state's tourism, hospitality and auto sales industries accounted for the bulk of the sales tax deficit.

"The presence of coronavirus in Florida presented its most serious threat to the sales tax forecast, especially to those taxes collected from tourists," the report said. "In addition, critical supply chains were already interrupted by the impact to other countries and retail sales displaced as a result of social distancing and crowd-avoidance behaviors."

Corporate income tax collections also fell $246 million below estimates, although the report said that the delaying of certain tax payments contributed to that drop-off, and Florida should start to partially recapture the revenue in June.

Most states are facing precipitous reductions in tax collections as governors around the country have closed businesses to curb the spread of COVID-19, the respiratory illness caused by the virus. But Florida's coffers were deemed especially vulnerable, given that the state does not levy an income tax and is one of only two states with a statewide sales tax that have not yet imposed tax on sales from out-of-state businesses that sell into Florida.

"Florida's heavy reliance on the sales tax as its main revenue source has put our state at risk, especially with the steep drop in tourism coinciding with the COVID-19 health crisis," Sadaf Knight, CEO of the Florida Policy Institute, told Law360 on Wednesday.

Sen. Joe Gruters, R-Sarasota, had sponsored a bill this year that would have required remote sellers and marketplace facilitators such as Amazon.com to collect and remit tax on sales into the state, but the measure was withdrawn after failing to clear all the necessary Senate committees. The state Legislature adjourned for the year in March. 

Gruters' bill, which would have taken effect July 1, was estimated to bring in more than $600 million in state and local tax revenue for the upcoming fiscal year. While not a panacea for the fiscal impact from the pandemic, observers have noted that it would have provided the Sunshine State with a fiscal boost that most other states are experiencing while their residents are shopping online with most in-state retailers closed.

The report noted that the grim revenue numbers for April were somewhat tempered from the three prior months where tax collections exceeded projections. In all, the state is $675 million off the estimate for the current fiscal year, which ends June 30, the report said.

In a Tuesday memorandum, Senate President Bill Galvano, R-Bradenton, referenced the combined $202.4 million in extra tax revenue that the state received in January, February and March, saying it will help Florida weather the pandemic. He acknowledged that revenue collections will likely drop in the coming months as well, and vowed to take a measured approach in addressing the shortfall.

Additionally, Galvano said that the state must wait for more guidance from the federal government about how it can use the $4.6 billion in federal revenue it received from the Coronavirus Aid, Relief and Economic Security Act .

According to the state Legislature's website, lawmakers have yet to send Republican Gov. Ron DeSantis the fiscal year 2020-21 budget bill, H.B. 5001, that they passed March 19. Democrats, who are the minority party in both legislative chambers, have pushed for DeSantis and lawmakers to convene a special session to address the budget in light of the pandemic.

Helen Ferre, communications director for DeSantis, told Law360 on Wednesday that it's too early to determine the full revenue impact from the pandemic. She added that the state has "ample reserves" and about $6 billion in federal funding to assist its economic recovery from the virus.

Galvano is also confident that Florida can manage the drop in tax collections with the state's current cash on hand, his spokeswoman Katherine Betta told Law360 on Wednesday.

"With the information and data we have at this time, the president is comfortable that with Florida's significant reserves, and the influx of federal funding made available in recent weeks, Florida has the fiscal resources needed to fully recover from the COVID-19 pandemic," she said.

Galvano has said that lawmakers may need to meet in a special session to appropriate the federal funding, and that he would support an extra session to address issues that may arise from the pandemic that would necessitate the Legislature's immediate attention. Betta said Tuesday's report has not altered his stance on a special session.

When asked about requiring remote sellers to collect and remit tax, Betta said that Galvano supported Gruters' bill as a way to put in-state and out-of-state retailers on equal tax footing, with or without the pandemic.

"In general, the president objects to the premise that budget issues should be addressed by revenue enhancements," she said.

House Minority Leader Kionne McGhee, D-Miami, was unavailable for comment Wednesday.

Gruters did not respond to requests for comment Wednesday.

--Editing by Neil Cohen.

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