CNHI Statehouse Bureau
The world’s biggest online retailer, Amazon.com, has agreed to start collecting sales taxes on Internet purchases made in Indiana, beginning in 2014.
The agreement means Amazon customers in Indiana will see the 7-percent sales tax added to their purchases after Jan. 1, 2014, and the state will see millions of dollars more in sales tax revenues.
Indiana Gov. Mitch Daniels made the surprise announcement Monday, crediting Amazon for working with the state to find a solution to an expensive problem: the loss of state revenue because of online sales that go untaxed. Daniels estimated the deal could bring an additional $20 million to $25 million in sales taxes annually to the state.
Still, Rep. Jeff Espich, a Republican who heads the House budget committee, said the Amazon agreement covers “only a small part of the problem.” Estimates of tax revenues lost to untaxed online sales run from $70 million to $200 million a year in Indiana alone.
The agreement was made to put an end to a lawsuit filed against the state of Indiana by Simon Property Group, the nation’s largest mall owner. The Indianapolis-based mall owner contended Amazon’s tax-free status in Indiana resulted in “an illegal and unconstitutional subsidy” that harms taxpayers and competing bricks-and-mortar retailers.
The agreement, though, doesn’t quiet complaints from Amazon’s brick-and-mortar competitors who want to know why Amazon, which had $35 billion in global sales last year, should get two more years before it has to collect and remit the Indiana sales tax.
They contend the state gave Amazon an unfair pricing advantage when it cut a deal with the giant online retailer five years ago. In return for building giant distribution centers in Indiana, Amazon got a pass from having to collect the sales tax.
“Amazon has enjoyed a five-year moratorium on collecting the sales tax. Why should they get two more years?” said Grant Monahan, president of the Indiana Retail Council.
Paul Misener, Amazon’s vice president for global public policy, said the 2014 date gives Amazon time to push for federal legislation that would compel all online retailers to start collecting sales taxes.
With the agreement, Indiana becomes only the fourth state in the nation where Amazon has voluntarily agreed to collect and remit sales taxes.
The company has been fighting other states attempts to force it to collect the sales tax. Amazon contends it’s protected by a 1992 U.S. Supreme Court decision that exempts online retailers from collecting sales taxes if they don’t have a physical presence in a state.
The Center for Business and Economic Research at the University of Tennessee estimates local and state sales tax revenue lost from online purchases across the country amounts to more than $12 billion per year.
Maureen Hayden is the Indiana Statehouse bureau chief for CNHI, the parent company of the Tribune-Star. She can be reached at email@example.com.