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March 30, 2013

Senators stalling Indiana online sales tax proposal

INDIANAPOLIS — A push to require and other online-only retailers to start collecting Indiana's 7 percent sales tax this summer is stalling in the Legislature, with some Senate leaders not wanting to interfere with a deal former Gov. Mitch Daniels reached with the company last year.

The Indiana House voted overwhelmingly in February in favor of a bill requiring sales tax collection in July — six months earlier than the agreement with Amazon. But that proposal that could mean tens of millions in additional tax collections isn't moving in the Senate, where Appropriations Committee Chairman Luke Kenley says it won't be taken up because the state should abide by the Amazon agreement.

Supporters of the bill maintain that the state's current policy allowing online retailers not to collect the state sales tax gives them an unfair advantage over traditional brick-and-mortar stores.

"All we're asking for is to put everybody on a level playing field and collect the tax," said bill sponsor Rep. Tom Dermody, R-LaPorte. "We're not taking any money away from any of the Internet companies."

Current policy dates to a 2007 deal with the Seattle-based Amazon, which agreed to open its first warehouse in Indiana with the promise that officials wouldn't push for online sales tax collection. Amazon now has five distribution centers in Indiana; it hasn't said how many people it employs.

After Indianapolis-based shopping mall owner Simon Property Group sued the state and there was lobbying push by traditional retailers over the policy, Daniels reached an agreement with Amazon last January for the company to voluntarily start collecting state sales tax in 2014.

Republican Gov. Mike Pence, who took office in January, told reporters recently that he supported the Daniels administration's agreement with Amazon and didn't want to break it.

Kenley, R-Noblesville, and Senate majority leader Brandt Hershman, R-Lafayette, are among the legislators who've raised concerns about hurting the state's reputation with businesses if it broke the deal with Amazon.

"They were under no obligation or legal requirement to do that. ... I'm perfectly comfortable with that arrangement," Kenley said.

The collection of sales taxes from online-only retailers is potentially lucrative for state government.

State officials project Indiana will see a $57 million a year boost in revenue just from Amazon sales, according to the nonpartisan Legislative Services Agency. A study completed last year by the Indiana Fiscal Policy Institute and Ball State University researchers estimates the state loses up to $114 million a year in uncollected sales taxes on internet purchases.

Indiana Retail Council President Grant Monahan said he believed the online sales tax bill would win approval if it reached the full Senate and that the trade group for traditional retail stores would continue pushing the issue through the end of the legislative session.

Supporters of the tax-collection proposal point to other states, including California and Texas, where Amazon is charging customers state sales taxes — but it isn't doing that in Indiana because of the deal that Daniels brokered.

"Amazon at the time said this was the best deal possible and then turned around and cut deals with a handful of states," Monahan said. "I think Amazon could have dealt more fairly with Indiana than they did."

The Associated Press left a telephone message Friday seeking comment from Amazon officials.

Looming over the entire matter is a 1992 U.S. Supreme Court ruling that prohibits states from forcing businesses without a physical presence in the area to collect sales tax. Kenley said Congress needed to give states the authorization to require tax collections by all online-only retailers and that he understood the frustrations of traditional store owners.

"It is not fair for them to have a 7 percent price disadvantage," Kenley said. "It's just totally unfair, but you've got to do this through the law."

The Indiana proposal would apply to online retailers with an office or warehouse in the state that generate at least $10,000 in annual sales to Hoosier customers. Current state law already requires sales tax collection for online sales by retailers, such as Wal-Mart, with Indiana stores.

The House Ways and Means Committee voted unanimously on Tuesday in favor of including Dermody's sales tax provisions in a Senate-approved bill, setting up for possible negotiations during the legislative session's final days in late April.

"I'm going to do what I can to keep it alive until the end of session," Dermody said. "I'm going to keep working this."


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