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November 27, 2012

Some lawmakers want to speed up online sales tax date

Company with big presence in Southern Indiana is the focus of the proposed tax

INDIANAPOLIS — A coalition of bricks-and-mortar retailers in Indiana want to speed up the collection date for the Internet sales tax, arguing the online giant Amazon.com is already scooping up sales tax dollars in other states.

At a press conference at the Statehouse on “Cyber Monday,” representatives from the Indiana Merchants for Tax Fairness Collection called for a quicker end to what they call an unfair advantage enjoyed by online-only retailers that escape the state’s 7 percent sales tax.

“Retailers don’t mind competition in the marketplace, in fact they thrive on it,” said Grant Monahan, coalition member and president of the Indiana Retail Council. “But they need competition on a level playing field.”

The coalition called the press conference on what’s considered to be the largest online shopping day of the year to announce legislation that would make Amazon — which this year opened a huge distribution center at River Ridge Commerce Center — and other online-only retailers start collecting and remitting the Indiana sales tax by July 1, 2013.

If passed, it would accelerate a deal already cut by Amazon earlier this year with Gov. Mitch Daniels, in which the online retailer had agreed to a sales-tax-collection start date of January 1, 2014.

Amazon, which had long fought the online sales tax both in Indiana and nationwide, has cut similar tax-collection deals in other states, but the time frame was quicker.

Amazon is already charging state sales tax on purchases made by residents in California, Pennsylvania and Texas. It’ll start collecting sales taxes in Virginia and New Jersey next year, months ahead of the start date in Indiana.

A report by the Indiana Fiscal Policy Institute earlier this year estimated that Indiana was losing $75 million to $125 million each year in lost sales taxes — a revenue stream that helps pay for schools and public safety. Some legislators think that estimate is low, since online sales are growing; national retail experts are predicting Cyber Monday sales will hit $1.5 billion — the biggest ever.

The proposed legislation, to be carried by Republican Rep. Tom Dermot of Laborite and Democrat Rep. Ed Delaney of Indianapolis, would affect all online-only retailers with a physical presence in Indiana, including Amazon, which has several warehouses around the state.

The law would have the biggest wallop on Amazon, the whale of online retailers. The company pulled in more than $17 billion in revenues in the fourth quarter of 2012 — a number expected to be even bigger this year as online holiday sales overall grow.

Amazon critics like Jeff Kinney, owner of Kinney Dancewear in Indianapolis, argue those billions made by Amazon have been made by undercutting merchants like him — bricks-and-mortar storeowners who are required by Indiana law to tag on the sales tax to purchases.

The law’s loophole that allows online-only retailers to skip that step, “does nothing but discourage people from shopping in the brick-and-mortar stores,” Kinney said.

Amazon officials couldn’t be reached for comment, but the company has long argued that shoppers come to its site for convenience and deeply discounted prices that are minimally affected by the no sales-tax loophole. Amazon’s often-stated position is that its sales are just as strong in states where it does collect the sales tax as in the states where it doesn’t.

That’s all the more reason to speed up the online sales tax collection date here in Indiana, argues Bob Kraft of the Indiana Farm Bureau, which backs the Dermody-Delaney bill.

“It’s not just merchants who are interested in tax fairness. Farmers are as well,” said Kraft. “When you’re talking about losing $75 million to $125 million a year in revenues, that’s an important number. If we can recoup that to go into the state’s coffers, that’s beneficial to everyone in this state.”

It’s unclear what the chances are for the legislation to move ahead in the next session. But it reflects a shift in how the state legislature views a much earlier deal that it made with Amazon, back when it was courting the online retailer to build warehouses here.

In 2007, Indiana lawmakers agreed to a change in some tax language that created a loophole for Amazon. In return for building warehouses here, Amazon got state lawmakers to agree they wouldn’t push for the online sales collection. Legislators defended the deal at the time, saying it was a way to bring more jobs to Indiana.

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