Indiana government officials and the nation’s largest online retailer have reached an agreement to begin collecting Indiana sales tax on Internet purchases.
Indiana will become the fourth state to reach such an agreement with Amazon.com, but Gov. Mitch Daniels (D) said he wants federal legislation to address the online sales tax issue.
“The only complete answer to this problem is a federal solution that treats all retailers and all states the same,” said Daniels in a statement.
According to the agreement between Amazon and the Indiana Department of Revenue, the company will begin to collect and remit the 7 percent Indiana sales tax beginning January 1, 2014 or 90 days after enactment of federal legislation, whichever occurs earlier. The state will not assess the company for sales tax for other periods.
Potential $75 Million Annually
State officials estimate Indiana residents who shop online would have approximately $75 million annually taken from them if all online sales were taxed. The State Budget Agency and Department of Revenue estimate Amazon.com purchases will pull in $20 million to $25 million per year in sales tax revenue.
The Alliance for Main Street Fairness, which represents traditional retail stores, has been lobbying hard for taxation of Internet sales, arguing the ability of online shoppers to avoid paying sales taxes gives online retailers an unfair advantage. However, the organization isn’t satisfied with the deal between Indiana and Amazon.
“While it is noteworthy Indiana’s elected leaders understand the need for a level playing field, this specific agreement allows Amazon.com to enjoy special treatment for two more years despite an obvious physical presence in the state. It is deeply unfortunate that the lifeblood of Indiana’s economy—its brick-and-mortar businesses—will need to survive two more holiday shopping seasons at a competitive disadvantage,” said AMSF spokesperson Danny Diaz.
Push for Federal Law
Diaz said the agreement “underscores the importance of Congress acting and dealing with this issue once and for all. We appreciate Gov. Daniels’ support for a national solution and hope he will urge the Indiana Congressional delegation to support federal legislation in 2012.”
Meanwhile, Amazon.com, which once fought hard against taxing online shopping, has come out for a federal approach to online sales taxes.
Senators Dick Durbin (D-IL), Mike Enzi (R-WY) and Lamar Alexander (R-TN) last November introduced a bill that would grant national authorization for states to collect online sales taxes.
“Amazon strongly supports enactment of the Enzi-Durbin-Alexander bill and will work with Congress, retailers, and the states to get this bipartisan legislation passed,” said Amazon vice president of global public policy Paul Misener in a statement when the legislation was introduced.
Many smaller online retailers remain opposed.
“Small online retailers are right to fear the costs and compliance burdens of this proposal,” said Steve DelBianco, executive director of NetChoice, an online retailer advocacy group.
Nick Baker ([email protected]) writes from Washington, DC. This article originally appeared in The Heartland Institute’s Budget and Tax News.