Governor and Commercial Real Estate and Legislature and Simon Property Group and State Government and Lawsuits and Taxes and Amazon.com and Sales tax and Government & Economic Development and Government and Law and Real Estate & Retail

Simon sues state over sales-tax loophole for Amazon.com

November 3, 2011
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Simon Property Group Inc. has filed suit against the Indiana Department of Revenue in an attempt to force the state to collect sales taxes from Amazon.com Inc.

The Indianapolis-based mall powerhouse said it filed the suit Thursday not to collect "monetary damages" but to level the playing field for Indiana's brick-and-mortar retailers including the tenants at its 27 Indiana shopping centers.

The lawsuit, filed in Marion County Superior Court, claims the state's "illegal and unconstitutional" decision to exempt Amazon from sales-tax collection gives the giant online retailer "an unfair advantage in the market."

The suit cites a study by professors at the University of Tennessee that estimates Indiana will forego about $195 million in revenue in 2012 alone by failing to compel out-of-state retailers like Amazon to collect sales taxes.

Simon earlier had requested that the state begin collecting sales taxes on purchases made from within the state's boundaries on Amazon.com. Online retailers typically are required to collect sales taxes on purchases from within states where they have a physical presence, but Indiana has not forced the issue with Amazon.

The decision by Indiana officials to take a kid-glove approach was an important factor in Amazon's decision to open four local distribution centers that employ thousands of Hoosiers. Of course, traditional retailers employ many thousands more.

"Main Street retailers are being harmed by this unequal playing field in Indiana and their existence is being jeopardized," Simon said in a prepared statement. "As a proud Indiana company which employs thousands of Hoosiers, Simon Property Group believes we have a responsibility to ensure the laws are equally applied to everyone."

Amazon has faced pressure in most of the states where it operates to collect sales tax, particularly as state coffers dried up during the recession. The company has argued the sales-tax issue should be decided at the federal level, something state Sen. Luke Kenley of Noblesville is pursuing.

The office of Gov. Mitch Daniels had not yet seen a copy of the suit, said spokeswoman Jane Jankowski.

In an October letter to State Rep. Bill Crawford, D-Indianapolis, Indiana Office of Management and Budget Director Christopher A. Ruhl said a state analysis estimated Indiana at most loses out on $25 million annually by not collecting sales taxes directly from Amazon.

The letter acknowledged that Amazon is the state's largest "non-remitter" of sales taxes but suggested the federal government would have to weigh in.

"A national solution that simplifies for all businesses the varying, complicated and burdensome collection requirements imposed by thousands of independent tax collecting jurisdictions remains the optimal solution," Ruhl wrote. "Further, Congressional action may be the only mechanism to overturn U.S. Supreme Court precedent that has precluded states from mandating collection of sales tax from remote retailers."

Simon CEO David Simon has made no secret of his annoyance at the tax advantage Amazon enjoys, summing up his position at an address to the Economic Club of Indiana in 2010.

“[The] Internet has a distinct advantage, which in my opinion is unfair,” he said at the time. “And hopefully we’re looking for fairness in our tax system. If you sell it in the physical world versus the virtual world, it ought to be the same. We need to level the playing field tax-wise.”

Amazon in July announced plans to open a second warehouse in Plainfield, its fourth in central Indiana. In total, Amazon said it will occupy about 3 million square feet of space and employ "thousands" of Hoosiers.

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