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Lawmakers looking for solutions to online sales tax issue

November 4, 2011

An Indiana lawmaker will push this legislative session to require the state to collect sales taxes from online retailer Amazon.com Inc.

Sen. John Broden, D-South Bend, intends to file a bill that would force the state to collect sales taxes from online retailers that have a physical presence or affiliated distributors in the state. It’s similar to a measure he advocated—unsuccessfully—to insert in the budget bill during the last legislative session.

"I have found this [policy] to be incredibly shortsighted and unfair for brick-and-mortar retailers," Broden said. "I don’t know why we are choosing to punish people who hire people who live in community and who pay property taxes."

Retail advocates contend state law already requires the Indiana Department of Revenue to collect sales taxes from Amazon. On Thursday, Simon Property Group Inc. filed a lawsuit in Marion Superior Court to make that case.

Grant Monahan, president of the Indiana Retail Council, said Broden’s bill would “make it abundantly clear that online retailers are to collect sales tax.” He hopes that lawsuit will strengthen the prospects for state legislation, which his group is backing.

The retail council also has been in discussions with Sen. Greg Walker, R-Columbus, about introducing legislation, but he has not yet committed to do so.

States across the country have been pushing to collect sales tax from Amazon, and some have faced lawsuits or threats to remove distribution centers from the states as a result. Indiana economic development officials’ agreement with Amazon that the state would not require the company to collect sales taxes has made some Indiana leaders reluctant to pursue a similar law.

To help lure Amazon to Indiana, the state repealed a law in 2007 that required companies that didn’t maintain a place of business in the state but had affiliated locations to get a retail merchant’s certificate, which would subject them to the same tax-collection duties as brick-and-mortar shops.

Amazon has four distribution centers in the state.

Gov. Mitch Daniels’ administration—as well as Amazon officials—have advocated a federal solution to address the issue.

Key fiscal leader Sen. Luke Kenley, a Noblesville Republican, has been at the forefront of efforts to get a federal law requiring online sales-tax collections. But Kenley said Friday that he’s not inclined to support a state solution.

He’s concerned a law such as the one Broden is proposing only allows the state to go after online retailers that have a physical presence in Indiana. That would put Amazon and other online retailers with an Indiana presence on unequal footing with other online retailers that don’t have physical locations here and, therefore, couldn’t be required to collect sales tax. He points to eBay as an example.

“I’m trying to level the playing field for all retailers,” said Kenley, who formerly ran a family-owned grocery business. “I’m worried the legislature will say, ‘OK, we’ve got the Amazon tax. Now we’re done.’”

Kenley and members of the Daniels administration are in ongoing conversations with Amazon to convince them to collect sales taxes. So far, “they haven’t said no, but they haven’t said yes,” he said

Kenley, who spent two days in Washington, D.C., this week discussing the matter with federal lawmakers, is among those who are hopeful the issue could get traction in Congress this year.

Both House and Senate bills have been filed, and a bipartisan group of senators, including Illinois Democrat Dick Durbin and Wyoming Republican Mike Enzi, intend to introduce a bill on the issue early next week, Kenley said. They’re also tentatively planning a Nov. 30 hearing on the issue.

Monahan said he also supports a federal fix as the “ultimate and best solution” but hopes to see Indiana lawmakers act in the meantime.

“I think it’s important to keep in mind the unlevel playing field that exists today between brick-and-mortar stores and Amazon,” Monahan said. “Indiana can do something about the Amazon situation now.”

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