State Government and Opinion and Taxes and Editorials

EDITORIAL: State can't afford to lose online sales tax

December 3, 2011

It’s not unusual for newspapers to re-run certain editorials—usually broad, sometimes seasonal messages that stand the test of time: Why can’t we all get along? Things aren’t as they once were. Yes, Virginia, there is a Santa Claus.

Although we rarely repeat ourselves word-for-word, we often revisit important issues. Indianapolis needs a comprehensive smoking ban. Ancient alcohol laws should be repealed. Mass transit is a must. And online retailers need to charge the same sales tax as brick-and-mortar stores.

The sales-tax issue typically rears its head this time of year, when holiday shoppers take to the Internet. Research firm comScore Inc. said online sales on Cyber Monday were up 22 percent this year, reaching nearly $1.3 billion.

Here’s hoping the UPS guys have been resting up—and legislators have been paying attention. This Internet thing just might be here to stay, and Indiana no longer can afford to forgo the millions of dollars in online sales tax revenue it misses out on each year.

As part of an effort to lure online giant Amazon to Indiana, lawmakers in 2007 repealed a law that required companies without a storefront in the state to get a retail merchant’s certificate and collect taxes. Amazon now has four distribution centers here.

Last month, Indianapolis-based mall owner Simon Property Group Inc. filed a lawsuit seeking to force the state to collect sales taxes from Amazon. The company said its goal is to level the playing field for brick-and-mortar retailers, including tenants at its 27 Indiana shopping centers.

Of course, the risk is that requiring online retailers to remit the sales tax will chase them away. We think the potential payoffs are worth taking the chance.

Results of a study conducted by the Indiana Fiscal Policy Institute and Ball State University’s Center for Business and Economic Research, released Nov. 22, pegged the missed opportunity at $40 million to $114 million a year.

Whatever the number, it’s nothing to shake a stick at—especially when public budgets are tight.

The sales tax question has been left to the states to decide, but the U.S. House Judiciary Committee took it up last month. Among those who addressed the panel: state Sen. Luke Kenley, a Noblesville Republican who serves as chairman of the national Streamlined Sales Tax Governing Board, which is pushing for a federal solution.

Nine states now require all retailers to remit sales taxes, and state Sen. John Broden of South Bend is expected to introduce legislation next year that would add Indiana to the list. A similar measure he advocated last year failed.

Kenley told IBJ last month he is not inclined to support the bill because it would tax only online retailers with operations in the state. “I’m trying to level the playing field for all retailers,” he said.

That’s a great idea that deserves his attention. But if lawmakers need to take baby steps to get there, we urge them to start walking.

Indiana has the opportunity to be near the front of the pack on this issue—and boost revenue after years of budget cuts. Let’s get it done. Acknowledge that times have changed, we can’t all get along, and even Santa Claus has to pay the piper. Virginia would understand.•

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To comment on this editorial, write to ibjedit@ibj.com.

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