Legislature and State Government and Retailers and Taxes and Sales tax and Retail and Government & Economic Development and Government and Real Estate & Retail

Bill seeks earlier date for online retailers to collect taxes

January 17, 2013

Hoosiers may be required to pay a 7-percent sales tax on top of their Amazon purchases starting July 1 if a proposed House bill is adopted.

The bill moves up by six months a deal Gov. Mitch Daniels struck a year ago with Amazon for the online retailer to begin adding the 7-percent tax onto purchases by Hoosiers beginning in 2014.

House Bill 1007 calls for online retailers with a presence in Indiana to begin collecting sales taxes, just as brick-and-mortar retailers are now required to do.

Rep. Tom Dermody, R-LaPorte, said the bill could generate an additional $77 million in tax revenue for the state. Currently, consumers are required to report their online purchases and pay the tax themselves—but few do.

Moving the deadline up by six months would allow the state to capture taxes from online purchases made during the busy holiday shopping season.

Dermody said the bill is about leveling the playing field between online retailers and brick-and-mortar stores.

“The retailers are not asking for any special deal,” Dermody said, “They’re just asking for fairness.”

Dermody said he hopes the bill would help curb the so called show-rooming effect, which occurs when consumers check out merchandise in a store, only to buy the same product online where they do not have to pay sales tax.

“People go in and look at products and they don’t just go home and order them, sometimes they order [online] right in the store,” said Rep. Eric Turner, R-Cicero, a co-author of the bill.

Rep. Steve Braun, R-Zionsville, spoke in a committee hearing about how online retailers were originally given the sales-tax exemption in an effort to help the public gain acceptance of doing business over the Web. Those days have come and gone, he said.

“There was a time it made sense to give breaks to these start-up online companies to help them out,” Braun said. “But not anymore.”

Bill Waltz of the Indiana Chamber of Commerce said online retailers always should have been required to collect sales taxes.

“Its not that we have anything against the Internet business,” Waltz said. “But if they are going to be here, like they are, they are going to collect sales tax.”

Waltz said that bill was not an “anti-Amazon bill” because Amazon has already agreed to start collecting sales tax in the future.

Lawmakers are sensitive to any accusation they are targeting Amazon in part because the retailing giant has created thousands of jobs in Indiana. The company last year announced plans to build a fifth Indiana distribution center as part of a $150 million expansion.

“Amazon is not the bad guy here. They came to the state and said they wanted to negotiate a deal,” Dermody said.

New Jersey, Pennsylvania, Arizona and Texas have already negotiated the same deal with Amazon to start collecting a sales tax.

Some say the sales-tax issue should be handled by Congress, not by individual states. Katrina Hall of the Indiana Farm Bureau said they have urged the American Farm Bureau to increase lobbying efforts to pass legislation in Washington, D.C.

Grant Monahan, president of the Indiana Retail Counsel, also said during the meeting that the change needs to come from Congress. He said federal lawmakers have been debating the Marketplace Fairness Act for years.

“It’s gotten some attention. It’s gotten public committee hearings, but nothing more than that,” Monahan said, “That bill will be reintroduced this new Congress, and I am hopeful that Congress will act on that.”

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