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Indiana lawmaker: Online tax could replace estate tax

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A top Indiana lawmaker is floating the idea of using an online sales tax to help replace revenue that wouldn't be collected if a proposal to eliminate the state's inheritance tax becomes law.

State Sen. Luke Kenley, a Noblesville Republican who chairs Senate Appropriations Committee, wants Congress to require all online retailers to collect state sales taxes. He said it would be an ideal replacement for the inheritance, or estate tax.

"It's almost a one-for-one replacement and it's a perfect replacement for the estate tax," Kenley told the Times of Munster.

Indiana would stop collecting about $165 million a year starting in 2020 if lawmakers eliminate the state's inheritance tax, according to estimates.

Currently only online retailers with a physical location in a state are required to collect sales tax. Individuals are supposed to pay a 7-percent use tax for online purchases where sales tax wasn't collected, but the Indiana Department of Revenue said that few people do.

In November, Kenley told a Congressional committee that pending legislation sponsored by U.S. Sen. Dick Durbin, D-Ill., would ensure equality between online and brick-and-mortar retailers by requiring both to collect sales tax from their customers.

A November study by the Indiana Fiscal Policy Institute and Ball State University estimated that Indiana misses out on about $77 million a year by not collecting sales tax for all online purchases. Other studies put the state's annual loss at nearly $200 million.

Kenley said even though Indiana is on track to have a $1.77 billion budget surplus by June, the state needs to protect itself by replacing the revenue if a proposal to repeal the inheritance tax is enacted.

"The additional revenues that we see right now aren't really guarding us from a second-dip recession," Kenley said.

A coalition of Indiana retailers recently launched a lobbying push aimed at convincing state lawmakers to force online businesses to collect the state's 7-percent sales tax from customers.

The group, which calls itself Indiana Merchants for Tax Fairness, argues that the state's policy puts traditional stores at a disadvantage to online retailers and costs the state millions of dollars in tax revenue each year.

Indiana's current policy dates to a 2007 deal to get Amazon.com to open its first warehouse in Indiana that came with the promise that state lawmakers wouldn't push for an online sales tax. Amazon now has three distribution centers open in central Indiana and announced plans last summer for a fourth.

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  • Tax is Tax
    Sorry, I am not buying into this proposal. Once a tax is established, it rarely goes away. What is the purpose of any tax? Government needs tax funds in order to operate. So, when a tax decrease or tax elimination is proposed, the first words out of most politician's mouth is - We Need a New Tax.
  • Geez
    The idea that everyone should pay a small 7% tax on internet purchases so that the rich and super rich can more effectively preserve their generational wealth is appalling. The merits of an internet tax should be discussed on their own, but it should never be implemented to protect the rich from existing taxes.
  • response
    I don't disagree - subsidies to raise corn and beans (or not to) in Indiana should also are a joke. Tax loop holes should be and codes need to be simplified to accurately tax person/business on true income. My point is rather that $1M is an arbitrary amount at which to determine you need to pay 71% in tax, particularly when the majority of that is not a liquid asset.
  • Oh, Really???
    It's been my experience after nearly 30 years in the tax professional business that NO family farms ever show a taxable profit. By the time you factor in government subsidies and other tax-free incentives, there is NO income tax due. So, perhaps, it's time to eliminate all of these so-called family farm dynasties that don't pay tax for generation after generation...
    • Problem is
      Taxing inheritance over $1M @ 71% - great idea, that should effectively eliminate any family farms over 200 acres - no one will be able to afford to inherit and stay in business.
      On-line sales tax - by all means. Tax consumption rather than efforts to save. It offers local businesses to not be put at a disadvantage for being located in state. The real issue lies with the implication that if one tax replaces the other, the old will never comes back. ...
      • We need more of your money
        Come on we need more of you po folks money. Good relationship with Durbin (what a joke he is). Hey while we are at it take away that perk for those disabled veterans too like you tried to do last year. those cripples should pay again and again - selfishly getting injured so we have to subsidize them. Are you sure Kenley is a Republican?
      • TYPICAL
        Luke, I expect nothing less that your old,useless ideas. Why not have a regressive tax, than a progressive tax. Again, you and Mitch think alike, the serf's should serve the rich masters. I say tax inheratance over 1 mill at 71%. Only earned income should a low tax rate. I am already on my hands and knees paying for the dome, the luke, market square, concseco, the mall, the simon building, the mall, the jw and all other subsidized companies and buildings. You make me sick, retire and take your feable ideas with you. I sure you will enjoy the perks of perf and lobbying.
      • Call it what it is
        Otherwise known as, "redistributing the tax burden from the wealthy to the middle class." Great idea.

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