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Indiana retailers press for online state sales tax

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Indiana's retail lobby urged state lawmakers Monday to pass an online sales tax provision that they said would level the playing field for businesses in the state and raise hundreds of millions of dollars in revenue. But lawmakers gave a lukewarm reception to the proposal likely to spark a backlash from online retailers.

The Indiana Retail Council and the Alliance for Main Street Fairness held a news conference in the Indiana Statehouse Monday to urge legislators to use their authority to force sites like Amazon.com and Overstock.com to pay the sales tax beginning the next budget cycle, netting the state somewhere near $300 million per year.

A 1992 Supreme Court ruling, however, prohibits states from forcing a business to pay sales taxes if that business does not have a physical presence in the state. What constitutes as a physical presence is debatable, and usually up to lawmakers, but the standard criteria include local affiliates, distribution centers and stores.

Using such tax loopholes, council president Grant Monahan said, erases the fair playing field between Indiana retailers and their online competition.

"The failure of internet retailers to collect sales tax puts Indiana retailers at a 7-percent disadvantage that is costing the state revenue and brick-and-mortar retailers the chance to grow," Monahan said.

But Senate Appropriations Committee Chairman Luke Kenley, R-Noblesville, said he didn't expect to include the online tax into the state budget plan now pending in his committee.

Kenley said the proposal for a state law wouldn't solve the problem because online retailers without physical sites in Indiana still would not collect the sales tax.

"What we need is for all online retailers to remit the sales tax," Kenley said.

He said there also was no sound reason to overturn the state's agreement with Amazon, but that a national solution by Congress was needed, as the number of states that are enforcing the online tax in order to generate revenue has increased over the past few years.

A 2007 deal to get Amazon to open its first warehouse in Indiana came with the promise that Indiana lawmakers wouldn't push for an online sales tax, the Indianapolis Business Journal reported. The state leaders brokering the deal also repealed a state law that required companies with a physical presence, including distribution centers, in the state to collect taxes on products used in Indiana.

The agreement led to the opening of two warehouses in the state, providing close to 1,500 jobs, according to company press releases.

Seattle-based Amazon and Salt Lake City-based Overstock did not immediately comment on the issue.

However, Amazon isn't against a sales tax but wants "a constitutionally permissible system that is applied evenhandedly," according the company's vice president of public policy Paul Misener's past comments.

Moves to tax Amazon in the past have caused the retailer to close facilities and cut ties with local affiliates, something that could cancel out the potential benefit of an online sales tax, Indiana Commerce Secretary Mitch Rood told the Indianapolis Business Journal.

But such political tangles don't change the council's stance on the tax.

"Well, it wouldn't surprise me if there was backlash from online retailers," Monahan said. "After all, they're operating now from outside the law. They're operating with a 7-percent advantage over Indiana retailers. I suspect they're not going to like that."

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  • WRONG
    It's not because of lower taxes...it's to AVOID taxes! Explain that to all the public employees who are losing jobs.
  • OK
    It's OK to shop on the internet...the issue is not paying taxes. It would be such an easy fix, as a system could be set up, so the zip code adds tha tax amount and directs the $ to the proper state.
  • Simplistic
    More simplistic focus on taxes from Hoosiers. (And when it's not "taxes" it's "unions"...) Here's the reason I do 80-90% of my shopping online: they have what I want. Stop catering to the lowest common denominator and improve your product mix. Or keep whining about taxes. It is easier than fixing the actual problem, as many politicians can attest.
  • Close all Local Stores
    I think you may be right. Local merchants are making way too much money. We should close all local stores that pay sales tax to the State of Indiana. We should make ALL purchases out of state. We could save....$300,000,000.00 or more. The State of Indiana spends too much money on schools, firemen, police, road repairs and airports. I say close all local stores so we can save that 7%. Gosh, I just realized, 80% of the local workforce is now on unemployment. They were making too much money anyway!
  • Internet Sales Tax
    It's better to shop locally, so you can see the fabric and design of clothing and shoes. But local retailers provide far fewer choices than the Internet. I don't have a problem with paying sales tax, as long as the collector sends it on to the state of Indiana. I don't want to have to get it back from the state it went to, then pay Indiana. Let the Internet retailers do the work.
  • Why I shop online
    I shop online because the items I want, books, music, games, cannot be purchased from retail stores in the Indianapolis area. The selection is just limited.
    • Missed the point
      If in state retailers are losing business to internet companies because of the 7% sales tax, that should tell everyone that the sales tax is too high. People tend to want to do business where the taxes are lowest.
      • Possible to avoid sales tax regardless
        Even if online retailers start collecting sales tax, Indiana residents can still avoid it by using a package forwarding service from a sales tax-free state like Oregon. Try http://bit.ly/gN2oGK
      • on line shopping
        Reasons not to shop locally: high gas prices, standing in long lines, prices on line are more competitive, (our taxes are all ready too high.) Most on line purchases offer free shipping.
      • Unfair ?
        What retailers fail to realize is;
        When we shop at their stores, we walk out with our things immediately. Returns are also much easier in person.

        I shop online knowing that I will pay no sales tax, but I am also aware that 80% or greater of the time I will also pay for shipping and wait 1 to 6 weeks to get my items.

        All this says to me is the local retailers I DO choose to shop at are babies. Maybe I should rethink all purchases in the future, as the already inflated prices I pay for everyday things Dont seem to enough profit to satisfy their greedy pockets.

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