The Indiana Department of Revenue has settled a lawsuit with four online retailers that had been challenging a state law that requires out-of-state sellers to remit sales tax.
American Catalog Mailers Association and NetChoice initially filed the lawsuit against the state in June 2017, and Wayfair Inc. and Overstock.com joined the suit in August 2017.
The settlement comes in the wake of the U.S. Supreme Court decision issued in June that says states are allowed to pass laws that require sellers without a physical presence in the state to collect sales tax from customers and remit it to the state.
Indiana’s law, which was passed in 2017, requires retailers that annually have sales of at least $100,000 in the state or do business with more than 200 Indiana customers to collect and remit the state’s 7 percent sales tax.
The state law targeting online retailers did not immediately go into effect in 2017, though, amid the pending legal challenges. Previously, only retailers with a physical presence in the state had to collect the tax, but Indiana has been collecting some online sales tax revenue thanks to deals in place with nearly 2,000 companies, including Amazon.
Following the U.S. Supreme Court decision in June, the Indiana Department of Revenue said it would begin enforcing the law Oct. 1.
It’s unclear exactly how much revenue the state could see from the tax, but a 2017 study published by the University of Tennessee concluded that Indiana lost $195 million in 2012 in uncollected sales taxes, and that figure is likely much higher now as more and more retailers shift to online sales.
Under the settlement agreement, the retailers essentially agreed to follow the law and begin collecting sales tax by Oct. 1. They also waived their rights to appeal the case.
Specifically, in the settlement with the American Catalog Mailers Association and NetChoice, the state agreed to provide sales tax administration software for free and cover the costs of any errors caused by that software.
But that offer is not unique to those retailers. Department of Revenue spokeswoman Emily Landis said the state pays membership dues to provide a program called Streamlined Sales Tax, which is available to any business that would like to sign up.
The lawsuit, which had been pending in Marion Superior Court, has been dismissed following the agreements.