Gov. Mitch Daniels recently announced the state has reached an agreement with Indiana’s largest online retailer, Amazon.com Inc., to begin collecting Indiana sales tax on internet purchases – thanks in large part to a Noblesville legislator. Indiana will become the fourth state to reach such an agreement with Amazon, but Daniels and State Sen. Luke Kenley will continue to push for federal action to fairly address the issue.
“The only complete answer to this problem is a federal solution that treats all retailers and all states the same. But for now, Amazon has helped us address the largest single piece of the shortfall, and we appreciate the company working with us to find a solution,” said Daniels.
According to the agreement between Amazon and the Indiana Dept. of Revenue, the company will voluntarily begin to collect and remit Indiana sales tax beginning Jan. 1, 2014, or 90 days from the enactment of federal legislation, whichever is earlier. The state will not assess the company for sales tax for other periods.
Kenley, who chairs Senate Appropriations Committee, began talks with Amazon almost a year ago about collecting taxes. Kenley has asked Congress to require all online retailers to collect state sales taxes. 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 DOR said few people do.
In November, Kenley told a congressional committee 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 Indiana loses about $75 million a year by not collecting sales tax for all online purchases. Of that, Daniels said the State Budget Agency and DOR estimate revenue from Amazon’s sales tax would be approximately $20 to $25 million per year.
Indiana’s current policy dates to a 2007 deal to get Amazon.com to open its first warehouse in the state, which came with the promise 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.