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Indiana Proposing Amazon Tax Law

  • Nov 28, 2012 | Gail Cole

Cyber Monday 2012 was the biggest single shopping day ever, with online sales up approximately 30% over 2011 Cyber Monday sales. It's hardly surprising, then, that two Indiana State Representatives want to introduce legislation that would require many online retailers to collect Indiana state sales tax sooner rather than later.

According to the Supreme Court Ruling of Quill v. North Dakota, a business does not have to collect and remit sales tax in a state unless it has nexus there. A company is considered to have nexus in a state if it has a physical presence there, such as a store front, manufacturing facility, or distribution center.

Amazon.com has five facilities in Indiana, and is currently scheduled to start collecting sales and use taxes in the state of Indiana on January 1, 2014, thanks to a deal made with Governor Mitch Daniels (R). A law suit challenging the fact that Amazon was not already collecting sales tax in Indiana was dismissed in January 2012, the day Governor Daniels announced the tax deal with Amazon. The online retailer has created thousands of jobs in the state.

Amazon.com currently collects sales tax in eight states including its home state of Washington: California, Kansas, Kentucky, New York, North Dakota, Pennsylvania, and Texas. Several other states have sales tax agreements with Amazon in the works.

Indiana State Representatives Ed Delaney (D) and Tom Dermody (R) announced on Cyber Monday that they want to "level the playing field for Indiana's brick and mortar retailers in time for the 2013 back to school and holiday shopping seasons." If their proposed legislation is enacted, remote sellers would be required to collect taxes if they do at least $10,000 in sales through in-state affiliates that receive a commission. Affiliates are websites that direct internet shoppers to other online retailers, such as Amazon.

Congress is considering several bills that, if enacted, would mandate sales and use tax collection at the federal level. The Marketplace Equity Act (H.R. 3179), the Marketplace Fairness Act (S. 1832), and the Main Street Fairness Act (S. 1452) differ in the details, but each propose allowing states to collect sales taxes from remote sellers in exchange for "simplifying their sales tax laws." In addition, the bills include small-seller exceptions: in H.R. 3179, retailers with less than $1 million in sales in a state would be exempt from collecting sales tax in that state; and in S. 1832, retailers with less than $500,000 in sales in a state would be exempt.

Some people, such as Washington State Governor Christine Gregoire (D), believe that  online sales tax legislation can be passed during the current lame duck session.

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Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.