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Indiana Takes Step Toward Amazon Tax

  • Feb 5, 2013 | Gail Cole

 Indiana: Amazon Will Collect Tax in 2014 After All.

UPDATE, 3.19.13 It looks like HB 1007 is dead. Senator Ryan Mishler (R), the original sponsor of the legislation, has said that it "just doesn't seem to have a lot of legs right now." He acknowledges that the bill, which would require Amazon and many other online retailers to collect and remit Indiana sales tax beginning July 1, 2013, "could … undermine the state's credibility with other businesses … [and] make it look like Indiana is willing to go back on deal." Amazon is currently on track to start collecting the tax in January 2014.

The Indiana House of Representatives yesterday underscored the need for Amazon to start collecting and remitting sales tax in the Hoosier State sooner rather than later. Instead of allowing the online retail giant to wait until January 2014 to collect sales tax, as decided in a deal struck by former Governor Mitch Daniels (R), lawmakers are pushing for a start date of July 2013. The motion, HB 1007, was approved in a 79 to 18 vote.

Amazon supports a federal solution to the remote sales tax problem. When announcing the fact that Amazon will begin collecting and remitting sales tax in Connecticut in November of this year, Paul Misener, Amazon's vice president of global public policy, said the company is looking forward "to working … toward passage of the legislation now being considered by Congress that would finally resolve the sales tax issue, level the playing field for all retailers, protect states' rights and allow states to collect the revenue owed."

Yet in the past, Amazon avoided collecting sales tax where it could. It struck deals with more than one state: jobs would be created, and sales tax collection would be delayed. Back in 2007, the Indiana legislature "gave Amazon a pass on collecting sales tax," and in 2008, Amazon opened its first distribution center in the Hoosier State. It has built four more since then.

Brick-and-mortar businesses point out that Amazon and other remote retailers have an "unfair sales advantage" over local businesses: at checkout, local sellers have to add sales tax while remote retailers don't. This is based on the 1992 Supreme Court ruling in Quill v. North Dakota, which determined that "a business had to be physically present in a state" in order for the state to require it to collect sales or use tax "on its behalf." That physical presence is nexus.

Indiana retailers argue, compellingly, that Amazon.com has nexus thanks to its many fulfillment centers. On their behalf, in 2011 the Simon Property Group, Inc ("the country's largest owner, developer and manager of high quality retail real estate"), filed a complaint against the state of Indiana requesting that "the State of Indiana begin collecting sales taxes on sales made by Amazon.com within the State of Indiana as required by existing Indiana law."

In response to that pressure, former Governor Daniels announced in January 2012 that Amazon would "begin collecting sales tax in Indiana effective 2014." At the time, Amazon said, "We want to get it done this year… [b]ut we may need 2013 to accomplish it." Indiana was the fourth state to reach such an agreement with Amazon. That same day, the Simon Property lawsuit was dismissed.

Of the current discussion to renege on that agreement, Senator Luke Kenley (R-Noblesville), an influential fiscal leader, said "I think this would be a very bad precedent to set. I think it would send a message to the corporate world that you can't go to Indiana and make deals with the legislature there and expect them to live up to their end of the bargain."

But Representative Tom Dermody (R-LaPorte) disagrees. "I think we need to send a message now to all governors going forward that if you want do do something like this, you need to come here (to the legislature) and you need to ask us to change the law, because that's how our constituents have a say in how our state is run."

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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.