Indiana's sales tax code remains unfair
Wednesday, November 28, 2012 10:00 AM
We believe that consumers should make every effort to shop locally.
Unfortunately, online shopping is cutting deeply into the profits of our local merchants.
There is no question that online shopping is convenient and the selection might be greater than what we find in some brick-and-mortar businesses.
We need to give our local business owners every advantage, but Indiana's sales tax code makes that difficult.
Under federal law, unless a retailer has a physical presence in Indiana, it is not required to collect Indiana's 7 percent sales tax. Instead, Hoosiers are expected to report the purchases on their income tax returns and pay the sales taxes then.
Few people do that.
Two lawmakers - Rep. Ed DeLaney, a Democrat from Indianapolis, and Tom Dermody, a Republican from LaPorte - plan to introduce legislation to try to force many Web-based businesses to collect taxes on their sales. They are joined by members of the Indiana Merchants for Tax Fairness, which has called for an end to an "unfair advantage" online retailers have over brick-and-mortar stores.
Indiana loses about $77 million a year from un-taxed online sales, according to a study released last year by the Indiana Fiscal Policy Institute.
And don't forget that local retailers pay property taxes and pay people to complete the paperwork necessary to report the sales tax. These are responsibilities that many online retailers avoid.
In Indiana, the biggest example of the problem is Amazon, which has several distribution centers in the state. The company struck a deal with state officials who wanted the jobs the distribution centers would provide. That arrangement allowed the company to continue pushing the responsibility for sales tax reporting to customers, at least temporarily.
DeLaney and Dermody's legislation would make Amazon and other online retailers begin collecting the state's sales tax on July 1. That's six months earlier than required for Amazon, under its agreement with the state.
It seems unfair to demand that one store assess a tax on behalf of the state while allowing its competitor to avoid that duty.
We urge lawmakers to take up the debate when they begin meeting in January.