Ways and Means Chooses Not to Act on Internet Sales Tax Collection Bill

For unknown reasons, the House Ways and Means Committee – after taking testimony – elected not to take a vote on SB 545 last week prior to the deadline for committee passage.

The bill represented a well thought out and sound approach for collecting Indiana sales tax on online transactions. While the bill died in committee, there remains the possibility that its provisions could find their way into another bill before the session ends. The Chamber will continue to advocate for this bill to be incorporated into another piece of legislation.

Internet Sales Tax Collection Bill Heard in House

The Chamber again testified in support of SB 545 last week. We are pleased it is receiving broad, bipartisan support. As we have noted previously, this bill represents an important step toward the Legislature requiring online retailers who have no physical presence in Indiana to collect Indiana sales tax from their Indiana customers when they make online purchases.

Senate Bill 545 is a well thought out and sound approach. Senator Kenley is to be commended for his pursuit of this legislation that will serve the dual purposes of leveling the playing field between in-state brick and mortar retailers and their online competitors, while also boosting Indiana’s sales tax base. The bill will further a key objective in the Chamber’s Indiana Vision 2025 plan.

Sales Tax Battles Growing Nastier

The call is growing louder (from the Indiana Chamber and others) for a federal solution to the online sales tax dilemma. But while that fight continues to be waged, Governing magazine looks at the individual state battles with Amazon. They only seem to add more fuel to the fire for a comprehensive national strategy.

States have been coming up with a variety of ploys — some conservative, others more radical — to get Internet retailers to collect the tax. Their efforts range from a handful of states claiming nexus via in-state affiliates that sell on the big-name websites to a 24-state compact to streamline sales tax systems. At the same time, states that levy sales taxes have come up with new allies in the fight to get the U.S. Congress to redress the collection issue and undo Quill. These allies include not just small mom-and-pop stores on Main Street but also giant retailers such as Target and Wal-Mart — retailers with robust Internet sites that do collect the sales tax because they have nexus in almost all states.

At every turn, Amazon has gone to great lengths to block state collection efforts. In states that claimed nexus because Amazon affiliates were located there, Amazon ended relationships with those businesses and, in turn, pursued litigation in the state. In states where it had facilities, it threatened to pull them out, thereby raising the specter of eliminating jobs. And where Amazon wanted to open facilities, it insisted on a free pass on tax collection. Amazon declined interview requests for this story.

Its pugnacious ways have paid off in some states, where the company was given the green light not to collect sales taxes for years — so long as it kept or built a facility in the state. But those ways have left bruised feelings, especially among legislators. In Tennessee, where legislators have been rethinking a deal Amazon struck last year to build distribution warehouses in return for not collecting the tax on goods shipped from those facilities, state Sen. Randy McNally likens Amazon lobbyists to take-your-lunch-money bullies. “They are making demands on the states that if a smaller business came in and tried to do, we’d laugh at ’em.”

This fall, however, there was what may be the biggest breakthrough on the Amazon tax front: California’s settlement with the company. After fighting legislation that would require out-of-state online retailers to collect sales taxes if they had affiliates, offices, workers or other ties to the state, the company ponied up millions of dollars to put the issue to taxpayers via a ballot referendum. It also cleansed its website of California-based affiliates. Then, the company suddenly backed down — in part because the damage to its reputation was growing. The online retailer struck a deal with the state that will require it to begin collecting sales taxes in California after a one-year grace period. In September, Gov. Jerry Brown signed the agreement into law.

The California deal suggests that Amazon may be changing its game plan. If that’s so, it would probably bring the rest of the Internet retailers into the fold as well. (Amazon recently made a similar deal with Tennessee.) Meanwhile, the states battle on, with legislators contending with the lobbying power of a giant — juggling the need for revenue versus promises to bring a few jobs to the state.