Indiana House panel backs online sales tax collection

An Indiana House committee overwhelmingly approved a bill Thursday to require Amazon.com and other online-only retailers to start collecting Indiana's 7 percent sales tax this summer, six months earlier than planned under a deal brokered by former Gov. Mitch Daniels.

The House Ways and Means Committee voted 20-1 to advance the bill to the full House. The proposal would start requiring collection of the sales tax in July but would exempt online retailers doing less than $10,000 in business a year in the state.

Bill sponsor Rep. Tom Dermody, R-LaPorte, said the state's current policy allowing online retailers not to collect the sales tax gives them an unfair advantage over traditional stores.

"We're not asking anything other than putting businesses onto a level playing field," Dermody said.

The current policy dates to a 2007 deal with Amazon, which agreed to open its first warehouse in Indiana with the promise that lawmakers wouldn't push for online sales tax collection. Amazon now has five distribution centers in Indiana but hasn't given details on how many workers it has.

Daniels reached an agreement with Seattle-based Amazon last January for the company to start collecting state sales tax in 2014. That followed a lawsuit by Indianapolis-based shopping mall owner Simon Property Group against the state and a lobbying push by traditional retailers over the policy.

Indiana Retail Council President Grant Monahan said he believed most lawmakers agreed it was time to end a price break that takes customers away from stores in the state.

"Internet retailers, who many times aren't based here, don't employ that many Hoosiers, if any at all, don't support community organizations, don't pay taxes here, get that advantage," Monahan said.

Some legislative leaders, however, are wary of overriding the agreement between Amazon and Daniels, whose term as governor ended earlier this month.

Sen. Brandt Hershman, chairman of the Senate Tax and Fiscal Policy Committee, said the argument over business fairness must be weighed against the potential consequences of breaking the deal with Amazon.

"We need to evaluate how making that deal would be perceived in the business community in general with respect to Indiana honoring its commitments," said Hershman, R-Lafayette.

The Associated Press left a telephone message seeking comment from Amazon officials.

It isn't clear how much money the state might receive from additional sales tax collections.

A study completed last year by the Indiana Fiscal Policy Institute and Ball State University researchers estimates the state loses up to $114 million a year in uncollected sales taxes on internet purchases, while a state Senate budget leader has said it could be as much as $250 million.

Monahan said the retailers group was still studying how many online businesses would be covered by the bill but believed it would include most with large Internet sales. Current state law already requires sales tax collection for online sales by retailers, such as Wal-Mart and others, that have stores in Indiana.

Dermody said Daniels reached a good deal to attract Amazon to Indiana but that it was no longer necessary.

"I think part of the agreement was that Amazon needed this time to prepare for collecting sales tax in our state, and now we've seen where there are four other states that have sooner deals than we do," he said.

Rep. Ed DeLaney, D-Indianapolis, a co-sponsor of Dermody's bill, said Amazon and other online retailers should never have been allowed not to collect the sales tax.

"We should collect taxes based upon rules, not on handshakes," DeLaney said.