As the General Assembly revs up this week, we again urge lawmakers to take a long look at a basic issue of tax fairness.
In December we urged lawmakers to examine online sale tax. And this week state Sen. Luke Kenley, R-Noblesville, raised the issue again. Kenley, who chairs Senate Appropriations Committee, wants Congress to require all online retailers to collect state sales taxes. He said it would be an ideal replacement for the inheritance, or estate tax.
“It’s almost a one-for-one replacement and it’s a perfect replacement for the estate tax,” Kenley told the Times of Munster.
Indiana would lose about $165 million a year starting in 2020 if lawmakers eliminate the state’s inheritance tax, according to estimates.
As things stand now, only online retailers with a physical location in a state are required to collect sales tax. Customers are supposed to pay a 7 percent use tax for online purchases where sales tax wasn’t collected, but, according to the Associated Press, the Indiana Department of Revenue reports that few people do. Indiana loses about $77 million a year by not collecting sales tax on all online purchases. Other studies put the loss at nearly $200 million.
While the numbers might work out well in the short-term, more fundamental issues are at stake.
According to the AP, Indiana’s current policy dates to a 2007 deal to get Amazon.com to open its first warehouse in Indiana that came with the promise that state lawmakers wouldn’t push for an online sales tax. Amazon now has three distribution centers open in central Indiana and announced plans last summer for a fourth.
But traditional stores are starting to balk. Those retailers say it’s a matter of fairness: If physical stores have to collect sales tax, they state, then Web-based outlets ought to have the same obligation. Those stores, they state, hire Hoosiers, invest in property and pay their fair share of taxes.
From Amazon’s viewpoint, why should the state reverse course? From the retailers’ viewpoint, why should Web-based outlets enjoy a tax advantage?
And why, in this economy, would any government enact a new tax?
Those are all questions worth asking.
We think Kenley is on the right track toward getting an answer.
Websites are not limited by state borders. With that in mind, we believe a serious national conversation is in order.
As we wrote in December, it’s a conversation worth having.