Sales Tax Proposed for Out of State Merchants

INDIANAPOLIS – Out-of-state retailers who do business in Indiana will be required to collect a tax from their customers making online purchases from them.

Senate Bill 545 passed the Senate by a 42-1 vote, with only Sen. Jim Buck, R-Kokomo, dissenting. Specifically, the bill requires retail merchants outside of Indiana to pay the sales tax if their gross revenues exceeds $100,000 in a calendar year and they make more than 200 separate transactions within Indiana.

The bill’s author, Sen. Luke Kenley, R-Noblesville, said it will help level the competition between merchants located in Indiana and those selling goods online.

“We have brick and mortar retailers in the state who pays 7 percent Indiana sales tax,” Kenley said. “They employ people, they pay taxes, they grow our economy and we put them at a seven percent disadvantage to somebody who may be on the internet and doesn’t pay taxes.”

Kenley cited studies showing that Indiana loses up to $200 million a year in lost sales tax income from online purchases.

Kenley said tax systems are only strong when they are fair.

The current tax system requires citizens to pay use taxes on their out-of-state purchases when they file their Indiana tax returns. About $2 million was collected in 2013 through use taxes.

“This is all about fairness,” Kenley said. “It’s all about getting equity for our brick and mortar retailers. It’s all about getting us to have a reasonable sales tax system.”

Buck cited his previous experience as a retail owner for his decision to vote against the bill.

He said increases in taxes always benefit larger businesses and hinder small business owners. Buck said internet purchases have been the only way small stores can survive against retailers like Walmart.

“I just think it’s an undue burden on a small retailer,” Buck said.

The bill now moves to the House for further consideration.


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