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Indiana bricks-and-mortar retailers at disadvantage with online sellers; state loses estimated $200 million

August 19, 2011

08/22/11 State Senator Luke Kenley, president of the national Streamlined Sales Tax Governing Board, today urged Indiana’s congressional delegation to support the recently introduced federal Main Street Fairness Act aimed at allowing local retailers to compete more effectively against out-of-state Internet sellers.

As chair of the Senate Committee on Appropriations, Kenley (R-Noblesville) also said he hopes state lawmakers would agree to use the nearly $200 million in additional revenue the state would receive from the passage of the federal legislation to eliminate Indiana’s inheritance tax and reduces others, so the Main Street Fairness Act is not seen as a tax increase on Hoosiers.  

“Hoosier bricks-and-mortar businesses are at competitive disadvantages with online retailers who often do not collect sales taxes on Internet purchases, costing our state as much as $200 million annually,” Kenley said. “Though consumers are required to report and pay a ‘use tax’ on Internet purchases when they file their taxes each year, many unknowingly fail to do so, costing Indiana and other states substantial revenue – an estimated $11.4 billion nationwide each year.”

A 1992 U.S. Supreme Court ruling, known as the Quill decision, determined retailers are not required to collect sales taxes in states where they do not have physical locations unless mandated by Congress. As a result, many consumers visit a store to compare or test products, but then make their purchases online – often avoiding payment of sales taxes, Kenley said.

If enacted, the Main Street Fairness Act would create a uniform sales-tax collection system ensuring all businesses – both online and brick-and-mortar retailers – collect uniform sales tax for purchases. The act would also relieve consumers of the legal burden to report to state tax departments the required sales tax they owe for online purchases.

“I am asking our congressional delegation to support a modern, streamlined, pro-business initiative that will help our thousands of retailers who are being discriminated against under the current policy,” Kenley said. “This is not a new tax but one that is already owed and not being collected. With sales tax serving as Indiana’s largest source of revenue, our K-12 schools, higher education institutions, public safety and other essential state services are hit the hardest by the current system. It’s time we level the playing field for our local businesses and remove this unfair burden from Hoosier consumers.”

Kenley said it’s important to note that the largest online retailer in the United States – Inc. – recently stated in a letter to U.S. Sen. Dick Durbin (D-IL), author of the legislation, that the company supports a simple, nationwide system of state and local sales-tax collections evenhandedly applied to all sellers, no matter their business model, location or level of remote sales.

Kenley said the Main Street Fairness Act is also supported by the National Governors Association, National Conference of State Legislatures, National Retail Federation, Retail Industry Leaders Association, International Council of Shopping Centers and the United States Conference of Mayors as well as state and local retail merchant groups across the country.

The Streamlined Sales Tax Governing Board oversees and makes updates to the Streamline Sales and Use Tax Agreement, which is a comprehensive, uniform, simplified approach to sales and use tax collections adopted by 24 states, including Indiana.  For more information on the agreement visit