The state expects to recoup up to $25 million with the deal.
The state of Indiana estimates that about $75 million in sales tax on Internet purchases goes uncollected each year by web retailers. But, thanks to a deal announced today with Amazon.com Inc., the state expects to recoup about a third of that, roughly $20 million to $25 million, Gov. Mitch Daniels said.
Amazon, No. 1 in the Internet Retailer Top 500 Guide, has agreed to voluntarily begin collecting sales tax on sales to Indiana customers as of Jan. 1, 2014, or possibly sooner if a federal law granting states the authority to mandate sales tax collection by Internet and catalog retailers is enacted before Jan. 1, 2014. Amazon has agreed to begin collecting sales tax either 90 days from the federal law’s enactment, or on Jan. 1, 2014, whichever is earlier.
The agreement coincides with a related legal complaint filed last November against the state by Indianapolis-based real estate developer Simon Property Group Inc., which said this week that it will dismiss the complaint, which was filed in Marion County Superior Court in Indianapolis. Simon filed the complaint in an effort to force the state’s hand to require Amazon to collect sales tax from Indiana customers and remit it to the state.
“This action is being filed to benefit all of Indiana's taxpayers and the state's bricks-and-mortar retailers, many of which are SPG's tenants at its 27 shopping centers in Indiana,” Simon said last fall in announcing the filing of its complaint, which did not seek monetary damages.
In a reference to the fact that Amazon has distribution facilities in Indiana, which under federal law allows the state to mandate sales tax collection by online retailers, Simon added: “The lawsuit is being filed after SPG requested the state of Indiana begin collecting sales taxes on sales made by Amazon.com within the state of Indiana as required by existing Indiana law. Amazon.com is required by Indiana law to collect and remit sales and use taxes to the state, for sales made over the Internet, but has consistently refused to do so even though it is required by current Indiana laws.”
In a press conference yesterday, Daniels confirmed that Simon's complaint was being withdrawn, and Daniels and Paul Misener, Amazon's vice president for global public policy, noted they wanted to focus on working toward creating more jobs and capital investment in the state. Misener noted that Amazon already has thousands of workers in Indiana and has invested a few hundred million dollars. "We're interested in bringing more jobs and capital investment to Indiana," he said.
Amazon’s agreement with Indiana is similar to others it signed last year with California and Tennessee, where the retailer said it would proceed with plans to invest in new distribution facilities that would result in thousands of new jobs.
Daniels, a Republican, said today that he considers the deal with Amazon a partial and temporary solution to the void in online sales tax collection in lieu of federal legislation. “The only complete answer to this problem is a federal solution that treats all retailers and all states the same,” he said. “But for now, Amazon has helped us address the largest single piece of the shortfall, and we appreciate the company working with us to find a solution.”
Misener added that Amazon would continue to lobby for federal legislation, but that the effort may take until 2013 to get final legislation.
Amazon already collects sales tax in Washington state, where its headquarters is based; in Kansas and Kentucky, where it maintains distribution centers; in North Dakota; and in New York, where it’s collecting sales tax while awaiting the result of a court case regarding that state’s law that requires online retailers to collect sales tax if they get sales leads from in-state affiliate web sites like blogs.