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updated: 11/26/2012 5:40 PM

Indiana proposal would move up online sales tax collection

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Associated Press

INDIANAPOLIS -- Two lawmakers say they plan to introduce legislation in the new year that would require Amazon.com and other online-only retailers with a presence in Indiana to begin collecting sales tax on July 1, 2013, six months earlier than a deal brokered by Gov. Mitch Daniels last January.

State Rep. Ed DeLaney, a Democrat from Indianapolis, told The Associated Press in a telephone interview Monday that it's unfair that Amazon and other online businesses aren't collecting the sales tax that businesses with brick-and-mortar stores are required to collect.

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"There's no reason to give a tax preference to one part of the retail world and not to the rest. That's what we're doing right now," he said.

DeLaney said he believes the online companies should already be collecting the 7 percent sales tax, and that the legislation he and Rep. Tom Dermody, a LaPorte Republican, will introduce will clarify that. He said he doesn't believe tax collection should be based on private agreements.

Amazon said last year that it needed two years to get ready to properly collect the state's 7 percent sales tax from customers. Daniels announced in January that he had reached a deal with Amazon that it would begin collecting sales tax from Indiana customers in 2014.

The proposed legislation was announced on Cyber Monday, named for the expectation that it'll be the biggest online shopping day of the year.

"It would mean they would begin collecting the tax before another school year begins or another holiday season begins where the only businesses have a 7 percent advantage," Dermody said in a telephone interview. "It would just even the playing field for everyone, and the sooner the better."

The Indianapolis Star reported that Jeff Kinney, owner of two Kinney Dancewear shops in Indianapolis, said he loses as much as 20 percent of sales to online retailers. He says some customers go to his store to ensure the item they are buying will fit properly, taking up a salesperson's time, only to buy the item online, evading the sales tax.

Indiana Merchants for Tax Fairness spokesman Grant Monahan said online retailers have a 7 percent advantage by not collecting the tax, which people owe but seldom pay on their own. The group is a coalition of more than 300 small-business owners from across Indiana.

"Retailers don't mind competition in the marketplace, in fact they thrive on it," Monahan told WISH-TV. "But they need competition on a level playing field."

Monahan said a statewide poll found that 69 percent of Indiana residents support "a level playing field" in the collection of sales taxes. A report released last week by the Indiana Fiscal Policy Institute and Ball State University researchers estimates the state loses about $77 million a year in sales taxes not collected on Internet purchases.

In March, Indiana House leaders headed off a vote for the state to begin collecting sales taxes from online retailers and override Daniels' deal with Amazon.

The state's current policy dates to a 2007 deal with Amazon for it to open its first warehouse in Indiana with the promise that lawmakers wouldn't push for online sales tax collection.

The AP left a telephone message seeking comment at Amazon on Monday.

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