Internet Sales Tax Laws

Farewell to Internet's Tax-Haven Status?: Amazon to start collecting Indiana state sales tax in 2014

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Following a pattern on displays in states such as Texas and South Carolina, e-commerce giant Amazon has agreed to start collecting state sales tax in Indiana in two years' time, reports the Washington Post (full disclosure: Amazon founder Jeff Bezos is a donor to Reason Foundation, the nonprofit that publishes this website).Counties and localities that tack on increments to the state rate will be out of luck and the new arrangement will net somewhere between $75 million to $250 million for Hoosier coffers (that sort of variance is an indicator that nobody knows how much of the state's 7 percent sales tax is being left on the table).

Retailers are required by federal law to collect sales tax only in states where they have a "physical presence," i.e. a warehouse or storefront. Amazon created warehouses in Indiana in 2007 and this current development is the final act of a prior agreement.

As the biggest kid on the e-commerce block, Amazon now advocates the federal government forcing all online merchants to collect sales taxes on every sale.

Paul Misener, Amazon's vice president for global public policy, said at a news conference in the governor's office that the company supported federal legislation requiring all sales tax collections by all online companies.

"It's the only way to level the playing field for all sellers," Misener said. "It's the only way for Indiana to obtain all the sales tax revenue that is already owed."

More here.

Last fall in Reason, Veronique de Rugy explained why the push to collect state and local sales taxes in states where a business has no physical presence is a form of taxation without representation.

For any number of reasons - from basic self-interest (saving 6 percent to 8 percent off purchases that get delivered for free to my door is no small advantage) to philosophical premises (the idea that the federal government might pass legislation dictating how non-federal taxes get collected is disturbing, to say the least) - I hope that at least large parts of the Net stay tax-free. But it shouldn't suprise anyone that those days are almost certainly numbered. As the eugenics-loving, pro-involuntary-sterilization legal giant Oliver Wendell Holmes Jr. would tell you, taxes are the price we pay for civilization. Or more precisely, the amount of protetction we pay not to be thrown in jail.