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October 18, 2011

E-commerce raises question of sales tax fairness

(Continued)

NORMAL, Ill. —

But she also knows cheaper online prices helped push Borders over the cliff and she admits she buys her textbooks online from an Internet retailer that doesn't collect the sales tax. She's a frequent enough shopper on Amazon's website that she qualifies for their no-cost shipping.

Consumers like Gianaris are so used to buying goods without paying taxes that they resist efforts to change the system, viewing efforts to add a sales tax to online purchases as another government attempt to impose a new tax. A Rasmussen Reports poll in April found more than 60 percent of Americans don't want an online sales tax in any form.

For his part, Simpson worries about the cost of collecting and remitting taxes to the multitude of states where his books are sold. “I don't object to collecting an online sales tax," Simpson said. “But somebody needs to come up with a way for me to do that (and remit the tax).”

In neighboring Indiana, Republican State Sen. Luke Kenley says he's found a way. He's president of the Streamlined Sales Tax Governing Board, a coalition of 24 states that have been lobbying Congress for a decade to enact a uniform sales tax for all retailers.

Five years ago, Kenley supported a legislative deal in his state – similar to those cut in Tennessee and South Carolina – that gave national online companies a break by agreeing not to go after them on the sales tax if they would locate their distribution centers in Indiana.

Intended to lure investment and jobs, it worked: Amazon quickly opened three distribution centers in Indiana, creating 1,700 jobs.

Kenley doesn't regret the deal, but admits his concerns over lost sales tax revenue are mounting. Almost half of Indiana's $13 billion annual budget is paid for with sales taxes. Last year, Kenley chaired the state's budget committee that cut $300 million in school funding to make up for a revenue shortfall.

"Nobody likes paying taxes," said Kenley. "But everybody recognizes you need some taxes for government to provide essential services.”

The best taxes, he added, “are the ones that are fair and even-handed and don't create unfair competition in the marketplace."

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Maureen Hayden is the Indiana State Reporter for CNHI. Contact her at Maureen.Hayden@indianamediagroup.com.

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