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Simon sues state over Amazon sales tax exemption

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A Marion Superior lawsuit is accusing Indiana of violating the state constitution by not collecting sales taxes from Amazon.com Inc.

On behalf of Indianapolis-based Simon Property Group Inc., law firm Cohen & Malad filed the suit Thursday against the Indiana Department of Revenue in an attempt to force the state to collect sales taxes from the online operations. The mall powerhouse claims the state's "illegal and unconstitutional" decision to exempt Amazon from sales-tax collection gives the giant online retailer "an unfair advantage in the market."

Specifically, the suit asks the court to mandate that the state’s revenue department issue an assessment to Amazon for unpaid gross retail taxes and use taxes, as well as interest and penalties. One of the counts alleges not collecting those taxes amounts to a violation of Article 1, Section 23 of the Indiana Constitution that prohibits disparate treatment of citizens – in this case, Amazon’s online operations here versus the other merchants required to pay the taxes.

“Defendants have failed and refused to comply with their statutory duties to issue such assessments, despite demand,” the suit says. “Their failure, without legislative authority, illegally and unconstitutionally exempts Amazon from the obligations to collect Indiana Gross Retail Tax and Use Tax, despite the fact that Amazon sells hundreds of millions of dollars of taxable goods to Indiana residents with many of those sales taking place wholly within Indiana every year.”

The suit cites a study by professors at the University of Tennessee that estimates Indiana will forego about $195 million in revenue in 2012 alone by failing to compel out-of-state retailers like Amazon to collect sales taxes.

Simon earlier had requested that the state begin collecting sales taxes on purchases made from within the state's boundaries on Amazon.com. Online retailers typically are required to collect sales taxes on purchases from within states where they have a physical presence, but Indiana has not forced the issue with Amazon.

The decision by Indiana officials to take a kid-glove approach was an important factor in Amazon's decision to open four local distribution centers that employ thousands of Hoosiers. Of course, traditional retailers employ many thousands more.

Amazon has faced pressure in most of the states where it operates to collect sales tax, particularly as state coffers dried up during the recession. Some states have been hit with lawsuits, as well as threats that distribution centers would be removed from those locations.

To help lure Amazon to Indiana, the state in 2007 repealed a law requiring companies that didn’t maintain a place of business in the state — but had affiliated locations — to get a retail merchant’s certificate, subjecting them to the same tax-collection duties as brick-and-mortar shops. Amazon now has three distribution centers in the state and has announced plans to open a fourth.

Gov. Mitch Daniels’ administration — as well as Amazon officials — have advocated a federal solution to address the issue. Key fiscal leader Sen. Luke Kenley, R-Noblesville, has been at the forefront of efforts to get a federal law requiring online sales-tax collections. Kenley, who spent two days in Washington, D.C., this week discussing the matter with federal lawmakers, is among those who are hopeful the issue could get traction in Congress this year.

Both House and Senate bills have been filed, and a bipartisan group of senators, including Illinois Democrat Dick Durbin and Wyoming Republican Mike Enzi, intend to introduce a bill on the issue early next week, Kenley said. They’re also tentatively planning a Nov. 30 hearing on the issue.

Kenley said Friday that he’s not inclined to support a state solution, which Sen. John Broden, D-South Bend, said he intends to introduce during the next legislative session. Broden had tried to insert a similar measure into the budget bill during the 2010 session.

Aside from what happens at the state legislative and Congressional levels, the issue could ultimately play out in courtrooms and pave the way for the Supreme Court of the United States to revisit this sales tax issue as it involves online operations. In Quill Corp. v. North Dakota, 504 U.S. 298 (1992), the court held that a business must have a physical presence in a state for that state to require it to collect sales tax. Although it didn’t specifically address the Internet at that time, the holding effectively has barred states from collecting sales taxes from most online operations.

 

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  • interesting story and suit
    I dont see any standing, first off. How does any one person have standing to sue over tax collection policy that is an executive function. Also: people dont just avoid malls now because of the sales tax issue, they avoid them because they are symbols of reckless capitalist over development of former farmlands that now are reduced to concrete lots and cheap but gaudy dens of commodity idolatry. A little bit of sales tax wont slow the malls decline.

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  1. Indiana's seatbelt law is not punishable as a crime. It is an infraction. Apparently some of our Circuit judges have deemed settled law inapplicable if it fails to fit their litmus test of political correctness. Extrapolating to redefine terms of behavior in a violation of immigration law to the entire body of criminal law leaves a smorgasbord of opportunity for judicial mischief.

  2. I wonder if $10 diversions for failure to wear seat belts are considered moral turpitude in federal immigration law like they are under Indiana law? Anyone know?

  3. What a fine article, thank you! I can testify firsthand and by detailed legal reports (at end of this note) as to the dire consequences of rejecting this truth from the fine article above: "The inclusion and expansion of this right [to jury] in Indiana’s Constitution is a clear reflection of our state’s intention to emphasize the importance of every Hoosier’s right to make their case in front of a jury of their peers." Over $20? Every Hoosier? Well then how about when your very vocation is on the line? How about instead of a jury of peers, one faces a bevy of political appointees, mini-czars, who care less about due process of the law than the real czars did? Instead of trial by jury, trial by ideological ordeal run by Orwellian agents? Well that is built into more than a few administrative law committees of the Ind S.Ct., and it is now being weaponized, as is revealed in articles posted at this ezine, to root out post moderns heresies like refusal to stand and pledge allegiance to all things politically correct. My career was burned at the stake for not so saluting, but I think I was just one of the early logs. Due, at least in part, to the removal of the jury from bar admission and bar discipline cases, many more fires will soon be lit. Perhaps one awaits you, dear heretic? Oh, at that Ind. article 12 plank about a remedy at law for every damage done ... ah, well, the founders evidently meant only for those damages done not by the government itself, rabid statists that they were. (Yes, that was sarcasm.) My written reports available here: Denied petition for cert (this time around): http://tinyurl.com/zdmawmw Denied petition for cert (from the 2009 denial and five year banishment): http://tinyurl.com/zcypybh Related, not written by me: Amicus brief: http://tinyurl.com/hvh7qgp

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