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State sues to defend new law requiring out-of-state retailers to pay sales tax

August 29, 2017

The state of Indiana announced Monday evening that it filed a lawsuit in defense of a new state law that seeks to collect sales tax from out-of-state sellers.

Gov. Eric Holcomb said in a written statement that he requested Attorney General Curtis Hill to file the suit “with full awareness that the United States Supreme Court ruled in 1992 that out-of-state retailers need not collect and remit sales/use taxes” unless they have a physical presence in a particular state.

“In light of the rapid evolution and capabilities of software and technology, the incredible growth of online sales in recent years and other factors, it’s time for the Supreme Court to revisit and overturn this ruling,” Gov. Holcomb said. “Hoosier-based businesses need the ability to compete on a level playing field as soon as possible.”

The lawsuit is a third-party complaint in response to an earlier suit filed in June by the American Catalog Mailers Association and NetChoice against the state over the new law and its implementation.

The lawsuit states that the Indiana Department of Revenue, as a third-party plaintiff, seeks a declaratory judgment to enforce the state’s new law “to require all retail merchants to collect and remit state gross retail tax."

The lawsuit filed in Marion Superior Court names Boston-based home goods retailer Wayfair Inc. and Utah-based closeout retailer Overstock.com Inc. as “third-party defendants”—two retailers that have gross revenue from Indiana sales of more than $100,000 and 200 transactions per year.

The debate over sales tax collections from so-called remote sellers has been raging for decades, but it has become more potent of late as e-commerce has exploded.

A report from the Indiana Fiscal Policy Institute and Ball State University estimated that Indiana lost about $77 million in sales taxes in 2012 alone because it couldn't collect all online sales taxes.

And the National Conference of State Legislatures has estimated Indiana could be losing about $400 million annually.

The Indiana law mirrors a similar one put forth in South Dakota—which many have stated could reach the U.S. Supreme Court to challenge the 1992 decision.

 

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