Chamber, Governor Applaud Supremes' Online Sales Tax Ruling

State could see millions more in sales tax revenue thanks to the U.S. Supreme Court's reversal on online sales.

(Undated) - There is already talk at the Indiana statehouse about collecting what the state is owed from online sales.

The U.S. Supreme Court with a 5-4 ruling Thursday opened the door to allowing states to collect sales taxes on every online sale, whether a seller is present in the state or not. Indiana supported the legal challenge led by South Dakota.

A previous 1992 ruling by the court had only allowed states to collect sales tax from online retailers who had a store or warehouse in the state. Of course, a lot has changed since the fledgling days of the internet 26 years ago. Companies like Amazon, NewEgg, and Overstock sell and ship millions of dollars of merchandise to customers in every state each day.

So the nation’s highest court took another look at the matter and overturned its earlier ruling.

“Each year the physical presence rule becomes further removed from economic reality and results in significant revenue losses to the States. These critiques underscore that the physical presence rule, both as first formulated and as applied today, is an incorrect interpretation of the Commerce Clause,” Justice Anthony Kennedy wrote in the majority opinion.

The potential implications for Indiana and other states equate to millions of dollars in tax revenue. State Representative Tim Brown (R-Crawfordsville) said only about one percent of people in Indiana actually paid an online sales tax last year.

Governor Eric Holcomb said he wants to take a look at what the ruling will mean for Indiana, and the taxes collected here. 

“A lot about our world and economy has changed in the 26 years since our nation’s highest court last ruled on this issue. With the incredible evolution of technologies and the growth of internet sales, this Supreme Court ruling will help level the playing field between our Hoosier-based companies that operate retail stores and out-of-state companies that sell products and services online in our state. We’re taking a careful look at the ruling to better understand its implications for Indiana,” Holcomb said.

The ruling is widely considered a win for retailers with traditional brick-and-mortar stores struggling to compete with pricing of Amazon and the like. Indiana Chamber of Commerce vice president of taxation and public finance, Bill Walz, says the change levels the playing field and will boost Indiana’s sales tax base.

“For years, this situation has resulted in substantial loss of revenue to states, thus increasing the tax burden on those who do pay the taxes they owe,” Walz explained.

“The Indiana Chamber has been a long-time advocate for online sales tax collection; it is one of the key goals in our Indiana Vision 2025 plan. We applaud state legislators who took the initiative in the 2017 Indiana General Assembly to prepare for this hoped-for decision. That legislation, which the Indiana Chamber strongly supported, has our state perfectly poised to fully implement an online sales tax law and trigger the tax collection.”

The 2017 law requires businesses to collect online sales tax if they make at least $100,000 per year or conduct at least 200 transactions in the state in a year.

Indiana has made agreements with more than 200 online sellers to collect sales taxes on some items.