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Tuesday, December 07, 2010
Ind. Law - "Online sales tax skipping targeted: States seek better ways to collect from shoppers"
Sales tax collections on out-of-state purchases are the subject of this lengthy Dec. 5, 2010 story by Lesley Stedman Weidenbener, published in the Louisville Courier Journal. Some quotes:
[Jessica Morris] didn't know that Indiana law requires her to add up those online purchases and pay a use tax when she files her returns in April. That use tax — equal to the state's 7 percent sales tax — must be paid on any items for which sales taxes weren't collected.Morris isn't alone in being unaware of the levy.
Kentucky and most other states have similar laws, but few taxpayers comply, said Neal Osten, director of the Washington office of the National Conference of State Legislatures.
“It's very difficult to collect” from consumers, Osten said. “It's very hard for taxpayers, too. You try to keep track of what you're buying. You might make a guess. But because online shopping has become so convenient, it's hard to keep track.”
Of the nearly 1.7 million tax returns filed last year in Kentucky, only 11,501 reported use taxes. Kentuckians acknowledged they owed about $662,000 for online and catalog purchases where no sales tax was collected.
In Indiana, only 24,000 taxpayers — out of 3.1 million people who filed returns — reported use taxes totaling about $1.4 million.
States have few ways to track down tax-skipping shoppers. In Indiana, they generally aren't detected unless their returns are audited, said Revenue Department spokeswoman Stephanie McFarland. * * *
To combat that problem, several states began working with the National Conference of State Legislatures to create the streamlined sales tax, a system by which all online and catalog retailers could voluntarily collect taxes and remit them to states. States that join the project make changes to their sales-tax laws to make collections easier for online retailers to administer.
Two dozen states — including Kentucky and Indiana — are members, and the project is starting to pay dividends. More than 1,800 online businesses are now voluntarily collecting taxes under the program. Last year, Indiana collected about $25 million.
But many of the largest online retailers, including Amazon, have refused to participate, complaining that it's complicated to keep track of all the different state tax rules. So states are pushing Congress to require it.
“There was a bill last summer, but it didn't go anywhere in Congress because the Republicans and the Democrats were refusing to cooperate on anything,” said Indiana Senate Appropriations Chairman Luke Kenley, a Republican who is the incoming president of the national Streamline Sales Tax Governing Board.
“Also, there were some people calling it a new tax — even though it isn't — and it was an election year, so we knew it wouldn't pass.”
But Kenley is confident the issue may gain traction in the new Congress, which he said includes a number of new lawmakers from states that are struggling with this issue.
Posted by Marcia Oddi on December 7, 2010 09:49 AM
Posted to Indiana Law