By Maureen Hayden
CNHI News Service

INDIANAPOLIS — The giant Web-based retailer Amazon.com is gearing up for the holiday shopping season, with plans to hire 2,500 people to work in its two Indiana warehouses. But unlike brick-and-mortar retailers, it won't be collecting taxes on its sales to Hoosier customers.

That job falls to the online buyer, in the form of a “use tax” that state officials acknowledge is widely ignored, costing the state millions of dollars in tax revenues.

The state intentionally gave Amazon a pass from having to collect and remit the sales taxes as part of a deal to lure the company here four years ago.

But some state lawmakers are now concerned about the loss of revenue, given the increase in Internet sales and a projected state deficit of $1 billion going into the next budget session.

Adding to the pressure are complaints from the brick-and-mortar retailers who fear customers are shopping online at sites that don't collect sales taxes rather than in their stores in part to avoid paying Indiana's 7 percent state sales tax.

“We’re putting them at a distinct disadvantage that they can't escape,” said Indiana State Sen. Luke Kenley (R-Noblesville), who has served as chair of the state Senate Appropriations Committee. “It’s not a level playing field.”

Kenley and others argue the problem is complex and that it will take congressional action to allow states to collect sales taxes on Internet purchases.

Complicating the issue is a 1992 U.S. Supreme Court ruling that said online retailers don't have to collect sales tax in states where they don’t have a physical presence.

Technically, the two warehouses that Amazon.com opened in Indiana are owned by an affiliate. In 2006, Indiana revised a state tax law that essentially exempted that affiliate from having to collect the sales taxes.

Maureen Hayden is statehouse bureau chief for CNHI’s Indiana newspapers. She can be reached at maureen.hayden@indianamediagroup.com