Charges of “online sales tax” have always been a challenge by state tax departments. A US Supreme court case has upheld that states cannot enforce a seller to charge and collect sales tax if the seller does not have a physical presence in the buyer’s state. This week, the State of Indiana filed a lawsuit in the Marion County courts requesting that Indiana be allowed to require the seller to charge and collect Indiana sales tax even though the seller does not have an Indiana presence. Many states before Indiana have tried to persuade the US Supreme Court systems to rule on this topic. The United States Supreme courts have declined to rule and have pushed back to the state departments encouraging the states to work it out.

State departments of revenue are losing money when a buyer from Indiana purchases an online item from a seller in Kentucky. If the seller does not have a physical presence in Indiana, the seller is not required to collect Indiana sales tax. It is the responsibility of the Indiana buyer to self assess Indiana use tax. This battle is between the Indiana Department of Revenue and all out of state vendors. If the state department wins this case it will be a very complicated process for all out of Indiana sellers to register, collect and remit Indiana sales tax.

This topic has been presented to the US Supreme court many times by many states. Do not expect the US Supreme Court system to rule anytime soon.

Contact your Somerset advisor at 317-472-2200 or  with any questions.