INDIANAPOLIS — How much state revenue is Indiana losing in uncollected sales tax due to online shopping? The question isn't easy to answer.
The University of Tennessee's Center for Business and Economic Research puts the worst-case scenario at $400 million. That's a best-guess number, based on several sources that estimate the volume of online sales from sellers including Amazon, Overstock and eBay that don't collect and remit the sales tax.
A study commissioned by NetChoice, an online retail advocacy organization, puts the Indiana loss figure closer to $118 million, due to increased compliance on the part of businesses that buy that online and pay those uncollected sales taxes as a “use tax.”
Indiana State Budget Director Adam Horst thinks its may be lower than that. He calls the $400 million estimate “wildly excessive” and cites several reasons for his skepticism. Among them: Half of the sales tax revenue in Indiana comes from sales made on items not bought over the Internet, including gasoline, utilities and major manufacturing parts.
Horst said retailers who are collecting the tax on their online sales bricks-and-mortar merchants like Walmart and Target that also have a strong online presence remitted $180 million to the state last year.
Whatever the loss figure, it's a small fraction of the $6.3 billion in sales tax revenues that came into the state in the last fiscal year.
Still, because sales tax collections make up 47 percent of all state revenues, the Indiana legislature is paying more attention to the online sales tax issue. After making painful budget cuts including $300 million to K-12 public schools every extra dollar counts.
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