Indiana and the Advertising Tax

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Thanks to the encouragement of the Performance Marketing Association, I recently contacted my Indiana State Senator, Luke Kenley, with regard to the status of advertising tax legislation in Indiana. It was fortuitous that Senator Kenley happens to be both my own State Senator as well as the President of the Streamlined Sales Tax Governing Board.  The body was created by the National Governors Association and the National Conference of State Legislatures to deal with the issue of sales tax collection as a result of Bellas Hess v. Illionis and Quill Corp. v. North Dakota.

Senator Kenley said that although there was discussion of a possible Internet tax amendment last year in Indiana (see the IBJ article Indiana Lawmakers Push for Internet Taxes), nothing ever became of it and he discouraged it. The “level playing field” argument continues to be brought up, but Kenley sees problems with the nexus argument and favors a federal solution where all sales would be taxed the same. I explained to him that even if an Indiana law were passed, it would just push the retailers to do what they have done in other states and drop Indiana affiliates, therefore getting around the law and not resulting in any taxes being collected anyway.

We discussed Amazon a little bit and he alluded to the fact that Amazon built a fulfillment center in Indiana a few years ago but does not collect sales tax in Indiana. He said that Amazon claims to be in support of the federal tax solution.

Although our conversation was brief, it was clear to me that Senator Kenley understands the affiliate and nexus issues better than most other legislators. I made a point of mentioning to him that Indiana is in a good position right now to reach out to businesses such as CouponCabin who have announced that they might be leaving Illinois due to the law enacted there last week.

I ended by asking him outright what he considers the status of the advertising tax to be in Indiana and he responded that although he cannot say what will happen in the future, Indiana has no plans to assert any type of affiliate nexus at this time in order to tax out-of-state retailers for purchases made online. Although the words “fairness” and “level playing field” continue to be tossed around by Indiana lawmakers as well as big brick-and-mortar retailers here, Senator Kenley seems to be well-educated about the pros and cons of various advertising taxes and is open to listening to arguments and suggestions. Good news for the time being in the Hoosier State.