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Frank Gray

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Lack of online sales tax hurting stores?

For decades, Indiana’s state income tax form has carried a line that reads, “Sales tax due on out-of-state purchases.”

The idea was that people would now and then make mail-order purchases, and they were expected to add up those purchases and calculate the unpaid state sales tax.

I can honestly tell you I have never kept a record of the few minor things I’ve bought through the mail, and I’ve never entered anything on that line. People did pay $1.7 million in “use” taxes in 2010, which sounds like a lot, but that comes out to about 26 cents per person in Indiana.

It’s hard to calculate how much sales tax the state loses from mail order and online shopping. Over the years I’ve heard varying estimates, though most seemed outrageous to me.

But times are changing. More and more people are buying more and more things online without paying any sales tax. I wonder how many even know what Schedule 4 is (that’s the form where you’re supposed to report the sales tax owed on online purchases), and I wonder how many people feel guilty about not owning up.

I doubt many people feel guilty at all. Why should they? After all, the state struck a deal with Amazon, the huge online retailer that is building a huge warehouse and distribution center in Indiana, that exempts it from having to collect sales tax on items sold in Indiana until 2014.

That deal doesn’t sit well with regular retailers. They have to charge their customers an extra 7 percent on what they buy in their stores, which makes Amazon’s deals look even better.

I understand the retailers’ position, but I also understand why the state struck the deal with Amazon. It was purely an economic development tool designed to create jobs.

Personally, I’m not the type to cry that the state is losing sales tax revenue because of all the tax-free online shopping that is going on.

What does concern me is what could happen to many brick-and-mortar retailers that are put at a disadvantage.

On one hand, we all should be worried that we’ll end up with rows of empty storefronts where traditional retailers have been driven out of business by tax-free sellers with huge installations elsewhere. We should be worried about what happens to the jobs that used to exist in those empty storefronts.

Some people won’t be bothered by that. It’s not their ox getting gored. They’ll shop for the best deal online and be happy.

What happens, though, when you buy something online and you need someone to service it, and the places that you used to go have been driven out of business?

We all better stock up on tools and learn to be good mechanics or technicians, because we will be on our own.

I’m told that there has been a bill floating around Congress for a couple of years that would require all online retailers to collect the appropriate sales tax depending on the state where the buyer lived.

If someone in Indiana bought something, they would be charged 7 percent sales tax. If you were in Texas you wouldn’t have to pay any tax, because Texas doesn’t have a state sales tax.

It sounds like a good idea, especially since online purchases are skyrocketing.

Online retailers will always have a bit of an advantage. With a national audience, they are able to deal in a much wider variety of merchandise and obscure parts than your typical store could ever hope to stock.

For example, on a national level there are going to be a lot more people looking for Ultegra 6600 clusters, if you know what that is, than there are in Fort Wayne.

If we kill the local shops, though, who’s going to install the cluster?

Frank Gray reflects on his and others’ experiences in columns published Sunday, Tuesday and Thursday. He can be reached by phone at 461-8376, by fax at 461-8893, or by email at fgray@jg.net. You can also follow him on Twitter @FrankGrayJG.

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