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Indiana Enacts Economic Nexus Legislation


Nexus

Effective July 1, 2017, Indiana has enacted economic nexus legislation affecting remote sellers. Sellers that do not have a physical presence in Indiana will be required to collect and remit Indiana sales tax and comply with the procedures and requirements of Indiana’s sales tax laws if the seller meets either of the following criteria for the calendar year in which the retail transaction is made or for the calendar year preceding the calendar year in which the retail transaction is made:

 

  • The seller’s gross revenue from any combination of sales of tangible personal property delivered into Indiana, a product transferred electronically into Indiana, or a service delivered in Indiana exceeds $100,000; or
  • The seller sells any combination of tangible personal property delivered into Indiana, a product transferred electronically into Indiana, or a service delivered in Indiana in 200 or more separate transactions. 

 

The Indiana Department of Revenue may bring a declaratory judgment action against a remote seller to establish that the person has an obligation to collect Indiana sales tax and that the person’s obligation to collect Indiana sales tax is valid under state and federal law. The department and other state agencies and state entities may not, during the pendency of the declaratory judgment action - including any appeals from a judgment in the declaratory judgment action - enforce the obligation to collect Indiana sales tax against any person that does not affirmatively consent or otherwise remit the sales tax on a voluntary basis. The latter does not apply to a person if there is a previous judgment from a court establishing the validity of the obligation to collect state gross retail tax with respect to that person.

 

Included in the statute is an explanation for the enactment of the remote seller collection provisions with a plea to the U.S. Supreme Court to reconsider its doctrine that prevents states from requiring remote sellers to collect the tax.  It also claims that the non collection of the tax by remote sellers causes significant harm to the state of Indiana. (H.B. 1129, Laws 2017, effective July 1, 2017)

 

UPDATE: On June 30, 2017, the trade associations American Catalog Mailers Association and NetChoice filed a lawsuit challenging the constitutionality of Indiana’s economic nexus legislation. The American Catalog Mailers Association and NetChoice are challenging the legislation as being in violation of the Commerce Clause of the U.S. Constitution as interpreted by the Supreme Court in Quill v. North Dakota. The trade associations made attempts to convince Indiana to suspend enforcement of the provision pending the decision in the South Dakota case on economic nexus but the state has not responded.  The statute included provisions that prohibit the state from enforcing the obligation to collect Indiana sales tax against any person that does not affirmatively consent or otherwise remit the sales tax on a voluntary basis during the pendency of the declaratory judgment action - including any appeals from a judgment in the declaratory judgment action.  We recommend that no company voluntarily elect to collect if their only presence in the state is under these economic nexus provisions. We will continue to monitor for developments. (American Catalog Mailers Association and NetChoice v. Adam Krupp, in his official capacity as the Commissioner of the Indiana Department of Revenue, Eric Holcomb, in his official capacity as the Governor of the State of Indiana, and Indiana Department of Revenue)

(05/09/2017)
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