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Three-Way Court Battle to Determine Whether Indiana Can Collect Sales Tax on Internet Purchases

State sues Overstock, Wayfair in hopes of persuading Supreme Court to reverse 25-year-old precedent

Indiana is suing two online retailers to force them to collect Indiana sales tax.

Trade associations for online and mail-order sellers actually sued Indiana first, arguing Indiana's new Internet sales tax law goes against a 25-year-old Supreme Court ruling. Now the state is suing Wayfair and Overstock.com in search of a ruling that the law is constitutional. 

The 1992 ruling involved mail-order sales, and said states can only force companies with a close connection to the state to charge the tax. Overstock charged Indiana sales tax when it had a warehouse in Indiana, but stopped collecting the tax in 2007 when it closed the warehouse. Under the court ruling, it's buyers who are supposed to keep track, which means most of those taxes don't get paid.

The new law puts enforcement of the tax on hold until the courts settle whether it's legal.

Indiana Retail Council president Grant Monahan says the state is losing as much as 400-million dollars a year in sales taxes. And he says not imposing the tax gives web sellers an unfair price advantage over brick-and-mortar stores.

Governor Holcomb says in a statement it's time for the high court to revisit and reverse its ruling in light of technological changes which have transformed how business is conducted.

(Photo: Damien Meyer/Getty Images)

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