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U.S. Supreme Court Rules State Can Tax Online Purchases

The 5-4 ruling will allow states like Indiana to tax purchases made online even if the retailer does not have a physical presence in the state.

STATEWIDE -- The U.S. Supreme Court is allowing states to levy sales taxes on online purchases.

The 5-4 ruling throws out a 1992 precedent, which stated that states cannot tax good bought online if the retailer that the goods were bought from does not have a brick-and-mortar presence in the state where the buyer lives.

"It certainly could be a lot of money for Indiana," said Ball State economist Mike Hicks, who says the ruling makes sense. "I think we estimated between $80 million and a quarter billion dollars a year in sales tax that could be collected. That's a big boost for us."

Hicks says it is a step towards equity between brick-and-mortar retailers and online retailers. Due to the 1992 precedent, only stores with a physical presence in Indiana.

Governor Eric Holcomb (R) agrees with Hicks.

"This Supreme Court ruling will help level the playing field between our Hoosier-based companies that operate retail stores and out-of-state companies that sell products and services online in our state," said Holcomb in an email statement. "We’re taking a careful look at the ruling to better understand its implications for Indiana.”

Indiana passed a law last year modeled on one in South Dakota, recognizing the South Dakota law would soon go before the Supreme Court. Both states' laws allow them to require retailers to collect sales tax if they have either 100-thousand dollars in sales or at least 200 transactions within the state.

Indiana's law has gone unenforced while the state awaited the South Dakota ruling. House Ways and Means Chairman Tim Brown (R-Crawfordsville) says it's not clear how quickly enforcement will begin. The Indiana Department of Revenue will need to write rules on how the requirement is to be enforced.

Regardless of how much additional money the tax brings in, Brown says it'll make Indiana's financial projections more accurate by eliminating the instability of guessing what portion of total sales would go untaxed.

Amazon already collects state sales tax on purchases in all 50 states.

Hicks adds that this ruling will do nothing to save floundering retailers like Sears.

(PHOTO: David Ryder/Getty Images)

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