Amazon.com Inc and Indiana Governor Mitch Daniels unveiled an agreement on Monday that may mean that the world's largest Internet retailer starts collecting sales tax in the state in 2014.
Amazon will voluntarily begin collecting Indiana sales tax on Internet purchases on Jan 1, 2014, or 90 days from any federal online sales tax legislation that may pass before that time, according to a statement from Daniels' office.
Online retailers without a physical presence in a state do not have to collect sales tax on purchases by those residents. As e-commerce ballooned in recent years, that exemption came under pressure from several states looking to fill big budget gaps.
Brick and mortar retailers have been pushing hard behind the scenes to get Amazon to collect sales tax. Some traditional retailers argue Amazon has an unfair price advantage because it does not collect the tax in many states, although Amazon has said customers shop with it for other reasons, such as wide product selection and availability.
The company struck a deal with California in September, which could see Amazon start collecting sales tax in that state in July this year. However, Amazon is pushing for Congress to pass national legislation.
On Monday, Indiana's Daniels said he will also push for federal action on the sales tax issue.
"The only complete answer to this problem is a federal solution that treats all retailers and all states the same," Daniels said in a statement. "But for now, Amazon has helped us address the largest single piece of the shortfall and we appreciate the company working with us to find a solution."
Indiana estimated uncollected online sales taxes total $75 million a year and, of that, revenue from sales tax remittal by Amazon would be about $20 million to $25 million a year. But the state said on Monday it will not assess Amazon for sales tax for periods before 2014.
"Amazon, Governor Daniels, and legislative leaders chose to work together on jobs and investment in Indiana and to focus on resolving the sales tax issue by strongly supporting federal legislation," an Amazon spokeswoman wrote in an email to Reuters. "As analysts have noted, Amazon offers customers the best prices with or without sales tax."
Amazon shares closed down 2.2 percent at $178.56 in afternoon trading on Monday.
(Reporting by Alistair Barr, editing by Mark Porter and Andre Grenon)