Indiana “Economic Presence” Nexus Law Suspended Pending Litigation

On August 28, 2017, the Indiana Department of Revenue acknowledged that it has no authority to enforce Indiana’s new “economic presence” nexus statute (House Enrolled Act 1129) as a result of ongoing litigation regarding the law’s constitutionality now pending in state Superior Court in Indianapolis.  Under the new law, which took effect on July 1, 2017, retailers with more than $100,000 in Indiana sales or 200 transactions with Indiana customers annually would be required to collect and remit Indiana sales tax.   Before the law took effect, Brann & Isaacson filed suit in late June on behalf the American Catalog Mailers Association and NetChoice challenging the constitutionality of the statute on the grounds that it violates the long-standing physical presence “substantial nexus” requirement for state sales taxes under Quill Corp. v. North Dakota, 504 U.S. 298 (1992).  In a filing on August 28 answering the ACMA/NetChoice complaint and initiating a declaratory judgment action against two prominent Internet retailers (Wayfair and Overstock.com), the Department of Revenue informed that the Superior Court that the Department has no authority to enforce the sales/use tax collection and reporting requirements of the law during the pendency of the litigation against any out-of-state retailers that do not voluntarily register to collect the tax.

We will keep you apprised of further significant developments in the Indiana litigation.