As you already know, Gov. Pat Quinn is trying to snatch away a rail car manufacturer from Wisconsin after that state’s new governor rejected federal high-speed rail money. Well, Scott Kluth of CouponCabin.com has said recently that the so-called “Amazon Tax” passed by the General Assembly in a few days’ time could drive him out of Illinois…
Scott Kluth runs CouponCabin.com from an office in downtown Chicago. Some days, he says, he can see Indiana from the top of his company’s building.
Even though Friday was typically grey and frigid, the kind of weather for which the Second City is infamous, Indiana was looking brighter this morning than ever before.
That’s because Kluth says he faces the loss of up to a third of his business if Illinois Gov. Pat Quinn signs into law a measure that would require online retailers such as Amazon.com and Overstock.com to collect taxes of 6.25% on web purchases made by state residents that came to those retail sites from Illinois-based web sites like CouponCabin.com. Consumers who visit the CouponCabin site can find digital coupons for discounts from such online retailers as Sears Holdings Corp., The Home Depot Inc. and Vistaprint, each of which is part of the Internet Retailer Top 500 Guide. Because those retailers pay CouponCabin a commission when consumers make purchases with those coupons, they would be subject to the sales tax law, and likely would cut ties with CouponCabin rather than collect the levy from shoppers, Kluth says.
“Our only remedy would be moving out of state,” he says.
So, Wisconsin’s Lt. Governor Rebecca Kleefisch left Kluth a voicemail message the other day inviting him to move to her state. Check it out…
LG Keelfisch is the person who ended up apologizing for some quite intemperate remarks she made during the recent campaign about gay marriage…
“This is a slippery slope in addition to that — at what point are we going to OK marrying inanimate objects? Can I marry this table, or this, you know, clock? Can we marry dogs? This is ridiculous.”
Something to consider when contemplating a move to the Cheese Head State. Then again, this proposed tax hike would, indeed drive Kluth out of business. He’d have to go somewhere else. Gov. Quinn needs to consider that when he decides what to do.
Senate Republicans have already started their fight to repeal the income tax increase approved Wednesday morning, even though Gov. Pat Quinn hasn’t even signed it into law yet.
Sen. Matt Murphy, a Palatine Republican, said he filed legislation this morning to repeal a tax hike Quinn is expected to sign. It would increase the personal income tax rate to 5 percent and corporate income tax to 7 percent for the next four years.
I have a second home in Wisconsin, specifically in a town of one thousand people in Clark County Wisconsin. Because of the direct decline in state funding for schools combined with steady enrollment declines at least three school districts in that county are fiscally collapsing.
During the 1993 legislative session, the Wisconsin state legislature enacted Wisconsin Act 16 to supposedly increase state financial support of public schools and generate property tax relief for local taxpayers. One component of this law set revenue limits on public schools receiving state financial assistance starting with the 1993-94 school year. Revenue limits establish the maximum revenue a district may raise through general aid and property tax.
The bottom line is that, since
established, revenue caps have grown at a slower pace than the cost of operating schools,
forcing districts to cut budgets and seek referendums to maintain their current levels of service. In many school districts, the gap between revenue and expenditures continues to grow annually, requiring ever deepening cuts, and the consolidation of fiscally collapsing smaller school district into larger school districts that are equally unstable.
Then at the onset of the recession State aid was reduced to districts throughout Wisconsin because of State revenue shortfalls. Wisconsin’s newly elected Republican Governor who is attacking our state’s increase in taxes has his own problems with funding public services including education and his solution right now is to do nothing or worse cut taxes. Wisconsin is faced with a $3 billion shortfall even with its expenditure controls. School districts and municipal governments are also fiscally in trouble and are cutting deeper and deeper. Democrat Tom Barrett who lost the election for governor to Republican Scott Walker, told the public that Walker’s tax cut plans would bury the state in debt and force deep cuts to public safety, education and property tax relief. Time will tell but I expect Barrett is correct and maybe I will sell the Wisconsin home and buy one in Pope County Illinois where I can afford the property taxes.
I don’t get it - Sears and Home Depot should be required to collect sales tax from Illinois buyers today, as I understand. At any rate, they’d certainly be required to do so under the new law regardless of whether they continue to offer discounts through Coupon Cabin.
So the new law doesn’t create a disincentive for most retailers to use Coupon Cabin. It may create a disincentive for the few retailers who are internet-only. But then why is Kluth leading with Sears and Home Depot? Is it because nobody has ever heard of VistaPoint?
What this really does is creates a disincentive for tax-avoiding businesses from robbing sales from retailers with locations in Illinois. Can’t see why I’d care. If Vistapoint, whoever they are, has no interest in paying Illinois sales tax, let them sell outside Illinois.
er, I mean VistaPrint. It’s a business-card printer. Gosh, it’ll really kill the state’s economy if Coupon Cabin can no longer offer discounts on business card printing, a service that is already a very low-priced commodity. Sheesh. What a mountain is being made of this anthill. Let’s level the playing field by making internet retailers pay the same tax local retailers have to. Stop the ridiculousness.
- Ray del Camino - Thursday, Jan 13, 11 @ 2:15 pm:
Rick Perry made thinking Texans really miss Gov. George W. Bush. Because he keeps getting re-elected, this tells you about the proportion of thinking Texans. THe late, great Molly Ivins used to refer to Perry as “Governor Goodhair,” often saying “…and did I mention, he has really good hair?”
As usual, he has both his facts and his assumptions wrong.
- I'm Just Saying - Thursday, Jan 13, 11 @ 2:31 pm:
Wisconsin is not the mecca where everybody is going to be running off to,” predicted Illinois Manufacturers’ Association President Greg Baise. “The last time I looked, their climate is a lot s——- than ours.”
irv & ashland: the amazon tax bill merely adds to the prevailing impression that illinois is completely disinterested in the technology sector (and all the jobs created therein).
look, i understand that so many illinoisans are proud of the state’s rust belt status. and maybe a few manufacturing jobs will be created some day, some where, in the state. but i happen to sit about 100 yards from some of the biggest bandwidth in the country and it’s a crying shame that illinois has no interest in developing the potential that stems from that. the amazon tax sends a clear message to the technology sector: go away. we don’t want your kind here…
I know i am stating the obvoius but me thinks many, many calls are being made right now and CEO’s, CFO’s and all other business leaders are listening. Especially those who lean conservative irregardless of the social policies of the suitor.
- Grandson of Man - Thursday, Jan 13, 11 @ 2:41 pm:
I’m doing my best to fight back and add perspective to the state worker attacks launched in soundbyte form by people like the Wisconsin governor. We all know that simple messages are usually not so simple. We unionized state workers no doubt have to make concessions, but as far as indiscriminate attacks, enough is enough.
United Van Lines reports that the states with the highest percentage of outbound moves that they recorded in 2010 were New Jersey, Michigan and Missouri, in that order. The highest percentage of inbound moves were to the District of Columbia, followed by Oregon and North Carolina.
Seems to me the tax and budget policies of these states are all over the map. Christie is supposed to be turning NJ around yet people there are still moving out. MI, no surprise there. But MO is not a high tax blue state yet people are leaving it in droves apparently. Why?
And if low taxes and business friendly regulations are what you’re looking for, DC is certainly NOT the place to find them. Same with Oregon — they have a pretty stiff income tax, but more people are still moving in than out. NC, I don’t know a whole lot about their fiscal policies.
It’s not exactly a scientific survey by any means but it’s interesting nonetheless.
The internet tax is going to cost the state jobs Bradsdeals, Fatwallet will not stay in Illinois and no startup will come here. The explosion of internet sales is playing havoc with tax revenues all over, unless the feds step in to regulate it internet buisnesses which are very mobile will flee any state that trys to tax them.
- Leave a light on George - Thursday, Jan 13, 11 @ 2:54 pm:
=Tax the rich? Hey, Illinois just raised taxes on everybody, right down to the poorest of the poor.=
Is that phone number her private, office, or mobile phone number? If it is, I’d think the right thing would be to remove it from the recording. If it’s a generic office/receptionist line then fine. But if she left that number on a private voicemail and it’s a private number, I doubt she’d want it published on the internet…
- Grandson of Man - Thursday, Jan 13, 11 @ 2:55 pm:
When Illinois starts paying its past-due bills and develops trust in this regard, isn’t this an incentive to attract businesses, such as those in the medical field?
- Way Way Down Here - Thursday, Jan 13, 11 @ 3:08 pm:
I’m thinking of starting an “Escape to Southern Illinois” campaign.
“I don’t get it - Sears and Home Depot should be required to collect sales tax from Illinois buyers today, as I understand. At any rate, they’d certainly be required to do so under the new law regardless of whether they continue to offer discounts through Coupon Cabin.”
Irv and Ashland–Sorry, but you don’t get it. Internet retailers don’t have to charge a sales tax if they cut off Illinois affiliates like Coupon Cabin. It’s already been settled in court that you’ve got to have nexus to charge the sales tax. I agree that there should be some sort of sales tax, but this law won’t accomplish that. Once the Illinois affiliates are cut off, the state will miss out not only on sales tax, but millions in state income tax that the affiliates are currently paying to the state.
- amazontaxisbadnews - Thursday, Jan 13, 11 @ 3:21 pm:
@irv & ashland
Vistaprint, amazon, and similar companies will keep selling in Illinois. They’ll just dump all the illinois affiliates to make sure that they no longer have nexus in the state of illinois. i.e. They still won’t pay taxes in Illinois.
All those illinois affiliates who just got dumped by Amazon, Vistaprint, Overstock etc will either close shop or move to another state. i.e Illinois loses tens of millions of dollars in tax revenue from these small businesses. This is why Wisconsin and Indiana are more than happy to pick up this income.
If you even did ten minutes of research on this topic, you’ll realize that other states that had similar laws saw no change in tax revenue and some cases there was actually a loss in revenue.
How is this good for the state of Illinois and small businesses in the state of Illinois?
Reguardless of if you think it is fair, there are going to be some companies (like Amazon) who are going to stop offering some revenue options to folks because of local tax issues.
So if you rely on these programs as a big part of your revenue model you are going to have to do something.
Let’s say for example I have a small company (it might even be just me) that identifies where you can buy clothes and other items you see on TV shows and gives you the option of clicking on links to buy these items.
So for example on this weeks episode of Dexter it turns out you can buy the shirt he has in the opening scene from Amazon and the lamp in the fourth scene from the Signals catalog.
I could generate revenue from the referral fees when you click on the link as well as when you do additional shopping. Might even support a small business who has a couple of people who spend each day looking for stuff that appeared on the show.
Now if I can’t get revenue from Amazon anymore I have a couple of options. Including moving my operation.
The folks who make their money off of referral streams are likely not that tied to a location for business reasons. (Heck I could become a business in Michigan without a lot of problem because odds are my servers are hosted someplace else and I have few assets that I would even have to physically move).
But if the source of my revenue no longer lets me get revenue in Illinois I have to get out of Illinois.
Funny how years ago there was this same issue with catalog retailing and that seems to have gone by the wayside.
I seem to recall efforts to resist implementing a federal policy on collections of internet sales taxes over the years. The primary argument was that, the internet is a fledgling little industry, and keeping it “tax free” was necessary to encourage its growth.
I think it’s time for the Feds to step in and force a national solution to this. The Border’s store on Michigan Avenue just closed, joining thousands of bricks and mortar stores that can’t compete against the virtual market that is the internet. It’s clear there is a trend among states to capture lost sales taxes by finding ways to collect the tax, beyond the totally ineffective “honor system” we have now.
I think the internet has matured to the point where these businesses should no longer get a free ride. A sales tax is a tax on sales. It isn’t that hard to figure out how to collect them for on-line purchases.
This bill is far from perfect, but let’s have the debate on this from a federal perspective, where a fair solution can best be implemented.
Is there a Golden Horseshoe Award for least realistic piece of legislation and grand-standing? Sen. Matt Murphy’s effort at an income tax repeal would be the first nominee for the 2011 award. The only real outcome of the state GOP fiscal “plan” would be state bankruptcy. Did the state GOP ever come up with that list of details that added up to a balanced state budget? And their lack of interest in a real solution did not help the state to take advantage of lower borrowing rates last year.
Interesting…shopping online is not as attractive as it once was…here’s the math. Buy Online + Pay IL Tax + Delivery Costs = Too Expensive v. Buy at Store + Pay IL Tax = No delivery tax, thus good deal. You follow?
Yeah, yeah…online stores often offer sizable discounts, sigh.
getting around the spending caps - check the language, does it only apply to the main general funds? if so our many special funds could circumvent the cap
The Senate repubs move to repeal the tax hike is cute - they are of course the party of repeal(health care) as opposed to appeal.
In case they forgot, next to the revenue loss from the recession the next biggest contributor is the increase in pension payments (not medicaid) per the 1995 50 year “kick the can down the road” plan - the big increases are mostly due to all the underfunding every single year (except 2004) by Thompson, Edgar, Ryan, Blago and the current administration. According to the actuaries none of those annual underfundings are scheduled to paid by the 50 year plan until about 2034 (when the numbers get really big). So Repubs take a look in the mirror before you repeal
Joe, what anyone over 40 fails to understand is that price is not the main driver for those who shop on the internet, so collecting taxes on purchases won’t save “mom & pop” stores. It is convenience and selection that online shoppers are looking for. Price is usually a distant third. Why would we cripple one of our only growing industries by attacking middlemen like affiliate marketers?
Just think how much business with thrive without having to compete with the unfair advantage that Overstock and Amazon have by not charging sales tax.
Ummm, no they will just not have an affiliate program open to Illinois residents. If they don’t have that or another Nexus, they don’t have to collect sales tax. That’s their solution.
Mom and pop stores will sell more.
For the most part really, really, really unlikely. For one thing I would argue most Pop & Pop operations at least by me are service providers or restaurants. Last time I checked I can’t order pizza from Amazon. Also when I think of what I order primarily on-line it is not stuff Mom & Pop sell anymore (Books, Software, Electronics and funny t-shirts).
This is also not a unfair tax since people are supposed to pay the tax on items they buy at online retailers anyway.
Same thing is true with mail order, don’t see anyone screaming that Lillan Vernon is cheating the state. Also I doubt if even 1% of tax payers fill that section of the state 1040 out.
The only new thing is now they have to collect it
Well they don’t because they can avoid a nexus in this state.
Cheryl44: no, you won’t find states following illinois’ example here. many more states are involved in the streamlined sales tax project which has as its goal to minimize the differences between the sales tax policies and practices of states wrt online commerce. illinois’ obstinate efforts in this area thumbs our collective noses at the idea of online commerce with reasonable (and uniform) rules across state boundaries.
i get it. we’re a rust belt state here. and we’re determined to remain in the dark ages…
How can Matt Murphy and other GOPers talk about repeal with a straight face when they don’t even have a plan of their own? Why do press outlets (and I don’t mean this savvy blog) encourage such obvious political games?
–I know i am stating the obvoius but me thinks many, many calls are being made right now and CEO’s, CFO’s and all other business leaders are listening–
Because moving a company is free — costs nothing. You can do it every other week.
What businesses are we talking about anyway.
U-Haul (kind of like War Eagle with Auburn; you just say it after every sentence for no reason at all).
- Guy from Texas - Thursday, Jan 13, 11 @ 8:59 pm:
For those who mention the Texas deficit, keep in mind that Texas uses a two-year budget cycle, meaning the deficit is spread over the next two years. Thus per year it is lower than Illinois despite Texas having a much higher, and growing population. While Perry is not perfect, the state of Texas added more jobs over the last few years than all the other states combined and did so with no income taxes.
Again, the coupon cabin people say nothing about Amazon. They say they’ll lose business from Home Depot and Sears. Even though the tax has utterly no effect on internet sales by Home Depot and Sears. So the Coupon Cabin report is bs, no matter how you folks try to change the issue. If they want to be taken seriously, they need to tell the truth. Home Depot and Sears, with local stores, will have to charge sales tax here regardless.
I actually believe the state would do better to tax package deliveries, and then agree to waive tax on all shipments originating with companies who collect sales tax.
But nothing in the new law will affect Coupon Cabin’s relationship with Sears nor with Home Depot. I was pretty sure that was true, and feel even more certain now that the semi-anonymous, new-log-in posts from likely lobbyists have failed to challenge my point.
- standonprinciple - Friday, Jan 14, 11 @ 1:05 am:
wordslinger — Guy from Texas is correct. Some states have gained jobs, some like Illinois have lost jobs. When you net it out, Texas outperformed the other 49 states combined.
Texas’ 10 year population growth of 4+ million is greater than the population of 24 different states! Texas absorbed the equivalant of state of Oregon in just 10 years. They must be doing something right to get that kind of growth.
“They (Texas) must be doing something right to get that kind of growth”
Yes, like having lots of oil under the ground, having a warmer climate, and being right on the Mexican border — all of which would still be the case no matter what their tax rate was. Having lower taxes is just the icing on the cake. They do, however, have a gross receipts tax (though it’s relatively small).
Every state and every city has its advantages and disadvantages and tax rates ALONE can’t be credited or blamed for them all.
- This Will Backfire - Friday, Jan 14, 11 @ 9:19 am:
Jimbo: IL can’t “make” an out-of-state company do anything of the sort, which is what the nexus battle is all about.
irv & ashland: My guess is you have a business that competes with an online retailer, and I can understand the frustration. But I have been following this story and as others above have stated, online retailers outside of IL can easily avoid the law by canceling ties with IL website companies, and then they can sell to IL residents without collecting any tax, just as they have been. So IL will collect no sales tax but will have driven these IL website companies out of the state or out of business, along with the IL jobs they provide.
wordlsinger: These online retailer “goofs” will laugh at this law and successfully sidestep it like they have in every other state that has tried this. They will continue to do the same business in this state, but meanwhile, many IL website companies are put out of business. The state can’t collect income tax from companies who have gone out of business.
- amazontaxisbadnews - Friday, Jan 14, 11 @ 11:49 am:
the supreme court already had a case that settled the issue of out of state companies paying local tax. It involved Quill. It went in favor of those out of state companies as long as they don’t have nexus in the state.
Illinois is trying to circumvent that ruling by loosely connecting the advertising relationship as some sort of nexus. Even though these websites are only connected via advertising and never actually touch the product. It’s probably not even legal as it skirts the supreme court ruling and that’s why Amazon has sued some states.
My guess is that there probably needs to be some sort of federal law to sort this tax issue out legitimately. The states on their own are just destroying their own fledgling internet economies and don’t realize the consequences until after they damaged it.