SUBSCRIBE to Capitol Fax      Advertise Here      Mobile Version     Exclusive Subscriber Content     Updated Posts    Contact
CapitolFax.com
To subscribe to Capitol Fax, click here.
*** UPDATED x1 *** Top court strikes down state’s “Amazon Tax”

Friday, Oct 18, 2013

* Back in 2011, the governor and all four legislative leaders signed on to a bill pushed by the Illinois Retail Merchants Association. The idea was to protect physical retailers from being undercut by online retailers who don’t charge sales taxes. It flew out of both chambers and was quickly signed into law.

Here’s a basic summary of the law from an Illinois Supreme Court ruling today which struck the statute down

(O)ut-of-state internet retailers and servicemen are required to collect state use tax if they have a contract with a person in Illinois who displays a link on his or her website that connects an Internet user to that remote retailer or serviceman’s website. There is no requirement under the Act that sales be made to Illinois residents to subject the out-of-state retailer or serviceman to Illinois use tax obligations, and there is no requirement that the computer server hosting the Illinois affiliate’s website be located in Illinois. Both new definitions are limited, however, to referral contracts that generate over $10,000 per year.

As a result, Amazon immediately announced that it was ending its Illinois affiliate program and many of those larger affiliates fled to other states.

* All for naught, however. The Court’s conclusion

The parties’ joint stipulation of facts states that an Internet affiliate does not receive or transmit customer orders, process customer payments, deliver purchased products, or provide presale or postsale customer services. Further, an Internet affiliate displaying a link on its website does not know the identity of Internet users who click on the link, and after a user connects to the retailer’s website, the affiliate has no further involvement with the user.

It is clear, therefore, that there is no interaction between an affiliate and a customer, and no “active” solicitation occurs on the part of the Internet affiliate. The click-through link makes it easier for the customer to reach the out-of-state retailer, but the link is not different in kind from advertising using promotional codes that appear, for example, in Illinois newspapers or Illinois radio broadcasts.

In short, under the Act, performance marketing over the Internet provides the basis for imposing a use tax collection obligation on an out-of-state retailer when a threshold of $10,000 in sales through the clickable link is reached.

However, national, or international, performance marketing by an out-of-state retailer which appears in print or on over-the-air broadcasting in Illinois, and which reach same dollar threshold, will not trigger an Illinois use tax collection obligation. The relevant provisions of the Act therefore impose a discriminatory tax on electronic commerce within the meaning of the [federal Internet Tax Freedom Act].

The federal law referenced in the opinion expressly prohibits “discriminatory taxes on electronic commerce.”

*** UPDATE *** From IRMA…

“It’s disappointing that the Illinois Supreme Court did not address the constitutionality of the issue, but rather erred in its conclusion that the act violated the Internet Tax Freedom act.

“We haven’t given up. There are other avenues for appeal we hope the state will take.

“This underscores the need for action in Washington to quickly pass the Marketplace Fairness Act.

“Working with a hodgepodge of laws around the country is intolerable, and brick and mortar retailers continue to be at a substantial disadvantage to their online competitors.”

- Posted by Rich Miller        


13 Comments
  1. - E Man - Friday, Oct 18, 13 @ 1:31 pm:

    Illinois finally got one right!


  2. - hisgirlfriday - Friday, Oct 18, 13 @ 1:38 pm:

    Interesting this comes down right as Wisconsins Amazon tax is set to begin next month.


  3. - wordslinger - Friday, Oct 18, 13 @ 1:49 pm:

    –Fitch Ratings has estimated that states in which Amazon does not collect sales tax are losing out on $11 billion in revenue.–

    The online retailers really have a sweet scam going on. They stick it to the brick-and-mortar guys and states, too.

    I guess Congress would have to level the playing field, but obviously they can’t be trusted with matches or pointy scissors, much less substantive legislation.

    With the competitive advantage of not collecting sales tax, I guess you can see how Amazon put Borders out of business.

    http://www.reuters.com/article/2013/10/17/usa-tax-wisconsin-idUSL1N0I613J20131017


  4. - Judgment Day - Friday, Oct 18, 13 @ 1:50 pm:

    Finally! A favorable decision for small business here in Illinois. Who would of thought.

    It never seemed to occur to anybody that the little, tiny startups often don’t have sufficient cash flow for a physical location. For them, that’s wasted money. Their physical location is their home, or apartment, or a garage, or even a storage locker.

    So Illinois did their best to chase all these small, tiny folks out of state. But the real impact was to send a message to all the little, tiny folks that Illinois isn’t a friendly place to start a business. The odds are long enough against us anyway, why startup in a place that goes out of it’s way to make the odds even longer.

    Maybe we started to reverse that today. Let’s hope.


  5. - Rail Sitter - Friday, Oct 18, 13 @ 1:50 pm:

    Maybe Illinois should level the playing field by eliminating all sales tax.


  6. - Anon. - Friday, Oct 18, 13 @ 1:53 pm:

    ==Their physical location is their home, or apartment, or a garage, or even a storage locker.==

    And if that home, apartment, or garage is in Illinois, they were required to collect the use tax from their Illinois customers before the Amazon law was enacted, and are still required to do so after this court decision. This decision only helps businesses, big or small, that are not in Illinois.


  7. - OneMan - Friday, Oct 18, 13 @ 1:59 pm:

    Interesting this comes down right as Wisconsins Amazon tax is set to begin next month.

    They are opening a distribution center in Wisconsin, that gives them a physical nexus, can’t get around that.


  8. - Judgment Day - Friday, Oct 18, 13 @ 2:10 pm:

    “The online retailers really have a sweet scam going on. They stick it to the brick-and-mortar guys and states, too.”

    Actually, the scam is going the other way. Here’s how it’s been playing out.

    1) With our ‘Amazon Tax’ here in IL, the IL based affiliate marketing programs stopped. So our small, tiny businesses go elsewhere.
    2) That meant that we (IL) stuck it to Amazon, but what we really did was to give the ‘big box’ retailers a boost in the marketplace. Except we didn’t - we actually gave them an opportunity to ’scam’ local shoppers.
    3) Maybe you don’t remember, but the ‘big box’ retailers all complained that they were financially penalized by keeping a high level of merchandise in their locations because shoppers would come in for comparison shopping, and then buy online. Remember?
    3) So IL passed the Amazon tax, with at least part of the goal being to correct this ‘imbalance’.
    4) Didn’t work. In fact, what it did do was to buy time for the ‘big box’ retailers to keep minimal stock on hand, and when people came in to shop, they got pushed into buying the needed items online in the store, where the physically located store would not only charge a high price for the merchandise, but all the applicable sales taxes for our bloated governments, plus inflated shipping and handling charges.

    Now, they would deliver the merchandise to the store where you could pick it up, but you got the ‘opportunity’ to pick up all their distribution costs, plus those fees and charges became an even greater profit center. In effect, they pushed their merchandise distribution costs and charges down to all of the local shoppers. Talk about a sweet deal - for everybody but the shoppers. How’d that work out for you?


  9. - wordslinger - Friday, Oct 18, 13 @ 2:20 pm:

    JD, I can’t say that I remember all that. And Amazon is hardly a little-guy victim, or their affiliates who were operating out of “storage lockers,” as you say.

    I think most big retailers have figured out just-in-time inventory systems by now.

    Bottom line, who has the competitive advantage on the same goods: those that have to charge and collect the sales tax, or that that do not?


  10. - Judgment Day - Friday, Oct 18, 13 @ 2:35 pm:

    Word, that’s one ‘bottom line’. How about a second one?

    Did Illinois trading jobs for sales tax revenue work out for Illinois?


  11. - PoolGuy - Friday, Oct 18, 13 @ 2:45 pm:

    personally I don’t purchase from Amazon just for the sales tax part. free shipping helps too. and I live in downtown area where I have to drive 15-20 min thru neighborhoods, traffic lights and parking lots to get to retail locations, and then deal with check out lines, customoers, and not always knowledgeable employees (I’m not anti-social for the record).

    if I know “exactly” what I want and amazon will ship it to my door in 2-3 days, either free or even for a small shipping fee, isn’t that a competitive advantage also, regardless of sales tax?


  12. - wordslinger - Friday, Oct 18, 13 @ 2:51 pm:

    –if I know “exactly” what I want and amazon will ship it to my door in 2-3 days, either free or even for a small shipping fee, isn’t that a competitive advantage also, regardless of sales tax? –

    That’s the choice of the retailer.

    JD, you tell me how many jobs. You seem to know.

    But I think this Internet thing is going to make it. The days where online retailers assert a competitive advantage because they’re an infant industry is long gone.

    Bricks and mortars employ people here and pay property taxes. That should be enough of an advantage for the online giants.


  13. - Curmudgeon - Friday, Oct 18, 13 @ 3:03 pm:

    Wordslinger: “I guess you can see how Amazon put Borders out of business.”

    Personally, I think Borders put itself out of business by some of its practices, including markups that were out of line even with other IL physical presence retailers.

    I buy from Amazon, and sometimes its website has given me the opportunity to buy from small Illinois-located sellers I otherwise would never have been aware of.

    The critics are looking at the situation backwards. Illinois is NOT losing EARNED revenue from online sellers — rather, it is seizing UNEARNED revenue from Illinois-located sellers who should be focus on protesting paying taxes for which they gain little, if anything, in “services” from the State.


Sorry, comments for this post are now closed.


* Loaf cancels on us
* Reader comments closed for the weekend
* *** UPDATED x1 - Durkin responds *** Madigan calls "Committee of the Whole"
* Friday afternoon document dump
* SUBSCRIBERS ONLY - Event and fundraising list
* *** UPDATED x1 *** Question of the day
* What a coinkydink
* Lincoln Funeral Reenactment events calendar
* Mismanagement, lack of staff leads to IDOC overtime problems
* Your daily "right to work" roundup
* Dold, Bost on "most vulnerable" list
* *** UPDATED x1 *** Obama library coming to Chicago - Rauner to sign bill
* Governor backs out of "debate"
* Creating Bright Financial Futures – A Credit Union Difference
* Today's quotable
* Rauner, legislators create "Star Chambers"
* "Democratic" group raises millions more
* Yesterday's blog posts

Support CapitolFax.com
Visit our advertisers...

...............

...............

...............

...............

...............

...............

...............

...............


Search This Blog...

Search the 98th General Assembly By Bill Number
(example: HB0001)

Search the 98th General Assembly By Keyword

          
        * Android Community Weekly Digest: May 2, 2015
        * Meerkat now available in beta version for Android
        * Xiaomi Mi5 and Mi5 Plus specs and release date leaked
        * Oppo N3 Review: lots of innovation, lots of opportunity
        * With Gruberie, Your Waiter Doesn’t Need To Take Your Order
        * Witness’s Live-Streaming App Is A Panic Button For The Smartphone Age
        * How to Download, Install, and Arrange Apps on Apple Watch

        * Pre-Order The New Lenovo ThinkPad W541 20EF000HUS Mobile Workstation
        * Moultrie’s Latest HD Action Camera Featuring Camouflaged Paint Scheme
        * Take Home This Affordable Dual SIM Android 4.4 Smartphone From OUKITEL
        * Arduino Home Automation Development Board Unveiled By GarageLab (video)
        * Quickly Test Coin Cell Batteries with DIY Battery-Testing Tweezers
        * Tomorrow Records Inspirational Messages for Your Future Self
        * Lumia 640 Will Be Among The First Devices To Receive Windows 10

        * Sox finale marred by poor D, Danks' short start
        * Subpar week capped by rough performance
        * Samardzija aiming to bounce back against Tigers
        * Sox finale marred by poor D, Danks' short start
        * Twins 13, White Sox 3: Worst Road Trip Since the Donner Party
        * Sox finale marred by poor D, Danks' short start
        * Flu bug shakes up White Sox lineup

        ...............


        Main Menu
        Home
        Illinois
        YouTube
        Pundit rankings
        Obama
        Subscriber Content
        Durbin
        Burris
        Blagojevich Trial
        Advertising
        Updated Posts
        Polls

        Archives
        May 2015
        April 2015
        March 2015
        February 2015
        January 2015
        December 2014
        November 2014
        October 2014
        September 2014
        August 2014
        July 2014
        June 2014
        May 2014
        April 2014
        March 2014
        February 2014
        January 2014
        December 2013
        November 2013
        October 2013
        September 2013
        August 2013
        July 2013
        June 2013
        May 2013
        April 2013
        March 2013
        February 2013
        January 2013
        December 2012
        November 2012
        October 2012
        September 2012
        August 2012
        July 2012
        June 2012
        May 2012
        April 2012
        March 2012
        February 2012
        January 2012
        December 2011
        November 2011
        October 2011
        September 2011
        August 2011
        July 2011
        June 2011
        May 2011
        April 2011
        March 2011
        February 2011
        January 2011
        December 2010
        November 2010
        October 2010
        September 2010
        August 2010
        July 2010
        June 2010
        May 2010
        April 2010
        March 2010
        February 2010
        January 2010
        December 2009
        November 2009
        October 2009
        September 2009
        August 2009
        July 2009
        June 2009
        May 2009
        April 2009
        March 2009
        February 2009
        January 2009
        December 2008
        November 2008
        October 2008
        September 2008
        August 2008
        July 2008
        June 2008
        May 2008
        April 2008
        March 2008
        February 2008
        January 2008
        December 2007
        November 2007
        October 2007
        September 2007
        August 2007
        July 2007
        June 2007
        May 2007
        April 2007
        March 2007
        February 2007
        January 2007
        December 2006
        November 2006
        October 2006
        September 2006
        August 2006
        July 2006
        June 2006
        May 2006
        April 2006
        March 2006
        February 2006
        January 2006
        December 2005
        April 2005
        March 2005
        February 2005
        January 2005
        December 2004
        November 2004
        October 2004

        Blog*Spot Archives
        November 2005
        October 2005
        September 2005
        August 2005
        July 2005
        June 2005
        May 2005

        Syndication

        RSS Feed 2.0
        Comments RSS 2.0
        WordPress

        Loading


        * Illinois Gov. Bruce Rauner's plan to farm out e.....
        * Edwardsville does booming business in asbestos .....
        * Lincoln Funeral Re-enactment events end with so.....
        * DCFS could experience budget cuts..
        * Lincoln’s hometown re-enacts funeral..
        * Nepal earthquake survivors return to Chicago..
        * Illinois Gov. Bruce Rauner's plan to farms out .....
        * Rauner agency privatization idea raises oversig.....


        * Rauner agency privatization idea raises oversight concerns
        * Watchdog group: Poor living conditions plague Vienna lockup
        * Remains of Marine killed in WWII to return to Illinois
        * Hikers warned to stay on Starved Rock trails to avoid falls
        * Rauner agency privatization idea raises oversight concerns
        * On 150th anniversary, Lincoln's hometown re-enacts funeral
        * No reports of major damage from small earthquake in Michigan
        * Richard Pryor statue to stand in his Illinois hometown
        * Rauner honors Lincoln legacy at Springfield commemoration
        * Chicago breeder says masked men stole pit bulls at gunpoint

        * Rauner DCEO privatization idea raises oversight concerns
        * Watchdog group: Poor living conditions plague Vienna lockup
        * Langfelder: Handle high-speed rail oversight locally
        * Annin flag drapes over Lincoln coffin once again for re-enactment
        * Southern Illinois county does booming business in asbestos lawsuits
        * Audit finds Illinois bridges went without inspections
        * Rauner signs Obama library, Lucas museum bill
        * Rauner to sign Obama library, Lucas museum bill on Friday
        * Manar, downstate lawmakers seek to boost Illinois' coal industry
        * Illinois governor tries novel approach in anti-union battle

        * 20 In Their 20s
        * Despite Vitale's business experience, CPS flunks Finance 101
        * How Matt Moog got gut-punched by Google and still won
        * Rauner's anti-union crusade could send Illinois into a budget disaster
        * Letter to the editor


          * Prosecutors: Maywood woman attacked nurse at mom's nursing home
          * Robert Morris University falls short of North American video gaming title
          * Prominent Pilsen priest removed for relationship with woman
          * Boy shot in Rogers Park among weekend's 26 wounded, 5 killed
          * Autopsy: Death of Summit man ruled homicide
          * Family searching for missing Crown Point man
          * Off-duty Oak Park police officer shot in Chicago
          * 1 dead in 5-vehicle crash in Will County
          * No bail for 3 charged in armed robbery, police shooting
          * Police remember fallen comrades at yearly St. Jude march


          * NTSB: CTA shares blame for O'Hare Blue line crash
          * Sheriff's office announces new mental health clinic
          * On the streets of Baltimore, trying to understand the anger
          * College of DuPage puts president on administrative leave
          * Chicago school cleaning contract millions over budget
          * Culturally-sensitive workouts yield health results for immigrants
          * Method factory opens in Pullman
          * Chicago May Day protests to include anti-violence as theme
          * More than 4,000 dead in Nepal as earthquake's toll rises
          * Obama chooses Chicago to host his presidential library


          * Paul Findley: The choice is justice or mercy
          * Rauner DCEO privatization idea raises oversight concerns
          * Statehouse Insider: Sometimes lucky is good enough
          * Watchdog group: Poor living conditions plague Vienna lockup
          * 'What's Next, Springfield?' Another conversation
          * Bernard Schoenburg: Rauner plans biker bash at mansion
          * Langfelder: Handle high-speed rail oversight locally
          * Annin flag drapes over Lincoln coffin once again for re-enactment
          * Southern Illinois county does booming business in asbestos lawsuits
          * Gabe Rottman and Katie McAuliffe: Update to online privacy laws long overdue


          * New Chargers coach: 'We're up to the challenge'
          * Baseball wins 21st in a row, 40th overall
          * Softball earns fifth seed for Big Ten tourney
          * Lottery results
          * Weakening thunderstorm system heads toward Quad-Cities tonight
          * Police arrest teen who allegedly displayed gun
          * 'Altar crawl' lets visitors see Davenport sanctuaries
          * Cyclists, schools and businesses ready for National Bike Month
          * World War II Remembrance Days
          * Urbana Grand Prix Bicycle Race


          * Images: The Blackhawks defeated the Wild 4-1 in Game 2
          * Blackhawks hold tight to home-ice advantage
          * Cougars stop Snappers in 10
          * Vice President Biden touts community policing at NAACP event
          * Kane leads Blackhawks past Wild 4-1

          * Bost is impressed by McKendree intern
          * EMILY's List endorses Duckworth; not waiti...
          * Armenian-American judge marks WWI-era kill...
          * Duckworth has choice words for women in co...
          * Upbeat — April 18-23
          * Proposed bill to create more Arsenal jobs
          * Olson urges Obama transparency on federal ...
          * Armenian-American judge marks World War I-...
          * IVCC's Mr. Phillips goes to Washington
          * Money moves: Duckworth, Rauner, Neil Bluhm

          * Hillary Clinton Is Suddenly Interested in ......
          * Corinthian students to boycott Education D......
          * Sessions, Durbin Issue Statement On DHS De......

          * Iran debate gives 2016ers a chance to scor......
          * Targeted mayor says indictment a 'punch in......

          * Tim Cawley’s Common Core math.
          * Michael Sacks and Rahm’s emails. 77 hours and waiting.
          * In A Gloomy Economy, Signs of Light
          * Who Pays For Bogus UAL Bankruptcy Post?
          * Let's Get Story Behind Faulty UAL Post
          * Chi-Town Activists? Joke Is On GOP
          * First, Kill All Publicly-Traded Law Firms
          * Internet Limits, Bill Daley and Obama...
          * Mr Mayor: Knock Down This Wal-Mart Wall
          * BW Chicago, We Hardly Knew Ye


          * Illinois Senate Confirms Tom Tyrrell to Lead the Department of Central Management Services - Tyrrell brings vast private, public, and military sector experience to lead CMS
          * IDOT Listening Tour Continues Next Week in 12 Illinois Communities
          * Governor Rauner Submits Statements of Economic Interest
          * Governor Rauner Takes Bill Action
          * College Illinois!® Extends Enrollment Through June 1st - Illinois families can still take advantage of 2014-15 reduced contract pricing





              Hosted by MCS SUBSCRIBE to Capitol Fax Advertise Here Mobile Version Contact Rich Miller