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.


* Reader comments closed for the weekend
* *** UPDATED x1 *** A few, sparse deets about the Obama visit
* Rauner now says he supports opening the State Museum
* Rahm fires back, and a trip down memory lane
* Red meat for the masses
* *** UPDATED x2 - A clue? - Rauner denies involvement *** AFSCME warns of "phony poll"
* "Not even cash-strapped Puerto Rico"
* Jesse White, many others blast Dunkin, endorse Stratton
* Question of the day
* SUBSCRIBERS ONLY - MJM's new ad, ILGOP's new buy
* Two completely different takes on the Ferro situation
* Because... Madigan!
* Rate the new ad for Rep. Avery Bourne
* SUBSCRIBERS ONLY - Supplement to today’s edition
* Caption contest!
* SUBSCRIBERS ONLY - Today's edition of Capitol Fax (use all CAPS in password)
* 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

  
* How to stream Super Bowl 50 from your phone, tablet, or media player
* LiveLike’s VR Spectator App Wins The 1st And Future Bringing Home The Game Category
* [Deal] T-Mobile offers customers an Alcatel OneTouch Pixi 7 basically for free
* Better call quality is coming to Hangouts
* Power tools: Apps that give your battery more juice
* How Mobile Technology Will Increase Stadium Security
* Twitter timeline may be getting shuffled around

* ALL TIME SSS POST AND REC TOTALS
* White Sox Minor Leaguer Shearrow suspended
* Spring not far away as truck heads to Arizona
* This week in White Sox: Sun sets on Andre Ethier rumor
* Did July change Chicago's offseason?
* White Sox trade rumors: Low, sustained heat around Andre Ethier
* Rumor with a view: Why not chase Puig?

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


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

Archives
February 2016
January 2016
December 2015
November 2015
October 2015
September 2015
August 2015
July 2015
June 2015
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


* Governor Signs Executive Order Directing Illino.....
* What price for victory? Casualties mount - Clin.....


* Police: Rockford's violent crimes surged 24 percent in 2015
* Names released of 6 relatives found dead in Chicago home
* 3 held in alleged fake kidnapping scheme in Chicago suburb
* Lake County offering mental health training to officers
* U of I reports record number of freshman applications
* Chicago FBI: 'Pinball Bandit' suspected in 5 bank robberies
* Amtrak, Illinois reach deal to maintain instate service
* New commemorative quarter features Shawnee National Forest
* Chicago Archdiocese to close parishes due to priest shortage
* Rauner: Illinois State Museum may open with its own funding

* Gaming Board seeks to revoke license of terminal operator
* Illinois Gaming Board seeks to revoke license of terminal operator
* Springfield awaits details on President Obama's visit on Wednesday
* Rauner alters bill that would reopen Illinois State Museum, includes admission fee directive
* IDOT, Amtrak reach agreement to maintain train service
* Rauner touts government consolidation legislation
* State, federal inspectors do flood damage assessments in Kincaid
* Rauner administration, AFSCME continue war of words over contract talks
* Rally to push for budget planned at Eastern Illinois
* Rauner wants public-private deal to add lanes to I-55 in Chicago area

* Too bad for Boeing—but this Rolling Meadows plant will get boost from Air Force bomber
* Small airlines to O'Hare brass: What about us?
* Why 'distressed' homes are so hot today
* What's the hottest job in Chicago tech today?
* Chicago teachers' rejection of deal is bad for all


* Brandon Mashinter making the most of his limited role
* As they chase the Blackhawks, Stars learning to handle adversity
* Sunday Sitdown with sociologist Michael Maly on whites and Chicago
* Brown: Under the wire in Uptown
* THE WATCHDOGS: Part-time City Council watchdog made nearly $800,000 in 4 years
* THE WATCHDOGS: Rauner still keeping secrets
* Mitchell: For sake of poor, minority kids, change needed at CPS
* BGA Public Eye: State OKs gambling malls while ripping ‘backdoor casinos’
* Georgia Nicols horoscopes for Feb. 6
* Dear Abby: Wife’s decoration overkill destroys his Christmas spirit


* Real estate developer John Tishman, man behind World Trade Center, John Hancock Center, dies at age 90
* Cop who shot Quintonio LeGrier and neighbor sues teen's estate, claiming trauma 
* Gage Park victims' identities officially released by medical examiner
* Health worker charged with stealing from elderly person she cared for
* Man accused of stabbing girl in domestic-related incident
* Man wounded in Lawndale neighborhood shooting
* Man charged in armed robbery of cab driver in Elgin
* Two boys shot to death in Gary
* Man killed, 5 others wounded in city shootings
* Deaths of all six victims in Gage Park ruled homicides by medical examiner


* Gaming Board seeks to revoke license of terminal operator
* Illinois Gaming Board seeks to revoke license of terminal operator
* Kevin Borgia: Wind energy a low-cost, reliable part of Illinois’s electricity mix
* Charles Krauthammer: The 'establishment' nonsense
* Springfield awaits details on President Obama's visit on Wednesday
* Rauner alters bill that would reopen Illinois State Museum, includes admission fee directive
* IDOT, Amtrak reach agreement to maintain train service
* Rauner touts government consolidation legislation
* State, federal inspectors do flood damage assessments in Kincaid
* Rauner administration, AFSCME continue war of words over contract talks


* Urbana man arrested for alleged cocaine sale
* 0206 Laterance Creighton
* Tiley: No contact with the UI about AD opening
* Pedestrian critically injured in Paxton
* Finke, Nunn looking good for Iowa
* Illini Preview: Recovery complete from triple OT win
* Coffee with the Plant Experts 02-06-16
* Saturday Sports Talk 02-06-16
* PODCAST: The Roofing Dog 2-6-16
* PODCAST: Holder Wealth Management 2-6-16


* Analysis: AP bureau chiefs in Koreas on planned launch
* Bulls' Butler has strained left knee, no ligament damage
* Haiti leader departs as he came: amid uncertainty, disorder
* Twitter CEO Jack Dorsey says timeline will stay in real time
* Neighbors begin vigilance as North Korea launch window opens

* House lawmakers overcome hurdle on key tra...
* Rodney Davis talks funding with Bloomingto...
* The agency that fought Illiana gets a new ...
* Rep. Dold takes educational cruise down Ch...
* Lawmakers decry high turnover rate of VA h...
* CBD Oil, and politics
* Simon considering state Senate bid
* Killer Congressman Tom MacArthur trying to...
* Shutdown? State may not notice
* Rep. Bob Dold

* Report: Obama and Other Gun Control Propon......

* Sen. Kirk Introduces Bill to Ensure Retire......
* Northwest suburbs in 60 seconds - Chicago ......

* Random thoughts. Union leadership conspiracy theories.
* Art and Activism.
* "Big Game" Happenings
* Thorner: Demand lawmakers enact a permanent Smart Meter opt out for Illinoisans
* Di Leo: Dwindling Jobs...and Attacking the Producers
* Happy 105th Birthday, Mr. Reagan!
* Rauner: State can save $500M on purchases
* Cook County Commissioner Morrison: Oppose firearm liability insurance proposal
* Wilson Men's Club Hotel Is For Sale, And Oak Park Columnist Is On The Case
* Illinois Board of Elections rules Ted Cruz a "natural born citizen"


* Emergency Management Officials, National Weather Service Encourage Winter Preparedness - November is Winter Weather Preparedness Month in Illinois
* Keep Your Family Safe This Winter - November through February are leading months for carbon monoxide related incidents
* Governor Takes Bill Action
* Illinois Department of Labor Director Hugo Chaviano Awards Governor’s Award for Contributions in Health and Safety to the Illinois Refining Division of Marathon Petroleum Company LP
* State Regulator Elected Treasurer of Interstate Medical Licensure Compact




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