Amazon will start collecting sales tax from Illinois consumers next month to comply with a new state law.
Amazon spokesman Ty Rogers said Friday the online retailer will be required to collect the 6.25 percent tax starting Feb. 1. The Amazon spokesman says the online retailer “offers the best prices with or without sales tax.”
Illinois lawmakers passed the measure last summer after the Illinois Supreme Court threw out an earlier attempt at legislation. The court ruled the earlier law violated federal rules against “discriminatory taxes” on digital transactions.
The law went into effect Jan. 1, but the state granted a month-long grace period to online retailers.
“It demonstrates real responsibility on the part of Amazon to collect these taxes before they even lay a brick in Illinois,” said Rob Karr, president of the Illinois Retail Merchants Association, which has long been in favor of such legislation. He was referring to the e-commerce giant’s decision, announced last fall, to build at least one distribution facility in Illinois.
It remains to be seen whether the new tax will aid Illinois bricks-and-mortar retailers, Karr said, “What does help now is that the tax code is no longer picking the winners and losers.”
That new facility meant the company would have to start collecting sales taxes anyway because they’d have an Illinois nexus. Wisconsin projected a $30 million boost when the state began collecting sales taxes from Amazon, but money could just shift around online…
Amazon sales are likely to decline about 10 percent in Illinois if its pattern follows those of other states, according to Itzhak Ben-David, an associate professor of finance at Ohio State University who studied the effect of the Amazon tax issue on consumer behavior in five states that implemented online sales tax laws from 2012 to 2014.
“The decline was most dramatic for large purchases,” Ben-David said in an interview. For example, he and colleagues measured a sales decline of nearly 25 percent on purchases of $300 or more.
“These results suggest that sales tax is an important factor in the eyes of consumers,” he said.
Those consumers flee Amazon for other retailers, though they tend to stay online. The study found a 2 percent uptick in purchases at local brick-and-mortar retailers and an almost 20 percent increase through the online operations of competing retailers.
More and more people want to - and like to - shop online if they can. That trend can’t be halted. But Amazon has been a huge sales tax avoider over the years, so this is welcome news. Now, the Congress need to even the playing field. Sen. Durbin and Congressman Schock recently penned an op-ed on this topic…
A bipartisan bill, known as the Marketplace Fairness Act, to level the playing field for the small businesses in communities like Springfield has the opportunity to become law.
It’s an effort we are working on together — along with many of our Illinois colleagues — to get over the finish line this Congress.
Main Street businesses have a hard time surviving when their stores become showrooms, where people come in, look around, even try out merchandise, and then leave to buy the product online to avoid paying state taxes.
This online sales tax loophole is giving online retailers a 5- to 10-percent price advantage over their Main Street competitors, and it needlessly is putting people out of business in Illinois and across the country.