Illinois Passes Online Tax Law

Sellers will be required to collect sales tax if they have in-state affiliates.

by staff writer
- Mar 11, 2011

Illinois Gov. Pat Quinn signed a new law on Thursday that will require online merchants working with in-state affiliates to collect sales tax on purchases made by Illinois residents.

The Mainstreet Fairness Act, as the new law is called, will help in-state brick-and-mortar shops, who have had to collect taxes, compete with online sellers who rarely did this, says Senate President John Cullerton, a strong supporter of the law. According to the Streamlined Sales Tax Governing Board, states will miss out on about $23 billion because of uncollected online sales tax.

Before the Illinois law passed, online sellers and retailers only had to collect sales tax from Illinois residents if they had a physical presence in that state, in accordance with a 1992 Supreme Court ruling. Now online sellers and retailers like Amazon will have to collect sales tax if they partner with Illinois advertisers, bloggers or Web sites to get traffic to their sites.

The law is expected to give Illinois an estimated $150 million in additional revenue. This money will prevent cut backs in health care, education and public safety, according to Cullerton.

Several states are trying to pass similar legislation, including California, Hawaii and New Mexico. However, some worry that laws like these will do little more than turn off retailers and cause them to cut ties with affiliates in these states. Amazon has already begun to do this.

In response to the new Illinois law, the Seattle-based retailer says it will cut ties with Illinois affiliates, calling the law "unconstitutional and counterproductive." Earlier this year, the company announced it would stop working with affiliates in Texas after receiving a tax collection letter from the state. It cut ties with affiliates in Colorado last year for similar reasons.

About the Author

Auctiva staff writers constantly monitor trends and best practices of those selling on eBay and elsewhere online. They attend relevant training seminars and trade shows and regularly discuss the market with PowerSellers and other market experts.

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