Illinois’ Amazon-Tax Law Deemed Unconstitutional

April 26, 2012

One way to get around paying Illinois state sales tax is to stay at home in your metro Chicago real estate and do your shopping online. Governor Pat Quinn tried to stop that, but a Cook County court judge has turned him down.

Last year, Gov. Quinn signed legislation, known as the Main Street Fairness Bill or the Amazon Tax, that would have required out-of-state online retailers, like Amazon, to charge Illinois’ 6.25-percent sales tax on purchases made from online affiliates based in Illinois.

gavel over a computerMany online retailers threatened to cut ties with Illinois over the law, and some actually did, so the Performance Marketing Association (PMA) filed a lawsuit over the issue and won.

Cook County Court Judge Robert Lopez Cepero ruled this week that the Main Street Fairness Bill violates the commerce clause of the U.S. Constitution, which limits just who a state can tax. It also conflicts with a federal Internet tax moratorium in place through 2014.

“We are thrilled with the outcome of today’s preceding and believe it paves the way for internet marketing affiliates to get back in business in Illinois.” said Rebecca Madigan, PMA Executive Director. “We commend Judge Cepero for his timely and thoughtful decision.”

Illinois law requires shoppers to pay state sales tax on their Internet purchases, whether the retailer charges it or not. If the retailer does not, Illinois residents are supposed to file the taxes on their state income tax returns.

But few do. The Illinois Department of Revenue (IDOR) estimates that between $150 and $170 million in state sales tax revenue goes uncollected each year from online purchases.

“We respectfully disagree with the court’s ruling and are reviewing our appeal options with the attorney general’s office,” said the IDOR in a statement. “We need to protect ‘brick and mortar’ stores from an unlevel playing field, and we need to recoup some of the estimated $153 million that was not paid by online merchants prior to the law being implemented.”

Until then, Illinoisans, shop on. Online, that is.

Categories: Internet Marketing

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