Illinois requires online retailers to charge sales tax
Other states also are moving to tax web-based businesses, which is strongly opposed by Amazon.
This post is by Seth Fiegerman of MainStreet.
Illinois Governor Pat Quinn signed a law last week requiring online retailers that partner with businesses located in the state to charge sales tax and report the tax revenue they collect.
The law, known as the Mainstreet Fairness Bill, is intended to force online retailers to abide by the same tax standards as brick and mortar businesses. Until now, retailers in Illinois, and in the majority of states, only had to collect sales taxes if they had a physical location in the state, effectively granting e-commerce sites a significant tax loophole.
According to the Illinois Department of Revenue, this law could help the state earn as much as $170 million in previously uncollected sales tax revenue, which should help deal with some of the state’s projected $4.9 billion budget shortfall for the 2012 fiscal year.
"Illinois' main street businesses are critical to ensuring our long-term economic stability, which is why they must be able to compete with every company doing business online in Illinois," said Governor Quinn in a statement. "This law will put Illinois-based businesses on a level playing field, protect and create jobs and help us continue to grow in the global marketplace."
Amazon, in particular, has used the tax loophole to its advantage by shaving off the sales tax amount (6.5% in Illinois) from the final price tag to be more competitive. While Amazon is not technically based in any one state, the site is known to team up with thousands of smaller websites that are. These local websites promote and direct users to products sold on Amazon, and under the new law, these partnerships would be reason enough for Amazon to institute a sales tax.
North Carolina, Colorado and Rhode Island have each passed similar bills, and other states are considering doing so, including California, where many Web companies are based.
Not surprisingly, Wal-Mart, the world’s largest brick and mortar retailer, was one of the first to praise the law in a statement for “leveling the playing field” between online and offline companies.
But the main downside to this bill is that it could end up hurting local businesses that sell their products online. Each time a state imposes this kind of law, Amazon terminates its partnerships with local websites to skirt the sales tax requirements.
This in turn removes a valuable revenue stream from thousands of homegrown businesses that depend on Amazon for the promotion of their goods. Amazon has already threatened to drop local partners based in Illinois.
That said, if this law eventually spreads to the majority of states, or if it is ever instituted on a national level, it would become increasingly costly for websites like Amazon to pull this stunt, as they would effectively have to sever ties with every local business in America.
More from Main Street and MSN Money:
The highest sales taxes in the country. The highest property taxes in the country. The worst public services in the country, most crooked politicians - pretty much all our past governors are in the pen. So of course a crooked political party will pass an illegal law.
I REFUSE to shop locally - I am NOT going to pay almost 13% in sales taxes. Screw Illinois.
The power to tax is the power to DESTROY. If you tax activities, there will be less spending as a result.
You idiots that love taxes are the real problem. You're the same shallow thinking do-gooders who's social programs harm situations rather than help in many cases. Get your hands out of our pockets and quit bankrupting our out of control governments.
People and businesses are leaving Illinois like it's a leper colony. Quinn's a fool, you do not increase personal taxes 67%, have 10% corp tax (except for the union companies), and expect to increase tax revenue with the droves of businesses that will leave the state.
The company I worked for eliminated my job and others after the tax increases in January. We hadn't had a raise or cost of living increase for the last two years.
Illinois Governor Pat Quinn signed a law last week requiring online retailers...
vs.
**Republican** Gov. Rick Snyder is drawing recall threats and angry protests over his attempt to...
Anyone else noticed the omission of the word "DEMOCRAT" in the first story?
I sure can't understand how some people get by without paying their taxes. I know people who don't file taxes at all that have large bank accounts, rental properties, some on full disability but work five days a week. If the government (IRS) has my Social Security Number, where my residence is, when I was born and etc. then why can't they check up on these people who do not file? Why punish retired people by increasing their federal income taxes and not the rest of the people who work and make a heck of a
lot more than most people get in their retirement checks?
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