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Illinois requires online retailers to charge sales tax

Other states also are moving to tax web-based businesses, which is strongly opposed by Amazon.

By MSN Money Partner Mar 14, 2011 6:28PM

This post is by Seth Fiegerman of MainStreet. 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:


Mar 16, 2011 4:18AM
Let's see - local sales tax is 12.75%. Online 0%.  Six other states tried this same idiotic law Illinois passed. ALL repealed it within 6 months. Why? Between Amazon and the other affiliate/associate programs, Illinois residents made almost 400 million in commissions (that's a conservative estimate.) They paid almost $90 million in income taxes and another 40 million in sales taxes.  So now Amazon and all other out of state companies have a simple solution - kill affiliate programs in Illinois.  EXACTLY what they warned everyone they would do (yet Illinois politicos exclaim "surprise and shock") - so the net result of this bill is not more income for the state - but probably $150 million LESS in taxes. A "fairness" bill? Look in your own backyard, Illinois. And 400 million less $$$ spent in the state. Illinois - what a state.

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.

Mar 15, 2011 6:13PM
I love how Amazon is referred to as "skirting" tax law and pulling a "stunt" when there is no evidence whatsoever that they are breaking any laws. This article is extremely biased. Why does the author think that Amazon is a national tax collection agency?

Amazon would most certainly not have to sever ties with every local business in America. Does the author honestly not know that some states don't charge sales tax? Businesses in Alaska, Delaware, Montana, New Hampshire, and Oregon will simply rush in to fill the void. Amazon won't even blink, and states like IL and CA will simply lose the income tax on those revenues while still failing to make Amazon collect the sales taxes.
Mar 15, 2011 7:51PM
The fact of the matter is the U.S. Supreme Court has ruled that the states can only collect the tax if the online business has a physical presence in that state. So it seems to me that IL. is the one breaking the law. If these politicians can not get their act together and balance budgets  they should be thrown out!!!!!!!  
Mar 15, 2011 10:30AM

I choose not to live in Illinois because of their tax policies, besides Amazon already charges me sales tax. I don't even buy gas in Il. because of their taxes, buy on either side Mo or Ky.


Mar 16, 2011 12:17AM
I pay  8-10 dollars to have items shipped to me. Now they want to add tax!  With shipping the playing field was level,  now it is  tilting to the big box stores
Mar 18, 2011 7:59PM
Maybe the governor of Illinois doesnt' realize that the residents of his state realize that he is overpaid and most of the public officials there are overpaid and get the bulk of incentives, benefits, i.e. retirement, sick pay,  --- you name it. Am I right or am I wrong?
Mar 16, 2011 4:29PM

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.

Mar 16, 2011 7:04PM

What your going to see in the next year is a bunch of homeless and poorer people. Its sad all they know is to TAX TAX TAX.

Mar 19, 2011 12:04PM
It doesn't matter how much they tax. They will find a way to waste it and in return you will have less. You will have less because they think you are stupid and they know better. A nanny state where they decide what's on the table less the salt. They have wasted nearly 900 billion with no jobs to show. Just flat stole this money and now you and your children will pay for it. They will continue to take till there is nothing else left except revolt. IL. cares as much as NY because they are spend and tax liberals. Most NY ers will move to NJ. Most of IL. will move to Indiana. When I can't buy what I need from the net I simply will stop buying and use what I have to get by. Tax away idiots.
Mar 16, 2011 7:00PM
And of course Wal-Mart wants all the online business's to go broke so they can make the profits.
Mar 19, 2011 8:23PM
This is typical. Government helping certain corporations (Walmart, etc.) at the expense of the little guy. One thing that is never mentioned is that shipping and handling charges often offset the tax savings. The big difference is what Amazon charges for the product. They show that most retailers are over charging for their merchandise. Typical of politicians with 6 or 7 figure incomes shafting the little guy just trying to make the ends meet. When are we going to get some constitutional politicians who represent the people and not big business. All politicians are the same.
Mar 15, 2011 11:40PM
The Illinois legislators would make Don Fanucci very proud.
Mar 19, 2011 9:51AM
Why would anyone be treated any different.In a free market the market will take care of it,s self.Stop the tax breaks for anyone or any company and let the market choose.Anything else is anti American,I am so sick of hearing all this talk of taxes and job creation.Demand creates jobs and nothing else,if you think a company will hire more people because they have more money you better go back to school.They will alwayes try do as much as possible with as few people as possible and pocket the rest.If you believe anything else I have a bridge for sale.
Mar 20, 2011 12:56PM
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Mar 16, 2011 12:05PM
Why should buying online be any different than buying through the mail?  When I use to mail an actual order form to a company I very seldom, if ever, had to pay sales tax.  I never resided in those states where the companies (Sears, JCPenney) had their mail-order facilities; most were in Illinois.  I still buy from these companies; however, I place the order online rather than via snail mail.
Mar 21, 2011 1:25PM

I have residence in ILLinois, and if we could sell at a fair price would gladly move south.

The taxes are too high and value of property is going to the dogs.  Thanks a lot Dem......

Mar 16, 2011 10:19AM
Mar 24, 2011 8:40PM

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?

Mar 16, 2011 6:48PM
First of all Illinois people must be a bunch of idiots to Elect the Governor they did, I mean really 66% tax increase on the citizens. They should have taxed the rich that much and they would have been out of debt the first year. Second all of you in Ill need to Volt every one of them back out of office. And you should know you can' trust in part of the Government there all a bunch of crooks. Just like the lottery was suppose to go to the schools, why in sam hell are schools broke. I would get State law suit going to mandate all the money from the lottery to go only where it was suppose to and that is the schools. And if they start taxing the business on the web then I pity out many will give up. You need to vote some lower to mid class people in office that have lived the poor life then they will cut the rich pay and stop all these million dollar bonus's that is going on.
Mar 24, 2011 8:59PM
Great post, Rcik.  You hit it on the nail!
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