Illinois Internet Tax Bill Becomes Law

After a couple of months to reflect, Illinois Gov. Quinn signed House Bill 3659, the Mainstreet Fairness Bill, into law today. That makes Illinois the 4th state to officially enact legislation forcing online retailers to collect sales tax in states where they have affiliate marketers (New York, North Carolina, and Rhode Island are the other 3).

Under Illinois’ new law (which is modeled on New York’s), any online company who uses in-state affiliates must now collect and remit sales tax on all purchases by Illinois-based customers. The collection requirement begins as soon as the company earns more than $10,000 in gross cumulative income from Illinois sales.

If past experience is anything to go by, it’s fair to assume that Amazon.com and other major online retailers will sever their relationships with Illinois affiliates, rather than get dragged into another tax jurisdiction.

So far, the only state enacting or threatening to enact some type of sales tax legislation that Amazon.com has kept ties with is New York. The company remains tied up in litigation in that state, but so far hasn’t terminated its affiliate plan. On the other hand, Amazon has terminated affiliates in other state that considered, but did not pass, legislation, including Hawaii and Colorado. (In Colorado’s a different type of legislation was passed that requires sales tax to be monitored and reported, but not collected). The retailer is collecting sales tax in its home jurisdiction of Washington, along with North Dakota, Kansas and Kentucky, where it has major distribution centers. In addition, several other companies, including CouponCabin.com, have announced plans to relocate their business operations outside of the state.

Legislation is currently pending or under consideration in the following additional states:
Arizona, Arkansas, California, Connecticut, Hawaii, Minnesota, Mississippi, New Mexico, South Dakota and Vermont.