House Debating Online Sales Tax Bill Now

Another bill to kill jobs in Illinois.

by Kristina Rasmussen

The Illinois House of Representatives is debating a bill to impose a so-called “Amazon.com” tax in Illinois. It has already passed the Senate. InternetRetailer.com has a good summary here, but here’s the policy concern in a nutshell:

Basically, some states, including New York, North Carolina, and Rhode Island, have passed laws that included online affiliate marketers—web sites that host banner ads for another company—as part of what constitutes physical presence for a company within a state. These states sought to declare certain out-of-state online retailers as having an in-state nexus (even though they had no in-state operations) because they place marketing tools on web sites run by others from within the state.

The practical result was vendors like Amazon.com and Overstock.com dropped thousands of advertising relationships with in-state advertisers, hurting local operators’ revenue streams. Illinois affiliates face the very real threat of being dropped should the state pursue “Amazon.com tax” legislation, as the obligation of calculating and collecting Illinois’s state and local option sales taxes would be immense. This loss of commerce for Illinois affiliates represents a direct threat to state income tax collections, as affiliates cannot pay income taxes on revenues they do not earn (as has been the case in Rhode Island).

Read our full testimony here.