llinois Supreme Court strikes down ‘Amazon tax’ as unconstitutional

llinois Supreme Court strikes down ‘Amazon tax’ as unconstitutional

In April, a Cook County judge called the "Amazon tax" law unconstitutional and demanded that it be repealed.

Illinois retail businesses levying for a law that would require online retailers to charge state sales tax at checkout found themselves out of luck on Friday, as the state’s Supreme Court upheld a former decision from a county judge who declared the law unconstitutional.

According to a report from the Chicago Tribune, the Illinois Supreme Court decision is the latest in a series of legal difficulties for the new law. Dubbed the Main Street Fairness Act – and known informally as the “Amazon tax” – the online taxing bill was passed by Illinois legislators all the way back inĀ  2011.

Supporters of the bill, such as the Illinois Retail Merchants Association, have cited the taxing processes of online retailers as an unfair business advantage. In states where sales tax is enforced, all patrons of Amazon and other e-commerce sites are still supposedly beholden to their home state’s sales tax laws. But many online retailers don’t charge sales tax at virtual checkout, leaving online purchases with the illusion of being less expensive than in-store purchases. If not charged at checkout, Illinois residents are supposed to pay their online sales tax when they file state income tax returns. However, whether due to forgetfulness, a lack of awareness about sales tax laws, or a refusal to pay, many residents in states like Illinois don’t end up paying a cent in online sales tax.

The reason for the inconsistency of when sales taxes were charged was due to pre-2011 legislation, which indicated that only online retailers with a physical basis in a sales tax state – in this situation, retailers with headquarters in Illinois – had to charge sales tax at checkout. The 2011 Main Street Fairness Act attempted to expand the law via loophole, demanding that online retailers with affiliate companies based in the state – ostensibly, third-party advertisers or coupon companies who direct traffic to online sales sites – also be qualified as “physical bases.” In other words, since Amazon was working with affiliates in Illinois, the bill would have forced the online retail giant to tax all or most Illinois sales.

Of course, the bill backfired horribly. Rather than deal with a state sales tax hassle, Amazon simply cut ties with most of its Illinois affiliates, a move that may have impacted as many as 9,000 businesses statewide. Some affiliates fled to non sales tax states so they could continue doing business with Amazon. Others were left furious with the state for the new bill.

In April, a Cook County judge called the “Amazon tax” law unconstitutional and demanded that it be repealed. Proponents from the bill – including the defendant, the Illinois Department of Revenue, vowed to “protect brick and mortar stores” by appealing the decision with the state Supreme Court. But with Friday’s decision, it looks like the Main Street Fairness Act may soon be a thing of the past for Illinois businesses.

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