An Illinois law aimed at leveling competition between online and offline retailers while collecting more state sales taxes owed from Internet purchases is unconstitutional a Cook County judge said Wednesday. …
In March 2011, Illinois passed the Main Street Fairness Act, informally dubbed the Amazon-tax law.Before the law, online retailers were forced to collect and remit sales taxes on purchases made by Illinois residents only if the online retailer had a “physical presence” in the state. For example, Sears must collect sales tax on virtual checkout at Sears.com because it has a headquarters and retail stores in Illinois. But Amazon.com does not have a physical presence and did not have to collect tax on checkout.
But the new law expanded the meaning of physical presence beyond a warehouse, factory or office to include affiliate companies, typically deal and coupon website operators that earn commissions for directing shopping traffic to an online store. Affiliates are essentially third-party advertisers for online stores.
To avoid having to collect sales tax upon virtual checkout, some large Internet retailers including Amazon.com, responded by cutting ties with affiliates in Illinois. That eliminated revenue streams for affiliate marketers. There were an estimated 9,000 affiliate marketers in Illinois, according to the Performance Marketing Association, a trade group that was the plaintiff in the case.
After the new law passed, some prominent Illinois-based Internet businesses, such as CouponCabin.com and FatWallet.com, fled to nearby Indiana and Wisconsin rather than be cut off from commissions from Amazon.com,Overstock.comand others.
Cook County Circuit Court Judge Robert Lopez Cepero said in court Wednesday that the Illinois law violated the commerce clause of the U.S. Constitution, which limits who a state can tax, and that the law conflicted with the federal Internet Tax Freedom Act, which prohibits some types of Internet-related taxes. He directed parties to draft an order reflecting his opinion. …
“We are relieved that the 9,000 affiliates that were based in Illinoismay now have the opportunity to operate in Illinois without jeopardizing their business relationships with online retailers. This ruling places the responsibility for a solution back where it belongs: in Congress. CouponCabin continues to strongly support a federal solution to the taxation of all online transactions.”via Chicago Tribune.
I got news for the mopes that voted for this thing — THESE JOBS AIN’T COMING BACK!!
Worse, the companies that left took the talent base with them. So now there’s some talent in Indiana or Wisconsin which will attract other tech businesses. Companies locate to where there is talent. The “if you built it they will come” only works in movies.
Chicago was establishing itself as an affiliate marketing empire, sort-of a Midwest silicon valley of online marketing. But 9,000 high paying tech jobs left.
What we need is a law that says anytime a legislature votes for some law later found to be unconstitutional that they get docked what it cost the taxpayers to defend in court and the estimated loss to the state treasury.