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Illinois state lawmakers pass Internet Tax Bill HB 3659, that could cost Illinois citizens thousands of jobs.
Last week, Illinois House of Representatives passed tax legislations concerning internet taxes. The bill focuses on out of state merchants such as Amazon.com and online retailer Overstock that do not occupy a physical dwelling in the state of Illinois, but have affiliations with Illinois businesses. The new law established these type businesses to be liable to pay Illinois sales tax.
The economic condition of Illinois is what prompted this House to pass the legislation. The outcome of the tax internet law is supposed to be a larger margin of tax revenue. Other states including Colorado, New York, North Carolina and Rhode Island have all passed similar laws, but have not seen the large amounts of revenue they expected. Instead, merchants severed relationships with affiliates in the states, prompting 12 other states to discard similar bills.
The law, if signed by Governor Quinn, can effectively impose a mandatory sales tax on retailers with contractual agreements with Illinois based affiliates. Nearly none of the companies that are affected by the bill have offices in the state. Neither do these companies actually sale, ship or handle any of the goods. The majority of the companies acquire commissions by forwarding shoppers to major online retailers. The Internet Tax Bill forces the online retailers to severe its relationships with affiliates.
Amazon.com sent a letter to its affiliate marketers with the following remarks, “The unfortunate consequences of this legislation on Illinois residents like you were explained to the legislature, including Senate and House leadership, as well as to the governor’s staff. Over a dozen other states have considered essentially identical legislation but have rejected these proposals largely because of the adverse impact on their states’ residents. We thank you for being part of the Amazon Associates Program, and wish you continued success in the future.”
CouponCabin.com, one of the small businesses affected by the bill issued a statement through its founder and president, Scott Kluth, saying, “For the third straight year, our staff has doubled in size and has already grown by 12% in the first week of 2011. Unfortunately, this bill will do significant harm to our growth by cutting our business by nearly one-third.” Kluth also explained in his elaborate statement, the impact the law would have on internet affiliates, losing their jobs, all across the state.
Governor Quinn has given no indications of when the tax law will be signed, or if he will sign it at all. The governor has 60 days to sign the bill and if passed, effective July 1, 2011.
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