Illinois Supreme Court Strikes Down Amazon Tax Law

Tax Professionals' Resource
October 23, 2013 — 1,899 views  
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The Illinois Supreme Court ruled that the nexus law involving clicks on retail ads and orders is preempted in accordance with the Internet Tax Freedom Act (ITFA) of the federal government on Friday. The Act disallows different states from being able to impose different taxes for different electronic transactions. The law of the state also expanded the meaning of ‘retailer’. The definition was changed keeping in mind those who are obligated to pay a sales tax and those who are specifically exempted from this.

Discrepancies and Misinterpretations of the Law

The click-through connection is the part of the law that caused the misunderstanding. If an out-stationed organization involved in making retail sales on the Internet has a contract with another organization within Illinois, then they are taxable as long as the domestic organization has a direct link to the out-stationed client. Also called performance marketing, this is the only case in which an Internet based retailer comes under the category of having to collect sales tax.

Amendments Made to Clarify and Accept Different Entities

The Illinois Supreme Court has now made changes or amendments to their original tax law to take into account electronic commerce. These new changes make things far clearer than before. Earlier on, it was stated that all retailers of any kind having businesses in the state would be required to ask for a sales tax from its consumers. They would also have to have a contract with a firm within the state to be allowed business on the web.

Other Areas that May be Concerned

This is not only limited to the Internet or online marketing, it is also in the print media and broadcast media. The court made a unanimous ruling (six to one) to strike down on the ‘Amazon tax law’, and mentioned that discriminatory tax for electronic commerce is prohibited. The Supreme Court’s ruling was the same as the ruling of the lower court that was involved prior to it.

Amazon’s Current Market Position

Justice Ann Burke and Justice Lloyd Karmeier read out their individual opinions based on the joint decision. Amazon had been under-going a major loss in stock value over the last few weeks due to this incident. Not only has this cost them a large amount of money, it has also lost them customers to competitive rivals because of the sales tax and price rate having sky-rocketed.

Tax Professionals' Resource