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Illinois considering tax on online shopping

January 5, 2011

On top of trying to raise income and cigarette taxes, Illinois Senate President John Cullerton (D-Chicago) is trying to raise taxes on online shopping. The Illinois Senate is poised to consider legislation that would require out-of-state online retailers with in-state affiliates - websites that have an agreement to link to the retailer - to collect sales and use taxes for purchases. Currently, only Colorado, New York, North Carolina, Rhode Island have such tax schemes, called "Amazon taxes." Proponents claim that this legislation will raise $150 million.

But other states' experience with Amazon taxes indicates otherwise. Rhode Island officials report that they have lost revenues because retailers have shut down their in-state affiliates. North Carolina's Department of Revenue is not even keeping track of the revenue collected. Moreover, Amazon taxes have invited costly litigation against the states on the grounds that such schemes violate the U.S. Supreme Court's physical presence rule in the Quill case. Perhaps that is why a dozen states that considered an an Amazon tax did not enact it.

Illinois should not follow in the path of the states to try an affiliates tax. Instead of raising taxes in uncertain economic times, the state should reduce spending and reform the tax code to promote economic growth. If you're concerned about this burdensome and unconstitional tax, click here to find your legislators and contact them to share your concerns.




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