Illinois The First State To Throw Out Laws Making Amazon Collect Sales Tax Based On Affiliates
from the a-good-win,-but-the-battle-is-almost-over dept
Over the years, we’ve covered a bunch of stories about Amazon cutting off affiliates in various states. The issue was mainly that states are desperate for sales tax revenue — and there’s something of an ongoing dispute about who’s responsible for paying and collecting sales tax. Technically, if you buy via “mail order” and don’t pay a sales tax, you’re still supposed to pay up the sales tax to your state yourself. It would appear that almost no one does this. If companies have a business “nexus” in the state, then they are supposed to be collecting the sales tax at the time of the order, and sending it on to the state. The issue here was that states passed laws (almost all of which targeted Amazon) arguing that if Amazon has affiliates in the state, that counts as having a nexus, and thus Amazon would need to start collecting the sales tax. But, an affiliate is hardly the same thing as having a physical presence in a state. As anyone who’s done an affiliate program knows, all it really means is that you’re agreeing to advertise for the retailer, and if any sales come through, then you get a cut. They’re not employees. They’re not even contractors. They’re just advertisers.
In NY, Amazon sued over their law, but the lawsuit got tossed and continues to wind through the appeals process. However, in Illinois, it appears that a similar law has been struck down by the Illinois Supreme Court, who said it violated federal laws prohibiting discriminatory taxes on online sales. And make no mistake about it: this is targeted directly at online sales.
It appears that the Illinois Supreme Court recognized the real relationship between Amazon and affiliates:
But Justice Anne Burke, writing for the court’s majority, questioned whether there was any substantial difference between out-of-state businesses reaching Illinois consumers through a click-through-nexus approach or through other approaches that aren’t taxed.
“The click-through link makes it easier for the customer to reach the out-of-state retailer,” Burke wrote. “But the link is not different in kind from advertising using promotional codes that appear, for example, in Illinois newspapers or Illinois radio broadcasts.”
There is one dissent, which argues that since this isn’t imposing any new taxes, just who collects them, that there is no discrimination issue here at all. Either way, all of this may be moot as there’s increasing support in Congress to basically force the issue on internet companies, making them collect the sales tax for states.