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Illinois Supreme Court Strikes Down 'Amazon Tax'

Illinois Supreme Court Building
Illinois Supreme Court

The Illinois Supreme Court on Friday struck down the so-called "Amazon tax." The decision could pave the way for businesses to make more money online.

The law was intended to force Internet retailers to collect Illinois sales tax.

Even if such companies didn't have an office or physical store here, they might have had Illinois "affiliates." That would be a website that linked to a product on, say, Amazon.com, and got a small kickback for every sale.

In a 6-1 ruling, the Illinois Supreme Court found this was discriminatory under federal tax law. That's because other media, from print newspapers to radio stations, can have similar relationships without having to collect taxes.

George Isaacson represented the companies challenging the law, and says the Illinois case could have national implications.

"There have been very few decisions under the Internet Tax Freedom Act, and especially dealing with the issue of discrimination against electronic commerce," Isaacson says.

In order to avoid the taxes, Amazon and other companies severed relationships with their Illinois affiliates.

Illinois estimates (pdf) it's missing out on more than $200 million in unpaid sales taxes for online purchases.

The state says it's reviewing the decision and considering whether to appeal.

Both sides say they'd rather have federal legislation that would make a uniform rule for Internet sales tax across the country.

The case is Performance Marketing Ass’n v. Hamer, 2013 IL 114496 (pdf).

Brian Mackey formerly reported on state government and politics for NPR Illinois and a dozen other public radio stations across the state. Before that, he was A&E editor at The State Journal-Register and Statehouse bureau chief for the Chicago Daily Law Bulletin.
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