The Illinois Supreme Court yesterday ruled the “Amazon tax” law is unconstitutional because if violates federal rules against discriminatory taxes. The six to one ruling in the case of Performance Marketing Association, Inc., versus Brian Hamer, the Illinois Director of Revenue, (Case 2013 IL 14496) the court ruled the tax discriminated against internet retailers because they were being forced to collect Illinois taxes while other out of state businesses, such as magazine advertisers and infomercials, were not required to collect the taxes.
This is potentially bad news for Michigan where lawmakers have followed the Illinois example. In specific is defining the way a business is determined to have operations within a state. Illinois, like Michigan, defines it as “a retailer having a contract with a person located in this State under which the person, for a commission or other consideration based upon the sale of tangible personal property by the retailer, directly or indirectly refers potential customers to the retailer by a link of the person’s Internet website.”
Michigan sees taxing the internet as a source for additional tax dollars which is probably a more truthful assessment than the Illinois legislature’s claim the tax was to level the playing field for in-state merchants. Michigan has been seeking new sources of revenue that do not represent new taxes, which require a vote of the people. Because the sales tax already exists, expanding it to web sales would not be considered a new tax in the opinion of the lawmakers.
The court did acknowledge in paragraph 23 of their ruling “the click-through link makes it easier for the customer to reach the out-of-state retailer, but the link is not different in kind from advertising using promotional codes that appear, for example, in Illinois newspapers or Illinois radio broadcasts.”
The court, even in its turning down of the Amazon tax, was correct in the opinion that click through is easy. Amazon is once again expecting high sales volume (see video) as it enters the holiday season.
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