Illinois “Amazon Tax” Puts Internet Firms in Danger

January 14, 2011

As we noted earlier this month, the Illinois Legislature rushed through a law that deems out-of-state companies to be in-state taxpayers if the companies receive commissioned referrals from in-state residents. These affiliate programs, of which Amazon.com is a prominent example, have been the subject of these likely unconstitutional, unwise, and aggressive state efforts to reach beyond their borders in imposing tax collection obligations.

The law is currently pending before Gov. Pat Quinn (D). Many Internet-based businesses in Illinois have expressed their concern if it ends up being signed into law. From the Chicago Tribune:

[The law] puts at risk huge revenue streams for such Illinois-based Web sites as FatWallet.com, CouponCabin.com and BradsDeals.com, which receive much of their commissions from sending customers to major online retailers.[…]

FatWallet officials were busy Thursday scouting ways to leave Illinois, Storm said.

"The reality is that as a business owner with 52 employees, we're not going to just get shut down because of a law Illinois passes. Our customers don't care whether we're in the state of Illinois," he said.

Brad Wilson, founder of BradsDeals, in Chicago, said about half his revenue would be in jeopardy, along with 20 jobs at his company.[…]

Revenue at CouponCabin, in Chicago, would be cut by one-third if the large retailers cut it off, said Scott Kluth, founder and president. He said he was dismayed that the bill was hurried through the Legislature.

"It was disheartening that this bill was passed by both houses in 30 hours without a full and fair opportunity for the voice of Illinois small businesses to be heard," he said. "Unfortunately, this bill will do significant harm to our growth."

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