Illinois Sales Tax Law Ruled Unconstitutional

An Illinois court recently made a surprisingly ruling regarding the hotly-debated topic of sales tax on Internet purchases. On April 25, Cook County Circuit Court Judge Robert Lopez Cepero said that a law requiring most online retailers to collect sales tax from Illinois residents was unconstitutional, and that it also violated the federal Internet Tax Freedom Act.

Under current law, residents of states that impose a sales tax, such as Illinois, must pay sales tax on online purchases. However, online retailers were not required to charges sales tax to Illinois residents unless their operation had a physical location in the state, and few make the effort to pay these taxes when filing their state income tax returns.

Due in part to the fact that this essentially makes online shopping cheaper than buying at a brick-and-mortar alternative, Illinois passed the Main Street Fairness Act in March of 2011. This expanded the requirement so that any online retailer with an affiliate company, deal or coupon website operator, or other third-party that received commission for sales in Illinois was required to charges sales tax. Informally dubbed the “Amazon-tax law,” this provision would have required Amazon to start charging Illinois residents sales tax.

However, Amazon responded by stopping doing business with the nearly 9,000 affiliate marketers in Illinois. Some other third-party businesses moved their operations to nearby states to be able to continue working with Amazon.

According to a Chicago Tribune article, the battle over this issue is expected to continue. Additionally, the U.S. Congress is debating issuing federal legislation regarding Internet sales tax.

Chicago business owners who have questions regarding any tax-related issue should contact a top Naperville tax law attorney. The Naperville tax lawyers at The Gierach Law Firm have a firm understanding of all aspects of Illinois business tax law.