Illinois Court Rules “Amazon Tax” Unconstitutional
Their long nightmare finally over, Chicago residents may now resume purchasing Brian Scalabrine jersey T’s free from sales tax.
From the Chicago Tribune:
Consumers who live in sales-tax states, such as Illinois, owe state sales tax on their Internet purchases, whether they pay it during virtual checkout or when they file their state income tax returns. But few actually pay unless tax is collected at checkout. That has the effect of making online purchases cheaper than those at bricks-and-mortar retailers.
In March 2011, Illinois passed the Main Street Fairness Act, informally dubbed the Amazon-tax law. Before the law, online retailers were forced to collect and remit sales taxes on purchases made by Illinois residents only if the online retailer had a “physical presence” in the state. For example, Sears must collect sales tax on virtual checkout at Sears.com because it has a headquarters and retail stores in Illinois. But Amazon.com does not have a physical presence and did not have to collect tax on checkout.
Cook County Circuit Court Judge Robert Lopez Cepero said in court Wednesday that the Illinois law violated the commerce clause of the U.S. Constitution, which limits who a state can tax, and that the law conflicted with the federal Internet Tax Freedom Act, which prohibits some types of Internet-related taxes. He directed parties to draft an order reflecting his opinion.
The quick decision Wednesday was unexpected, even to officials of the Performance Marketing Association, said PMA Executive Director Rebecca Madigan. “The judge pointed out and agreed with us that the state overreached its boundaries in trying to regulate interstate commerce,” Madigan said. “We…believe it paves the way for Internet marketing affiliates to get back in business in Illinois.” However, the battle has just begun, said David Vite, president of the Illinois Retail Merchants Association, which supports the law. “This is the first step in a very long battle,” Vite said. “We have seen local judges be overturned regularly on these kinds of questions.”
While several states have passed or are considering passing an “Amazon Tax” compelling online retailers to collect sales tax on purchases made by the state’s residents, the victory in Illinois — which comes on the heels of a similar ruling in federal court regarding an Amazon Tax instituted in 2010 in Colorado — is a strong indication that the courts may well view the tax as an overreach of state powers, and a violation of Quill v. North Dakota.
Read the full decision here.
