"This law will put Illinois-based businesses on a level playing field, protect and create jobs, and help us continue to grow in the global marketplace." "Illinois' Main Street businesses are critical to ensuring our long-term economic stability, which is why they must be able to compete with every company doing business online in Illinois," Quinn said. Illinois is among a handful of states ? including New York, Rhode Island and North Carolina ? that have instituted similar laws to extract sales taxes from online merchants and boost depleted state coffers. Amazon declined to disclose how many of its affiliates are in Illinois, but Overstock said it did business with "well over 100." Amazon and Overstock have relationships with thousands of affiliates across the country. The state sales tax in Illinois is 6.25 percent.Īmazon and Overstock said they would avoid the sales-tax issue by dropping their affiliates in Illinois. The average state sales tax rose to 5.52 percent in 2010 from 5.48 percent in 2009. jumped to a record high of 9.64 percent in 2010, from 8.63 percent in 2009, according to Vertex Inc., as cash-strapped city, county and state governments sought new revenue. The average combined sales tax on goods purchased in the U.S. The new law expands the meaning of "physical presence" beyond a warehouse, factory or office to include affiliate companies, typically deal and coupon website operators that earn commissions for directing shopping traffic to an online store.
Under the new law, called the Main Street Fairness Act, online retailers must collect and remit sales taxes on purchases made by Illinois residents if the online retailer has a physical presence in the state. The law, which took effect immediately after it was signed Thursday, is expected to have little effect on consumers but deals a blow to small Web businesses that count Internet retail giant Amazon and other online merchants as a major source of ad revenue. "Amazon has basically a 10 percent pricing advantage, and they're fighting like the dickens to keep it," said Fiona Dias, executive vice president of strategy at GSI Commerce, a Pennsylvania-based digital marketing firm. to claim they have no physical presence in a state ? something they must do in order to avoid charging their customers sales tax. The controversial law makes it tougher for online merchants such as Amazon and Inc. said it would blunt by severing ties with Illinois affiliates. Pat Quinn stepped into the Internet tax fray this week, signing into law a bill designed to collect a sales tax for certain online purchases, a move that Inc. : Allows you to comparison-shop online.CHICAGO ? Illinois Gov.
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