Internet Sales Tax For Illinois

Two days, two controversial new laws in place for Illinois residents.  Just a day after he abolished the death penalty in Illinois, Governor Pat Quinn signed into law today,  a sales tax for internet retailers.

Under the new law called,  The Main Street Fairness Act, companies like Amazon.com and Overstock.com are to collect the 6.25%  sales tax from Illinois residents,  if the merchant has some physical location within the state.

“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,” said Quinn. “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.”

In an effort to avoid charging the sales tax, Amazon.com and Overstock.com have said that they will cease any affliation with Illinois web sites that drive traffic to both Amazon and Overstock’s sites.  Affiliates are paid a fee by the online retail giants,  for sales brought in through advertisements and links on the affiliates’ web sites.

And while the new law is not supposed to negatively impact the online consumer experience, small businesses are taking it as a loss and are already planning their next move, literally.

“We will have no choice but to consider moving to another state, a cost far greater than the benefits the bill allegedly would produce,” said Scott Kluth, CEO of CouponCabin.com, an affliate.

FatWallet.com CEO Tim Storm, another affiliate said, “It would cost Illinois more than it hopes to collect, hurt small and growing businesses in the thriving Internet industry in Illinois, force some affiliate marketers in Illinois to move to other states and put others out of business altogether.”

The Illinois Department of Revenue projects the state’s losses as ranging from $153 million to $170 million in uncollected sales taxes each year from online purchases.

The bill, which was was passed by the House in January, has been largely backed by brick and mortar retailers like Sears and Wal-Mart;  and had Governor Quinn not acted at all, the bill would have become law tomorrow without his signature.