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Illinois expands sales tax for online purchases
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Kai Ryssdal: Amazon's just about done with the state of Illinois. You can still buy stuff from the online retailer if you live there. But if you make your living as one of Amazon's Illinois-based associates, you're out of luck.
Amazon's cutting ties with websites in that state that have been selling Amazon's goods by way of advertising links. Amazon says it would rather do without the ads than be forced to collect sales taxes under a newly signed Illinois law. Our senior business correspondent Bob Moon explains.
Bob Moon: It's not just Amazon that's resisting growing pressure from budget-strapped states to collect sales taxes.
Jonathan Johnson heads Utah-based Overstock.com. He argues the U.S. Supreme Court has already let companies with no physical presence in a state off the hook.
Jonathan Johnson: Overstock doesn't have any employees, any warehouses, any goods in Illinois. That's why we don't have to collect sales tax.
Johnson says Overstock just notified its Illinois-based affiliates that sell or promote its goods on their websites that those relationships are being terminated. The reason? The state contends they make Overstock liable for collecting taxes.
Rebecca Madigan represents the affiliates who get paid sales commissions in what's known as "performance marketing." She says Amazon and Overstock don't want to be burdened with collecting taxes.
Rebecca Madigan: It becomes much more expensive for them than any sort of revenue that they're getting from these affiliate websites.
Jason Brewer represents brick-and-mortar members of a trade group that includes Wal-Mart and Best Buy. He says their online sites collect sales taxes in all states, and their rivals aren't being honest about their unfair advantage.
Jason Brewer: Clearly at this stage, they've built a business model around not collecting that sales tax, so I think it's rather disingenious of them to suggest that it doesn't matter.
Chicago-based movie critic Roger Ebert is one of those who supports his website with Amazon sales links. Last night, he tweeted that he also supports the new law, but because Amazon has decided to evade what he called "fair and just Illinois taxes," he has only "20 more days to make a fortune." Then he sent another tweet, linking to an Amazon sale for Levi's.
In Los Angeles, I'm Bob Moon for Marketplace.
Illinois is making and enforcing taxes because its fouled everything up fiscally. If they want business to thrive, reduces taxes in the first place. Cut spending, and stop borrowing. The government and its functions are not as important as its people. Its existence is always optional.
Amazon protests too loudly. I have purchased goods from vendors that used Amazon for order fulfillment. Not only did Amazon collect sales tax for the vendors, but correctly identified the proper jurisdiction, and charged me the correct rate, which is a major accomplishment, given CO's complexity with regard to sales tax. Online vendors that refuse to collect sales tax for my jurisdiction are last-resort vendors for me; we need the revenues.
Online retailers still have to pay for shipping. The additional tax will make them a bit less competitive in Illinois. If the state gets punished by slowing e-commerce activity, then no one else will follow. If Illinois raises enough to help fill in the budget shortfall without hurting then other states may follow.
This is an unfortunate tax loophole that penalizes local merchants. Amazon and the like claim that collecting state and local taxes is too difficult, but this would be trivial with simple database software. Surely this is not beyond the capabilities of Amazon, or any other online retailer. The only fix is a Federal law, so don't hold your breath for any action on this issue. In the meantime, states like Illinois (and sadly California) pass/are considering passing these poorly conceived laws that generate no new tax revenues, but destroy the incomes of tax-paying local affiliates.
