Online Sales Tax-Illinois Update

Illinois Says NO to the Amazon Tax

No, is what Cook County Circuit Judge Robert Lopez Cepero said to the state of Illinois on April, 25th 2012. Judge Robert Lopez Cepero struck down the 2011 sale tax law that would tax online sales from out-of-state companies. Judge Cepero also ruled that the Illinois law is unenforceable because of a Federal Internet Tax moratorium that runs through 2014. This is clearly the right decision because having an affiliated company that makes sales and or refers customers to an online retailer does not create enough of a presence to justify the online sales taxes.

Online Sales Tax-The Amazon Tax

How can an Online Sales Tax be a bad?

Companies that sell goods over the internet should collect the state’s sales taxes too, right? WRONG! If you try to force an online company to collect a state’s sales tax then the online business will just move out of state. That’s exactly what the CEO of CouponCabin did because Amazon threatened to sever ties with them unless they left Illinois. Maybe a different state should try to collect an online sales tax? WRONG AGAIN! Doing the same thing over and over again and expecting different results is the definition of insanity. Wake up people! If we try to enforce a sate of national online sales tax solution, online companies will not just move out of state to avoid the tax, they will move out of the country!

Where does Amazon.com fit in?

Amazon has been making deals with states left and right over the past few months in an attempt to avoid paying back taxes and penalties. Previously, Amazon had manipulated the fact that they had no physical presence in other states as a reason not to collect taxes from its customers. Now Amazon has changed their tune because states like Texas have stated that Amazon.com owes an estimated $269 million in uncollected sales taxes and penalties from 2004 to 2009. In my personal opinion, Amazon is just “playing nice” and siding with the state because they want to avoid the sales taxes and penalties.

Conclusion

The federal moratorium on internet sales tax will run through 2014. How will the next round play out? Will states be required to pass their own legislation regarding internet sales tax collection, rates, and requirements? A federally mandated online tax rate could be a solution. However, a few states (such as Oregon) have no state sales tax. And are those collected funds then federal (IRS) funds, or do they get delegated down to the individual states? Online sales through Amazon may hurt brick and mortar establishments, however legislation which would “level the playing field” so to speak, may have an underlying effect on the jobs which are created and sustained by Amazon, its suppliers, and shipping companies. Its wholly possible that such companies would move out of the states entirely, taking their jobs with them. Personally, I believe the brick and mortar establishments need to find their own innovations and adapt to the markets with which they operate in, leaving the tax code out of it!

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