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Illinois Remote Sales Tax: Here, Gone, and Here Again

  • Jan 21, 2015 | Gail Cole

 Illinois expands definition of out-of-state seller... again.

Update 01.23.2014: Amazon will begin collecting tax on Illinois sales February 1, 2015.

In 2012, Illinois lost more than $1 billion in unpaid sales tax on remote sales, according to the National Council on State Legislatures. Although taxpayers are supposed to pay Illinois use tax when Illinois sales tax isn’t paid at the time of purchase, few actually do. The resulting drop in revenue is problematic, since it affects funding for many state services. Furthermore, businesses located in Illinois consider it unfair: They have to charge sales tax.

No longer. Illinois has adopted a new rule, effective January 1, 2015, that expands the definition of out-of-state seller in Illinois. It applies not just to Internet retailers but to remote sellers of all sorts: catalog, mail, phone, shopping channels.... As a result, more businesses located in other states and selling to people in Illinois are now considered to have nexus with Illinois, and therefore have an obligation to collect and remit Illinois sales tax.

Illinois has been working toward this for several years. It enacted an affiliate nexus law in 2011 that required “ecommerce companies like Amazon to charge sales tax in the state, even if they have no physical presence there.” In response, Amazon terminated its affiliate program in Illinois and at least one company, FatWallet, left the state to set up shop in neighboring Wisconsin, where there was no affiliate nexus law.

Were such responses necessary? In the spring of 2012, the Illinois affiliate nexus law was struck down by the courts. Amazon removed Illinois from its blacklist, reopening its associates program to people and businesses in Illinois. On November 1, 2013, Amazon began collecting sales tax in the state of Wisconsin (new home of FatWallet). According to its website, Amazon is still not required to collect sales tax in Illinois (old home of FatWallet).

Response to Illinois’ newest attempt to tax remote sales is trickling in. Brick-and-mortar retailer Christopher Anderson of Christopher’s Fine Jewelry says he thinks “it’s going to help small businesses around here.” The folks at FatWallet “declined to comment” (WIFR.com).

photo credit: alles-schlumpf via photopin cc

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.