Illinois Supreme Court strikes down Illinois ‘Amazon Tax’

The Illinois Supreme Court today struck down the state’s “Amazon Tax,” a state law that forced online retailers to pay Illinois taxes regardless of whether they had a storefront or other physical presence in the state. In its ruling, the Supreme Court indicated that it struck down the law because it conflicts with a federal...

The Illinois Supreme Court today struck down the state’s “Amazon Tax,” a state law that forced online retailers to pay Illinois taxes regardless of whether they had a storefront or other physical presence in the state.

In its ruling, the Supreme Court indicated that it struck down the law because it conflicts with a federal law enacted in 2000 – the Internet Tax Freedom Act – which prohibits states from imposing discriminatory taxes on electronic commerce.

And that’s just what Illinois’ “Amazon Tax” did.

Amazon and many other e-commerce websites have affiliate programs, which allow participants to place links to Amazon on their own websites and receive a cut of any sales made to customers who follow the affiliate’s links.

But in 2011, the Illinois General Assembly enacted a law that required Amazon and any other online retailer with affiliates in Illinois to collect a “use tax” for all sales to Illinois costumers.

The court struck down the law under the U.S. Constitution’s Supremacy Clause, under which state laws that conflict with federal law are invalid. Illinois’ affiliate tax could not stand because it directly conflicted with the Internet Tax Freedom Act, which prohibits discrimination against electronic commerce. The “Amazon Tax” did not apply the same tax to affiliate (or “performance marketing”) programs that involved print or broadcast media.

Illinoisans should celebrate the court’s ruling.

This tax destroyed jobs in Illinois and forced affiliate marketers to either shut down or flee to other states.

For example, Overstock.com and Amazon.com ended their relationships with Illinois-based marketing affiliates. Chicago-based CouponCabin moved to Indiana. And FatWallet.com, which had been headquartered near Rockford for three years, skipped the border to Wisconsin.

This decision restores these affiliate marketers’ right to earn a living free from unconstitutional government interference.

With this ruling, the Illinois Supreme Court did exactly what courts are supposed to do: look at what the constitution requires, and strike down any law that violates the constitution. Too often, judges in Illinois and across the country fail to take their constitutional responsibilities seriously and serve as a “rubber stamp” for whatever the government wants to do. The justices who voted to strike this law down should be applauded for doing the right thing.